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Jason
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09-03-2009, 08:35 PM
Post subject: ***OFFICIAL*** Bankroll Management For Real Life, Not Poker
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#1 (permalink)
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Full House
Join Date: Dec 2004
Location: TN
Posts: 883
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A spin-off from another post I made, let's talk about good ideas on building wealth, saving money, and handling money. I'm a big advocate of Dave Ramsey's program: the Total Money Makeover. He has 7 steps:
Step ---> Goal
Step 1 ---> Emergency fund of $1000 in the bank not to be touched except ONLY for emergencies
Step 2 ---> Debt Snowball - pay off all debts smallest to largest except for the house
Step 3 ---> Fully funded emergency fund of 6 months of bills and expenses not to be touched except ONLY for emergencies
Step 4 ---> Put 15% into retirement fund (Largecap, Midcap, Overseas, Aggressive Growth) & ROTH IRA's
Step 5 ---> College fund for the kids with an ESA
Step 6 ---> Pay off the house
Step 7 ---> Build wealth - have fun, invest, and give
a) Enough money to pay bills (break even) off interest (assumes 08% return)
b) Enough money to make comparable income off interest (assumes 08% return)
I'm almost half-way through step 6. I hope to have my house paid off in the next 3 to 5 years which would have it paid off in less than 11 years from the day I bought it. Then it's time to build wealth!
Some other thoughts: NEVER EVER EVER use credit cards. Don't fall into the trap that EVERYONE needs a credit card - STOP making banks rich! If you can't afford it, don't buy it. Don't buy new cars and save up cash to buy any vehicle - drive a $1000 beater if you have to. Cars go down in value VERY quickly. Don't fall into the trap that EVERYONE has a car payment. Don't run up tons of student debt. Save up or work as you go. Your wealth is your greatest income building tool. Either get a nice high paying job or get several small paying jobs and pile up the cash. Clip coupons. Limit eating out. SELL STUFF! Use EBAY, Craig's List, or have yard sales! I'll think of other ideas later.
Your real life bankroll is a lot like your poker bankroll, when you start off, it seems very small and like it will never grow, but if you stick with it, it will SPIRAL towards wealth similar to how good poker players spiral up the stakes from $2NL to $200NL. By making bad decisions, it's a lot like all the bad players who take shots and constantly make bad decisions and wonder why they keep getting knocked down or think it's rigged.
The average millionaire is not the flashy athlete or Hollywood star. The average millionaire clips coupons, drives a used car, and doesn't borrow money. It is usually someone like your next door neighbor who you wouldn't even think has over a million dollars.
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- Jason
 
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spoonitnow
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Straight Flush
Join Date: Sep 2005
Location: IRC Chat Room
Posts: 5,406
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No strategy in the commune wtf are you doing
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Quote:
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Originally Posted by Ripptyde
I only have 2 simple rules when I am coaching a new student.
Rule # 1: don't ask questions
Rule # 2: don't ask questions
I have no interest in discussing strategy with a protege'. Your job is to remain quiet and listen. I have a very systematic approach that I will share with the right candidate and I promise that I will turn you into a force of nature and show you elements of the game of poker that you never knew existed.
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drmcboy
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DrButtInski
Administrator
Join Date: Aug 2004
Posts: 9,601
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Nice post.
I do think using credit cards and paying them off monthly > not using them. You get air miles or cash back or whatever. Also you aren't building a credit history, esp with no car payment either. I have several hippie friends that struggled getting loans because they never had a CC.
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BooG690
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09-03-2009, 09:33 PM
Post subject: Re: ***OFFICIAL*** Bankroll Management For Real Life, Not Po
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#4 (permalink)
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Join Date: Mar 2009
Posts: 1,439
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Good job starting this thread. Maybe you can edit the first page and add some good ideas that we have for our very own bankroll management.
When I got my first credit card (age 18), I was a reckless little fucker. I ran up my credit card bill without thought. But I don't regret it one bit. Why not? I learned early the dangers of using a credit card. I finally paid off my credit card debt (some of the moneys which came from poker as a matter of fact). However, I have a teeny problem with one of these steps:
Quote:
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Originally Posted by Jason
Step 2 ---> Debt Snowball - pay off all debts smallest to largest except for the house
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I'm going to have to disagree with this one and recommend paying debts off according to interest rate: start with the highest and work your way down to the lowest. Only make the minimum payment on your debt with the lower interest rates and pay back as much as you can toward the debt with the higher interest rate. The reason is simple: you want to knock out your debt with the highest interest as quickly as possible.
