They could just be accounting for it as a marketing expense.
Well…yes, you can!
Actually, the teller won’t do it themselves, but they will set you up with someone there who can explain all that stuff and give you the forms and whatnot.
A lot of it you can do online too.
Well, as this thread should point out, ignorance is a lot more common than conspiracy. I suspect the reason it’s not usually taught in school is that school systems are not run by CPAs and MBAs. They are run by liberal arts majors making $45k a year (or whatever teachers make these days). To a certain extent, it’s probably viewed like astrophysics or nuclear engineering - something advanced and specialized that people can take in college once their interested. I didn’t even take accounting until after I graduated college. I started applying for banking jobs and it occured to me that I had no clue what “banking” actually was.
Speaking of $45 a year, that is plenty of money to start saving, considering people here said they make a lot less than that. Even if it’s just a little bit, it’s a good habit to get into.
I couldn’t agree more. I read to many posts on this board that seem to imply that businesses have an endless supply of money and resources. Not to mention a complete lack of understanding of what a business is or what it does.
Many people seem to believe in the “money is the root of all evil” bullshit. Money is the root of not sleeping on the street and eating out of dumpster. Selfish greed and willfull ignorance is the root of evil. It’s great to be an idealist or pursue studies that interest you, but at the end of the day, you still need to eat and sleep somewhere. For some reason, a financial planner who helps families build wealth is not seen as honorable a profession as a social worker.
Another thing that confounds me is people who say the stock market is the same as gambling. Yes, there is an element of risk involved, but they are quite different.
Gambling is putting $20 down on a roulette table. aybe you win, maybe you lose
Investing is BUYING a number on that roulette table. So now you get a piece of whatever action that number sees. Sure there’s a risk of nobody betting on that number or the occassional big payout, but over the long term, the odds of making money are in your favor.
Don’t forget the volume, though. Say you offer six months free financing (effective cost, oh, say 8%), but you get 20% more business from it. You’ll still come out about 10% ahead, and as Tomcat said, a lot of people won’t even cash in on that 8% cost; they’ll pay you the interest (plus a little more for your trouble, assuming they’ve made payments but got hit with interest on the whole nine yards). If you try to squeeze every last penny from every last transaction, you may wind up with substantially fewer transactions to squeeze.
Or you can go with something like CareCredit (the company that handles financing for my Lasik); the clinic could care less, because they get their money up-front in either case. CareCredit takes the debt and runs the interest-free financing, charging credit-card rates if you don’t quite make it. As I said, the ones who don’t quite pay it off subsidize the ones who do. I think the clinic even makes a little referral fee if people sign up through them.
*couldn’t care less.
Missed the edit window, too.
And that bother me, too. I blame my lack of breakfast. I’ll go find some and come back later.
We have just had a very big financial scandal in the UK due partly to poor financial understanding by a section of the population. This involved a Christmas saving scheme whereby agents ( who were paid commission) were employed to persuade friends and family to send money each month to the company which operated the scheme. Note, this was a company, not a bank or other savings institution. They would have been regulated and protected by various “watchdogs”, but the company fell through this net.
The idea behind the scheme was that in December the savers would either get Christmas hampers or vouchers to spend in various high-street stores. Both of these offered poor value for money poor value. The vouchers paid no interest and the contents of the hamper could have been bought for less in any supermarket.
On Friday October 13th 2006 the company announced that it had gone bust, owing about £50 million pounds to the savers. It turned out that it had not “ring-fenced” this money but had used it to prop up other ailing parts of its operations. So many people faced a bleak Christmas, some being owed nearly a thousand pounds.
When asked why they did not open their savings accounts and get some interest, many said they thought that this was a more convenient means of saving for Christmas, and some even said they didn’t know how to open an account or they would be tempted to dip into the money. There are “notice” accounts which lock your money away for a certain time to prevent this temptation , but they were unaware of them.
Also the agent network operated a form of moral blackmail whereby people felt morally obliged to sign up to the scheme because their friend had asked them to.
Not to mention the fact that the interest rate on interest-free loans is much higher than what they’d be able to sell if they were offering a straightforward loan. (We bought a couch interest-free a couple of years ago and the interest rate was 19.9%.) I would bet “interest-free” financing actually makes businesses a lot more money in interest than a simple 5% APR loan would.
