OT: good advice for personal finances.

[akelman]

I remember when we had two incomes, lived somewhere relatively inexpensive, and could do all of this (http://www.businessinsider.com/financial-advice-written-on-an-index-card-2013-9). Good times! Now, of course, I invest all of my money in silver alloy Campy components. The price of Chorus levers is going up, up, up!

[Fishbike]

The cyclist's financial plan:

Invest in silver Campy, anything Colnago and anything you can call pantographed

Beware red and white bikes: some hold value very well; some not so much

"Nice patina" = old and worn

Don't buy bike companies from towns known for horse racing

N+1 is a valid investment formular

Invest in precious metals

Take the advice in the "Graduate" if and only if you are a multi million dollar bicycles manufacturer

"NOS" is not a mutual fund

[pbarry]

^^ Awesome. :hello:

[avalonracing]

POTD Fishbike :beer:

[cmg]

invest in water, soon to be a hot commodity. figure out how to sell air. also soon to be a hot commodity. :)

[MattTuck]

Good advice on that index card.

Should be 'save 30% of your money' if you intend to step up your cycling habit when you retire.

[seat_boy]

I would say browse a cheaper bike forum. There's a lot of blingy rides around here.

[EDS]

I would not follow the investment advice on that note card.

[saab2000]

I would not follow the investment advice on that note card.

Why not? Looks pretty solid to me.

[AngryScientist]

I would not follow the investment advice on that note card.

so then you would advocate NOT maxing out your 401k, NOT paying off credit card debt every month, and NOT paying attention to fees then?

[saab2000]

so then you would advocate NOT maxing out your 401k, NOT paying off credit card debt every month, and NOT paying attention to fees then?

I too am curious what is going on with that. I've become very interested in personal finance over the past couple years and everyone I've talked to, including people who make their living in the world of finance, give advice that is essentially identical to what is written on that card.

My only regret is that I didn't start sooner with this stuff, but I still have done pretty well following the ideas on that card.

[EDS]

Why not? Looks pretty solid to me.

Following reasons: (i) I would purchase individual stocks, (ii) don't fear actively managed funds, (iii) think the bit about social welfare programs is too simplistic to have merit and (iv) think maxing out 401(k) is just a start.

[EDS]

so then you would advocate NOT maxing out your 401k, NOT paying off credit card debt every month, and NOT paying attention to fees then?

Swing and a miss.

[akelman]

Following reasons: (i) I would purchase individual stocks, (ii) don't fear actively managed funds, (iii) think the bit about social welfare programs is too simplistic to have merit and (iv) think maxing out 401(k) is just a start.

I'd add a line to that card: "People who claim to know better rarely do." Maybe you're the exception to the rule, EDS. I hope so for your sake. In the meantime, the advice on that card is exceptionally solid for the rest of us mere mortals.

[saab2000]

Following reasons: (i) I would purchase individual stocks, (ii) don't fear actively managed funds, (iii) think the bit about social welfare programs is too simplistic to have merit and (iv) think maxing out 401(k) is just a start.

I do have some individual stocks, mostly because I wanted to dip my toes in the water. I don't really actively manage them, but there is more risk it would seem in investing in individual stocks if you're not going to actively manage them, in addition to the cost of entry.

My S&P 500 funds are passive funds and have very low costs, so we'll see how they work out.

As to maxing out the 401(k), that's a lot of money, but I do it anyway. This year it's $17,500. Do a Roth IRA too. But I doubt most people can afford to do this.

I can't say you're wrong, but I'd be curious to know your thoughts on why you feel individual stocks are good and also your thoughts on why actively managed funds are good when they often don't beat passive funds like S&P index funds, especially after fees are factored into the equation.

Curious only. There's no editorial in these comments. If the topic is too inflammatory, feel free to PM me. I'm always ready to learn and have had constructive conversations off line with another finance person here.

[EDS]

I do have some individual stocks, mostly because I wanted to dip my toes in the water. I don't really actively manage them, but there is more risk it would seem in investing in individual stocks if you're not going to actively manage them, in addition to the cost of entry.

My S&P 500 funds are passive funds and have very low costs, so we'll see how they work out.

As to maxing out the 401(k), that's a lot of money, but I do it anyway. This year it's $17,500. Do a Roth IRA too. But I doubt most people can afford to do this.

I can't say you're wrong, but I'd be curious to know your thoughts on why you feel individual stocks are good and also your thoughts on why actively managed funds are good when they often don't beat passive funds like S&P index funds, especially after fees are factored into the equation.

