Author Topic: Anybody interested in discussing personal finance / investing? (Read 850 times)

Conniesaki · « **on:** March 14, 2019, 01:00:26 pm »

At the unfortunately late age of 35 (~15 years ago) I decided to get my situation together, deciding I didn't want to be a burden on anybody anymore than necessary (including the gubmint), wanted to have as much control of my own life as I reasonably could, wanted the option of changing jobs, or just up and quitting if I ever wanted, etc etc. So I've read quite a bit of personal finance and investing literature and listened a lot to the well-known personal finance gurus on the radio and TV. So at this point I think I have a pretty good handle on what I think it should take for people to become pretty financially stable ... well, OK, at least it works for me, and so I wonder if it would work for others too. So I thought maybe the stuff I've learned, and the things I do, could help some of you. And, as is always the case, somebody out there will know a lot more than I think I do

, so I'll learn more, too.

Anybody interested?

(By the way, feel free to include discussion about the personal finance approaches in the "I'm Rich, I'm Rich, I'm Going To Be FILTHY RICH!!!" thread

)

Tree · « **Reply #1 on:** March 14, 2019, 03:44:53 pm »

I think we are all interested in taking control of our financial lives. I have a good 20+ years on you (I've circled the sun a few times) so you get points for not waiting. Or, at least not waiting as long as "the other guy/gal" who is living in regret and is stuck there. Even if you don't get many bites on this thread it appears that you have your attitude lined up. No one is going to do it for you unless your last name rhymes with rump.

Good luck.

maxtog · « **Reply #2 on:** March 14, 2019, 04:14:15 pm »

I think the 4 most important things are:

1) Reduce or eliminate expensive debt
2) Save and invest such savings EARLY (while young) and continuously
3) Diversify (mutual funds, and of various types/categories/risk profiles)
4) Always spend within your means and spend carefully

Along with:

5) Always take advantage of pre-tax savings plans (457, 401k, etc)
6) Take a long-term approach
7) Dollar cost average (buy continuously, don't try to play the market)
8 ) Reanalyze risk as you get older- start contributing to lower-risk (don't sell other stuff)
9) Don't count on Social Security

Bob Skinner · « **Reply #3 on:** March 14, 2019, 05:07:26 pm »

At your age I would recommend you start out with a Certified financial planner (I used Ameriprise).
They will review with you just where you stand financially right now and recommend a plan for the future.
The financial planner can advise you on where and how to invest in the various markets.
The other things I would do is take maximum advantage of any 401K type saving plans your employer offers.
Also, just force yourself to set aside a certain amount to save each pay period. If you can have it deducted from your paycheck before you receive it , it doesn't hurt as much and you will learn to live without it. I started out at $5:00 a pay period and as my pay increased I moved it up to $25:00. Started this 35 years ago (I'm 75) and used the saved money to buy US saving bonds. Bonds were a good investment then, not so good now.

Conniesaki · « **Reply #4 on:** March 14, 2019, 05:23:53 pm »

Quote from: Tree on March 14, 2019, 03:44:53 pm

I think we are all interested in taking control of our financial lives.

For sure, although I feel like many are interested but actually do little to nothing about it. I've occasionally tried to bring up the topic with friends, especially those that really need it, but nobody really wants to discuss it. Too much effort. Much easier to poke around on that smart phone, consuming rather than producing. (or at least consuming more than they produce)

Quote from: Tree on March 14, 2019, 03:44:53 pm

I have a good 20+ years on you (I've circled the sun a few times) so you get points for not waiting.

... Oh, I forgot to mention, I'm 50 now, so been of this mindset for ~15 years now. Wish I 'd started at 30. Or 25. No, 20. Hell, let's say 15. Coulda woulda shoulda started at 15 when I first started lugging my dad's lawn mower behind my bike to mow neighbors' lawns at $15-$20 each. I wasted a looot of money in that 20-year period

I think what also hit me at age 35, for whatever reason, I saw a pay stub that showed my cumulative pay for that year, which while my salary wasn't great, over the course of almost it year it looked significant to me ... and then UH OH I started thinking about how much money I'd made working fulltime for close to 20 years, and how comparatively little I had to show for it. That actually hurt

... but it was a motivator.

Quote from: Tree on March 14, 2019, 03:44:53 pm

Or, at least not waiting as long as "the other guy/gal" who is living in regret and is stuck there.