Also, as for retirement, START NOW! I'm 22 and I've had an IRA since I was 18. Deposit $100 a month into your IRA and you will have >$1 million for your retirement. Plan for the future.
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That's how winners play; we convince the other guy he's making all the right moves.
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Reidak
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Flush
Join Date: May 2006
Location: Toronto
Posts: 566
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Quote:
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Originally Posted by drmcboy
Nice post.
I do think using credit cards and paying them off monthly > not using them. You get air miles or cash back or whatever. Also you aren't building a credit history, esp with no car payment either. I have several hippie friends that struggled getting loans because they never had a CC.
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QFT. Building credit is a must. Also, if you aren't carrying cash you are likely to use debit. Be sure your banking plan includes enough transactions so that you arent paying $1 or $2 when you go over 30 transactions per month. Instead of paying more for a better plan, say an extra $8/mo for an additional 100 transactions, use your credit card instead. The interest rate is not a factor if you have the discipline to spend only what you have. You are likely to get better incentives from a card with 28% interest than one with 18% interest, and if you never pay any interest you are better off with a cc with a higher rate buy say double the airmiles or .5% more cashback.
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Reidak
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Flush
Join Date: May 2006
Location: Toronto
Posts: 566
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and a dollar of debt is a dollar of debt that is costing you interest. Pay off the dollars with the highest amount of juice. IDK why this guy says pay off the smallest and move to the largest? maybe he assumes that the smallest debt would be credit card and the largest would be say a car loan or something like that which would be lower interest
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Yeah, the Steps as listed are too simple to be taken literally and incrementally in all cases. Definitely pay off the highest interest debt first, as has already been suggested. That said, Step 4 belongs before Step 2 if all your debt is cheaper than expected investment returns, ie. paying down a line of credit with a 5% interest rate is not necessarily preferable in bull markets with expected rates of return on index funds of 9%.
Also, that 6-month emergency fund is really large and unnecessary for a young person with no dependents and easily transferable skills. The power of compound interest means early retirement investing is probably a priority in such a situation. Save a shitload from age 20 to 30 in your Roth and you can set it up so you never have to contribute another dime and can retire a multi-millionaire at 55.
Otherwise, OP's points are bang on. Don't borrow unnecessarily, look for deals and take advantage of free shit, new cars are stupid, getting rich doesn't happen overnight etc. etc.
Getting rich and staying rich is definitely not balla but it's the only chance 99.9% of the population has to get financially independent.
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Ltrain
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Flush
Join Date: Aug 2005
Location: Miami, Florida
Posts: 514
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Quote:
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Originally Posted by Reidak
and a dollar of debt is a dollar of debt that is costing you interest. Pay off the dollars with the highest amount of juice. IDK why this guy says pay off the smallest and move to the largest? maybe he assumes that the smallest debt would be credit card and the largest would be say a car loan or something like that which would be lower interest
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I actually agree with paying the small amounts off first regardless of the rate so that you start to see progress (this is what I did btw in paying off my student loans; starting with the small school subsidies and working up to the large private loans). If you start with the big debts, even at low interest rates, the time it takes you to pay if off will dishearten you very quickly. The peace of mind and intangible benefits from paying off each debt in full is very powerful and motivating.
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"Don't judge a man until you have walked a mile in his shoes. Then you are a mile away, and have his shoes." - Anon.
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UG
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Moderator
Join Date: Jan 2005
Posts: 1,855
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Quote:
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Originally Posted by Ltrain
Quote:
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Originally Posted by Reidak
and a dollar of debt is a dollar of debt that is costing you interest. Pay off the dollars with the highest amount of juice. IDK why this guy says pay off the smallest and move to the largest? maybe he assumes that the smallest debt would be credit card and the largest would be say a car loan or something like that which would be lower interest
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I actually agree with paying the small amounts off first regardless of the rate so that you start to see progress (this is what I did btw in paying off my student loans; starting with the small school subsidies and working up to the large private loans). If you start with the big debts, even at low interest rates, the time it takes you to pay if off will dishearten you very quickly. The peace of mind and intangible benefits from paying off each debt in full is very powerful and motivating. |
and loses you money...therefore, it's not smart, unless you're so mentally weak that paying off a small debt like that will drive you to keep paying off debts.
