I Got My Personal Finance Ass Kicked

I asked my friend Ramit Sethi, who writes the I Will Teach You to Be Rich blog, to come to my high school and speak to the senior class on personal finance. He was awesome and the compliments about his talk continue to pour in. It was a nice mix of useful tips and explanations styled with a certain hipness to appeal to the high school demographic.

When I turn 18 in about a month, I will be organizing my finances. I’ll be buying Quicken to track my weekly budget, getting a couple credit cards, opening a high interest online savings/checking account, and investing in an index fund. As per Ramit’s suggestion, I’ll be thinking about my finances  from short-term, medium-term, long-term perspectives and have various accounts for each category. I will also be buying some books to help me understand this stuff.

I know that by starting now – even with small numbers – my 40 year old self will thank me!

9 comments on “I Got My Personal Finance Ass Kicked
  • Ben,
    I didn’t hear Ramit Sethi speak but it’s probably what everyone else preaches about personal finance. My .02 is to diversify. I don’t agree with an index fund. That might have been the way to go pre-2000. If you look at the S&P 500 at the start of the tech bubble (2000) to current, it was a downward trend and then it moved sideways, it took a while to recover. Had you retire at 2000 and depended on this, you would have waited over 5 years to recover your losses. I recommend a diverse fund of small cap, large cap, bonds and international.

  • Diversification is for cowards and wishers. If you feel an investment is worth it, invest. If not, don’t. It’s quite simple.

  • Ben,

    one of the strongest financial myths that young adults are led to believe is that opening up credit cards is a good financial tool and it’s the ONLY way to build your credit. This is a huge fallacy. You don’t need credit cards. It’s nice to think that you will always pay them off at the end of the month, but it very rarely happens. SOMETHING will come up that causes you not to pay them off and then you’re in a downward spiral of stupid credit card debt.

    If you are thinking in terms of buying a house someday, you can build your credit in other ways: Paying your rent on time for 2 or more consecutive years. Paying utilities on time for consecutive years. Plus, if you have a net worth that is well in the positive, and you can make a down payment which so few young people do nowadays, you won’t need to worry about your dumb FICO score. The FICO score should be called the “i love debt” score, because it ONLY judges you based on the debt you have and how you handle it, not how much actual CASH you have or what you are worth. Anyway, hope that helps. I would advise to stay away from the credit cards though. Save 1,000 – 2,000 for emergencies rather than using a credit card for the unexpected.

  • Erik, I’m still going to open credit cards because I’m confident I can pay them off and because it’s a good – though, as you say, not the only – way to build credit. As Ramit says, “Just because a technology has the potential for bad doesn’t mean we don’t use it.”

  • I understand your point, and you are entitled to your personal decisions. When I was referring to “you” in my earlier comment, I was referring to the general public who uses credit cards. I should have clarified that I wasn’t directly speaking to you when I was referring to not being able to pay off the cards on time.

    One more thing regarding this subject. There have been studies done that using plastic psychologically causes people to spend more rather than when someone sees the cash coming out of his or her hands. Something to think about…also, I encourage you and all of the readers of this blog to read “The Total Money Makeover” and/or “Financial Peace” by Dave Ramsey. It is a radical perspective about personal finance that works and works well.

  • Peter Drucker once said that “Innovation is the specific instrument of entrepreneurship… the act that endows resources with a new capacity to create wealth.” Whatever political and tax changes come in the future the country must continue to how long-standing economic success is truly achieved.

  • Son in other words, we should have invested in dot-com stocks in 1999 and houses in 2007. Hey, I felt that those investments were “worth it.” (The problem, of course, is that what they’re “worth” is what someone else will pay for them).

    “Don’t Diversify” – quite possibly the stupidest advice ever given, and the only redeeming quality of that advice is that a fool and his money are soon parted.

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