Who here is good with money?

My dad gave me that book about 15 years ago. It has a lot of insights into how to accumulate wealth, but it may not be the path everyone would choose. It's still a good read and an eye opener.

The number 1 lesson of that book is the glaring difference between the reality and appearance of wealth and how the pursuit of the appearance is what leaves most people poor. They are trapped in a cage of their own making.

My advice to anyone who wants some: Never borrow money.

Always pay cash, or guess what? You can't afford it. Too many people go into hock just because they want a fancy car or big screen TV like their friends. Then they spend their lives working off the interest.

The only allowable exception might be a house, especially with mortgage rates so low. But don't buy more house than you can comfortably pay for. And by that I mean buy way less house than the mortgage lender says you can afford.

Save, save, save! Save half of what you make. You'll be rich in no time.

wbjones wrote: same thing .... the earlier you start ..... there was a story about this.. I'm sure I won't get the "facts" exactly right, but the gist is .. a young couple started investing ( age 21) the $2000 each person, each and every year for ( this is where I don't remember the exact sequence ) 15yrs ??? something like that .. and another couple didn't start until they were .. what ever age the first couple stopped investing .. call it 35, and they put in the same $4000 each yr until age 65 ( several more yrs than the first couple) and you guessed it the first couple had MUCH MUCH more money at retirement than the second .... ahhhh .. the wonder of compounding interest

Curmudgeon wrote: Then your horizon is nowhere near long enough. Seriously. You need to think really long term. There is simply not enough time to build up a really big cash cushion in your 20's to help out in your 40's unless you have a really high paying job, are willing to live like a monk so you can sock away 80% of your income and have a windfall inheritance or hit the lottery. That's not exactly a common set of circumstances.

Let me rephrase. What if I am already maxing my Roth IRA, contributing 6% of my salary to 401k (25% employer match), have no debt and 50k in a low yield savings account. No house/car/credit card debt though I do plan on investing another $3k in a boat soon. I AM saving for retirement but I also want to start saving to get out of the rat race ASAP. I was thinking about buying a small apartment as a rental property with the 50k in cash, but I also may be moving soon and hopefully buying a house (I currently rent). I am 25. I am not looking to retire at 40 but instead start businesses/have passive income where I can quit my day job and enjoy life. Wishful thinking?

Keven wrote: Let me rephrase. What if I am already maxing my Roth IRA, contributing 6% of my salary to 401k (25% employer match), have no debt and 50k in a low yield savings account. No house/car/credit card debt though I do plan on investing another $3k in a boat soon. I AM saving for retirement but I also want to start saving to get out of the rat race ASAP. I was thinking about buying a small apartment as a rental property with the 50k in cash, but I also may be moving soon and hopefully buying a house (I currently rent). I am 25. I am not looking to retire at 40 but instead start businesses/have passive income where I can quit my day job and enjoy life. Wishful thinking?

You absolutely can get out of the rate race in your 40s. At 25 with that kind of savings and no debt you're well positioned for it. Your Roth IRA and 401k contributions should continue but beyond that you should start looking for places to cut expenses and roll those savings into investments that have returns but aren't too risky. Rental housing is a good one as long as it's well bought - don't buy expensive stuff or stuff in really E36 M3ty areas. Just decent housing in stable neighborhoods. You know, the ones where the values haven't tanked due to the housing crash.

Owning your own house is a nice savings account but isn't an investment. I like owning my house because I like doing work to it, but the only way it's an investment is if I plan on moving to a cheaper house down the road - and I don't. So for the rest of my life the capital I have in the house will be tied up in my housing, so definitely don't overspend there.

My wife and I, being debt free, have set up a 50% savings rate - actually a bit over - after going on a bender of reading mrmoneymustache.com . He's got some awesome advice on there. Some of it's not really doable (ie, he strongly advocates biking to work, there's no shower here and I can't see spending $10k to install one just to save $.50/day in gas.) but the savings stuff is achievable by the average middle class American. Retiring in 15 years is quite possible.

Edit: I forgot to add: a double or similar small multi-unit rental would be a great way to both own your residence AND start down the road of getting rental property. The bank should be willing to loan you the money based on its being your residence, and then you can also build up experience in managing a rental property so that when you want to buy another one you're well positioned for it.

So what advice do you guys have for someone who is living abroad as far as investing for retirement? I'm not allowed to contribute to my 401k anymore, yet the German gub'ment takes out 19.6% (as tax) towards the national pension insurance.