the no credit card thing is way off, assuming you're not living paycheck to paycheck. I was worried I'd go nuts once I had one, but I most definitely haven't. we pay off our CC bill every month and every year we average $400+ cash back. We actually just switched to a Southwest Airlines Visa card and it looks like we'll get 3+ flights paid for a year, just by using their card...
if you're only making enough to just barely pay off your card from month to month, then yeah, it's not smart at all. sometimes shit happens (car breaks down, AC breaks, whatever), so if you don't have money stored up CC's can be really bad.
if you realize you can't go nuts with your CC and you have to actually pay for what you buy, it's totally worth it.
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bikes
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a hot damn mess
Administrator
Join Date: Nov 2007
Posts: 2,447
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Where is the BRM for young people imo.
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I damage threads that may actually benefit some posters
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Reidak
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Flush
Join Date: May 2006
Location: Toronto
Posts: 566
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For young people:
Learn how to cook
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by Bbickes
Where is the BRM for young people imo.
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Get the kind of piggy bank you have to smash with a hammer to get money out, imo.
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BooG690
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Join Date: Mar 2009
Posts: 1,439
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Quote:
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Originally Posted by Bbickes
Where is the BRM for young people imo.
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Umm...WTF is the difference? Start early...this point shouldn't be taken lightly.
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That's how winners play; we convince the other guy he's making all the right moves.
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Scenario:
Let's say some cat, we'll call him Benny, saved $2000 every year for retirement at 9% interest (compounded annually) from the time he graduated at 22 until the time he is 30. Then Benny didn't save any more until he retires at 55 because Benny's house is a money pit and he likes to get massages. Benny invested a total of $16,000.
Benny knows this other dude, Kenny. Kenny never got around to saving until he was 30 but then decided it was probably a good idea. Kenny saved $2000 every year until he was 55, also at 9% interest (compounded annually), meaning he invested a total of $50,000.
Ignore inflation for a minute. Who has more money in his portfolio at 55, Benny, who invested $16K or Kenny, who invested $50K? How much does he have?
I'm sure you can guess Benny will have more money from my setup and comments above, but just how much more?
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JL
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Full House
Join Date: Jan 2006
Posts: 1,095
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I'd like to know how I can get 9% interest.
I think I am getting like 1% right now.
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by JL
I'd like to know how I can get 9% interest.
I think I am getting like 1% right now.
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Over the long term, which all retirement investing in equities should be, 9% is totally realistic. Some years you'll lose money, other years you'll make 25%, but over time the returns on most popular indices are in that ballpark.
What are you invested in that you're getting 1% on?
BTW, some of these terms are probably strange to some of you reading this. Speak up if that's the case. Like I said, most people are really poorly prepared for this aspect of life. For whatever ridiculous reason, people don't like to teach this to kids.
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Galapogos
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4-of-a-Kind
Join Date: Jun 2005
Location: The Loser's Lounge
Posts: 2,322
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Quote:
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Originally Posted by JL
I'd like to know how I can get 9% interest.
I think I am getting like 1% right now.
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Are you talking about GICs?
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Quote:
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Originally Posted by sauce123
I don't get why you insist on stacking off with like jack high all the time.
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flomo
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Full House
Join Date: Mar 2006
Location: mashing potatoes
Posts: 878
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This shit don't sound so BALLA. this is the commune=WE JUST BALL
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Quote:
Originally Posted by bigred
Protect dog
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humanfugitive
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Straight
Join Date: Dec 2007
Posts: 147
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Awesome thread - thanks for the info.
So I just graduated from school and started working. Most of my income goes to rent and food and stuff but I have enough left to do something with. It's all sitting in my checking until I figure out what to do first. What would be my first plan of action?
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wufwugy
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4-of-a-Kind
Join Date: May 2006
Posts: 1,660
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As far as I can tell, for the individual*, credit and investment do not necessarily go together. Any kind of investment one could make via credit (like purchasing a home) would be smaller than just renting for cheaper and putting extra cash into investments that gain its own interest or appreciates against inflation. Providing people with credit is an investment for other businesses
*I say for the individual because I have no clue how it works for business, but if I had to guess it would be that credit is very important for business investments.
