   Financial Planning
  While people often post asking how much money they should expect to make for various jobs, one thing I don't remember ever seeing on GameDev.Net is a thread aasking what to do with the money you make.I'm going to be graduating soon, and shortly thereafter I'll have a nice full time job (whether I'm hired from an internship I've had throughout my 'college career' or I use those years of experience as a selling point on a resume sent elsehwere). One thing I've started to think about is what to do with the money I'll be making. I know it'd be plenty easy to simply spend it, but I'd much rather retire early and enjoy the fruits of labor without having to force small doses of leisure between milestones.To that end, I'm looking for good literature on financial planning. The hot item seems to be Dave Ramsey's books, but after reading reviews, it really sounds like they are more about motivation than education, and that is something I don't really need. I want to learn what I need to do to make maximum use of whatever money I make, and I won't have any problem motivating myself to do that.Any suggestions on good financial planning literature?   
  1st: don't get married2nd: don't get children(I am married and have two children)grtx,nick   ;  Always make the full, tax-free deduction from your paycheck to your retirement fund (in the US that would be 401(K)), especially if the company you end up working for does any kind of matching. First, that's more efficient money, as you get to keep 100% of it instead of the roughly 63% in the US you'd expect to keep for an entry level position. Second, if there is matching, it's usually dependant on how much you put in, and is essentially free money. Alway have at least the minimum necessary to get the full match, and more if you can stand it.Next, pay off your student loans ASAFP. Do whatever it takes, dump as much money as possible on them. Depending on how high your student loan interest rates are, it wouldn't even make sense to save some money to put into a savings account or money market fund. For example, I have a checking account that makes 5.3% APY interest, but my student loans are 7.25% APR. It makes no sense to have money sitting in my checking account, earning 5.3%, if those same dollars can go towards my student loans, preventing a charge of 7.25%.Buy the shittiest car that will get you to work. Try to live at home with your parents. Don't date while you're doing this. Just accept that you're going to be way behind the video game curve for the next 2 to 5 years. Don't eat out (this is the hardest one for me). Once you pay off those student loans, you will have so much extra income you probably won't know what to do with it. I'm currently spending $1300 a month on my student loans. By this time next year, they will be paid off -- in only 3 years instead of the original 15 year term. If I wanted to buy a car right now, I could really only getting something used, with no garauntess that it would be any good. If I wait until next year, I could pretty much buy whatever I want and have it mostly paid off by the end of next year.I have found that the easiest way for me to stay honest about my spending is to track it by the week and project it out for an extended time period. By paying close attention to my real monthly and weekly expenses, and overestimating my incidental expensese (thing that just come up, like $65 for the full Nightwish discography...), it really helps me to see the future impact of my spending habits. With it, I can see that buying a $1000 computer today could lead me to being out of cash in 2 months, just because of how big of a hit it would be to my cash reserves.I do this completely without credit cards. I have 1 card that has a $1000 spending limit for some department store, but I haven't ever used it. I only got it for the 30% discount (huge, I was buying a full warddrobe for work). I have my Visa cheque card, and that is what I use any time I need a "credit card" type thing (booking hotels, renting cars, etc). So yes, I live completley on cash. I'm currently at $13,000 of debt, with projections showing my cash offsetting my debt in early 2008. Adding up all my assets and liabilities, I will reach positive net worth by November, which I have to say is damn exciting.   ;  The first rule of investing is don't invest money in savings while you still have debts. Pay off all your debts ASAP and don't think about the next step until you have done this.You might be able to save some money reorganising your debts - taking one to pay off the others maybe, but it depends a lot.The other big factor is do you want to rent or buy a place to live?edit: actually as capn_midnight says, a pension where the employer puts money in to match your contribution could be an exception to the "just pay off your loans" rule, since someone else is giving you free money. But it's hard to be excited by pensions when you just graduated!   ;Quote:Original post by capn_midnight...You can use credit to your advantage but only if you are the kind of person who is organised and disciplined about it. In the UK lots of credit cards give you stuff for signing up, and pay back 1-2% on what you spend. As long as you ALWAYS pay off the full amount ON TIME you can actually come out ahead. But this is a fairly "advanced" tip, you have to be able to resist buying things on your credit card "because I pay it off in a few months".;  My internship paid enough (and I went to a cheap enough school) that I don't have any loans. In fact, I actually have a decent-sized savings account already, after buying pretty much anything I want. Note that when I say that, I'm the kind of person that only buys something when they find a need for it, so I don't have the latest computer parts and I'm used to being behind the curve a bit (and the fact that I'm boycotting DRM and infested products helps). Of course, nobody is perfect, and I do occasionally regret purchases, but I learn from my mistakes and try to research every large purchase as much as possible beforehand (which often takes months, since large purchases aren't typically urgent).I already have a decent used car, though I'm thinking of replacing it since the state recently started offering $3000 vouchers for cars as old as mine (to get the pollution levels down or something) and that is more than what the car cost ~6 years ago.I know basic things like "Save Money", and I already intend to stay at home a bit longer in order to get a larger savings going. However, I currently have all my money in a basic "saving's account" which has  a lower rate than inflation, so my money is basically slowly leaking away. I need to find out the right kinds of places to put money to avoid that problem, and to make maximum 'safe' return (no day trading for me =-).Actually, I'm not sure the interest rate is lower than inflation because wikipedia seems to say some types of interest are adjusted for inflation and I'm not sure what type of interest the basic account has. This is at least some of the type of information I need in order to maximize savings.I use an Amazon card for practically every purchase because I get 1% back in certificates to Amazon, and I always pay it off in full every month so I don't pay interest or other fees.Like I said, I don't need the really really basic stuff like "save money", I just need to know how to maximize the benefit of doing so. Thus, I'm looking for literature rather than simple advice =-)Quote:Original post by d000hg[...]But it's hard to be excited by pensions when you just graduated!It depends entirely on what is required to get the money - if I can get it when I'm ready to retire, it's plenty exciting. If I can't get it until I'm 70+, then not so much. It also depends on the specifics - my current understanding is that you still pay taxes on the money, but not until you take it out of the account (because at that point it becomes income) and if that is the case, it's not neccessarily better than simply investing the same amount of money. But it all depends on details, like the interest rate that pensions get vs the interest rate that mutual funds or other investment types get. I need to learn about all this kind of stuff to make an informed decision =-)Quote:Original post by d000hg[...]The other big factor is do you want to rent or buy a place to live?[...]Right now, I plan on buying because it makes more sense to me - it's possible to get your money back (depending on the housing market) should you decide to move, so why would you instead rent if you can afford otherwise?On the other hand, I'm not sure it's actually the better choice because I know nothing about finances on that kind of level.One thing I've noticed is that it seems like the loan rate is lower than the highest rate you can 'safely' make in interest, so it might be better to pay a house off over time instead of at once even if you can afford to save for a few years before moving out, because you'd make more in interest than you'd pay. Then again, this idea might be due to different interest types not matching up so easily, which is why I need some good literature =-)   ;Quote:Original post by d000hgedit: actually as capn_midnight says, a pension where the employer puts money in to match your contribution could be an exception to the "just pay off your loans" rule, since someone else is giving you free money. But it's hard to be excited by pensions when you just