How did you learn to manage money?

[Kaido]

I like Mr Money Mustache. Dude is hardcore but you can learn a lot of behavior adjustments that really put you on the path to savings and growing money through simple compound interest. You may not want to depend on spoon-fulls of olive oil as part of your daily caloric intake, like MMM, but his advice is a solid foundation of fixing disastrous budget issues and learning to shave bad, money-wasting habits out of your life in order to create several hundred dollars-worth of "Free" money every month. It is a great start.

Also, jlcollinsnh, The Mad Fientist, and Go Go Curry Cracker are solid FIRE bloggers.

The one big thing I disagree with MMM on is that you have to go ultra-frugal on everything. imo, you should decide on what lifestyle you want & then work towards supporting that goal. If your goal happens to be being ultra-frugal on everything, then great. If your goal is to manage a fleet of 5 cars, plus a motorcycle, quads, and jetskis, then also great. Also, I think that work can be pretty fulfilling if you find something you really like doing (half of which is attitude, anyway). Personally, I have no plans to ever retire because I like working & get bored easily, and using my talents to do something fun & creative & meaningful that helps others (which currently means fixing computers) brings me a lot of satisfaction (and a paycheck). I also appreciate convenience in my life & am willing to both work to pay for it and put in the effort to reduce decision fatigue, whether it's with my computers or with financial management or whatever. I don't think being hardcore about everything is a requirement for say early retirement or good financial planning, unless that's a personal goal you have because you enjoy that lifestyle.

With that said, he does have an awful lot of good information for people looking to do something similar to him, as well as a good introduction & onboarding process. Same with Dave Ramsey & other people with financial "systems" available. Everyone in financial education gets a lot of criticism, but people don't realize that not everyone grew up with & was taught good financial habits or had the interest to learn about it in the past. It's like criticizing people who are overweight & out-of-shape for waiting for so long to get into shape...everyone has to start somewhere! So props to MMM for putting up a good-quality informational website & doing regular updates and putting his own personal story out there for people to read.

 

[Sho'Nuff]

With real estate and renting it can be dicey.

Throwing out renters can be tricky. Especially if a mom has babies. Then, what if they destroy the apartment. It's going to be very difficult to get a settlement when the client doesn't have two pennies to rub together. IMO, that's why research is key. Pick an area that's close to a shopping center. University and hospital are also ideal. Make sure many of your tenants are hard working. I know Grant Cardone favors the South because he hates the snow. Snow and ice = Lawsuits. Many of his multi family apartments are in very nice areas. He looks for high end stores like Whole Foods and Starbucks. He even looks for an area with a high gay population. Gay people normally take care of their things and they usually have good paying jobs. Again, it takes research. Nothing is ever easy.

Every time someone talks about real estate someone brings out a story like this. Yes there are risks to real estate just like any investment. But stories like this really are the exception and not the rule. If they were the rule, Nobody would be in the rental business. Yet millions of people are. And an obvious way to avoid the eviction issue is to rent vacation properties for a fixed term. Though I agree the most reliable way to make real money in real estate is to own and rent apartments in multi-unit complexes.

That said - one always has to remember the costs associated with any investment. And in rentals, you have to factor in maintenance, the mortgage, and any utilities you might be providing to your tenants.


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[Sho'Nuff]

I find that a bit odd for the truck. Assuming you have a good credit score you would have been better off leaving the money in and getting a low interest rate car loan in 88% of the rolling 5 year returns for the S&P since 1926. Hopefully it was a very recent truck purchase as the market has been particularly strong over the last 7 years

Yeah the truck purchase is a bit of an oddball. I took out money from my investments for that purchase primarily because trucks are very expensive (even used ones) and I hate debt. Even with the money I took out I still financed the truck. I just wanted the term and payment to be reasonable because while I have substantial cashflow each month, large swaths of that cashflow are pre-allocated to various things. So - unless I want to re-allocate my whole income - I needed to keep the truck payment under a certain figure.

