How did you learn to manage money?

[slackerinabox]

Any book, etc. advice would be great.

I've had an odd relationship with money - I grew up with penny pincher parents who did well for themselves through sound financial decisions, but they were always too busy to teach us anything (and, ok, indians are a little proprietary with information). Ever since i've been on my own I've rebelled against that penny pinching and have been too much of the opposite. A few actually positive changes means more financial responsibility and higher stakes, so we need to drill down on our finances.

I don't know where to start -sure, spend less save more but there's a whole world of terms I don't understand, and I don't know what I don't know. Retirement in particular scares me. I'm about 30 years away but it seems like many of my 30something peers are way ahead of me, and it's about time to catch up.

Any books, courses, website recommendations would be great. I'll start using mint, anything else?

 

[cbrunny]

K.I.S.S.

especially when you are starting.

We use YNAB in our house. Similar to Mint, just different. A great place to start.

I'd start by sketching out goals. 1 year, 5 year, etc. Then start doing some math. Again, keep it simple, use Excel and figure out how much you need to put where to hit your goals. Worry about investments & such later, but start socking money into an account now.

One thing we do is set up multiple different savings accounts. I think i have 5 or 6. Each one serves a completely unique purpose. My wife has a few too. One for long term stuff. one for short term stuff. one for retirement. one for vacation. that kind of thing. That way you don't cross the streams. You do not want to cross the streams.

 

[Uppsala9496]

A lot of people can't/don't save because they have easy access to their money.
I've been investing extra cash into some Vanguard ETF's. For straight cash holdings I keep it in their money market. This way there is no temptation to dip into it. Takes a business day to transfer into my bank, so that is a hurdle that kills any temptation.
Also have 3 savings accounts. And don't waste your money on paying interest for credit cards.

 

[PricklyPete]

My parents did fine, but never attempted to teach me anything.

Both my wife and I like security, so living at the edge of our resources has never been in our lives. We have always pushed for minimal debt.

I have regularly used excel ever since leaving college to look at my finances and project where it will leave us in 5+ years (I'm usually pretty conservative in my calcs). This helps keep reality in check and provides more re incentive to save.

I use Mint just to keep an eye on things, and I do a monthly budget in excel that I update daily and forward a recap to my wife so we are both on the same page.

This has worked out well for my family and has offered us a lot of options/choices in our life that would not have existed if we were living on the edge financially.

 

[boomerang]

My father told me once that it was important to distinguish between my needs and my wants. It was good advice.

 

[dave_the_nerd]

Trial and Error. :-(

 

[Svnla]

How? By reading and learning from smart people such as Warren Buffet, John Bogle, Benjamin Graham, and so on.

This is what I learn. Right on top of my head:

1. Spend less than what you make. Six months (truly) emergency account is great to have.
2. Learn the power of compounding. Continue to put money regularly (monthly) in your investment account(s) is the best way to go, regardless if the market is up or down.
3. Know the difference of "wants" vs. "needs".
4. Start early >>>>>>>>>>>>>>>>>>> start later (manage money and investing).
5. Pay yourself first ie. automate to take out the money to save/invest before you spend, not spend first and then invest "whatever leftover".

Books? Let see, "The Intelligent Investor" by Graham is a good one. "The Little Book of Common Sense Investing" by Bogle. "Guide to Understand Money and Investing" by Wall Street Journal. Those can get you start.

Websites? I like Motley Fool, Money, Google Finance, Yahoo Finance, just to name a few.

OP, since you are still young (30 more years to retire), I recommend you use the method from Buffet. Put 90% of your investment into a low cost index fund/ETF and 10% in a low cost bond fund. Keep it up and when you about to retire, you will have some decent money.

 

[GagHalfrunt]

It's pretty much common sense, you live within your means and when you have tough choices you go with what you really need rather than what you want. Like if money is tight and you can pay your rent or buy hookers and blow, you man up and make the mature decision. You get the hookers and blow and you crash on a friends couch. You should be able to figure that out on your own.

 

[dullard]

I was taught most of my money lessons from my parents and watching my older sister struggle (initially).

My sister wanted to buy, buy, buy. She had to have absolutely anything cool. My parents were fighting her so much, that they decided to stop buying her anything at all but instead give her the same amount of cash. She went on spending spree getting a few pieces of trendy clothing immediately. Then she had nothing else for the rest of the year. And she didn't even like the clothing she bought (she only wore those $150 faded blue-jean overalls that were so trendy in the late 1980s one time).

Overspending was clearly the wrong choice.

I did the opposite. I didn't care a thing about anything trendy. My parents gave me the same deal and I just plunked it all into a savings account. I spent my teenage years living like a pauper. I could have been going out, having fun, etc. But no, I just stayed at home, fairly bored.