Curious only. There's no editorial in these comments. If the topic is too inflammatory, feel free to PM me. I'm always ready to learn and have had constructive conversations off line with another finance person here.

I am just a working stiff and not a financial professional. I am also a long way from retirement.

My personal view and experience is that that the average working stiff like me does not need to actively manage individual stocks or portfolios and that certain actively managed funds, etfs, etc. do perform well and have sound managers and strategies behind them.

It used to be easier for sure. I just don't see how a maxed out 401(k) will be enough to retire on, even with 30+ years in.

[EDS]

I'd add a line to that card: "People who claim to know better rarely do." Maybe you're the exception to the rule, EDS. I hope so for your sake. In the meantime, the advice on that card is exceptionally solid for the rest of us mere mortals.

I apologize if I upset you. Not sure why you are projecting on me.

All I was saying was that planning for retirement is not that simple and each person needs to take some ownership. I certaintly wish I had all the answers. For now I will plug away with my multistrategy conservative approach.

[saab2000]

I am just a working stiff and not a financial professional. I am also a long way from retirement.

My personal view and experience is that that the average working stiff like me does not need to actively manage individual stocks or portfolios and that certain actively managed funds, etfs, etc. do perform well and have sound managers and strategies behind them.

It used to be easier for sure. I just don't see how a maxed out 401(k) will be enough to retire on, even with 30+ years in.

I guess it depends on one's needs. But 30 years at $17,500 (plus 15 years of catch up funding), assuming a retirement at 65 (the mandatory age in my business) means you have contributed $600,000 in principle alone. And the compound interest over those 30 years puts the value of that account, assuming 4% growth and compounding 4 times per year, at well over $1M.

We'll see what happens, but that's not a bad number at this time of the game.

Everything depends on growth and when one expects to retire. But an account of, say $1.2M at retirement, allows an income of $48,000 annually on interest alone if growth stays at 4%. That may be optimistic. This is where fees come into the equation. Fees of 1% take $12,000 annually on an account of $1.2M. So in order to keep the balance static each year your annual income from interest is cut by 25% on a high fee account with fees of 1%. Just an illustration.

Past performance is not a guarantee of future results, as they say..... :banana:

[Ken Robb]

If we think about this as a baseball analogy the card espouses going for a high batting average vs. home runs. No huge hits but less chance of striking out.

If a person wants to comfortably retire at a "normal" retirement age I think the card makes sense for many people. If a person hopes to hit a home run so he can retire wealthy while he is young it won't work.

My concern about actively managed funds is, as all of their disclosures state, "past performance is no guaranty of future returns" or words to that effect. Many of the gurus running these funds will hit a home run once but that success may make them myopic to changing trends which will cost them farther down the road. The ones I have looked at have fees around 2% a year.
When I deduct that from the return that I can reasonably expect them to earn in the long run it doesn't look like good value to me.

How one earns the majority of his income also must be considered. For 36 years I was a real estate broker with no guaranteed income, paid vacation, 401k, health insurance (I bought my own) plus I had pretty steep fixed overhead for dues, fees, insurance, advertising, etc. The way I handled the uncertainty was to live on a budget that I felt I was almost certain to meet and put the rest into retirement funds. Some years the contribution was skimpy but some years it was big.

I heard a lot of comments from friends in the business like:" with the money you're making why don't you have a bigger house, fancier car, etc?" Lots of those people became what are known as "shooting stars". They had a few big years, spent too much, committed to too much expense, and had to leave the business and/or declare BK.

Many people are surprised to hear that I did not invest a lot in real estate. There are two reasons for that. If clients know I am a big investor myself they might get the idea that any deal I offered them wasn't good enough for me. The other concern is: if real estate is my main source of income and my main investment what do I do when real estate has one of its down cycles? My income is off so I need to dip into savings/investments and they are down too. I bought and held mostly big company stocks that made things or offered services I like. When Bank of America annoyed me as a customer I sold their stock. That was a good move as it soon took a dive. I guess wasn't their only disgruntled customer. :-)

The only money I ever borrowed was for mortgages. I never carried a balance on my credit cards. I never felt like I "had to make a deal" to keep an inflated lifestyle afloat and I retired to a reasonably comfortable life at 64. If I had not seen that the real estate market was going in the dumper 6 years ago I probably would have stayed in the business another couple of years.

