Financial Golden Rules

[collegemoney]

Hello All,

I am looking forward to soaking up as much information as possible from this forum and blog so thanks in advance. I am 22 years old, currently working full time, while trying to get back to school and finish up. I am pursuing a double major Economics/Mathematics with a minor in Biology.

I was a financial wreck for several years, and finally started to take charge, and I now realize the discipline, hardwork, and dedication it takes to create wealth (personally and financially). I have recently also started a blog because hopefully it will help me stay more on top of my own progress. My goals are to be back in school full time in the fall, with a savings of $15,000.00 with $0 debt. My long term goal is to graduate with $15,000.00-$25,000.00 in savings and <$75,000.00 in school loans.

I was also wondering if there are any "golden rules" that you who are more experienced/learned than I keep to. Right now I am sticking with "earn more, spend less". Any general advice as to what to read, do, or consider is always much appreciated.


Thank you,

Chris

[snafu]

Great that you are aware of the need to make a plan. Most 22 y/o aren't that sophisticated, they still think it's fun to keep drinking beer until they vomit! It isn't how much you make...it's how much you keep that is important.

Frankly, if you know where you're going...it's waaa-y easier to get there. I suggest you write yourself a 'road' map with measurable timelines. You'd best include plans for graduate degree and likely post grad for Economics/Math majors. What positions in existence now...do you see yourself seeking?

As a math major, you know $ 15,000. by fall [12/09 - 9/2010] requires $1,500. saved ea. month. I suggest you research all grants, scholarships, PT earning opportunities for undergraduates to avoid the burden of a $75K albatross [debt] before obtaining relevant [training based] employment. Unless you proposed to retain $15K-$25K of student loan sum to invest for 5 plus years...how do you see using the savings mentioned?
Have you explored PT work in the Finance industry - banking, investment counselling, money management, debt management etc?

[EEinNJ]

Save, don't spend.
Invest, don't speculate.
Plan for the unexpected.
Money is a tool, not an end in itself.
Goals should be about what you want the money for, not just having x amount.
Figure out your risk tolerance. Taking risk seems worth it until you face the consequences of the downside.

[Merch]

A few other things:

- 10% of your gross (atleast) should go into retirement
- You should also set aside a certain amount for charity each year
- your emergency fund is for emergency and not wants
- always sepnd less then you bring home

[highsavings]

Get the habit of paying off credit cards each month. Use them as Charge Cards, not credit cards

[jIM_Ohio]

If you spend less than you earn, you will be successful, assuming the spending is not on debt payments.

How successful you are depends on how much less you spend relative to what you earn. Meaning someone which spends 80% of what they earn will be more successful than someone which spends 90% of what they earn. This is true regardless of income levels.

[thepromoshop]

One golden rule I live by is don't spend more than you have or more than you can make!

[buildmybudget]

I recommend the Richest Man in Babylon for its golden rules!

1. Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family. In other words, a person should put away 10% of his or her income for the future as a bare minimum. This rule is so incredibly fundamental, yet only a small minority even bother to follow it.

2. Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field. If you invest your money well, your money will simply make more money. Again, a very simple and obvious rule, but one that many people never get to because they didn’t follow the first rule.

3. Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling. This rule encourages cautious investing, or at least encourages the investor to at least be informed. In today’s era, one can turn to the internet for plenty of investing information.

4. Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those who are skilled in its keep. This goes hand in hand with the third rule: if you invest in stuff you don’t understand, you’re likely to lose money. Don’t buy the latest hot stock from your stockbroker; investigate and invest where you want.

5. Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment. The worst option is to invest in anything that promises absurdly good returns, or anything that you’re heavily pressured into buying. These investments are scams and won’t stand up to serious research.

[sandrark]

Consistency matters. Consistent savings, even of small amounts, add up to big gains over a 40 year horizon. So get in the HABIT of savings.

Automate, automate, automate. Your retirement savings, your liquid savings, your insurance premiums to ensure continual coverage.

Be willing to buy less than the "best." Invest or save the difference. For example, my brother was recently replacing his Mac. The new iMac ranged from $1200-$2000. Frankly, for email and net surfing, the $1200 was more than sufficient. He was fearful that it wouldn't be "good enough" - and his fear, even though he could describe NO activity in which he needed a larger screen or faster processor, almost propelled him to spend more than 50% higher than needed. I encouraged him to buy the $1200 version, he's already produced a couple of picture CDs with soundtracks, and everything is fine.

Rich people are willing to DELAY gratification. You pay a premium to be the first on the block to own anything, or to over-spend. We waited for 8 years to re-do our kitchen, paid cash, and are very glad we did so, instead of taking out a home equity loan (how a friend, under threat of layoff, paid for his kitchen remodel).

Pick your life partner wisely. Divorce is expensive, and threatening to your long-term net worth.

Sandi