LooseSuits Thread: Best personal finance advice after college?

Best personal finance advice after college?

creat1ve — Wed, 31 Oct 2007 00:27:44

It's actually very simple. Don't buy what you can't afford. And shop smart, do your grocery shopping in bulk at a store like costco or something. Use 20 percent of your take home (if possible) for savings. Credit cards should be on an emergency only basis. I say this as someone who has been in quite alot of debt making it from a 460 fico to well over 700. I had to go to credit boot camp.

good site for reference
www.creditboards.com

Best personal finance advice after college?

mvlabs — Tue, 30 Oct 2007 08:56:04

Make a budget and measure your spending (every last dime). The best thing to do for yourself is measure and put the data before your eyes.

This could show you some interesting spending behaviors. If you are doing well, it could also act as positive reinforcement.

And yes, direct or immediate deposits/transfers are best and better prevent you from mis-allocating funds (like when you get really drunk and want to buy that $20 pizza for everyone).

Best personal finance advice after college?

eltiburon — Sun, 28 Oct 2007 07:54:02

Don't get caught up in the hype of the hip city life of the young professional. You are gonna get a good job and make more money than you are used to. So, what's gonna happen is you are gonna start feeling rich and spending on things you don't really need. I remember my roommates and I 2 years ago used got into all this hype of wearing Express and Banana Republic only, dressing all preppy thinking - hey, it's okay I have a real job now. The end result was one of my roommates got into so much debt he had to move back with his parents, and I...well I caught myself on time and cut back on the crap I didn't need. So, don't let that happen to you.

Start saving and investing aggressively. Open up an account with a mutual fund company and invest in sector funds. Why mutual funds and why sector funds? Well, mutual funds are the best option for investors who cannot fork out $100,000 or more to design their own portfolio and eliminate all the premium risk. Since you are young and will likely keep your money in the sector fund for a long time value over the next 20 years is likely to increase tremendously. Even if things don't work out and you lose your money, you will be fine - you are young and will make up your losses probably 10 times over. Good luck and hope this helps.

Best personal finance advice after college?

cooper — Fri, 19 Oct 2007 08:21:51

I am just out of college so I can't give advice, but I own my apartment and just bought a house to flip with money left to me. My family has a history of investing and savings. I pay off all my cards and have no idea if I have a credit rating or not . I use them all the time I just pay them off.
I also heard something when on the television when I walked in the door today which was interesting. Everyone may know this but I didn't.

I don't have student loans but I know a lot of people I went to school with do. Suzie Orman was on Oprah talking to families in serious financial difficulties. One guy was 100,000 grand in debt with student loans and had been for some time...when they would call he just would not answer the phone. She said that they love it when you don't pay because student loans are on not bankrupt able and eventually they will just garnish his wages with years worth of interest his life could be totally screwed.

This made me wonder how many people know this. I went to a school which was very expensive and often heard of people with hundred grand loans, and I also heard people mentioning bankruptcy as an out.

Best personal finance advice after college?

thebeancounter — Fri, 19 Oct 2007 06:57:29

On that note, I'm adding it to Bloglines so I don't forget about it again.

Thanks! One more reader... I think that makes three now!

If I were to give ONE piece of advice, it would be to start saving for retirement. Every college graduate laughs at the idea, and the statistics back me up, but you can't underestimate the time value of money. I gave myself 12 months out of college to get my life in order, etc. before I started saving for retirement. It's still a LONG way off, but I can already see that magical time value of money principle at work. Oh, and if you can get your employer to add matching funds, then you're just a fool (yes, a fool) not to take that free money. It's an instant return on your investment!

Best personal finance advice after college?

DavidBB — Sun, 15 Jul 2007 07:00:40

Don't believe anyone who tells you that if you just work hard enough and long enough your life will turn out fine – eventually – and it will all be worth it in the end.
http://reflectionscoaching.typepad.com/reflections_on_balance/2007/06/some-really-rea.html

Best personal finance advice after college?

