The Amateur Financier

This week has been pretty horrible, money-wise. As I mentioned on Wednesday, I had to spend nearly $1000 on my car to keep it running. As a result, my financial situation is lower now than it was last week, and it was not great then.

The account rundown, as always:

Savings

PNC (Checking Account) $ 238 -$566
Susquehanna (CD) $ 2542 +$0
ING Direct (Checking) $ 39 -$100
ING Direct (Savings) $ 1405 +$405
ING Direct (Orange CD) $ 1012 +$0
HSBC Direct (Savings) $ 22 -$200
Smarty Pig (Savings) $ 2439 +$100
Vanguard (Money Market) $ 1000 -$0

Total Savings $ 8697 -$361

Investments

Vanguard (Roth IRA) $ 5395 -$238
- Small Cap Index (NAESX) $ 3108 -$151
- High Dividend Yield (VHDYX) $ 2287 -$87

Share builder (ETFs) $ 2334 -$74
- Total US Market (TMW) $ 705 -$30
- Extended Market (VXF) $ 712 -$27
- Total Foreign (VEU) $ 452 464 -$12
- Small Cap Value (VBR) $ 215 -$10
- Emerging Markets (VWO) $ 250 +$5

Total Investments $ 7729 -$312

Total Assets $ 16,426 -$673

Credit Cards

MasterCard (JCPenney) ($ 107) -$0
American Express ($ 1645) -$1146

Student Loans ($ 11,929) +$0

Total Debts ($ 13,681) -$1146

Net Worth $ 2745 -$1818

I’m actually pleasantly surprised by my expenses this week. After you subtract the aforementioned car expenses, the investment losses, and my insurance premiums, my out of pocket spending (for things like gas and food) was only $145. I do need to get myself a budget to manage such ‘incidentals’, but I’m happy about my self-control and restraint this week. Hopefully, next week will be a bit kinder to my wallet, and I’ll have happier news to report.

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Yesterday, I wrote about all the things my mother taught me about money. She laid a good foundation for my financial success up to now, and her support and encouragement will no doubt serve me well in the future. The more I learn about financial issues, though, the more I wish I had received a broader exposure to money and investing while I was growing up. I sometimes feel like I’m trying to catch up to other people my age when it comes to financial knowledge and money management skills. (Although, as I’ve been hanging out on PF blogs a great deal lately, I might have a somewhat skewed view as to just how much the average twenty-six year old knows about good money traits.)

There are several points I particularly regret not learning sooner in my short life:

1) Invest early, invest often – When I started to look into managing my money more actively last year, one of the avenues I considered was investing. My mother, though, expressed numerous concerns with my plans. If I had been encouraged to start investing earlier, I could have a greater investment currently in place (although, given the latest market movements, perhaps it was good that I didn’t have more ‘skin in the game’).

When I have kids of my own, I’m going to do what I can in order to spark an interest about money and investing in them. One specific plan I have is to match their Roth IRA contributions while they’re in high school (and possibly college), in a sort of make shift 401(k). This will pass along several important lessons: start saving for retirement as soon as possible, using tax-advantaged accounts allows your money to grow, and when someone offers you free money, you should take it.

2) Network, Network, Network – One of my biggest problems finding a new job has been the lack of a network to utilize as I search. It’s tough to find something when you can barely get your foot in the door. I’m hoping my luck will change soon, but at the moment, I wish I had built up a network of contacts before I left school.

I’m working to build up my network now, including planning to go to a few conventions and putting myself out in front of placement agents. I am trying to make friends and contacts in my field (and for that matter, in the world of PF bloggers). It’s slow going, especially as I’m normally a shy, withdrawn person, but it’s important that I have more contacts, in case I find myself in this situation again.

3) Take advantage of the Internet – Alright, this one is hardly my mother’s fault; the web wasn’t even invented until 1993, when I was already eleven years old. The idea of setting up a blog, putting up a few ads, and using that as a source of revenue is new enough that I’m not too surprised I’m only now getting started with it.

By the time I have kids, though, the internet revolution will have been in effect for more than a generation; while I won’t claim to know what the future of computers will hold, I do know that my kids will need to understand them. I’m going to do my best to spur them to get online and figure out ways of making money, from blogging to producing static websites and other online ‘side hacks’. Chances are, they’ll be even more proficient at using the computer than me, so perhaps they’ll end up showing old Dad a few new ways to make money online.