graduated!One thing to remember, putting off saving for retirement deprives you of the last X years of interest that you would receive, not the first X years that you skipped saving. Saving now looks pretty boring, only a few dollars a year of interest, but the power of compound interest makes early spending incredibly more profitable than late spending.For the sake of comparison, let's say we are tracking two people, both work for 45 years, both put $25,000 into retirement some sort of fund at 14% APY (YMMV, but this is what I got on my 401(k) last year) over 25 years ($1,000 a year, an incredibly easy amount to save). Person A starts saving this money right away, Person B waits 10 years before he gets started. Here is the tab-delimited sheet, so if it doesn't look right, you can copy-pasta and open it in your favorite spreadsheet applicationyearcontribution (a)total contribution (A)interest (A)total interest (A)total (A)contribution (B)total contribution (B)interest (B)total interest (B)total (B)0$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.001"$1,000.00""$1,000.00"$0.00$0.00"$1,000.00"$0.00$0.00$0.00$0.00$0.002"$1,000.00""$2,000.00"$140.00$140.00"$2,140.00"$0.00$0.00$0.00$0.00$0.003"$1,000.00""$3,000.00"$299.60$439.60"$3,439.60"$0.00$0.00$0.00$0.00$0.004"$1,000.00""$4,000.00"$481.54$921.14"$4,921.14"$0.00$0.00$0.00$0.00$0.005"$1,000.00""$5,000.00"$688.96"$1,610.10""$6,610.10"$0.00$0.00$0.00$0.00$0.006"$1,000.00""$6,000.00"$925.41"$2,535.52""$8,535.52"$0.00$0.00$0.00$0.00$0.007"$1,000.00""$7,000.00""$1,194.97""$3,730.49""$10,730.49"$0.00$0.00$0.00$0.00$0.008"$1,000.00""$8,000.00""$1,502.27""$5,232.76""$13,232.76"$0.00$0.00$0.00$0.00$0.009"$1,000.00""$9,000.00""$1,852.59""$7,085.35""$16,085.35"$0.00$0.00$0.00$0.00$0.0010"$1,000.00""$10,000.00""$2,251.95""$9,337.30""$19,337.30""$1,000.00""$1,000.00"$0.00$0.00"$1,000.00"11"$1,000.00""$11,000.00""$2,707.22""$12,044.52""$23,044.52""$1,000.00""$2,000.00"$140.00$140.00"$2,140.00"12"$1,000.00""$12,000.00""$3,226.23""$15,270.75""$27,270.75""$1,000.00""$3,000.00"$299.60$439.60"$3,439.60"13"$1,000.00""$13,000.00""$3,817.90""$19,088.65""$32,088.65""$1,000.00""$4,000.00"$481.54$921.14"$4,921.14"14"$1,000.00""$14,000.00""$4,492.41""$23,581.07""$37,581.07""$1,000.00""$5,000.00"$688.96"$1,610.10""$6,610.10"15"$1,000.00""$15,000.00""$5,261.35""$28,842.41""$43,842.41""$1,000.00""$6,000.00"$925.41"$2,535.52""$8,535.52"16"$1,000.00""$16,000.00""$6,137.94""$34,980.35""$50,980.35""$1,000.00""$7,000.00""$1,194.97""$3,730.49""$10,730.49"17"$1,000.00""$17,000.00""$7,137.25""$42,117.60""$59,117.60""$1,000.00""$8,000.00""$1,502.27""$5,232.76""$13,232.76"18"$1,000.00""$18,000.00""$8,276.46""$50,394.07""$68,394.07""$1,000.00""$9,000.00""$1,852.59""$7,085.35""$16,085.35"19"$1,000.00""$19,000.00""$9,575.17""$59,969.23""$78,969.23""$1,000.00""$10,000.00""$2,251.95""$9,337.30""$19,337.30"20"$1,000.00""$20,000.00""$11,055.69""$71,024.93""$91,024.93""$1,000.00""$11,000.00""$2,707.22""$12,044.52""$23,044.52"21"$1,000.00""$21,000.00""$12,743.49""$83,768.42""$104,768.42""$1,000.00""$12,000.00""$3,226.23""$15,270.75""$27,270.75"22"$1,000.00""$22,000.00""$14,667.58""$98,436.00""$120,436.00""$1,000.00""$13,000.00""$3,817.90""$19,088.65""$32,088.65"23"$1,000.00""$23,000.00""$16,861.04""$115,297.04""$138,297.04""$1,000.00""$14,000.00""$4,492.41""$23,581.07""$37,581.07"24"$1,000.00""$24,000.00""$19,361.58""$134,658.62""$158,658.62""$1,000.00""$15,000.00""$5,261.35""$28,842.41""$43,842.41"25"$1,000.00""$25,000.00""$22,212.21""$156,870.83""$181,870.83""$1,000.00""$16,000.00""$6,137.94""$34,980.35""$50,980.35"26$0.00"$25,000.00""$25,461.92""$182,332.74""$207,332.74""$1,000.00""$17,000.00""$7,137.25""$42,117.60""$59,117.60"27$0.00"$25,000.00""$29,026.58""$211,359.33""$236,359.33""$1,000.00""$18,000.00""$8,276.46""$50,394.07""$68,394.07"28$0.00"$25,000.00""$33,090.31""$244,449.63""$269,449.63""$1,000.00""$19,000.00""$9,575.17""$59,969.23""$78,969.23"29$0.00"$25,000.00""$37,722.95""$282,172.58""$307,172.58""$1,000.00""$20,000.00""$11,055.69""$71,024.93""$91,024.93"30$0.00"$25,000.00""$43,004.16""$325,176.74""$350,176.74""$1,000.00""$21,000.00""$12,743.49""$83,768.42""$104,768.42"31$0.00"$25,000.00""$49,024.74""$374,201.49""$399,201.49""$1,000.00""$22,000.00""$14,667.58""$98,436.00""$120,436.00"32$0.00"$25,000.00""$55,888.21""$430,089.70""$455,089.70""$1,000.00""$23,000.00""$16,861.04""$115,297.04""$138,297.04"33$0.00"$25,000.00""$63,712.56""$493,802.25""$518,802.25""$1,000.00""$24,000.00""$19,361.58""$134,658.62""$158,658.62"34$0.00"$25,000.00""$72,632.32""$566,434.57""$591,434.57""$1,000.00""$25,000.00""$22,212.21""$156,870.83""$181,870.83"35$0.00"$25,000.00""$82,800.84""$649,235.41""$674,235.41"$0.00"$25,000.00""$25,461.92""$182,332.74""$207,332.74"