Do not go into debt to buy a car. I think that is one of the most common financial mistakes people make. Many people finance a car for an amount that is 50% or more of their annual gross salary!

Favorite "gurus": Bob Brinker, Suze Orman, Ric Edelman.

Rules to live by:
1. Pay yourself first. Put money into savings for a rainy day and don't touch it unless that rainy day comes.

2. Start investing for retirement as soon as possible, through a 401k at work and/or a Roth IRA. Max out the 401k contribution as soon as you can. The only place to make money now, except for real estate, is in the stock market. But it only works if you save for a long time. TIME is what pays with market investments and allows you to ride out the ups and downs of Wall Street. But be cautious about where you invest. Not a hot tip for quick bucks from the BIL. Fidelity is an excellent investment house for beginners (actually, for anyone).

3. When the market falls, do not sell. Buy! If it continues falling, continue buying! That is axiomatic.

Suze Orman is very aggressive in her approach to people, but her advice is solid. She has books and kits that are helpful for new investors. My personal favorite is Bob Brinker, but you have to listen to him for quite awhile if you are new to investing; one time only won't do it!

Sorry, I don't know how to make this funny!

When your husband asks you if that's a new blouse you're wearing, say, "Oh, this old thing? It's been in my closet for years!"

Works every time! Sorry, couldn't resist. :)

My favorite "You won't believe how much money I saved today!"

Such a deal. They were two for one.

Their coupon saved me a bunch.

I really don't use those store aps with specials that show up on my phone. Just fun to see what's up with store prices.
I checked item prices with my phone ap and got the best deal.

Focus on value, not cost.

Learning to perform an objective cost:benefit analysis is important.

Cheap (fill in the blank) can cost twice (paint is a good example of this maxim).

Finally, and this isn't solely financial, but our family saying is "If it's not fun, why do it?", credit Jerry Greenfield.

sandyponder

My son was telling me about a friend who was cleaning her closet and finding never-worn clothes that still had the tags on them. Her comment was "I had to have this until I had it."

That has become our joking mantra when considering impulse purchases, or regretting them!

Maybe these funny financial definitions below will help.

Serious advice...savings are essential...and the more you save and the sooner you save, the faster your savings will grow. Key caveat: capital preservation. That won't happen if you put your savings at risk and lose your capital. Diversify: don't put your eggs all in one basket.

Mutual funds: 80% of all mutual funds underperform the stock market and management fees are cheapest on stock index funds, so consider them if you want to do equities.

I used to give presentations a lot and people would look to me for financial advice on what stocks to invest in. They never liked my advice which was to take their money and pay off their credit card debt first...that was a guaranteed 17%+ savings and you couldn't do that well in the market unless you were extremely lucky.

I agree that Suze Orman provides sound advice.

Here is a link that might be useful: funny definitions

Baron Nathan Rothschild supposedly said, "Buy when there's blood in the streets, even if it's your own."

This is also attributed to him, "I made my fortune by selling too early."

If you can't afford to pay cash don't buy it, home purchase being the one exception.

Perhaps someone else can come up with a way to say this so it doesn't sound preachy, because it does:

There have always been people who live beyond their means, trying to "keep up with the Jones," etc. But today people (of all ages) often spend more than they have because they feel entitled to do so. They believe that they've "earned" the right to buy a new, high-end car, or a house that they can't afford, right out of college. You're not entitled, unless you have the funds to pay for it.

Live beneath your means.

Many people finance a car for an amount that is 50% or more of their annual gross salary

Really??

Pay yourself first.

Your kids can get loans for college, but no one is going to loan you money for your retirement.

Live below your means.

DH was car shopping last wknd when he and the salesman got on the subject of how many people get themselves into trouble buying more car than they can afford. The salesman pointed out a high end suv and it's owner outside and commented that the customer wanted to trade it in because he owed $17k more than it was worth!

This is a subject near and dear to my heart. We've always lived below our means and sometimes even ridiculed for it. Guess who's laughing now?:) Retirement is fabulous!

I just came up with one:

If you can't afford to pay for it now, you can't afford it.

That simple principle has served us so well. My husband and I certainly aren't always perfectly in tune about financial issues. However, we both are allergic to debt. We wait, and sometimes wait and wait and wait and WAIT for what we want until we can afford to buy in full. We do that with our cars-cash only for new vehicles that we then keep for 10+ years. Credit card balances are paid in full each month. I lived with my original 1950 kitchen till a few years ago when we could remodel and pay for everything in full. We did have a small mortgage on our house that we paid off within 3 years after purchasing it.

As others have said, living debt free means you are truly *free*. I have no worries about losing my house, or my cars or my sleep at night due to money problems or debt.

So that's my advice: if you can't afford to pay for it now, you can't afford it.

Ann

The old rule of thumb was long ignored, but still valid IMO: housing costs (mtg ins tax) should take up 1/4 of your monthly income.

Live sufficiently, give extravagantly.
Try not to mix the two up.

"It met with an unfortunate fate" for when something went to Goodwill or in the trash.

