Thoughts About [Money]

[tcepsa]

Money is something that I have almost always had a hard time talking about. I think my parents were probably more open with me about sex than they were about money management. For example, my dad tried to teach me how to use Quicken and balance my checkbook and create a budget, but I don't remember us ever sitting down and having "The Talk" about finances (whereas I can remember that we did have "The Talk" about sex). So I had some of the technical knowledge of how to balance a checkbook and keep track of money, and I understood that I wanted to keep it out of the red, but beyond that I didn't have much. And I didn't really have any classes on the subject, either, that I can remember. We might have touched on it a little bit back in Family and Consumer Sciences (about 10 or 11 years ago), and I had one Econ class in college that was just painful for me, and that's about it. To me, investing and things like that were something that I would learn about doing "once I grew up."

It's slowly dawning on me that it is time for me to grow up about money. It's time for me to get my head out of the sand and take a more active look at--and role in--my finances. Up until this point I've basically been focusing on staying out of the red. I think I've pretty much got that down now, and I'm looking to learn more about how I can put my hard-earned cash to work for me. I'm currently working my way through some of the Rich Dad books, which seem to be a very good starting place. Right now I'm focusing on absorbing as much of the material as possible, but soon, in a month or two, I will want to start actually doing things as well. For example, a message I'm seeing pretty consistently is "find a competent financial advisor." How does one do that?

I would be surprised if there aren't at least a few LJ communities out there that talk about money management, and I intend to search for them. And if there aren't, or if I don't find one, then I'll probably try to create one. I'm interested in joining, or opening, a dialogue about money. Getting it out of the closet and taking a good look at it. Dusting it off, oiling it up, tinkering with it, seeing whether I can get it to work for me instead of sitting in a bank working for someone else. I know that seems a little bit against the American way, where people talk about money in hushed tones, with shyness, embarassment, fear, or anger (either because they don't have as much as they want, or they have more than their neighbors, or--as I suspect is often the case--both). But I also know that some of the people reading this don't care as much about what other people think, and are more interested in taking beliefs (both their own and others') out and giving them a thorough examination, holding them up against as objective a perspective as they can get. That's all I'm really suggesting here, but instead of beliefs about God and the Universe, I'm going to start looking at beliefs about Money and the Economy. Just as I think it is important for me to have many perspectives when I am pondering the spiritual, I think it is also important for me to have many perspectives when I am pondering the financial.

To that end, I'd like to invite you to comment (anonymous is fine if you're more comfortable with that) on this and subsequent [Money] posts.

Comments

[medusa13.livejournal.com]

Yeah, every so often I start thinking that its time I learned about money, so I'll read some articles and think about joining an investment club, or something. But I never actually get around to do anything productive. It seems most investment strategies I've read about focus on people who have more money to invest than I do. I never understood the top-hush tones when it comes to $$$ either. All of it gives me a headache.

[tcepsa.livejournal.com]

*nod* Some of the stuff I've read starts out with "Say you have $25,000 to invest..." and goes from there to give an example of a way they could turn that into $500,000. I'm sure that's good information, and I'll file it away for future use, but right now it's more like, "Say I have $1,000 to invest. How do I turn that into $25,000 so that I can use that wicked cool strategy for getting to $500,000?"

I think a lot of the reason why people don't like to talk about money is because it's so closely tied to status. I'm still trying to develop really solid basic habits myself in some areas, and I'm not entirely comfortable saying what those areas are because I'm afraid people will judge me poorly because of it. But I'm going to say the biggest one for me, anyway, because then I have to take it out and look at it. And maybe people will look down on me because of it. Oh well. If I am successful at changing that habit, then maybe there will be other people who will also be able to benefit by seeing how I changed it.

So here goes. My worst financial habit is being late paying bills that have to be mailed. Why? Lots of little reasons. Not having stamps is one. Misplacing the statement is another. Thinking that I can do it by computer, and then not following up is another. It's all kind of underscored by the fact that, hey, I don't want to let this money go. I'm like a raccoon with something shiny. So I need to stop seeing that money as mine, because it's not, really. It belongs to whomever I owe it, and the sooner I get it to them, the better. It doesn't matter if it is making the number in my checking account bigger; in fact, if it is, then it is probably making things worse by making me feel like I have more money than I really do, since not all of the money that is there is really mine. And that's the attitude that I am going to try to have towards mailing in bills from now on. Not to think about how much I want to keep the money. Not to try to wish that it would just go away and take care of itself. To face it head on and take care of it.

