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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!

[chucker]

8. Realize that being wealthy is not a worthwhile goal in life.

[Kickaha]

9. But it beats the hell out of being poor.

[Yontsey]

I thought for a Roth IRA you could only put $3000 a year into it?

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Originally Posted by chucker 8. Realize that being wealthy is not a worthwhile goal in life.

That is very true, but you cannot neglect the value in the world of a dollar. The difference in the quality of life is astounding. I don't want to be a bajillionair but I want to be able to give my family a quality live and put my children through college no matter what happens with my career. It's a common conception that money doesn't buy happiness, and for the most part that is true, but when you're 35 and your kids cannot take tennis lessons with their friends because you can't afford it it certainly does have an affect.

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.

[chucker]

Originally Posted by Kickaha 9. But it beats the hell out of being poor.

Sure, but you can be poor and happy. Focusing your life on becoming rich is only going to distract you from becoming or remaining happy.

(I've seen it happen.)

Originally Posted by tensdanny38 That is very true, but you cannot neglect the value in the world of a dollar. The difference in the quality of life is astounding. I don't want to be a bajillionair but I want to be able to give my family a quality live and put my children through college no matter what happens with my career. It's a common conception that money doesn't buy happiness, and for the most part that is true, but when you're 35 and your kids cannot take tennis lessons with their friends because you can't afford it it certainly does have an affect. 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.

Yeah, I can agree with that.

[chucker]

Originally Posted by tensdanny38 If you are in the working world today, you see that the executives all have college degrees

Meep! You should DEFINITELY listen to Steve Jobs's Stanford speech. Highly recommendable.

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Originally Posted by Yontsey I thought for a Roth IRA you could only put $3000 a year into it?

I am pretty sure its 4k if you're single, 6k if you're married. I believe you may even be allowed more if you're combined salary is over 110k, but don't quote me on that.

[Banana]

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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Originally Posted by Banana 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. 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).

Masters in business generally does mean you get a good job though. That's what i'm going to do. Get my BS in engineering, then hopefully have wherever I am working send me back to school to get my masters in business, so I can manage a team of programmers or something to that effect. EE/SE bachelors + MBA = management and phat bank. Problem is you work like a dog to make that phat bank which really sucks as I want to be a very active father someday

[Banana]

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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Originally Posted by Banana 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.

oh i 100% agree. Unless you're entering a field that absolutely needs grad school straight out of college (PA, medical school, scientific research, etc) I think its not necessarily the best idea to jump into that right away. There is nothing that beats experience in the working world (or so my father tells me). The company I am working for right now has bi-annual meetings with every employee to further gauge what they want to do with the company and their career goals. I know they are pretty willing to send the straight shooters back to school if they want to pursue higher education if they intend to stay with the company for the long haul.

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!!

[zippy]

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.

[Dorian Gray]

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!

Originally Posted by chucker Sure, but you can be poor and happy. Focusing your life on becoming rich is only going to distract you from becoming or remaining happy.

Being happy is only a marginally more noble goal than being rich, and both are expressions of selfishness and ego. Margaret Thatcher attempted to explain her politics as a rejection of the concept of human greed, replacing that idea with the notion that we all want to have choices in life, and that money enables choice. Her philosophy was comically short-sighted in the eighties, and still is today.

[scratt]

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...

[psmith2.0]

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?

[autodata]

Originally Posted by tensdanny38 Masters in business generally does mean you get a good job though.

Only if you go to a top-tier school.

Originally Posted by Banana 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.

There is if you go to one of the top 6 or so schools, and ideally Stanford, Kellogg or Harvard. Otherwise it's not really worth it unless you have the right work experience, and even then you still have to get lucky.

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Originally Posted by scratt 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...

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.

[autodata]

Originally Posted by Banana One point: Masters degree doesn't always translate into more money.

So true. In some fields it has absolutely no impact and for those in other field it can potentially make them appear over-educated and under-experienced (I think I might be in this situation).

