Financial Wisdom

[philipbarrett]

2 best peices of financial advice I ever heard, from an economist no less:

"never invest in a depreciating asset"

"if you want to retire wealthy at 65 don't get divorced at 47"

[schrec]

Originally Posted by jimhaleyscomet

Have you ever heard of Dave Ramsey and Financial Peace?

His basic premise is to pay cash for everything and get debt free. It really is a path to Financial Peace. He has a radio show on talk radio, web site, and classes that are often taught through local churches.

A couple of our friends bought us a membership in FPU for a wedding present. It was one of the best wedding presents we could have received. We took the classes earlier this year and learned a lot. We are currently working our debt snowball, and have paid down about 3/4 of our revolving debt. By March/April we will have it all paid off. And believe me it was a huge chunk of money. The program works, and if you have issues with money, it is a good starting point.

[Meriden]

Originally Posted by philipbarrett

"if you want to retire wealthy at 65 don't get divorced at 47"

When I was studying sociology I recall an article that suggested that much of American social mobility was downward and happened to women during divorce.

But on to turning money into more money...

"The single best investment I have ever made was my MBA." ~ My wife.

Go to school with it.

http://nces.ed.gov/fastfacts/display.asp?id=77

[philipbarrett]

Originally Posted by Meriden

"The single best investment I have ever made was my MBA." ~ My wife.

1989, my wife was studying for her MBA at UD which was costing us all our savings & more. I lost my job and life got a little tough so she offered to drop the Graduate program and get a job. "**** no" I said, that's our only ticket out of this mess!

Paid off in spades...

[TwoSmokeDS]

"Do something you are good at, and do it well, and you don't ever have to worry about money" -- unknown.

[Fort Bend Rider]

There is no dignity quite so impressive, and no one independence quite so important, as living within your means.


Calvin Coolidge

[Butte]

Originally Posted by Fort Bend Rider

There is no dignity quite so impressive, and no one independence quite so important, as living within your means.


Calvin Coolidge

+1. It can work wonders.

That and being smart/shopping around first before those larger purchases. You figure out what you want, and you haunt CL like mad. It will always take time, but the savings you find in the end usually make it well worth the wait. Except for those few times when stuff just kinda falls in your lap. But that would be the exception, not the rule. I digress...

[mbrew]

I've worked with people who were in debt to help them get out, and I really didn't like it. Usually, by the time someone with sought help, they were in deeply and it was a very emotional and tough experience to work through. I hope some day to work with young folks starting out to help them learn some good habits.

You have taken an extraordinarily important step here in looking for support. We are inundated with messages telling us that we need to spend money and that we should own this or that. Talking to, and or listening to folks that have a different mindset than to spend everything they get is an important balancing point. Education does not equal competence with money. I've seen guys with accounting and finance degrees that made a good living, but were always broke.

Few among us can do without some type of spending control (you can read that as a budget) and in reality, I'd bet that all who have some success with money have at least a rudimentary system. They can be as simple or as complex as you wish. A very simple version might be to use x% of my salary for living expenses, x% for savings and x% for spending money. A regular and automatic savings program where the money comes out before anything else is the single most important part of every successful program I've seen. I don't know anyone that has success with money that doesn't practice that.

Dave Ramsey is good and if you use his program I can guarantee results. the Babylon book is an excellent read and would work into the reading program you described above. There are other good ideas out there too.

FWIW, I define success with money to be living within your means - taking care of your day to day expenses, having the ability to handle the foreseeable "emergencies" while saving something for the future.

I'd urge you seek out folks that have success with money on a regular basis, read about good habits when you can and to start a good savings program the first moment you can. Tomorrow is good, yesterday is better.

Good luck

[philipbarrett]

Originally Posted by mbrew

We are inundated with messages telling us that we need to spend money and that we should own this or that.

And we look around us & see "everybody else" with all the stuff we don't have. Like I try to explain to my kids, don't be fooled by other's possessions. That nice car? It's a lease with an 8K/yr cap & a high$ downpayment. That big home entertainment system? Financed at 14.9% APR.

