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moana
Jun 18, 2005

one of the more intellectual satire communities on the web


Newbie Personal Finance Thread

Hi, this is a thread for any newbie questions having to deal with personal finance in general. It has links to all of the most common megathreads, answers to all of the most frequently asked questions, and quotes from posters in here who are much smarter than me. If you have any questions about personal finance in general ("What is a CD?", "How can I best pay my car loan off?", "Should I buy six eggs for $2 or three dozen for $9?"), feel free to post them here. If you feel as though your situation is particularly unique or if it will take you a million pages to take BFC's sage advice, go ahead and start your own thread.

These are the things that we'll usually need in order to give you good advice:

- A list of all your debts and assets ("I owe $5k in student loans and have $2k in my savings account").
- If you're asking how to best pay off your debt, we'll also need to know interest rates and balances on each debt you have ("Kohls credit card, Balance: $3720, Rate: 7.85%")
- Your budget, including income and expenses. Check out the Let's Share Our Budgets Thread for ideas if you don't know what a budget looks like.
- Your goals. If you say "I make $5k a month and want to start investing!", well, we're gonna need to know what you're investing for. Retirement? A house? Future college fund? If you're not sure, we'll help figure it out with you.

Megathread Links

and, if none of these work to save you...


FAQ

How should I pay off my debt or get started saving?
Getting Rid of Debt
There are many methods of getting rid of debt but two which are most often recommended:

- Pay off your highest interest rates first
- Pay off your smallest balances first

The mathematically optimal method is to pay off your highest interest debt first, then the next highest, etc. Doing this saves you the most money in interest payments. If you're disciplined enough, this method is the best. However, some people prefer to pay off their smallest debts first for the psychological value:

traveling midget posted:

The Debt Snowball

The principle is to stop everything except minimum payments and focus on one thing at a time. Otherwise, nothing gets accomplished because all your effort is diluted. First accumulate $1,000 cash as an emergency fund. Then begin intensely getting rid of all debt (except the house) using the debt snowball plan. List your debts in order with the smallest payoff or balance first. Do not be concerned with interest rates or terms unless two debts have similar payoffs, then list the higher interest rate debt first. Paying the little debts off first gives you quick feedback, and you are more likely to stay with the plan.

This will result in you paying more money to service your debt over the long run, but psychologically getting rid of the small balances serves as a motivator. Whether you need that or not is up to you. The same principle applies to cutting down on spending. Some people are able to just put away their credit cards, some people need to cut them up into little bitty pieces to stop using them, some people put them in a cup of water and freeze them in the freezer so they only use them in case of emergencies. How much self control do you have? This will determine which path is best for you to stop spending and get out of debt.

EvilSpongeBob posted:

Most people would agree that you should start saving for the future now. Today. I recommend that you do the following in the order that they appear.
http://forums.somethingawful.com/ed...ostid=371326560
1 - Start an emergency savings account of 3-9 months of expenses. Three months if you live at home with your parents and really don't have expenses. Nine months if you have a family and are the only source of income. I recommend placing this money in an online savings account or a money market fund.

2 - Does your company offer matching contributions on your 401k/403b retirement plans? If you are not contributing enough to take advantage of your employer's free money, then you are literally throwing money away. For example, my employer, the US Government, automatically puts in 1% and matches up to 5% into my 401k. So I would need to contribute 5% of my pay to take advantage of the free money.

3 - Pay off those high APR debts NOW. I cannot emphasize this enough. Your credit cards and auto loans are a guaranteed loss of 10% or more a year. No investment that anyone can recommend in this forum will give you a guaranteed return more than 10% per year. Credit cards are a necessary evil (so you can eventually buy a house later in life), but carrying debt on them will eat you up and poo poo you out.

Where should I keep my savings?
There is usually a tradeoff between liquidity and higher rates. Checking accounts almost never are good places to store your money. Other options include:
Savings accounts (you can usually get a better rate with an online bank) - easily accessible, though some places may require a minimum deposit
Money Market Accounts - a type of savings account that usually requires a higher deposit but has higher rates
CDs - these are (usually) fixed-term holdings that have higher rates than savings accounts. The downside is that you sign up to keep your money there for a specific length of time and if you want to withdraw your money early, you'll pay a penalty.
Bonds, T-Bills, HSAs, etc - there are a million different kinds of places to put your money. If you want more information, poke around investopedia.
Bankrate.com also has lists of banks with the highest rates on certain kinds of holdings, so check that out before deciding where to put your savings.

How can I improve my credit score? Should I keep a balance? What should my utilization to credit ratio be?

Fraternite posted:

Honestly, don't worry about your credit score and just make good financial choices -- your credit score will take care of itself.
Never keep a balance you don't absolutely have to unless it's a rare exception (0% APR for a short term).

skipdogg posted:

The utilization factory doesn't have a history. If one month you're at 80% utilization, and next month your down to 10, your score can and will change dramatically. It's not like making a late payment where the effects gradually go away over time, it's pretty much instant.

You could have 80% utilization on all your credit cards and a 670 credit score, you know your going to buy a house in the next 3 months so you pay everything off, and your score will probably jump into the 720 range or better lowering your mortgage interest rate and saving you money over the long run.

If somebody calls my previous employer as a reference, it's illegal for them to say bad poo poo about me, right?
Wrong. This is a common misconception, though, because so many companies won't say anything bad about you. However, it's not illegal:

evensevenone posted:

You're confusing the typical policy with the law. A former employer can say anything they want, but if they lie, they could be sued for defamation. Therefore it's best to say nothing but the dates that someone worked there, because that's the only thing that you can prove without a doubt.

I'm in Canadaland, where money is made out of maple leaves. What do I do?

Chernori posted:

Hello fellow Canagoon! Here's a wall of text for what you need to know about investing in Canada (as far as I know, please do your own research and check with professionals!):


TAXES!
To start off, let's talk about taxes. Part of every dollar you make goes to the government to run the country. Usually this is done automatically by your employer. At tax time, you figure out if you paid too much tax or too little tax.