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BooG690
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Join Date: Mar 2009
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Quote:
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Originally Posted by humanfugitive
Awesome thread - thanks for the info.
So I just graduated from school and started working. Most of my income goes to rent and food and stuff but I have enough left to do something with. It's all sitting in my checking until I figure out what to do first. What would be my first plan of action?
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ROTH IRA. Just open one up and throw a couple of bucks in there. Once you open one up, it is easier to get in the habit of depositing into the IRA monthly (you should set-up automatic deposits even). Once you get push the ball, it'll start rolling with the quickness.
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That's how winners play; we convince the other guy he's making all the right moves.
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meeloche
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Join Date: Feb 2007
Posts: 2,131
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As others have said the credit card part should be amended to you should not carry a balance month to month on your credit card. Credit card's are an excellent way to build credit.
I have way more credit than I deserve cause I use my cc for everything (I also pay it off every month). I would recommend doing the same.
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JL
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Full House
Join Date: Jan 2006
Posts: 1,095
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Quote:
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Originally Posted by Galapogos
Quote:
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Originally Posted by JL
I'd like to know how I can get 9% interest.
I think I am getting like 1% right now.
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Are you talking about GICs? |
No just my banks shitty RRSP.
I know nothing about investing so most of my money just sits in my savings account, which is making 0.75% right now.
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wufwugy
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4-of-a-Kind
Join Date: May 2006
Posts: 1,660
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I'd have to look at it more closely to know for certain, but as far as I can tell, one of the simplest long term investments is simply purchasing gold and other precious metals. If you bought a ton of gold fifty years ago you would be rich rich rich today simply due to inflation
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Galapogos
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4-of-a-Kind
Join Date: Jun 2005
Location: The Loser's Lounge
Posts: 2,322
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Quote:
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Originally Posted by JL
Quote:
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Originally Posted by Galapogos
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Originally Posted by JL
I'd like to know how I can get 9% interest.
I think I am getting like 1% right now.
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Are you talking about GICs? |
No just my banks shitty RRSP.
I know nothing about investing so most of my money just sits in my savings account, which is making 0.75% right now. |
You should be getting a much better return on average from your RRSPs. Definitely set up an appointment with some guy in a suit that works there and have them help you with your RRSPs. Because even GICs have better returns than what you're currently getting.
Why aren't you on MSN anymore?
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Quote:
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Originally Posted by sauce123
I don't get why you insist on stacking off with like jack high all the time.
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Galapogos
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4-of-a-Kind
Join Date: Jun 2005
Location: The Loser's Lounge
Posts: 2,322
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Quote:
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Originally Posted by humanfugitive
Awesome thread - thanks for the info.
So I just graduated from school and started working. Most of my income goes to rent and food and stuff but I have enough left to do something with. It's all sitting in my checking until I figure out what to do first. What would be my first plan of action?
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Just a little tip but it sounds like you plan on doing wise money things with what you have left over at the end at the month. There's one key thing that you should do which is pay yourself first.
That means figure out how much you can afford to invest each month and invest that money at the start of the paycheck rather than at the end. If you do it, you will find it's much easier to put away say $500 if you take $250 off each check as soon as you get them rather than trying to spend so you have that much left over at the end of each pay period.
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Quote:
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Originally Posted by sauce123
I don't get why you insist on stacking off with like jack high all the time.
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Jack Sawyer
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4-of-a-Kind
Join Date: Jan 2007
Location: Old School
Posts: 2,535
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I need $200 a week to survive well. I also need $400 a month to buy shit I don't need. My housing situation is pretty much set, and that would be my intrinsic advantage.
That makes me a rich bastard with $1200 a month, and anything above that goes into savings to be spent on crap later.
I don't know about this credit history thing, and I hope never having to find out about it. But differing countries have differing ways of doing shit.
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My dream... is to fly... over the rainbow... so high...
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VHS is like a book and a book is like a stack of kindles.
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Hey, I'm in a movie!
http://youtu.be/lGdnIrRKDTI
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Halv
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pro crastinator
4-of-a-Kind
Join Date: Aug 2005
Location: No hindsight for the blind.
