Managing money

[Forsher]

And that means no diversification... stuff can happen to your one piece of land that ruins your day. And I'm not even talking about real estate market crashes ... I'm talking problems with tenants, damage to the premises and all that sort of thing. Idiosyncratic problems that don't really worry you if your investments are spread across many different things.

No pain, no gain.

[Neu Leonstein]

No pain, no gain.

Sure, but it's a question of the expected ratio between the two. Average nominal returns in commercial real estate in the US over the past couple of decades or so are maybe around 10%. But you got almost the same if you'd just held the US blue chip stocks. And you would've been able to do it with much less starting capital and run a lot less risk of something going catastrophically wrong.

[Ethel mermania]

What about just buying up tons of land?

In principle, in terms of outright expected return, this might be ok. But there are a couple of issues with it... and mostly I think they have to do with illiquidity and minimum trade size.

Illiquidity is obvious... if you suddenly need the money, it's a lot harder to sell a bunch of commercial real estate than it is to sell some stock market funds or something. The sooner you need the money, the more it will cost you to get it.

The second is sorta obvious too - there's a minimum amount of money that you sorta need to buy enough real estate to collect rent on it. That means two things. The first is that someone who has less than that minimum in spare cash sitting around (which is most people) can't really do it at all. And the second is that unless you really have a lot of spare cash, your bit of real estate is going to be a very big chunk of your total assets. And that means no diversification... stuff can happen to your one piece of land that ruins your day. And I'm not even talking about real estate market crashes ... I'm talking problems with tenants, damage to the premises and all that sort of thing. Idiosyncratic problems that don't really worry you if your investments are spread across many different things.

R.E.I.T.'s, or stocks of commercial landlords like vornado, for less cost/risk.

[Parnassus]

You have to think about the way you think about money. Poor people (and I grew up this way) who have a little extra money think about what they can spend it on. If they don't change the way they think, they'll be poor their entire lives. Middle class people who have a little extra money think about how they can save it for the future. Typically, this means they put it into a savings account. Unfortunately, while this gives them some room to breathe in emergencies, they typically *lose* money because of inflation. Wealthy people think about how their money can make them money.

You also have to change the way you think about investing. You will not make money overnight. Anything you look at on a time frame of less than five years is gambling, not investing. Hundreds of thousands of people have gone bankrupt trying to gamble on the stock market.

First, there are relatively safe places - like CDs or government bonds. These are generally guaranteed against loss of principle (the original amount you put in) and earn a small percent (2-5%). Some CDs also pay dividends, which is just extra free money. You can get these from your bank, or shop around for the best rates (Nerd Wallet keeps a running list of best CD rates). They work more or less like a savings account, except you agree to leave the money there for the duration (always read the CD agreement for early withdrawal penalties). At the end of the term, they pay out the principle + interest. If you want to keep investing that money, you buy another CD (after shopping around again).

Then, you can look at what I'll call "second tier" - mutual funds, ETFs, indexes. These are stock holdings that own stock in multiple companies (usually hundreds), so you're looking at a larger picture than just putting your money in one company. You can buy them for sectors (consumer staples, utilities) or other groupings (large cap = huge billion dollar companies) or indexes (like an S&P 500 index owns stock in every S&P 500 company, as the S&P 500 goes up, you gain money).

IRA's are generally a mix of these two (above).

Last, think about individual stocks. They're the most volatile, and you should a lot of research on the market and each company before sinking money into them. Some stocks pay dividends (free money every quarter just for owning the stock), which you can take in cash or reinvest into that company. For example, Johnson & Johnson pays $3.60/yr, which means every quarter you get $0.90 per share you own. So, if you own 10 shares, you'll get $9. Also, remember the old saying "buy low, sell high". It sounds like a smart ass response about stocks, but most people actually do the opposite. They see a stock skyrocketing and they want in on that action. So, they buy when the stock is at its highest. And, when they see a stock they own drop drastically, they panic and sell it.

Then, dead last, if at all, you can (but most advisors recommend against it) "play the market," i.e. gamble on trends on a shorter time frame. For example, you could buy $100 worth of stock in a marijuana company betting that 1) it's going to be legal in the US soon, and 2) the company you picked is going to be the one (out of many) that wins control of the market. Never gamble more than you can afford to lose every penny of.

