Financial advice

[yesthattom]

Basic Financial Advice PDF
I’ve gotten out of a lot of credit card debt and helped others. I finally put my advice down in the form of powerpoint slides. This is nothing new I’ve invented, just the basic tips I’ve gotten out of books that have helped me. In these slides, I’ve written 2 example goals: getting out of debt and saving up for a big poly house that a lot of my friends dream about.

Comments

[rmd.livejournal.com]

typo on page 24. "too" should, from context, be "took", i think.

"Big Poly House"

[mrfantasy.livejournal.com]

Polyethylene?
Polyvinyl chloride?
Polyester?

Oh, yeah. Sort of like a commune, but ever so slightly different. . .

Re: "Big Poly House"

[yesthattom.livejournal.com]

From what I hear, hardly a difference :)

[icarusjj.livejournal.com]

Good suggestions there Tom. I'm going to pass it along to a couple friends who can use them.

[yesthattom.livejournal.com]

Thanks!

[airshipjones.livejournal.com]

I like this. What I like most is the examples. I have seen the concept before, but your examples are easy to relate to, and easy to understand. I think it makes the whole concept much more motivating. Thanks.

[yesthattom.livejournal.com]

Thanks!

I'd be willing to go through the slides on the phone for people that need it. I need to make a MS-Excel spreadsheet that people can use to track things.

[jss]

Very nicely done.

[Page 1 (cover), you don't take any on-screen credit for the talk. This means that theoretically someone could use your PDF as-is as if it were their own. (Not that anyone here would do that, or that someone willing to plagarize your work would have problems retyping it to get rid of an author credit, but still....)

Page 14, you aren't ending the "debt" example sentences with periods. Is this an intentional style choice? Some examples are multiple sentences, and only the last one is unperioded (sic).

Page 17 made me laugh aloud.

Page 19, debt C is missing the dollar sign on the monthly payment.

Page 24, "too" should be "took" (as rmd noted).

Page 26, one bullet has punctuation; the other two don't. Consistency!

Page 27, use em dashes not double hyphens. Also, a note on 401(k) plans: If you start investing in one (regardless of company match) as soon as you can at any job (especially your first post-college job), you'll "never have" that money in your paycheck and you won't miss it. My first post-school job paid enough that I could put the then-maximum 15% into the 401(k) plan and thus never missed it, and could budget my life on the remaining 85% (less taxes etc.).

Page 34, you mention cancelling credit cards once they're paid off. I don't know that I agree. I have a handful of $0-fee cards around for emergencies (granted, more than I need), so as long as they're paid off (and they are), what does it cost me to keep them on-hand? There's no fees and no interest beng charged. Am I missing something?

Page 39, you have a quote-style imbalance around "game' [sic].

Page 40 shows Books (a la bibliography). Does it make sense to collect the URLs and other references from the rest of the talk and put them on a single slide at the end ("References")?]

[roosterbear.livejournal.com]

Page 34, you mention cancelling credit cards once they're paid off. I don't know that I agree.

According to Suze Orman, you don't want to cancel all of them, because having a some open accounts improves your FICO score, which is especially important if/when you're ready to shop around for a mortgage. However, if having them open is a temptation, it's probably better to close them than to tempt yourself to go charge them up. The best for your credit rating and your financial health is to have a few cards open, using them just often enough to keep them open and pay them off right away when they are used.

[aguynamedwill.livejournal.com]

Yes, I'm an avid watcher/reader of Suze as well, and you are right. If you must close accounts, close the ones that were opened most recently, and work backwards. People in debt can use every point in their FICO score :)

Other random thoughts

[mrfantasy.livejournal.com]

I've never known a drug dealer who took credit cards. Admittedly, I'm not very well versed in such things.

In terms of credit cards, I forget what the impact of closing accounts is on your credit score. I think it's neutral or good, and certainly having lots of cards even at zero balance is a negative.

We basically charge everything--including gas, and food, and I have most recurring expenses like the cable modem bill, cell phone bills and DirecTV auto paid to the credit card--and pay the bill in full every month. Doing it this way, we get 25-60 days of extra "float" on our money, and we get airline miles on our primary card (or percent off on other purchases, or a rebate, or whatever promotional card you might have). You have to be careful though--one late payment or not paying the full balance destroys any incentive money in late fees or interest charges. Also, float is less useful than it is during high interest times when your money might earn interest in a bank.

Another good piece of advice on banking. We're using Commerce Bank for checking--no monthly fees, free ATM, free online bill pay. The accounts aren't interest bearing, but the money we save on fees and bill pay (figure paying a bill with a written check costs $1 in the check itself, postage, and hassle) offsets that. Then all of our short-term savings go into an ING Direct account, which earns 2.4% interest right now (as good as a 1-year CD but we have access to our money at any time). We can transfer at will between Commerce and ING. Pulling money from checking to ING does allow us to "forget" about it and budget within our proscribed means.

