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![[image loading]](http://uk2.net/blog/wp-content/uploads/mooooney.jpg)
I'm going to have to manage my money for the rest of my life. I am so friggin excited! The revelation came when I accepted a student loan, looked at my budget, and thought "gee I have enough $$ for a ps3/tv!" But before I decided to decide to purchase it when I can, I really asked around in various places and thought about it ( here)
It started with that, grew into google searches and ended up full on budget-altering and note-taking. Now I'm kind of penny pinching, I want to invest all my money. I'm going to open up an account at a discount brokerage (roth ira and short-term) and invest small sums in carefully selected companies each month regardless of market price. (I think this is called dollar cost averaging) I'm going to have all my dividends reinvested and let these non ira accounts sit for at least 2 years.
I've got some questions for any of you who know something about stuff like this. They might be real stupid, and if they are, correct me:
1. When I get out of school and have to pay back my student loans, is it more prudent to liquidate portions of my assets and pay it all back immediately or leave them be and pay it back more slowly with job $$/other sources? Or is this just really situation dependent?
2. Where can I go to have somebody look over account terms, fees, all the legal text and what should I look out for?
3. How do taxes work? Or are they so complicated that I should hire somebody?
4. What's generally a good amount to have in the bank just in case?
5. Is there anything I'm planning on that is drastically wrong?
6. Any other money management tips would be much appreciated.
feel free to ask me questions. This is an area of my life I want to have under an iron grip, know exactly where it is and generally where its going.
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I read a book by Ramit Seti called I will Teach you to be rich, and it's advice is to never invest until you're fully out of debt. Actually, do yourself a favor, buy his book. It's delightful to read, both in value which is incredible, and in entertainment. He speaks to college students specifically. Do it, it's the best $10 you'll spend.
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Are you sure you are going to have enough money to invest in stocks while you are living on student loans? Doesn't make much sense to me to be considering how to invest your money when you are living in debt.
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Also, always have 2.5x your monthly expenses in the bank. (I wish I could do this. I'm working on it!)
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it'd be a really good idea to pay back student loans as quick as possible, interest is the god damn devil
taxes can be very case dependent, i know my family always has a friend who is an accountant do ours cause i wouldnt want to miss out on free monies the government has to give me.
personally ive never had less than 2k in the bank, but i think a good safe amount would be 500? maybe less if you figure emergency money can be tighter, it might be a good idea to make the amount what a months rent is actually. In case you're a silly music major who buys an iphone or something
i guess a good sort of money managing thing is, say you want to spend so much in a month obv rent is out of the way first, but then do all your shopping or as much of it as you can (for food) at the start of the month, or right when you get your pay check. Because all else fails if you have food and rent covered you arent fucked
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I'm in the same situation as you, now, so I'm no authority here... as for your #1, though, if you're talking about investments you're trying to collect interest on, you're almost certainly better off using that money to repay your loan now rather than try to collect interest - I really doubt you could make more than your loan would accrue. An exception would be some kind of benefit your employer pays you 1:1 on, like a 401k or health expense account.
However, you should try to keep a couple months' living expenses liquid (at least liquid enough that you can get it before your checking account runs out) in case of losing your job/medical emergency/your car explodes/whatever. You'd be better off paying your loan more slowly than open yourself up to an emergency situation where you'd have to borrow money at a high interest rate.
Also, having paid taxes many times, it's not hard at all. At least, if you have no dependents or business-related expenses to write off. Just make sure you have the right number of exemptions on your W-4 (Most likely "2" for you - one for yourself, one for being single with 1 job). Based on the number of exemptions you put down, a certain amount of each paycheck you get is automatically withheld (You'll notice on your pay stubs). The more exemptions you claim, the less money is withheld from each week's pay. However, at the end of the tax year, you owe the same amount in taxes regardless of whatever you put on the W-4.
For example, say you make $400 a week. If you put "0" on your W-4 you might have $200 withheld from each paycheck ($10,400 total withheld at the end of the year). If you put "2" on your W-4, you might have $100 withheld from each paycheck ($5,200 total withheld at the end of the year). When you sit down to do your taxes at the end of the year, you find out that you owe $5,300 total in taxes. If you had put "0", that means you get a $5,100 refund check and if you had put "2", that means you need to pay another $100. You pay the same amount regardless, but in the case you had put "0", the government held onto that $5100 for a whole year. (note: these $ values are totally unrealistic, it's just an example)
Some people like to take fewer exemptions so that they use taxes as sort of a savings account and get a big refund check at the end of the year. I think that's stupid - you'd be better off having the right amount withheld and putting that money towards paying your loans or investing ASAP. If you're the sort of person that would worry about blowing all your money as soon as you get it, you can direct deposit some of your money into a separate savings account so you don't accidentally spend what you're trying to save.