[Xmara]

Start a savings account as soon as you turn 18. While some banks require you to put in X amount of money per month and a high fee just to open one, I found a local bank that only requires you to deposit $1 to get started and has no monthly deposit requirement. It takes some searching to find, but it’s worth it.

That being said, don’t withdraw from your savings account unless:

• It’s an emergency (unexpected medical situation and your insurance won’t cover it, etc.)
• You’re wanting to buy a house or get an apartment
• You’re using it to get married, start a family, etc.
• A few other reasons I can’t think of off the top of my head rn

Point is, don’t withdraw just because you want a new gadget or something else you really don’t need. Use it only for the big stuff.

Save your spare change in a jar. When it gets full, roll the change and add it to your savings account.

Always make sure your checkbook is properly balanced. Pretty much all banks have an online service where you can look at your funds in your accounts so that really helps.

Make a monthly budget. Make sure you allot the right amounts for bills, groceries, payments, etc. Don’t go over the budget unless it’s an emergency.

Just because your credit card has a $2000 limit does not mean you should charge $2000 to it every month. That’s a great way to get into debt and ruin your credit score (which needs to be high, because low credit scores mean not being able to buy a new car or new house if you choose to).

Budget when buying groceries. You don’t need to eat filet mignon once a week. Buy generic (unless of course you prefer the brand name to the generic).

These are all the tips I can think of rn that my mom gave me.

[Neu Leonstein]

Start a savings account as soon as you turn 18. While some banks require you to put in X amount of money per month and a high fee just to open one, I found a local bank that only requires you to deposit $1 to get started and has no monthly deposit requirement. It takes some searching to find, but it’s worth it.

I assume you live in the US? The reason I say that is that I continue to be shocked every time by how poorly big American banks treat their customers. Australia is hardly the most advanced in the world money-wise, but the idea of a account keeping fees for a savings account (or a cheque book, for that matter) sounds really antiquated. Apparently Canada is pretty bad too, in that regard. Maybe the lack of comparison is what's kept Americans from burning down branches so far.

[Costa Fierro]

I have no money. Therefore I have no bills to pay and, stress to build up, and a soulless job to slave away at.

[Ethel mermania]

I have no money. Therefore I have no bills to pay and, stress to build up, and a soulless job to slave away at.

Nice when someone else is paying your housing, and food bills.

[The Blaatschapen]

I have no money. Therefore I have no bills to pay and, stress to build up, and a soulless job to slave away at.

Nice when someone else is paying your housing, and food bills.

I should marry a rich woman

[Ethel mermania]

Nice when someone else is paying your housing, and food bills.

I should marry a rich woman

Mom said it was just as easy to love a rich girl as a poor one. I should have listened to mother.

[Esternial]

I earn more than I spend.

It's currently amassing on my bank account. Waiting for me to actually go and buy index funds with it.

Or should I short the Pound?

Let's buy a farm together for both sheep and alpacas.

[The Alma Mater]

That’s a great way to get into debt and ruin your credit score (which needs to be high, because low credit scores mean not being able to buy a new car or new house if you choose to).

Do note that in many countries having ANY sort of credit, be it a loan or a credit card or whatever, reduces the mortgage you can get by a significant amount.
Even if you always pay them on time they are still deducted from your "maximum loan capacity".

[The Blaatschapen]

I earn more than I spend.

It's currently amassing on my bank account. Waiting for me to actually go and buy index funds with it.

Or should I short the Pound?

Let's buy a farm together for both sheep and alpacas.

Sounds good

[Seythennia]

Save at least 10% of every paycheck. Put that in a savings account, or invest it if you really care. Don't use credit cards if you can help it. Also, carry cash; having your spending money right next to you in your wallet helps keep you more aware of how much you have, rather than keeping it in some far-off bank account.

[Duhon]

Money is shit and we should abolish it.

You can't exactly abolish the concept of exchanging things of value, now. Whether it be shells, cows, rocks, people, gems -- money will always be with us, one way or the other.

[Ifreann]

Money is shit and we should abolish it.

You can't exactly abolish the concept of exchanging things of value, now. Whether it be shells, cows, rocks, people, gems -- money will always be with us, one way or the other.

