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What Do You Want to Learn During Financial Literacy Month? Print
Friday, 27th March 2009 (by J.D.)This article is about Administration
I’m commandeering the “ask the readers” slot this week to recruit your help. It’s time to plan which topics to cover during Financial Literacy Month!
How much do you know about money?
Have you learned about the power of compounding? Do you know how the stock market works? What is a bond? Can you tell the difference between an Income Statement, a Balance Sheet, and a Cash Flow Statement? Do you even know why you would want to?
Do you know how to keep a budget? Do you understand how your taxes are used and why we pay them? Do you know what it takes to purchase a house? How much insurance do you need? What’s an index fund, and how do you purchase one?
Financial Literacy Month begins next Wednesday. Every April, Get Rich Slowly focuses on the fundamentals of personal finance. This is an opportunity to get back to basics, and I’m looking forward to it! There are some great guest posts lined up this year, but I’d also like to do some research and writing on basic topics that appeal to you.
Are there subjects that you’d like me to write about in greater depth next month? Is there a financial term that you find confusing? Have you ever wondered how bonds work? What fundamental personal-finance concepts would you especially like Get Rich Slowly to explore in April?
I won’t be able to respond to every reader suggestion, but I’ll certainly tackle those that get the most requests.
March 27th, 2009 at 3:03 am
Is there anything that GRS hasn’t covered? I don’t think there is anything left to be covered.
Maybe, there will be interest in some case studies, especially or people in their teen or early twenties beating student loans and have laid good foundation stones for financial independence.
Otherwise, I don’t think there is something GRS has missed. I think everything is described in detail here and in my another favorite blog, which is Free Money Finance.
March 27th, 2009 at 3:38 am
I would like to know more about ETFs. I would also like to know of alternative investments to Equities, Fixed Income, and Derivatives. To truely spread the risk I feel I need to invest in markets outside the financial industry. Just don’t know how.
March 27th, 2009 at 3:50 am
I’d like to know why this stuff is rarely taught in school and, if it was, what would you teach first and at what age?
March 27th, 2009 at 4:04 am
I would like to see examples of spreadsheets of sample budget outlines. This would be beneficial to me so I can set up a budget and track my expenses.
March 27th, 2009 at 4:08 am
I would like to learn how to do a budget so I know where my money is really going.
#2 I also agree with Writer’s Coin. The things I am reading now in PF books & on PF websites/blogs (such as GRS) should be taught to teens in H.S. In Jr. H.S. kids should be learning about, and how to use, savings accounts, checkbooks, & what credit is really all about. I think there would be less of a mess now if people knew how to handle credit & money & how to save & budget their money.
March 27th, 2009 at 4:24 am
The easy answer is as much as possible. In college I learned more about finance from a proffesor who went outside the curriculm to teach us. That lasted until some on complained.
As I am looking at more hours being cut at my part time job, I am in good shape to handle the cut in hours. Until I came across this blog I never heard of an emergency fund. In high school we were told to use credit cards for an emergency. I would like to know why our finance education is so bad.
March 27th, 2009 at 4:47 am
I’d like to know more about:
1. ETF’s. Exactly what are they and what is the case for or against them?
2. Bonds. How do they work and when would they be a good idea?
3. Roth vs. 401(k). Is after tax or pre-tax better? Some of both? If some of both, how much of each? If there’s no 401(k) match at one’s employer, is it best to skip it and go straight for the Roth?
To speak to financial education in schools, having been in secondary education for a number of years, it is true that financial education is sorely lacking. The main reason for this, that I can see, is because of state and federal “standards.” So much time is spent on teaching to these tests and benchmarks (which do not include financial education as part of their requirements) that there is virtually no time left for anything else.
I taught English, so whenever possible, like when we were doing a nonfiction unit for example, I tried to include reading on basic financial topics that would be of use to the students. Most do not do this, however.
March 27th, 2009 at 4:49 am
I’m wondering how (if at all) I should address the losses in my retirement accounts. Also, we’re planning on buying a new house soon. Any financial tips pertaining to those two items would be greatly appreciated.
