Money Matters

The power of saving money:

Let's say you're 30. You open an IRA account and put $5,000 in the S&P 500 index fund today. You leave it there until you retire at age 65. Historically, the S&P 500 earns about 10% per year. Some years are downers, some years are way up, and overall it comes to an average of 10%. Here's what happens:

2007: $5,000
2008: $5,500
2009: $6,050
2010: $6,655
...
2042 (retirement year): $140,512

Now let's say instead of saving $5,000 today, you decide to put it off and you start saving when you're 40 years old, in the year 2017.

2017: $5,000
2018: $5,500
2019: $6,050
2020: $6,655
...
2042 (retirement year): $54,173

See that? You wait 10 years, and you just cost yourself about $85,000. If you had started saving at age 20 instead of age 30, you'd have $364,452 by the time you hit age 65.

Point being: it is never too late. Don't wait, it just costs you money. If you're talking about saving for your child's college education, or saving for retirement, or saving for a house, whatever. Do whatever you possibly can to get time working on your side.

When it comes to saving, yesterday is gone, but today is better than tomorrow. I even like to think about Rage Against the Machine when it comes to saving money:

"It has to start somewhere, it has to start somehow. What better place than here? What better time than now?"
You just made a great argument for privatising part of Social Security.

as for insurance, if you've got 20years until retirement, you can buy decreasing term insurance that'll cover the balance of your mortgage immediately and decrease its coverage over time (meanwhile, you're paying off the mortgage, so the decrease is okay). that's the cheapest way to cover expenses should something happen, and by the time it's up (if you've not neglected saving and investing) you can be self insured.

or you can just buy general term insurance. you get more coverage and it's cheaper than whole life (you don't toast bread in your freezer, so why mix your life insurance with a high-fee investment you can't control?).

also, no new cars saves a lot of money (IF you know enough to avoid total clunker or have a friend/family member that can help you).

the most important though is to get a FIXED mortgage (not adjustable rate), try to put money down when you buy a house, and try to accelerate payments if you can afford it. Some companies offer mortgages LONGER than 30 years... AVOID THOSE. while it might let you move into a slightly bigger house, the interest you end up paying compared to the house's value is insane.
Your better off instead of a decreasing term policy just go with a level term policy which is not very expensive unless you have health issues. They tend not to cost much more than the decreasing term and give you level death benifit.

I also notice it helps you stay in shape. Most of the food one buy's for lunch will be of the less than healthy variety.

True, though I try to mostly eat salads when I do eat out. But the temptation is definitely there as opposed to packing a lunch.

You just made a great argument for privatising part of Social Security.

Yes exactly. Privatizing social security is a brilliant idea. Too bad dumbass George W is too much of a moron to convince anybody.

People are resistant to privatizing it because they A) they view the investments as too risky (which is retarded, it would be mostly US Stocks and Bonds) and B) the financial literacy in this country is retarded. Hardly anybody understands the power of saving money and managing it properly. Personal budgeting and personal finance should be a required course in high schools.

Enough political venting. We're here to share knowledge in a judgment free forum. You hear business people say all the time that "time is money." They're right. So if you take your money, and you put it to work over time, you end up with a lot more money. Pretty much that simple. The earlier you start saving, the better off you are.

Along the lines of the latte effect I've noticed the bring your lunch to work effect. When I bring my lunch rather than eat out I save so much money. Eating out even at just a sub shop can run a good $8 for lunch... so that's potentially at least $40 per week or $160 per month!

I typically bring my lunch 4 days per week and I only eat out on Fridays, it definitely helps ease the burden on the wallet.

Yeah that's another HUGE one. Bringing your lunch is the best solution. With food, I like to think there are four corners of the square, putting all four together is the holy grail:

- Tastes good
- Is Cheap
- Is Healthy
- Is Convenient

It's almost impossible to put all four together. If you're eating out, someone makes it for you, so it's convenient. It usually tastes good. But it's hard to find it healthy, and it rarely is cheap. If you want to eat out for cheap, you're usually talking McD's or Wendy's, rich is real unhealthy.

Then there's making your lunch. It's cheap. It's healthy if you do it right. And usually you can make it taste good. But it's inconvenient.

In the end, I'd rather not clog my arteries, and I'd rather have the extra $160 in my pocket each month.

Personal budgeting and personal finance should be a required course in high schools.

I completely agree.

More 'life lesson' type of classes need to be taught at earlier ages. I know when I hit 18 and I got my first credit card I had no freaking idea how to manage my money responsibly. I had plenty of friends who were even worse than me. I think by 20 we all had pretty significant credit card debt ($1,000 or more).

It took me until just a few years ago to finally erase all of my credit card debt.

It's all about planning before you begin the week. On Sunday, plan your menu, go out and stock up on what you need. Make double batches so you have leftovers. Both my fiancee and I can eat five days including snacks for sixty bucks. This is including a healthy version of macaroni and cheese, turkey chili, apple cinnamon muffins, turkey meatballs, shredded chicken sandwiches.

Possibly my favorite cheap meal that has leftovers for days is the shredded chicken. Buy a shit pile of chicken, load it all up in the crockpot, pour a bottle of BBQ sauce over it, let it go all day and you're done. Put it open-faced on a half of a whole wheat bun, and it's tasty and you've got pounds of it for leftovers.

I completely agree.

More 'life lesson' type of classes need to be taught at earlier ages. I know when I hit 18 and I got my first credit card I had no freaking idea how to manage my money responsibly. I had plenty of friends who were even worse than me. I think by 20 we all had pretty significant credit card debt ($1,000 or more).

It took me until just a few years ago to finally erase all of my credit card debt.

Yeah, college students pretty much fall victim to this trap all the time. So many of them haven't been taught about the dangers of debt. And of course, being away from home and parents for the first time gives you a sense of freedom. And being 18 or 19 years old, people usually have a sense of invincibility, like nothing bad is ever going to happen to me. Combine all that together and you get a lethal mix when it comes to debt. Credit card companies prey upon it; you can probably all remember your college days and having credit card companies set up a table in the commons or the cafeteria where you could just stop by and sign up for a credit card.

It's dangerous, especially for females who like upscale shopping. Some end up with debts requiring monthly payments equivalent to the rent for a 2-bedroom apartment.

Credit cards are a terrible temptation.

But what about the free f-ing t-shirt?! WHAT ABOUT THAT?!?!?!?!

One of my fraternity brothers was the guy who ran all the Credit Card promotions on campus. While many people wanted to shoot him by the end of the semester, the fraternity made money off the number of applications that could be processed. The best prizes we gave away were shot glasses.

I didn't get my first credit card until after college. Well at least one that I used. I did sign up for a bunch in college, but cancelled accounts as soon as I got the card.