7 ms·

For someone who recently graduated and quite clueless about financial planning, do you have some resources to get started?

koolba 9y ago
The usual generic financial advice I give is: - Maximize every retirement vehicle offered to you (max 401k, HSA, etc). - Pretend that any money you sock away for retirement doesn't exist. This is best done with automated withdrawals so you never even consider it money in your checking account. - Learn to cook. This doesn't actually save much money at the individual level but is huge for families. - Set up separate accounts for expenses and savings. Most payroll setups allow you to automatically divert funds to multiple accounts. This lets you automatically put $X in your expense account and $TOTAL - $X in the savings account. Again, the idea is to never consider that money spendable. It goes into a lock box. - Shoot for a 50+% after tax savings rate. It sounds nuts but it's actually easier than you think. The key is to not bump up your expenses as your income increases. You might not be there when you first start out but if you're increasing earnings 5-10% per year you'll get there quite quickly (particularly in tech). - Never buy a new car. They're for chumps. - Never lease a new car. That's for the biggest chumps. - Once you've built up an 8 to 12 month nest egg of reserve cash, start allocating the rest in a diversified portfolio. Pick securities from the trading company that don't have transaction costs (large discount brokers usually have in house mirrors of popular ETFs for this). Stick on this path and you'll eventually be sitting on a decent nest egg. Plus if you've reined in your expenses, if you decide to go the founder route you'll have plenty of runway to pursue your ideas.
- smileysteve 9y ago
  > - Learn to cook. This doesn't actually save much money at the individual level but is huge for families. I'd say it can save a ton of money at the individual level and is likely much healthier, and often time as well (probably biased because I can passively cook because I understand the science of cooking) My example meal that is paleo friendly is grilled chicken breast and frozen vegetables; my dinners cost ~ $3/day that way. Add in rice or quinoa for about $0.30/day. If you're cooking more complex meals the savings or nutrition might not be as much - or if your grocery store is far away or expensive.
  - dkns 9y ago
    Any recommended reading on passive cooking? Sounds like something that would be really useful for me.
    - eru 9y ago
      Look up eg Sous Vide cooking.
    - smileysteve 9y ago
      Hmm. I haven't read anything about it; Some tools come in handy - George Foreman cooks both sides and shuts off at a temperature. A little experience teaches you when a chicken breast is juicy or drill - Oven cook timers (i mostly use the oven for fish/potato trays) are one of the most underrated and underused "automated" things that we've had for 50 years. - Typically hard to mess up covered or steamed vegetables or potatoes; they have a "natural" alarm; is the water overflowing or do you smell at all (the water is low). Use enough water that'll it'll evaporate as you turn the burner down.
  - BatFastard 9y ago
    If you really want to save money on food, just fast frequently, saves a ton of time too.
- arielweisberg 9y ago
  Avoiding new cars is not something I agree with. A new inexpensive Toyota Corolla will have cheaper financing, fewer miles, and a longer warranty and fewer years at the starting to get expensive to maintain stage. You also have to price in the true cost of an old car once it reaches the age of unreliability if you intend to drive into the ground. Just one failure on a road trip can result in expensive alternate transportation, towing fees, expensive and unreliable repairs, your time etc. Having a young reliable car has value and how much value it has depends on whether you have more money or time. Used cars are over priced IMO. There is an argument to be made RE trading in cars at 100k before you need to do the tires, brakes, plugs, transmission fluid either the first or second time. So many things aren't priced into cars correctly. Depending on how much you pay for mechanical work it's overall cheaper and lower risk and requires less of your time.
  - lotsofpulp 9y ago
    If you want to extract the most value, and you have multiple cars in your family with 1 car being not mission critical, then you should always buy new, keep up with maintenance, and use them until they’re run into the ground. As long as you have 1 car that someone doesn’t absolutely need, or at least everyday, then you have time to shop around when your oldest one breaks down.
  - eru 9y ago
    Just buy eg a three year old Toyota Corolla? (Only speculating. Out of personal preference I only live in places where you don't need a car.)
