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- technique, on 10/12/2007, -1/+16#1: Don't play WoW
#2: Buy a console, not a PC, for gaming
#3: $1 / condom is much cheaper than $800 / mo child support - PPoff, on 10/12/2007, -0/+12I like it because it offers 102 tips. 101 was simply insufficient. Dugg.
- jnosanov, on 10/12/2007, -0/+12From headline: "Why is it we never learn basic personal finance skills in school?"
Because schools are run and curriculums are established by the federal government, which has the worst financial habits of anybody. - chocobomog, on 10/12/2007, -0/+8The entire list is great, but the first 7 are the most important. Following these, while not always easy, will change your financial life.
1. Pay yourself first.
2. Spend less than you earn.
3. Pay your bills on time.
4. Avoid debt to the extent possible.
5. Set a budget. And live by it.
6. Set concrete goals.
7. Have an emergency fund.
#5 really affected me. My wife and I just picked up budgeting software and this entire year we thought we were following all of these rules, but as it turns out not following #2 negates following #1 and #7. It took a computer program to open our eyes.
Great list! - savingadvice, on 10/12/2007, -1/+9good fundemental list for those needing personal finance help
- Crosshare, on 10/12/2007, -0/+7This is one of the biggest things missing in high school education. Personal finance would be the most important class someone could ever take as a junior or senior. I went to a high school that replaced basic economics with a personal finance class and it's one of the best classes I've ever had. They would bring in debt/credit counselors to teach us the pitfalls of credit cards and so forth..... Once again great class to have.
- jtp8736, on 10/12/2007, -0/+6An emergency fund is only unrealistic if you don't set a budget and don't follow the guidelines under "frugality."
- chocobomog, on 10/12/2007, -0/+6I used Microsoft Money 2006. Since 2007 just came out, you can find 2006 for half price. It connected straight to our online bank account and let us know exactly what we were spending.
- chocobomog, on 10/12/2007, -0/+5"If you make $50,000 per year, they're saying that you can only buy a $125,000 house, which you would be lucky to get 1 room with."
Then you are living in a place with inflated real estate prices. Where I grew up, $125,000 will get you a very nice house (4,000+ sq ft). Where I live now, 125K will get me a closet. Needless to say, I'm saving my money to buy a house in a much cheaper market. Save your money instead of buying a house beyond your means. - blankman, on 10/12/2007, -2/+6A lot of these are unrealistic, such as "Never spend more than 2 1/2 times your income on a home." If you make $50,000 per year, they're saying that you can only buy a $125,000 house, which you would be lucky to get 1 room with.
Another pretty unrealistic one is "Have at least three months' income (some say six) in a high-yield savings account that can be easily accessed." Most people I know live from check to check and can't really just put aside 3 months worth of salary, unless they want to not pay any bills and not eat for 3 months. - somoose, on 10/12/2007, -0/+4The whole point of these tips is to help you NOT live from paycheck to paycheck. Yes, this means you'll either rent longer or buy a smaller home, but in doing so you'll be able to first get out of credit card debt and then start putting that 3 months' worth of salary aside. It also may mean giving up $5 lattes and 50" plasma TV's, but having control of your finances is much more relaxing!
- ramfordt, on 10/12/2007, -1/+5# 103 Ditch them $6 coronas... $2 40oz premium malt liquor is where its at
- edraven, on 10/12/2007, -0/+4@chocobomog
Which software did you use? - ScionAltera, on 10/12/2007, -0/+4I interpreted that advice as "put a little away each paycheck until you have 3 to 6 months worth of money saved up" instead of "put 3 to 6 months worth of money in a savings account right now, and keep it there". Even if you are living paycheck to paycheck, you should be skimming as much of that 10% off the top first thing before you do anything else with it. It'll hurt at first, but when you get laid off or injured or your apartment complex burns to the ground, you'll be glad you have that to cushion the fall.
If you can't afford to skim anything off for your savings, scrutinize your spending. Cut out as much as you can until you're earning more than you spend. If that's impossible, start searching for a better job and/or a raise. When you get that better job, don't make the obvious mistake and increase your spending to match the extra income. Keep a lid on it and put that extra cash away. - skotski, on 10/12/2007, -1/+5Most would be easy if No. 2 were possible.
