PARTY HARD!!!!
Manage your money like it's your face the hour before your first date.
Where were you when I laid the earth’s foundation? Tell me, if you understand. Who marked off its dimensions? Surely you know! ~ GOD
From bitter experience, I can tell you to put away as much as you can in savings. It only takes one catastrophe to put you in a hole that you may never dig your way out of.
What kind of savings? Depends on your station in life. If you're young, you can go for some high-risk, high-return investments. If you're old, your goal is more to keep what you have, so lean towards low risk.
In the micro view, establish a budget. You know what your income is, you know what your expenses are. If your income is higher than your expenses, you have a surplus. Establish how you want to spend the surplus—some for savings, some for entertainment, some for education, some for your collection of garden gnomes, whatever.
Here is the important part: stick to your budget. It doesn't matter how much money you have or how much you make if you can't discipline yourself to live within your means.
Hmm, suppose how much should I put down into the savings? (Like a percentage of earnings?) What else might I use my emergency savings for?
edited 23rd Jan '11 7:12:55 PM by QQQQQ
http://www.moneyunder30.com/how-much-money-saved-30
http://www.mdmproofing.com/iym/emergency_fund.html
http://20somethingfinance.com/emergency-savings-fund-why-how-much-and-where/
From the second link: "When it comes to "beginner" Emergency Funds, many people have found success with Dave Ramsey's approach. I, too, am an advocate of his methodology.
In his "Baby Steps" plan, Ramsey advocates that folks start with an Emergency Fund of only $1,000. (Or $500 if you make $20,000 or less per year.) You should keep this amount in your Emergency Fund, and no more, until all your debts — other than your mortgage, if you have one — are paid off.
Ramsey isn't alone in this idea of a starter Emergency Fund. Fellow author David Bach, in his 2004 book The Automatic Millionaire, recommends something similar: Build an emergency fund of one month's worth of expenses before embarking on any sort of debt payoff plan."
Generally speaking your priorities should be: pay (or avoid) a lot of debt, then build up an emergency savings in a high interest bank account (like a money market account), then build up a set of long term investments (like stocks or bonds).
Ja, alright. So I suppose you keep three, six months worth of living expenses in a High-Yield savings — keep yourself out of debt, and all is well. Or to put it in Roll-Playing terms, savings is like the emergency Hit-Points if something bad happens. (Sorry, can't keep ze geekiness out.)
What happens in a long-term investment? Like you invest a portion of money into a growing company, like Epiphyte(2) Corp 1 — and if this company makes great success, you gets a good return?
edited 23rd Jan '11 7:54:33 PM by QQQQQ
Well, you could do that, but most people consider that investing in specific firms is highly risky, unless you are very highly knowledgeable in how the stock market works. Far safer is to go to a brokerage firm, and ask them to invest your money for you, by putting it in a fund that pools your money with lots of other people and spreads the investment around several dozen companies, and maybe some government bonds. They will go over several options for you (more or less risky, quick cash or long term payoff, etc.) you pick the ones you like the best.
Thanks for making this thread; I want to know, too. What about working while in college? Good idea or no? (My parents are willing to pay, but I know it'll be something of a strain on them, and I'd like to get the money back in their pockets as soon as possible.)
"War doesn't prove who's right, only who's left." "Every saint has a past, every sinner has a future."
More like giant cherries
^^ Be sure to get an index fund with as low a fee as possible, ideally less than 0.5%
The thing is that there is absolutely no evidence that fund managers can beat the market on average. So why waste your money on huge fees? Fees are just a guaranteed negative return.
Blind Final Fantasy 6 Let's Play
@Handle: It's an excellent idea, tell your parents to put the money they would have paid you into an investment fund for you, and then you can spend your own money and still have something when you graduate (they will be very impressed with how responsible you are). Also, the work experience on your resume will make getting a job after you graduate much easier.
edited 23rd Jan '11 8:16:00 PM by DeMarquis
Hmm, how do investment funds work, exactly? Is it like my parents investing in stocks on my behalf?
"War doesn't prove who's right, only who's left." "Every saint has a past, every sinner has a future."
Yes, instead of giving X amount of money for living expenses, you agree to pay your own expenses, and the money they would have given you goes into some sort of fund that you get control of when you graduate (this is in addition to any graduate gift they were planning on giving you!). I wouldn't recommend stocks, though, if you're just now going into college, or you are already there, then you want the best return over only 3-4 years, and in that short a time frame a certificate of deposit (a "CD") would be a better bet. Your parents can get one of those from any bank.
