Financial Literacy - how to get started ???

[nodakfan17]

Hey Brewer Fans- I'm looking for some input from those of you with more financial experience than myself.

 

I'm in my early twenties and wrapping up an MS in Economics, but I'll be the first to admit that my knowledge of investments and wealth building strategies is only average. In the near future, I would like to obtain a position as an economic analyst or consultant; however, I would also like to develop several business interests on the side that will one day afford me financial independence. In the mean time, I am looking to develop a high "Financial IQ" by familiarizing myself with a wide array of topics. I would very much appreciate it if anyone could suggest a few books or websites for me to check out. Posting any advice or experience that you have would also be tremendously helpful.

 

Thank You!

[davego]

I like lots of the stuff Dave Ramsey has to preach.

 

http://www.daveramsey.com

[twobrewers]

David Bach is fantastic for beginners. (Really simply techniques that would be better than 95% of what people do now)

 

For an advanced read "The Prudent Investor's Guide to Beating Wall Streets at Its Own Game" is also very good.

 

Lastly, I really like the Motley Fools.

[homer]

Buy a book. A good one is the Wall St Journal Guide to Investing. I bet a "Dummies Guide to Investing" is probably pretty good for starters too.

[JimH5]

I like Smart Money magazine. But that doesn't mean that understand all of it.

 

I'm also at the point where if an investment vehicle is so complex and hard to understand, then I'm not interested in buying it.

[craigharmann]

I like lots of the stuff Dave Ramsey has to preach.

 

http://www.daveramsey.com

Second the Dave Ramsey suggestion.

[temke]

im a clark howard guy myself. 2-3pm on 620. he is also apparently all over headline news these days also.

 

http://www.clarkhoward.com

 

the man is pretty much a dork, but has some decent thoughts about personal finance

[nate82]

I hate Jim Cramer but his books are easy to read if you don't know a lot about the financial markets. If you are looking for advice take the advice from the talking heads on the radio and TV shows with a grain of salt. A majority of the talking heads have an agenda behind what they are telling you to buy and sell. This is very prevalent on MSNBC Money the analysts they have on there are usually trying to push stocks that they own or are in connection with.

 

Jim Cramer's books

[gypcasino]

Don't get married.

[Thurston Fluff]

I'm not sure if by having a business on the side for financial Independence means you want to own your own business and live off that. If you do I think you will have a better chance of it working if you go for it right away. Don't get another job and hope to someday make your side project work full time.

 

Having a business on the side in the hope to someday make it full time is something I think a lot of people who want to run their own business have backwards. The people I see who start a job and work towards their dream of running their own business never quite get there. By the time they are ready they have more to lose. If you start now with little to lose you may end up out of work by age 30 and a wealth of experience to go into the next job. If you go independent at age 30 or so and fail you are now 40 or older and have a house and family depending on it working out. Usually by the time you want to start you have too much to risk to take that leap. I think most people who succeed on their own started when they had nothing to lose. Certainly was that way for us.

My wife and I are by no means business experts but we had nothing to lose but time and maybe a little later retirement if we failed. I don't think either of us would have worked for someone else, got financially stable then said, let's risk it all by getting a phone line, gorilla suit and some balloons and make it work on our own.

 

As far as financial expertise I don't know what that even means today. A lot of so called experts couldn't see the crisis we have today coming. How can they be experts if they miss very thing they are supposed to be looking out for? The business model we knew for generations is changing as we speak. Better to write the book yourself than trust what someone else wrote about how things used to work IMO. Trust your instincts, but don't confuse what you want to work with what you think will work, don't be afraid to make mistakes and learn from each of them. It's your 20's anything you screw up there is time to fix. The practical experience you gain in the process will teach you more than any book could hope to. If all you really want is to gain wealth just diversify. Not just diverse stocks but look into property or invest in other ventures locally as well as some safer investments like CD's boring but always gains never loses. Diversity means no single failure takes everything away.

[valpocrewsader]

I like lots of the stuff Dave Ramsey has to preach.

 

http://www.daveramsey.com

Second the Dave Ramsey suggestion.

Thirded.

[MJLiverock]

That Ramsey stuff looks like a scam to me. I went to the website and saw all the ads about how he will help you save money.... if you pay him $10/month or more for subscriptions which immediately reminded me of an old question. If Carlton Sheets was so good at making money in real estate why does he need to make money selling the ideas to me? Why doesn't he just make money in real estate? Not completely germain but the idea of charging me money and selling me subscriptions to tell me how to save money strikes me as ironic. But then again I hate people like Suze Orman too.