Hang out with good friends who know how to have a a good time, without spending a lot of money doing it.

And a great book is "the millionaire next door" In this book some academic researchers looked at the lifestyle behaviors of people with "net worth" of over 1 million dollars. It gives a lot of perspective on many facets of life that add up to financial balance and success, in a way that most people have never considered.

Congrats to your friends!

My advice would be to learn how to cook and plan healthy menus. It saves money, is healthier and as an added bonus, can be a great creative outlet.

Always always have at least six months of bill back up money in the bank before you think of buying a large ticket item. It will save you from money arguments (top 5 of reasons for divorce).

My advice to newleyweds:

"Don't expect to live as well as your parents - it has taken them ___ years (thirty, perhaps) to get where they are in life.

Pretty much along the same lines as Goldgirl.

Anything from Dave Ramsey is good, but he does quote the Bible occasionally, particularly in the context of debt, giving and charity. He has sound advice, though, and is very upbeat. I find Suzi Orman to be a bit grim, and I don't always agree with her.

One of my favorite Dave quotes: Don't spend money you don't have to buy things you don't need to impress people you don't like.

From me: Live well beneath your means.

Nothing is more powerful than being debt free.

Never loan money or cosign for anyone, ever. If you have money to give, then give it feely as a gift, but never "loan" it.

Cultivate an attitude of contentment and gratitude for all you have and do not focus on that which you do not have or want. With this, the money issues can often look after themselves.

Thank you, this advice has been a gold mine of ideas for my project. I've started feeling excited about it, and I've enjoyed reading the advice. I'm going to start putting it together after the new year, so feel free to keep adding of you have more ideas. I appreciate the people of this forum very much!

Terrill's---yes, really! I agree it's hard to believe, but more than a few of my DD's friends graduated from the same engineering university, got jobs for $50k per year and promptly went out and "bought" a car for $25,000. They financed a car that cost half their annual salary, and most had student loans on top of that!

for newlyweds, I would advise to discuss finances only in broad daylight, never at night or before bed. it really is not a romantic subject.

Regarding the car issue, I somewhat disagree with what others have said. It may not be the standard advice given by financial experts, but I think that having a reliable vehicle is very important. A new or newer car for an employed new graduate will not have repair bills (because it is under warranty) , or unexpected breakdowns. Allowing them to have reliable transportation to me is very important. I live in the midwest where there is no realistic public transportation option. And young people under the age of 25 often cannot rent a car due to age if they need a reliable car for a business trip.

We have always bought new cars, and then kept them a long time. For us thais has been a very good thing. We have chosen non-fancy, but reliable models. This has served us well. Sometimes a known expense (car payment every month), is easier on the budget than unexpected large repair bills.

Which brings up another key point of finances, which is cash flow. Sometimes smoothing out your cash flow is more important than paying off debt right away. It is a balancing act, and not everyone has the discipline to not go overboard. But I don't think that debt is necessarily bad.

I also did the new car thing many years ago. I was in a profession where if you were five minutes late to a job you might better have stayed home, where car trouble on the road meant not only desperately trying to find a colleague who could get there in time and losing the money for that particular job, but also losing the referrals that would have resulted (and this was a word of mouth business entirely). At that time I was driving 30K to 36K miles a year, 85% of it job-related.

Yes, I was strapped for a couple of years, despite the very low rate I got, but it was well worth it. I got 207,000 miles out of that car without a single breakdown and the peace of mind would have been worth even more.

If I had worked in an office job where I could have phoned in to say that I had car trouble and would be a couple of minutes late, that would have been different, of course.

Writersblock, when your car was at the 70,000 mile mark it obviously would have been a great used, affordable car for someone who pays cash. Since you kept yours so long you got your money's worth, but there are loads of people who are serial car leasors, or who buy cars and want to ditch them the moment the warranty period is over. Those $17,000 cars are not new, so they're cheaper to insure, and the secondhand owner pays the depreciated price that includes the 20% hit the first buyer paid.

Reliable transportation is a must, I agree. And if it is a necessary evil, I guess it is necessary, but I don't agree that managing debt is better than no debt, which is the holy grail of financial security.

I have always liked "some people know the price of everything and the value of nothing."

This is a great topic, and one that isn't discussed enough.

Even though I don't feel the same way regarding debt as KWSL, I do respect that KWSL's point of view can be valid.

Why? Because personal risk tolerance is a big part of one's financial outlook and strategy.

And also the consideration of what you can "afford" is a combination of cash flow, savings goals, expected income, age, future expectations, past events, and your tolerance for risk.

But I think saying if possible, to always avoid debt it is only valid as a conclusion, not as a starting point.

You may need to buy a new refrigerator, and have cash in savings to pay for it, but prefer to keep your savings cushion liquid, and put the refrigerator on a store card. That store card may offer 12 months same as cash, or 24 months, and if your monthly cash flow can easily cover the payment this might be the better decision for you.

If the thought of that bill makes you crazy, then by all means pay the cash and then pay back your savings over the next 12 months.