This is hardly a complete list of what I hope to pass onto my kids (and what I regret I didn’t learn about sooner), but it’s a decent start, and should inspire me to help my children grow and learn.

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J.D. of Get Rich Slowly made me laugh by posting about cats as stock market analysts. Honestly, it’s one of the better (or at least, more entertaining) suggestions of how to reform Wall Street that I’ve heard lately. At the very least, it would make for more interesting shows on CNBC:

“Now, Mittens, if the Dow is going up, bat the rubber mouse; if it’s going down, pounce on the ball of yarn.”

But that’s not the only thing that made me think this week:

Young People in Debt – Studenomics writes about several of the societal forces that lead young people to get into debt, specifically credit card debt. He touched on convenience, media pressure, and the feeling many young people have that they need to reward themselves. I would add in some of the practices of the credit card companies (only requiring you to pay a tiny amount of the total debt each month) as a major contributing factor.

10 Things You Must Do After College – My Life ROI (a relatively new blogger, whom I have begun to follow) gives several useful actions you should take while you’re young, such as starting a Roth IRA, building your network, and start a rainy day fund. All very reasonable actions to take, and my only quibble is that you should be doing most of these things during college, if not before. If you’re old enough to hold a job and you haven’t started checking things off this list, what are you waiting for?

Three Financial Lessons Learned the Hard Way – The current market conditions are proving a harsh and brutal teacher, as Lazy Man and his wife are discovering. One big thing I took away from his story is the importance of establishing your risk tolerance well before investing, and being willing to follow it, even in bad times. It’s easy to say you’ll be able to handle a drop in your portfolio’s worth, but much harder to actually resist pulling out when it happens to you (as I can certainly attest).

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I give my mother a great deal of credit; she raised me and my two sisters essentially by herself, all the while working full time. She never let us feel deprived, alone or unloved. I’m proud of all her accomplishments and everything she has done.

Some of the most important lessons she taught me involved money. Between her actions in her personal life and what she explicitly told me, I learned a great deal about how to get a handle on my finances and keep my life in balance.

1) Control your spending – One of the first lessons I learned from my mother, I picked up simply by watching her in her daily life. She did spend money, but not on extravagances. She would buy food, resisting temptations of candy and sweets. She took us to the library, encouraging us to borrow books rather than buy them. She enrolled us in low cost after school activities, such as Scout programs, allowing us to socialize, learn, and grow.

All of these experiences that I observed helped to establish the idea of frugality in me. I still tend to keep my spending low, without even making much effort. Many of the tips I encounter about saving money, such as packing your lunches and resisting daily treats (like a Starbucks coffee) come naturally to me, all because of my mother’s influence.

2) Save up for what you desire – When I was sixteen, I wanted to get a car. (Well, actually, my mom wanted me to get the car more than I did, so I could take my sisters to school and our other activities, but I still wanted it, as well.) Rather than simply buying me a car, my mother encouraged me to get a job, earn and save the money, and buy the car on my own. Thus began my employment at McDonald’s, lasting long past when I actually bought my first car (a 1988 Aries, if I remember correctly; a pretty solid car, especially since I only paid $1000 for it).

From this, I learned that if you are going to make a big, expensive purchase, the best way to do so is NOT to charge it and slowly pay it off while accumulating interest; but rather, to work, spend less than you earn, save the difference, and eventually purchase the item outright. It has been a valuable, meaningful lesson for me, and I am glad I learned it without having to get overwhelmed by debt (as so many other people seem to have done, sadly).

3) Study hard and get good grades – My mother always stressed education. She encouraged us to work hard in our classes and take some of the harder courses. She pushed my sisters and I into the gifted program at our school and motivated us to stand out academically as much as possible.

This might not seem related to my finances, but it’s had at least two important monetary impacts on me. First, my good grades and high SAT scores allowed me to start college without having to pay for my tuition, and by keeping my grades high allowed me to continue in the same fashion. I still had room and board expenses, but the savings enabled me to graduate with a relatively small amount of student loan debt, avoiding one of the major pitfalls of the recently graduated college student.

Secondly, that push to learn and study has stayed with me up to this date. As a result, I tend to be cautious, carefully, certain to learn as much as I can about something before jumping in. It is a good approach for many things in life, particularly when it comes to money and investing.

Almost all of my good money management traits are a direct result of my mother’s influence.

This is not to say that my mother taught me everything I now know about money; in fact, there are some areas where I wish she had done more. I will cover those tomorrow.

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