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Investing for the future

Old 09-11-2008, 09:54 AM
  #1  
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With all the wondrous changes in pilot pay and retirement benefits what do you do to prepare for the future? How have you invested your money so that you can enjoy a descent retirement.

What resources can you provide to your fellow pilots to aid us in preparing for the future? For us guys at the regional level that deal with very low wages and the setback of starting over again at a new airline are especially in need of help.

Do any of you operate home-businesses or other types of business such as real estate & franchises?

Thanks for any help
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Old 09-14-2008, 07:34 PM
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not a single post? Guess I will have to come up with my own ideas....
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Old 09-15-2008, 05:27 PM
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I guess I'll chime in. You make it sound as if you don't have any money now. It is hard to invest when you don't have anything to invest. With that being said, you need to take some part of each paycheck and invest it in your 401k (if there is a company match) or a Roth IRA (considering your income is low). Diversify. Invest consistently through good markets and bad markets. Take emotion out of your decisions and don't follow the news reports about what is the next hot stock or that you should sell all your equities and buy gold. As you get pay raises, add to your investments. Invest for the long term. Never buy a complete position at a single time. Invest over a period of time. Accept the fact that you will never buy anything at its lowest point, and you will never sell anything at it highest point.

If you can't afford to invest, you are living outside of your means. If you feel that you are living within your means, but still can't afford to invest, that is just the way the cookie crumbles sometimes. Hopefully soon you can afford to invest.

In todays economy, prices are low and a good time to start investing. Will the market continue to fall...probably; but who knows how much. Will it recover? Absolutly! Once again, be patient, stick with quality investments (don't speculate, or try to pick the next hot stock) and invest for the long term, not what you think is going to happen tomorrow or next month.

It helps if you set goals for what you want to accomplish with your investments. Is it retirement? If so, what do you want to do with your retirement? Figure out how much it will cost to accomplish what you want in retirement in todays dollars and then you can get an idea of how much you need to retire with. Then you can get an estimate of how much you need to set back each month. The more you can invest early, the more you will have at retirement because it will compound. Compounding is an amazing concept, and it works well. It has made a lot of people rich! Think of it this way, if you worked your Jr. and Sr. year in high school, invested $100 per week for those 2 years, you would end up a millionaire before turning 65 without ever investing another dollar. That is based on an average return of 7% per year which should be easily achieved with disciplined investing. You can find calculators online that you can determine the "cost of waiting" to start investing at different ages. It will open your eyes.

Hope this helps some.
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Old 09-15-2008, 08:52 PM
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Ok, now for some specifics. I am no financial guru, but this is the plan.

Invest fully on a company matched 401k/IRA. Then figure out your discretionary income every month, then add half of that on top of your fully vested 401k/IRA and send the other half to a high-interest online savings account. You are going to need an emergency fund just in case anything happens.

How much of a percentage should you invest in stocks/bonds? Take your age and subtract it from 100. That is the percentage your portfolio should have invested in stocks. The rest, bonds.

Once you have saved up 6 months worth of living expenses(MINIMAL 3 months), invest a little more of your discretionary income into your 401k/IRA. Keep saving though, just in case you may want to buy a house one day, but that 6 months you have saved... DON'T touch it!!! Emergencies only!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Don't have a credit card? Get one, but watch your spending. Build up that credit!

Don't have a degree? Get one in a field other than aviation(don't put all of your eggs in one backet) using a student aid program such as a Pell Grant. A Pell Grant is free and will also provide you with extra living expense money provided you keep at least a "C" average in all of your classes.

Did I miss anything? PM me for more details.

Hope this helps as well.
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Old 09-16-2008, 04:00 AM
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Notice how this starts..."I am no financial guru." Take that to heart. I am so sick of hearing that about take your age from 100 and that is the percentage of stocks vs. bonds. That is not true. It depends on a lot of factors, but would you as a 20 year old planning for retirement have an average of 20% bonds in your portfolio? Try talking to a real financial guru, that is what they are there for.

