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DiGNAN17: I still have some things I desperately need to learn. The most important of these, I feel, is personal finance.


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robricc: Well, anyway, I don't know where you learn stuff like that. I think you just have to pick it up by seeing how your parents and others do things.


I think you guys have an important point here.

I do think most people just learn this stuff initially from watching their parents. And I do think some of society's ills would be improved if people could either (a) break free of the poverty cycle of their parents, or (b) improve upon their parents' mediocre financial skills.

However....

I don't know how much people would do with this info if they had it rammed down their throats before they could see the relevance of it.

I'm a good case in point. And I don't think I'm alone. I had at least two good chances to pick up some of this stuff and instead I let it slide in one ear and out the other both times.

  • We had mandatory Free Enterprise and Economics classes in high school. I think they talked about Monetary Supply (M1, etc.), stocks, and for all I know it might have hit on mortgages, CDs, retirement planning, and budgeting as well. But I remembered that stuff about long enough for the test and then forgot it all instantaneously. It sure didn't seem relevant to me as a high school student. Besides, I was convinced I was going to somehow invent the world's coolest gadget *real* *soon* *now*, have the world beat a path to my door, become immediately wealthy, and never have to sweat all the small stuff....

    We even had a class where we had to read the Wall Street Journal every day (in class) for a week. It made no impression on me.

  • Boy Scouts. Personal Management Merit Badge. Man, if I wasn't ready for this in high school, I sure wasn't ready for it back in Boy Scout days. But at least I did learn how to make a budget. So I guess it wasn't a total waste. But you know, an eleven-year-old's budget just isn't that exciting! Paper route money in, movie money out, "thank you, goodnight."


An interesting point for you to consider is that a lot of the advice you may get, even from people who really should know, isn't that great.

When I finished school and moved to a new town, I went straight to the CFO of the small company I had my new job with. I asked him "what's the best bank here for me to use for setting up checking and savings accounts."
I figured he would know, seeing that he managed money for a living.
I opened an account where he recommended and soon found out that they (a) had the most restrictive balance requirements and service charges, (b) paid the worst interest, and (c) wouldn't offer me a car loan. I.e., they were the worst bank in town for me, though they might have been a better deal for him.

I know someone who opened his first checking account when he arrived at college. (No, I'm not talking about myself here.) He had his first few checks mailed back to him. You see, no one had ever explained to him that you needed to *sign* them. And he was (and still is) an extremely intelligent person, who is now very successful.

But it just bolsters your point that some basic training is frequently missing from our schooling.

Another time, I received a check (from a college graduate) made out for "one hundred and thirty-seven dollars and 12/100". My bank wouldn't take it until she wrote me another one for "one hundred thirty-seven dollars and 12/100". She was stunned, and absolutely couldn't believe it when I told her that although the bank was being unusually pedantic, "everyone knows that on American checks the word 'and' should only appear between the dollars and the cents." She had never heard such a thing and thought I was just making stuff up. I almost had to bring her in to the bank to prove it to her. I'm sure she wrote checks like that all the time and this was the first time it had bitten her.

Anyway, I'm rambling again.

So here's my thoughts, they're probably worth what you paid for them.
Also, about half of this is very US-centric (what's new).


Here's my list of What I Wish Someone Had Told Me (TM)

  1. I think The Motley Fool has some beginner investment advice.

  2. Do a 401K if you can, and open an IRA otherwise. Like the man says, starting at 25 is exponentially better than 35. And 35 is better then 45. (Alright, alright, I guess technically it's only geometrically better, not exponentially. Whatever.)

  3. If your company has an ESPP, jump in with both feet. Max it out even if you have to borrow money from a friend the first six months. (After that your earnings from the first period will prevent you from needing to borrow the next time.)

    These are an absolute no-lose deal if your company lets you do "same day sales." If they don't (a rare and unusual case), then look into it before investing, as it is possible (though unlikely) to lose money if the stock drops 15% before your sell window.

  4. Credit cards. You know the story. If you always pay in full, you can never get into one of those 24.99% holes that can take years to dig out of. (Yeah, I know, most people here will disagree with me on that suggestion.)

    Also, you need at least two, in case one of them decides to randomly lock you out when you're on vacation. This happens a lot nowadays, as automated anti-fraud flags get flipped for the strangest and most bizarre reasons. Should you have a lot more than two? Well, I guess that depends on how much of an impulsive spender you are.

    Also, be aware that having a lot of excess available credit can hurt your credit score when you're applying for a mortgage.

    Additional point: avoid credit cards (such as Sears) which only report negative credit information. This means these cards can never increase your credit rating, only decrease it.

  5. House payments. DO NOT miss or be late on the first payment. You might lose the house right there. If things get tough down the road, they may cut you a little slack -- after you have established a prompt, regular payment record with them.

  6. Taxes. When you're young and don't have a house, it's usually a simple 15-minute one-page deal. Minimal stress.

    After the house, you have to go to the big boy's form, but it's still usually no big deal.

    On the other hand, if your finances start getting really complicated, accountants are totally worth it.

    But in the meantime, you can go a long long way with just Quicken and TurboTax and save yourself a lot of money. But if you're too disorganized to Quicken, accountants may still useful.

    Also, what does it hurt to go to H&R Block when they offer one of those occasional deals where they say "we'll look at your tax form for free and show you how much we could save you."

  7. Stock Options. If you're a techie, and are going to join the next Google, there are a few things to watch out for. And there are different things to watch out for if you're getting options from a big established public company versus a tiny startup.

    Keywords to look up: AMT and "83(b) election"

    Important fact to remember. In the recent bubble-bursting, there were lots of people who ended up owing millions of dollars in taxes on stocks which were worth only a few hundred dollars, resulting in bankruptcy. Their reward for working 90-hour weeks for years on end was to lose their ass, their house, and often their marriage.

    Make sure this doesn't happen to you.

    They could have avoided this by selling by the end of the year or buying protective puts or collars. But either (a) no one told them, or (b) they were idiots.

  8. Monthly or yearly fees on bank accounts, credit cards, etc. Never, ever, ever, get an account which has these unless you are absolutely certain you are getting something which more than makes up for it. After a year, check and see if you are really using those frequent flyer miles or "percentage back" money to the tune of more than your service charge. A surprising number of people don't. A half-dozen $15/mo. charges add up to $1000+/year.

  9. Add up how much you spend on fast food in a month. Wow! that much?

    P.S. Smoking is expensive, too. But you already knew that.

  10. Insurance payments like you wouldn't believe. Car insurance, house insurance, life insurance, renter's insurance (protects your stuff if you don't own a house), perhaps eventually liability insurance (people are sue-happy)

  11. Oh yeah, like TigerJimmy said, save up at least 3 months worth of expenses, preferably more. It's almost certain that you will be laid off or fired at some point in your life. Might as well be prepared early.

  12. Set aside a small amount of time every week to do this stuff, that way it never builds up and becomes overwhelming. I.e., pay all bills every Tuesday night, or spend 15 minutes researching investments every Sunday afternoon, etc.



And this ties into genixia's legal comment as much as it does to the financial stuff, but don't put off making a will for too long.

Obviously, you need one if you have children (to say who raises the child in lieu of you and your spouse), and you probably don't need one if you're 22 and single. But if you have anything that you don't feel comfortable having the state randomly assign or just keep for themselves, then make your intentions known in a legal document.

Also, if you have opinions on if and when to pull the plug if you are in a coma, you need to document this. Otherwise, the state decides. Even your spouse may not get a say.

Alright, I'll shut up now.
OK, everyone, tell me where I'm wrong, and what I left out.