NextGen Investor Handbook

Summary

• The Stifel NextGen Investor Handbook serves as a guide for new adults to establish financial security, find employment, and plan for their future.
• Key topics covered include budgeting, saving, investing, personal finance, tax planning, inheritance, marriage, estate planning, helping aging parents, family focus, and philanthropy.
• When deciding where to live, individuals should consider convenience, proximity to home, hobbies, climate preferences, and cultural activities.
• Job search strategies include preparing a resume, cleaning up digital footprints, networking, applying through job boards or direct company sites, and staying persistent.
• A resume should be one page, highlight education and skills, and be tailored to specific jobs, while a cover letter can serve as an elevator pitch.
• Digital footprint management involves deleting questionable social media posts and ensuring LinkedIn profiles are professional and up to date.
• Networking involves connecting with people in desired fields, alumni, and parents' friends, and attending job fairs.
• Job applications can be submitted via job boards like Indeed or Handshake, directly through company career pages, or through recruitment agencies.
• Persistence in job hunting requires responding quickly to communications and following up with thank you emails.
• A budget helps prioritize spending and manage money by tracking income and expenses.
• The 50/30/20 rule recommends dividing income into 50% for needs, 30% for wants, and 20% for savings.
• Needs include housing, transportation, bills, utilities, groceries, and healthcare.
• Wants include travel, entertainment, and restaurants.
• Savings categories include debt reduction, emergency savings, retirement, and HSA or 529 savings.
• Saving early leverages compounding, where investment returns generate additional returns over time for exponential growth.
• Katie saving $83 monthly from age 21 to 31 would have approximately $249,000 by age 65, while Matt saving the same amount from age 35 to 65 would have approximately $136,000.
• Savings can be split into short-term goals (rainy days), medium-term goals (buying a house or car), and long-term goals (retirement or education).
• Successful saving strategies include creating a budget, identifying money goals, starting early, avoiding impulse spending, automating savings, and checking progress regularly.
• Investing helps grow money and potentially beat inflation, which reduces purchasing power.
• Five questions to consider before investing include financial goals, time horizon, risk tolerance, growth aims, and amount to invest.
• Account types include general accounts (checking, savings, brokerage, retirement) and education accounts (529 plans, Coverdell ESAs).
• Checking accounts offer high liquidity with low interest, while savings and money market accounts earn interest but may have withdrawal limits.
• Retirement accounts include Traditional IRAs (pre-tax contributions, taxed on withdrawal), Roth IRAs (after-tax contributions, tax-free withdrawal), and employer-sponsored plans like 401(k)s.
• 529 plans are state-sponsored investment accounts for education expenses with tax benefits, while Coverdell ESAs have income limits and age restrictions.
• Investment principles include risk and return, diversification, time horizon, asset allocation, and composure.
• Main asset classes include cash, equities (stocks), fixed income (bonds), real estate, and alternative investments.
• Investment products include individual stocks, bonds, ETFs, and mutual funds.
• ETFs trade like stocks throughout the day and are typically passively managed, while mutual funds trade once daily after market close and are typically actively managed.
• Credit scores range from 300 to 850 and are influenced by payment history, credit use ratio, new credit, credit mix, and length of credit history.
• Car buying involves considering affordability, how long the car will be kept, repair handling, and negotiating the price rather than just the monthly payment.
• Leasing offers lower upfront costs and flexibility but may cost more long-term and has mileage limits, while buying builds equity and may cost less over time.
• Homeownership builds equity, offers tax benefits, and anchors families in a community but involves maintenance costs and less flexibility than renting.
• The 28/36 rule suggests housing expenses should not exceed 28% of gross monthly income and total loan payments should not exceed 36%.
• Prequalification is a less formal loan estimate, while preapproval involves a hard credit check and in-depth financial review.
• Building equity increases ownership stake in an asset through down payments and principal paydowns.
• Tax filing options include doing it yourself, using software, or working with an accountant.
• W-4 forms determine tax withholding, W-2 forms recap annual earnings and taxes withheld, and 1099 forms report investment income.
• Income tax rates are progressive, while capital gains are taxed at lower rates if assets are held for more than a year.
• Deductions lower taxable income, while tax credits directly reduce the amount of tax owed.
• Estate taxes are levied on the value of a deceased person's estate, while inheritance taxes are levied on the recipient based on state rules.
• Inherited assets have a tax basis that determines taxes owed upon sale.
• Marriage and finances require open communication, regular financial planning, discussing investments, and celebrating financial wins.
• New parents should consider child tax credits, estate planning with guardians, life insurance, and 529 plans for education.
• Term life insurance covers a specific period and is cheaper, while permanent life insurance lasts a lifetime and is more expensive.
• Estate planning documents include a Last Will and Testament, Revocable Living Trust, General Durable Power of Attorney, Durable Healthcare Power of Attorney, and Advance Healthcare Directive.
• Helping aging parents involves organizing finances and documents, cataloging personal property, managing digital information, and addressing physical or emotional health needs.
• A family mission statement defines family values, goals, and legacy to ensure everyone is on the same page.
• Philanthropy involves giving time, money, or goods to help others and can include charitable trusts like Charitable Remainder Trusts or Charitable Lead Trusts.