Posts: 1,842
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1. Win a decent amount at poker first year, save most of it.
2. Win enough second year to break even after living expenses.
3. Win nothing third year, live off of savings from first year while "looking for a job".
4. ???
5. Retire?
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bigspenda73
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Straight Flush
Join Date: Jul 2006
Location: Pwnsylvania
Posts: 7,545
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Quote:
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Originally Posted by HalvSame
1. Win a decent amount at poker first year, save most of it.
2. Win enough second year to break even after living expenses.
3. Win nothing third year, live off of savings from first year while "looking for a job".
4. ???
5. Retire?
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I'm on step 4, also get on AIM sometime biyiyiyiyatch.
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Lucothefish
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Full House
Join Date: Mar 2009
Location: Cretaceous Park
Posts: 700
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Quote:
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Originally Posted by BennyLaRue
Scenario:
Let's say some cat, we'll call him Benny, saved $2000 every year for retirement at 9% interest (compounded annually) from the time he graduated at 22 until the time he is 30. Then Benny didn't save any more until he retires at 55 because Benny's house is a money pit and he likes to get massages. Benny invested a total of $16,000.
Benny knows this other dude, Kenny. Kenny never got around to saving until he was 30 but then decided it was probably a good idea. Kenny saved $2000 every year until he was 55, also at 9% interest (compounded annually), meaning he invested a total of $50,000.
Ignore inflation for a minute. Who has more money in his portfolio at 55, Benny, who invested $16K or Kenny, who invested $50K? How much does he have?
I'm sure you can guess Benny will have more money from my setup and comments above, but just how much more?
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If you really can hit 9% then yes, benny will have more. Lower that figure to 8% and run the numbers again, and Kenny will have more.
Regardless though, it still highlights how terribly important it is to start investing in your future early.
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<@d0zer> how will you learn if I don't berate you harshly?
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by Lucothefish
If you really can hit 9% then yes, benny will have more. Lower that figure to 8% and run the numbers again, and Kenny will have more.
Regardless though, it still highlights how terribly important it is to start investing in your future early.
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Yeah, at 9%, Benny would have a portfolio worth $226K (off of an initial $16K investment) and Kenny would have $201K (off of a $50K investment) at 55.
Kenny would only have $610 more at 8%, barely enough to buy Cialis. Still, the point is absolutely what you've said, that it's terribly important to start investing early. Do that, and your money does most of the work. This is fairly easy stuff, but so few people actually take action on it.
As for "if you can really hit 9%", the historical rate of return for the S&P 500 from January 1926 to March 2009 was 9.51%. Or are you of the opinion that we're in a new investment environment and we won't see returns like that again? I'd suggest a little more foreign investment is probably necessary going forward, but 9% over the long term is absolutely still possible, especially if you continued to buy at the discount prices we've seen during the last three years.
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by JL
Quote:
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Originally Posted by Galapogos
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Originally Posted by JL
I'd like to know how I can get 9% interest.
I think I am getting like 1% right now.
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Are you talking about GICs? |
No just my banks shitty RRSP.
I know nothing about investing so most of my money just sits in my savings account, which is making 0.75% right now. |
What kind of shitty RRSP? For the rest of this post, JL, I'm talking generally, not necessarily in response to you.
If you walk into a bank clueless and just ask them for an RRSP or other type of mutual fund, they'll sell you the fund that they make the most money off of in fees. These fees can absolutely kill your returns. I'm a big believer in index funds (where you invest in the entire TSX, for example, and your returns match those of the market), Exchange Traded Funds (ETFs) in particular. With those, you pay an initial fee to purchase them and if you do it through an online discount broker, you can get them for a flat fee of $15-$30. Annual fees come out of your return and are extremely low (usually less than 0.1% vs. 1% - 6% for mutual funds). Provided you don't make a lot of transactions, ETFs are a very cheap way to invest.
You need to question the funds and brokerages you see advertised on TV. Why the fuck do they want to advertise those particular funds to you? Because you make THEM money when you buy them. That's the whole reason they're in business...their returns first, yours second. Forget dose guise, this is all stuff you can do very easily and cheaply and only thinking about it maybe 10-12 hours a year.
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Look at me, I'm wufuwgy but practical!