    - sjm-lbm 9y ago
      As a once-a-decade new car buyer, I think the problem with this strategy is the risk profile. There's a decent chance that the 3 year old car will be fine, but the risk is higher - and a lot of buyers that hold on to cars for a long time would view an unscheduled car purchase (due to a reliability issue) as worse than getting the very best deal on the purchase price. Buying a new car every other year is for suckers. IMHO, buying any car every 3-4 years is for lesser suckers. Part of how you get to the comfortable decade on a car is to buy new and take care of it. .. and, of course, this all goes out the window if you find cars interesting or exciting, and therefore want to buy nicer cars more frequently just because you enjoy cars.
- ball_of_lint 9y ago
  On these notes, you might take a look at the following: https://www.robinhood.com/ https://www.robinhood.com/ Robin hood is a free stockbroker. They make money from loaning money and collecting interest on leftover funds. https://www.mrmoneymustache.com/ https://www.mrmoneymustache.com/ Mr. Money Mustache is a blog about saving. He mirrors many of the above points and has a lot to share about how he reached an early retirement at 30.
- defined 9y ago
  > - Never buy a new car. They're for chumps. > - Never lease a new car. That's for the biggest chumps. Disagree on the leasing if you have your own company. The lease payments are all interest and deductible from your income. Sure, you don't end up with a car but if you do a 36 month lease, your new car is under warranty the whole time. I've seen too many people suffer from the false economy of used cars. If you are lucky (or a skilled mechanic), you can benefit, but if not, the repair expenses and vehicle breakdowns become a large drain. I agree that financing a new car is just a depreciation hole, but you need your wits to avoid being screwed over when getting a used car. You just never know what's been done to it.
  - danenania 9y ago
    Seems like you're asking for trouble from the IRS if you lease a car for personal use and call it a business expense no?
  - nilkn 9y ago
    > I've seen too many people suffer from the false economy of used cars Just get a 1-2 year old low-mileage CPO vehicle. It should still have the original warranty active. Ideally you should also target brands with great warranties like Hyundai (100k miles/10 years). This is as far as I can tell close to the optimal financial strategy for car ownership. Personally, though, I do buy new, and I pay cash so I never, ever have a car payment. I hate the feeling of paying off a car over years as it depreciates. I really prefer to just get it over with and then enjoy knowing that I totally own it, no strings attached.
- eru 9y ago
  Optimize your taxes, and invest in the lowest cost, most diversified funds you can get. (That's mostly index funds.) Optimizing your taxes can mean investing in your own home. That's the opposite of diversified, but in a lot of countries the tax advantages are just too big to ignore.
- BatFastard 9y ago
  Good advice, the cooking is fun if nothing else.
- nfriedly 9y ago
  This is an excellent comment, I want to second every single thing said here. To follow up this point: > - Once you've built up an 8 to 12 month nest egg of reserve cash, start allocating the rest in a diversified portfolio. Pick securities from the trading company that don't have transaction costs (large discount brokers usually have in house mirrors of popular ETFs for this). Here are a couple of simple, low-cost all-in-one options that get you that diversified portfolio without you having to think about it. Pick one: https://investor.vanguard.com/mutual-funds/target-retirement/#/ https://investor.vanguard.com/mutual-funds/target-retirement... https://www.fidelity.com/mutual-funds/fidelity-fund-portfolios/freedom-funds https://www.fidelity.com/mutual-funds/fidelity-fund-portfoli... There are plenty of others, but those are two that I'd recommend in a heartbeat.
jbeckham 9y ago
Absolutely. Dave Ramsey's approach is probably my favorite. Basically, don't buy it if you don't have the money for it. https://www.daveramsey.com/ https://www.daveramsey.com/
- AnIdiotOnTheNet 9y ago
  I'd say that isn't enough. Don't buy it unless you honestly believe that your life will be better for having bought it. Take the time and really think about it before making a purchase. You'll be shocked how much useless impulse buying the average person does.
  - volkk 9y ago