I do appreciate of course that cars are depreciating assets. But every now and then its ok to buy something because you want it, and not because its a smart investment (cars not being an investment at all). And seeing as how I am on track to retire at age 54 with no debt, I am ok with my decision.



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[Sho'Nuff]

If you really risk adverse, better put your money in FDIC-insured accounts (not paying much) than investing in stocks and bonds because you would pull your money out the second the market goes south and then you would be in a deep hole to climb out of.

If you have some money that you can afford to lose (after you make sure that you have no credit card/high interest debt, have 6 months emergency account), then put 90% in a cheap index stock fund and 10% in a cheap index bond fund. Warren Buffet said so.

Unless you can find an FDIC account that pays a return greater than inflation (hard to do these days) - keeping all your money in those accounts is not a wise decision as you will actually LOSE buying power over time. A better option would be to put the money into a utility stock (electric company) that pays a good dividend. They are about as safe as you can get in the stock market but obviously not completely immune to the market. Just remember that many dividends are taxable.


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[Kaido]

Yeah the truck purchase is a bit of an oddball. I took out money from my investments for that purchase primarily because trucks are very expensive (even used ones) and I hate debt. Even with the money I took out I still financed the truck. I just wanted the term and payment to be reasonable because while I have substantial cashflow each month, large swaths of that cashflow are pre-allocated to various things. So - unless I want to re-allocate my whole income - I needed to keep the truck payment under a certain figure.

I do appreciate of course that cars are depreciating assets. But every now and then its ok to buy something because you want it, and not because its a smart investment (cars not being an investment at all). And seeing as how I am on track to retire at age 54 with no debt, I am ok with my decision.

See, that's where personal goals come into play & why I don't agree that every decision needs to be dictated by the most prudent financial decision possible, because you need to live your life the way you want it too, based on the resources you have available. I'm in a different situation with a different goal; to make a long story short, I bought a new car in 2015 that turned out to be a lemon. Went through the lemon-law process only to be told I could trade it in at market value, but due to deprecation I would owe $4,000 to get rid of it, so that route was basically a bust. I don't want to make $4k magically disappear, nor do I want to roll the negative equity into another vehicle, thus making my monthly payment higher, so my personal goal for right now is to continue to live with the bugs in the car until I pay it down enough that I can trade it in or sell it to Carmax or whatever without shelling out thousands to get rid of it. Not really the best idea in terms of having a reliable car, but it also doesn't disrupt my financial plan either.

So TL;DR, sometimes the best decisions aren't necessarily the best financial decisions from a money-only perspective, they're the best for your own goals in your particular situation. And the overarching rule of finances is "you can buy whatever you can responsibly afford", so for you, if it made sense to pull out cash for your truck but then do a payment on it, that supersedes what would otherwise be called the best financial decision to do something else like a non-bulk-withdrawl for monthly payment or whatever. But having more resources available & doing more thinking about your financial plan gives you more options for the choices you can make. Assuming you're not in dire straights, life is for living, so you need to have a balance between spending & saving, because you don't just want to save endlessly until you retire & then die and never really get to enjoy life if you had the opportunity to but chose not to. I see a lot of blogs advertising the endless saving thing & ultra-frugality thing as a lifestyle choice rather than out of temporary necessity, which is fine if that's your personal goal & you want to make a hobby out of being an extreme couponer & stuff, but I don't think that should be applied to everyone equally. Goals, balance, and being willing to think about your finances & work towards being successful is the name of the game.

 

[slackerinabox]

Thank you, thank you, thank you for this discussion guys - lots to think about and chew on. I'll be picking up a few books (heck, 3 bucks on ebay), though I realize that a lot of this is common sense. or should be, but I lack that common sense so .. lots to learn!

 

[highland145]

What do you jerks have against paying interest?

Pretty sure that's racist or something.

