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how do you manage your finance?

just curious how you manage your financial matters. Percentagewise, how many goes to savings, stocks, paying mortgage/loans, children education, etc?

programmeur
Sunday, November 10, 2002

See Joel's review of a book called, "A Random Walk Down Wall Street", by Princeton economist Burton Malkiel:

http://www.joelonsoftware.com/navLinks/fog0000000262.html

Read the book, and follow Malkiel's advice.

Alex Chernavsky
Sunday, November 10, 2002

"A random walk" is not really a personal finance book, and Joel's review is about 8 sentences long, so I'm not sure how that answers the fellow's question. There are hugely disparate personal finance strategies... if you want two extremes, try :

"Your Money or Your Life" - buy used clothes, get out of debt, save, scrimp, put any extra into T-bills, get out of the rat race early to spend more time volunteering at the food co-op.

"Rich Dad/Poor Dad " (and other permutations): get into debt, use debt to buy real estate from bankrupcy courts,resell real estate for profit, forget about college, take a sales seminar, buy naked puts, get out of the rat race early to spend more time hustling random deals.

to answer the question... i have no kids, 27, $2000 of student loan debt,  programmer for biomedical research. $70K a year. 3/4 of salary goes into savings account, the other 1/4 is used for food/shelter/entertainment.  part time ski patrol / EMT job, additional $10K a year...use part time money to pay for night courses. when bank account reaches FIDC insured limit (< $100K) will start purchasing US T-bills. 

2020sarah
Sunday, November 10, 2002

"There are hugely disparate personal finance strategies"

Maybe, but the vast majority of them are not rational.

The second half (roughly) of Malkiel's book is devoted to personal finance.  The first half is theory, but it's written in an interesting, accessible style.

Alex Chernavsky
Sunday, November 10, 2002

I like the Motley Fool's books, though I ignore their stock-picking "systems". No more stock picking or timing for me. Talking about stocks bores me. I split my investments 1/3 S&P 500, 1/3 US small cap, and 1/3 international stock funds (ala the "Armchair Millionaire" book, which I also like). I like to keep things simple.

Luckily, I have no debt. I max out my 401k (free money), company ESPP (free money), and IRA (tax shelter). I am hording the remainder of my paycheck for a down payment for a house.

http://www.fool.com

ZM
Sunday, November 10, 2002

do note  that the original question asks what other people are doing, not what books to read. i had a college roommate who was really into all the investment literature, especially the motley fool. he loved to give advice on what to read and what to buy, and weirdly, people loved to listen to it. his persona on the fool.com bboard was ranked very high. however, i don't know how many of the other motley "fool" members or real life advice takers realized he only had about $2800 invested in his "portfolio." 

i spend 10% of paycheck on living expenses, 40% on student loan repayment :(, and try to save the other half...

CocaCola
Sunday, November 10, 2002

My "Strategy"  has been to buy property with my savings, every mortgage I have had I have strived to pay off as early as possible. I like the security of living fairly comfortably if ever I did'nt have work (like now).

This has left me with no debt so that 'most' of my savings have gone into conservative investments, CD's etc. If I had been more of a risk taker I could have made more money in stock in the roaring 90's, but I never lost a dime either.

I've just sold all my property, so at the moment I've got a bit more than $1.5M sitting in cash 100% secure, low interest, at call, which I will buy a house with soon when I find one I like.

I have inexpensive tastes, which helps.

I am 42, have no kids and have been a contractor for about 14 years, in constant employment.

Alberto
Sunday, November 10, 2002

I suppose what all that means is in my opinion don't waste it when you're earning it, especially if you are making good money, basically my strategy has been to make hay while the sun shines.

Alberto
Sunday, November 10, 2002

If I had money I am sure I would invest it wisely.

(I am currently earning less in a full time position as Webmaster than I was working on the kill floor at an abbatoir.)

Thanks.