As long as you understand clearly the difference between explain * and advise, ask the HR person’s boss to ask the HR person to get off his or her a*. I am an HR person, and parts of this really are our job. It is HR’s job to explain the company’s policy for the 401k, like how much you can contribute and how much they will match, and the procedure for getting contributions set up, which may involve you contacting a third-party company. The HR person won’t be allowed to advise you what fund to put your money in or how much you should contribute. They don’t have any particular knowledge of what’s a good fund, and it would be a legal liability for the company for them to give advice to employees about that. But they should explain. In fact, if you are in an entry-level job rather than one of the higher-paying jobs in the company, it actually improves some of HR’s measurements for you to participate. Some companies do have arrangements for financial advisors to come in and make presentations, or discounts for their employees to meet with outside financial advisors. Ask your HR person if any of that is available to you.
Sorry for the double post, but the thread is a great time to thank Mrs. Lunde, who taught a unit called Careers to all the ninth graders at my school for many years. In addition to thinking about future career options, we also did basic things like learn how to write a check and keep a check register, and to figure out the cost of interest on purchases. I’m surprised and saddened that other schools don’t teach this stuff.
I believe my high school had a Math of Money class, but I didn’t know anyone who took it. All of my friends took math classes to prepare them for college, where there wasn’t any time to break away and discuss financial matters. Now, probably the only way to get finances discussed in a classroom at all would be to include a financial section on standardized tests.
I’m bookmarking this thread. It’s been really useful so far. Thanks everyone!
As for the “conspiracy theory” I mentioned in my other post, I’m not really serious, it just seems like everything’s working against logic sometimes.
Voyager mentioned something that I think is very important–our tendency to make irrational decisions regarding money. I’m well aware of behavioral economics (my BA in psychology is actually from the same school he mentioned in his post, and they’re very big on behavioral econ), and maybe I’m just too worried that I’ll do something foolish to actually get out there and make some financial decisions. I can’t really ask my parents, or my husband’s parents, and books that I’ve read feel a little too impersonal. I won’t do anything until I can be certain that it’s the smart thing to do in my situation.
For example: I live within my means. I’m fine day-to-day and could probably be fine if I had to stop working for a few months. I’ve got a decent chunk of money in my savings account. Not much interest there, but I have access to it any time. However, between my husband and I, we have about twice that amount in student loans. They’re low-interest loans, so I pay the minimum amount and hold on to the rest of my money for The Future. And I’m going back to school next year, which will probably make our total loan amount go up by half.
The Future: It includes moving from NYC sometime in the next year, buying a car (which can be used, if necessary), and me going back to school to become a nurse (which will take a year and almost double my yearly income once I can start working). A year or so later, we will probably start looking at buying a house. And there may be a baby in the mix.
The Big Question: How much money, of what we have in the bank, should we budget spending on the car? How much should we put away for the eventual house? How much should I put in an index fund? Should I get a CD? Should I do none of the above and pay off the damn student loans instead? Should I put it towards nursing school and incurring less loans?
(At least I’m not depleting it on designer handbags and going clubbing every night, like a lot of people my age. That much, I know.)
Yeah…it gets complicated. What do I do with the money I have? This is where I’m COMPLETELY lost. How can I get this sort of advice?
One piece of advice I can give your is to put you emergency money away in a money market account. In ours, we have about ten grand, which would cover our house payments for six months with a cushion for emergencies (like the heatpump dying or something). We chose the MMA because it is very liquid and has a fairly decent interest rate, but has penalties for too many withdrawals per month. (Three is the maximum.) Plus, we can manage it online with all our other accounts.
You could go to a financial planner.
Really though, the best thing is for you to create a budget. Figure out how much you take in each month after taxes, 401k and other paycheck deductions.
The next step is to figure out your monthly costs - rent, car payments, food, heat, phone, cable. Start with the more fixed, mandatory costs and then work your way down. From there it’s simply a matter of tweaking your budget until you’re comfortible with your payments.
Quicken and Microsoft Money are pretty good tools for maintaining your personal finances.
