Personal Finance Advice

[ellsbebc]

What materials (books, magazines, etc.) do you recommend for general personal finances? I'm a a recent college graduate, age 22, and started my first full-time employment this week. For reference, I am debt free -- no car payments, no school loans, nothing; therefore, I'm not looking for books to escape debt. I've read "How to Become an Automatic Millionaire" by Bach already. The next on the list is Ramsey's "Total Money Makeover".

 

[SkinnyGoomba]

IMO it's reasonably simple, at th very base of it you would like to see your assets increasing every year, that starts with saving which should be easy to do with no debt or expenses.

Remaining at no debt is nice, but IMO debt is a worthwhile tool to use if you can budget and behave yourself with a cc or other methods of leverage.

 

[Young88]

One local newspaper, from your town/city/region, one national, cause you should know what's going on. Everyday news, things that happen in world, country and your city are influencing your budget on so many ways. Most of them have also financial part, ads and so on.
Books- depends on your education (major).

 

[ellsbebc]

Having majored in math & finance, I understand the basic philosophy of spending less than I earn and grow my assets. I am speaking of ideas to plan for future, such as how much should I contribute to 401k since my company doesn't match anything the first year. I make between 40-50k. Is it best to contribute 10% my first year? Or possibly I'm overthinking it all and the questions I have must be directed toward a financial planner.

 

[SkinnyGoomba]

You understand compound interest, present value, ect, consider what you feel you will need for retirement and work backwards. Take advantage of incentives such as a match in the second year, ect.

 

[CYstyle]



Having majored in math & finance, I understand the basic philosophy of spending less than I earn and grow my assets. I am speaking of ideas to plan for future, such as how much should I contribute to 401k since my company doesn't match anything the first year. I make between 40-50k. Is it best to contribute 10% my first year? Or possibly I'm overthinking it all and the questions I have must be directed toward a financial planner.

It depends on if you have any debt, ie student loans or car loans, mortgage perhaps. Also take a look at fees and plans your company offers for the 401k plan.

 

[papa kot]

I grew up with no money. My family was so piss poor that I envied people who bought stuff at J.C. Penny. When I graduated, I ended up with $50K in loans and a job that paid $49K per year. What I am about to tell you won't make you rich, but, and you have to trust me, it will make your life enjoyable in in the nearest future.

Rule #1 -- learn to retire and to milk the tax code. This means you should be putting away into two types of retirement funds: The standard 401K and something Roth (IRA or 401K). Your current situation is awesome, as your 401K contributions will reduce your taxable income and as you're not making too much, you're allowed to contribute to Roth accounts where money will grow tax free. I recommend maxing out your Roth while you still can and starting from 10% into 401K. Increase the contribution to 401K by 1% per year.

Rule #2 -- rainy day fund. At least $5K first year given your income level. Then make sure that you have 6 months of living expanses stashed.

Rule #3 -- remember that your neighbors make you broke. A financially responsible person who makes $50K/year does not buy a $50,000 car. 95% of stuff people buy is nothing but crap for show. Resist the urge to spend money, especially if it is on the the items that do not appreciate.

Rule #4 -- discipline. Put your savings plan on automatic withdrawal. Set a monthly budget: income - bills - retirement - living expenses = savings. Fixing your monthly living expenses (as opposed to savings) will make your savings grow faster. Many people do the opposite by saving only a predetermined amount each month. I say that it is easier to determine who much you'll spend and then trow the rest into savings.

Rule #5 -- buy things that can be fixed. This applies everything starting from shoes to furniture.

 

[zielschuss]

Rule #1 -- learn to retire and to milk the tax code. This means you should be putting away into two types of retirement funds: The standard 401K and something Roth (IRA or 401K). Your current situation is awesome, as your 401K contributions will reduce your taxable income and as you're not making too much, you're allowed to contribute to Roth accounts where money will grow tax free. I recommend maxing out your Roth while you still can and starting from 10% into 401K. Increase the contribution to 401K by 1% per year.

Agreed. Taxes will only go up for you as you increase your income and the government eventually raises taxes to finance excessive spending.

Since you're not getting a company match and you have a reasonably low tax bracket still at your income level, I think you should be saving in a Roth IRA right now. Then, once you get a 401k match, put in just enough to get the full match and put the rest into your Roth IRA. 10% is a reasonable savings goal.

As for reading, there are some great blogs out there for young people who want to take control of their financial lives. This is a good one:

http://www.moneyunder30.com/

And there are many more...

 

[Hampton]

One local newspaper, from your town/city/region, one national, cause you should know what's going on. Everyday news, things that happen in world, country and your city are influencing your budget on so many ways. Most of them have also financial part, ads and so on.
Books- depends on your education (major).

It's not harder then what he wrote. I never read any books, always newspapers and that was it.

 

[Temudjin]

Take a hard look at what you want to achieve both personally and financially given a certain time frame. Write them down and then achieve it. Like everyone else, you'll adjust where you need to.

Try not to use your earned income to buy your elective material toys. Buy assets that generate revenue and use other people's money to buy them (finance). Rental property is one example of this type of asset, which is especially fruitful in an area with lots of job opportunities. Interest from financing is tax deductible as well as the expenses associated with running and acquiring rental property assets. Tax codes favor this type of investing behavior. The money you generate from those assets is what you'll use to purchase your "toys".

From your OP you sound like you're in great shape for a great start. Find a real life mentor who knows how to make money, and has already made it. Their financial wisdom is priceless. You'll learn more about real life business from them than any college campus. My own personal mentor here in Houston does not have a degree of any sort and is a multi-millionaire with his real estate developments and a few other businesses he owns not related to real estate. I've learned more from him than what I learned at business school at the University.

Good luck with your endeavors.

 

[gettoasty]

For those who do not have a 401k but a different retirement plan e.g. Simple IRA:

Simple IRA have a 2-year wait period it seems.
If I start my deferrals first year then change jobs the second year that offers a 401k plan; etc., do I have to wait the full 2-year period before I can rollover/take distributions? I may hit a 25% taxation it seems.

I am in similar situation as OP but with some debt from school. Funny enough I actually work for CFP...on top of that I think management purposely used a Simple IRA so to retain its new employees for at least 2 years if they choose to participate. What a joke. Matching also does not begin until end of 1st year.

The CFP briefly told me to start ASAP as the tax saving is beneficial as a lot of employees fail to realize the tax benefits and dwell too much on the "no matching" the first year or so.

I may just open up a Roth IRA at the bank or something instead first. It will not tie be down, but will also be NQ money versus qualified in a traditional IRA.

Thoughts? (did not mean to hijack thread)