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by wufwugy
I'd have to look at it more closely to know for certain, but as far as I can tell, one of the simplest long term investments is simply purchasing gold and other precious metals. If you bought a ton of gold fifty years ago you would be rich rich rich today simply due to inflation
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Actually, Gold is on par with index funds over the very long term. If you invested in Gold in 1926 at $20.63 an ounce and sold at today's price of ~$990, you'd have made earned 4.8% interest. In the past 50 years, which is the timeframe you mentioned, Gold has done a bit better, just a shade under a 7% return.
Gold really shined in the 70s. In 1971, it was $40 an ounce and was $615 by 1980, a return of about 35% over the decade but it went to shit in the 1980s. Investing in 1971 would mean about a 9% return if sold today, but again, that's on par with the S&P over the same timeframe...the two are far too linked to see one outperform the other for very long.
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a500lbgorilla
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JESUS TAKE THE KEYBOARD
Join Date: Sep 2004
Location: This room is a good place to be
Posts: 8,379
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So what have you done with your money benny? And what do you plan to do?
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Smithers, use the amnesia ray.
You mean the revolver, sir?
Precisely.
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by a500lbgorilla
So what have you done with your money benny? And what do you plan to do?
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For retirement, exactly what I've been talking about. Index ETFs, both domestic and foreign. Until new and better products come along, I see no reason to change.
For non-retirement investing, I've purchased some individuals stocks with a value investing approach (I'll put it this way and you can guess the holdings...I've made some nice money off of Americans getting fat) and Canadian income trusts with high dividend yields. However, I've learned about that sort of investing because I'm interested in it and would like to spend more time on my portfolio than the 10 hours a year I mentioned. It's more for fun than anything. If you don't have the aptitude or interest, do not go this route. Investing in individual equities is risky.
I don't have the time at the moment, but eventually I do want to get into rental properties. That's no longer passive investing though...the time required will be more like getting a small business off the ground than paper investments. Again, not for everyone.
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by wufwugy
As far as I can tell, for the individual*, credit and investment do not necessarily go together. Any kind of investment one could make via credit (like purchasing a home) would be smaller than just renting for cheaper and putting extra cash into investments that gain its own interest or appreciates against inflation.
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Yes, you're right when it comes to rate of return. Homes are not investments, really. Homes are liabilities. The old adage "your house is the biggest investment you'll every make"? That's total bullshit. When you figure out the mortgage payment and maintenance, you will have often lost money or "might" make 1% annual interest on your home when you go to sell. Factor in the cost of your time against that 1% and your return is wiped out. And big deal if you do make a slight return, you still need a place to live, a place that likely has appreciated at the same rate your former house did.
There are only two ways houses can be considered quality investments on par with equities:
1) You constantly move from peak markets to growing markets to maximize your return. I don't mean new neighbourhoods. I mean moving to new states and cities with the largest potential.
2) Rental income, as I mentioned above.
Still, I'm a big fan of owning your home. You have to pay to live somewhere anyway and, depending on the market, obviously, a mortgage payment is generally about the same as rent for the same square footage. Your maintenance is an additional cost renters don't pay but as you build equity in a home, borrowing opportunities become more available (for quality investments, not spending) and the forced savings aspect means that one day, your mortgage payments will go down, provided you don't keep upgrade to a McMansion or something. And there's the non-monetary reasons...I don't want to put up with a landlord and if I want to make changes, I can.
Also, I believe in the US you get to write off mortgage interest on your taxes, yes? It's a different situation for everyone, but consider those tax savings when weighing whether or not to rent or buy.
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a500lbgorilla
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JESUS TAKE THE KEYBOARD
Join Date: Sep 2004
Location: This room is a good place to be
Posts: 8,379
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Quote:
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Originally Posted by BennyLaRue
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Originally Posted by a500lbgorilla
So what have you done with your money benny? And what do you plan to do?
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For retirement, exactly what I've been talking about. Index ETFs... |
Aaaaand I'm asleep. This is probably why people don't teach kids to deal with money. You get into the first finance term and my eyes glaze over. The world of money is obscure and complicated. I have enough trouble dealing with my coworkers and my bitches, I dont wanna suffer through learning this jargon.