- RajAtWork, on 10/12/2007, -0/+3Sorry. Schools are run by locally-elected school boards (at least in US). Federal gvnt gives money for particular programs.
- generalginjur, on 10/12/2007, -0/+3It depends on where you're looking to live. While the slums in some cities are still quite expensive, there are still more than enough examples of people trying to outpace the Joneses and simply (stupidly) think that paying an exorbitant amount for a house is logical.
As for having the emergency fund, that's kinda of where #2 comes into play. If you spend less than you earn, then that fund builds itself.
Most people, when they get over their entitlement issues and Jones-envy, can easily live within their means and not check-to-check, - Crosshare, on 10/12/2007, -0/+3@chocobomog
Inflated housing markets jump vastly from state to state. My cousin spent $40,000 less on a house in TX than I did in CO and his is brand new, with about 1000 sq ft more than my house which is 36 yrs old. His is also in a better neighborhood. Meanwhile we have Californians moving to Colorado and they think we're giving homes away. - chocobomog, on 10/12/2007, -0/+3@threepio
This one doesn't say it, but most lists include an exception for portable high-priced work-related equipment that costs more to fix than to buy new. Laptops, PDAs, professional cameras, etc., which are necessary for your job (and not solely for entertainment) definitely need extra warranties. - pabster, on 10/12/2007, -0/+3Great list.
Living below your means (spending less than you earn, consistently) is really the key to it all. - pwr4, on 10/12/2007, -0/+2100. Buy a hybrid?
Gas is going to have to get a lot more expensive to recoup the extra investment in your vehicle, even with the tax break. What about extra maintenance on a vehicle with two engines and a complex transmission! - w9thwonder, on 10/12/2007, -0/+2I would be poor if it wasn't for tip 102. Thankfully now I can sleep at night.
- chocobomog, on 10/12/2007, -1/+3Because many companies (and to some extent, the economy) profit from people who have no concept of personal debt. And then politicians choose to pander to those who up to their eyeballs in debt, the companies which may cause the debt, or people who follow these rules and wish to remain debt free.
- jtek99, on 10/12/2007, -1/+3Care to explain? It makes sense to me; mutual funds have sky-high fees, and stocks have a higher return over the long run, if you've got the time to wait, while bonds are lower risk for those who are retiring soon.
- weirdone, on 10/12/2007, -0/+2aren't T-bonds only a stronger investment during recessions?
- weirdone, on 10/12/2007, -0/+2I think this is more of personal preference. You can diversify your stock portfolio yourself if you want and you will reduce your risk to near the level of mutual funds. However, the real cost here is the time spent in managing your money yourself whereas with a mutual fund you're entrusting that to someone else.
If you're younger and looking to invest, stocks I think are the way to go. You will learn something about finance by doing it yourself. You'll save yourself some fees that mutual funds typically have attached to them as well. You might also have more time to manage it than say someone with a family to worry about. It also probably doesn't matter nearly as much if some of your investments don't work out as planned when you're younger.
@atgunning: Diversification can only reduce risk so much. It is a limit equation that will also hit the same amount of risk and then hit a wall where you can't go any lower. Having 350 stocks or 50, you're probably about the same risk-wise. You just typically don't want any stock of your portfolio being more than 5%, 10% if you REALLY like the company. At least this is what I have been able to read since I have started investing and it seems like good advice to me. - inactive, on 10/12/2007, -1/+2"30. Buy airline tickets as far in advance as possible. The cheapest flights are the ones the are bought at least two months in advance. For holiday travel especially, buy as soon as you can."
This is 100% FALSE, buying 2 month in advance will almost guarantee you a higher priced ticket. Airlines usually set a high price to catch the "2 month in advance" crowd, also they try to catch the "last minute" crowd, the best time to buy ticket is 1-2 weeks in advance. - cliffzdude, on 10/12/2007, -0/+1Extended warranty = HUGE profit margin.
Why? Remember an extended warranty is best looked upon as an insurance policy. Would you buy your car insurance from a company that socks away $.85 of every $1.00 as profit?
Nope...
I never, ever buy extended warranties. Sure, I've been hit with some big repair bills but, in the long run compare all my purchases going back ten years. Add up all the money I'd have paid out if I bought an extended warranty on all my stuff vs. how much I've paid out in repair bills. The net result? I win, by a huge margin. I've paid out far less money in repair bills than if I'd have bought extended warranties.