 

[Exterous]

With that said, he does have an awful lot of good information for people looking to do something similar to him, as well as a good introduction & onboarding process. Same with Dave Ramsey & other people with financial "systems" available. Everyone in financial education gets a lot of criticism, but people don't realize that not everyone grew up with & was taught good financial habits or had the interest to learn about it in the past. It's like criticizing people who are overweight & out-of-shape for waiting for so long to get into shape...everyone has to start somewhere! So props to MMM for putting up a good-quality informational website & doing regular updates and putting his own personal story out there for people to read.

I think its useful for more than just people looking to do something similar. Like I mentioned earlier its a nice change of pace from all the advertisements and Joneses out there trying to get you to buy more stuff\services. They also have some decent DIY stuff on there if you just like being handy and a decent tax question section. I'd probably get Face Punched a few times on there for things like our house, vacations and my home theater stuff but I still find a lot of interesting or valuable stuff on there

Yeah the truck purchase is a bit of an oddball. I took out money from my investments for that purchase primarily because trucks are very expensive (even used ones) and I hate debt. Even with the money I took out I still financed the truck. I just wanted the term and payment to be reasonable because while I have substantial cashflow each month, large swaths of that cashflow are pre-allocated to various things. So - unless I want to re-allocate my whole income - I needed to keep the truck payment under a certain figure.

I do appreciate of course that cars are depreciating assets. But every now and then its ok to buy something because you want it, and not because its a smart investment (cars not being an investment at all). And seeing as how I am on track to retire at age 54 with no debt, I am ok with my decision.

I understand people don't like debt but it can be a useful tool in these days of historically low interest rates. We're on track to retire early as well and I could have purchased my used car outright but I still got a loan. If we're talking a $20k vehicle there are pretty good odds that it would cost $15k-35k more to take the money out of an account than get a car loan if we expand out the lost gains over 15 years. I don't mean that as a judgement against your decision at all, its just my point of view on it. Congrats on being on track to retire early!

 

[Kaido]

Thank you, thank you, thank you for this discussion guys - lots to think about and chew on. I'll be picking up a few books (heck, 3 bucks on ebay), though I realize that a lot of this is common sense. or should be, but I lack that common sense so .. lots to learn!

The best starting point I can suggest is just to start laying out personal financial rules for yourself. Just build it up slowly over time. Eventually you will have a solid foundation of knowledge built, you will have habits that support your goals, and you will have a structure of tools & services that support your goals.

 

[Sho'Nuff]

I understand people don't like debt but it can be a useful tool in these days of historically low interest rates. We're on track to retire early as well and I could have purchased my used car outright but I still got a loan. If we're talking a $20k vehicle there are pretty good odds that it would cost $15k-35k more to take the money out of an account than get a car loan if we expand out the lost gains over 15 years. I don't mean that as a judgement against your decision at all, its just my point of view on it. Congrats on being on track to retire early!

Yeah I am aware that I am trading some lost gains for reduced debt, and I have definitely used debt to my advantage in the past. But in this particular instance I was more concerned with the cashflow impact of the truck payment than I was about those returns. Particularly as I have so much in the market now that the lost gains are not going to impact my ability to retire when and how I want at all. Not that those lost returns are anything to sneeze at of course. You may also be interested to know that I am working to pay myself back for the money I took out by investing a little more than I normall do each month. In essence, I gave myself an interest free loan with an indefinite payback period. Yes I know I still lose some of the growth. But I am not losing all of the growth and I am not losing the principal either.

I just need the next 14 years to give me returns that are similar to those I had over the last 20 years (avg 7.8% annually) and I'll be all set. Particularly as I will have 0 debt at that time. House will be paid off. Kids will be in college. Wife will be at work. And I will be on the golf course when I am not learning how to blow stuff up and/or make fireworks. A nice bonus is that my wife will be working for a few more years after I retire (because she wants to), and then she will retire with a pension. AND we have the benefit of being able to maintain government employee health insurance while retired. So unless something changes we don't have to worry much about the cost of health insurance from age 54-65 (58-65 for my wife).