    Personally, it's so difficult for me to find out how to calculate value. I'm sure ultimately there is some formula thats perfect for me, but who the hell knows what it is. For instance--I've basically stopped touching my PS4, but this new game came out 2 weeks ago which I wanted to play. I figured, I'll probably get bored of it in under a week, but I bought it anyway. And of course, as predicted, I was bored within 1 week and haven't touched it. Granted, I got probably like 10-15 hours of gameplay out of it, but there went $60 + tax. Is the $4-6 an hour to play it worth it to me? I honestly have absolutely no idea. During the game, I had fun and lost track of time, but I didn't better myself or anything, and mindlessly passed time. I guess the philosophical debate of what is worth doing is left to another conversation..
    - eru 9y ago
      I guess at least you know that it was just entertainment, and didn't delude yourself. Not worse or better than watching a movie or reading a novel.
  - Veelox 9y ago
    I have found that Dave Ramsy is has really good advise if you are in debt, need to get out, and have no idea how to do it. I think it isn't very good advise if you are getting out of college and make 6 figures.
shimon 9y ago
Start with Scott Adams' financial checklist: https://www.mattcutts.com/blog/scott-adams-financial-advice/ https://www.mattcutts.com/blog/scott-adams-financial-advice/ Note the item about hiring a fee-based financial advisor. I hired one starting a few years ago even though I am pretty good at this stuff, but I think they're especially helpful for newbies to establish good expectations and habits.
- zip1234 9y ago
  I'm not sure it is clear what fee-based means in the article. There are some that get a commission based on the products that they sell. In other words, the mutual fund that they use they might get a cut of. A fee-only adviser is one who takes a certain percentage each year. This is the kind that you want as it is in their best interest to grow your account and they won't move your money unnecessarily just to generate commission. The ones that get commission based on products are making money in hidden ways, but they are making money. Much better to have it up front and out in the open.
  - eru 9y ago
    I thought fee-based means you just pay them a fixed fee you agree on up front? (And their interests are aligned insofar as they want repeat customers and you to tell your friends to use them?)
    - mercutio2 9y ago
      You are thinking of fee-only, which sounds very similar, but is vastly different from fee-based. Fee only is what you want. As it happens, Scott Adams appears to have meant the exact opposite of how he’s been quoted! Scott specifically meant to warn people off financial advisers who charge a percentage of assets. Fee-based as a label appears to exist purely to confuse unsophisticated consumers, by sounding so similar to the (good) fee-only label.
      - shimon 9y ago
        Good point. The intention (in my post and presumably the ones I referenced) is that the financial advisor should be paid only a fixed fee by her client and not be biased like a commissioned salesperson.
Veelox 9y ago
The other pieces of advice are all good resources. Something that I am learning is that sometimes the "financial planning" advice you see has the goal of maximizing $$$. Realize that it is your money and you can spend it how you want to. With that said, be realistic about the trade offs you make, you can spend $30 on food and $10 on coffee every day if you want or you can buy a $30k car in cash in three years if you eat on $10 a day[0]. Good financial planning allows YOU to make informed decisions about YOUR money. [0] ($30 (expensive food) + $10 (coffee) - $10 (cheap food)) * 365 (days in a year) * 3 (years) = $32,850 That is almost a Tesla Model 3 ($35k standard)
dv35z 9y ago
This is my condensed, actionable notes & advice: http://ro.vu/notes/finance/2014/how-to-build-and-maintain-wealth/ http://ro.vu/notes/finance/2014/how-to-build-and-maintain-we...
jonmb 9y ago
I recommend Ramit Sethi's book, I Will Teach You To Be Rich. Don't mind the corny title. It's full of practical and solid advice. And unlike many books, he gives you actionable steps to follow through with the advice. That's what makes the difference.
Torwald 9y ago
The guy at https://www.youneedabudget.com https://www.youneedabudget.com explained this stuff very well to me. But this was years ago, when his program was a bunch of emails. You may have to just check out the free trial and see if it is helpful to you.
clay_to_n 9y ago
Good resources already posted, but this is also worth reading as an intro to thinking about income + costs of living as it pertains to early retirement: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...
deleted 9y ago
[deleted]
Cymen 9y ago
Consider reading "Early Retirement Extreme" but s/Retirement/Financial Independence/g. Working towards financial independence can bring a wealth of benefits even before you reach it. There is also an active forum for the book.

