Personal Finance for a 20 year old?

Question

Hey, I'm a 20 year old college student and I want to learn about personal finance. Can someone give me an idea of where to start? A book to read? Personal advice of any sort? Roth IRA? Mutual Fund? I hardly know the difference between the two, but can someone give me an idea of how to safely and securely begin investing money?

Answer 1

Once you start earning an income, you should invest in stocks, bonds, and money market funds. You want to buy a diversified portfolio of stocks, as individual stocks are too risky. For most folks this means buying mutual funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. Buy no-load, low cost funds. If you are like most people you will invest part of your money aggressively in stock funds, and part conservatively in money market funds and bond funds. Vanguard.com has an on-line questionnaire which will give you an idea how aggressive you want to be.

If your company offers a 401K plan at work, try to invest the most you can. The money grows tax free, and some companies will match your contribution. Investing in a mutual fund IRA is also a good idea.

I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. and ~20-30% in a foreign stock index fund. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion

Buying a house instead of renting will save you a lot of money in the long run. You don't have to pay rent and you build equity in your house instead. Buying rental property can also be a good investment. However, being a landlord can be hard work, and many people are not good at it. If you don't know how to handle deadbeat renters, you can have trouble.

If you have high-interest debt, like credit cards, it is best to pay this off first before trying most of the investment ideas above. You should also have 3-6 months of salary saved up as an emergency fund in a bank or money market fund before trying more risky investments.

Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.

Sources:

http://www.iwillteachyoutoberich.com/blog/
http://www.vanguard.com/VGApp/hnw/planningeducation
http://www.dallasnews.com/sharedcontent/dws/bus/scottburns/columns/2007/vitindex.html
http://www.fool.com/school.htm
http://sec.gov/investor/pubs/assetallocation.htm
https://flagship.vanguard.com/VGApp/hnw/FundsInvQuestionnaire?cbdInitTransUrl=https%3A//flagship.vanguard.com/VGApp/hnw/planningeducation/education

Answer 2

Read the book, The Millionaire Next Door. Also, The Total Money Makeover by Dave Ramsey. The Millionaire Next Door contains very suprising info about millionaires-how they got there and how they live. The Total Money Makeover is a no nonsense book about the pitfalls of credit and debt. It also gives you a templete on how to manage your finances. It's really basic and easy to read. A good book to start with because you could read it over a weekend easily. And it will open your eyes. I would be leery of college courses about finances taught by some university professor two paychecks away from bankruptcy. Get the basics down first from someone who's been there and back and there again.

Answer 3

College student? Look in your course catalogue under Economics and Personal Finance for an introductory course. You probably have room for an elective, don't you?
Best thing to do before investing is to research financial advisors and investment brokers. They have the time and temperament to deal with your finances, but you don't. But remember, ALWAYS pay yourself first from each paycheck, even if it's only $5 a week! Continue saving long term and don't panic if some of your dollar value temporarily declines. If you invest in stocks or securities, you're in it for the long term. Same with real estate.

Answer 4

Hi,
To help you with personal finance I'd recommend a software package by Australian business Parcus Group.
Easy to use program with features including budgeting, financial planning, real estate analysis, shares valuation, life insurance...
You also get a bonus list of 100s of reference books & texts you start reading to improve you financial education.
Costs US$24 so it's not a huge investment but absolutely great value for money.
Check it out at
http://www.parcusgroup.com/index.html
Regards

Answer 5

Hi there,

I would say the first thing that you should do is spend a good amount of time learning and researching........... So far my favourite author is robert kiyosaki, he has written a series of books, his first one being "Rich Dad, Poor Dad"

His books have really helped me but i would also recommend watching the movie "The Secret" it also has totally change my thinking.

Once you have done this you need to focus on building up MSI's (Multiple Sources of Income). No Millionaire has ever gotten that way with only one source of income. Rich dad will also tell you to specially focus on the ones that are passive, i.e. taking very little if any upkeep and work but the money still keeps coming in. If you have these Passive incomes working for you while you also work on your primary income (you day job or another project) you'll be successful in no time.

There are hundreds of these out there but the ones that come to mind straight away are:

Rental income
Dividends from shares
"Pay to surf" sites like AGLOCO
Affiliate Sites
Business's like Laundry Mats, Gaming Machines, Vending Machines etc.....
royalties from books, software and music.
and so on...............

I hope this helps you out some what, just remember it'll be a lot of hard work but if you stick with it and focus on your goals you'll definitely be successful.....

Answer 6

Start saving at an early age and you can retire faster.

Put 10-25% of your earning in your savings account and you can start saving a lot of money.

To start withdrawing from your Roth IRA at retirement, it's required to have atleast 5 years of activity... so the sooner you open it the sooner you can utilize it's capabilities.

Roth IRA is nice because you can invest money in it (stocks,mutual funds, ETFs, bonds, cds) and it grows tax free and it's tax free when you withdraw from it at retirement.

Answer 7

First, you must know what your goals/ concerns are and when to fulfil them.
Second, you have to know your current resources (money from your parents, part-time job, bank interest) as well as expenses and liabilities (personal expenses, loan, unsettled credit card balance). Then you must calculate them to know what and how much do you have.
Third, you have to check whether you have any surplus, and if so, how long it takes to achieve your goals.
Fourth, you have to add your knowledge. Read books, newspapers, magazine, etc about personal finance.
Fifth, do not take whatever salesmen offer you. Do not step in to what you do not know. Learn carefully.

Answer 8

Talk to your bank about savings accounts options. Talk to other banks about their options. And unless credit is giving you skymiles, it's not worth it. Also, learn to do spreadsheets

Answer 9

You are pissing off every parent with kids who have no direction. How about a job mentoring my kid? I'll pay you..wait...wait...$128.87. Is that enough? ....wait..let me check my couch.

Answer 10

http://money.cnn.com/magazines/moneymag/money101/