I Know Nothing About Personal Finance!

[Kueen]

"Save your money and spend less."
That's all I have ever been taught.

I'm nineteen years old and in community college. Recently, I have realised how little I know about money and investing/saving.

I started asking my friends and family about finance. My friends seem to know as little as I do and seem annoyed of me asking, so I decided against asking anymore. My family will give me answers, but there financial terms and vocabulary is far beyond my comprehension. They might as well have been speaking Mandarin for gosh sakes.

I went to my local library for answers. I have read a couple of books from which I now know they are only but "Get Rich Quick" books. Although, they have inspired and built an extreme curiosity in finances and economics I have been warned not to trust these authors.

WELL W....T....F ! What do I have left...?

That is why Im asking you guys!


What books or websites could you recommend someone who knows nothing about finances? If possible pointed more into the direction of a younger audience. (Someone who has no credit nor there own place yet.)Also, how updated should books on finances be? Most of the books in the library are 5-20 years old.

I have recently signed up for a finance course at my school, but my curiosity wont allow me to wait for next semester! I want to start learning now!

[bjl584]

Well, this is a great website to learn about money. Stick around here for awhile and you will learn plenty. There are also plenty of good books at the library and bookstore. The "dummies" books series has several books on investing, stocks, retirement, etc. You can also try some known authors such as Suze Orman and Dave Ramsey. Both have several books on the subject. Since you are in college take an economics course or at least go talk to one of the professors in the economics department. If they are passionate about what they do, they will talk to you until you are tired of listening.

[cypher1]

I think you just need to be a little more specific on what you're curious to learn about. Are you looking to know more of different investment options? Or trying to save/budget day to day? Since you're in college, I'm assuming you have a checking/saving account, and if so are you pretty good about saving or planning ahead? If you have student loans, or other debt, are you familiar or aware of the interest or how much you'll owe when you have to pay? If you don't already do it, keeping track of monthly costs and expenses will be an eye opener for where all your money goes to.

As bjl584 said, this is a great forum for answering all your questions or getting you in the right direction. Lots of great people willing to take the time to explain and give their opinion.

[Kueen]

bjl584: Im already learning by just browsing a couple of forums! A question for you though. How much do the editions to the dummy books mater? For instance I have one of the many dummies books on investing but its from 5 years ago. How much would that information have changed?

cypher1: Luckily, my parents are taking care of college for me completely. All I take care of is books, school supplies and transportation. I never really made a budget. I always put most of my paycheck into my savings. Then when it comes time to buy books and supplies, I take what ever is needed out. In this case I would like to learn to make a budget so I can plan ahead just like my parents when my children go to college someday. I would also like to look into investment chooses too; I'm a little afraid of it being a little over my head though.

[papa_squat]

Aside for the dry, horribly boring textbook I had for a high school class that basically taught how to balance a checkbook and write checks, the first personal finance book I ever read was Suze Orman's The Money Book for the Young, Fabulous & Broke. I was 22 at the time and it actually was pretty helpful in wrapping my head around the fundamentals of finances (FICO scores, credit cards, retirement, and some somewhat-duh advice to save money, but good advice nonetheless). It has a good glossary of any terms that go over your head and it has some basic info on personal finance, investing, big purchases and just overall aditute toward money. I think it's about 6 years old now; the information is still mostly valid, but don't expect any interest rates she quotes to be anywhere near as good as she mentions. Her investing advice is pretty conservative and mostly focuses on retirement savings and investing through index funds and dollar-cost averaging. I've started reading her Women & Money book, but it's mostly too anecdotal for my taste. Some people think she's a little too basic, but she's a good place to start for setting goals and taking steps to get the financial basics in plain language.

I honestly haven't seen many great recent personal finance books. I wonder if a lot of these "finance gurus" are eating crow after the housing market and economy tanked and they're hestitant to give advice in this climate, but I'm not a marketing expert. All I know is that the "Rich Dad, Poor Dad" author was really into real estate investing and his wife wrote the most horrible book I've ever read, called Rich Woman. Her stories about her friends going out to lunches and dinners and vacationing in Hawaii and asking her for investing advice as if they've never seen money before made me want to puke!

[dczech09]

The very first book I read outside of college was The Total Money Makeover by Dave Ramsey. Fantastic book with a solid system for getting from rags to riches. It is also the book that has inspired me to pursue my own career in producing financial education materials.

[maat55]

Originally Posted by Kueen

bjl584: Im already learning by just browsing a couple of forums! A question for you though. How much do the editions to the dummy books mater? For instance I have one of the many dummies books on investing but its from 5 years ago. How much would that information have changed?

cypher1: Luckily, my parents are taking care of college for me completely. All I take care of is books, school supplies and transportation. I never really made a budget. I always put most of my paycheck into my savings. Then when it comes time to buy books and supplies, I take what ever is needed out. In this case I would like to learn to make a budget so I can plan ahead just like my parents when my children go to college someday. I would also like to look into investment chooses too; I'm a little afraid of it being a little over my head though.

I highly suggest you read The Total Money Makeover by Dave Ramsy and The Automatic Millionaire by David Bach. These books will give you a direction and philosophy on personal finance, while books like Personal Finance Desk Reference will give you defined explanations on most personal financial elements.

I would give anything to have read these books when I was your age.

[skydivingchic]

Do you live in the dorms or in an apartment? If you live in an apartment, I would recommend tracking all the costs - rent, utilities, phone, internet, groceries, etc. Even if your parents pay for all this, it should help give you some ball park ideas about what expenses you will need to cover after graduation. That should help give you a good foundation for a budget when you are on your own. You said you were responsible for your transportation. Does this include gas, maintenance, and insurance on the vehicle? Track that stuff too so you know what kind of expenses to expect.