Gnorb — Fri, 06 Jul 2007 22:26:16

FYI: I just wrote a blog post in response to this The Misconception of Credit Card Debt. It's a horrible title, but whatever. It's a good article (I think). And yes, if you like it enough feel free to Digg it (or Thoof it, or whatever else...)

Best personal finance advice after college?

BubbleGum — Fri, 06 Jul 2007 14:17:53

Wow...it's so interesting to see how different cultures are. Born in China and living in Australia, I grew up in the culture that parents teach you to save for something you want cause that's what parents, grandparents have been doing their whole life. Even with the introduction of credit cards, home loans, personal loans, people still feel uncomfortable and unsecure to live with debt.

Is the video exaggerating in some way?

But it's probably true "saving" is not something that will naturally come to American or Australian's mind. That's probably why Aussies get paid weekly, otherwise, might need to get a loan to get through the entire month...

Best personal finance advice after college?

fuscom — Tue, 03 Jul 2007 09:29:57

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Best personal finance advice after college?

auburn — Tue, 03 Jul 2007 03:15:17

Most of the financial advice I ever got was through modeling. I think it's important that you show your children at an early age the generalities of how to handle money. Ex: My husband and I decided on the obligatory Disneyworld vacation trip and I made a huge thermometer type graph hung on the inside of a door. There was a special savings account used for this purpose only. Every time we put money in the savings account, our son would take the red crayon and color the thermometer to that amount. We were trying to show that vacations are worth saving for and the two years it took was valuable to him.

Best personal finance advice after college?

betheboy — Tue, 03 Jul 2007 03:14:14

Be careful with the credit cards and read the customer agreements for the cards you have. You may be paying more money in interest than you think you are.

Best personal finance advice after college?

Gnorb — Tue, 03 Jul 2007 01:33:23

@Joe: Actually I've been able to put together a pretty interesting system when it comes to budgeting, mostly because it's never really worked for me:

1) Figure out how much your "bills" are per month (not including misc. like food)

2) Provided you're making enough, open up a bank account that's just checking and put enough money there to cover your bills plus about 10% (enough for an "emergency" funds -- auto maintenance, medications, etc -- or donations)

3) Create a savings account and automatically bank 10% (start out with 5% if you have to, but the higher, the better).

4) In another bank, create a "spending" account. Whatever's left over after bills and savings are paid, put there. This is where your food, entertainment, and misc money will come from.

Do whatever you can to minimize your recurring expenses, and maximize your savings. After you have a good amount in savings (at least 3 months worth of living expenses, but preferably 6) start investing. Whether this is real estate or mutual funds or building a business, it's all up to you, but by this point you've protected yourself in case things get rocky.

I wrote an article on how my wife and I have been doing that, and plan to write some more about it in the coming weeks, specifically how we implemented our plans. (This note, however, makes for a nice preview).

Best personal finance advice after college?

Joe — Tue, 03 Jul 2007 01:23:40

Track what you spend and create a budget. I bought Quicken the year before I graduated college and have been using it since.

It is hard to be accountable for your actions if you don't have visibility into what they are. A budget and measuring your expenditures against it will help you identify areas that need improvement.

Best personal finance advice after college?

Devin — Fri, 29 Jun 2007 18:25:09

Thanks for your clarification, Gnorb. I'll check out your post soon. :)

Abi, thanks, another good (and often overlooked) point.

22Dollars, that makes sense, too--take care of the problems before they become problems. ;)

Thanks again everyone.

Best personal finance advice after college?

22Dollars — Fri, 29 Jun 2007 16:39:38

My best advice is to not wait till after college to start thinking about how your going to handle your finances. If fact, I remeber back in college days, staying up late with my room mates talking about how to make extra money on the side to help pay off these huge college bills we each had. We addressed the problem early and today I think each of us (4) are college debt free.

Best personal finance advice after college?

Gnorb — Fri, 29 Jun 2007 00:37:22

What Abi said. (Big point right there. Also, it's a security hazard.)