I have a couple friends like that. Yet they do nothing. It's really disappointing ... disheartening. At this point I realize SWMBO and I will very likely be traveling and enjoying a very nice life while friends we would enjoy traveling with will probably be forced to continue working.

Quote from: Tree on March 14, 2019, 03:44:53 pm

Even if you don't get many bites on this thread it appears that you have your attitude lined up.

Good luck.

maxtog · « **Reply #5 on:** March 14, 2019, 05:31:36 pm »

Quote from: Bob Skinner on March 14, 2019, 05:07:26 pm

Started this 35 years ago (I'm 75) and used the saved money to buy US saving bonds. Bonds were a good investment then, not so good now.

Yeah, bonds are safe, but (like CD's) they are pretty useless for investing now and have been for at quite a while... simply because the interest rates have been so low, for such a long time. At any age not too close to retirement (maybe < 10 years), one should certainly be looking at stock mutual funds because there is plenty of time for them to gain value. The key with investing is time- it is more important than anything else (a close second being diversity). The earnings will compound and re-invest, and time will absorb the market instabilities and ensure dollar-cost-averaging with regular purchases (at least once a month, if not more, is good).

Like we both said, it is imperative to take advantage of any and all employer-driven pre-tax savings plan, because for each dollar you save/invest, that comes right off your taxable incoming. This not only lowers your annual taxes, it puts MORE money in an investment where it can work for you. When you take the money out when at or near retirement, presumably your income bracket will be much lower... further reducing what you would have had to pay in taxes later. And with such programs there is usually some type of matching... THAT IS FREE MONEY! AND MONEY YOU PAY NO TAX ON NOW! It doesn't get any better than that. So one should do everything possible to take as much advantage of that as possible.

Conniesaki · « **Reply #6 on:** March 14, 2019, 05:32:14 pm »

Quote from: Bob Skinner on March 14, 2019, 05:07:26 pm

At your age I would recommend you start out with a Certified financial planner (I used Ameriprise).
They will review with you just where you stand financially right now and recommend a plan for the future.
The financial planner can advise you on where and how to invest in the various markets.

I just replied to Tree's post that I'm 50 and that I've been committed to my financial plan for ~15 years now. And I actually did visit a paid Certified Financial Planner, maybe 10-12 years ago. His conclusion was that my income, investments and plan were all solid, but that I needed more insurance.

Quote from: Bob Skinner on March 14, 2019, 05:07:26 pm

The other things I would do is take maximum advantage of any 401K type saving plans your employer offers.
Also, just force yourself to set aside a certain amount to save each pay period. If you can have it deducted from your paycheck before you receive it , it doesn't hurt as much and you will learn to live without it. I started out at $5:00 a pay period and as my pay increased I moved it up to $25:00. Started this 35 years ago (I'm 75) and used the saved money to buy US saving bonds. Bonds were a good investment then, not so good now.

I agree with all that

So you started at ~40, similar to my ~35. Do you regret not starting sooner, like I do? I'm not saying I wanted to be a cheap-@ss no-fun stick-in-the-mud. I just wish I had my plan way back then. It tells me how much to save, exactly how to invest it, etc. At least with a plan if you deviate a little you're well aware of it and can adjust or correct. With no plan you've got next to nuthin'.

I don't even think the details of your plan matter nearly as much as actually having some plan and sticking to it pretty closely. Let's say you're comfortable with bonds. If you decide you want 90% of your money in bonds, 5% in cash and 5% in stocks, great ... as long as you stick to it you'll do fine.

maxtog · « **Reply #7 on:** March 14, 2019, 05:36:09 pm »

Quote from: Conniesaki on March 14, 2019, 05:32:14 pm

I agree with all that So you started at ~40, similar to my ~35. Do you regret not starting sooner, like I do?

I started at something like 25 (25 years ago) and when I did start, it wasn't smart enough (aggressive enough) and regret not having started the moment I could have, which would have been at age 21 and worrying less about risk. But I did wake up by age 30 and made much better decisions.

maxtog · « **Reply #8 on:** March 14, 2019, 05:42:10 pm »

Quote from: Conniesaki on March 14, 2019, 05:23:53 pm

For sure, although I feel like many are interested but actually do little to nothing about it. I've occasionally tried to bring up the topic with friends, especially those that really need it, but nobody really wants to discuss it. Too much effort. Much easier to poke around on that smart phone, consuming rather than producing. (or at least consuming more than they produce)

By the way, one of my employees (who is also a friend) is like that. Couldn't be bothered. Wanted to play video games and buy junk. I had to push him hard for YEARS to get him to start saving. Finally, after 5 years, I put together a spreadsheet showing what money he would have if he had just contributed $4000 a year which would get the $2000 employer matching, then compounded everything over those 5 years at a very conservative expectation of 6% APR. I also showed him just the FREE money he threw away by doing it without counting his required $4k. And also showed him how it is NOT $4k coming out of his pay checks because of being pre-tax.