 

Nodakfan17, You have an MS in Econ so you are light years ahead of most people. I have a BS in Econ and a BS in Finance and work in the financial industry. I would recommend a few simple rules. Understand what you own, understand what fees you are paying to own that investment or get that advice, and understand how the person selling it to you is being compensated. And above all, if it sounds to good to be true... it probably is.

 

Most people don't understand the fees they pay within a mutual fund or the actual performance of that fund relative to a benchmark. Fees paid to a financial advisor may be tacked on on top of the actual mutual fund management fees which can be buried in the share price. They also don't take into account the tax consequences of the funds' distrubtions and figure that into returns as well.

 

Rember risk is a two way street, anything that has really high returns or projected returns probably has a much higher risk level. The younger (or longer investment horizon you have) you are or the more discretionary the investment income is then the higher the risk level can be. i.e. don't invest money you are trying to save for house purchse next year in the stock market or natural gas futures.

 

An intersting book I read a long time ago was The Capitalist Pig, it was kinda humerous but covered a lot of basic investing questions. The author was a young guy who was a student at Northwestern and used to have a radio show. It has been a while since I read it but it was a funny easy read.

 

I would also suggest learning about how banking works. What terms the loans like your mortgage and car loans are offering and how to compare them. Some people swear ARMS are bad, but I have never had a fixed rate loan because used properly ARMS are just fine as long as you understand what you are doing.

 

I could probably write pages of this stuff since I've dealt with it everyday for the last 10 years of working in banks and investments. Feel free to PM me if you have specific questions.

[jjfanec]

I will fourth Dave Ramsey and vehemently disagree that he is a scam. The company I work for gives us all training from Dave Ramsey to become more financially aware and it is great stuff. I know a lot of people have gone through Dave Ramsey's financial peace stuff and have really been helped out by it.

[davego]

I know that I have not spent a dime on Dave's stuff and have knocked out over 50% of our debt and will be free (save the mortgage) by November. Pretty much any plan will work if you spend less then you make and stay on your plan...like a diet I suppose.

[Point Beer Is Best]

I'm also at the point where if an investment vehicle is so complex and hard to understand, then I'm not interested in buying it.

That's good advice that even the experts follow. Warren Buffett once said he didn't invest in Enron because he didn't understand their notes to their financial statements.

 

A book I've just started reading is a very old one that has been revised many times over the years - "The Intelligent Investor" by Ben Graham. Basically, you have to learn to keep your emotions out of investing. And you should be looking for bargains in the stock market when everyone else is running for the hills (like right now).

[valpocrewsader]

That Ramsey stuff looks like a scam to me. I went to the website and saw all the ads about how he will help you save money.... if you pay him $10/month or more for subscriptions....

Not at all. What you're seeing is the equivalent of a fan club, a membership fee to get access to a community message board, commercial-free access to archives of his radio show, etc. Ramsey is an author, radio show host, and TV show host on the Fox Business Channel. I wouldn't call selling books a scam, and the contents of those books can actually be obtained for free by listening to his shows (and probably browsing the free areas of his web sites).

 

Ramsey's over-arching tenet is to live debt-free. His steps include:

- building a small emergency fund while banishing credit cards from your life and budgeting strictly

- then paying off all debt by starting with your smallest and working to your largest. He admits that mathematically, you could come out ahead by comparing interest rates, but psychologically you're better off ignoring interest rates, paying off the smallest loans with extra going to principle, "snowballing" that payment into the next highest to combine with the minimum you were making there and on and on until you're debt free except for your home. It's about seeing debt disappear before your eyes.

- then building a real emergency fund of 3-6 months' expenses

- then paying off the house. Ignoring the mathematics of investing at a higher rate than mortgage borrowing -- it's psychological -- pay off the home and OWN it, no more payments, no risk. Definitely debateable, but most of us would not refinance our home to take out $50,000 to invest in the market, so why would we invest $50,000 of our income in the market before putting it towards principle on the house?

- then, with NO PAYMENTS in your life, build wealth investing 15% income, give generously by donating to charities, and have fun with all the money you're not giving to banks and credit card companies!

 

He preaches never borrowing for a car (and definitely not leasing), instructing instead to buy a $1,000 beater until you can save for an upgrade (and then save for another upgrade...). The overall motto is "act your wage" -- if you're borrowing for something, you can't afford it and shouldn't be buying it. (Exception of house.) He's also constantly stressing hard work and picking up extra jobs. Filing bankruptcy is almost never necessary in his eyes.

