Financial Planning
Yeah, if you are careful you can play the system. But you only have to miss one payment by a couple of days and several months' woth of cleverness is wasted. Living without credit teaches you to manage your money so you are more likely to use credit sensibly.
1. Budget.
2. Pay yourself first - put money into your "rainy day" account, because rain will come.
3. Pay off student loans.
Those three things are essentially the keys to avoiding the kind of trouble I've dealt with the last year and a half.
2. Pay yourself first - put money into your "rainy day" account, because rain will come.
3. Pay off student loans.
Those three things are essentially the keys to avoiding the kind of trouble I've dealt with the last year and a half.
Quote:Original post by capn_midnight
Next, pay off your student loans ASAFP.
Wow. Just thought I'd say, that's way different from priorities in Australia. You just get a government loan, indexed to inflation. I probably won't pay mine off until I absolutely have to (if your income is above a certain level, they take it out of your taxes automatically).
To echo what Oluseyi said, pay yourself first. I bought this book, The Automatic Millionaire, 3 years ago after seeing him on TV and now I that am making enough to save some, I am saving aggressively. I learnt about the pay yourself first idea from it.
Now to tackle credit card debt and school loans. :(
Now to tackle credit card debt and school loans. :(
An introductory stock investment book might be helpful, or you can "learn the hardway" :)
Although the risk increases, I think it is really the only serious way to grow your money. You are young enough that you can afford the risk because you can make it up with income and wait out the periods when the market does bad. In those cases, just keep accumulating cheap stock.
I thought these books were descent intros:
"The Neatest Little Guide to Stock Market Investing" by Jason Kelly
"The Stock Market Course" by George A. Fontanills, Tom Gentile
Although the risk increases, I think it is really the only serious way to grow your money. You are young enough that you can afford the risk because you can make it up with income and wait out the periods when the market does bad. In those cases, just keep accumulating cheap stock.
I thought these books were descent intros:
"The Neatest Little Guide to Stock Market Investing" by Jason Kelly
"The Stock Market Course" by George A. Fontanills, Tom Gentile
Quote:Original post by DaBookshahQuote:Original post by capn_midnight
Next, pay off your student loans ASAFP.
Wow. Just thought I'd say, that's way different from priorities in Australia. You just get a government loan, indexed to inflation. I probably won't pay mine off until I absolutely have to (if your income is above a certain level, they take it out of your taxes automatically).
I'm going to let you guys in on a little secret, "indexed to inflation" is just a nice way of saying "2.1% APR". It's your government telling you "while we are devaluing your savings, we still expect you to pay the full value of your loans". Back in 2005, when inflation was at 3.5% in the US, I had a car loan at only 3.9%, and that was through Honda Finance of America, notorious for never running special deals. If you look closely, you can find places giving out 0% APR car loans. For a $15,000 car, that means you're slicing off around $450 in the first year, just because the government can't stop printing money. It's like cocainne to them, always looking for the next big high, never quite finding it.
The stock market is really a high risk endeavour, unless you pick bonds or something - but then the high gains aren't possible. You need to put time into it and then it only needs a huge terrorist attack and the market drops 40% or something...
In the UK, property is probably the safest bet for a longer-term investment. It all depends if you plan to invest a lot of time on your investments, or plan to use your time making the money in the first place. A simple high-rate bank account (where you aren't allowed to take the money out easily) is pretty good as long as you keep having money to put into it.
In the UK, property is probably the safest bet for a longer-term investment. It all depends if you plan to invest a lot of time on your investments, or plan to use your time making the money in the first place. A simple high-rate bank account (where you aren't allowed to take the money out easily) is pretty good as long as you keep having money to put into it.
It may sound tacky, but to a person fresh out of college with no major financial responsibilities (outside a student loan), I would suggest reading Rich Dad, Poor Dad. You probably won’t get any practical advice from the book, but might get a better insight if you are serious about being wealthy at a later age.
