Ask HN: Money management Hey HN! I am a recent university graduate that has accepted a full time position with a large software company. This position comes with a substantial amount of pay. Since I come from a fairly poor family I am unaware of the proper way to "invest" and save money wisely. Do you guys have any advice or can recommend any books that will help me be wise with my money? Thanks in advance! |
I read it when it first came out, and it's an amazing read. Short enough to could get through it in a day; funny enough to make you laugh; information density is great; and lots of supplemental material on his blog free of charge.
Check out http://iwillteachyoutoberich.com - he's got tons of material on there, and if you like his style, definitely buy the book.
I don't mean that to stand alone but I am sure others will suggest plenty of good books, etc.
I bought an iOS app which I use to track my income and expenses. This doesn't help me save money except track how much I've spent on my credit cards so I don't overspend and will have enough money to pay back the banks at the end of every month and not incur any interest.
Credit cards are useful for getting discounts on things. I get a 5% discount when I shop for groceries at a particular store. When the annual fee comes, I call up the bank and ask for a waiver. They usually agree to waive it off.
I have 2 bank accounts. One which is where I use for spending on everyday needs and depositing my salary. The second one is for savings. I setup my first bank account to automatically transfer $500 every month to this savings account. This recurring transfer is also setup on the iOS app I mentioned earlier.
On google docs, I noted down what my regular expenses are, like transport, food, household bills. So I know how much extra I will have after those.
Don't be tricked by discounts that tell you how much you save if you buy that product. You save more money not buying it. It's different if the product is a daily neccessity or you think will be beneficial.
If I were you, I'd build up a substantial amount of savings first before investing. An amount that will allow me to go jobless for a few months.
Or allow me to do things that's beneficial to myself in the long run such as buying a camera to learn about photography. It's what they call "investing in yourself"
Past that, start investing in your retirement. I strongly advise reading this thread over at SA: http://forums.somethingawful.com/showthread.php?threadid=289...
In summary:
1) Contribute to 401(k) up to employer match. Employer match = free money. There is not a single investment that has a greater return on investment than your employer match...even if the 401k has shitty fees and shitty funds.
2) Max out Roth IRA (or possibly traditional IRA if you are in a high tax bracket)
3) Max out 401(k) - optional step, depends highly on your 401k plan. If the plan is good, this is a great place to shelter tax-advantaged dollars. If your plan is bad (high fees, etc) you may be better off just using your money in step 4
4) Start a taxable savings account, brokerage account, or go out and blow some money at a strip club or something.
That's all retirement savings. You should also divert money towards long-term, non-tax-advantage funds. This is something that you want to put money in and gain more than 1% interest in a bank account, but may need to liquidate before you retire (purchasing a house, going on a trip, etc)
Edit: Also, if you ever have the desire to purchase individual stocks - stop and invest in an index fund. If you accept that you will never beat the market (which in all likelihood you won't, especially if you don't have time to research stocks), you should never purchase individual stocks as a means to make money.
Now, I purchase a few individual stocks on the side, but this is my equivalent to gambling or buying lottery tickets. All the money that is set aside for retirement or long-term investing is firmly placed inside of index funds.
Look for funds' fees and tracking errors before choosing.
You may also want to hang out at http://www.trejdify.com/ which is like Hacker News but business only!
He's been very successful on the radio for teaching people how to save money, and a lot of it's sound advise. I think he's even recommended to buy his books second hand before, so it's cheaper.
Ramit Sethi is the expert on this. The book is I Will Teach You To Be Rich. I will gladly credit Ramit with earning me tens of thousands of dollars.