Tim
Sunday, November 10, 2002

You were working at the floor of an abattoir?  Serious?  Where was this?  How awful was it that you left?

Diego
Monday, November 11, 2002

My stats:  28 years old; gainfully employed for 4 years.  67K salary.  Half goes to mortgage + living expenses.  Other half into Vanguard Total Stock Market Index Fund.  Current net worth of around $80K.  No debt except mortgage.  Expect to retire at 45 with $1M after tax (in 2002 dollars).  Plans will change with marriage/kids.

In retrospect, the stock market was not the place to be the past 3 years.  All in all, though, with bonds paying jack, and the market P/E being around 17, it's probably not a bad time to be in.

To me, being cheap is a no-brainer.  Bag the huge house, the SUV, the kitchen remodel, the $80 shirts, $100/mo at Starbucks, the big screen TV, etc.  I look at every dollar that I spend as costing me time - the one truly non-renewable resource.  My only weaknesses are eating out (too lazy to cook) and travel (though I'm willing to travel cheap).

Just really, really cheap
Monday, November 11, 2002

Tim,

I know what you mean, a friend of mine is now making less developing software than he was 5 years ago as a courier.

I suppose it's all about the 'future'. Essentially, you're saying that it's better to be a webmaster now, and look to the future for whatever comes next, than it is to still be on the abattoir floor in ten years time.

I think you're right.

Alberto
Monday, November 11, 2002

Just for kicks, lets enumerate the possible ways to "get money":

- Sell your time (get a job; consult)
- Add value to existing goods (land development, manifacturing)
- Create and sell intellectual property (software)
- Invest in assets that statistically increase in value (stocks, a house, collectables)
- Lend money (bonds, banking, etc.)
- Play "zero-sum" financial games (futures, gold, roulette)
- Theft (including misrepresenting assets to assist appreciation)
- Be king (taxes)
- Receive gifts (inheritance, etc.)

I think this is it.  All except #3 have been around for centuries.  Am I missing anything from this list or has the "getting money" problem been solved?

Getting Money
Monday, November 11, 2002

Monthly expenses for just myself:

$1150 - Mortgage (2100 sq. ft. - definite overkill)
$220 - Property taxes
$450 - Food/grocery (eat out all the time)
$250 - Utilities
$120 - Car (paid for; gas + insurance)
$100 - Entertainment
$120 - Vacation

No cell phone, cable modem, TiVo, fancy computer, or other money pits.

Obviously, I could stay home, eat Ramen, and turn down the heat.  I'm curious, though, how CocaCola is able to spend only 10% of his/her salary on living? 

Burning Money
Monday, November 11, 2002

Burning Money,

$1150 Mortgage - this is an investment and smart, some of that money will come right back to you one day.

I made most of my money from property, if it wasn't for property I would have saved very little.

Buy then hold
Monday, November 11, 2002

CocaCola,

10% on living!

Still living with your parents, or really well paid?

Personally I won't divulge my finances, its too depressing.

I think the best financial advice came from Cliff Richard = 'be a bachelor boy.'  Wish I'd heeded that one.

Ged Byrne
Monday, November 11, 2002

I spend money till I don't have any. Then I stop. If this occurs before the end of the month I attempt to spend less next month.

Mr Jack
Monday, November 11, 2002

Like Jack, I have what is known as the Bachelor's budget.

Stick all your money in one pocket.

Keep dipping into that pocket and spending, until the pocket is empty.

Hopefully, this will coincide with the next refill.

tapiwa
Monday, November 11, 2002

http://www.amazon.com/exec/obidos/tg/detail/-/0471185205/qid=1037030942/sr=1-2/ref=sr_1_2/002-1608825-1080829?v=glance&s=books

stock free
Monday, November 11, 2002

>> Luckily, I have no debt. I max out my 401k (free money), company ESPP (free money), and IRA (tax shelter). I am hording the remainder of my paycheck for a down payment for a house. <<

How much do you need to hoard to buy a house? Have you investigated it seriously? When I got out of college I thought renting was the way to go until I had a 10-15% downpayment. Then I switched jobs during the .com explosion and was looking at a 20K+ salary increase. Unfortunately I no longer qualified for the low-cost starter loans that let you pay 2-3% down and get a cheap mortgage rate.