It's not that I don't have the money, it's just that I'm scared to let it go. It's a lot like playing with fire, but the only thing I've learned how to do so far is to hoard it like some kind of hellish squirrel. I do that, and then I get burned because I held onto it for too long. So I need to make it more like water, help it flow better, and keep things a little cooler for me :)

[blushing-grace.livejournal.com]

Me too. Just the mailing thing though. It's not even particularly difficult, I pass a post office (that's closed when I go by) where I can get stamps from their machine daily, and there's a drop box by my mailbox and outside at work, but I don't. I never have. I used to write letters, address them, stamp them, and then leave them on my desk. I don't spend outside my means, I just don't mail the stuff. If it's online, I'm good about paying. I've tried to set up most my stuff to do things that way.

[tcepsa.livejournal.com]

*nod* It's looking like the online, automated payment strategy is probably the way to go on this. I think part of the reason I've resisted it so far is because it feels like I should be able to do it manually before I allow myself the luxury of automating it. I'm realizing, however, that's just something I made up in my own head, and I should drop it in favor of something that works better for me personally.

My new mantra: there's no shame in online bill pay...

[elkor.livejournal.com]

For example, a message I'm seeing pretty consistently is "find a competent financial advisor." How does one do that?

Well, the guy Charlie that we chatted with at the BR meeting last week (he sat behind us) is a Financial Advisor for American Express. No idea how good he is, but you might talk to him.

Also, devina runs an lj community geared specifically for personal finance personalfinance. You might start there.

Personally, right now my investment strategy is simple:
$X,000 in bank to cover 4 months of living expenses.
$Y,000 in 401k every year to plan for retirement.
$Z00 into bank every month to cover misc expenses (car repair, etc).

Anything left over is spending money to blow as I desire.

But, this is after coming off a strong hoarding streak where I was paying off $70,000 in college and credit card debt (accomplished in 6 years, thank-you-very-much).

My advice to you? Figure out your goals. Once you know what those are, you can work on achieving them.

[tcepsa.livejournal.com]

*nod* That sounds like good advice. Figure out what I want to do, then find someone who can help me get there, then work with them to develop a plan to do it.

(also, way to go on the debt management--sounds like you've earned a little respite :)

And I'll definitely check out that personalfinance community.

[emeraldliz.livejournal.com]

Well you're certainly in a better financial spot than I am at this point and really have no background in it, but I just say I really hate the entire idea of borrowing money. I understand that huge things like cars and mortgages generally need to be handled that way, but I figure otherwise, don't spend it unless you've got it.

Best advice is research, ask for referrals and get yourself a financial advisor.

[taliejen.livejournal.com]

Okay, so I hate to shill for the overly-tanned Suze Ormond, but her recent book "Young, Broke, & Fabulous" isn't that bad. Her special on PBS (same name) was pretty good, too. It has practical advice (whether or not you need life insurance, etc) for the young and broke - she finally realized that for someone like me (75K in school debt, 10K in personal debt) all of the old truisms - you should have 6 months of living expenses in your savings account, etc - are absolutely worthless.

The other thing to think about - automated online bill pay. You set it up once and it will automatically pay each month on the same date the amount you specified. Great for steady payments (cable, student loans, phone, etc.). It cuts down on the guess work.

[tcepsa.livejournal.com]

I'm the same way, which is one of the reasons I got the car I did instead of a flashier, more up-to-date one. I had a bad experience when I first moved out here that ended up with me maxing out a credit card to meet my living expenses, and I'm still paying it off.

I understand that there are some situations where it might be advantageous to go into debt (e.g. maybe to take advantage of an opportunity that you would otherwise miss, and that will make you lots of money and thereby pay for itself in the future) but I'm not familiar enough with that sort of strategy yet to try it. For now, though, I'm doing my best to wipe out my debt and keep it that way while I learn more.