If viable retirement options read like "getting into rental properties" then I'd be interested. That's doing something, the problems that you'll encounter seem more defined and the entire project seems much more satisfying. Vrs "Well Im going to invest the total share of my price divided in my Roth IRA fund to roll into an accruing interest FCP loan that'll mature into an 8% JPD once Ive managed the required PCPs and HSTs."
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Smithers, use the amnesia ray.
You mean the revolver, sir?
Precisely.
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by a500lbgorilla
Quote:
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Originally Posted by BennyLaRue
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Originally Posted by a500lbgorilla
So what have you done with your money benny? And what do you plan to do?
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For retirement, exactly what I've been talking about. Index ETFs... |
Aaaaand I'm asleep. This is probably why people don't teach kids to deal with money. You get into the first finance term and my eyes glaze over. The world of money is obscure and complicated. I have enough trouble dealing with my coworkers and my bitches, I dont wanna suffer through learning this jargon. |
I explained it above, thought you had followed along.
It's a bit of learning at first, sure, but it doesn't take long. I'm sure once upon a time implied odds made you glaze over too.
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a500lbgorilla
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JESUS TAKE THE KEYBOARD
Join Date: Sep 2004
Location: This room is a good place to be
Posts: 8,379
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Yah, but I learned that after I started winning. So, i'll need to win a lottery or something before I start cracking into all this non-sense.
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Smithers, use the amnesia ray.
You mean the revolver, sir?
Precisely.
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by a500lbgorilla
"Well Im going to invest the total share of my price divided in my Roth IRA fund to roll into an accruing interest FCP loan that'll mature into an 8% JPD once Ive managed the required PCPs and HSTs."
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Let me make it super simple. What I'm talking about invests you in the whole stock market, not individual things.
Walk into a bank. Tell the pretty lady or handsome dude that you want to buy this:
http://money.cnn.com/quote/quote.html?symb=VTI
Give them your mobnies.
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a500lbgorilla
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JESUS TAKE THE KEYBOARD
Join Date: Sep 2004
Location: This room is a good place to be
Posts: 8,379
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how much would be a good purchase? was 2k just an abstraction or should i go as high as i feel comfortable?
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Smithers, use the amnesia ray.
You mean the revolver, sir?
Precisely.
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Jason
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Full House
Join Date: Dec 2004
Location: TN
Posts: 883
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I wanted to comment on the credit cards. Some have said to pay the highest interest first. That is a logical sometimes common reaction. However, they have done research and discovered that finance is 80% attitude and behavior and only 20% head knowledge. Dave Ramsey advocates paying the smallest balance first because you get a lot of "quick wins" and get the ball rolling and therefore, people get EXCITED about getting out of debt. They often find creative ways to stretch their dollar or make more money because they are pumped about knocking out the next debt. The difference of paying off the highest rate first doesn't nearly compete with the difference in your attitude when you start seeing results!
Next, I've seen more than one reference to "building credit" or "having good credit". This is another common reaction I've heard from my friends and family. To be rich, you have to have a paradigm shift AWAY from the idea that you NEED or SHOULD USE credit. YOU DON'T and YOU SHOULDN'T! You DO want to still pay your credit card bill on time if you have one, BUT you don't want to hang on to the card. If you play with snakes, you will get bit. Being wealthy has NOTHING to do with borrowing money or building credit. The days of borrowing money are OVER. When you borrow money, you are taking on big risks and hurting your chances to build wealth.
As for investments, GOLD is a terrible investment. Since Napoleon, it has averaged 2% or so and even less in recent times. The best investments are Mutual Funds across the 4 types I listed above. You want a diverse portfolio that doesn't have all your eggs in one basket. The stock market has averaged 12% since it was invented. The reason I quote 8% in my original post is to subtract 4% for inflation. You don't want to invest in any ONE stock - that's like gambling. Rather, you want to spread your portfolio in the mutual funds of your choosing which get reinvested in MANY stocks by people who do that for a living. You just do a little research to pick the best funds. To do the research, I recommend going to a site like Fidelity and sorting by the best funds for LIFETIME, 10 Year, 5 Year, 3 Year, and 1 Year. DO NOT INVEST IN MUTUAL FUNDS UNLESS YOU WILL NOT TOUCH IT FOR AT LEAST 5 YEARS. Mutual Funds are bad short term investments, but GREAT long term investments, so make sure you can leave it sit for a while before you put it in. Yes, as has been said, ROTH IRA's are FABULOUS investments. They are basically TAX FREE mutual funds and there is a LIMIT to how much money you can put in them like maybe $5k per year or something like that.