 

There's a lot more that he offers in his teachings. It's common sense stuff, but he's got a gift in his firm and inspiring delivery. I recommend anyone go to www.daveramsey.com/tdrs and listen to archives of his radio show (it's free).

[The Active 33]

Dave Ramsey!

[davego]

Valpo "Represent!"

 

I can't say that I'm 100% adherent to Dave, but I try my best and know our finances have improved a lot. I try to get bits and pieces of the show each week. Really, it's pretty much a rehash every-night, but a great 'marker' for me of the path to be on. Again, just for me it has been an outstanding program.

 

No more "stupid-tax" for this guy!!!

[craigharmann]

Basically what Dave tells people is common sense. LIVE WITHIN YOUR MEANS! Don't charge stuff on credit cards, have a "rainy day" savings account because you WILL need to put new tires on the car, fix the washer, whatever. It makes total sense. I wish I would have known it back when I was in college and first out on my own spending way too much on credit cards. I would be able to own my own house by now, instead of renting!

[homer]

Anyone read Rich Dad, Poor Dad? Robert Kiyosaki is totally against stocks right now. His philosophy is to invest only in gold and income producing real estate (that is, you buy a property and the rent that you get covers your mortgage and then some - easier said than done these days since most banks are requiring much bigger down payments than in the past). He's convinced all the bailouts we're going through will devalue the dollar so much that it will crash everything by 2020. Not saying I buy that but something to take into consideration.

[nodakfan17]

Hi Folks- Thank you for all of your input. I would welcome more if you have the time to post it.

For those of you who suggested Dave Ramsey, Jim Cramer, Clark Howard, and / or David Bach, could you please suggest a specific book of theirs? I noticed that they all had a few titles to their credit, but I would like to start with the one that will give me the best introduction to investments and wealth management.

[Point Beer Is Best]

Where do most people here invest? I'm looking at starting a Roth IRA to supplement my company-sponsored 401(k), and wondering if people here have invested online (which is something I'd like to do, but would like to hear any comments/suggestions). Thanks.

[LouisEly]

Ramsey's over-arching tenet is to live debt-free. His steps include:

- building a small emergency fund while banishing credit cards from your life and budgeting strictly

- then paying off all debt by starting with your smallest and working to your largest. He admits that mathematically, you could come out ahead by comparing interest rates, but psychologically you're better off ignoring interest rates, paying off the smallest loans with extra going to principle, "snowballing" that payment into the next highest to combine with the minimum you were making there and on and on until you're debt free except for your home. It's about seeing debt disappear before your eyes.

- then building a real emergency fund of 3-6 months' expenses

- then paying off the house. Ignoring the mathematics of investing at a higher rate than mortgage borrowing -- it's psychological -- pay off the home and OWN it, no more payments, no risk. Definitely debateable, but most of us would not refinance our home to take out $50,000 to invest in the market, so why would we invest $50,000 of our income in the market before putting it towards principle on the house?

- then, with NO PAYMENTS in your life, build wealth investing 15% income, give generously by donating to charities, and have fun with all the money you're not giving to banks and credit card companies!

 

Are you kidding me? That's his schtick? People pay money for that advice? Like craigharman said, that's common sense. You can get that exact advice for free by reading any old copy of Money magazine in your doctor's/dentist's waiting room.

 

Here's something even simpler - invest 20% of your income first, then spend 100% of what is left. The only addition - with today's economy, have an emergency cash fund of at least 6 months. Harder to find a job now, so it will take longer.

 

Back to the original poster's question - I'm sure there's a book at Borders along the likes of "The Complete Idiots' Guide to Investing" or something like that. It will give you the basics and explain it in layman's terms.

[twobrewers]

Don't get married.

That advice is absolutely ridiculous - and I hope it was tongue in cheek.

 

Marry someone who is financially compatible with you. My wife shares my viewpoint on finances and we live accordingly. (She picked out her own wedding ring - $600) We are far from poor, but believe that debt (especially without assets backing it) is foolish.

 

Instead of each paying rent on an apartment - we pay one rent. We car pool places all the time. Instead of going out looking for entertainment, we often stay home and entertain ourselves. Since we are already married, we have no courtship costs. (She hates flowers because they are a "waste of money and die right away") We also have two incomes. Economies of scales = much greater wealth.

[davego]

Of course it is straight forward and common sense. So is weight loss...ever look around at all the people that know better in that arena too? I'd dare to guess if a person could combine a weight loss/finance advise book it would make that author a few coins.