Ever wondered why credit companies are so keen to push 0% for X month loans with huge financial penalties for not paying off in the prescribed time? Talking to a representative of one of those companies, he told me that around 75% of applicants don't even make payment #1 let alone pay it off before the time period!

[Meriden]

One of the secretaries at my wife's office bought a new minivan every year because she "needed it for her children." She was surprised to learn that my wife (and her boss) routinely gets 200k out of a car before trading it in.

Two researchers at Emory (I think) looked into household wealth and determined that most millionaires in America had a few things in common: self-employed, modest homes, used cars and free beer as I recall. Some professionals like physicians and attorneys had great debt in part because they learned a consumptive lifestyle in college and from their parents. They wrote a popular book on the topic called "The Millionaire Next Door."

I generally don't like folk financial recovery schemes and pop topic books although TMND and "The Wealthy Barber" are good looks at the what and how of the subject. An individual either has the where with all to education themselves and discipline to implement good personal financial management or they don't. A hook won't make it easier to do. One of my employees thinks that if she only believes and follows the advice of some guy in the media she will somehow recover from a quarter million dollars’ worth of uncollateralized debt. She doesn't realize that he, like the toothpaste advertiser, is just selling something. I think she needs to file bankruptcy and divorce her husband who doesn't work. At least she will be able to answer the phone. Lesson 1: Financial planners make their money selling services, books, etc. Brokers make their commissions on sales regardless of the success of the investment. Caveat Emptor.

An employer of mine in Arlington offered their managers personal finance training in the early 80s and I always appreciated what I learned. That information went into recovering my first wife from her debt (never, ever walk away from a mortgage) which was an experience that wiped me out in my 30s. Lesson 2: Never marry a person with debt.

[jimhaleyscomet]

Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery

– Charles Dickens in David Copperfield

Meriden is correct in saying the most (perhaps 90%) of financial planning folks get paid on commission and are often deeply in debt themselves. The Dave Ramsey program does not take a "percentage" of you debt/assets, accept commissions off of financial products, and you can be sure that he and the folks that work for him are either out of debt or working on it. Beware of the company you keep when seeking financial help especially anyone that is up to their eyeballs in debt.

You mentioned you are going to get "bonus" money otherwise known as a windfall. It is important to take a small percentage of that and use it for mad money. Then save the rest. Trying to sock away every cent usually just motivates us to spend more later. Also, many folks take a windfall and use it as a down payment and end up even more in debt then they were before they started. Beware of that behavior as well.

[Fort Bend Rider]

I guess I learned at an early age that I didn't like not having money in my pocket. My foundation was set by my parents, who taught me that you always put something back, no matter how small. In the early years, like most folks, I had to live from paycheck to paycheck. I didn't like it, but we all have to start some where. As time went on, I was able to put a little something in the bank, but I did not buy anything that I could not afford. If I wanted something, I saved up for it, then I purchased it.

Like most folks, I did have to finance cars and house, but before I purchased them I assured myself that I could comfortably afford the payments. When I purchased a vehicle, I bought what would fulfill my needs. I didn't buy a vehicle because it looked good, or had a bunch of bells and whistles. I also did not go out and keep buying bigger and bigger houses. As some have learned, housing is not always the best investment. I have lived in my house for 27 years, and now it is paid off. Sure it is not as nice as some folks with the newer homes, but guess what, it has air conditioning, heat, water, cable, flushing toilets, and I stay dry when it rains.

I don't really understand how folks get themselves in heavy debt. The one situation where I can understand it, is if it is because of a medical condition. In most other situations one should have some control over the issue. I guess I look at it this way, if my job didn't pay enough, then I would do what I had to do to get another job that paid better. If that meant going back to school then so be it. If I lost my job, and there wasn't any hope for getting a equal or better job locally, then I would start looking elsewhere.