Re: Other random thoughts

[geeksdoitbetter.livejournal.com]

and the ING accounts just went up to 2.6% *woot*

[stitchinthyme.livejournal.com]

I did essentially the same thing (though I didn't have a name for it) when I paid off my credit cards. I was determined not to drag Ray down into the $20K hole I was in when we started going out (which I got into due to my own stupidity), and I did get them all paid off well before we got married using exactly the method you describe. And although we charge virtually everything now, we pay it off in full every month. Our only debt is our mortgage (though we will soon have a car loan on top of that -- I am going to try and make it as small as possible, though).

What we don't do is invest, other than my 401(k). I need to get a financial advisor or something, because although I certainly would like to make money, I'm not patient enough, nor do I have enough time, to read through reams of accountant-speak to try and figure out which investments would be best.

[yesthattom.livejournal.com]

My investing difficulties have been recently solved by Vanguard's new blend fund. You pick the fund who's name includes the year you retire (or multiple of 5 closest) and they manage the fund to be growth while you are young, stable when you are old, and income when you are retiring. My 401K at a previous company had something similar. The benefit of doing it with Vangard is, well, they're fees and "expense ratio" are very low. Credit Unions : banks :: Vangard : Investment houses.

[geeksdoitbetter.livejournal.com]

if i have a percentage of my pay going into my ING savings account at a guarenteed 2.6% interest, do i really need to open a 401(k) with my new consulting company (no matching funds, sadly)?

[yesthattom.livejournal.com]

If there are no matching funds, then you might as well invest it on your own. However, there are some benefits to doing it with the 401K:

A 401k is pre-taxed money. So, if you put $100/month into your 401K it would have taken $130/month to make the equiv investment in ING.

The theory is that when you retire you'll be in such a low tax bracket that you won't hardly have to pay any taxes (well, maybe 1/2 as much taxes). Oh, and it helps a lot that you put in $130 instead of $100. That pays big in the end.

An IRA is similar. However a Roth IRA they do the taxes differently. It's post-tax in, and no tax when you withdraw (I think. I'm sure someone will correct me if I'm wrong).

Also, you can take a loan against your 401k for specific purposes, one of which is to pay for your first house. The interest rate you'll be charged is lower than you'll be charged at a mortgage company, and the interest you pay goes into the 401k. So it's a good deal. (check with your specific plan to make sure that's true for you... I know it was true 10 years ago for me).

You might want to ask your HR person these questions. They'll have the details on your specific 401k plan.

[geeksdoitbetter.livejournal.com]

interesting ... i have an IRA that i created when i left Mattel (the money came from my Mattel 401(k))

perhaps, instead of starting another 401(k) with a company i might leave in six month, perhaps i should re-start contributing to my existing IRA thingie?

[yesthattom.livejournal.com]

Yes, you should be able to do that.

IIRC, my IRA was in an account that had high fees until the combined balances were over $20,000. I'm so glad I finally moved it elsewhere. (I'm not sure why I'm telling you this, it just occurred to me as I was typing the previous answer).

Tom

[geeksdoitbetter.livejournal.com]

tee hee

you're telling me so as to prompt me to check the fee structure for my own IRA

thanks!

Good job, Tom!

[kathdem.livejournal.com]

One of the things this country really needs is really good, really solid financial education. I can remember in 6th grade, we learned how to write checks, and this was one really solid piece of information that I carried with me. Imagine if, at the same time, we started talking about debt, investments, and planning for the future. I don't know about you, but most of my elders are TERRIBLE at managing their finances, and so the knowledge has certainly not gotten passed along in the family.
This is one of the reasons why privatization of SS is such a hare-brained idea. If people in this country knew how to save and invest it would be much less of an issue.

[auntiemisha.livejournal.com]

When cancelling credit cards may not be such a good idea: part of your credit score is based on what percentage of existing credit is available. Unfortunately I have never seen written down exactly how the credit judgers figure this out, I don't have any exact numbers. :-( There oughta be a law!

On the other hand, for people who are habitual credit card overusers (our society encourages this), it's probably better to cancel them than run the debt up again.

[likethewatch.livejournal.com]

Thanks for sharing this info, Tom.

Regarding student loans, why not snowball them too? They're racking up interest, too, so now it doesn't seem to matter if the money was spent on education or a coke habit.

[yesthattom.livejournal.com]

It depends on your situation.

If they are the kind of loans that "pause" when you are unemployed, don't snowball.
If they aren't, snowball them.
If they are causing you stress, snowball them.

Student loans are medium-good debt. They are investments in yourself. For example, a 4-year degree stared in 1987 (when I did) added an estimated $1 million to my lifetime earnings. Unlike a coke habit which isn't likely to have the same results. A little interest isn't so bad in that case.