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On June 27 2010 15:15 Eiserne wrote:
I read a book by Ramit Seti called I will Teach you to be rich, and it's advice is to never invest until you're fully out of debt. Actually, do yourself a favor, buy his book. It's delightful to read, both in value which is incredible, and in entertainment. He speaks to college students specifically. Do it, it's the best $10 you'll spend.
yes that is good advice.
most student loans tend to be in the 7-9% range in annual interest rate. If by keeping your money in your investments you can do better than (9%)x(total_student_loan_number), then sure, but most cases, you'd want to pay back your student loans first.
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On June 27 2010 15:19 Divinek wrote:
it'd be a really good idea to pay back student loans as quick as possible, interest is the god damn devil
taxes can be very case dependent, i know my family always has a friend who is an accountant do ours cause i wouldnt want to miss out on free monies the government has to give me.
personally ive never had less than 2k in the bank, but i think a good safe amount would be 500? maybe less if you figure emergency money can be tighter, it might be a good idea to make the amount what a months rent is actually. In case you're a silly music major who buys an iphone or something
i guess a good sort of money managing thing is, say you want to spend so much in a month obv rent is out of the way first, but then do all your shopping or as much of it as you can (for food) at the start of the month, or right when you get your pay check. Because all else fails if you have food and rent covered you arent fucked
From what I understand, income from stocks that goes directly back into buying more stocks isn't taxed. it's only taxed when you start using that income on other things besides tax.
i think a good financial or tax advisor would charge like, 100 an hour. if you can afford it, it's great, because knowing all the little loopholes would save you wayyy more money than the 100 it took for you to talk to him
but if not, still just go on forums and ask around for the tax advice. you'll get the overall important ideas.
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1. When I get out of school and have to pay back my student loans, is it more prudent to liquidate portions of my assets and pay it all back immediately or leave them be and pay it back more slowly with job $$/other sources? Or is this just really situation dependent?
many student loans are 0 interest while you are in school, one you are no longer in school they tend to ramp up interest rates quite a bit. this means for instance if you loaned out 10000 with 12% interest after schooling (usually smaller total loan, but a larger interest rate than the typical student loan) and got through your school in four years, at the end of that four years, you owe 10000. if you pay 150 a month, at the end of the year you are looking at about 9300 dollars of debt. even though you paid 1800 you only paid off about 700. so larger than that monthly payments are good for living off of a steady income post school, but obviously because of the high interest rate the quicker you pay off a loan the better.
+ Show Spoiler +2. Where can I go to have somebody look over account terms, fees, all the legal text and what should I look out for?
Public accountants do this, tax law and finance law can help also, if you go to a school with a law school, you can try to find a Teachers Assistant or a Law student in grad school to help explain it, usually they wouldn't mind, the law students especially if you buy them lunch or something.
3. How do taxes work? Or are they so complicated that I should hire somebody?
It's pretty complicated, you pay based on your total income: a set amount + a percentage of everything above that amount. the more you make the higher the base amount and percentage, and then you also can subtract certain expenses, and there are multiple tax breaks for various activities. Hiring someone will take care of it, however buying (even if you do not use it, it's a tax write off) Turbotax software or something, and running it gives you an idea of everything that goes into it and if you can understand it, or get a law student friend to help you, you can do your taxes right there. The IRS has a website, as do pretty much every government agency and you can read more there.
+ Show Spoiler +4. What's generally a good amount to have in the bank just in case?
This is entirely dependant on your situation with housing, typical expenses, total debt ect. typically as you age. most money should go into CDs + Show Spoiler +(a CD is when you loan a credit union or bank your money and they garauntee a certain percentage extra after a certain period of time)
5. Is there anything I'm planning on that is drastically wrong?
Discount Brokerages can get you in some trouble if they aren't licensed, so always do background information on the company you are handing your money over, and don't be afraid to check records on government websites. they are there to help you. At your age, investments should be for the long term, and not a shorter term (2 years) if you plan on needing the money two years from now (presumably to pay off loans or such) you should look into safer more managable investment than the marketplace. goto a credit union and get an 18 month CD, interest rates are not too high, but most companies offer special deals at 18 month CDs, including being able to upgrade your rate if interest rates go up (netting you more money from that point on) and being able to deposit money into the CD once. Remember with CDs you pay a fee for early withdrawl, and if you don't withdraw the money when the CD is up, they usually automatically roll over into a new CD.