Personal finance is actually pretty simple. You only have a specific amount of money coming in, and to stay debt free, you have to spend less than that amount. If it means going without something that I want, then so be it, I would rather do without the toy than to owe someone for something I can't afford. Life is tough and sometimes you just have to say "NO".

I may get some flaming from folks on this, but I have little sympathy for folks that get themselves in heavy debt, and can't afford the life style they are trying to live. If you can't control your credit card purchases, then cut them up. I assure you, if you only pay cash, you won't spend more than what you have in the bank.

[Meriden]

Originally Posted by jimhaleyscomet

Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery

– Charles Dickens in David Copperfield

Meriden is correct in saying the most (perhaps 90%) of financial planning folks get paid on commission and are often deeply in debt themselves. The Dave Ramsey program does not take a "percentage" of you debt/assets, accept commissions off of financial products, and you can be sure that he and the folks that work for him are either out of debt or working on it.

Sorry I didn't mean to mislead. The handful of financial planners I know are all doing quite well, not that they are representative of the group as a whole. As for Dave Ramsey, I know little about him, but it appears that his income comes from selling Financial Peace University and advertising time on his media programs.

Originally Posted by Fort Bend Rider

Personal finance is actually pretty simple. You only have a specific amount of money coming in, and to stay debt free, you have to spend less than that amount. If it means going without something that I want, then so be it, I would rather do without the toy than to owe someone for something I can't afford. Life is tough and sometimes you just have to say "NO".

I may get some flaming from folks on this, but I have little sympathy for folks that get themselves in heavy debt, and can't afford the life style they are trying to live. If you can't control your credit card purchases, then cut them up. I assure you, if you only pay cash, you won't spend more than what you have in the bank.

+1

I didn't get a credit card until my business forced me to.

A plug for "Voyaging on a Small Income" by Annie Hill. On the surface it is about sailing, but beneath it is about capitalism at it's most fundamental level.

www.amazon.com/Voyaging-Small-Income-Annie-Hill

www.amazon.com/Voyaging-Small-Income-Annie-Hill

and if you want a new idea, read an old book...
The 200 Millionaire

www.amazon.com/Extraordinary-Popular-Delusions-Madness-Crowds

www.amazon.com/Extraordinary-Popular-Delusions-Madness-Crowds

[philipbarrett]

Might I recommend Alain De Botton's "Status Anxiety?" An intelligent, witty and erudite antidote to the pressure to consume. Don't expect impenetrable philosophies from this philosopher, it's an easy and entertaining read.

Status Anxiety: Alain De Botton: 9780375725357: Amazon.com: Books

Status Anxiety: Alain De Botton: 9780375725357: Amazon.com: Books

As for the credit card - I'm an American Express guy. All the convenience but you have to pay it off every month.

[shanedman]

I just paid off my car in full. That makes me $300/month richer now.

[Anger]

Originally Posted by shanedman

I just paid off my car in full. That makes me $300/month richer now.

Congrats.

[kurt]

Originally Posted by shanedman

I just paid off my car in full. That makes me $300/month richer now.

Now for the kicker, how are you going to save it?

[jimhaleyscomet]

Originally Posted by shanedman

I just paid off my car in full. That makes me $300/month richer now.

I find that every month I go without a payment I like it better and better.

Congratulations!

[shanedman]

Originally Posted by kurt

Now for the kicker, how are you going to save it?

think im gonna set that money aside, or most of it, into a "fix-it" fund for future vehicle repair bills.

Going to be buying a truck within the next couple weeks.... once i have a truck, selling the car... once car is sold, buying a bike....
and once i have the truck and bike, which i will own and not have payments on, that extra money can go into a fund dedicated to keeping those vehicles running. Thats the plan in regards to that $300/month i will be saving.

slowly trying to get to a point where the saving money idea is simpler for me.

trying to take in all the advice i am getting from so many of you. Lots of good input, and i think its sinking in

BONUS: one really good point about paying off the car, when i went to pay the guy, i talked him into taking like $300 off what i owed him, since i was paying CASH.