Again, no hard “advice”, but it puts you in a mindset to look beyond just your paycheck for sources of income and teaches the importance of building an asset pool (not just saving). If I had to do it all over again, I would have bought at least one property before I got married, and rented a portion out while I lived in the other portion (either a duplex or multi-room house). But at a young age you can do the same with paper assets or another small business (maybe something in software).
You can live well off by saving, but you probably will never be “wealthy” or free from work unless you develop a solid source of income outside of your paycheck. The best thing about paying yourself first is that after you develop a solid nest egg of assets, your wealth increases whether you work or not. This is a lot harder to do after you get a serious girlfriend/wife and/or have kids.
Again, no hard “advice”, but it puts you in a mindset to look beyond just your paycheck for sources of income and teaches the importance of building an asset pool (not just saving). If I had to do it all over again, I would have bought at least one property before I got married, and rented a portion out while I lived in the other portion (either a duplex or multi-room house). But at a young age you can do the same with paper assets or another small business (maybe something in software).
You can live well off by saving, but you probably will never be “wealthy” or free from work unless you develop a solid source of income outside of your paycheck. The best thing about paying yourself first is that after you develop a solid nest egg of assets, your wealth increases whether you work or not. This is a lot harder to do after you get a serious girlfriend/wife and/or have kids.
My brother is studying finance and he tells me that getting credit cards is a good thing. Use the credit cards and take on a meager amount of credit card debt, even if you can pay it off immediately. The credit card companies are trying to make a profit off of everyone that owns a credit card and they create "credit scores" to gauge how desirable you are to the credit card company -- you give them profits by paying off debts with interest. You want to have a high credit score. Create small amounts of debt (such as gas consumption or groceries) to build up your credit rating.
Chances are, later on in life you will want to get a loan for a car or purchase a house with monthly mortgage payments. These are not small purchases so you really want to save money. In seattle, the median cost of a family sized home has surpassed $500,000. That means people have to either be filthy rich or take out 30 year mortgages with big monthly payments or take 40 year mortgages with smaller payments, or take an adjustable rate mortgage and hope to either move or refinance before the rate jump. The point here is that a mortgage has an interest rate which is determined by your credit score. A slight decrease in your interest rate on a theoretical $500,000 mortgage over 30 years can mean tens of thousands of dollars in savings or unnecessarily wasted money, depending on your credit score.
Also, buy a house if you can afford it. It's better to put money towards something you already own and build equity on it (as long as the housing market appreciates) vs paying monthly rent for something you don't own. If you think you'll have trouble paying the mortgage payments and you're a single guy, get some room mates and charge them rent! Use their money to help pay off the mortgage and thus get additional equity on the house!
As for book recommendations, I recommend reading "The richest man in Babylon".
Chances are, later on in life you will want to get a loan for a car or purchase a house with monthly mortgage payments. These are not small purchases so you really want to save money. In seattle, the median cost of a family sized home has surpassed $500,000. That means people have to either be filthy rich or take out 30 year mortgages with big monthly payments or take 40 year mortgages with smaller payments, or take an adjustable rate mortgage and hope to either move or refinance before the rate jump. The point here is that a mortgage has an interest rate which is determined by your credit score. A slight decrease in your interest rate on a theoretical $500,000 mortgage over 30 years can mean tens of thousands of dollars in savings or unnecessarily wasted money, depending on your credit score.
Also, buy a house if you can afford it. It's better to put money towards something you already own and build equity on it (as long as the housing market appreciates) vs paying monthly rent for something you don't own. If you think you'll have trouble paying the mortgage payments and you're a single guy, get some room mates and charge them rent! Use their money to help pay off the mortgage and thus get additional equity on the house!
As for book recommendations, I recommend reading "The richest man in Babylon".
Quote:Original post by capn_midnight
I'm going to let you guys in on a little secret, "indexed to inflation" is just a nice way of saying "2.1% APR".
I'll let you in on a "little secret" - I know exactly what indexed to inflation means, And I still like it. I doubt I could have got a loan at that rate from anyone except the government - Didn't you say your loan was at 7.25%?
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