What is Digg?44 Comments
- zirtbow, on 10/12/2007, -0/+115Man I hated clicking through all that.
1. For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.
2. It's worth refinancing your mortgage when you can cut your interest rate by at least one point.
3. Spend no more than 2 1/2 times your income on a home. For a down payment, it's best to come up with at least 20%.
4. Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.
5. Never hire a roofer, driveway paver or chimney sweep who is going door to door.
6. All else being equal, the best place to invest is a 401(k). Once you've earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.
7. To figure out what percentage of your money should be in stocks, subtract your age from 120.
8. Invest no more than 10% of your portfolio in your company stock - or any single company's stock, for that matter.
9. The most you should pay in annual fees for a mutual fund is 1% for a large-company stock fund, 1.3% for any other type of stock fund and 0.6% for a U.S. bond fund.
10. Aim to build a retirement nest egg that is 25 times the annual investment income you need.
11. If you don't understand how an investment works, don't buy it.
12. If you're not saving 10% of your salary, you aren't saving enough.
13. Keep three months' worth of living expenses in a bank savings account or a high-yield money-market fund for emergencies. If you have kids or rely on one income, make it six months'.
14. Aim to accumulate enough money to pay for a third of your kids' college costs. You can borrow the rest or use some of your income to help out when your child is in college.
15. You need enough life insurance to replace at least five years of your salary – as much as 10 years if you have several young children or significant debts.
16. When you buy insurance, choose the highest deductible you can afford. It's the easiest way to lower your premium.
17. The best credit card is a no-fee rewards card that you pay in full every month. But if you carry a balance, high-interest rates will wipe out the benefits.
18. The best way to improve your credit score is to pay bills on time and to borrow no more than 30% of your available credit.
19. Anyone who calls or e-mails you asking for your Social Security number or information about your bank or credit card account is a scam artist.
20. The best way to save money on a car is to buy a late-model used car and drive it until it's junk. A car loses 30% of its value in the first year.
21. Lease a new car or truck only if you plan to replace it within two or three years.
22. Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower.
23. Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance.
24. Don't redeem frequent flier miles unless you can get more than a dollar's worth of air fare or other stuff for every 100 miles you spend.
25. When you shop for electronics, don't pay for an extended warranty. One exception: It's a laptop and the warranty is from the manufacturer. - killinger777, on 10/12/2007, -2/+3926. Web Design classes are a waste of money.
- Vimes, on 10/12/2007, -1/+16Zirtbow, you are my hero.
- ersatzphi, on 10/12/2007, -1/+12So if a guy is just breaking six figures, he should only spend 250,000 on a home? That seems a bit low, in New Jersey that will buy you a shack, or am I just reading it wrong.
- cattar, on 10/12/2007, -2/+11I think it is saying that 98% of your investment spending should be for stocks, not all of your total earnings. It's just saying that younger people should put more money into stocks because they would be more adept at handling the risks vs. rewards as compared to other investment options.
- dolemite5005, on 10/12/2007, -1/+9I got to this, "Spend no more than 2 1/2 times your income on a home." and realized this advice is way out of date. How might one do that in an area where the median home price is $500,000? For 2.5x my salary I might be able to rent a shed in someones backyard.
- scottman666, on 10/12/2007, -1/+8Good article, but did there have to be 25 separate links?
- walterk29, on 10/12/2007, -1/+7Better link: http://money.cnn.com/2006/10/16/pf/easyway_25rules.moneymag/index.htm
- mianos, on 10/12/2007, -0/+6I love the laptop one:
"25. When you shop for electronics, don't pay for an extended warranty. One exception: It's a laptop and the warranty is from the manufacturer"
In my experience I have seen laptops fail more than anything else. I'm am sure other people's experience may vary but we have a pile of broken laptops much bigger than the pile of PCs. - dwwatk01, on 10/12/2007, -2/+8Yep. I'd say most people violate this one, especially the second part (I know I do):
4. Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.
It is just too easy now to get into debt. Everywhere you turn you are offered financing to buy now what you really cannot afford. - chocobomog, on 10/12/2007, -2/+6The advice is very sound and not out of date. The problem is people think they have to buy a house at 10x their income because that is how much houses cost in the area. The debt on that is insane! I know of a few silicon valley people who make really good money, but decided to buy a house that was 10x their pay with a no-money-down loan. That is massive debt and if everyone does that the economy will crash. When it does, that is when you use the money you saved by renting cheap to buy a house when it is finally within range. Better to save now and be debt free than buy beyond your means and pay for it for the rest of your life.
If you live in an area that has insane housing prices then SAVE YOUR MONEY by renting. Eventually you will be able to move to a different area (either for retirement or consulting online) and buy mansions for the same price as a lowly house in overpriced markets.