[coie.livejournal.com]

One of the most important things is to have a really realistic idea of your budget now, and what little bits you're willing to cut out. It's important not only to know rent or food, but also what you usually spend on entertainment. If you cut your entertainment budget (eating out, going to movies, etc) dramatically, you'll probably be miserable from cutting out so many things, and are more tempted to totally blow your budget. The point of money is to help you do fun things, not just in the future but also now.

From the money you're willing to save, you should divide it again... into money you'd need in an emergency and money you wouldn't. You need a certain amount of your savings to be basically risk free, like a money market account. These earn a respectable amount of interest (i think one of mine is like 3.5%) If you had an emergency, you could easily get to these funds, and spend them without incuring huge financial penalties. It's probably best to start out with most of your savings in a money market until you have some cash built up. Banks sometimes offer money market accounts, and I also had a money market at Vanguard for a while.

It's good to have a 401K but you're generally heavily penalized if you need to tap into those funds. So don't put anything into a 401K that you think you'd need in the next few years. That's long term savings.

My parents had all of my college savings in mutual funds from Vanguard and Franklin Templeton, so I know a decent amount about those. I still have a respectable amount of savings there, and I've been quite fortunate with them. Mutual funds are generally a lower risk then buying stocks individually yourself. Say you invest in an international fund. They spread your investment out into stocks from a number of different firms, minimizing your risk. They deal with which individual stocks to buy or sell, to help grow theaccount. My aunt is part of an investment club, which has the same general idea of banding together and spreading out capital to minimize risk. Buying stocks individually can make you a lot of money, but it takes a lot of research and such... I would stay away from this option until you have a decent safety net. Money in stocks or mutual funds can be accessed more easily then from a 401K. However, if you pull funds out too soon (like within a year I think) you'll be hit with short term capital gains taxes, which will take a big percentage of any profit you made. Long term capital gains are taxed at a much more favorable rate.

That's what I know off the top of my head about investing, although there is more rattling around in there somewhere if I were to think about it LOL

[elkor.livejournal.com]

It's good to have a 401K but you're generally heavily penalized if you need to tap into those funds.

An exception being for the first time purchase of a home. You can withdraw up to $10,000 without penalty (taxes still apply) if you are using it to buy a home.

So, as long as the closing costs of the home purchase + interest for the tax year is greater than $10,000 you can use the full amount without any additional tax liability.

[tcepsa.livejournal.com]

If you cut your entertainment budget (eating out, going to movies, etc) dramatically, you'll probably be miserable from cutting out so many things, and are more tempted to totally blow your budget. The point of money is to help you do fun things, not just in the future but also now.

Those are some really good things to keep in mind. I'm still working on focusing on what I feel would be a reasonable amount to spend on entertainment, because I keep fluctuating between ultra-frugal and splurging. It's like financial bulimia... when I'm holding back and not spending money on anything, I feel bad because I don't get to have/do the fun things that I see other people doing. When I splurge, I feel bad because part of me knows it's going to make things harder for me later on. So I'm working on getting a much better handle on my budget so that I can have enough money for the things I need, and so I can spend money on things I want to do or have and not have to worry about my bank statement later.

Thanks for the saving and investment tips as well. I'm finally getting to the point where I can build up a cushion a little bit, and start putting some money into a money market account so the next time my car's transmission breaks down I won't have to scramble to come up with money to fix it or buy a new car. From there I will probably look at putting some of it into a mutual fund or something like that (this is the part where I assume I've found a decent advisor or two by this point so I don't do something incredibly stupid :)

I can see that I've still got a lot to learn, though. For example, it's just starting to set in that you don't get hit nearly as hard for making money in a regular market investment as you do for dipping into a 401k. For some reason, I had thought that any money you put into the market had to stay in the market for like twenty years or you would get hit with some insanely huge tax (though the exact amount was something I didn't actually know). So finding out that there are things like the short-term gains and long-term gains taxes is really good for me to know ^_^ Now that I know they exist, I can start looking into what it means for something to be "short term" and "long term" and what the penalties actually are (which I suspect are based on the amount and the type of investment, etc., but at least I have a place to start :)

*grin* If you do decide to think about it, I'd love to hear more about the other stuff that's rattling around up there sometime ^_^

[fireandearth]

I'm interested in talking about money too. It's something I've been putting a lot of time and energy into lately. I'm coming at things from a bit of a different perspective than most people seem to be.