Canada has a progressive tax structure, which works like this: your income is divided up into brackets and the dollars in each bracket pay a different percentage to the government. Imagine you have a series of cups which represent the brackets and a jug of juice, which represents your income. You fill up the cups one at a time. When you're done, each cup has a different amount of juice removed (the first cups have very little taken, while the later cups might have up to 40% taken out). What's left is yours, also known as your after-tax income.

This matters because investments that do well count as income when you sell them or get interest, so you have to pay tax on them as well. Basically, you have to think about tax when you invest -- that's why people talk about 401ks and IRAs all the time. So let's talk about investing in Canada.

IRAs! RRSPs and TFSAs!
Investments go into accounts, which I'll refer to as holding accounts from now on (to differentiate them from individual places to put money, like bank accounts and savings accounts). Holding accounts are like baskets where you can put investments -- you can put stocks, bonds, GICs, even regular savings accounts inside a holding account. There are two major types of investment holding accounts that you should know about : RRSPs and TFSAs. If something's not in a holding account, it's unregistered.

Unregistered:
This is the simplest status for investments, because it doesn't have any special rules about what you can do with it. It's what most stuff is by default. For example, your chequeing account would be unregistered, because you can take out or put in as much money as you want without affecting anything else. If something's not in a basket, it's unregistered. You already paid tax on the money, so the government doesn't care what you do with it at this point.
Why is it good? You can do whatever you want with it.
What's the catch? You get taxed on any profits.
How much can I put in? As much as you want.

TFSA:
These accounts are pretty new and really useful for someone in your position. Any investment (which could be anything from a savings account to stocks) in a TFSA holding account won't be taxed when you sell it or generates interest. This makes TFSA accounts pretty much great for everybody. The only catch with TFSAs is that you can only put in a certain amount of money and that if you take money out, you can't put it back until January of the next year. You almost certainly want to max out your TFSAs.
Why is it good? No tax on profits! You can take money out any time.
What's the catch? If you take money out, you have to wait until January to put the money back in.
How much can I put in? $5000/year.

RRSP:
RRSPs can hold almost anything, just like TFSAs. RRSPs affect your taxes in a special way. Any money you put in an RRSP is deducted from your income. So if you made $30,000 and put $10,000 into your RRSP, the government would tax you like you only made $20,000 which could mean you get a whole bunch of money back when you file your taxes. It's not exactly free money though -- you're actually just delaying the taxes you pay. When you take the money out when you're older, the money is added to your income and you pay taxes on it then.

Even though you pay tax later, it's usually still worth using your RRSP. If you add money when you're making a lot and take it out when you're not making as much (say when you've retired), you pay less tax per dollar (say 20% instead of 30%). Also, you can invest the extra money you get at tax time, letting you grow your money before paying tax on it. Most importantly, your investments can grow without being taxed every year, so you'll end up with a lot more. RRSPs have one serious caveat to them: any money you take out cannot be readded later on, unlike a TFSA.
Why is it good? Money can grow untaxed! It reduces your taxes!
What's the catch? Any money you take out is added to your income, so you pay tax on it then. Also, you can't put money you take out back in.
How much can I put in? 18% of your income from last year (unless you're rich).

That just about covers the holding accounts!


INVESTING!
Congratulations on your nest egg! I'm glad to see that you're saving lots, even if you don't have much idea what to do with it yet. Being thrifty savers will make it much easier to secure your future.

Before you start buying anything though, you need to decide what you're doing with the money. The sooner you need the money and the less flexible the withdrawal date, the less risk you should take (which means reducing or eliminating the amount of stock you own). As the "money is needed" date approaches, you should scale back your risk level (so you might start off 50% stocks/50% bonds and end up all GICs. Of course, if the goal was something like "buy ALL the ice cream" that you could easily delay a couple years, you can take on more risk because you can delay if there's a bad year or two.

If you need the money in five years or less, you should probably just invest in GICs, savings accounts, and bonds. With that time horizon, you don't have time to make up for a bad year, so you need a near-guarantee of your principle being intact. If you're looking at 5 to 10 years, you can take a bit more risk with your money, so you could look at having a bit of stock exposure (at least for the first few years), while still relying mostly on bonds and guaranteed stuff. If you're looking at investing for retirement or for a far-off goal (a baby's university education or a trip around the world when you're 45), you can start getting fully into stocks.

Index investing is a great idea for almost all investors. It's easy, protects you from your worst enemy (yourself), and guarantees that you won't do much worse than the overall market (which has drifted upwards for the past 100+ years). In case you're not clear on the concept, index funds are investments that pool the money of many people to buy stocks or bonds that represent a certain part of the market (like, say, all Canadian stocks). Because they're only trying to mirror the market, they're cheap to run and don't charge much in the way of fees (as opposed to active mutual funds, which might charge 2.5%/yearly or more).

Let's say you're looking at saving for retirement and you guys are 25. People commonly say that you should take 100 and subtract your age, and that gives you about what percentage of stocks you want to be in (with the other portion being bonds). So you'd have 75% stocks and 25% bonds. I'm a big fan of the "Couch potato" style portfolio, where you divide up your money into a few index funds and just rebalance them yearly or every few months to keep them near your target percentages.

Canadians actually have a few good ways to invest in indexes. You can either get a brokerage account and buy ETFs (which have lower fees and which you buy like stocks and cost money when you buy and sell them) or you can buy index funds (which usually cost nothing to buy, but tend to have higher fees).

I really like (and use) TD bank's index e-funds. There's no trading commissions (so you can add money as often as you want) and the fees are very low (though higher than index ETFs). You just need to sign up at the bank and then register for the e-funds, which you can buy and sell online using TD's EasyWeb banking interface. It's simple to use and can hold RRSPs, TFSAs, and unregistered stuff as well.

For myself, I have 25% TD Canadian Bond Index-e, 25% TD Canadian Index-e, 25% TD U.S. Index-e, and 25% TD International Index-e. I have the bonds in my TFSA, since bond interest counts as regular income and gets fully taxed.