36$0.00"$25,000.00""$94,392.96""$743,628.36""$768,628.36"$0.00"$25,000.00""$29,026.58""$211,359.33""$236,359.33"37$0.00"$25,000.00""$107,607.97""$851,236.34""$876,236.34"$0.00"$25,000.00""$33,090.31""$244,449.63""$269,449.63"38$0.00"$25,000.00""$122,673.09""$973,909.42""$998,909.42"$0.00"$25,000.00""$37,722.95""$282,172.58""$307,172.58"39$0.00"$25,000.00""$139,847.32""$1,113,756.74""$1,138,756.74"$0.00"$25,000.00""$43,004.16""$325,176.74""$350,176.74"40$0.00"$25,000.00""$159,425.94""$1,273,182.68""$1,298,182.68"$0.00"$25,000.00""$49,024.74""$374,201.49""$399,201.49"41$0.00"$25,000.00""$181,745.58""$1,454,928.26""$1,479,928.26"$0.00"$25,000.00""$55,888.21""$430,089.70""$455,089.70"42$0.00"$25,000.00""$207,189.96""$1,662,118.22""$1,687,118.22"$0.00"$25,000.00""$63,712.56""$493,802.25""$518,802.25"43$0.00"$25,000.00""$236,196.55""$1,898,314.77""$1,923,314.77"$0.00"$25,000.00""$72,632.32""$566,434.57""$591,434.57"44$0.00"$25,000.00""$269,264.07""$2,167,578.84""$2,192,578.84"$0.00"$25,000.00""$82,800.84""$649,235.41""$674,235.41"45$0.00"$25,000.00""$306,961.04""$2,474,539.87""$2,499,539.87"$0.00"$25,000.00""$94,392.96""$743,628.36""$768,628.36"Summary:Person A earns a total of $2,474,539.87 in interest alone and is almost 10000% more than his original contribution.Person A's last year of interest brought in $306,961.04Person B only earns a total of $743,628.36 in interest, which is only about 3000% of his original contribution.Person B's last year of interest only brought in $94,392.96Person A has earned nearly 333% more than Person B, mearly for starting his savings earlier than Person B.Over the first 10 years that Person B did not contribute, Person A only earned $7,085.35 of interest.In the last 11 years that neither Person A or B contributed, Person A earned $1,321,347.77 more in interest than Person B.   ;  Shop around for bank accounts. Some of them are giving free, high-interest (5 - 6%) checking accounts, with no fees, if you go with a "digital banking" scheme (direct deposit and/or online bill pay, electronic statements, minimum number of debit card purchases). I have a checking account with Orrstown Bank right now that is 5.3% APY interest. I'm making $4 a week with the balance that I carry. That's pretty freaking phenominal.   ;Quote:Original post by ExtrariusMy internship paid enough (and I went to a cheap enough school) that I don't have any loans. In fact, I actually have a decent-sized savings account already, after buying pretty much anything I want. I already have a decent used car,Excellent, you're already hugely ahead of the game. Don't worry too much. Even with a low paying job, since you don't have any debt, you're socking away some serious coin. Even with an extremely conservative retirement savings program, you're on track to retire very early and still be sitting pretty.Quote: though I'm thinking of replacing it since the state recently started offering $3000 vouchers for cars as old as mine (to get the pollution levels down or something) and that is more than what the car cost ~6 years ago.All I can say is to setup a spreadsheet and project it out, see if it makes sense. If it comes out to a wash and you get a newer car out of it, I'd say go for it.Quote:I know basic things like "Save Money", and I already intend to stay at home a bit longer in order to get a larger savings going. However, I currently have all my money in a basic "saving's account" which has  a lower rate than inflation, so my money is basically slowly leaking away. I need to find out the right kinds of places to put money to avoid that problem, and to make maximum 'safe' return (no day trading for me =-).Actually, I'm not sure the interest rate is lower than inflation because wikipedia seems to say some types of interest are adjusted for inflation and I'm not sure what type of interest the basic account has. This is at least some of the type of information I need in order to maximize savings.I would highly doubt that a simple savings account is adjusted for inflation. I personally don't know of any account types that actually adjust for inflation. Yes, that means that simple savings accounts are pretty much dogs.Quote:Quote:Original post by d000hg[...]But it's hard to be excited by pensions when you just graduated!It depends entirely on what is required to get the money - if I can get it when I'm ready to retire, it's plenty exciting. If I can't get it until I'm 70+, then not so much. It also depends on the specifics - my current understanding is that you still pay taxes on the money, but not until you take it out of the account (because at that point it becomes income) and if that is the case, it's not neccessarily better than simply investing the same amount of money.Usually, you