For the price of a decent-sized 2 bedroom house, I can buy a mansion fit for the governor in the state my parents live, which is exactly what I plan to do. - jasegler, on 10/12/2007, -2/+6If you can't find a house within 2.5x of your income then there are problems with your situation.
I moved to the Seattle, WA area last year and it was not a problem to hit that general rule.
Affordable housing was one of the go/no-go decision points for accepting my new job. And yes I have refused jobs in the past because the pay was too low for the cost of living in an area.
If too much of your income is going out as fixed bills your setting yourself up into a fragile financial situation. I know people right now who have the 100k household income and the 500k house.. And I hear them bitching about money all the time.. Retirement savings? right... They are lucky to get from paycheck to paycheck. If anything unexpected happens they could easily end up falling behind on mortgage payments and losing their homes.
On the other hand I know people who lost their jobs in 2001.. They couldn't find another job for multiple years.. It was tight with only one income and occasional contract work... They were able to keep their house, cars, etc because they were living within their means before they lost their jobs. In a fragile financial situation any adverse condition means a collapse of the house of cards. - MikeMacMan, on 10/12/2007, -4/+8Interesting stuff. The bottom line is to be cheap and don't buy things you don't need.
- subscribtion, on 10/12/2007, -1/+5No, you're absolutely right. I live in NJ (as I assume you do) and 2.5x your income really won't get you much around here, even if you make a better-than-decent salary. Anyway, it's all sound advice.
- wilf_brim, on 10/12/2007, -1/+5That's not what they meant. They are talking about asset allocation. I am 41. My asset mix should be about 80% stocks, with the remainder in fixed income securities (bonds, CDs). I'm a bit higher, because I have another defined benefit retirement.
The point is that the older you are, the less you should rely on the stock market. I remember back in the dot com bust CNN interviewed a couple that had to go back to work. They were in their 60s, and all of their invenstments were stocks. Very stupid. The younger you are the more you can afford transient declines in stock value. - aussia, on 10/12/2007, -5/+8"7. To figure out what percentage of your money should be in stocks, subtract your age from 120."
Um. Saving 98% of my income would leave me with pennies. This clearly wasn't written with young people or students in mind. - NanoStuff, on 10/12/2007, -3/+6#26 Save on bandwidth by blocking cnn.com
- grammarpolice, on 10/12/2007, -0/+3Kids, don't buy booze 4 times a week. If you have to drink more than 1 time a week then pre-game pre-game pre-game.
- Basketb926, on 10/12/2007, -3/+6He is saying of the money you've saved. Meaning that 98% of the $ you've saved should be in stocks. That does seem high though. Also, a 40 year old should have 80% of their savings in stocks? a 50 year old 70%. That seems WAYY too high. How about subtract from 70, or something like that.
- mianos, on 10/12/2007, -1/+4The concept behind that would be don't over-extend yourself on your first home. Once you pay one off you can go on to get another mortgage of similar size to make up the difference and a better place.
- honds, on 10/12/2007, -1/+3I live in Massachusetts and I'm from CT. A decent house goes for $500,000 in either state... and that's a decent one not a "great" one. Now, I won't give away personal details but I can tell you I don't make $200,000 a year.
- theOster, on 10/12/2007, -0/+2welcome to new york:
http://newyork.craigslist.org/brk/rfs/222925348.html
notice that the bathroom and living room are the same size (3'x3') but the wide angle makes it look HUGE!!! - miaow, on 10/12/2007, -1/+3not very satisfying advice.
27 : make a website and try and get people to click on the ads. don't do a list on separate pages cos it will infuriate the readers and they will give up. - charlietuna, on 10/12/2007, -2/+3Nobody with a blue collar job who lives in Long Island can meet all these guidelines.
- ReemonIJ, on 02/18/2009, -0/+1Great information thanks to the initial digger. Blessings ...
- cnowacek, on 10/12/2007, -3/+326) Plant a handful of rich seeds. You'll be sure to grow rich.
- JCaptainP, on 10/12/2007, -1/+1If you want to live in a “pricy” area, rent. Due to significant increases in property prices, owners have shifted their focus from rental income to capital gains. Additionally, with the help of current US financial institutions, there is a market for these million dollar houses; however, rent no longer corresponds to these prices.
Traditionally, rent is/was a little less than 1/100 of the total cost of the property per month. For instance a $100,000 property could bring in $1,000 per month. However, this is not the case for an $800,000 property which may go for $3,000 a month. So rent while the housing market is cooling. - fitzfan, on 10/12/2007, -2/+2"This clearly wasn't written with young people or students in mind."
It should read to find what % of your portfolio should be in stocks, subtract from 120, so if you are under 20 you should be 100% in stocks, no bonds, since you are young enough to take on more risk, but when you are 60 you should only have 50% in stocks, since it isnt worth risking your nest egg to try to get a little bit richer.
