Someone smarter than me once said, “Those who don’t understand interest, pay it. Those who do, earn it.”
Save up for the big ticket items you want. The skill of saving will serve you well all of your life. Delaying gratification until you have the cash in your hand will curb your impulse buying pretty quickly and you will make considered choices.
You should pause, consider cautiously anything you are going to take on as a regular payment whether weekly, monthly or quarterly. Each of those things raises your bottom line. You should hear a bell ringing every time it inches forward.
I have found it advantageous to live in cheap housing. The cheapest I could find that I was willing to live in. Carpet and paint are cheap, the money I saved on housing helped me to save money for traveling, my passion.
I found a cool post here that had a lot of common sense type advice that had never really occurred to me before. Any search on that site is likely to yield a few gems worth of valuable info. I check that site daily. Oh, don’t let the name fool you, it’s called Dumb Little Man, but the guy that runs it certainly is not one. Well, he is a man, and he also might be little, but not dumb.
Having $1000.00 set aside somewhere that you can easily access it in the case of an emergency (a TRUE emergency mind you, not a shoe sale) will save you tens of thousands over the course of your life, as well as prevent you from starting down the slippery slope of credit card debt.
I’d highly recommend picking up a book called “Get A Financial Life”. $10 on Amazon, a great investment:
It’s written for people in their 20s and 30s, I found it to be very valuable and an enjoyable read.
Don’t pay for a dead horse.
But it’s OK to beat one…
In the US pensions are rarer and rarer, and, except for government jobs, risky. 401Ks don’t have guaranteed payments, but they go with you. I will get some sort of pension from Lucent/AT&T, but I’m not including it in my retirement planning, since I suspect it will be small.
Want something? Always, always try to get a second-hand one on e-bay before you go out and buy a new one.
Besides the money saved, it has at least three advantages:
-you can see how well it holds up under wear and tear.
-if it stands in your house and somehow, despite your planning, you really don’t like the way it looks, you don’t have to torture yourself to keep it because you paid big bucks for it. You just put it on e-bay again and try again.
-you help the environment.
Seconded. I haven’t used e-bay yet, though. I am, however, a devotee of Amazon.com, and I love it!
There’s nothing shameful about buying stuff used or refurbished (IME, “refurbished” has meant generally that the outer packaging was slightly damaged, and the retailer doesn’t want it). Trust me, it’s a beautiful thing.
And **Anne Neville ** is right. I buy my everyday clothes (casual/business casual) at outlet stores, Century 21, and Burlington Coat Factory, and even then, I buy clothes only two or three times per year.
I mean, really, why pay more if you don’t have to?
And if you *do * pay more, make sure it’s something that you’re going to keep for a long time. Things that I know that I’m going to wear/use for years, provided that I take good care of them, and they’re of such quality that they’ll hold up well for several years (say, certain dress shoes, or my recently-purchased laptop)? Yeah, I’ll pay more for that kind of stuff, and even then, only if there’s no other, more convenient way to get them cheaper.
Yep. And the numbers are absolutely mind-blowing.*
*Not meant to disparage those who go bankrupt due to medical bills, job loss, or any other reason that doesn’t include keeping up with the Joneses.
Online shopping for groceries can really reduce your weekly bill - supermarkets spend a fortune on their design and layout to tempt you into spending as much money as possible.
By shopping online you only buy what you planned, plus you’re less likely to grab small-yet-expensive impulse purchases on your way round. You can also take your time and plan your meals around a weekly menu, rather than trying to think on your feet about what to cook in four days’ time.
You pay $10 in delivery charges, but I reckon you save at least that by not coming back with heaps of crap you didn’t need (plus there’s no petrol costs etc).
Ladder your rainy-day fund CDs so that you have a CD maturing every few months. This way, if you have to access cash quickly, you lose a minimum (hopefully nothing) to the interest penalty.
Here’s a link with an explanation. It also links to a calculator.
GT
I haven’t read all the input, but we’ve had these threads before and they were chock full of good advice. I was in your shoes for a helluva lot longer than 24 years before the lightbulb went on. One of many pieces of advice I have is to plan for a rainy day, because sooner or later, it will rain. You can bet on it. And when it does, there’s nothing like a cushion to allow you to deal with the situation calmly without taking the first crappy job that comes along, trading your comfortable abode for a shithole, or tapping into your 401K just to make ends meet.
Go to the bank this weekend and open up an IRA. I dragged my feet on the 401K thing and now I’m playing catch-up. I always figured I could do it later. Stupid, stupid thinking.
Shop for good interest rates. I am so embarrassed that I kept thousands of dollars in a savings account that earned about 1% when I could have had it in a 5% account or a CD. Our CD matures next month and you can bet I’ll be looking around for the best rate. It’s free money!
**Personal finance-wise: **
I won’t slam it, but I don’t really like “want something? Buy used stuff.”
Almost everything “used” I’ve ever bought in my life has just meant I delayed buying a good “new” one a little while down the road. The “used money” was just lost money.
To me, that just sounds like someone trying to find a cheap way to still participate in the consumer cycle. You want to get off that cycle. Live small.
Also, saving $.50 on milk will help your weekly bills, but it will not help you BUILD WEALTH, which is what financial advice is really focussed on (at least once you get past the “get out of debt” stage).