koolba 9y ago

The usual generic financial advice I give is: - Maximize every retirement vehicle offered to you (max 401k, HSA, etc). - Pretend that any money you sock away for retirement doesn't exist. This is best done with automated withdrawals so you never even consider it money in your checking account. - Learn to cook. This doesn't actually save much money at the individual level but is huge for families. - Set up separate accounts for expenses and savings. Most payroll setups allow you to automatically divert funds to multiple accounts. This lets you automatically put $X in your expense account and $TOTAL - $X in the savings account. Again, the idea is to never consider that money spendable. It goes into a lock box. - Shoot for a 50+% after tax savings rate. It sounds nuts but it's actually easier than you think. The key is to not bump up your expenses as your income increases. You might not be there when you first start out but if you're increasing earnings 5-10% per year you'll get there quite quickly (particularly in tech). - Never buy a new car. They're for chumps. - Never lease a new car. That's for the biggest chumps. - Once you've built up an 8 to 12 month nest egg of reserve cash, start allocating the rest in a diversified portfolio. Pick securities from the trading company that don't have transaction costs (large discount brokers usually have in house mirrors of popular ETFs for this). Stick on this path and you'll eventually be sitting on a decent nest egg. Plus if you've reined in your expenses, if you decide to go the founder route you'll have plenty of runway to pursue your ideas.