He was floored and FINALLY started.

Conniesaki · « **Reply #9 on:** March 14, 2019, 05:47:37 pm »

Quote from: maxtog on March 14, 2019, 05:31:36 pm

Yeah, bonds are safe, but (like CD's) they are pretty useless for investing now and have been for at quite a while... simply because the interest rates have been so low, for such a long time. At age 35, one should certainly be looking at stock mutual funds because there is plenty of time for them to gain value. The key with investing is time- it is more important than anything else (a close second being diversity). The earnings will compound and re-invest, and time will absorb the market instabilities and ensure dollar-cost-averaging with regular purchases (at least once a month, if not more, is good).

Like we both said, it is imperative to take advantage of any and all employer-driven pre-tax savings plan, because for each dollar you save/invest, that comes right off your taxable incoming. This not only lowers your annual taxes, it puts MORE money in an investment where it can work for you. When you take the money out when at or near retirement, presumably your income bracket will be much lower... further reducing what you would have had to pay in taxes later. And with such programs there is usually some type of matching... THAT IS FREE MONEY! AND MONEY YOU PAY NO TAX ON NOW! It doesn't get any better than that. So one should do everything possible to take as much advantage of that as possible.

I actually think bonds are great, for my plan, which is to hold a fairly small percentage of them, let's say 10% of invested money. So on day 1 you put $100 in bonds and $900 in stocks. 2 weeks later the bonds have fallen to $90 and the stocks have risen to maybe $920, so now your mix is at 8% / 92%. And say you have $20 from your paycheck to add to your investments, you would probably put all $10 into the bond fund since it had fallen, and since the $20 would bring your mix up to $100 / $920 which is 9.8% / 90.2% ... very close to your target. This plan forces you to buy low. You would follow this same strategy throughout including retirement: If bonds were below your 10% target then you take your distribution from stocks, and vice versa.

maxtog · « **Reply #10 on:** March 14, 2019, 05:57:03 pm »

Quote from: Conniesaki on March 14, 2019, 05:47:37 pm

Let me just say once more that I'm 50, not 35 ...

You replied to an earlier version of my post. I revised it the moment I saw that was wrong (and before you posted)

Quote

Anyway, I think bonds are great, for my plan, which is to hold a fairly small percentage of them, let's say 10% of invested money.

I wouldn't disagree with that. As long as it is a small amount. Bonds just don't earn much of anything, so it is more of a "holding area"

Quote

So on day 1 you put $100 in bonds and $900 in stocks. 2 weeks later the bonds have fallen to $90 and the stocks have risen to maybe $920, so now your mix is at 8% / 92%. And say you have $20 from your paycheck to add to your investments, you would probably put all $10 into the bond fund since it had fallen, and since the $20 would bring your mix up to $100 / $920 which is 9.8% / 90.2% ... very close to your target. This plan forces you to buy low. You would follow this same strategy throughout including retirement: If bonds were below your 10% target then you take your distribution from stocks, and vice versa.

That is a good way of looking at it. One of the HUGE mistakes many people make is to TRANSFER money between funds... (which is, selling one thing to buy something else) that is generally a huge no-no unless you REALLY know what you are doing. Just reallocate where you are putting the money when you buy. Don't sell.

Another important factor is as you get closer to retirement, you will want to skew your investment purchases to be more and more risk-averse (safe/conservative), since there is less time to recover from any market problems).

Conniesaki · « **Reply #11 on:** March 14, 2019, 05:58:48 pm »

Quote from: maxtog on March 14, 2019, 05:42:10 pm

By the way, one of my employees (who is also a friend) is like that. Couldn't be bothered. Wanted to play video games and buy junk. I had to push him hard for YEARS to get him to start saving. Finally, after 5 years, I put together a spreadsheet showing what money he would have if he had just contributed $4000 a year which would get the $2000 employer matching, then compounded everything over those 5 years at a very conservative expectation of 6% APR. I also showed him just the FREE money he threw away by doing it without counting his required $4k. And also showed him how it is NOT $4k coming out of his pay checks because of being pre-tax.