**Investment wise: **
some day you will have money and you will have a chance to participate in the nextbig thing. This might be tech stocks in '99. It might be housing in '05. It might be a chance to own shares in an emerging country, or product.
It will seem like everyone you know has made money on it.
You will hear a million different justifications, “it’s different this time”, “it’s different here”, “this is a whole new world economic order”, “they’re not building any more land”.
You will feel like you are missing out, and by the time you finally get the nerve to buy in, it’s too late. And, if you had the nerve to buy in earlier, it still would have been too late.
Debt-wise:
Also, DEBT is a financial anchor. Like the guy said earlier, “stupid people pay interest. Smart people earn interest.” I have never paid ONE CENT of interest or fees in my entire life on a credit card. I have a 15 year mortgage because I bought a house which I could do because it was 1.65 times my annual salary.
When your house appreciates in value, that doesn’t mean you can just borrow against it. . .every cent you just borrowed against your house is money you WON’T have later, and more money than a cent.
Isn’t it “absolutely essential” a lot of the time? I make a good living but I need a car to get around here in the country. What options do I have? Do you mean lease a car? It would seem like saving the cash is not a common option??
The best financial advice I got has come from several places, and it comes down to Keep Good Records; assume that you’re gathering this information in case of some dire worst-case scenario like death or divorce. The information will be useful in other areas, such as loan applications and such, but you want to have everything just in case.
The usual records include:
[ul]
[li]Vital records paperwork, including birth, death, marriage and divorce records;[/li][li]A complete list of bank, credit card, investment and retirement accounts;[/li][li]Pension information, including VA pensions;[/li][li]Real-estate records including a copy of the deed and mortgage paperwork;[/li][li]Military records (if applicable); [/li][li]Social security numbers of all family members, including children; and[/li][li]Copies of wills, powers of attorney, living wills and health care POA.[/li][/ul]
The above information should include all family members, including children.
Make sure this information is accessible to the people who need it; one guide I have says not to put it in a safe-deposit box because those are sealed after death. (I’ll be happy to send a copy of this if anyone wants it.)
The other good piece of advice I got is to make sure that there’s a sort of slush fund available in case of an emergency specifically to pay household bills in case of emergency that isn’t subject to probate or divorce settlement. The guy who told me about this said that he’s had to deal with too many families who can’t pay the electric bill until the estate has been settled.
I apologize for all the doom-and-gloom, but most of this information comes from military sources which assume that those are circumstances which have a non-trivial chance of occurring.
Robin
My biggest advice is to avoid debt. IMO you are foolish to ever carry a credit card balance for purchasing consumer goods. I pretty much believe that (other than a house) if you have to finance something, you can’t afford it. Save up until you can pay cash.
When we were first married, my wife and I styled our life so that we could live on one of our incomes. Allowed significant savings and flexibility when she wished to stay home with the kids. Of course, we did not have as big a house (or mortgage) as our friends, travel or eat out as much, as nice TVs/cars/etc.
Since it hasn’t been posted here yet, I thought I’d quote this still valid advice:
Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Cars are sort of “tweeners” to me.
People pretty much have to go into debt to buy a home. You should try to control it as much as possible, but most would agree with me.
Also. . .NEVER go into debt for vacations, televisions, JetSkis, Wii’s. If you pay interest on these things, you are dumb. You don’t do them if you can’t afford them. If you borrow against the equity in your house to pay for them, you are dumb.
Cars, like I said, are tweeners. I COULD have paid cash for my last car. Instead, I tok out about a $15,000 loan, and I’ve been paying 5% while that $15,000 I left in an investment account has been earning about 7%.
They’re usually necessities. And, even if paying cash for them is better, it’s not so much better that you’re making a crippling mistake by not doing it.
I did something similar to this. I put my emergency cash into fixed rate investment certificates. But I didn’t ladder them over 1, 2, 3, 4 and 5 years, because rates are pretty low, and I was worried that I might need the cash sooner than that in the event of a real emergency; plus, that strategy assumes you have all your money available in year 0, whereas I was stocking it away as I earned it - I laddered them all in one-year certificates (in Canada, GICs) as I was paid every month.
Now I have $24,000 sitting in these certificates, or $2,000 per month comming due every month. If something should happen I could probably live off of that (just about) for a year or so, assuming I can cover the mortgage from other sources. I get a certain amount of protection from variation in interest rates, though obviously not as much as the 5-year laddering strategy.
Read Suze Orman’s The Money Book for the Young, Fabulous and Broke. Read it twice. Make your husband read it.
It’s brilliant. It’s uplifting. It’s straightforward. It will answer all your questions and give you a plan to live by. It includes all of the answers given in this thread (except “never ever pay interest” - Suze is a realist!) and backs it up with explanations.
When I was 24 I started thinking more seriously about my money. I skimmed this book, paid off my CCs and then bought a house. A few weeks ago (I’m 28 now) I just went and read the book again, cover-to-cover. I was stoked that I had been doing everything right so far, and now have a clear view of how I should proceed.
If and when you get the book, log in to her website and use the code from the book to create an account and get even more cool stuff from Suze.
FTR I do not work for Suze Orman. I just think she kicks major ass 