Where's your money?

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I'm 23 and I don't know what that means. Banks are parasites and predators, never forget it. Leeches. It's just a shame that you really need at least a current account. I have a current account and a credit card (which I've never used, thank God). I've got a bit of money put away in a pension, which I really regret. I wish I'd put it in an ISA instead. It's just froze in there now as I've stopped making payments to it and can't take it out.

 

Hmm, there is a disturbing lack of financial awareness amongst some of you.

It doesn't matter if 'finance is boring'. Brushing your teeth is boring too, but it's still important to do it, otherwise your teeth will fall out. Looking after your finances does not require much more effort than brushing your teeth, once you get into the habit.

[ March 28, 2007, 22:39: Message edited by: Harbourboy ]

 

Heh...spoken like a true father.

I find them tedious and boring too, but the fact that it *makes* me money, means that I suck it up and deal with the parts I don't like. If I really didn't like it, or was just too lazy, I could do what my dad does...his financial lady does everything for him, so all he has to do is stop by her office once every 6 months or so to sign papers and get a report on how much his money is making him.

 

Kitrax - just who or what is this 'financial lady'? I don't think I have one of them.

And to clarify - it is OK to completely ignore your finances, but only if you don't mind having no money and never achieving any sort of financial security and having to work until you're 100.

 

You can't save or invest what you don't have.

 

I max out my 401k plan at work. My employer matches everything I put in, up to 5% of my income, and I'm completely vested at this point, so it really makes no sense for me to not pump that as much as I can. So in effect 10% of my annual income goes into a retirement plan. I have my money spread out over several different funds, and each fund has a ton of different stocks, so I cannot even begin to guess at how many different companies I own stock with. Diversification is definitely the way to go, because the long term trend in the stock market is up. By investing in a large array of stocks, the odds state that most of them are going to make a heck of a lot more money than they lose.

@Barmy - the good news is that you are only 23. You still have a good 40 years left of work in you before you retire, and there is still plenty of time to invest. However, I will caution you with this: The earlier you start investing the better. My one regret is that it took me until I was 28 to set up a 401k account. The longer your money is in there, the more interest it earns, so while the contributions you make in the early years are comparitively small compared to what you will be able to put in later, they actually turn out to be your most valuable investments because they acrue interest for the next 40-something years.

I have found that the easiest way to start saving is for the employer to directly deduct the money from your paycheck. That way, you never have it to miss it.

 

My money is directly deposited into my checking account on a bi-weekly basis after insurance and the 5% 401k deductions are taken out (along with company matching). My 401k is as aggressive as it can get, because I'm also 23 and if my volatile stocks happen to bomb, there's always next year. What I don't use for the pay period gets placed into a savings account.

Great points! Compound interest should be taken advantage of as much as possible; early investing yields the chance for exponential growth at a much less painful deduction than if you wait until, say, your mid-30s. Everyone should take a quick look at this chart for an example of how your money can work for you and why it's best to start early. It will vary, of course, depending on the interest rates you get. But, check out the end result with investing in your 20s versus investing double that amount in your 30s!

[ March 29, 2007, 22:07: Message edited by: War Nerve ]

 

That is so true, money that is not easily accessible tends not to get used. For me, money that is directly deposited into my bank account usually stays there until I really need it. But cash that goes in my wallet tends to get spent. So yeah, auto-deducting from your paycheck makes that money harder to get to, so it'll get saved more easily.

 

I have about $12k in investments managed by Edward Jones. It is my intention to leave it untouched for several decades, minimum. Theoretically, in that period of time it should increase significantly (it's already increased several hundred percent in the past 15 years). So, theoretically, if I leave it alone--and take other measures once I'm out of college and get a career of the ground--I'll be pretty much set for retirement.

 

@War Nerve - that chart you posted shows exactly what I was talking about. In the scenario where you start at age 25, you get far more back. That fact alone should tell you getting started early is the way to go. However, if you look more closely at the numbers, you'll see that it is even more in favor of getting started young. That is because the 25 year old invested about $50,000 throughout his life time, and ended up with about $600,000. The 35-year old and 45-year old each invested about $75,000 throughout their life times, but they STILL came out with less. So time is the key.

What this tells you is that it is very difficult to "catch up" if you start late. It is possible to do it, but only if you invest a far greater percentage of your current salary into retirement. The least painful way is to start early, even if you can't afford much than have to invest a heck of a lot more earlier.

To use the chart once more to illustrate the point, look at the comparison between the 25 and 35-year old. At age 35, the person who started investing when he was 25 only has about $22,000 in his 401k plan. So at the moment the 35-year old starts investing, he's only $22,000 behind, which doesn't sound like much. However, because of the effects of compound interest, that $22,000 more that the 25-year old had turns out to equate to a difference of $150,000 by the time they both reach retirement age - a 600% return on your investment.

I am quite pleased with that chart. I am currently 33, and right not my 401k is about $20,000 - right about what the guy who started at 25 had at that time.

 

Sure, the chart is certainly assuming many things, but it's still a very handy tool just to get a visual on how compound interest can potentially work. Examples in actual dollar amounts are much easier for some (like me) to comprehend rather than an explanation in words.

 

Well...I don't exactly know her full/real title, but she's a free service offered by my credit union. She specializes in getting people out of debit and in the habit of making good financial decisions. She has many friends and such in the financial industry that help her clients. By mentioning her name to her recommended partners, they'll waive startup fees, give you slightly better rates, and usually charge lower fees.

For example, one of our goals was to get my credit card (that got maxed out due to the wedding/honeymoon) paid off. She recommended us to a company that negotiates with credit card companies. They waived the $100 start up fee, lowered their monthly fee to $3, got our interest rate on the credit card down to a fixed 9%, and got American Express to remove the late fees and over limit fees on my card. That was about 6 months ago, and now the card is 80% paid off.

The ironc thing about it, is that 95% of the members of the credit union (which is the largest in Utah) don't know about the free service. rolleyes:


I just got another 5% raise at work, and decided to invest 4% of it, and keep the other 1% for myself. I increased my 401k another 2% for a total of 6%. My company has a very generous 401k plan, which I’m already taking full advantage of, but I figured I could always contribute a little more. The other 2% is going towards the stock purchase plan.

 

Here is the gospel according to Snook on how to invest in the U.S.

1. Make sure you put in enough money into your corporate 401K in order to get the maximum match out of your employer
2. If you are eligible make sure you max out a Roth IRA ($4,000) in 2006 and I think 2007.
3. Put additional monies into the corporate 401K up to the maximum you are allowed.
4. Invest money in taxable accounts.

 

None of that gospel applies in NZ. The terms 401K and Roth IRA are meaningless outside of the USA.

 

Hence, I ended the sentence with "in the U.S."