As far as debt...within a week, my car will be paid off (a year early at that!) and my only debt will be my credit card and my student loans. The card is next, but I'm really tempted to be putting money away into my "6 months" account before my work contract is over.

sobe_death wrote: So what advice do you guys have for someone who is living abroad as far as investing for retirement? I'm not allowed to contribute to my 401k anymore, yet the German gub'ment takes out 19.6% (as tax) towards the national pension insurance. As far as debt...within a week, my car will be paid off (a year early at that!) and my only debt will be my credit card and my student loans. The card is next, but I'm really tempted to be putting money away into my "6 months" account before my work contract is over.

at what rate is the CC debt? when i talked about this with my dad (bank president) he said you have to think about what paying down the debt is going to save you, and compare it to what putting the money away in savings will make you on that money. if your CC debt is 5% interest, then you can "make" 5% over whatever the term would have been by paying it off now. there is no sense in putting money in an investment or savings making 2%, while you're paying 5% on debt that your investment cash could have paid off. what turns a lot of people off of this is that paying off the debt means that you're less liquid, i.e. you don't have cash on hand in case of emergency, but you just have to keep that in mind when thinking about how much cash to keep on hand.

dculberson wrote: You absolutely can get out of the rate race in your 40s. At 25 with that kind of savings and no debt you're well positioned for it. Your Roth IRA and 401k contributions should continue but beyond that you should start looking for places to cut expenses and roll those savings into investments that have returns but aren't too risky. Rental housing is a good one as long as it's well bought - don't buy expensive stuff or stuff in really E36 M3ty areas. Just decent housing in stable neighborhoods. You know, the ones where the values haven't tanked due to the housing crash. Owning your own house is a nice savings account but isn't an investment. I like owning my house because I like doing work to it, but the only way it's an investment is if I plan on moving to a cheaper house down the road - and I don't. So for the rest of my life the capital I have in the house will be tied up in my housing, so definitely don't overspend there. My wife and I, being debt free, have set up a 50% savings rate - actually a bit over - after going on a bender of reading mrmoneymustache.com . He's got some awesome advice on there. Some of it's not really doable (ie, he strongly advocates biking to work, there's no shower here and I can't see spending $10k to install one just to save $.50/day in gas.) but the savings stuff is achievable by the average middle class American. Retiring in 15 years is quite possible. Edit: I forgot to add: a double or similar small multi-unit rental would be a great way to both own your residence AND start down the road of getting rental property. The bank should be willing to loan you the money based on its being your residence, and then you can also build up experience in managing a rental property so that when you want to buy another one you're well positioned for it.

Thanks. I've been on MMM, along with GetRichSlowly. It seems like those sites focus only on cutting costs and not making money. Lately theyve been talking about a bunch of other random articles that barely apply.

I do plan on continuing my contributions to 401k/IRA but I need to find something to invest my cash in. Rental real estate is the best I can come up with, the second being opening up a small booking keeping business that I would run after work.

I like the idea of a multi-unit rental but not as a first property. I am really handy with things and I think I can make a good land lord. I just want to start small since I do have a demanding job and I don't want a management company. Plus I tend to be a hoarder and living in an apartment with my boats and cars and junk would probably not fly.

mguar wrote: In reply to Keven: Keven; Carl Marx was a pretty smart capitalist. He said owning the means of production is the only way a man can determine his own destiny.. When you rent, you're making the landlords payments for him plus putting a little away for his future prosperity. Until you own your house you are controlled by your landlord.. he can raise the rent, change the erms of the lease etc.. Yes you could move but that's not cheap. A friend of mine has had to move 17 times in the past 23 years..The last move even though it was only 7 miles and plenty of friends showed up to help cost $700 dollars(The landlord wanted to turn his duplex into a single home) The time before that it was $1000.. (To be with children) Most due to changing economic circumstances and never for a job. The point is that cheap rent has a cost, a real cost to you.. It's called opportunity cost.. You've missed the bottom of home prices.. They are on their way up.. How high up? Well the real question is what time frame? What's gonna happen in the next period of time that will affect the price of things? The real solution to improving the economy is well known and understood.. Our Dollar is too strong. So things we make cost too much both here and abroad.. When will the dollar weaken? It's in the hands of politicians.. However certain facts basic facts need to be understood.. first supply and demand.. as more people want a certain thing the price of that thing goes up. (I know you know) Metropolitan property is getting more and more valuable.. In Paris a small efficiency apartment of about 700 sq.ft. is selling for over a million dollars.. (In the good neighborhoods) That's cheap compared to Tokyo or Singapore.. Farm land has sold for as high as $18,000 an acre recently in Nebraska. So just moving out to the suburbs is not going to be that cheap in the future.. Plus the cost of fuel.. at $4.00+ a gallon the average commute will soon be costing more than $10.00 a day which over the 30year mortgage of a typical home is $78,000 (plus whatever the rate of inflation will be over the next 30 years) Add to those numbers water costs.. especially in the west.. A friend who owns a home in San Diego County reports that his water bill is more than his electric bill used to be.. Population is putting increased demands on the basic need of shelter.. Population has way more than doubled in my lifetime and the 7 billion people on earth now with be 8 billion within a little over 20 years.. The highest demand for homes will be right here in America. Bottom line wait as long as you want to buy a home.. you'll only pay more for it..