Have you heard of Your Money or Your Life by Dominguez? Summary: reduce your spending by paying attention to how you're spending your money and make sure that's consistent with your values. Spend less $ -> need less $ -> spend more of your life living and less of it "making a dying" to get money you spend to get to work to make money to pay for the house you're never in and support the family you never see.

I come from a background of not being open about money too (which is something I've been working on a post about). The reason people are afraid to talk about it is because we've equated having it and getting it and keeping it with self-worth. You have a big fancy sports car so you're a success! I drive a little clunker and I'm not as good as you are. Never mind that person 1 has $100,000 in debt and person 2 has $5,000 saved up.

So, let's talk about money.

[tcepsa.livejournal.com]

I'm coming at things from a bit of a different perspective than most people seem to be.

I know that feeling--it sounds like a perspective rather similar to mine, actually, at least given how strongly I agree with what you've posted.

I haven't heard of that book, but I'll definitely look into it, since that is one of my big things with money. The whole philosophy that so many people have of "work harder to have more money to buy flashier stuff to prove to the world how amazingly awesome you are" doesn't wash with me at all. That description of "making a dying" you mentioned seems quite accurate, especially when it seems like for many people it is "work harder at a job you hate to have more money etc." So you have a six figure income. When was the last time you did something you enjoy, and actually enjoyed it?

At the same time, I'm not opposed to having money. In fact, I'm hoping that through discussions like this, I will ultimately end up having enough to do pretty much whatever I want whenever I want to do it (with exceptions for big things like flying to the moon, which I would probably have to budget a couple months in advance ;) But that part doesn't come for awhile. That's the big dream, the overarching goal. Right now I'm still way down at the baby steps level, trying to comprehend that it might be possible to even get to that point.

I am, however, opposed to thinking that my worth is related to how much I make. That's definitely part of my worldview right now, and I am trying to get rid of it. If I end up making a lot of money, I want it to be so that I can do the things I want to do and see the places that I want to see and have time for it all--not because I think it proves that I'm worth something. So that's something that I am working on in myself. It's another aspect of why I'm looking at money like this. Because, like you noted, it can be very deceptive. People with big fancy cars and big fancy debt, people with little, simple cars and money at their disposal. Which one is more likely leading the life they really want to lead, and following their dreams? Which one is more likely to get there in the long run? It's really impossible to tell, without knowing more about their individual approaches, but it would probably be easier for the one with the little car to get there than for the one with the big debt.

[fireandearth]

Well, I'm all for pimping out this book. It sounds like you would certainly be interested in it. But don't go to a bookstore...get it for 2 bucks on ebay. ;)

http://search.ebay.com//search/search.dll?sojs=1&from=R40&satitle=dominguez++your+money

I'd love to have someone to share a perspective with.

[tcepsa.livejournal.com]

Ordered :) Thanks for the tip--I'm saving money already! ;)

(reminds me of a line from a song about home repair that refers to going to the hardware store, "They know me on sight down there / I save hundreds of dollars there every week!")

Also, I've got a few of the Rich Dad, Poor Dad books; let me know if you'd like to borrow them.

[fireandearth]

I might, at some point. I'm currently swamped in things I want to read, but I'd like to take a look at those.

[(Anonymous)]

Check out www.fool.com which offers articles on a wide variety of investing and personal finance issues written in a conversational, digestible tone. Site access is free of charge, though I think you have to register first.

Whether or not you need a financial advisor is debatable. It seems that you're drawn to this financial advisor idea to keep yourself in check. But if you don't know enough about how your money and the markets work, how are you planning to make sure that your advisor isn't silently bleeding you dry? Which isn't entirely impossible. Don't assume that other people know how to manage *your* money better than you do. Trust yourself, m'dear. You're certainly smart enough to do this on your own and considering the wealth of information available online, in books, etc. you really may not need someone to look over your shoulder for you.

-Crystal