That said, the thing I am most worried about right now is that the government is going to change the tax laws on high value retirement accounts to my detriment. If that happens I might literally lose my mind, because it seems that all the government wants to do for me now is figure out a way to transfer the wealth I earned through hard work and smart decisions to other people who didn't work for it and/or inefficient government programs..

 

[TwiceOver]

Some people who play with fire get burned, choosing debt over immediate pay off is really only for the rich and job secure people.

 

[Svnla]

Unless you can find an FDIC account that pays a return greater than inflation (hard to do these days) - keeping all your money in those accounts is not a wise decision as you will actually LOSE buying power over time. A better option would be to put the money into a utility stock (electric company) that pays a good dividend. They are about as safe as you can get in the stock market but obviously not completely immune to the market. Just remember that many dividends are taxable.

Normally, I would agree with you but look at the poster that I was replied to. He said he is very risk adverse. Therefore, I would not want him to put his money into stocks and then pull out the second the market heads south. Just look at the people that pulled out during the crash in 2008.

You can find FDIC accounts that pay over 2%, just have to do some works. Hint.. multiple "reward checking accounts".

 

[Svnla]

Thank you, thank you, thank you for this discussion guys - lots to think about and chew on. I'll be picking up a few books (heck, 3 bucks on ebay), though I realize that a lot of this is common sense. or should be, but I lack that common sense so .. lots to learn!

You are welcome.

Remember everybody is NOT the same. Our suggestions are just that, broad general suggestions. ONLY you can determine the "risk" level that you can tolerate.

As I said, as long as you have 6 months emergency account, no high interest debt(s), max out IRA/401k/work retirement accounts, your finance situation is in good shape, then get some money (that you can afford to lose) and put 90% of them in cheap S+P 500 stock index and 10% in bond index. Keep it going and going so you can have the power of compounding (because you have over 30 years to go). You will not be sorry.

Remember, go slow and steady in a long term investing situation >>>>>>>> go too fast and crash.

 

[zinfamous]

What do you jerks have against paying interest?

Pretty sure that's racist or something.

sorry, South Carolinian isn't a race.

 

[highland145]

sorry, South Carolinian isn't a race.

If it were, we'd be in the last 3 anyway.

We did get rid of our governor though so dumph could pay off McMaster.

 

[skull]

Thank you, thank you, thank you for this discussion guys - lots to think about and chew on. I'll be picking up a few books (heck, 3 bucks on ebay), though I realize that a lot of this is common sense. or should be, but I lack that common sense so .. lots to learn!

Check out bogle heads. Its the best advice you can get especially for the lazy. Their entire plan is to do nothing, once your invested and have it set to auto transfer. The philosophy is that the market will perform in time. You just put the money in low cost index funds and bonds diversifying as much as possible every week. Then don't touch it til you retire. The plan is that whether the market goes up or down the average over many years will out perform everything else.

 

[slackerinabox]

You are welcome.

Remember everybody is NOT the same. Our suggestions are just that, broad general suggestions. ONLY you can determine the "risk" level that you can tolerate.

As I said, as long as you have 6 months emergency account, no high interest debt(s), max out IRA/401k/work retirement accounts, your finance situation is in good shape, then get some money (that you can afford to lose) and put 90% of them in cheap S+P 500 stock index and 10% in bond index. Keep it going and going so you can have the power of compounding (because you have over 30 years to go). You will not be sorry.

Remember, go slow and steady in a long term investing situation >>>>>>>> go too fast and crash.

I'm following this advice for sure (sp + bond), I'll be reading up on index funds for sure. I'm in a weird situation in that we have very little debt ($500 cc, $300 car loan) other than our big mortgage, we're just going paycheck to paycheck and it's getting exhausting. We don't even over spend on stupid stuff, we just don't have a clear and repeatable budget so we make stupid mistakes (ordering dinner too much one week, too many cabs another, then payments from weeks ago finally go through over drafting embarrassingly) . It's a lack of discipline and the wife and I are going to have a big discussion this weekend. Logging will be an immediate first step, as will a beta budget. We know how to live cheaply due to extended unemployment but, now that we have jobs, we've over done it ... putting the brakes on that stat!