If you wanted to use ETFs instead (which would mean you would be trading only a couple times a year, lest commissions devour your profits), you could either trade at the big banks (most are $30/trade unless you have a lot of assets with them) or with a discount brokerage (which charge about $5 to $10 per trade). I have an account with Questrade, though I don't use it for ETFs.

Conclusion

That should give you a pretty good overview of investing here in Canada! Keep saving and investing and you'll be all set when you're older. If you want a good general purpose finance book to read, check out The Wealthy Barber by David Chilton. If you have any questions, feel free to ask here or in the long-term investing thread. Here are some good links for more information:

Good blogs!

TFSAs!
RRSPs!

Couch potato portfolios
TD's Easyweb online banking
Questrade Discount Brokerage

What about Australia?

froglet posted:

Australian retirement planning isn't too difficult.
Here's a link with All You Need to Know About Superannuation (courtesy of the Australian Securities and Investments Commission), they can explain superannuation much better than a goon ever could.
(Actually, now that I think about it, the FIDO website may be a good resource for many Ausgoons

What should I read to learn more?

Unormal posted:

Here's some reading recommendations:

Fundamentals

If You Can - a great summary of what you should know as a young investor, by Bernstein:
http://www.etf.com/docs/IfYouCan.pdf

The Four Pillars of Investing
http://www.amazon.com/Four-Pillars-...o/dp/0071385290

Vanguard Investor Education Pages
https://personal.vanguard.com/us/pl...ation/education

Why Smart People Make Big Money Mistakes
http://www.amazon.com/Smart-People-...ref=pd_sim_b_45



Deeper Cuts

Intelligent Investor
http://www.amazon.com/Intelligent-I...ref=pd_sim_b_39

Stocks for the Long Run
https://personal.vanguard.com/us/pl...ation/education

A Random Walk Down Wall Street
http://www.amazon.com/Random-Walk-D...ref=pd_sim_b_23

The Intelligent Asset Allocator
http://www.amazon.com/Intelligent-A...29645913&sr=8-1

All About Asset Allocation
http://www.amazon.com/About-Asset-A...29645934&sr=1-1



Economic Interest

Devil Take the Hindmost
http://www.amazon.com/Devil-Take-Hi...ref=pd_sim_b_41

Against the Gods
http://www.amazon.com/Against-Gods-.../ref=pd_sim_b_1

A Splendid Exchange
http://www.amazon.com/Splendid-Exch...15291970&sr=1-4

Resources
Vanguard Investing Information - Vanguard is a commonly recommended investing site because of their low expense ratios, and their guides to investing are very useful to get started learning about things
Bankrate.com - lists of rates for CDs, MMAs, savings and checking accounts, and just about everything else
Investopedia - your encyclopedia for all things financial
Online Savings Account Rates - a list of savings rates for different banks

I'll be adding to the OP regularly, so if you have some good info or links that I should add, please post in here and let me know. Thanks!

moana fucked around with this message at 18:14 on Aug 26, 2016

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vivat virtute
Dec 28, 2006


when i die, bury me inside the lambic store






Under the "How do I get rid of debt or start investing" section there's only investment, so here's a pretty universally recommended method of getting out of debt:


The Debt Snowball

The principle is to stop everything except minimum payments and focus on one thing at a time. Otherwise, nothing gets accomplished because all your effort is diluted. First accumulate $1,000 cash as an emergency fund. Then begin intensely getting rid of all debt (except the house) using the debt snowball plan. List your debts in order with the smallest payoff or balance first. Do not be concerned with interest rates or terms unless two debts have similar payoffs, then list the higher interest rate debt first. Paying the little debts off first gives you quick feedback, and you are more likely to stay with the plan.

Ciaphas
Nov 20, 2005

> BEWARE, COWARD




Here's a newbie question then. I've got $5000 sitting around in savings that I was going to put into my car. Current payoff's $18.5k, about $550/mo at 7.85% interest (sticker was 17k--I went in badly upside down due to some lovely decisions in college).

When I mentioned the 5k to a mate, he suggested I open a Roth IRA with it instead since (I guess) that's the cap for annual contributions. Which sounds good--my 401k is chugging along (I'm 25) but hell the more the merrier when I retire, right? So now my question is, what would I be better served by: pouring every spare dollar into the car until I get my title, or make the $5000 for the Roth, THEN start pouring into the car?

(if this somehow matters, it's a Honda Civic EX that had 36k miles at the time--at 39k an engine cylinder cracked and I got a replacement engine under warranty so the car's in good shape )


(edit) While I'm thinking of Roth IRAs, I'm having trouble understanding something about them: when exactly is it taxed, when I deposit it? Wouldn't that mean I'd be double-dipping on taxes if I deposited already-taxed money (paychecks) as opposed to being taken direct from my post-tax wages?

(edit again) Or hell are you even allowed to contribute outside of directly from your paycheck, making this whole edit moot?

Ciaphas fucked around with this message at 01:37 on Jan 21, 2010

slap me silly
Nov 1, 2009


Grimey Drawer

I would lean towards putting that to the car loan. You'll give up your chance to make a 2009 Roth contribution, but you've already got the 401k (with employer matching?), and 7.85% is getting on up there.

You contribute to a Roth IRA with after-tax dollars, meaning you pay taxes on that money along with the rest of your salary - put the other way around, you don't get to deduct the IRA contribution from your taxable income when you file. But then you pay no taxes on the withdrawals (if you follow the rules). An IRA is completely separate from your employer/paycheck and you can start one on your own with any bank that offers them. Vanguard is nice. While you're thinking about it, do some research on the funds in your 401k if you haven't yet - retirement thread is a good place to start.

TagUrIt
Jan 24, 2007
Freaking Awesome

How do people normally split up their money? For a few years, I've been dumb and had everything in a free, no interest checking account. Time to fix that.

I'm thinking something along the lines of:
- Free checking account without much money in it. I would use this to pay off bills/rent and then have an extra $500 or so in there.
- Short term 'savings' in a money market or savings account. This would also include 6-9 months expenses. (The rates at the banks were at most 0.5%, but it looks like 1.5% is doable online.)
- Retirement Savings (Set up an IRA somewhere like Vanguard which seems to be popular as a hands-free solution. Employer doesn't do matching of 401k contributions at the moment.)