Money is a sign of poverty.

[Duhon]

You can't exactly abolish the concept of exchanging things of value, now. Whether it be shells, cows, rocks, people, gems -- money will always be with us, one way or the other.

Money is a sign of poverty.

?

[Ifreann]

Money is a sign of poverty.

?

If we had enough things, we wouldn't need to use money. Ergo, money is a sign of poverty.

[Duhon]

?

If we had enough things, we wouldn't need to use money. Ergo, money is a sign of poverty.

But we can never have enough things, for new ones will always appear and entice us. Ergo, that statement is nonsense.

[The Blaatschapen]

You can't exactly abolish the concept of exchanging things of value, now. Whether it be shells, cows, rocks, people, gems -- money will always be with us, one way or the other.

Money is a sign of poverty.

Lack of money is also a sign of poverty

[Ifreann]

If we had enough things, we wouldn't need to use money. Ergo, money is a sign of poverty.

But we can never have enough things, for new ones will always appear and entice us. Ergo, that statement is nonsense.

I don't means we individually, I mean we as in our society.

[The Blaatschapen]

If we had enough things, we wouldn't need to use money. Ergo, money is a sign of poverty.

But we can never have enough things, for new ones will always appear and entice us. Ergo, that statement is nonsense.

Such a consuming mind set.

Desire is suffering.

Why do we always want more? Can you give proof for that?

[Ethel mermania]

But we can never have enough things, for new ones will always appear and entice us. Ergo, that statement is nonsense.

Such a consuming mind set.

Desire is suffering.

Why do we always want more? Can you give proof for that?

To love is to suffer

[Hakons]

But we can never have enough things, for new ones will always appear and entice us. Ergo, that statement is nonsense.

I don't means we individually, I mean we as in our society.

Unless you know how to create matter out of nothing, scarcity will always be a thing. How on earth can you concede that people have unlimited wants but somehow come to the conclusion that society doesn't?

[Autonomous Cleaner Bot Cleaners]

For example, here's one I like (and just to be clear, I'm not the one who came up with this):

• Every payday (or slightly longer, depending on fees to buy index funds), take whatever part of your income you can spare, i.e. you don't think you'll need to spend within the next couple of years or so.
• About 100-{your age} per cent of that new money goes into a low-cost stock market index-tracking fund, with as much diversification as you can get.
• The remainder goes into a low-cost bond market index fund.
• You don't sell anything unless you really need to access the money.

...

Maybe you think one can do better by doing something else?

First, know how much you make in income, and how much you spend in expenses. Account for every cent. There's nothing to save or invest until you know its there.

Second, reduce your expenses as much as possible. Your needs are mostly wants. Treat them accordingly.

Third, if you have any money left after expenses, use it to establish an emergency savings fund. 3 to 6 months worth. Enough to pay all your bills for long enough to get a new job. This is the money used to not become homeless; establishing it is top priority.

(The following assumes the current tax laws of the United States...)

Fourth, buy those index funds in a tax-deferred retirement account, to which you're contributing on a pre-tax basis. You get an immediate reduction in taxable income, you're automating your savings, and you cannot touch those funds until retirement age and/or your situation is so desperate you're willing to pay ordinary tax plus a 10% penalty (maybe excepting certain health-related expenses or first-time home purchases; check your specific account details). This last advantage is OK since, as we're likely investing in an aggressive (80-70%) stock allocation, so we don't want to touch it for at least a decade or so anyway, ideally longer.

Fifth, once you've maxed out contributions to the above, begin contributing to a post-tax account like a Roth IRA, which is largely as above except you can withdraw 100% of the value of your contributions tax and penalty free at any time, and 100% of total account value tax free at retirement.

Sixth, once you've maxed that out, and you've still got some left over, then you're doing fantastically well, and can go nuts on a taxable brokerage to your heart's content.

And regardless of the brokerage/account type, do not invest anything you're not ready to wave bye-bye to immediately. This is why we establish and maintain a positive cash flow and emergency savings account first.

None of this is professional advice, do whatever you want at your own risk, if you think I know anything you get what you deserve.

Money is shit and we should abolish it.

My labor is not free. Sorry.

The tax man, the land lord, my employer, and Special Circumstances seem to think it should be. They're all wrong too.