 

[Svnla]

I'm following this advice for sure (sp + bond), I'll be reading up on index funds for sure. I'm in a weird situation in that we have very little debt ($500 cc, $300 car loan) other than our big mortgage, we're just going paycheck to paycheck and it's getting exhausting. We don't even over spend on stupid stuff, we just don't have a clear and repeatable budget so we make stupid mistakes (ordering dinner too much one week, too many cabs another, then payments from weeks ago finally go through over drafting embarrassingly) . It's a lack of discipline and the wife and I are going to have a big discussion this weekend. Logging will be an immediate first step, as will a beta budget. We know how to live cheaply due to extended unemployment but, now that we have jobs, we've over done it ... putting the brakes on that stat!

Hold it right there. See the bolded/underlined part? Need to solve it first before you do anything such as investments.
You must sit down with your spouse and family member(s) to discuss where are ALL of your expense. And I mean everything. No exception. Write down everything you spent during the last 30 days and then figure out the "needs" and "wants". Then set up a budget and stick to it.

Remember, take small steps, go slow and steady. This is a marathon, not a sprint.

 

[slackerinabox]

Hold it right there. See the bolded/underlined part? Need to solve it first before you do anything such as investments.
You must sit down with your spouse and family member(s) to discuss where are ALL of your expense. And I mean everything. No exception. Write down everything you spent during the last 30 days and then figure out the "needs" and "wants". Then set up a budget and stick to it.

Remember, take small steps, go slow and steady. This is a marathon, not a sprint.

You're 100% right, the genesis of this thread was an argument I got into about repeating past mistakes. Paycheck to paycheck is a bit of an exaggeration, but it has been hard when unplanned situations come up... for example our car was towed for being too close to a walkway and the stupid excessive $900 tow charge made my heart sink and put me in panic mode- I was hoping that panic mode over money was behind me... I'm guilty too, and it's always the little things with the mrs. Like she'd walk into a cvs for one thing and end up spending $40, which quickly adds up. I'm (was) the gadget spender, she was the little purchases add up queen. It's a lack of consciousness about spending that needs immediate action for sure. I'm going on a $30 a week allowance for each of us then working on a firm budget this weekend.

 

[Mai72]

Every time someone talks about real estate someone brings out a story like this. Yes there are risks to real estate just like any investment. But stories like this really are the exception and not the rule. If they were the rule, Nobody would be in the rental business. Yet millions of people are. And an obvious way to avoid the eviction issue is to rent vacation properties for a fixed term. Though I agree the most reliable way to make real money in real estate is to own and rent apartments in multi-unit complexes.

That said - one always has to remember the costs associated with any investment. And in rentals, you have to factor in maintenance, the mortgage, and any utilities you might be providing to your tenants.


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You misunderstood what I was trying to say. I actually like real estate. I know it's not for everyone and that's fine. But, for the most part real estate is tried and true. If you were to look at the financial portfolios of many millionaires today you'd notice that most own property.

It's like anything. It takes work, dedication and commitment. Do the research. Make mistakes. Learn from those mistakes. In no time it will pay off. I'm suprised that many people here don't like real estate.

 

[Mai72]

You're 100% right, the genesis of this thread was an argument I got into about repeating past mistakes. Paycheck to paycheck is a bit of an exaggeration, but it has been hard when unplanned situations come up... for example our car was towed for being too close to a walkway and the stupid excessive $900 tow charge made my heart sink and put me in panic mode- I was hoping that panic mode over money was behind me... I'm guilty too, and it's always the little things with the mrs. Like she'd walk into a cvs for one thing and end up spending $40, which quickly adds up. I'm (was) the gadget spender, she was the little purchases add up queen. It's a lack of consciousness about spending that needs immediate action for sure. I'm going on a $30 a week allowance for each of us then working on a firm budget this weekend.

