[quote]Sturat wrote:
So I’ve decided it’s time to get a job that pays more money, significantly more money and I actually have my final interview for one in about an hour. Regardless of whether I get this particular job in the next 6 months I intend to have something significantly more lucrative than the $45k a year that I’m currently making.
Here’s the thing. With my new income I want to use it to start making more money but I don’t know a damn thing about doing so and neither does anyone in my immediate family (my cousin Brian does but he’s way way way beyond the financial level I’ll be moving into so not really a lot of help).
What sorts of things should I do? …[/quote]
Basics from my POV.
Look at your debt. Find your highest-interest debt, focus on that, pay it down first. If you’re carrying multiple lines of debt and can consolidate to a better rate, do. You’re paying minimums (or slightly over) on all other accounts.
Build a cash cushion. Advice these days is to have 3-6 months of ready reserves (cash, savings account, short-term money market) that you can tap into should you need to (job loss, medical emergency, house burns down, lawsuit). My experience with the US economy over the past decade is that it’s spotty, and having reserves beats getting into debt. I’d focus on both this and paying down the most expensive debt first. Keep your cushion in cash or short-term CDs (certificates of deposit). Interest rates right now are crap, but c’est la vie.
Draw up a budget, figure out what your income and expenses are. You can do this with a spreadsheet, pen and paper, financial software, or online sites. But do it. Revisit, revise, and adjust annually. Compare your actual expenses and savings/overages to the budget. Figure out where you can cut back. It can be easier to save money than earn it, sometimes. Look ruthlessly at any recurring costs (services, subscriptions, memberships, etc.), and reduce any that aren’t worthwhile to you. Get a cheaper cable, Internet, phone plan, etc. Buy a used car with good mileage.
Get rid of the stuff you don’t need. It’s costing you money (space, storage, maintenance, moving costs, other things you could have). Sell it or donate it.
Maximize your retirement plan contributions. Find out what your employer’s match is, and what additional programs you can donate to.
Draw out a spreadsheet that estimates your income, expenses, savings, and investment returns until retirement. You’ll probably need a couple of million by then, if not more.
On investing: A Random Walk Down Wall Street is still one of the better investment books. It’s a bit dated, but the principles hold pretty well. It’ll give you the basic theory.
Then buy one of the recent books about Wall Street. Mark Lewis’s Liar’s Poker is a good one. Realize that the game there is highly rigged against the small investor. If you’re even thinking about real estate, read all you can about the housing bubble. I’m a fan of http://www.patrick.net/ which aggregates news feeds. It’s mostly about the US market, though it covers Canada, Australia, the UK, China, and elsewhere as well. The Canadian market’s looking very bubbly.
As far as investing, understand your basic choices: cash, government bonds, corporate bonds, stocks, metals. My general recommendation is to go with a broadly diversified index fund (I generally do a 500 or 1000 stock index), with increasing holdings (rule of thumb: your age as percent holdings in bonds) in high-quality commercial and government debt as you get older. You can play the market, but your transaction costs (even with trading sites) are still high, and the pros have all kinds of edge over you.
Patience and a regular contribution to an investment fund can work well. Understand that when you invest has a lot to do with it though. Great graphic from the NY Times: In Investing, It’s When You Start and When You Finish - Graphic - NYTimes.com
(Basically: if you started investing in the 1950 or 1980 you did well. 1969 or 1999, not so much. Even with a lifetime of investing, a bad start is a big handicap.
As much as you can play the financial games, not fucking up helps a lot. Don’t get really sick, don’t get divorced, don’t get hurt, don’t get sued. The fact that you’re on a fitness site and care about your body and health is a good thing.
Investing in your own company/business can work out really well for some people, but understand what you’re doing going into it. Realize that there are a lot of people ready and willing to screw you over. Keep your eyes open.