A few money management pointers for the up and coming professionals from ABC's Special: Unbroke-What You Need to Know About Money.
-Paying cash makes more sense: Cedric the Entertainer tells us that the old school way to pay for something was to use cash. This way there’s no debt and no worries.
-People have lots of credit cards on average: The average person has about 5-9 credit cards. You really only need one.
-It takes 58 yrs to pay off 10k if you pay only the minimum.
-If a student starts school, buys a laptop on credit for 1k, and makes only the minimum payment it can take them close to the time they’ll attend their 20 year re-union to pay off the debt. WOW!
-Many people are living paycheck to paycheck: You need a safety net; an emergency fund of 3-6 months expenses.
-A system to start building up an emergency fund: Start saving 1 dollar a day for four months. Then up that to 2 dollars a day. Now amp it up to five dollars a day. Before you know it you’ll have $1000 saved.
-Definition of stock: A share of ownership in a company.
-Definition of bonds: A loan to a company for a set period of time with a set return.
-You have to take a long term view when investing: The stock market goes up and down but over the long term the market goes up.
-Stock indexes give a measure of how companies are doing: Dow is the top 30 companies, the S&P 500 is the 500 top companies, and the Nasdaq lists newer tech companies.
-You need a retirement account. When stocks go down there’s an opportunity to buy. It’s tough to save for the future without stocks in your portfolio. Individual stocks can fluctuate but overall markets go up. The biggest risk is not taking a risk.
-One term you need to know to retire: 401(k) - Money goes in before taxes so it grows tax free. Even though stocks can fluctuate wildly in the short-term, over the long-term stocks have always gone up. You can invest up to $16,500 a year in a 401(k) plus many companies offer a company match. Variety is crucial in your portfolio so make sure you diversify. A 401(k) is automatic savings since it comes right out of your paycheck. If your company offers a match it’s ridiculous not to meet the match. For example: if company offers a 50 cent match that’s 50% return right off the bat. These days saving for retirement is mandatory.
These are all great basic premises for someone to take care of their finances. Hopefully it helps to get a few people to take a look at their financial situations.