smileysteve 9y ago
> - Learn to cook. This doesn't actually save much money at the individual level but is huge for families. I'd say it can save a ton of money at the individual level and is likely much healthier, and often time as well (probably biased because I can passively cook because I understand the science of cooking) My example meal that is paleo friendly is grilled chicken breast and frozen vegetables; my dinners cost ~ $3/day that way. Add in rice or quinoa for about $0.30/day. If you're cooking more complex meals the savings or nutrition might not be as much - or if your grocery store is far away or expensive.
- dkns 9y ago
  Any recommended reading on passive cooking? Sounds like something that would be really useful for me.
  - eru 9y ago
    Look up eg Sous Vide cooking.
  - smileysteve 9y ago
    Hmm. I haven't read anything about it; Some tools come in handy - George Foreman cooks both sides and shuts off at a temperature. A little experience teaches you when a chicken breast is juicy or drill - Oven cook timers (i mostly use the oven for fish/potato trays) are one of the most underrated and underused "automated" things that we've had for 50 years. - Typically hard to mess up covered or steamed vegetables or potatoes; they have a "natural" alarm; is the water overflowing or do you smell at all (the water is low). Use enough water that'll it'll evaporate as you turn the burner down.
- BatFastard 9y ago
  If you really want to save money on food, just fast frequently, saves a ton of time too.
arielweisberg 9y ago
Avoiding new cars is not something I agree with. A new inexpensive Toyota Corolla will have cheaper financing, fewer miles, and a longer warranty and fewer years at the starting to get expensive to maintain stage. You also have to price in the true cost of an old car once it reaches the age of unreliability if you intend to drive into the ground. Just one failure on a road trip can result in expensive alternate transportation, towing fees, expensive and unreliable repairs, your time etc. Having a young reliable car has value and how much value it has depends on whether you have more money or time. Used cars are over priced IMO. There is an argument to be made RE trading in cars at 100k before you need to do the tires, brakes, plugs, transmission fluid either the first or second time. So many things aren't priced into cars correctly. Depending on how much you pay for mechanical work it's overall cheaper and lower risk and requires less of your time.
- lotsofpulp 9y ago
  If you want to extract the most value, and you have multiple cars in your family with 1 car being not mission critical, then you should always buy new, keep up with maintenance, and use them until they’re run into the ground. As long as you have 1 car that someone doesn’t absolutely need, or at least everyday, then you have time to shop around when your oldest one breaks down.
- eru 9y ago
  Just buy eg a three year old Toyota Corolla? (Only speculating. Out of personal preference I only live in places where you don't need a car.)
  - sjm-lbm 9y ago
    As a once-a-decade new car buyer, I think the problem with this strategy is the risk profile. There's a decent chance that the 3 year old car will be fine, but the risk is higher - and a lot of buyers that hold on to cars for a long time would view an unscheduled car purchase (due to a reliability issue) as worse than getting the very best deal on the purchase price. Buying a new car every other year is for suckers. IMHO, buying any car every 3-4 years is for lesser suckers. Part of how you get to the comfortable decade on a car is to buy new and take care of it. .. and, of course, this all goes out the window if you find cars interesting or exciting, and therefore want to buy nicer cars more frequently just because you enjoy cars.
ball_of_lint 9y ago
On these notes, you might take a look at the following: https://www.robinhood.com/ https://www.robinhood.com/ Robin hood is a free stockbroker. They make money from loaning money and collecting interest on leftover funds. https://www.mrmoneymustache.com/ https://www.mrmoneymustache.com/ Mr. Money Mustache is a blog about saving. He mirrors many of the above points and has a lot to share about how he reached an early retirement at 30.
defined 9y ago
> - Never buy a new car. They're for chumps. > - Never lease a new car. That's for the biggest chumps. Disagree on the leasing if you have your own company. The lease payments are all interest and deductible from your income. Sure, you don't end up with a car but if you do a 36 month lease, your new car is under warranty the whole time. I've seen too many people suffer from the false economy of used cars. If you are lucky (or a skilled mechanic), you can benefit, but if not, the repair expenses and vehicle breakdowns become a large drain. I agree that financing a new car is just a depreciation hole, but you need your wits to avoid being screwed over when getting a used car. You just never know what's been done to it.
- danenania 9y ago
  Seems like you're asking for trouble from the IRS if you lease a car for personal use and call it a business expense no?
- nilkn 9y ago
  > I've seen too many people suffer from the false economy of used cars Just get a 1-2 year old low-mileage CPO vehicle. It should still have the original warranty active. Ideally you should also target brands with great warranties like Hyundai (100k miles/10 years). This is as far as I can tell close to the optimal financial strategy for car ownership. Personally, though, I do buy new, and I pay cash so I never, ever have a car payment. I hate the feeling of paying off a car over years as it depreciates. I really prefer to just get it over with and then enjoy knowing that I totally own it, no strings attached.
eru 9y ago
Optimize your taxes, and invest in the lowest cost, most diversified funds you can get. (That's mostly index funds.) Optimizing your taxes can mean investing in your own home. That's the opposite of diversified, but in a lot of countries the tax advantages are just too big to ignore.
BatFastard 9y ago
Good advice, the cooking is fun if nothing else.
nfriedly 9y ago
This is an excellent comment, I want to second every single thing said here. To follow up this point: > - Once you've built up an 8 to 12 month nest egg of reserve cash, start allocating the rest in a diversified portfolio. Pick securities from the trading company that don't have transaction costs (large discount brokers usually have in house mirrors of popular ETFs for this). Here are a couple of simple, low-cost all-in-one options that get you that diversified portfolio without you having to think about it. Pick one: https://investor.vanguard.com/mutual-funds/target-retirement/#/ https://investor.vanguard.com/mutual-funds/target-retirement... https://www.fidelity.com/mutual-funds/fidelity-fund-portfolios/freedom-funds https://www.fidelity.com/mutual-funds/fidelity-fund-portfoli... There are plenty of others, but those are two that I'd recommend in a heartbeat.

jbeckham 9y ago

Absolutely. Dave Ramsey's approach is probably my favorite. Basically, don't buy it if you don't have the money for it. https://www.daveramsey.com/ https://www.daveramsey.com/