[edit] Dang, didnt see all the responses ahead of me. - unpopulardude, on 10/12/2007, -1/+1"23. Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance."
Haven't these people ever gotten onto priceline, orbitz or expedia for a last minute deal? I've gotten some astonishing things with 12-48 hours notice.
I'm also surprised at some of the missing things. Like:
26. Learn how to cook. It will cost about 1/4 to 1/3 of what you pay at the restaurant. Even things you don't cook, like that bottle of wine, will only be a fraction of the cost at home.
27. Don't live alone.
28. Marry someone who also responsible with their finances (or alternatively, don't marry a compulsive spender, someone with bad credit, or someone with no job).
And, I'm astonished that they missed this one about houses. They paid so much attention to homes and mortgages, how could they miss #29:
29. Don't buy a house with more square footage than you are likely to use. You'll probably furnish all that extra space, and you will likely heat it, cool it, and clean it. Either that, or it will fill up with stuff from Costco. - pineandpalm, on 10/12/2007, -1/+0These are all great suggestions. They are simple and make a lot of sense. I wish it were easy to follow them, as the numbers do look like they add up nicely.
Unfortunately in today's society (here in the States), things are not as they used to be economically. For younger people starting out, with a family or not, things are tougher now financially then we've faced in this country in a long time. For example, it is very difficult to live in an area where a job will pay you decently--as your living expenses and housing costs go up CONSIDERABLY with that pay (as ersatzphi pointed out above). If you have kids, you need to factor in good schools etc. (which often equates to not being able to live in the more affordable areas). Once you weigh in the good paying job, the expensive living situation to be within a reasonable commuting distance, and the good school, it's very difficult to have anything left over to live with--let alone take these steps suggested here to work your way towards 'becoming rich'.
My parents always talk about how things were the same back when they were starting out. But I'm having a hard time understanding how it is. In well paying markets, people were making $100,000+/year, buying nice houses in nice areas for around $100-150,000 or so and the average luxury car cost around $20-30k. Those numbers don't seem to 'inflate' accurately with the cost of living inflation that we've experienced in the past 15 years or so.
It will be interesting to see what happens with the inflation levels, real estate markets and salaries over the next few years as we start rolling down this hill we've been climbing. - unpopulardude, on 10/12/2007, -1/+0Sure. Let your dog do it. A long experiment by the Wall Street Journal showed this. They threw darts to select investments. When carefully analyzed, the darts did as well as the experts.
- Gardenhead, on 10/12/2007, -2/+1It seems like any sort of housing is uber-inflated now, at least in Chicago. I think by the time I'm ready to buy a house or condo the prices will be much lower. OTOH, I could see downtown getting even pricier, its hard to say.
- RandomGuySteve, on 10/12/2007, -1/+0besides living expenses, free money.
- CatsAreGods, on 10/12/2007, -4/+2I already do virtually all that and I'm not rich. Who do I sue?
- JCaptainP, on 10/12/2007, -2/+0This is a good tip, but you also don’t want to be the richest man in the grave. Be conservative/smart in most aspects of spending, but also splurge here and there.
- mianos, on 10/12/2007, -3/+1You are probably young. If you follow all that you will be. Keep it up.
- intanet, on 10/12/2007, -2/+0I agree, it is impossible to adhere to the 2.5X rule of thumb with respect to housing. In June I'll be graduating with a MS in Computer Science from Stanford, and my fiance will have her JD. We both already have offers, and we'll be making over $200K combined at the young age of 25. Yet $500K isn't enough for even a 1000 sq ft house in Palo Alto. I've heard of people buying houses at 10x their income in the Bay Area. The crazy housing market really makes it hard to save, but at the same time, I wouldn't want to live anywhere else but Cali.
- JCaptainP, on 10/12/2007, -2/+0If this article recommends investing in stocks I think that they should mention that a person needs to be somewhat diversified. This means investing in more than a handful of stocks. Just do this, get your dog to choose 30 stocks. Statistically you will be much better off. Seriously!!
- cattar, on 10/12/2007, -4/+0whoops, wrong reply
- kwojniak, on 10/12/2007, -5/+1If anything, a laptop purchase should make you buy the warranty more because the parts are harder to replace if something goes wrong, and being mobile, they have a greater chance of being damaged.
Also #22: "Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower." - sure doesn't apply when you're dealing with Apple products ;)
Just from those 2 bad pieces of advice alone, I wouldn't necessarily believe everything else. - mianos, on 10/12/2007, -6/+1delete me
- steal_apps01, on 10/12/2007, -11/+4Wow, when i first glanced at the story I thought I read;
"25 things to grow"
And I thought PENIS. - argoff, on 10/12/2007, -13/+2A better one,
1) get out of debt no matter what,
2) loose the house and rent before housing collapses,
3) buy gold like all hell will break loose, because the USD is in deep do do
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