[chucker]

Originally Posted by Dorian Gray Being happy is only a marginally more noble goal than being rich, and both are expressions of selfishness and ego.

Excuse me? Asking for happiness is egotistic?

[Kickaha]

Well sure, unless you're committing yourself 100% to the communal hivemind, you're selfish.

Didn't you know that?

[LudwigVan]

Originally Posted by zippy Listen to Dave Ramsey, or read his book "Total Money Makeover"...

Speaking of books, an old co-worker of mine was quite taken by Your Money or Your Life by Joe Dominguez and Vicki Robin. I also knew a women at my old job who took these author's tips (or used a similar approach from another source) and retired at the age of about 35. Last I heard she occasionally works part-time at a food store, but otherwise she lives simply off her own invested money.

[Dorian Gray]

Originally Posted by chucker Excuse me? Asking for happiness is egotistic?

Trick question? It's practically the definition of methodological solipsism.

Originally Posted by Kickaha Well sure, unless you're committing yourself 100% to the communal hivemind, you're selfish. Didn't you know that?

Kickaha, I suppose it's kind of cute how you hunt down nearly all my posts and attack them with unrelenting teenage sarcasm, and maybe I should be flattered, but it doesn't seem to contribute much to the discussion. Does it perhaps make you happy? I'm obviously not going to go back to first principles every time I mention my personal morality choices, just as nobody in this thread seems to feel the need to explain why they want to be wealthy. If you have a difference of opinion - and clearly you generally disagree with whatever I say - then express yourself coherently, preferably without mind-numbing pedantry, and move on. Bickering endlessly isn't very satisfying and I doubt any of the other posters care very much that we disagree on practically everything that matters.

[chucker]

Originally Posted by Kickaha Well sure, unless you're committing yourself 100% to the communal hivemind, you're selfish. Didn't you know that?

Does writing some open source stuff, donating some money and contributing to some Wikis and projects count?

[chucker]

Originally Posted by Dorian Gray Trick question? It's practically the definition of methodological solipsism.

Well, I guess I don't subscribe to "methodological solipsism", then. Whatever the fuck that is.

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.

[Kickaha]

Originally Posted by Dorian Gray Kickaha, I suppose it's kind of cute how you hunt down nearly all my posts and attack them with unrelenting teenage sarcasm, and maybe I should be flattered, but it doesn't seem to contribute much to the discussion. Does it perhaps make you happy? I'm obviously not going to go back to first principles every time I mention my personal morality choices, just as nobody in this thread seems to feel the need to explain why they want to be wealthy. If you have a difference of opinion - and clearly you generally disagree with whatever I say - then express yourself coherently, preferably without mind-numbing pedantry, and move on. Bickering endlessly isn't very satisfying and I doubt any of the other posters care very much that we disagree on practically everything that matters.

Oh come on, you love the attention and you know it. Besides, I don't exactly 'hunt down' your posts, don't flatter yourself quite that much... it'd be... egotistical. You just have a propensity for throwing out comments and opinions that I find to be utterly bonkers, and usually, highly condescending and well, unjustifiably snobbish. Not all of them by any means, but more than the usual poster.

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.

[LudwigVan]

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.

[turbulentfurball]

Originally Posted by tensdanny38 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.

I agree wholeheartedly here. This is one of the biggest issues facing young graduates and people of my age in the UK at the moment. The housing market is becoming more and more difficult to enter, therefore many are waiting longer before buying a house. This in turn means that they will, as tensdanny says, be throwing money away at a time where it would be best put towards a mortgage. To use myself as an example, I'm on a salary at the moment which is around 29% higher than the minimum wage. I've done some research into mortgages, and on my current salary, I can perhaps afford a parking lot in Edinburgh. Banks will give me a mortgage which would cover less than half of a brand new one bedroom flat in many developments in the city. I just can't see where to progress from this point, and the situation is getting worse on a monthly basis. More than any other issue, I think this the biggest problem facing people of my age in the UK.

[Kickaha]

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.

[spotcatbug]

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.