I see what you're saying and I agree. I currently live 40 minutes from my work, 45 from my girlfriend, an hour from being able to go on the boat, and an hour 15 from the beach. I'm also 40 minutes from the fun areas for bars/restaurants. I originally wanted to move to an area that is closer to all of these things but I recently changed my mind. Here are some details that are preventing me from moving right away.

I currently have 2 great roommates which allow me to live in a clean house with 2 car garage (necessary for previously mentioned hoarding) for only $200-350 a month (depends on utilities).

I also started helping a CPA that lives in my community with his business he runs out of his house. I help him during the night after I get done with my normal job. This is something I eventually would like to do on my own, so moving away from something that is providing valuable experience doesn't quite make sense.

So I've decided to stick in my current home until at least next spring, perhaps longer. I just want to see what happens with this CPA guy. The good news is my roommates said they would move with me which would keep costs down. The other issue is my girlfriend would likely move in with me too if I moved, but she wouldn't be ok with living with my 2 roommates, at least not for an extended period. Might be ok with living with 1. If I don't move soon shes going to sign a new lease for 2013.

On the topic of rentals:

Lets say you find an awesome rental property that's very low priced, and we're talking even with it half empty you're looking at a 10 year return on investment.

It'll take a few thousand in work, but the current tenants are happy with the low rent.

So it seems like a sure-fire deal...except that your not planning on sticking around the area...

Do you invest and manage the property from afar, or pass on the deal?

PHeller wrote: On the topic of rentals: Lets say you find an awesome rental property that's very low priced, and we're talking even with it half empty you're looking at a 10 year return on investment. It'll take a few thousand in work, but the current tenants are happy with the low rent. So it seems like a sure-fire deal...except that your not planning on sticking around the area... Do you invest and manage the property from afar, or pass on the deal?

depends on how long you plan on sticking around. if you can get the place to a point where its making money before you have to leave, then hand off the regular maintenance and repairs to a management company to handle things locally when you move away (some will do everything, collect rent, maintain and repair, or you can collect the rent, and they'll just deal with repairs for a set cost per month).

sobe_death wrote: So what advice do you guys have for someone who is living abroad as far as investing for retirement? I'm not allowed to contribute to my 401k anymore, yet the German gub'ment takes out 19.6% (as tax) towards the national pension insurance.

IIRC that can count at least against your Social Security payments if you are a US citizen, for all that's worth. Depending on how long you'll be in Germany and paying into the system there, you might also be able to draw a small pension (but that requires something like 10-15 years worth of contribution, I'd have to look this up)

sobe_death wrote: As far as debt...within a week, my car will be paid off (a year early at that!) and my only debt will be my credit card and my student loans. The card is next, but I'm really tempted to be putting money away into my "6 months" account before my work contract is over.

What are your prospects re extending the contract or finding new work? If they're not walk out, walk straight in, sock away the money into the 6 month emergency fund.

There is no point in paying off the credit card and then not being able to pay the rent or mortgage (or food) if you are out of work.

AngryCorvair wrote: no time to read entire thread. has anyone recommended reading "the millionaire next door" and then living it?

I don't know, I think I skipped a page, too, but I would also recommend "Stop Acting Rich" by the same author.

BoxheadTim wrote: IIRC that can count at least against your Social Security payments if you are a US citizen, for all that's worth. Depending on how long you'll be in Germany and paying into the system there, you might also be able to draw a small pension (but that requires something like 10-15 years worth of contribution, I'd have to look this up) What are your prospects re extending the contract or finding new work? If they're not walk out, walk straight in, sock away the money into the 6 month emergency fund. There is no point in paying off the credit card and then not being able to pay the rent or mortgage (or food) if you are out of work.

I do know that I can conceivably get these pension contributions returned if I leave Germany before 5 years is up. I have to wait 2 years after I leave, and then I can apply for the refund. That is a LONG time to be missing out on the interest on a significant portion of my income.

My contract may be extended to the end of the year, but I'm not wasting time on trying to find a new job either. My current employer knows this, and has even been helping me to find a more permanent position within the company as well.