Archives for August 2007

Saving For A Home On Your Own: Learning From Those Who Did It Successfuly

How about some helpful investigative reporting from the media this time? The New York Times article Every Penny Counts profiles six New-Yorks who managed to buy their home without the benefit of rich relatives or Wall Street bonuses. While the stories weren’t surprising, I still found them to be very reassuring and even inspiring. In addition, I tried to pick out a few useful themes:

Make The Home A Priority
There’s saying you want a home, and then there’s taking action to get that home. One of the new homeowners put it bluntly:

?If you want to own a place, you have to do everything to own a place and everything else comes second.?

Along those lines, every single person profiled changed their lifestyles to make saving up over $20,000-$100,000 a reality. While it wasn’t easy, each person did it their own way. Take Pablo Ag?ero and wife Janey Lee:

They gave up smoking to cut costs, they stopped meeting friends after work for beers, they didn?t buy new clothes, and they stashed away tax refunds and as much of their earnings as possible. Whenever they wanted to buy drinks, gadgets or cookware, they asked each other: ?Do I want an iPod or a house? Do I want a latte or a house??

Or Amy Wegenaar:

So she went into savings overdrive: she went grocery shopping only with a list and cut out luxuries like expensive juices. When she went out with friends, she ordered the happy-hour drink specials and often chose Mexican food so they could munch on free chips and split a cheap entree. She shopped the sales racks at Urban Outfitters and sewed dresses from discounted fabric she bought on the Lower East Side.

Getting Support From Your Family and Friends
Obi Onyejekwe actually made friends with co-workers who also wanted apartments of their own:

They chose to eat out at places with entrees that never cost more than $15 and went to events like the Warm Up dance parties at P.S. 1, where the only thing they bought was beer. ?A lot of pressure to spend and splurge wasn?t around because everybody was saving to buy real estate,? he said.

It worked: He and 8 friends now own homes that cost $320,000 to $550,000.

On top of this, I say share your goals with your friends. Tell them why you’d rather watch the game at home, or why you can’t fly out to Vegas. They should understand, and might even share the same dreams or at least wouldn’t mind saving a few bucks themselves.

Don’t forget your family either, all I ever hear is “Did you find a house yet?” I think being in this together with my wife has made the process a hundred times easier than if it was just me.

TheStreet.com Gives Horrible Financial Advice To Young People

I know there is plenty of bad advice out there, but this one just caused me physical pain. Mr. Cliff Mason impressively gained the status of Staff Reporter at TheStreet.com fresh out of college (did I mention his uncle is Jim “Mad Money” Cramer?). He hits the ground running with his recent article Young Ones, Go Forth and Speculate, where he bashes veteran Wall Street Journal reporter Jonathan Clements and proceeds to share some of his vast financial knowledge with us.

Pearl of Wisdom #1:

I believe that saving money is at best nonessential for the under-30 cohort, and that people my age will generally get more from spending their money than from buying stocks or bonds.

Pearl of Wisdom #2:

Buy small-cap stocks that trade under $10, have little analyst coverage and a reason to go higher. In a word: Speculate. […] With maybe $2,000 to invest a year, you won’t make serious money in the market unless you take enormous risks. It’s much more likely that you’ll get wiped out, but since you won’t have a lot of money on the line, it’s a worthwhile risk.

Wait, there’s more! You must see Mr. Mason in person in this TheStreet.com video showing off his brand new iPhone. Why did he buy this phone? “Well, I wasn’t doing anything… and I had money to burn… it is a babe magnet…” What about his current plan? “I have an old Verizon line that my dad still pays for [the iPhone is AT&T-only] … I should tell him about that…”

Hmm… sure sounds like someone I should listen to for financial advice!

I found this article via the Diehards Forum, where author Taylor Larimore submits his succinct reply:

If a young investor age 25 invests $4,000/year @ 10%, at age 65 he/she will have $1,947,407.

If a gambler waits until age 35 (and loses), he/she will have $733,774–less than half.

Investing for retirement should not be a gamble.

My response? As a 20-something who tries hard every day to balance enjoying life now, buying a house, and funding my own retirement someday, I’m a bit offended by his flippant views on saving.

I don’t really care what Mr. Mason does with his money. But to tell others to just gamble it away because it’s “not that much”? Being 25 and actually having $2,000 saved up is not something to be dismissed. Not only can you take advantage of the wonder of compound interest, but look at how risk decreases as your time horizon increases when properly diversified. Why increase your risk needlessly when you could be decreasing it?

Okay, maybe I’m being too harsh. When you’re young, you should take risks. Go into debt to pay for college or graduate school, work at a start-up company or at a non-profit that you love, or even start your own business. Take chances with money that can really reap huge rewards!

Weekly Money Carnivals

Now that I’m getting a bit more settled, I’m making an effort to get back to being more active in the blogging community. Carnivals are a place where blogs get together and share posts pertaining to a specific topic. Here are a few that I participated in recently -join me in perusing them and sharing what you found especially helpful.