Finance

[Enforcer Talen]

What tricks of the trade have you learned to keep yourself healthy, wealthy, and wise? Any mistakes youve learned from?

Me, I'm a 20 yr old live at home college student, so I dont have too many issues yet. But as a rule, I dont buy with credit cards, get it paid off with money I have in the bank, and purchase things that will help me learn. ie, education, martial arts, nonfiction books on money, military history, psych, or politics. I dont buy or play videogames almost ever, and most of my time online is doing research for whatever. I dont play world of warcraft, utopia, or everquest.

All in all, Im really cheap. Ill buy second hand clothes, games, books, or whatever, whenever I can, and since Im military, Im trying to use as many of the benefits as they offer to pay for college. grants, gi bill, veteran's benefits, its all good. One of my goals is to get through college with no debt and a nest egg, and thats been going fairly well so far.

[Guardsman Bass]

One thing I would recommend is that you watch your food and gas consumption, and try to get a reckoning for travel times. Food especially, particularly if you make it a habit to eat out, can add up extremely quickly. Write down what you buy, immediately after you get back from the store.

[Civil War Man]

All in all, Im really cheap.

This is by far the most important characteristic you need if you want to end up with a comfortable amount of money. It is, as I like to put it, spending money like you don't have it. That way, you'll have it later for when you need it.

[weemadando]

I lived for 2 years on under $200 Aus a fortnight. From that, remove $135 a fortnight in rent... Then think about how happy I was when I got a casual job.

[Jalinth]

All in all, Im really cheap.

This is by far the most important characteristic you need if you want to end up with a comfortable amount of money. It is, as I like to put it, spending money like you don't have it. That way, you'll have it later for when you need it.

Being cheap can be very annoying especially if you try to freeload off friends. Try to live at or (if you are earning a decent income) significantly below your income. Especially if you are in job that has high income swings. Best advice from one client (real estate) is budget yourself so much as a baseline ($50,000 per year) and invest the rest after the taxman's share of course.

Questions to ask:
Do you absolute need a car? Savings - significant just for gas, repairs and insurance. Depends on the location - New York? Questionable. Middle of Kansas, vital.
If you need a car, do you absolutely need a new one? Especially an SUV (major peeve of mine)
Housing - how much do you really need? Do you really need a 7,000 sq foot house for you and your dog covered with marble?
On the cheap side, do you really want to live in a shitty place that stinks, stuff doesn't work, and you are afraid for your safety?
Food - again, is going out all the time a good use of your dollars? Likely not.
Avoid junk food - costly and little nutrition. Fruits and vegies are generally cheaper and much better for you.

[Pint0 Xtreme]

I read this somewhere:
The rich save first and spend what's left over.
The poor spend first and save what's left over. Guess what? There's nothing left over to save.

[Darth Wong]

One frustrating thing about money is that you feel kind of bad when people around you are enjoying a higher standard of living than you are. It softens the blow somewhat if you can say that you've got some noble reason to be eschewing their lifestyle (eg- making sacrifices for your children or being eco-friendly), but if you're just doing it because you want to be fiscally responsible, it takes a fair bit of willpower to resign yourself to living below the standard of living of your acquaintances indefinitely. Perhaps you can look forward to laughing at them when you're 60, but that's a long way away.

[aerius]

Healthy, well, I try to get enough sleep. Sounds easy, but since I'm doing shiftwork it's damn near impossible at times. Fortunately I don't have to work a true nightshift, the latest I can expect to work is about 2am. Other than that, eat my 2 square meals a day and try to get as much exercise as I can. In terms of mental health and staying stress free, lots of music and spending quality time with my GF. Relax and have semi-regular get togethers with good friends where we all have a good laugh. Leave the job at work and don't bring it home. Learned this one the hard way from when I was doing contract work in the electronics industry. I used to get stressed out thinking about work at home, wondering if I'd done everything right, and planning out the next day's work. No good unless you're living by yourself, and even then it's probably not the best thing.

Wealthy, err...I'm working on that. Figure out my needs and prioritize them. For instance I don't need a $2500 suit for work, it's not going to last 10 times longer nor be significantly more comfortable or functional than a $250 suit. The $250 suit will however be significantly more durable & functional than a $175-200 suit, find the point of diminishing returns and buy at that point. Someone might then point out I own a $4500 bicycle and consider it to be extremely extravagant. Considering that I put over 3000km on the bike every year, and that I've owned the bike for 5 years while replacing only the tires, chain, cables, and brakepads, I'd say it's a pretty good investment. Sure I could get a bike for half the price, but it would've been recycled into popcans by now, I planned for the long term and more than break even after a few years. Cycling's a big part of my life, like I say, needs & priorities, I know people who spend more on their computers because to them, computers are important. Spend the money where it'll do the most good.