AnIdiotOnTheNet 9y ago
I'd say that isn't enough. Don't buy it unless you honestly believe that your life will be better for having bought it. Take the time and really think about it before making a purchase. You'll be shocked how much useless impulse buying the average person does.
- volkk 9y ago
  Personally, it's so difficult for me to find out how to calculate value. I'm sure ultimately there is some formula thats perfect for me, but who the hell knows what it is. For instance--I've basically stopped touching my PS4, but this new game came out 2 weeks ago which I wanted to play. I figured, I'll probably get bored of it in under a week, but I bought it anyway. And of course, as predicted, I was bored within 1 week and haven't touched it. Granted, I got probably like 10-15 hours of gameplay out of it, but there went $60 + tax. Is the $4-6 an hour to play it worth it to me? I honestly have absolutely no idea. During the game, I had fun and lost track of time, but I didn't better myself or anything, and mindlessly passed time. I guess the philosophical debate of what is worth doing is left to another conversation..
  - eru 9y ago
    I guess at least you know that it was just entertainment, and didn't delude yourself. Not worse or better than watching a movie or reading a novel.
- Veelox 9y ago
  I have found that Dave Ramsy is has really good advise if you are in debt, need to get out, and have no idea how to do it. I think it isn't very good advise if you are getting out of college and make 6 figures.

shimon 9y ago

Start with Scott Adams' financial checklist: https://www.mattcutts.com/blog/scott-adams-financial-advice/ https://www.mattcutts.com/blog/scott-adams-financial-advice/ Note the item about hiring a fee-based financial advisor. I hired one starting a few years ago even though I am pretty good at this stuff, but I think they're especially helpful for newbies to establish good expectations and habits.

zip1234 9y ago
I'm not sure it is clear what fee-based means in the article. There are some that get a commission based on the products that they sell. In other words, the mutual fund that they use they might get a cut of. A fee-only adviser is one who takes a certain percentage each year. This is the kind that you want as it is in their best interest to grow your account and they won't move your money unnecessarily just to generate commission. The ones that get commission based on products are making money in hidden ways, but they are making money. Much better to have it up front and out in the open.
- eru 9y ago
  I thought fee-based means you just pay them a fixed fee you agree on up front? (And their interests are aligned insofar as they want repeat customers and you to tell your friends to use them?)
  - mercutio2 9y ago
    You are thinking of fee-only, which sounds very similar, but is vastly different from fee-based. Fee only is what you want. As it happens, Scott Adams appears to have meant the exact opposite of how he’s been quoted! Scott specifically meant to warn people off financial advisers who charge a percentage of assets. Fee-based as a label appears to exist purely to confuse unsophisticated consumers, by sounding so similar to the (good) fee-only label.
    - shimon 9y ago
      Good point. The intention (in my post and presumably the ones I referenced) is that the financial advisor should be paid only a fixed fee by her client and not be biased like a commissioned salesperson.

Veelox 9y ago

The other pieces of advice are all good resources. Something that I am learning is that sometimes the "financial planning" advice you see has the goal of maximizing $$$. Realize that it is your money and you can spend it how you want to. With that said, be realistic about the trade offs you make, you can spend $30 on food and $10 on coffee every day if you want or you can buy a $30k car in cash in three years if you eat on $10 a day[0]. Good financial planning allows YOU to make informed decisions about YOUR money. [0] ($30 (expensive food) + $10 (coffee) - $10 (cheap food)) * 365 (days in a year) * 3 (years) = $32,850 That is almost a Tesla Model 3 ($35k standard)

dv35z 9y ago

This is my condensed, actionable notes & advice: http://ro.vu/notes/finance/2014/how-to-build-and-maintain-wealth/ http://ro.vu/notes/finance/2014/how-to-build-and-maintain-we...

jonmb 9y ago

I recommend Ramit Sethi's book, I Will Teach You To Be Rich. Don't mind the corny title. It's full of practical and solid advice. And unlike many books, he gives you actionable steps to follow through with the advice. That's what makes the difference.

Torwald 9y ago

The guy at https://www.youneedabudget.com https://www.youneedabudget.com explained this stuff very well to me. But this was years ago, when his program was a bunch of emails. You may have to just check out the free trial and see if it is helpful to you.

clay_to_n 9y ago

Good resources already posted, but this is also worth reading as an intro to thinking about income + costs of living as it pertains to early retirement: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...

deleted 9y ago

[deleted]

Cymen 9y ago

Consider reading "Early Retirement Extreme" but s/Retirement/Financial Independence/g. Working towards financial independence can bring a wealth of benefits even before you reach it. There is also an active forum for the book.