Some Visa/MC cards will double your warranty up to an extra year if you use their credit card to purchase your item, some debit/check cards do this as well. Keep your receipt, get with the credit card company and "register" the product just to be sure. Wham-bam, you just doubled my warranty for free. My buddy just had a projector lamp burn out on his DLP projector, visa just bought him a new lamp. Now that is truly priceless... - ahawks, on 10/12/2007, -0/+186 Save now. It doesn't matter if you're six or 60. You should be saving a little bit every month, aside from retirement savings. The sooner you start, the better.
87 Pay off high interest debts before you start saving. Earning 5% in your savings account isn't going to do much good if you're accruing 17% interest on your credit card debt.
So true, so true. I was going to invest in some CD's with a 5% return, and then I realized my motorcycle loan is 8%. Guess where I decided to put the money? :) - keitho, on 10/12/2007, -0/+1*insert monty python and quest for the holy grail monologue about how to properly utilize the holy hand grenade*
- dancpsu, on 10/12/2007, -0/+1With my company's health plan, it was $500 to start. Including hospitalization, prenatal, and a birthing class.
- chocobomog, on 10/12/2007, -2/+3or
#3: $1/ condom is cheaper than $6,000+ for one year's maternity/hospital bills. Although the outcome does affect rule #102 which is very positive. - TheDragonTony, on 10/12/2007, -0/+1This is mostly a good list, (although some of their advice is listed twice and some of it is contradictory buy a used car... get rid of your car). Here are some of the ones that I had a real problem with... though I should say that I am not a professional and these are all just my opinion.
4. A lot of student loan debt has a very low fixed interest rate... When I consolidated my student loan debt I got to lock in a rate below 3%... I get more interest than that from my savings account. A lot of people are in that same situation and for all of us it is beneficial to NOT pay off our student loans any faster than we have to.
12. IMO online college for the first few years is an awful idea, a huge part of college for a lot of people is the social aspect and you cannot get that from online college. Personally I think that anyone who goes to college should spend (at least) their first year in the dorms.
16. This is just stupid first off not everyone can be an engineer. Secondly, if everyone could be an engineer they wouldn't have 6 of the 10 top paying job slots. Major in whatever you want just have a career plan in mind, especially if you have a major like English or Medieval European Literature.
28. If you're going to buy a used car make sure that it is from a reputable place and make sure that you can get some type of warranty on it
32. Some products (like laptops) are worth getting the extended warranty.
66. Should stay "Don't try to pick stocks if you aren't going to put in the work to do it well."
71. Diversity is important in your portfolio... but I think that they are telling you here to be over diversified... it is too much work for most people (myself included) to keep track of at least 10 stocks in their own portfolio (let alone picking ten good stocks to begin with). If you are going to be this diversified you should probably have a professional handling your investments.
74. While borrowing from your 401(k) is a bad idea if you get a loan from your 401(k) (which you may or may not be able to do) you don't have to pay taxes on the loan until you actually withdraw the money... and the interest you are paying goes back to yourself.
80. Should read Max out the match in your 401(k) first, your Roth IRA second, Max out your total 401(k) and Traditional IRA after that.
82. If you have a good stock purchase plan where you get a discount when buying company stock it can be a good idea to have that be one position in your diversified portfolio... otherwise they are absolutely correct.
Retirement section missing: they should have said in here to plan on NOT having social security when you retire.
100. Hybrids are not a good way to save money, they cost a lot more than comparable cars in their class... buy one because it is good for the environment but not to save money. - oxyrubber, on 10/12/2007, -1/+2"#1: Don't play WoW"
True that... unless you are afarmer and you make more playing WoW than you would in the real world.
"#2: Buy a console, not a PC, for gaming"
Why? I like the PC's ability to "try before you buy" and I really detest the new EULAs for console-based online stores. A PC can easily emulate all of the old gaming consoles (NES, SNES, GameBoy, Dreamcast, etc). Granted, if you are sold a "gaming PC" from some PC builder, you will probably end up getting shanked for much more than it's worth.