Underspending was clearly the wrong choice.

I eventually learned that balance is what matters. Spend lavishly now, but only up to 85% of your money (note Social Security is about 7% and company 401k match will be several more percent, so getting to 15% saved isn't that hard). Invest the rest. That way, retirement isn't a worry and you can continue spending lavishly in retirement at the same rate that you did before retirement. You get to thoroughly enjoy today AND tomorrow.

If spending only 85% of what you take home is difficult, remember this one phrase: "I can buy anything I want, any time I want, because I don't".

 

[Exterous]

I was given some pretty good but very general advice when I was a kid by my father. Not knowing a lot of details and not taking it to heart I made some mistakes early on. Fortunately the foundation was there so I was able to build on it. Reading helped fill in the details and there is a ton of good information out there. Its getting a bit long in the tooth but I think Millionaire Next Door is a great book. Bogleheads and Mr. Money Mustache-esque blogs have very good information and run counter to a lot of the 'noise' out there (although I don't ascribe to all of their preachings). Bogleheads in particular has a good retirement wiki and glossary to use. They are also pretty responsive to posts and have a good breadth of information. Its a complicated topic with lots of products out there designed to separate you from your hard earned money so it can take some time to sort it all out. But if you keep at it you'll figure it out and the rewards will almost certainly be well worth your time and effort

One thing to keep in mind is that, just because someone appears to be ahead of you that doesn't mean they actually are. Fancy cars, houses and toys can all be bought with debt or by forgoing savings. People who appear well off are living paycheck to paycheck more often than you might realize

One thing that helped us was having an allowance. We each get a certain $ amount in cash every other week that is for things outside of utilities\mortgage\gas\groceries\lunch brought from home type of stuff. Its also after retirement contributions. We can each do whatever we want with it. It took a bit to build up a personal 'stash' but if I see a game\toy\whatever that I want I just dip into my stash and get it. Of course that means I might forgo something else until the stash recovers but it makes us consider our purchases more. This also helped our relationship because she was a spender and I was a saver. I would save money and then she would come home with new shoes or a new purse instead of us making headway on savings. Now she can buy whatever shoes\purse\etc she wants and, as long as it comes out of her allowance, I give exactly 0 fucks. It also helped turn her from a spender into a saver.

 

[clamum]

Common sense
My parents: I had an allowance as a kid. They were also good role models in that they didn't spend money they didn't have on shit they didn't need. My mom used coupons when she could.

 

[Red Squirrel]

I never really learned any specifics, I just kind of used common sense. Save everything I can, only spend what I need. If something is really expensive, is there a cheaper alternative that will get me the same or similar results. For example a car. I refuse to buy a brand new car, the price difference between buying new vs used is just too huge. I rather buy used and then deal with the odd repair, it's still cheaper in the long run. Then I try to make it last until it no longer makes sense to repair it.

Though I kinda just picked up the concept of saving even at a younger age. When I'd get an allowance for example I would save most of it, maybe spend some on candy, but not all of it. If there's something I really wanted then I'd save up.

Once I hit high school I wanted lot of computer related stuff but my parents would not want to buy it. So I got a job in summer, and saved up. Also needed to start saving up for college. So really I kind of picked it up naturally. Though I've always kind of had the mentality of stashing stuff for later and not using it all. Even in games.

 

[[DHT]Osiris]

Trial by fire. I had very poor teachers growing up irt money, which I learned what I could from, but for the most part it's been 'don't buy nice things because you've been paying off debt for half a decade, dummy'.

 

[Drako]

My dad was an accountant. He always told me to use a debt to income ratio spreadsheet, and make sure to keep the ratio below 15%. It worked for me.

 

[Ns1]

I spent too much of it, crashed and burned, and now I know better.

 

[purbeast0]

I started doing odd jobs like shoveling snow and raking lawns and baby sitting when I was like 10. I used to save up for my own video games and stuff. Then I got a real job at a grocery store as a bagger right before N64 came out and I saved for that. I then saved all of my pay checks so that I could buy a car when I turned 16 and I spent all of my tips. When I was 16 I also got my first credit card and I never got into CC debt.

Just doing all of that basically taught me how to manage money. My parents were divorce when I was young and I lived with my mom and she was super frugal too, so that probably also had an effect on me. I'm pretty frugal now a days and debate a lot of purchases just because the cost, even though I can easily afford it. Half the time I wish I didn't do that though. The other day I went to get some clothes from Kohl's and it ended up being $360 after 20% coupon, and for like a full day I was contemplating if I should have spent that much. That's the most I've ever spent on clothes at once.