Is this a reasonable/normal set up?

One more question about the magical 3-12 months expenses: Where do most people keep this money?

(I used The Sun Financial Diary listing of savings rates. I found it useful, so it might be useful to have in the OP unless there is a better resource that I missed.)

moana
Jun 18, 2005

one of the more intellectual satire communities on the web


TagUrIt posted:

Is this a reasonable/normal set up?

One more question about the magical 3-12 months expenses: Where do most people keep this money?
Sounds just about right to me. The savings or MM account would hold your 3-12 month expenses, although right now it's not a huge deal to just have it all in your checking account since interest rates are so low.

slap me silly
Nov 1, 2009


Grimey Drawer

moana posted:

Sounds just about right to me. The savings or MM account would hold your 3-12 month expenses, although right now it's not a huge deal to just have it all in your checking account since interest rates are so low.

It depends - for me the extra interest I get from the online savings account is equal to half a year's worth of cell phone bills. But this distribution to checking/money market/online savings is exactly how I set things up too.

moana
Jun 18, 2005

one of the more intellectual satire communities on the web


slap me silly posted:

It depends - for me the extra interest I get from the online savings account is equal to half a year's worth of cell phone bills. But this distribution to checking/money market/online savings is exactly how I set things up too.
Who's your savings account with? I used to use ING, but then their rate went to poo poo and I stopped caring. I guess once you build up your emergency fund it makes a decent difference, at the beginning it's not worth chasing rates. I should start shopping around again, I guess.

slap me silly
Nov 1, 2009


Grimey Drawer

HSBC. They were on top for a while back in the 5% days. Now they're not on top, but it's still pretty reasonable, or enough so to keep me from looking around. They do take a day or two longer than everyone else to transfer money, from what I hear.

KarmaCandy
Jan 14, 2006


TagUrIt posted:

One more question about the magical 3-12 months expenses: Where do most people keep this money?

I keep a good portion of my emergency fund in my checking account, personally, just because my savings/checking accounts aren't linked and it can take awhile to transfer money, and I may not have that time in a true emergency. I keep it at $5k and then anything above that gets transferred into my savings account for short term goals.

Picaresque
Dec 1, 2006


I'm 20, at University, have ~10K saved up, no student loans, no debt or necessary expenses. I am planning on studying abroad this Spring semester and am going to travel while abroad. I'm majoring in a profitable in-demand field, have a paid internship for the summer and will most likely have a job when I graduate.

I will make ~8K this summer and I got a relocation stipend to cover my living expenses. Since I don't have any necessary expenses, I do not have an emergency fund and do not know how much money I really need to save.

I currently have a 1.5% savings account with most of my assets, with the rest in a checking account. I don't know what I should do with my money. I'm not using it, and would appreciate having more of it when I really need it.

Is it better for me to invest in a Roth IRA, invest aggressively in stocks or look into CD's/Government bonds?

slap me silly
Nov 1, 2009


Grimey Drawer

Hmm, I'm inclined to suggest that you wait until you have a job and then decide. You'll miss your chance to make a 2009 contribution to an IRA, assuming you had earned income in 2009. However, you'll still be able to contribute for 2010, and you can make a much better prediction of your finances once you're hired.

An IRA should probably be your next step, either way. It can contain stocks and bonds, there's no conflict there. Just don't put in the money you want to use for snorkeling in the Bahamas.

moana
Jun 18, 2005

one of the more intellectual satire communities on the web


Picaresque, you're in almost exactly the same spot I was in when I was 20. I suggest starting a Roth and maxing out your $5k contribution for 2009, for a few reasons:

- it's never too early to get started for retirement
- you can take out whatever you put in without penalty if you decide you need to use it for other things (you just can't take out any interest it earns)

Like slapmesilly says, you can invest in anything within the structure of a Roth. For example, your Roth IRA could consist of 80% stocks, 20% bonds. I suggest reading the Long Term Investment megathread for ideas on how to do this; there are options where you can really get active in deciding what kinds of investments to pick, and options that will basically do it all for you. If you want to start now, I'd recommend sticking it all in a Target Retirement fund right now (that's a really passive kind of fund that doesn't require a lot of thinking), and then reading up to decide later what kind of investment strategy you want to pursue and how exactly you want to diversify your investments.

And you can wait until later to decide if you should put any in for this fiscal year. As a student, you don't have many expenses to think of and your parents will likely help you if need be, so your emergency fund is not a huge priority like it would be if you were supporting yourself.

slap me silly
Nov 1, 2009


Grimey Drawer

The only thing I'd add to that is that 80% stocks/20% bonds or Target Retirement isn't really compatible with the idea of taking it out again if you need it, unless it is really a dire emergency type of situation.

I did just make my own 2009 IRA contribution into a money market in case I need to get it in the next 6 months, though. :)

KarmaCandy
Jan 14, 2006


Picaresque posted:

I am planning on studying abroad this Spring semester and am going to travel while abroad..... I'm not using it, and would appreciate having more of it when I really need it.

Is it better for me to invest in a Roth IRA, invest aggressively in stocks or look into CD's/Government bonds?

Will you not be paying for that "traveling while abroad" this spring for some reason? If you're going to be paying for it then you will need at least some of that money to be free and available to you, so you wouldn't want it locked up in a CD.

I'd research where you think you'd want to go, how you'll get there, where you would want to stay, what types of things you want to do while there and get an idea of how much you'll need for "Travel." Traveling can be cheap but it can also be very expensive - all depends what you have in mind, but it seems like you do want to use at least some of it, and you want to use it soon.

When you finish school will you still have no expenses if you don't get a job right away? Just because you have no current expenses doesn't mean you can't get an estimate as to how much you would need - Any particular place you want to live? How much does rent usually go for there or would you be okay with moving back in with your parents? Emergency funds are also good for other things - injuries that insurance doesn't cover, major car repairs if you have a car, etc.

After that - Any other short term goals you have planned? More traveling, etc.?

Once you've got an idea as to discretionary spending while abroad/budgeting for travel/an emergency fund for if you don't find a job right away, like everyone else said - I'd open an IRA and invest the rest in there.