Even if the store card doesn't offer any no interest period, you may still be better off keeping your cash liquid, and instead pay the interest for the flexibility to have a low monthly payment.

Different circumstances make different decisions the right one.

What I think is important is to have the full working knowledge to understand the total cost of ownership, opportunity cost of decisions, how credit works, what makes your credit score change, and what aspects aside from borrowing are determined in part by one's credit score.

For example, your auto insurer can use your credit score as a part of the decision model to determine how risky you are, and therefore your insurance rates.

So credit activity that one can afford is often a good way to keep a credit score high, or to improve one that is more average.

I tend to disagree with julie in that the interest rate can have a huge impact on the financing decisions...if you're savings are in a bank earning 0.5% and the interest charges on financing the refrigerator are 15%, then you are better off using the cash than paying the interest charges. This is especially true if you are paying off a minimum balance and the interest charges keep compounding.

And this is especially true when the value of the asset being financed is very short lived.

I think it is total insanity when people put a meal on a credit card and then think they're doing a smart thing to roll their credit card debt onto a home equity or mortgage loan because the interest rate is lower. You are still financing that meal that has long since ended in the sewer for the next 25-30 years. That is never a good idea.

This post was edited by AnnieDeighnaugh on Wed, Dec 26, 12 at 7:41

I'm not trying to speak for Julie, but I am pretty sure that she would never advocate using credit for meals, or rolling that type of debt into a home equity loan. She (I believe) is talking about major purchases that are financed on reasonable terms in order to keep a cash cushion intact.

I give credit to Kiki for looking in several directions for advice to pass along to her friends. Kiki, although the subject may seem dry, disagreements over money are one of the leading causes of divorce,so your tips may end up being more helpful than the others'.

Yes KWSL, that is what I meant.

And Annie you are correct that interest rates do play a part in analyzing credit decisions.

And generally paying for discretionary expenses over a long time period with interest would not be a generally recommended good decision.

And I agree that collateralizing revolving credit card debt by shifting it to home equity mainly favors the lender, not the borrower.

Thank you kswl : ) it is certainly giving me food for thought as well, it is awakening a little interest in me even, and I have never ever been interested reading about finances. I think my part of the project is going to include purchasing a couple of the overall financial planning guru books. A local church pre-marital counseling is going to give me a copy of their money quiz, so they can compare their money management styles, and I'm trying to think of a clever and attractive way of presenting the advice so it looks gifty and charming. Still thinking though...

Never use a credit card for anything unless you can pay it off monthly.

Live below your means.

Don't spend money to impress people.

Don't refinance your home to pay off other debt...it's like taking your home to a pawn shop.

You might want to do something with a booklet or something about estate planning too....not very cheerful, but guaranteed that no one gets out of this world alive....

Good points here. Try to not go into debt for anything other than a mortage. I know that is not always possible - but try. And whatever debt you do incur, pay off as quickly as you can.

KSWL mentioned young people going into debt over cars, etc. but it amazes me the number of people RETIRING with debt.

tina

A local church pre-marital counseling is going to give me a copy of their money quiz, so they can compare their money management styles...

What a wonderful idea! Our pre-canna counseling (a million years ago) barely touched on finances.

Tinam, you are so right about people retiring with debt--- that has got to be an incredibly stressful situation.

Love the idea of a nice looseleaf binder in which you put each person's advice in with a three hole punch. There is a lot of free information available from the federal government about debt and finances, including consumer awareness info. Anything like that could also be punched and included in the binder. A lot of young couples who really don't know much about money would probably benefit from some course like Dave Ramsey's "financial peace university." It is taught at churches and community centers. I haven't taken it but occasionally listen to him on the radio and think he gives very good common sense answers to callers' financial questions.

"Try to not go into debt for anything other than a mortage. I know that is not always possible - but try. And whatever debt you do incur, pay off as quickly as you can."

I'm sorry, but I do not agree with that advice. Whether to go into debt or not depends on what you can earn on the money that would have represented the cash payment for the thing. The last new car before this one, we wrote a check. This one is being financed because the rate was too good to pass up - 3%. We are making substantially more than 3%, so we are continuing to stay with the car loan. If that spread were to change, converging toward zero, we'd pay off the loan in full. Until then, however, remaining in debt is continuing to make us money.

Annie, the estate planning comment sparked another idea, I asked our mutual friend what he charges for a pair of simple wills, and he said for our friends he would just do them for them, so we get to add that into the package! I'm getting excited.

I found the gardenweb household budgeting section, which has provided some interesting food for thought as well.

I'm also feeling like I'm more ignorant about money than I thought I was, lol!
So many different ways of manipulating and being manipulated by money! I think because I'm a stay at home mom, i get tunnel vision, treating money as simply a household budget, not really a tool for wealth. Oddly enough, ending up doing the financial portion for them may end up changing my perspective too!

And sable, I just got Bob Brinkers's A Random Walk Down Wall Street for $1 at a book sale! Looking for books from the others : )

This forum is such a great resource!