6. Any other money management tips would be much appreciated.
Pretty much read what i said above, and a diversified portfolio as a general economic rule, will "double" in value every 7 years. meaning if you invest perfectly every 7 years your money will double. clearly no one can invest perfectly though.
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to add to my answer to 6. if your employer offers to match your savings for retirement, do it! Do IT! DO IT! it's free money for you, just for saving it for later. If you start putting money into retirement funds once you can afford to save money away (don't live outside your means) you'll notice how much money you have 30 years down the road and be so happy you did. and then when you retire you will likely not have to worry about a damn thing financially.
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![[image loading]](http://i48.tinypic.com/5dl751.jpg)
When I saw "Money Ma" I was thinking of something completely different
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should buy an iphone imho
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Yup another blogger before you insists that your brand spanking new iphone4g is absolutely essential.
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On June 27 2010 15:07 KurtistheTurtle wrote:
3. How do taxes work? Or are they so complicated that I should hire somebody?
Generally, as far as investment goes, the IRS only taxes you on your dividends/interest or your realized gains (or losses, as case may be). Another way to think about it is they only tax you any time there is a cash transaction. Your company pays out dividends? Thats cash in your pocket--taxable. You decide to sell a stock at a gain? Thats cash from your sale in your pocket--taxable. However, do note that if you do not sell your stock, even if it is worth 100 times what you bought it at, it's not taxable. The moment you sell it, you get cash and it's taxable.
Also keep in mind that your GAINS are taxed, not how much cash you get out of it. That means if you bought it at $100, and sold it at $120, you are taxed on your $20 gain portion. Likewise, if you sold it at $80, you can take a loss of the $20 on your tax return (this is capped at $3,000/year). For long term gains (investments held > 1 year), the tax rate is either 0% or 15%. For short term gains (<1 year), your tax is your ordinary income tax rate. For dividends/interest, the tax rate is either 0% or 15%. The reason why there is 0% or 15% is based on what your overall income is (so including things like your salary, business income, etc). If you make about $34k or less, it's 0%; if you make $34k or more, it's 15%.
However, with that being said, any investments you put into a non-roth retirement account is effectively tax deferred. That means, any gains, losses, or dividends you would ordinarily pay taxes on is not taken immediately by the IRS. So you could in theory trade your account every single day of the year and make a ton of money, and it won't be taxed. The caveat, of course, is that because it is a retirement account, you can't take it out until you're 60 (there is a 10% penalty, in addition to your ordinary taxes if you take it out early).
If you put it into a Roth account, you effectively pay your taxes beforehand and will not be taxed on any earnings you make in the account. Even when you take out your distributions at 60, you won't be taxed. The penalty for withdrawing early is also 10%, but only applies to any money that you've held in the Roth for less than 5 years. That is, if you put 5k into your Roth now, you can take it out in 5 years without the 10% penalty.
PM me if you want any further information from the tax side or even financial management side. There's a ton of info out there and it's difficult to filter it out.
Disclosure: I'm a CPA.
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Oh, and relating to investments, you have to first think about why you want to invest. This affects what timeline you are looking at, how much risk you want to take, and your overall investment strategy. Is this savings for your retirement? Are you looking to get rich quick? Is this for your first down payment on a house? Lots of very different scenarios with lots of different investment strategies. Find a purpose first before putting your money in.
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On June 27 2010 16:34 Caller wrote:
should buy an iphone imho
hahaha
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IIRC Donald Trump had some strategy or system he advises people with debt who want to get into investing use. I don't know it myself but it was in one of his books and I overheard my friend talking about it - maybe you can look that up, I'm sure it involves partitioning your regular income or something. Either way I'd listen to gchan.
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This is weird , you went from wanting to splash all your money on some PS3 and a new TV to now wanting to invest in stocks.Is that money burning a hole in your pocket or something.
.Just spend the money frugally on living expenses.
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On June 27 2010 21:33 iPlaY.NettleS wrote:
This is weird , you went from wanting to splash all your money on some PS3 and a new TV to now wanting to invest in stocks.Is that money burning a hole in your pocket or something.
.Just spend the money frugally on living expenses.
It isn't weird at all, some people just have different thought processes that drive their priorities. Happens to me all the time, I will work overtime or have money left over from expenses and say to myself "I have extra money, I can go ahead and blow this on some fun stuff for a change.". Then I actually think of something I would like to have and check into the best way to go about purchasing said thing. By the time I'm done I look at what I will be spending and think about the impact of that money on long term goals and that's the end of that.