Do you have any debt? If you have any debt, the order of priorities may change. For now, I'm assuming no debt.

Generally speaking, where you save/invest money should be dictated by your time horizon for needing the money and your risk tolerance. One of your first goals should be to build up an emergency fund, which is generally recommended to be 3-6 months worth of expenses. It doesn't sound like you have a lot of expenses right now, but you could start saving so that when you graduate you are already well on your way. An emergency fund needs to be kept in an FDIC insured liquid account. Many people here keep their EF in a high yield online savings account (ING, Emigrant, etc). This is money you would use to cover things like major car repairs or a job loss.

For things like retirement, where you have a long time horizon to ride out bumps in the market, you can be aggressive with your investing (i.e. mostly stock mutual funds). For shorter term things like a house down payment or a new car, you would want that money in a savings account or CDs that won't fluctuate in value. If you were putting aside money for a kid's college account, you could start out with more aggressive investments (like stock mutual funds) when the kid is young and gradually transition the asset allocation toward more bonds as the child approaches college age.

The books suggested above would be good places to start. I believe another favorite is Boglehead's Guide to Investing for more investment oriented advice, though I've not read it myself. I don't believe the general investing advice has changed much over the years - invest based on time horizon and risk tolerance, don't chase the next hot trend, minimize fees, etc.

[Angio333]

Originally Posted by maat55

I highly suggest you read The Total Money Makeover by Dave Ramsy and The Automatic Millionaire by David Bach.

I agree. These are two books that you must read!

[thesmartnickel]

It looks like you are on the right track by looking through a forum like this. I'm new here but I wanted to try to get into the personal finance community since I write a blog about it targeted toward college students. I would try to look for high quality blogs and go do some of your own research online. Learn what you can by looking up budgeting, credit cards, loans, bank accounts, retirement, and mortgages and never stop trying to find new information.

[elessar78]

I'd be aware of the stark difference between your Finance classes and personal finance. There are many rich people in the Financial sector who don't exactly follow the wise precepts of personal finance. Finance classes will give you understanding how the markets (only a part of it) work, but probably won't give you the tried and true tenets of keeping your personal finances in order.

It's more about self-discipline and long-term goals (delayed gratification).

[jpg7n16]

Originally Posted by Kueen

A question for you though. How much do the editions to the dummy books mater? For instance I have one of the many dummies books on investing but its from 5 years ago. How much would that information have changed?

Although personal finance doesn't change too much, you should be more aware of the difference between 'investing' and 'personal finance.'

Personal finance is a lot more than just investing. Personal finance topics: Budgeting, planning, goals, cash management (includes Emergency fund), risk tolerance, insurance, investments, taxes, estate planning, retirement, employee benefits, etc.

Investing is just a portion of your overall financial picture.


So when you look for books, don't just look for investing. They are important, but not complete.

[dfeucht]

Originally Posted by maat55

The Automatic Millionaire by David Bach.

I think this is the best basic personal finance book i have read.

[krantcents]

You should probably read John Bogle's books: Common Sense Investing, Bogle on Mutual Funds and John Bogle on Investing.

[maat55]

Originally Posted by Angio333

I agree. These are two books that you must read!

IMO, people need more than random information from a forum. When someone is starting out, they need to read a few books on this subject.

Forums are great for asking specific questions or discussing topics, but not where to learn A to Z information.

[Frugal]

I would read Amy Dacyszyn's Frugal Gazette, from the late '80s and early '90s. She inspired me when I got my start couponing and learning to save money on a tight budget. Her series of Tightwad books have lots of tips to save money. There are also a lot of websites out there you can find that give you tips on saving money.

[Ima saver]

The wealthy barber is an easy read for a newcomer.

[bjl584]

Originally Posted by Kueen

bjl584: Im already learning by just browsing a couple of forums! A question for you though. How much do the editions to the dummy books mater? For instance I have one of the many dummies books on investing but its from 5 years ago. How much would that information have changed?

cypher1: Luckily, my parents are taking care of college for me completely. All I take care of is books, school supplies and transportation. I never really made a budget. I always put most of my paycheck into my savings. Then when it comes time to buy books and supplies, I take what ever is needed out. In this case I would like to learn to make a budget so I can plan ahead just like my parents when my children go to college someday. I would also like to look into investment chooses too; I'm a little afraid of it being a little over my head though.

The editions probably aren't going to make or break you. The information in the older versions is still relevant. At least to get you started. Use caution with some of the more in depth subject matter when you advance to that level. Subjects concerning legal matters like wills and trusts may be dated, as laws may have changed.

[Kueen]

Wow! Thank you for all your support!

I know have a wonderful list of books that I am currently reading! Even more wonderfull most of the suggestions you gave me are in my local library! You guys will probably be hearing from me later on for other questions!

I couldn't thank you guys enough!

[zetta]

In general, older editions of books should be fine (outside of laws that change like trusts and estate planning.) Books are the place to learn general principles -- and these do not get outdated over a period of years.

Here are books I've found useful to learn about investing, and the main topic covered. I've placed them in the order I would recommend reading them. You can click on my Booknotes catagory in my blog to read my summaries of numbers 1, 2, and 7.

1. All Your Worth (getting your basic financial picture in order so you have money available to invest)
2. The Complete Idiot's Guide to Getting Rich (helps with goal setting)
3. Bogleheads Guide to Investing (explains mutual funds and the indexing strategy)
4. http://investingessentials.blogspot.com/ An online book about implementing the Bogleheads strategy,
5. The Intelligent Asset Allocator (how to structure your portfolio)
6. Morningstar Guide to Mutual Funds (how to analyze and pick funds)
7. Common Sense on Mutual Funds by John C. Bogle (highly technical analysis of index investing)