Best personal finance advice after college?

Abi — Fri, 29 Jun 2007 00:35:24

Don't abandon credit cards that you've paid off, especially ones that don't have annual fees. The length of your credit history on each card is one of the factors used in determining your credit score.

Best personal finance advice after college?

Gnorb — Fri, 29 Jun 2007 00:14:46

Since the advice here has been generally good, I'll let it be. (Though no one here's said it, I will: START YOUR OWN BUSINESS. Real estate, eBay, website design, a blog network (*wink*), network marketing, selling seashells by the seashore -- whatever. Build your asset base, and do whatever you have to in order to develop passive income.) On a related note, I'd say read this.

ErinR: Get one credit card (one!) to build credit, but pay off every cent before you get charged a penny of interest.

Actually, this won't do much for your credit. Credit is a measure used by companies to test a number of factors, including (1) how trustworthy you are with borrowed money, and (2) how much money they can safely make off of you. (This is one of the reasons your credit takes a hit whenever you check it -- UP TO 20% (if you check multiple times) Can't have someone knowing TOO much about their history. After all, information is power. Always keep a close eye on those trying to keep information from you. Never trust them). Get at least one credit card, but you can get more. Just don't use more than one at a time. The number of cards you have don't matter, self control does, and for some business expenses credit cards will be your best friend -- and your worst enemy (think of them as a partner fully funding an endeavor and only expecting 20% ROI, instead of 50%+). By the way, never, ever, ever carry more debt than 50% of your total credit unless you can pay it off within 3 months. That WILL hurt your credit score.

Recommendation: start off with one card. Buy something small-ish ($200 is enough) and pay the minimum for a couple of months, then wipe out the debt. Do that a couple of times. Your credit score (and limit) will go up. Then abandon the card, unless you're going to use to make more money than it'll cost you to use it. Also remember: Rent doesn't go towards your credit score, so no matter how good you've been to your landlord, it's not having an effect on your credit. Of course, don't be nasty to them. Still pay them on time. Just know that you won't be able to walk into a car dealership and say "But I've rented for X months, why isn't my credit at 700 yet?! What do you mean I'm a ghost in the system?!" (A ghost, by the way, is someone who doesn't have much credit history. Medical expenses and rent keep you a ghost, loans and credit cards give you history. Not saying either is good or bad -- you're hearing this from a person that made it a point to pay cash for everything for 25 years -- just different ways of working within the system.)

Best personal finance advice after college?

Nicole — Fri, 29 Jun 2007 00:07:00

I read BeancounterBlog when I remember to -- okay, it's not often, but I've always found it to be pretty good.

On that note, I'm adding it to Bloglines so I don't forget about it again.

Best personal finance advice after college?

Devin — Thu, 28 Jun 2007 23:59:31

Awesome insights everyone, this is great!

peroty: I like your nickel and dime comment. Most people my age look past them and they add up. Personally, if I see a fee at a bank I don't agree with I call them up and let them know I don't want that. After some arguing I can simply walk away from the bank pretty easily. ;)

dreamweaver: Great point. I started maxing my IRA at 18 and at 20 it already looks to be growing quickly. Imagine 10 or 20 years away. Hooray compounding.

estarla: Ah yes! debt-to-credit ratio is often overlooked. Great tip.

Nicole: Point #2 is good. I'm looking to get a new car after I have some steady income. But, like you said, salary and take-home are completely different.

ErinR: I agree, I think automatic transfers are one of the best form of savings. No thought required, no action, no veto!

Do any of you read any personal finance blogs?

Best personal finance advice after college?

ErinR — Thu, 28 Jun 2007 23:29:37

My biggest rule of thumb is to live below your means. As far below as possible. Don't spend any more than 1/3 of your income on your housing and utilities. Invest in a cookbook or two. Pare down the superfluous expenses (you don't need every channel your cable company provides). Get one credit card (one!) to build credit, but pay off every cent before you get charged a penny of interest.