After that, you need to basically set aside “emergency money” - which you keep in a low risk fund that is very liquid. Short term money - which can be put in someone less liquid (like the house fund) but still pretty low risk. And long term money - that can be in higher risk places - like the stock market.
Don’t pay off the student loans - provided they aren’t a big drain on your cash flow. Generally, you get a tax break for them and they are at low interest.
The idea is to maximize growth while minimizing risk. Creating that balance is the tough thing.
Actually, I am in one of the highest-paying positions in the company below management, in the class of Specialist. The only entry-level positions are given to college-aged interns, who will never be full-time with benefits. I wasn’t looking for them to tell me what to invest in, I need an explanation of what a retirement plan is and how it works, what my options are, what I need to sign, and what happens after I sign.
As it is, it’s like they’ve given me a box with knobs, all unlabelled; if you turn one, something happens, but you can’t tell what, nor what effect it will have on whatever the other knobs do, and they won’t tell you, either. All this stuff may be obvious to an American who grew up here and absorbed the workings of the system by being in it. I’m a foreigner, and I’ve only been in the system for six weeks. (The other five and a half years I’ve worked here, I wasn’t in the system.)
I appreciate your input, and would also appreciate any information you might know on what I should read to further acquaint myself with how employment and retirement plans in America work.
These are the wisest words in this thread. We’ve decided that $5K more in our 401K is worth waaaay more than a fancy-schmancy TV. We paid $800 for ours and it has a beautiful picture. We don’t need anything more than that.
We put ours in a regular savings account that pays 5%. Free money…what’s not to like?
If you are eligible or will be eligible soon, they should have given you a packet of information that talks about what your options are within the company’s 401(k), including what sorts of accounts you can invest in, whether they give out matching funds, etc.
For example, my company has a Safe Harbor plan, which means that all eligible employees get a certain percentage of their income put into an account, whether they put any of their own money in or not. Your packet should tell you if your company does something like this, or perhaps a traditional match where if you put in 1% out of your paycheck your company puts in the same amount, up to a pre-set percentage limit.
The packets we get quarterly show what sort of returns the various accounts have, what’s considered high, medium, or low risk, etc. An easy thing to do is to pick one of the funds that’s aimed toward a specific retirement date. For example, I have money in a fund that’s geared toward people who will retire in 2045.
All the term “401(k)” means is that there is a tax rule that allows you to have a certain percentage of your paycheck withheld before income taxes are paid on it. There is a limit as to how much you can put into the plan pre-tax.
Because it comes out before income taxes are taken, the bites don’t seem quite as big. If you put $100 into your account every paycheck, your paycheck will not be $100 lower because your taxes will also change. Because the money isn’t taxed before it’s invested, and because many companies give you free money for participating, they can be really excellent ways of building up a big chunk of money. The downside is that you get hit with a penalty if you withdraw the money, and at many places I think the only way you can withdraw the money is by leaving the job.
That’s probably the best advice anyone can give, aside from keeping some rainy day money. Kids right out of college seem to get into this kind of trouble the most.
I think it’s because they think they have all the money in the world now and will only make more money.
One of the smartest things I did was save as much money as I could once I finished business school instead of buying a new home theater system. When I was laid off from my job a year and a half later it made the difference between me spending six months bumming around in Manhattan and me 29 yrs old spending six months living at my parents house in the suburbs.
I declare this to be the best thread ever. Lots of good advice, and I think I’m going to seriously look into this “money market account” idea. I mean, I have a checking account with a couple grand in it. The thing never goes below say $2,000. So basically I’m sitting on $2k which isn’t getting any interest. Money market seems the way to go for this. It wouldn’t get locked away if I really needed it, but it won’t just be sitting stagnant like it is now.
Thanks dopers!
One thing you have to keep in mind is that financial advice from strangers on the internet who don’t know much about your personal situation or risk tolerance may not be worth what you’ve paid for it. And it should be clear that bad financial advice can be just as damaging as bad legal or medical advice. Caveat emptor.
(That said, money market accounts and low-fee index funds are good choices for the average investor who’s just looking to learn a little interest. Still, be careful.)