Picaresque
Dec 1, 2006


KarmaCandy posted:

Will you not be paying for that "traveling while abroad" this spring for some reason? If you're going to be paying for it then you will need at least some of that money to be free and available to you, so you wouldn't want it locked up in a CD.

I'm sorry, I wasn't clear on this point. I'm planning on traveling and will be paying for it myself. I did, however, not count it as a necessary expense because there's no set amount I HAVE to pay. I'm still working to figure out how much I'd like to budget for travel, and it kind of depends on what else I want to do.

Currently, I'm still considering my financial options but I probably won't commit to anything until I know how much I'll spend abroad.

KarmaCandy posted:

When you finish school will you still have no expenses if you don't get a job right away? Just because you have no current expenses doesn't mean you can't get an estimate as to how much you would need - Any particular place you want to live? How much does rent usually go for there or would you be okay with moving back in with your parents? Emergency funds are also good for other things - injuries that insurance doesn't cover, major car repairs if you have a car, etc.

After that - Any other short term goals you have planned? More traveling, etc.?

I'm finishing my degree a semester early in the fall, so I have some financial cushion with scholarships, college funding, etc. Most of my job prospects are on the West Coast, which tends to be expensive but I'll only go out there if I get an offer. I understand what you mean by an emergency fund-- I also work a part-time job during school which makes about 2K/semester which tends to cover incidental expenses. I didn't include it in my original post because I won't be working while abroad.

My short term goals would probably include more traveling, but they'd be much smaller in scale (<2K) and not need as much budgeting. I'm also thinking about taking some time (1-2 months) after graduating to travel, but I'd only do that if I commit to a job offer.

KarmaCandy posted:

Once you've got an idea as to discretionary spending while abroad/budgeting for travel/an emergency fund for if you don't find a job right away, like everyone else said - I'd open an IRA and invest the rest in there.

I'll try to sit down and figure out a realistic budget before I start to travel-- it's just a weird feeling to spend money after I've been saving for so long. Most of my plans revolve around budget travel, it's just a question of how much total I want to spend.

Thanks to everyone for the advice! I will probably invest into an IRA during or after the summer when I have a clearer idea of my finances.

thepedestrian
Dec 13, 2004
hey lady, you call him dr. jones!

So I recently signed up for Mint, and I was perusing and found an offer for an HSBC checking account that seems to beat my current Wells Fargo account. It pays some interest which I do not get currently, and they give you 3 free withdraws at non-HSBC ATMs a month (WF does not do that at all) and that would save me the $10-15 I pay every year in 3rd party ATM fees from WF. It's a $1 minimum with no monthly fee.

My only concern is I have both my checking account and credit card with Wells Fargo and the credit card provides overdraft protection which I haven't needed in a few years but have before in the past.

I'm unsure about this because it's an obvious sponsored ad on Mint and feels kind of gimmicky, but as far as I can tell it would save me money each year. Anyone have any thoughts on HSBC checking or signing up for sponsored accounts on sites like Mint?

slap me silly
Nov 1, 2009


Grimey Drawer

Well, my bank (USAA) reimburses any and all ATM fees up to $15 per month, if you need a gold standard to shoot for.

TagUrIt
Jan 24, 2007
Freaking Awesome

I did all of my research and stuff into checking accounts at banks in my area, and ended up going with Wells Fargo yesterday. However, this afternoon in my mailbox, I found a promotional item from Chase that offers $150 free (as opposed to the $25 I was offered in person). Otherwise, the offers are effectively the same for me. (I don't write checks so the main difference of free checks vs. $14 /box doesn't seem like a big deal.)

Is there a reason why I shouldn't try to close my account with Wells Fargo tomorrow (obviously "returning" the free $10 they gave me thus far) and open one with Chase? The difference is $115, so it's definitely worth considering...

moana
Jun 18, 2005

one of the more intellectual satire communities on the web


Wow, $150 sounds like a pretty good deal. Make sure there aren't any major requirements (some banks require direct deposit for those deals). When you go in to close your account at Wells, bring in the offer and ask them about it. They might match it, or they might bring up some other information/requirements that you should know about. Companies almost always know the loopholes in each other's promotional offers, so that's the best way to find out.

slap me silly
Nov 1, 2009


Grimey Drawer

I'm suspicious of all of that stuff - rewards checking with 5% interest sounds great until you realize you have to have direct deposit plus 10 debit transactions plus 3 bill pays per month, making your life complicated and your credit card rewards program useless, etc. So I feel like there might be a catch here too.

I prefer USAA to gimmicks

Vestral
Dec 30, 2008


I need some credit card management advice. For reference, I'm in Australia.

For years I had one credit card for emergencies (CBA card). I then moved out of my parents' house and along the way bought furniture and had more expenses than I'd planned for crop up and ran up a balance. 6 months ago I got a second new card (Suncorp card), with a balance transfer promo rate of about 3 percent. The plan was to pay off that $2600 in six months. The promo rate expired yesterday and I still have a balance of $1300. I was also not responsible with the CBA card, and never payed it off fully until September '09. Since then I've run it back up to $500 having moved house about a month ago.

I use the CBA card for paying bills automatically, then send the cash over as I have it ie I send it $50 a week, which pays off the auto-bill for internet service in a fortnight, mobile phone the next week and electricity in the next 4 weeks if all bills come in the same week.

So... I have some options. I can leave things as they are, pay the new rate of 11% on the $1300, and keep paying that off as I have been at $200 a month. I also keep the CBA card and try to pay off the existing balance plus new bills at $200 a month as well. CBA has 55 days interest free, then the rate is 18%.

Second, I can transfer the balance on the CBA card to the Suncorp card, pay 11% interest on $1800 and then I should be able to pay off bills charged to the CBA card before the interest free period is up. The only caveat here is I was not responsible in the past (spent my weekly pay then discovered I needed fuel for my car and charged that etc) and may run up a balance anyway.

