Stallion
Join Date: Feb 2006
Location: Milwaukee
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Lately i've been talking to my Dad a lot about how to become wealthy on a working class income. Seeing as many of us on this board are in the stage in life where money is scarce and graduation looms in the not so immediate future, I figured this would be an interesting and useful thread for some of the older, wiser AppleNovian to share some of their experiences and knowledge on the manner.
From my research and discussions I have the found a few key points: 1. As soon as possible, buy a place. Renting in the end is throwing money away. Even if you're paying your mortgage for 30 years, you're getting something for your investment, as where with rent you're getting nothing in the end. I realize directly out of college you may be moving again within a few years, but in my eyes it does not matter. You can rent the property to someone else and ideally get most of the mortgage payment back. 2. Max out the roth IRA from the moment you graduate college until you retire. This thing is awesome because compound interest if an incredible tool. You can put up to 4000 in a year if you're single (taxed before it goes in) or 6000 if you're married. Say you do this every year from 25-65, you'll end up putting in 160,000 in. If you know a little bit about investments however, can pick out some solid mutual funds at a solid 8% interest average over the course of 40 years, you'll come out with 1,119,124.16. The beauty of it all is that when you pull it out, that money is tax free, so you get to keep it all!! If these numbers alone don't encourage you to save your money (and that money is worth more in the bank then in that 800k house or brand new m5 bmw), I don't know what will!! 3. Throw in whatever your company matches for your 401k. This is essentially free money. Even if you have to live a little on the shitty side for 5 years because you're short on money, its worth it in the end because you're getting atleast double what you put into this back plus interest. Free money!! 4. Don't get into credit card debt/have solid credit. Don't buy things you don't have the money for. With each payment of a credit card, your rating goes up. With each missed/late payment, your rating goes down, your money owed goes up, plus a late fee. Compound interest can really work in your favor or against you. Let it be a powerful tool for you and one you avoid losing a battle to at all costs. 5. Drive your cars into the ground. Cars lose value faster than any other investment. Buy one, and drive the hell out of it, and keep it around for as long as you can. Having a modest car doesn't make you any less successful, it makes you rational. 6. Live within your means. Remember, if an accident ever happens you're going to need the money to fix it. Sure, big screen TVs and a lakehouse are nice, but what happens when your child gets caught downloading the latest simple plan album and you're on the hook for 6gs or a long court trial? You've got to plan for the worst! 7. Get a masters degree. If you are in the working world today, you see that the executives all have college degrees, where as the older workers who aren't making 6 figures didn't get them. The equivalent to this today is having a masters versus a bachelors, since it is simply expected for you to get a masters degree. just a few tips from Tensdanny! |
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8. Realize that being wealthy is not a worthwhile goal in life.
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Veteran Member
Join Date: May 2004
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9. But it beats the hell out of being poor.
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*AD SPACE FOR SALE*
Join Date: Apr 2005
Location: Cleveland-ish, OH
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I thought for a Roth IRA you could only put $3000 a year into it?
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Stallion
Join Date: Feb 2006
Location: Milwaukee
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These are not how to become a bajillionair. The only way to do that is hard work. These are ways to take your working salary and maximize it for every penny its worth for very little additional work. |
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Stallion
Join Date: Feb 2006
Location: Milwaukee
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is the next Chiquita
Join Date: Feb 2005
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One point: Masters degree doesn't always translate into more money.
Two years ago, studies show that unemployment rates were higher for Masters graduates than for high school dropouts. Also, BS engineers are more likely to be paid more than their MS/Ph.D doting teachers and if I understand it, companies will prefer to hire a BS graduate over a MS graduate. Schooling really doesn't mean shit if you have no idea what you want to do with your life. The people who graduate and go directly to good jobs are one who know what they want (even though they may not really want it or like it). |
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Stallion
Join Date: Feb 2006
Location: Milwaukee
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is the next Chiquita
Join Date: Feb 2005
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I know quite few MBA graduates who are still floundering aimlessly. Furthermore, it is now dubious whether there are any clear benefit to getting a MBA graduate over a BS graduate who has already worked two years.
Your plan of getting your company send you to a school for that is more sensible, though. This way, the company has some say over the education and are ready to put their money where it is. |
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Stallion
Join Date: Feb 2006
Location: Milwaukee
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When you figure out the opportunity cost for grad school straight out of college (especially if you're in debt and the interest is accumulating) it may not be such a good idea financially. Grad school seems like a much sweeter gig when that 5-10k a semester isn't coming out of your own pocket!! |
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Veteran Member
Join Date: Jul 2005
Location: Unknown
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Listen to Dave Ramsey, or read his book "Total Money Makeover"
He's a Christian, and he incorporates some scripture into his methodology, but don't let that turn you off if you are not of like mind. When you get down to his basic lessons regarding money management, he's very solid IMO. His slant is for people who are trying to get out of debt, but if you could learn to not get into debt in the first place, that would be huge. The one thing I wish I would have done differently: NEVER get a credit card. You simply do not need one. Everyone is concerned with their credit, but if you live a debt free life, who cares what your credit score is. And yes, you can even buy a house with no debt, though it will take longer to get there, and will require some discipline. I'm not totally down on mortgages, though, but if at all possible, limit to 15 years. Consumer debt is, IMO, an impending crisis in the US. Do you know where children get all of their energy? - They suck it right out of their parents! |
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Veteran Member
Join Date: May 2005
Location: Paris, France
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You're still in college and you're worrying about buying a house and investing money wisely? Sounds like a great way to age before your time!