have a specific maturity date, and you pay a fine (usually a hefty percentage) for deducting early.I'll have to check on the tax thing. I'm almost positive that income from interest is taxed at a lower rate than income from wages. If that is the case, it is definitely better. Quote: But it all depends on details, like the interest rate that pensions get vs the interest rate that mutual funds or other investment types get. I need to learn about all this kind of stuff to make an informed decision =-)That really is the key, you should put your money towards the safest, highest interest account that you have, be that debt or savings.Quote:Quote:Original post by d000hg[...]The other big factor is do you want to rent or buy a place to live?[...]Right now, I plan on buying because it makes more sense to me - it's possible to get your money back (depending on the housing market) should you decide to move, so why would you instead rent if you can afford otherwise?On the other hand, I'm not sure it's actually the better choice because I know nothing about finances on that kind of level.It depends, buying ties you down, which is usually not a good thing for young people trying to play the job market for higher wages. Closing costs can be expensive, so you always have to sell the house for more than you paid just to break even. Trying to sell a house if you want to move is very hit-or-miss. However, buying gets you started in investment, and if you do decide to move, you have the option of renting the place to someone else at a profit!  It depends on where you live, but in my town, typical mortgage payments are far cheaper than monthly rent payments, so you can be making quite a big markup. I'm talking 50% or more. But of course, that makes you a landlord, which means you have certain responsibilities to your tenants that you are legally obligated to perform (mostly related to repairs). And again, money earned from this sort of income is taxed differently than wages. At least in the US, wages are taxed at a higher rate than any other form of income, so it makes good sense to get as much of your income out of wages and into something else, anything else.Quote:One thing I've noticed is that it seems like the loan rate is lower than the highest rate you can 'safely' make in interest, so it might be better to pay a house off over time instead of at once even if you can afford to save for a few years before moving out, because you'd make more in interest than you'd pay. Then again, this idea might be due to different interest types not matching up so easily, which is why I need some good literature =-)Check out The Only Investment Guide You'll Ever Need, by Andrew Tobias. It's an easy read, and it's really no-nonsense. He discusses the various forms of investment that you can get into, explains how one makes money off of them, etc, and gives his personal opinion on each. He advocates a simple investment portfolio, coupled with living under your means. For example, he really doesn't have much to say on trading Futures other than basically "they're for suckers".   ;Quote:Original post by capn_midnightI do this completely without credit cards. I have 1 card that has a $1000 spending limit for some department store, but I haven't ever used it. I only got it for the 30% discount (huge, I was buying a full warddrobe for work). I have my Visa cheque card, and that is what I use any time I need a "credit card" type thing (booking hotels, renting cars, etc). So yes, I live completley on cash. I'm currently at $13,000 of debt, with projections showing my cash offsetting my debt in early 2008. Adding up all my assets and liabilities, I will reach positive net worth by November, which I have to say is damn exciting.I have to disagree with this. Credit cards are only dangerous to people who leave balances on them.I use a credit card as a free 30-day loan that offers me 1-5% back. I currently have 3 cards:Discover Gas Card: 5% back on gasoline purchases. Use it only for gas.Amazon Visa card: 3% back on all amazon purchases. Use it only for Amazon.Regular Visa card: 1% back on all purchases, 2% back on grocery purchases. Use it for everything else.So basically, I get to invest the money I spend on my purchases for a month for free, while I wait for the bill to arrive. Then they're nice enough to give me 1+% back on top of that. The credit card companies must hate me. I haven't paid a finance charge in over 5 years. They keep increasing my credit limits, hoping it will make me freak out and buy more than I can afford. Too bad it won't happen. :)Living completely on cash (literally) is for suckers, when there are so many companies out there giving you free money, hoping you're irresponsible.   