Get some financial software and learn to balance your checkbook. Save every receipt, keep copies of every check, and be vigilant about recording them in your software. It'll help you in the long run to understand where every penny goes.

Pick a certain amount of money to save every month and save it. No excuses. Consider it a fixed monthly expense.

Allow yourself some frivolous spending, too. Even if you need to save up a little for it. Buy something that's a little too expensive (A Playstation game? An expensive pair of pants? A swanky dinner?) every once in awhile so that you don't feel like you're being too hard on yourself. You'll be fine.

Best personal finance advice after college?

Nicole — Thu, 28 Jun 2007 23:21:20

1. Attempt to save at least 10% of net income, adjusting up or down accordingly with what you can afford. Don't count on only the company's 401(k) matching program -- open a secondary RSA or, if you plan to be in a higher tax bracket later in life (hopefully you do), go for the Roth IRA. Of course, you want some of your savings to be liquid, so putting some money into a savings account is a good idea as well. Be sure to shop around as your local brick-and-mortar bank is going to give you a bad deal -- online banks like ING Direct, etc, offer similar security but better interest rates. Most importantly, have savings automatically taken from your bank account. If you never see the money, you'll be less tempted to spend it.

2. Don't commit to new expenses before getting your first paycheck. Taxes and other deductions always end up being more than planned. In other words, don't commit to a larger car payment before you know exactly how much your take-home pay will be.

3. If you can swing it make sure you put money away for travelling. You're going to want to visit your now far-flung college friends or meet them in a fun, exotic locale for reminiscing. :)

Best personal finance advice after college?

estarla — Thu, 28 Jun 2007 21:49:30

If the interest rates are better, consolidate your loans.

Ditto on the credit cards. Start by paying off the small ones. It helps you with the gratifying feeling of meeting goals. Watch your debt-to-credit ratio. Try to keep it below 40%, or aim for it--that's a big tick on the debt-to-credit ratio meter. But keep them active (yet as low as possible cuz the interest rates are the worst)! It's your revolving credit.

Keep a savings account and budget that into your monthly expenses. You need a cushion for emergencies, or one act of god (or fender bender) will throw you off your financial track. Keep in mind your car insurance and health insurance deductibles--plan for those.

Maybe this goes without saying, keep your monthly expenses as low as possible. The roommate suggestion is very helpful with bills. :) Also, keep them realistic when it comes to monthly expenses and allow yourself to live *somewhat* comfortably. If you are not being honest with yourself about your monthly expenses (like consistently spending more than planned on your grocery bill) then you will not be able to reach your goals and look to the next step.

Invest for retirement. Never underestimate the power of compounding interest. (Einstein gets credit for that one) Always go with a matching program first (401k)--it's free money, instant return. Then move to the IRAs. Do the Roth unless you're making under 50k.

Good luck!

Best personal finance advice after college?

dreamweaver — Thu, 28 Jun 2007 21:46:45

Invest something regularly to an IRA, even if it's a small something. If you start now, by the time retirement comes around, there's no worries.

Best personal finance advice after college?

peroty — Thu, 28 Jun 2007 21:42:53

Don't live off your credit cards like my roommate did. He's STILL in debt 3 years later.

Get a job. Any job. Bills need to be paid. Even if it sucks, remember, you need to make money while you hunt for that awesome job.

Get a roommate (or a few) it's easier to split bills and food and rent than to try to go it alone (unless you've got a super job!)

Don't nickel and dime yourself to death! That $2.00 here and that $5.00 there will end up doing you in. They'll fly under your financial radar leaving you wondering where all your money went.

Best personal finance advice after college?

Devin — Thu, 28 Jun 2007 21:36:32

I'm wondering what your best tip would be for people like (someone just out of college, new job, new responsibilities).

Was there any big mistakes made? Lessons learned?

I'm hoping to take some of your input and add it to my own and write a comprehensive article or two. :)