@Kurtis in regards to1: I think your decision should come down to how ambitious you feel. The more drive you have the more you will probably want to take risks. Risks are better taken early on when you don't have as much to lose, and have more time to recover. There's a big difference between a 25 year old having to start back up from scratch as opposed to a 35 year old with a family.
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Thanks for the advice. I checked out Sethi's website, wow, like a fountain of common sense. I'm buying his book tonight. I'm going to start trying to make $$ online (selling stuff & ad revenue) and pay back one of my student loans before I get out of college. I'm tightening up my budget even more and I'm going to at least pay down my interest until I get out of college.
gchan, I copied & pasted your response into a wordpad file. I'm probably going to use every year for the rest of my life unless i memorize it lol
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TossFloss
Canada606 Posts
1. Keep your portfolio diverse. Do not invest more than 15-20% into a single company.
2. Your broker is your enemy. He makes money on a per-transaction basis. Don't believe his lies. Make sure you get a load down on the per-transaction fees so that you are not eaten alive by them.
3. Lots of older books talk about investing for dividend. There used to be a time when dividends were very popular. But that's no longer the case.
4. Keep 3 months worth of living expenses in the bank.
5. By the time you graduate, you should have more experience investing. Contrast your typical % return from investing with the % interest rate of your student loan.
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if you are in college, i suggest you not worry about investments and focus on your studies. 10% is considered a good investment. 20% is considered an amazing investment. That means if you start with 1000, in a year, if you have 1200, you've done great! I don't know how much you are starting with, but it probably wont be that much. So that few hundred bucks you MIGHT make, is not worth you doing "less" well in school.
focus on your grades and invest later.
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TossFloss
Canada606 Posts
On June 28 2010 09:16 TunaFishyMe wrote:
if you are in college, i suggest you not worry about investments and focus on your studies. 10% is considered a good investment. 20% is considered an amazing investment. That means if you start with 1000, in a year, if you have 1200, you've done great! I don't know how much you are starting with, but it probably wont be that much. So that few hundred bucks you MIGHT make, is not worth you doing "less" well in school.
focus on your grades and invest later.
The investment learning experience itself is substantial. Also, doing something well does not mean you have to do it to the exclusion of everything else.
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I agree. Investment learning experience is very important. At least for me, when I first started to invest, I would spend so much time worrying if my stocks went up or went down throughout the day, I couldn't concentrate. I'd feel sick to my stomach when I check in the morning and saw my stock feel 5%. Now that I've gained more experience, I realize that this is just facts of the market and I don;t let it get to me. But it definitely affected my performance at school a bit.
Also, investing take a lot of time. Fundamental analysis, you need to know whats going on all the time, and know how it might affect the market. technical analysis, you could read hundreds of books. If you just do whatever floats your boat, expect to lose money lol. but thats my opinion.
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I went to borders but didn't actually end up getting that book. An employee helped me and they supposedly had one in stock but neither of us could find it, but I did get another one I was planning on which was reccomended to me via pm. And I realized that:
1) I should get experience as soon and cheaply as possible. I wasn't placing a value on my own brain as an asset. I've been using my economics courses and learning all kinds of new terms and developing my own stock investment strategy over the past week. It'll be another two months before I'll have a realistic amount of money to buy stock so by this time it'll work or I'll know whats broken and fix it.
2) I should look for opportunities which I can pursue right now. I've already started drafting plans for a potential asset which wouldn't cost me more than $20 + spare time in a year. And it will be fun either way.
3) I'm gonna need a lot more technical books and to find a mentor-like person who I can ask questions.
I also learned about dutch ovening today. who knew
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money is total shit... when you have it yoy have to constantly thibk of what to do with it, when you dont have it, getting sime is huge worry
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even prior to my sudden interest in financial intelligence I've always thought money is a means of being able to do the things you want. I don't even know what you mean you can't think of what to do with it
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On June 28 2010 14:51 JohannesH wrote:
money is total shit... when you have it yoy have to constantly thibk of what to do with it, when you dont have it, getting sime is huge worry
spoken by someone who doesn't have any.
money isn't everything but it is financial freedom. To be able to buy things without having to worry is a great feeling.
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To not have to worry about finding money to buy groceries or pay your credit card bill is a great feeling
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If you think investing in stocks is a good thing to do when you are living off loans then you should play a stock market game instead. Pretty fucking dumb to risk your money to learn and get experience when you have no money. And its not like you can invest a substantial amount at this point for it to have any benefit for the risk.