So I followed a little different path than the card recommends but I think if I had stayed in my early corporate career I would have followed the card almost to the letter. I was always more worried about being broke than driven to be wealthy. I have known people who would rather swing for the fences with the risk of striking out than plod along the middle road with guys like me. I think they are good for our overall economy. We need risk-takers.

[akelman]

I apologize if I upset you. Not sure why you are projecting on me.

All I was saying was that planning for retirement is not that simple and each person needs to take some ownership. I certaintly wish I had all the answers. For now I will plug away with my multistrategy conservative approach.

You didn't upset me at all, EDS. My point was that the card offers very basic, common-sense strategies for people like me: mere mortals (rather than captains of industry or individuals with an investment profile large enough to open doors in the corridors of finance). As Ken says, if someone like me follows the advice on that card to the letter, I'll likely retire at a reasonably young age with a good amount of money in the bank. On the other hand, people like me who think they know better usually don't.

[crownjewelwl]

please don't look for financial advice on a custom bike forum!!!

[fuzzalow]

There's some pretty good advice on that index card. Probably the most critical "to-do" of the tips given is "save 20% of money (income)" which is exceptionally hard to do for most Americans. Having investable capital makes almost all that follows on that card possible.

I'd only suggest that a portion of the asset base not follow this index card advice and be allocated towards more aggressive investments. Because if you anticipate to have college tuitions and weddings and the myriad child offspring obligation & responsibilities as future events, there will not be enough investment return to make all of those other events achievable. In your favor however is the investment time horizon is substantial if you do not dawdle.

[EDS]

You didn't upset me at all, EDS. My point was that the card offers very basic, common-sense strategies for people like me: mere mortals (rather than captains of industry or individuals with an investment profile large enough to open doors in the corridors of finance). As Ken says, if someone like me follows the advice on that card to the letter, I'll likely retire at a reasonably young age with a good amount of money in the bank. On the other hand, people like me who think they know better usually don't.

Is there anything on that card that you weren't doing before seeing it?

[saab2000]

Is there anything on that card that you weren't doing before seeing it?

Most Americans aren't doing anything on that card.

[biker72]

please don't look for financial advice on a custom bike forum!!!

+1
Too many people with loads of disposable cash.
Low cost index funds or ETF's are the way to go.
I had almost no extra money at age 40. Kids, old car, house that needed some work,....and the list goes on..
My company 401K was a lifesaver. Now at age 75 I can afford some extravagances.

[ColonelJLloyd]

All I was saying was that planning for retirement is not that simple and each person needs to take some ownership.

I'm not sure how none of us gleaned that from this.

I would not follow the investment advice on that note card.

[cfox]

I just don't see how a maxed out 401(k) will be enough to retire on, even with 30+ years in.

So what? It will certainly help. You should still max out everything you can to get the tax benefit*. (obvious) Added bonus if your employer matches contributions.



*if for some reason you think your marginal tax rate will be a lot higher when you retire, skip the 401k and take the tax hit now.

[cfox]

Most Americans aren't doing anything on that card.

This is so true, and it spreads across all income levels. I live in an affluent part of the country; I can't tell you how many poor rich people I know. They are in the same financial condition as a single mom in a trailer park, they just have way nicer stuff. A couple we know is getting divorced and they can't afford to actually separate, so they are making life a living hell for their kids by staying under one roof. They do, of course, have a ski house in Vermont they can't sell...

[Ken Robb]

So what? It will certainly help. You should still max out everything you can to get the tax benefit*. (obvious) Added bonus if your employer matches contributions.



*if for some reason you think your marginal tax rate will be a lot higher when you retire, skip the 401k and take the tax hit now.

This decision is tricky because even if we figure that our income will be less after retirement we can only guess at what tax rates will be and what deductions may be in effect in the future.

I used tax deductible retirement contributions because when I had an exceptionally good year I was kicked up into very high brackets for federal and state income taxes. Years ago we were allowed to average our taxable income over several years which seemed fairer to me as it smoothed the curve but that policy went away quite a few years ago.

If your income isn't above the allowed limit a Roth Plan may offer less uncertainty for your retirement. Your contributions are not tax deductible now but all growth and future withdrawals (after retirement) are tax free. OTOH just as we don't know what future tax rates/deductions might be we can't be really sure that our government might not decided to tax those Roth withdrawals after all.

[EDS]

I'm not sure how none of us gleaned that from this.

Do you follow that plan? If you own stock then you don't follow that plan.