He was floored and FINALLY started.

I'm surprised he tolerated you harping on his finances for years. But that's great that his light finally came on.

Most people respond with something like, "Um, yeah, where am I going to get $20/ week to invest? Every dollar is already spent." ... as they use their late model smartphone, frequent Starbucks, eat out, buy appetizers, drink Heineken, etc.

I have no problem with any of those products ... for those who can afford them.

maxtog · « **Reply #12 on:** March 14, 2019, 06:05:29 pm »

Quote from: Conniesaki on March 14, 2019, 05:58:48 pm

I'm surprised he tolerated you harping on his finances for years. But that's great that his light finally came on.

Well, it wasn't like it was every week or month. But, eventually, I asked him if he wanted me to keep reminding him, and he said yes. So I did.

Quote

Most people respond with something like, "Um, yeah, where am I going to get $20/ week to invest? Every dollar is already spent." ... as they use their late model smartphone, frequent Starbucks, eat out, buy appetizers, drink Heineken, etc.

EXACTLY. I pointed out many ways he was wasting money, certainly enough to cover the something like $120 coming out of the every-other-week paycheck. But also stressed that it doesn't have to be $4K/year, try $2K/year... try ANYTHING! Just do something!!!!

Conniesaki · « **Reply #13 on:** March 14, 2019, 06:13:47 pm »

Quote from: maxtog on March 14, 2019, 05:57:03 pm

I wouldn't disagree with that. As long as it is a small amount. Bonds just don't earn much of anything, so it is more of a "holding area"

To me they aren't a holding area. They are something very useful since they run kinda contrary to stocks. If stocks are down, you're still OK because you have some bonds. Having no bonds is not too good, IMO, because if the stock market is down, well you're down, no matter what. You have nothing to counter the fallen stocks.

Quote from: maxtog on March 14, 2019, 05:57:03 pm

That is a good way of looking at it. One of the HUGE mistakes many people make is to TRANSFER money between funds... (which is, selling one thing to buy something else) that is generally a huge no-no unless you REALLY know what you are doing. Just reallocate where you are putting the money when you buy. Don't sell.

I only transfer $ between funds to re-balance ... to get my holdings back to my target allocation percentages (10% bonds / 90% stocks) ... and only once every 2-3 years. Re-balancing is one of the few things I don't have set in stone, because it's not really needed. You could probably re-balance every 5 or 10 years and still be fine.

Quote from: maxtog on March 14, 2019, 05:57:03 pm

Another important factor is as you get closer to retirement, you will want to skew your investment purchases to be more and more risk-averse (safe/conservative), since there is less time to recover from any market problems).

If people follow a solid plan, for a long enough period, I think there's a good chance they'll have enough money in retirement that shifting to lower risk will be optional. But for people who decide they do want to shift to lower risk near or in retirement, I think it's best to plan how that will be done well beforehand so emotional decisions are removed when the time comes to actually do it. Set a plan and follow it.

Conniesaki · « **Reply #14 on:** March 14, 2019, 06:35:01 pm »

By the way, this is my financial bible: Retire Early Sleep Well by Steven R. Davis

I was looking for a book that just told me what to do man ... and if I ever feel like reading why, well hopefully it would have that, too. And this book does have both ... and he covers every topic in fairly simple 1- to 3-page chapters. Which for me knowing very little at the time, is what I needed. The first version came out in 2002, just a couple years before I started looking for it: Good timing.

He does talk about amounts of pay to save, etc etc, but since I was already not living paycheck-to-paycheck, the chapters that impressed me most were his discussion of stocks vs bonds and why you need some of both, and then chapter 30 where he lays out the set of specific Vanguard index funds and gives 4 allocation suggestions: Lower risk (50% stocks / 50% bonds), medium-low (60/40), medium-high (75/25) and higher risk (90% stocks/ 10% bonds). So, even in the "low" risk portfolio, he still suggests 50% in Vanguard's stock index funds.

I keep that book in my office and find I still do review things in it every year or two.

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Author Topic: Anybody interested in discussing personal finance / investing? (Read 850 times)

Conniesaki

Anybody interested in discussing personal finance / investing?

Tree

Re: Anybody interested in discussing personal finance / investing?

maxtog

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Bob Skinner

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Conniesaki

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maxtog

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Conniesaki

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maxtog

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maxtog

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Conniesaki

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maxtog

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Conniesaki

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maxtog

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Conniesaki

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Conniesaki

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