I don't get what you mean by adding half of your discretionary income to a fully VESTED 401k/IRA. Are you saying that you shouldn't invest in your 401k/IRA unlesss you are immediately vested or wait until you are fully vestedbefore you start investing? Do you know what vested is?

I still didn't see any specifics...I thought you were going to give us some hot stock tips.

Originally Posted by Adobo
Ok, now for some specifics. I am no financial guru, but this is the plan.

Invest fully on a company matched 401k/IRA. Then figure out your discretionary income every month, then add half of that on top of your fully vested 401k/IRA and send the other half to a high-interest online savings account. You are going to need an emergency fund just in case anything happens.

How much of a percentage should you invest in stocks/bonds? Take your age and subtract it from 100. That is the percentage your portfolio should have invested in stocks. The rest, bonds.

Once you have saved up 6 months worth of living expenses(MINIMAL 3 months), invest a little more of your discretionary income into your 401k/IRA. Keep saving though, just in case you may want to buy a house one day, but that 6 months you have saved... DON'T touch it!!! Emergencies only!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Don't have a credit card? Get one, but watch your spending. Build up that credit!

Don't have a degree? Get one in a field other than aviation(don't put all of your eggs in one backet) using a student aid program such as a Pell Grant. A Pell Grant is free and will also provide you with extra living expense money provided you keep at least a "C" average in all of your classes.

Did I miss anything? PM me for more details.

Hope this helps as well.
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Old 09-16-2008, 05:27 AM
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Some pretty good responses and info on this thread. I'll throw in my $0.02.

Step One: Budget.
Doesn't have to be complicated. Set up a monthly budget listing your money in versus your money out. i.e., income vs expenses. This gives you a snapshot of your monthly financial condition and is key in planning how much to do with what.

Step Two: Emergency Fund.
Set aside $1000.00 to $2000.00 in a savings account and DO NOT TOUCH it unless it is an absolute emergency. Your car's transmission is an emergency. A new plasma t.v. is not. If you take money from this fund, stop everything until it is replenished. One of the reasons emergencies are called what they are is because they come when least expected.

Step Three: Live Below Your Means.
Easily said but hard to accomplish, so it takes a lot of the D-word - discipline. This will help you to avoid the B-word - broke.

Step Four: Pay Off Debt.
With the exception of your mortgage (if you have one), I would make a huge effort to pay off everything you owe and try to live a life free of debt. This involves discipline but the rewards are very much worth it.

Step Five: Invest.
Invest in your 401k. Like someone mentioned earlier, do not get emotional about the market. If you check it everyday and worry how it's affecting your investments you will go nuts. Check it quarterly and know that the market will have it's ups and downs. However, you are investing for the long term and over the course of 30 years, you will statistically come out ahead.

How to invest? My advice is to seek the services of a good financial planner, specifically one who charges a flat fee and DOES NOT work on commission. I fly with many people who do their own investing and who all claim to have the best advice. I also noticed that they are all still working too.

Spend the money and let someone who specializes in finance and investing manage your portfolio. It may cost a $1000.00 per year, but it is money very well spent and will save you time and money in the long run.

Don't have a credit card? Get one, but watch your spending. Build up that credit!
I strongly disagree with this statement. Dave Ramsey says it best with the phrase "if you play with snakes you're going to get bit." There is only one reason to build up your credit and that is so you can attain more credit - i.e., so you can borrow more and go further into debt. Trust me, you can have ZERO debt and still get a mortgage. I can think of absolutely ZERO reasons to have a credit card. I haven't had one in over six years and have managed just fine with a debit card. I've booked airline tickets, rental cars and hotels with it.

O.K., I hope this advice helps out.
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Old 09-16-2008, 05:32 AM
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All of this is sage advice. Listen up. More people should or we would not be in the economic crisis this country is quickly finding itself.
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Old 09-16-2008, 08:59 AM
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Over time, this simple rule has proven to be a winner for me:

1/3 of your income to live;
1/3 for expenses
1/3 for savings

That is broadly it. Pay yourself first, get rid of debt as quickly as you can, do not use your credit card often (and try and pay it in full every month), don't ever max it out, invest wisely and diversify. Long term is long term. If you can pay cash, pay cash. If you had to pay for something in cash, would you really buy it?