Index fund means your earnings are tied to the whole market going up and down, rather than specific companies, but you'd have to assume you have a magical ability to predict things then. As 99% of people have been shown not to have this ability, it's better just to go with very broad funds.
Key thing is to maximise savings and especially "registered" savings (I don't know the specifics of US tax law, but you should spend an hour or two reading the tax guide the first time you do it, it doesn't change much year to year). Canadian tax laws are far simpler than US ones but the key thing is to maximise your savings in such a way to reduce your income tax. As you're a college student at this point, you should be able to whittle down your income tax to zero and possibly get a few benefits. I know lots of people who failed to do so and get saddled with an insane debt load while paying taxes and complain about it (when if they had just spent one hour of their life in the year, they could have paid zero tax).
Savings is important. Basically the general rule is that the younger you are, the more you can put into riskier investments (but talk to someone specifically knowledgeable in finance for what that is). If you aren't a crazy day-to-day hawk and just want to have a safe financial life, just put away a specific amount each pay cheque, without thinking or doing, you just put it away. You don't touch that money ever, and if there's more to put into savings, you do so. Windfall gains are perfect for putting into savings, not spending. If you have a decent job when you're doing this, you'll find that you'll have a whole bunch of money saved up in no time.
Alright. What might be some of the major typical causes of debt? How might I handle/avoid them (apart from Savings)? I know for one I can minimize utility expenses from this thread. But I am thinking along the lines of taxes, housing mortgages, mob bosses, etc.
edited 24th Jan '11 10:03:47 AM by QQQQQ
Well your major expenses are, in some rough order of magnitude:
- Mortgage.
- Education tuition fees.
- Car.
- Food/basic utility.
- Entertainment/clothing.
Key thing here is this. For education tuition, you might not have much choice about (other than going to state university or getting scholarships, if you can get into a good university, just take the offer because it works out in the long... very long run). A person I know went to Harvard for poly sci, then managed to get into law, comes out with an insanely high debt, and then it took him 5 years to get anywhere in his profession. At this (15-20 years) point he's making triple the median household income of America by himself.
Mortgage/car, ensure you buy within your price range. Don't go, oh gee, equity is awesome, I'm earning 20k so I'll buy a 600k house. If you're earning 20k, buy a house within that price range. I forget exactly what it is, but it was something like 25% of your income should go to mortgage and then like 15% to your car. I forget the exact number, so you should double check that.
The rest, if you can be cheap go ahead. The point is to think "What is my interest/hobby" and spend money on that and ignore other stuff (If your hobby is drawing, then you can afford to buy a wacom tablet for 600 bucks. The understanding is that you didn't spend that on something you don't like, say going out to the movies every friday with your friends). At the same time, don't go "I'll save money by not getting internet", crippling yourself socially is going to harm your income.
edited 24th Jan '11 11:15:21 AM by breadloaf
Really? If you go hunting enough you can reduce your income tax by that much? That's great, thanks. 
So, as someone just out of high school, what would be the best job options? Is it possible to be in college and do something other than working at a fast food place or something?
"War doesn't prove who's right, only who's left." "Every saint has a past, every sinner has a future."
Once in college, get a job through the university. Most have an office dedicated to helping undergraduates find positions. The best ones are professional in nature, working in an office environment of some kind. Eventually, when you figure out what degree you want, you will look for an internship in that specific field. Again, the university placement office will help you.
:V
First rule: never take life advice from the internet. Seriously, nothing will ever come out of it. I'm sure a study somewhere can back me up on this but I've seen some really horribly advice given out.
edited 24th Jan '11 8:16:18 PM by saladofstones
Well he's talking about WWII when the Chinese bomb pearl harbor and they commuted suicide by running their planes into the ship.
This post was thumped by the Stick of Post Thumping
@salad: Well, people are simply directing me to resources. They've mostly been telling me whom to ask for more information. I have a fairly developed BS dectector, I'd like to think, if someone tells me something like "Put all your money in this obscure company!" I'm not going to do it.
"War doesn't prove who's right, only who's left." "Every saint has a past, every sinner has a future."
I am wondering, for you grown-up and out-of-the-Bird's-nest Tropers, what advice would have about managing your day to day funds? This is not to sound naive on my part, but it is a spur of the moment question on my musings about the future — and I (along with other Tropers possibly) would very much like to know how to handle the financial quibbles later on.