The second option sounds like it would work out better for me and I'd save some interest money, but I'm pretty crap at managing my money. I can't guarantee I'll pay things off in 55 days, especially since my boyfriend's half of the bills comes at $50 a week since he is worse with his money and blows it all on random crap far too often. We're in a your half/my half situation, not a shared financial outlook (He's seems happy to have a 2k credit card debt that he'll pay off one day then charge back up the next)

Any advice? I'm more confused by all the numbers themselves, my brain shuts down when I look at mathematical problems (no doubt why I can't get rid of these pesky debts)

Evil SpongeBob
Dec 1, 2005

Not the other one, couldn't stand the other one. Nope nope nope. Here, enjoy this bird.

Vestral posted:

I need some credit card management advice. For reference, I'm in Australia.




It sounds like you really need to get a hold of your overall financial situation. For example, you're not budgeting, you're opening up new credit cards and I would bet that you have no idea what your monthly expenses are. Combine that with your BF's ways, and I predict a Cornholio. Take a look at the OP, get an overall view of your financial situation, then tackle those specific debts.

LorneReams
Jun 27, 2003
I'm bizarre

College Slice

My credit union offers 5% checking/savings up to $25K. Requires dirict deposit which if you are in a pinch, can be handled with a paypal account. Luckily my work allows unlimted deposit breaks, so I have like 5 different banks that my money goes to.

I found similar deals at other credit unions locally. (usually 3-5%)

No usuage or balance requirments.

Chernori
Jan 3, 2010


First of all, definitely read the first post in this thread. Here's a link, if your PGUP, Home, and Up arrow keys are broken:

http://forums.somethingawful.com/sh...1#post371326560

Vestral posted:



Okay, let's take a look:

CBA 18%: $500
Suncorp 11%: $1300

Possible plan: Balance transfer the $1300 to the higher interest card.

DON'T DO THIS

Credit cards are set-up specifically to make money off of you. If you made that transfer, you would be paying $1300 (or more!) at 18% and you would likely be charged interest retroactively on the $1300 because you didn't clear it all.

Here's my recommended plan of attack:

1) DO NOT USE YOUR CREDIT CARDS
You need to stop using credit cards. I would seriously recommend taking a portion of your pay (like $100, whatever) as soon as you get paid and put it an envelope. Then put that envelope somewhere out of the way. This is your "oh no I need gas at the end of the month" money.

Cut up your CBA card. You're not using it for awhile. Take your Suncorp card and make it as annoying to use as possible. Freeze it in a block of ice, bury in your cat's kitty litter, whatever. You're only allowed to use your Suncorp card if it's a 100% emergency -- something that threatens your survival like a big medical bill or a vehicle disaster that would completely prevent you from getting to work.

I would recommend that you create an emergency savings account and set up an automatic transfer to fund it, if possible. Having some money in the bank to protect you in case something goes wrong will give you peace of mind. A lot of people seem to have problems actually doing this, so it might be better for you to just work on the cards rather than getting bogged down trying to put money aside for savings.

2) Pay off the CBA card.
Make minimum payments on the Suncorp card. Pay as much as you can to the CBA card. Set up some sort of automatic transfer (can you do online bill payments?) that trigger right after you get paid. Pay it off as fast as you can. If it has an annual fee, think about closing the account (or changing card types) when you pay it off.

3) Pay off the Suncorp card.
Same idea as before. Pay off the Suncorp card as quickly as you can. Don't charge more stuff to the card! A new couch is not an emergency! A dented fender is not an emergency! Some nice shoes are not an emergency!

Here's some quick articles I just Googled for you to get up to speed on credit cards:
http://www.daveramsey.com/article/g...eandmoney_debt/
http://www.creditcardfinder.com.au/...anagement-guide
http://www.creditcardfinder.com.au/...-cards#howtouse

Again, make sure you check out the first post in this thread. Feel free to ask questions, especially in the megathreads. Lots of the posters here are really knowledgeable and helpful.

Chernori fucked around with this message at 17:06 on Jan 26, 2010

Josh Wow
Feb 28, 2005

We need more beer up here!


I was hoping to get some outside perspective on the best way to pay off my student loans, which are my only debt. Here's the numbers as of last month:

Total: 11,085

A - 1,945 @ 2.48%
B - 2,065 @ 2.48%
C - 378 @ 2.48%
D - 944 @ 2.48%
E - 1,728 @ 6.8%
F - 3,804 @ 6.8%

My minimum payment is $157 and I've been paying more than that every month, which bumps back when you have to make your next payment. Right now I don't have to make another minimum payment until April. Since I don't have a minimum payment every month that gets evenly split between all the loans I've been putting my entire payments towards one of the two loans at 6.8% to get them paid off more quickly. I just sent in a check for $400 towards E that isn't reflected in my numbers since the statement I'm looking at is from last month.

Right now I'm trying to decide if I should take a large chunk of my savings and throw it towards the 6.8% loans. I want to get those paid off as soon as possible for obvious reasons and I was just thinking how if an emergency actually came up there's nothing I can think of that I can't put on my credit card. Right now I've got:

Checking: $2559
Savings: $652
Credit Card: $132

After I pay off the card that's a total of $3079 I have available. My thinking is that I can take $2000 of that money and throw it at my 6.8% loans and cut them down a considerable amount. My rent + utilities only cost me about $400 a month and I could easily spend less than $150 a month on food + gas, so if for some reason I lost my job that'd be less than $600 a month to put on my credit card meaning my $3000 limit would last me 5 months. My rate on my card is 7.4% so the interest wouldn't be much more than what I'm already paying on my loans. Basically I'd be taking a gamble that I don't hit any sort of emergency, and my risk would be .06% more interest. At least that's my thinking, which could be incorrect.

I'd like to hear why I shouldn't do this though, because I don't want to screw myself over trying to make more progress on my loans. Also if anyone has better suggestions for a plan to pay off my loans I'd love to hear em.

Grumpwagon
May 5, 2007
I am a giant assfuck who needs to harden the fuck up.



Josh Wow posted:

student loan stuff

I wouldn't pay them with savings. You can deduct student loan interest from your taxes, so even the 6.8% rate is decent. Credit card rates can change. If you had a very large savings stockpile, I'd maybe say differently, but IMO the risk isn't worth it.