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On June 27 2010 15:07 KurtistheTurtle wrote:
4. What's generally a good amount to have in the bank just in case?
6. Any other money management tips would be much appreciated.
4. A great amount of emergency money to have is 6 full months salary. This takes 10-15 years to save up, so it's not too much per weekly paycheck. These are for big emergencies you may have later in life. If you begin to put away emergency savings now, when you really don’t have any emergencies that may come up, when you’re in the position of owning a home, having a full time job, maybe even a family, you have a base already of emergency money so you don’t have to start from scratch.
It may sound like too much, but my parents learned the hard way. They had several thousand dollars saved for a housing renovation. Then my dad's union went on strike for 8 weeks. They tried to live off the renovation savings, but it wasn't enough. In that time, with living expenses, insurance, and mortgage payments they fell so deep into debt that they declared bankruptcy less than a year later. I grew up with a lot of money problems. I watched the family van get repossessed and the bank foreclosed on the house I spent most of my childhood. These were real emergencies that a good emergency fund could have made MUCH easier.
6. Keep track of everything you spend and work it into a monthly budget. Prioritize what you really need with savings for food, housing, a vehicle, and other needs. Spreadsheet programs like excel make budgeting a million times easier than previous generations. It's like pulling nails at first, especially with assuming everything is more expensive than it is, but after a few hours of negotiating values with yourself you will have a template that lasts a long, long time!
Also, when saving money, make sure you're saving it in the right place. Any amount over $1000 needs to be in a money market or interest-bearing checking. Any amount over $3000 needs to be in a mutual fund. Interest is a wonderful, wonderful thing...just make sure your money is somewhere you can immediately access.
Credit cards are more trouble than they're worth. Everything that you used to need a credit card for you can also use a debit card. Go with them.
Also, start putting miniscule amounts of money away for retirement. $10-$20/paycheck. You would not believe the number of people in their mid-thirties that wished they did this!
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On June 28 2010 14:51 JohannesH wrote:
money is total shit... when you have it yoy have to constantly thibk of what to do with it, when you dont have it, getting sime is huge worry
lol u got a lot to learn buddy
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Thanks for the answers. I've ordered a bunch of books at ridiculously low prices (just had to trade in an old textbook for a class I switched out of) so I'll be reading through those soon.
Basically, investing w/ student loan money is a dumbass idea unless you can make a guaranteed 20% with no risk. In that case I should be taking out as many loans as possible.
My focus has turned to my organization and time management along with personal finance. I went out, bought a personal planner and organized all my financial files, online accounts, etc (this was like 15+ hours in the past 2 days). I set to-do lists and tasks for each day all with the ultimate result of being done at ~5-6 and making extra $$ on the side. Weekends off. Basically I make my own 10-5 job when I'm not working. I've learned that if I give myself set amounts of time to do things (like write an important paper in 24 hrs ^^'') I'll just somehow know exactly what I need to do and not dawdle around. If I give myself extra time, I'll actually get less done. Weird, but I've come to realize its how I am.
I have a new question. As a full-time college student, what are some ways I can make money on the side? I've got some answers I'd like to share but please let me know if you think of anything else or have other related advice
1. get a job (duh)
2. sell things online (ebay, craigslist, etc)
3. Freebie Trading (time-consuming & chump change but a dollar is a dollar)
4. Affiliate marketing (haven't explored this yet)
5. Start a website (in the pipeline, I'll get around to this when I have time)
6. Odd jobs
And more specifically, what are some ways I can do it with my remaining 1.5 months of summer? My plan right now is to put up flyers at local grocery stores advertising me to mow lawns, and another one involving house-sitting flyers (I've got references and I'm an eagle scout so its a matter of getting them to call me and scheduling it)
I'd also like to get better at negotiating, networking and figuring out opportunities. Even with just a little bit of research and practice, I have kind of a filter through which I view situations now and react accordingly. It's different than just social aptitude, its like a subconscious thing but I'm very aware of it. Ramit Sethi's website is a great place for that, but its in a distinctly business setting. If you've gone through a similar process, how do you recommend I do this? Any other good resources on this?
I might make a new blog. My quest to buy a ps3 is turning out to be self-improvement month.
Oh, one other thing. My thirst for knowledge somehow turned back on. The reason why is still beyond me, maybe its just because I'm starting to connect everythign I've ever learned, but I've been missing it since...4th grade. I remember the first day I genuinely didn't want to go to school. But now I'm looking around for free classes and seminars to attend, new opportunities to learn things...theres SO much I want to know. I go through such massive amounts of information each day but I can't remember all of it. I need a system. This isn't school anymore and I'm so friggin excited
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EPT