Wise, umm...duh...get back to me in 40 years when my hair's either grey, white, or gone...

[mr friendly guy]

I didn't think too much into finance, until by chance while in the bookshop I glanced over a book by an Australian finance broker called the "Barefoot investor". Since then I have glanced at various finance books. I consider buying them an investment.

From my reading, the key to "financial independence" is regular savings + investment. Usually they recommend between 5-15% of your net income. If you save at least you get some money, although if you don't need the money (in the near future), you can invest it and hopefully get higher returns. Its best to start early, so that compound interest has more time to kick in.

You also have to realise, its not necessarily how much you earn, but what you do with your earnings. This may seem counter intuitive and it doesn't hurt to earn a lot, however financial planners report people who earn shit loads of $ struggling financially, while people on average incomes do well come retirement. The difference is that one group saved, the other spent. People who get pay rises, end up living more extravagantly to "keep up with the Jones".

From what you are telling us, you like to be cheap. Which is alread good. I realised early on, I should put my money into things I truly want, rather than to keep up appearances. I would rather buy sci fi collectables, novels, dvds than that awesome car (personally when my current vehicle breaks down, I would rather buy a 2nd hand car, because to me its just a mode of transport). I don't need fancy smancy clothes or the label shoes.

The other thing we should distinguish is between good debt vs bad debt.
Personally I have no problems with credit cards, because I pay them back before they are due. Credit card debts are counted as bad debt. Things which are good debts are loans on investments. Good debt = debt required to buy assets which make money (either by appreciation or income flow, eg houses), bad debt = assets which lose money (usually by depreciation, eg cars). So try to avoid borrowing to buy depreciating assets.

The other thing I want to say is regarding cashflow. Basically you are going to get money from broadly 3 types of sources.
1) you working
2) your money working eg rent, dividends, interest on cash etc
3) charities / pensions

Most people would have the first source. It said that one of the way the rich seems to be well off yet don't work as hard, is because they have the second source doing the job for them. If your money is producing as much income as you do, you can theoretically not work and live on your money working for you. Depending on who you read, people would argue that an asset's ability to produce cashflow is more important than its ability to appreciate (ie if the share price drops a little, its less important than how much its paying you in dividents). Cashflow is more important in a long term view. If you are in it for the short term, having an asset appreciate and selling it might be better.

I would suggest that you read some books on finance by borrowing them from the library and photocopying relevant parts.

[mr friendly guy]

I read this somewhere:
The rich save first and spend what's left over.
The poor spend first and save what's left over. Guess what? There's nothing left over to save.

I believe it was Richard Kiyasaki (?sp). Author of "Rich dad, poor dad." A reasonable read as it goes into broad principles on how to accumulate wealth.

[TrailerParkJawa]

I read this somewhere:
The rich save first and spend what's left over.
The poor spend first and save what's left over. Guess what? There's nothing left over to save.

I believe it was Richard Kiyasaki (?sp). Author of "Rich dad, poor dad." A reasonable read as it goes into broad principles on how to accumulate wealth.

That guy might produce a few kernels of truth in his books but most of his stuff is a steaming load of crap designed to get you to buy his books. Beware.

Here are some things I believe are prudent when it comes to finance:

1. House first, nice car second. Buying an expensive car before you have a home of your own is a good way to possibly push home ownership out of reach.

2. Always sign up for the 401k at work, especially if your company matches. My company matches $2000 for the first $1000 dollars I contribute.

3. If you don't have a 401k plan at work or make a low income, look at a ROTH IRA. ROTH's are excellent vehicles for retirement. The money you put in is after tax but when you retire it is not taxed.

4. Pay your bills. This sounds silly, but I have co-workers who have trouble paying their electric bills because they've bought stuff they don't need like a new computer hard drive, beer, etc. Not paying bills will hurt your credit rating which in turn hurts your ability to make big purchases like a car or home.

5. If you can afford it, keep 6 months to 12 months savings in cash for an extended emergency. Most people say 3-6 months is sufficient but I was unemployed or underemployed for 18 months during this last downturn.