I think your current policy of throwing as much extra money as you have at the 6.8% loans is smart. After you finish with those, I'd beef your emergency fund up, and only then work on paying the low rates off. I mean, 2.48% is really cheap money (and as a student about to pick up some loans closer to your 6.8% ones, I'm jealous).

Vestral
Dec 30, 2008


Chernori posted:

First of all, definitely read the first post in this thread. Here's a link, if your PGUP, Home, and Up arrow keys are broken:

http://forums.somethingawful.com/sh...1#post371326560


Okay, let's take a look:

CBA 18%: $500
Suncorp 11%: $1300

Possible plan: Balance transfer the $1300 to the higher interest card.

DON'T DO THIS


Thank you for your advice. I've checked out the budget thread from the OP before, but nothing else, since I don't have a budget yet that actually works. (I'm used to living week to week, and screwed up plugging in monthly numbers) I'm working on a proper budget with all the right numbers in there.

Second, the plan you mentioned above was never my intention, I planned to do the reverse. Since posting I've pondered getting a new card at a 3% rate and transferring both debts to that one for 6 months and working towards paying that off. I never EVER made a purchase on the Suncorp card, it was strictly for the balance transfer. Aside from moving house and expenses I deemed necessary (no cash for gas/groceries and nothing else) I'm only charging phone, electricity and internet to the CBA card. I got the drat thing paid down to only $20, but then had to pay movers, transfer of internet, phone and electricity and carpet cleaning running back up that $500 balance.

Since then, I've moved more towards cash transactions than debit card, and have felt more aware of what I'm spending my pay on and thus why I seem to run out of cash left every 2 weeks. I haven't bought clothes or shoes, and only 2 novels for myself this past year. I can only justify purchases less than $20 but they add up if you don't have a budget and don't keep track! I'm learning as I go here.

I'm not going to get a new card since I hosed up last time I tried to save myself some money by not paying off the full balance. This time THE PLAN: do a budget goddamnit and have money set aside for bills so I can pay cash for them all. Pay minimum on Suncorp card (currently $30 a month, easy) and put all I can towards the CBA card. DO NOT CHARGE ANYTHING TO THIS CARD. At $500 bucks I can pay it off in two months, one if I cut right back on pointless takeout and snack food. Then I move onto the Suncorp card, 6 months later it's gone at my current payments, but without the other card and a proper budget, that should be down to 3. Then I'm free and clear!

Edit: forgot to mention both times, I have $2k cash in a savings account for dire emergencies, and $10k in what I'm now thinking of as an emergency account (I started saving it thinking about a deposit for a house one day, these days it just sits there waiting for me. I forget I even have that sometimes which I guess is good since I won't spend it until I'm unemployed and destitute)

Vestral fucked around with this message at 15:04 on Jan 27, 2010

slap me silly
Nov 1, 2009


Grimey Drawer

Vestral posted:

I have $2k cash in a savings account for dire emergencies, and $10k in what I'm now thinking of as an emergency account

What? You are still ahead of the game then. Assuming this isn't in the stock market or a retirement account, feel free to use it to pay off your cards in one fell swoop. Then take the $400/mo you were putting towards the cards and put it in the savings account instead - set that up as an automatic transfer so you don't have to remember to do it. You can eliminate your debt and improve your savings habits by tomorrow. There's just no reason not to do this. But be very careful never to carry a balance on the cards again or you'll be back in a year with a zaurg thread. Only use them for gas, or freeze them in ice if you have to. Keep a $200-500 minimum in your checking account so you won't run out of money and "need" the card.

It looks like a lot of the CC debt is due to irregular expenses like moving, right? Plan to use savings for that instead, next time, and be more careful how much you spend.

If things get more serious with your boyfriend you two will need to get on the same page about this kind of stuff.

Pillowpants
Aug 5, 2006


Should you ever close a credit card?

moana
Jun 18, 2005

one of the more intellectual satire communities on the web


Pillowpants posted:

Should you ever close a credit card?
If it's not your first card, if you have other ones, and if the limit is low enough that it doesn't really affect your credit utilization ratio. Or if it gets stolen. Or if you're not planning on buying anything on credit ever again and don't care about your score. Or if you can't stop spending like craaazy. That's about the only times I can think of.

slap me silly
Nov 1, 2009


Grimey Drawer

In defiance of the common wisdom, I just closed my first credit card at the ripe age of 12 years because I developed a grudge against the company and I got a better card somewhere else. But I did wait until after I got the mortgage...

Josh Wow
Feb 28, 2005

We need more beer up here!


Grumpwagon posted:

You can deduct student loan interest from your taxes

You can only do this if you pay over $600 a year in interest. Last year I paid like $670 in interest, so this year I probably won't even break the $600 mark so that's a moot point. You said you woulnd't pay it with savings but didn't give any reason for that, care to explain? I'm looking for reasons not to do this, right now I'm not seeing any.

crazyfish
Sep 19, 2002



And the student loan interest deduction isn't a credit, it's just a deduction, meaning that even if your marginal rate is 25%, you're still throwing away 75% of the 6.8% interest. It's the same argument perpetuated by people that don't understand taxes when they talk about deducting mortgage interest.

Angora
Feb 16, 2009

by Ozmaugh


I'm curious if someone in my situation should start/continue to invest in the stock market, or if what I'm doing is a poor decision.

I currently am finishing up my second year of a two year's Masters program. I've racked up about $14k in Student Loans. Additionally, my father has personally loaned me another $9k for tuition which I can pay him back interest free at my leisure. Almost all of my loans are subsidized, meaning they won't accumulate interest while I am going to school. This works to my advantage because I plan on taking a short break to beef up my resume then moving across the country to get my PhD. From what I understand, the loans should be deferred if I continue my education. I also am looking at state schools where tuition will be low if I change my residence, which I plan on doing.