Have you tried budgeting software? I really like YNAB. With YNAB you give every dollar a job. The program runs on their server. It's $50 for a yearly subscription. What I love about YNAB is they run free webinars on how to effectively save money, invest, use their program, and many more. And, that's important. You always want to be in the process of learning.

YNAB is free for the first 30 days.

 

[Mai72]

I would lump that under #6 because that's an additional thing you can do to grow your personal funds above & beyond a standard 9 to 5 job...if you have the buying power available, you can buy real estate, get a second house to rent to tenants, rent out storage units, etc. Of course, not everyone has the ability to put down $500 million in real estate, or even be able to secure an additional $400k loan on top of their house, so that one is a little more difficult for the average bear. And not everyone wants to have to deal with tenants, either (not that all real estate purchases require that).

Yes, I agree about being careful about a college loan. I wrote the generic "education" word in there because you can to go college, trade school, vocation school, etc. And there are plenty of options alternative to that as well...do OTJ training, become an entrepreneur, join the military, etc. In addition to that, you want to secure a job that will financially benefit you in the future. They will let you pay to learn anything you want in college, but that doesn't mean there's a job at the end of the tunnel waiting for you, or even a good-paying job for that matter, so it's easy to get stuck "following your dream" & then end up getting burned at the end by not really doing some research into what you plan on doing for the rest of your life. I have a couple friends who went to dental school, which is horrifically expensive (the average amount owned after school is well over $200k), but is also pretty secure because it's a very solid job to have for the rest of their life, so it's not a bad investment of their time or money.

Great points.

And, in the case of dentistry you could do that until your 70 plus if you choose. The same with being a doctor. Many of the people who go into dentistry or become doctors have passion that stays with them for life. It's their calling.

Grant made his fortune with real estate. I'm not suggesting that everyone has the potential to build up a $500m plus real estate portfolio. I know that's probably out of my league, but if I could just do 1% of what he did I'd be happy. lol

BTW, check out BiggerPockets and their podcast if you have the time. They talk mostly about multi-family apartments. They are all young and make most of their income from rentals. Very informative.

 

[skull]

I'm following this advice for sure (sp + bond), I'll be reading up on index funds for sure. I'm in a weird situation in that we have very little debt ($500 cc, $300 car loan) other than our big mortgage, we're just going paycheck to paycheck and it's getting exhausting. We don't even over spend on stupid stuff, we just don't have a clear and repeatable budget so we make stupid mistakes (ordering dinner too much one week, too many cabs another, then payments from weeks ago finally go through over drafting embarrassingly) . It's a lack of discipline and the wife and I are going to have a big discussion this weekend. Logging will be an immediate first step, as will a beta budget. We know how to live cheaply due to extended unemployment but, now that we have jobs, we've over done it ... putting the brakes on that stat!

Is the cc $500 total or $500 a month like the car? $500 a month would be about a $30,000 balance on a credit card. Thats a lot and would need to be addressed both monetarily before you think about investing and in the way you look at it as monthly expense not a huge debt.

 

[JulesMaximus]

I'm an accountant. I never spend more than I earn and I always sock some money away and don't carry any credit card debt.

 

[slackerinabox]

Is the cc $500 total or $500 a month like the car? $500 a month would be about a $30,000 balance on a credit card. Thats a lot and would need to be addressed both monetarily before you think about investing and in the way you look at it as monthly expense not a huge debt.

For clarity, it's $290 cc period for me, car loans are tiny - we drive an 8 year old minivan and a zippy hyundai we paid cash for. Our mortgage takes a bite but, after running through a budgeting template we should be able to save $500 a month easy and still have room to breathe. lots of habit changes to come too, need to trim back on the convenience items and tighten the belts. 50 cent bodega coffee instead of starbucks