Anyway, I payed about 10K down for a 217K house. My area is still in a housing bubble so my house is now over 280K and I owe < 200K just 2 years later. I'm getting a home equity line of credit on that difference and it feels good to know I could spend the next 2-4 years building my own startup or something and not needing to make a lot of money at all.

Ok, so back to the original question:

Currently I see about 4K per month after taxes.
I also have 1200 per month going into ESPP and a 401K.

1500 on my mortgage.
300 on a new car loan (STUPID!! runs nice, but I could have bought a 1-2 year old car for 2/3 the price or less and not pay a thing now).
300 month utilities (including dsl line & cell phone).
200 month paying student loans

600 month - gas, food, computer toys, movies, girlfriend maintenance, car insurance, etc...

So I guess I save about 25% of my income. Right now most of it just goes into my checking at 1.2% interest or else a money market at 1.7%.  I have a RothIRA, but I'm too scared to put that money into the stock market right now anyway. I consider my student loan and mortgage payments to be "saving" because my net worth goes up as I pay off the principal.

I don't consider the car loan to be saving because I figure the car depreciates so my net gain is flatter.

Saver
Monday, November 11, 2002

To take care of me & my family:
Health insurance.
Disability insurance.
Life insurance.

Not sure of exact percentages.

2nd:

25% of take-home goes to debt reduction (student loans).

A small portion goes into the rainy day fund (currently @ 6 months living expenses).


3rd:

Having fun, and lots of it.

I need to speed up the loan repayment so I can start investing more. 

...
Monday, November 11, 2002

hi, my math was off. thanks to those who caught it. ;-)

somehow, i am very lucky and share a 2 bedroom apt which only c osts $900/m total. my share is $450. this is about $450/m less than the average in my area. thus my rent is about $5500 a year. cell phone is $50/m (a bit high) and my split of the cable modem is $20/m. car is paid for and i only drive it when i have to get groceries. (i drive a hoopty) My friend owns a snowboard shop, so i can get cheap deals on all the sneakers and t-shirts i need. so overall i only spend maybe... 10-12K out of $90K a year, depending on how much drinking I do.

CocaCola
Monday, November 11, 2002

I thought I'd stumbled into "Joel on Relationships" when I saw "how do you manage your fiancee?" Happily, I was mistaken.

Chris Winters
Tuesday, November 12, 2002

Out of curiosity what is this 401K thing people keep talking about? I take it it's a USA thing?

Mr Jack
Wednesday, November 13, 2002

Why are brits too damn lazy to look things up on their own?

http://www.dictionary.com/search?q=401k&r=67

I'd just like to point out that I'm british and we don't use that word over here
Wednesday, November 13, 2002

From the link above: "Source: The American Heritage® Dictionary of the English Language"

a) So why isn't the domain dictionary.us?
b) "American Heritage"? *cough*
c) American dictionary of the English language? *choke*


Wednesday, November 13, 2002

Two thoughts:

1.  I know we got off the topic with books, but everyone should read "Buffett: The Making of an American Capitalist".  Yes, I know it doesn't quite fit with this question, but the knowledge is valuable.

2.  I think of my personal capital allocation in the following way:

a. spend -- gonna waste it today.
b. save -- keep it today, but spend it tomorrow.
c.  invest -- make it work for me
d. donate -- speaks for itself.

I don't know my actual allocation, but at minimum I try for this:

a. 75%
b. 10%
c. 10%
d. 5%

and when I have extra money I try to increase b and d.

Again, read about Warren Buffett.  You won't regret it.

Scott
Friday, November 15, 2002

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