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- Jason
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by a500lbgorilla
how much would be a good purchase? was 2k just an abstraction or should i go as high as i feel comfortable?
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$2K was just an abstraction but a great start.
If you make an average salary ($30K to $50K), a good rule of thumb and relatively easy to do is to save at least 10% of your net salary for retirement. If you make more, you can afford to save more...ideally, you'll get into a place where you're saving $10K+ annually but most people can't afford that at first.
Here's a retirement calculator if you want to figure out a real dollar figure for you.
https://personal.vanguard.com/us/pla...tent.jsp#early
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humanfugitive
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Straight
Join Date: Dec 2007
Posts: 147
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Sweet.
So I've been looking into IRAs, both roth and traditional. Wouldn't a traditional be more effective if I am not willing to withdraw before my account matures?
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by Jason
I wanted to comment on the credit cards. Some have said to pay the highest interest first. That is a logical sometimes common reaction. However, they have done research and discovered that finance is 80% attitude and behavior and only 20% head knowledge. Dave Ramsey advocates paying the smallest balance first because you get a lot of "quick wins" and get the ball rolling and therefore, people get EXCITED about getting out of debt. They often find creative ways to stretch their dollar or make more money because they are pumped about knocking out the next debt. The difference of paying off the highest rate first doesn't nearly compete with the difference in your attitude when you start seeing results!
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Whatever floats your boat, dude, but UG said it best:
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Originally Posted by UG
and loses you money...therefore, it's not smart, unless you're so mentally weak that paying off a small debt like that will drive you to keep paying off debts.
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by humanfugitive
Sweet.
So I've been looking into IRAs, both roth and traditional. Wouldn't a traditional be more effective if I am not willing to withdraw before my account matures?
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You're going to want to ask an American to be sure but my understanding is the Roth is a better choice for young people.
The difference is in how you're taxed...the traditional is a pre-tax investment meaning you deduct the contributions from your income when you pay income tax. You pay tax on the withdrawls at retirement though. But let's be honest, you don't make shit when you're young, so income tax deductions aren't as important as they are when you're older and in a higher tax bracket.
With the Roth, it's a post-tax investment. You don't deduct your contribution when you pay income tax but the money grows and is withdrawn tax free.
There's no problem asking a financial advisor or bank employee for help on this stuff. Just don't take their advice when they tell you what specific funds to buy or, if you do, be sure to ask how much the fees are. The fees kill you. Once your portfoilio gets significant, you might want to find an advisor who charges an hourly fee rather than makes money per transaction.
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BennyLaRue
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Full House
Join Date: Sep 2007
Posts: 646
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Quote:
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Originally Posted by Jason
As for investments, GOLD is a terrible investment. Since Napoleon, it has averaged 2% or so and even less in recent times.
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Gold prices were fixed during much of that time period. It's not a fair comparison. Also, you're going to have to explain where you got the 2% number and what you mean by recent. Are those 2004 numbers or something?
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a500lbgorilla
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JESUS TAKE THE KEYBOARD
Join Date: Sep 2004
Location: This room is a good place to be
Posts: 8,379
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Quote:
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Originally Posted by BennyLaRue
Quote:
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Originally Posted by a500lbgorilla
how much would be a good purchase? was 2k just an abstraction or should i go as high as i feel comfortable?
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$2K was just an abstraction but a great start.
If you make an average salary ($30K to $50K), a good rule of thumb and relatively easy to do is to save at least 10% of your net salary for retirement. If you make more, you can afford to save more...ideally, you'll get into a place where you're saving $10K+ annually but most people can't afford that at first.
Here's a retirement calculator if you want to figure out a real dollar figure for you.
https://personal.vanguard.com/us/pla...tent.jsp#early |
Sweet, thanks for the quick tip. I finally feel like Im investing properly in my future.
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Smithers, use the amnesia ray.
You mean the revolver, sir?
Precisely.
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Numbr2intheWorld
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Moderator
Join Date: Aug 2006
Posts: 3,561
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Just fyi if you file as a pro gambler you can't put money in a Roth.
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