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On the other hand... I would rather enjoy my life when I am still relatively young, than have pots of money and be at the end of my life with nothing by the way of experiences to show for it....
I have lived by that rule, and have two homes, my own vehicles, all the toys I want, and some bits and pieces of land and a couple of businesses.. I feel fit young and healthy and have all my own teeth! On the other *other* hand my best friend from school is now pot bellied, balding, wears glasses for eye strain and is in an unhappy marriage in a house he owns, and wife who will probably soon take it all off of him, because he has worked in a bank since leaving school, and hates his life... I have never saved, never had a pension, and rarely have enough money to get through the rest of the month in my bank account at any one time.. I have also blown pots of money on stupid things, and laughed and moved on, broke, but another thing crossed off the list.. I have also never actually worked for anyone, nor have I ever actually had to be in a work place at any specific time in my life. I have left every job/career/thing I was doing when it got boring, and I have always been happy... And I have a doozey of a drug habit.. Never killed anybody, never robbed from anybody, never threw up, never got addicted, never went to gaol, ... , and I DID have a fu&^in' great time! tensdanny, I am not you are wrong.. What I am saying is there is a balance... 'Remember, measure life by the moments that take your breath away, not by how many breaths you take' Extreme Sports Cafe | ESC's blog | scratt's blog | @thescratt Last edited by scratt : 2006-07-24 at 12:08. |
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Mr. Vieira
Join Date: May 2004
Location: Tennessee
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I think so too. So many people just buy into that whole "gotta have Stuff™" and "keeping up with the Joneses (and the Smiths, the Robinsons, the Carters, the Bakers, etc.).
So many people get themselves into such a ridiculous hole by their mid-twenties, simply trying to "live the life" or measure up to what they think makes a "successful person". Or buying into idiot MTV/pop culture standards of "what you gotta have" to be seen as a certain way. Seen it with my own eyes more times than I care to. Sad. Because it's VERY hard to get yourself out of. Why do you think there are all those car loan/paycheck places, and commercials on TV for "getting out of debt and fixing your credit score"? Those are relatively recent phenomenons, preying on the more dipshitted and irresponsible among us. Or, at the very least, looking to them as a huge, neverending source of business. There used to be a time when getting a credit card was a bit of a chore. Now I think they'll give any goober one. And said goober has never been taught about credit, finance charges, interest, etc. Or money/finances in general. So guess what happens then? |
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hustlin
Join Date: May 2004
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Stallion
Join Date: Feb 2006
Location: Milwaukee
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oh its all good. I agree with much of this. Its awesome that you have started your own businesses. I would love to do that! Problem is I need to A. learn how to, and B. find a location that has a clear need edit - I really would love to do this. My grandfather started an insurance company that has been very good to my family. Currently my dad runs it and he works for himself and does quite well. I would assume I am inline to run the show next, but I am not sold on the idea of a small business like that being able to compete in the insurance world where everyone is swayed by advertising and prices despite a lack of one on one personal contact and quality service. |
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hustlin
Join Date: May 2004
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Last edited by autodata : 2006-07-24 at 13:04. |
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Veteran Member
Join Date: May 2004
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Well sure, unless you're committing yourself 100% to the communal hivemind, you're selfish.
Didn't you know that? |
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Join Date: May 2004
Location: Minnesota
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Veteran Member
Join Date: May 2005
Location: Paris, France
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FWIW, I'm happy. I enjoy being happy. And if you think it's selfish to feel that way, then I guess I'm extremely selfish. |
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Join Date: May 2004
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Frankly, I don't find it worth my time or energy to debate you on these things - you're set in your mindset, and nothing I say is going to sway you. So why bother? I will, however, continue to make murmurs of disagreement when I find your comments to be particularly egregious or bizarre, just as I would with anyone else. Smooches. Last edited by Kickaha : 2006-07-24 at 13:55. |
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Veteran Member
Join Date: May 2004
Location: Minnesota
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On undergraduate degrees and earnings potential: I stumbled across this article a few minutes ago about the stagnation of wages and tight job markets for college graduates.
Last edited by LudwigVan : 2006-07-24 at 17:38. |
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Right Honourable Member
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Last edited by turbulentfurball : 2006-07-24 at 14:26. |
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Veteran Member
Join Date: May 2004
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My wife and I are in an odd position as well - we live in one of the most expensive areas in the US, and property taxes here are some of the highest rates... on top of some of the costliest property. Bottom line is that if we were to buy a house, we'd actually be paying almost as much in taxes per month as we are currently in rent. Plus the mortgage. The mortgage is, mostly, investment (assuming property prices rise, and they've been quite flat here for the last couple of years, and only slowing down more recently...), but the taxes are money that's just gone. (Yes, yes, community spirit, blah blah blah, but the city/town/county mismanagement of funds here is legendary and rampant, so a good percentage of those monies would quite literally just be gone - no benefit to anyone.)
Bottom line - we're seriously considering *continuing* to rent here for the near future, to *save* money. Weird. If we were anywhere else, we'd be buying ASAP, but here? Doesn't make sense at the moment. We're considering moving a county or two over just to make it feasible. |
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Veteran Member
Join Date: May 2004
Location: Clayton, NC
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With regards to Roth vs. traditional IRAs, I've always wondered: wouldn't it be better to defer paying taxes until later so that you're investing more money? With a traditional IRA (vs. Roth), wouldn't the compounding interest on the tax money you don't give to the IRS more than overcome the taxes you will have to pay later? With a Roth IRA you pay taxes up-front (and not later), but that gives you that much less to invest.
Ugh. |
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