As far as assets, I have around $8500 in a credit union from my father's job that I have as an emergency fund. Additionally, my grandfather gave my sister and myself shares in Proctor and Gamble when we were children to help fund our education. Neither of us have needed to dip into them because we were excellent students and got everything through grants and loans. My shares currently value at about 12.5k


Now I've been taking an interest in investing my personal funds, and possibly putting some of the PG shares into other similar blue chip stocks. I've invested $500 of my own money into Pfizer stocks, and have another $275 in my account if I choose to invest again. I can afford to throw $150-200 into my brokerage account every two weeks with my paycheck, and plan to continue doing this. This number should rise sharply once I finish my M.A. this June. I want to invest in a handful of long-term stocks.

My ultimate goal is to come out of a pHD program owing under $50k in student loans and also having enough to cover the costs to start work as a therapist. Is investing in the stock market a smart decision?

As a follow up question, would it be a good idea to take some of the PG shares and invest them into other S&P stocks?

edit: As an aside, I also have excellent credit.

Angora fucked around with this message at 19:34 on Jan 29, 2010

DenialTwist
Sep 18, 2008
In the beginning the Universe was created. This has made a lot of people very angry and has been widely regarded as a bad move.



Is it ever a good idea to cash out a small 401k to pay off CC debt? I am starting a new 401k in April when my new employer offers it (my one year anniversary) and I would have enough after the cashing out the old one to pay off about 1/3 of my debt. Is it worth it? I have about 5.6k in CC debt paying off 1k this month and I have 3.2k in the old 401k, I'm 22 if that matters. I also plan on paying about 100-300/month of the CC debt after the intial payments depending on much I can work my second job these next few months.

DenialTwist fucked around with this message at 01:58 on Feb 3, 2010

slap me silly
Nov 1, 2009


Grimey Drawer

Two scenarios:

Cash out the 401k, have $2500ish after taxes and penalties. CC debt is reduced to $2100, paid off in a year at $200/mo assuming 20% interest. Put the $200/mo into a retirement account for 18 months after that.

Keep the 401k, credit card debt is $4600 and takes 2.5 years to pay off at $200/mo.

Now what happens after 2.5 years are up. In the first case, you have 18 mo * $200 = $3700 in some retirement account. In the second case, you have $3600 in the 401k. That's assuming 5% return in both cases. So it's more or less a wash? Did I miss something? Anyway, if my assumptions are reasonable, I'd probably suggest keeping the 401k just to enforce a little discipline. :)

DenialTwist
Sep 18, 2008
In the beginning the Universe was created. This has made a lot of people very angry and has been widely regarded as a bad move.



Thanks, the main reason I was looking at cashing out the 401k to payoff my debt is so I could begin to accumulate some cash savings as I currently have none and would like to pay cash for my next big purchase (a car; mine is 10). So at 22, would starting all over again be a terrible thing with the 401k; my plan is tentatively-1. Start hacking away at debt as fast as possible 2. When the debt goes down to one card (about 2k) cash out the 401k to pay it off and start sticking that 200 a month into cash savings so I can pay cash for a new car when I need one.

Eggplant Wizard
Jul 8, 2005


i loev catte


A few questions, so I'll start with the basics.

- I have 17k in student loan debt, deferred till 2013 while I'm in grad school.
- I make a little more than 21k a year
- I have about 10k in savings, plus my checking account is usually between 4 and 5k.
- I have various funds set up for me by relatives which are worth a total of about 22k at the moment. I don't touch these; one is a mutual fund and the other is some English thing that I don't get till I'm 25 and will probably continue to ignore because the pound is stronger than the dollar.
- I have two credit cards, which I pay off every month. My limits are 5k and 5.8k respectively.
- I don't have a car or any other assets! Whee!
- I'm 23 years old.

So, my questions:
1. Should I be starting a retirement account? I hear yes a lot, but I don't know if that's a good idea given my income or if I should just keep most of my cash where it is and figure things out when I'm properly employed (I'm a TA or on fellowship till 2013).

2. As a godless liberal socialist New England elitist pansy, or whatever, I am tempted to move my money out of the big banks and go for my university's credit union instead. My CCs are Visa and AmEx; my little savings and checking are Bank of America; and the bulk of my savings are with ING. The relative funds are in American Funds and Mystery English Bank. Right now I'm thinking I'd move the BoA stuff and one or both of the CC's to a credit union. My sub questions are...

2a. How would cancelling my credit cards and getting new ones elsewhere affect my credit score? Does this depend on my limit, pretty much?

2b. Would closing my BoA accounts affect my score?

2c. I will probably keep things in ING because it's the best :snort: rate there is right now at around 1.25% apwhatever, unless I do a SmartyPig thing. Sound good? Should I make an absurd goal on SmartyPig and do that instead?

2d. What do I ask the credit union, and what answers am I looking for?

3. What else should I be doing? I have a budget and a mint.com account and am trying to make good decisions about purchases (= not buying anything ever). I might end up needing orthodontics this summer (gently caress) and it's important for me to keep a certain amount liquid in case of similar emergencies happening in the future, so I'm not sure CD's and such are a good idea. Also the stock market is so beyond me, so I'll leave that up to the American Funds folks.

Thanks money goons

Eggplant Wizard fucked around with this message at 16:48 on Feb 3, 2010

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slap me silly
Nov 1, 2009


Grimey Drawer

DenialTwist posted:

Thanks, the main reason I was looking at cashing out the 401k to payoff my debt is so I could begin to accumulate some cash savings as I currently have none and would like to pay cash for my next big purchase (a car; mine is 10). So at 22, would starting all over again be a terrible thing with the 401k; my plan is tentatively-1. Start hacking away at debt as fast as possible 2. When the debt goes down to one card (about 2k) cash out the 401k to pay it off and start sticking that 200 a month into cash savings so I can pay cash for a new car when I need one.

Just be clear with yourself about what you're doing, and don't let the CC debt confuse the issue. After a few years, you're down a 401k, up a car, so that's the trade - you cashed in your retirement savings to pay for your car. Starting from zero with a 401k at 24-25 isn't terrible, no - but dipping into your retirement accounts is gonna cost you a lot over time if you make it a habit. That $3200 in the 401k could be worth upwards of $40k when you retire if you keep it in there.

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