"#3: $1 / condom is much cheaper than $800 / mo child support"
Very true. Even when you want kids, The $1 is a good investment to allow you to pick the time that is right for you to be able to afford to raise them. - nkthen, on 02/26/2008, -0/+1Another great site on personal finance:
http://www.easypersonalfinance.com - markingtime, on 10/12/2007, -0/+1And to Think that I almost did major in english... *sigh of relief*
- bdkosher, on 10/12/2007, -2/+3#1: Tithe
- Homunculiheaded, on 10/12/2007, -0/+1I agree with the housing thing, maybe if you live in the middle of the country (US) or the South. Good luck finding even a shed a commutable distance from Boston. Same goes for NY and SF. It's not about Keeping up with the Jones either, if you live in these areas then you know that there is nothing available for $150,000. And you can't really argue that 'well you should just move to the middle of nowhere' because the opportunities career wise are significantly greater if you life in these areas, not just in the variety of Jobs but also the areas for growth.
- diversionmary, on 10/12/2007, -0/+1I think I make around $82k right now, 2.5* 82k = Not even a condo where I live (Northern Bay Area, California).
I pay $1250/mth rent on a 1000sf house and that's a good deal. Once wifey is out of school, we're thinking about moving to Oregon. My salary wouldn't be as good though. - dolemite5005, on 10/12/2007, -0/+1This same list was posted about a month ago, it was just as obvious and lame then as it is now. Burried!
- warfang, on 10/12/2007, -0/+1@chocobomog
Paying yourself first means when you get your pay check you take a certain percentage every time and you save it for investments, ect... - jtp8736, on 10/12/2007, -0/+1This is very true. I laugh at people who go out and buy a brand new car and think they're saving money because it's a hybrid. I saved bundles by paying cash for my Toyota.
- roadtrippy, on 10/12/2007, -0/+1Don't use your debit card for everything. It's a bad day when you find out that drink you bought at the stop-n-rob for $1.07 overdrafted your account and that $1.07 drink became a $34.07 drink. Yeah, done that one a couple times...
- vrillusions, on 10/12/2007, -0/+0"30. Buy airline tickets as far in advance as possible."
that's actually incorrect in my experience. Earlier this year I went to Japan (from Ohio, USA). Started to look at airfare 5 months ahead and it was around $1200 - $1500. It stayed like that until about 1 1/2 months till departure date, then it dropped to $800. it's like that for a couple weeks before it started to climb again.. or the flight got full. YMMV.
I haven't read all of them yet, but one of the top tips should be "research before you buy". The internets aren't just for pron. There's plenty of sites to check prices on products, airfare, hotels, etc.
(edit: just noticed above comment about the same thing, still leaving here for the second part) - tuuky, on 10/12/2007, -0/+0"#1: Don't play WoW"
Man, that made me laugh really hard.
I think the reason you should play console games instead of pc's is that you'll probably have more need to upgrade your pc a lot faster when new games come out tha require intensive graphics support than your console game.
My personal favorite? #16 - Don't major in English... very funny and sad at the same time. - zydeco, on 10/12/2007, -2/+2You must not know anyone that had a baby. It's easily $10,000 to *start*, not even counting high-risk cases, C-section deliveries, or post-natal complications.
- atgunning, on 10/12/2007, -1/+1Being a former stockbroker, it breaks down like this: Stocks have a much higher exposure risk than mutual funds. If you had $10,000 in 2 companies, as opposed to $10,000 in 350 different companies, you will be less exposed to price fluctuations. The more places your money is, the less risk. That said though, bonds are considered low-risk due to the government guarantee of their face value.
I think what the article was trying to say was dont invest too conservatively when you are young, cause you will miss out on larger opportunities. - ahawks, on 10/12/2007, -1/+1
45 Never spend more than 2 1/2 times your income on a home. Know what you can afford and what you cannot.
... what do they mean? I make $50,000/yr. so I can spend $125,000 on a home? That sucks! - pwr4, on 10/12/2007, -0/+0Actually, you're mostly incorrect. It is definitely not 100% false or true. I work in Revenue Management for a major airline. More often than not, the original article's statement is true. It's basic economics, supply and demand.
- colinm, on 10/12/2007, -0/+0"Never spend more than 2 1/2 times your income on a home" doesn't work in the UK either: average house price[1] = £199,184 ($379,999). Divided by 2.5 = £79,674 ($152,005).
[1] - http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/html/houses.stm -
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