 

[louis redfoot]

i macgyvered my way through life, always doing more with less.

that's the secret, just be a tightwad. perhaps visit the oversized wallet forum for more specific tips.

 

[Red Squirrel]

Oh right forgot about credit card. as soon as I was 18 (minimum age) I got a credit card. But I never carried a balance. For me it was a way to pay for web hosting, domain registration etc then I would pay it off right away. That helped me build credit and got me off on the right foot once I did need credit. My first real loan was actually my mortgage. Or maybe I got the credit line before, I can't recall. I rarely keep credit around for long though. Like sometimes I'll put stuff on the credit line but I try to pay it off asap. Like last summer I put A/C on the credit line as I wanted to install it in summer and not save up for it, so I paid it off throughout the winter.

 

[AznAnarchy99]

I don't like paying interest so I make sure I have enough to pay it all every month.

 

[bbhaag]

Mostly from my parents. They had a really good grasp on their finances when I was younger. They had to though because they were self employed and raising three kids.

 

[Ackmed]

Trial and error, plenty of mistakes. Credit mistakes stay with you for a long time, can be a hard lesson learned. I didn't have parents around to guide me really. Financed some things I should not have. Pretty savvy about it now, but it took learning on my own by my mistakes.

 

[Ancalagon44]

Read Mr Money Moustache, if only because it gives you something to shoot towards and some ideas. It paints the picture of being financially free, where your income from your investments is enough to meet your daily expenses, allowing you to do whatever you want.

How to get there? Reduce your expenses and focus on paying off your debt. Debt is a lot more expensive than you realize, and it is a horrible feeling being trapped in it. It is a great feeling when you get free. I am not free, yet, but I have no credit card debt and my car will be paid off soon.

I guess when you have a more long term view of your finances, that also encourages you to make better decisions. I find it easier to put off purchases like new computer hardware, knowing that it sets me back quite a bit. I'm much more cautious about buying anything now, because I try to put as much as I can into paying back my debt. And it does work.

 

[lykaon78]

Trail and error here and a tight wad wife that helped to calm down my penchant for spending.

My problem is that I'm at the point now where I'm debt free but the house, have a stable income, have emergency savings, and the bare minimum retirement (401k to ensure the match for me and a annually maxed out Roth for the wife) but I don't have a lot of guidance on where to put my savings next.

I curious to how others have handled this situation? I've considered consulting a professional but I work with financial professionals everyday and more than half of them are morons. In full disclosure, I mostly work with commissioned sales people so maybe the "financial professional" label is a little loose here.

 

[Exterous]

Trail and error here and a tight wad wife that helped to calm down my penchant for spending.

My problem is that I'm at the point now where I'm debt free but the house, have a stable income, have emergency savings, and the bare minimum retirement (401k to ensure the match for me and a annually maxed out Roth for the wife) but I don't have a lot of guidance on where to put my savings next.

I curious to how others have handled this situation? I've considered consulting a professional but I work with financial professionals everyday and more than half of them are morons. In full disclosure, I mostly work with commissioned sales people so maybe the "financial professional" label is a little loose here.

I agree - it can be very tough to find good financial advisers. You can setup some straightforward 3-5 fund portfolios that are easy to self manage and will likely get you farther than most 'professionals'. A fee of 1-2% may not sound like a lot but a 1.2% fee or ER for a managed fund will cost you ~$200,000 over 30 years compared to a 0.2% index fund assuming a 7% return. Given that most managed funds (70-95% depending on the year) under perform the index fund in their area its unlikely a fund or manager will beat an index fund enough to offset their added cost.

https://www.bogleheads.org/wiki/Lazy_portfolios

How to go about using index funds to expand your portfolio depends a lot on your 401k options. Many do not have options for low cost funds (ER <0.3%) so it may be better for you to open a Roth or invest in a taxable account you open through someone like Fidelity, Vanguard, Schwab. Hopefully you or your wife do have those options though. If your goal is to retire early I would start looking at taxable accounts to fund the pre-59 years. Yes rule 72(t) exists but it is not a flexible rule so having non-IRS constrained accounts is a good idea for early retirees. One thing to consider with 401k contributions is that your AGI is reduced by your contributions which should mean you can put more away for retirement than you could if you made contributions post tax. For example if I didn't max out my 403b I would have paid another $3200 in income taxes this year. Thats $3200 I might not have been able to contribute if the contributions were made post-tax. May not sound like a lot at first glace but if that additional $3200 is invested every year that would be $150k after 20 years at 7%. Of course this will vary by tax bracket with it being less beneficial at lower brackets and more so at higher

 

[RandomWords]

I was just born with the desire to save... on that note - my biggest advice would be don't take out loans and make sure you pay off your credit cards every month.