6. While you should'nt waste money, don't go overboard and hoard every penny. Live your life. Visit another state or country. Try that nice steak house. We all need to treat ourselves once in a while. Its good for your well being.

[mr friendly guy]

I read this somewhere:
The rich save first and spend what's left over.
The poor spend first and save what's left over. Guess what? There's nothing left over to save.

I believe it was Richard Kiyasaki (?sp). Author of "Rich dad, poor dad." A reasonable read as it goes into broad principles on how to accumulate wealth.

Correction to my earliar post. Its Robert T. Kiyosaki.

[Enforcer Talen]

Books my dad has been reccomending (20 years air force accountant, masters in business) me include "Millionaire next door", "automatic millionaire" and "start late finish rich." It has some pretty interesting stuff that includes saving and investing 20-30% in long term growths, as well as real estate. Also included are the obvious ones - pay your bills on time, dont misuse credit, et al.

As Im still just learning the theory, Im curious what the practicallity has been for the other sdnetters.

[mr friendly guy]

What practicality has all this done for me? Well ask me that in a few years and I will tell you whether it helped or not?

So far I do the usual don't have bad debt, use the tax minimisation schemes, and use "cost dollar averaging" for managed funds (mutual funds in the US). I suspect even if I didn't do these things, I would so far have enough money to indulge my habit of collectables, books etc. This way I just have more.

However I can say that with this advice I seriously helped a friend reduce monthly. He had accumulated a debt from a student loan at around 9% interest. He had a high interest account at 5% interest (and this was money he wasn't needing to pay for his regular expenses). I simply told him to take out chunks of his bank account and use it to pay off part of the loan, and instead of depositing regular x amont of dollars into his bank account, use the x amount to pay off the loan (9% > 5% after all. After taking my advice his monthly repayments have dropped drastically. Before saving can begin, bad debt must be cleared.

[HemlockGrey]

We should get Joe in here. IIRC he's an accountant-in-training, and I remember him saying a few months ago that his professor was going to teach the class how to exploit inefficiences in the credit card system to absolutely rape credit card companies. Would be nice if he could share the secret.

[Col. Crackpot]

There is a popular saying regarding finances going around now. "Pay yourself first". Every week i have 5% of my check deposited into a 401K account (of which my employer matches half) Anyone who has access to a 401K (or a 403B for you non profit workers) and an employer who matches funds and choses not to contribute at least 3% is a fool. Even if you are stuggling to get by, that 3-5% isn't really noticeable, but 30 years down the line when you have a small fortune to supplement your social security income, you'll sure as hell notice it.

[salm]

Healthy - running, gym, i´m not stingy when it comes to fun such as partying, concerts etc, i cook stuff from scratch and tend to avoid fast food.

Wealthy - two jobs

Wise - uni

[Dalton]

Well, for wealth I found a fairly high-paying job that I'm damn good at doing. That includes a 401(k), which I put 6% of my earnings into (IIRC). Crackpot speaks truth: a 401(k) is pretty important right now, especially if social security becomes privatized; if you have the chance to get one, jump at it.

[TrailerParkJawa]

Well, for wealth I found a fairly high-paying job that I'm damn good at doing. That includes a 401(k), which I put 6% of my earnings into (IIRC). Crackpot speaks truth: a 401(k) is pretty important right now, especially if social security becomes privatized; if you have the chance to get one, jump at it.

A 401k combined with a ROTH is your best bet for retirement. I've heard rumblings that there is going to be a new ROTH 401K where you can contribute after tax money. That would be interesting, especially if it came with a match.

[tharkûn]

What tricks of the trade have you learned to keep yourself healthy, wealthy, and wise? Any mistakes youve learned from?

Healthy? Exercise. No not heavy weight training, but finding something that works up a sweat you enjoy. Biking, swimming, running, rock climbing, kayaking, gratuitious sex ... whatever you enjoy doing and can devote a good bit of time towards. I've been told that you also look for activities you can enjoy even in imperfect health or as you age. For me, biking and swimming work.

Wealthy? Pick a good paying job and make your education worth something. If you want to follow your dreams and pursue your "dream job" - fine, just be sure to have a something tangible to fall back on if that doesn't pay out. If you do take a job for the money - as long as you think it is bearable who cares?

Wise? Let get back to you when I have a clue.