Be patient and have discipline (as a pilot, you've got that down!). You don't even need to earn an astronomical salary to end up with a more than decent amount of money in the long run. Organization, patience, discipline, and wise decisions are key.

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Old 09-16-2008, 10:53 AM
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Originally Posted by Tinkerbell
Over time, this simple rule has proven to be a winner for me:

1/3 of your income to live;
1/3 for expenses
1/3 for savings

That is broadly it. Pay yourself first, get rid of debt as quickly as you can, do not use your credit card often (and try and pay it in full every month), don't ever max it out, invest wisely and diversify. Long term is long term. If you can pay cash, pay cash. If you had to pay for something in cash, would you really buy it?

Be patient and have discipline (as a pilot, you've got that down!). You don't even need to earn an astronomical salary to end up with a more than decent amount of money in the long run. Organization, patience, discipline, and wise decisions are key.

BINGO!!

There are people out there who are millionaires whose salary has never exceeded $100K/yr. There are also many people who earn million dollar salaries who are either broke or living paycheck to paycheck.
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Old 09-17-2008, 10:58 AM
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I shorted the hell of out BAC on Friday and after LEH went BK on monday I've already rivaled my FO pay for a year. No kidding. I've since bought it again and also picked up a few October options on it at $27.50 while it was down to $26.80ish earlier today. Now that it's at $28.50 I could already cash out but am going to wait for it to bounce back with the new rule about naked short selling going into effect. I've been investing since I was hired at the airline. First started small just trying to make a $100 here or there but the past three months I've been making more doing this than I have my real job. Paid off all credit card debt I gained when making only 18k that first year and still have enough to put a nice % down on a new home. Usually if I make $1k+ I've taken money out and put half in my savings. Only problem is it's not dependable. During July I almost had an aneurysm when BAC dropped to $18 but luckily that's when the dividend hit and that extra 150 shares the DRIP purchased ended up doing me well when it went back to $32. So it has it's ups and downs. I've come out very much ahead but one thing it's taught me is to live off my paycheck because you never know when it will go belly up. I owned some EWZ that lost about $12 per share on me. Can't figure out why as it was worth $78 last year when oil was at $60 but now that it's dipped below $100 everyone is panic selling. Go figure.

Anyway my concept on life has been that a dollar you spend today hits you two fold. It's one less in your account and that's one less you have earning interest of the future. People dogged me like no other on here because I've always told FO's not to go blow money on expensive headsets, bags, etc until they get a little more security in their job. People gave their own excuses and too many guys walk around wondering how they'll pay off the debt. No one wants to admit it's them but then whole country is going to hell by hand cart because everyone owes everyone else. This current credit crunch is a prime example of what happens when the balances become due. Once you get on the front side of that curve that $200-$400 or whatever you pay extra per month adds up FAST. Credit card debt gone and a restructuring of my student loan some time back it's almost like having a free apartment lol. Feels much better. Now I'm debating if I should pay my car off or not. Another huge downside appears to be the taxes. I keep money for them but I have no idea how to do taxes on so many transactions. Hopefully turbotax or quicken can help as I've done about 2300 transactions so far this year(like I said I started out small lol). I use to day trade a lot more where as now I just set a % I'd like to make and wait for that to hit. That has turned out to be the better way to go for me. Anyway if I have to do it line by line for each trade I've done I'm gonna be found dead on my desk.

Also I'm starting my own side business. Aircraft appraising. There's no one in my home area that does it so I'm going to do that for fun on the side. Figured I wanted to do something aviation related. A family friend also is the CEO of a rather large bank while another does insurance underwriting. They've both said they'd like to have an appraiser in the area.

Last edited by ToiletDuck; 09-17-2008 at 11:34 AM.
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