March 27th, 2009 at 4:53 am
For Beth (Comment #5 above) about Roth vs. 401k:
As to the question of after-tax vs. pre-tax it comes entirely down to whether you think your current tax bracket is greater than the tax bracket you’ll have in retirement.
If you think the two are the same, then after-tax vs. pre-tax is a wash. Reason: Remember the commutative property of multiplication from 5th grade? Here’s a real life example!
However, there are generally going to be differences as to the two plans (401k vs Roth).
With a Roth you will have more investment options.
With a 401k you’ll (likely) get some employer match.
With a Roth you’ll have lower expenses. (Most 401k or 403b plans charge an administrative expense in the range of 0.5% to 1% of assets per year on top of the expenses of the funds.)
Hope this helps.
March 27th, 2009 at 4:58 am
I don’t know if this would be irrelevant to a lot of your readers, but I would love a US->UK translator (e.g. a Roth IRA and 401(k) are equivalent to what in the UK?) Might also be useful for other areas where you have a significant readership. Your blog is great, but sometimes I feel like I can’t follow your advice because I don’t know how to translate it across the atlantic.
March 27th, 2009 at 5:00 am
@Oblivious Investor — Thanks, that does help.
March 27th, 2009 at 5:09 am
UK stuff would be relevant to me, too
I’d also be interested in information on the safety/security of investments - “ring fencing”, saver protection, etc., to help choosing investment institutions and what happens if they go bust.
March 27th, 2009 at 5:19 am
I would be very interested in a discussion of the difference between APR (Annual Percentage Rate) and APY (Annual Percentage Yield) as they provide different numbers on the same financial transaction. It’s a flavor of fun with math that can be a bit misleading. I sort of get it but would like a discussion on the topic. Perhaps there are other formulas that you could include in the discussion.
Mark
March 27th, 2009 at 5:21 am
JD, what I’d love is a demystification of life insurance. Simple explanations of the different types, trusted (or highly-rated) providers. When you need it. When you DON’T need it. How and if it works in a same-sex relationship when living in a hostile state.
Actually a second topic would be financial planning in general for those in same-sex relationships. How to CYA and generally plan in an environment in which the gov’t is hostile to your relationship (which is true of the federal gov’t and most states in the US at least).
Thanks!
March 27th, 2009 at 5:22 am
I’d like to know more about different stock market transactions, like the difference between a regular purchase and short sale, etc. Most of what I read is filled with a language foreign to most everyday people.
March 27th, 2009 at 5:31 am
Adam: A short sale is simply borrowing a security, then selling it. (As opposed to most sales, which are of securities that you already own.)
It’s done in the hopes that the security will decline in price. If the price does go down, the short-seller can then repurchase the security at the new lower price, and give it to the institution from whom he originally borrowed it.
His profit will be equal to the total decline in price.
The danger, however, is that the price will go up! If it does, his potential losses are unlimited. (This is markedly different from normal investments in which you can’t lose more than you initially invested.)
March 27th, 2009 at 5:32 am
I would like to see advice for baby-steps investing — I have been setting aside money for my brokerage account, but it seems so daunting sometimes to save for months and months to meet the minimum to put into a mutual fund I’ve chosen, and then that’s what I’ve got, it’s not diversified outside of the fund. I’ve been picking index funds but it sort of feels weird to still have just one choice in there. Are there better options out there for people who haven’t got much (or are wary of doing much) to start investing in relatively small amounts?
Also, seconding WheelDancer at #11 — a commonsense primer talking about APR/APY sorts of issues might be interesting. Throw in a discussion of the different ways interest is calculated on, e.g., credit cards or savings accounts, and if you’re daring some of the equations used to calculate things like mortgage amortization. I’m actually taking a math class now that covered a lot of that stuff and it was really sort of eye-opening to be able to calculate my own amortization table and tweak figures, instead of just feeling like “this is too hard, I just have to blindly give the bank money and let them do the math.” Sort of a borrower’s toolbox of definitions and tools, maybe.
March 27th, 2009 at 5:32 am
Personally, I’d just like to know where to get started finding a financial advisor. I’m wary of banks because they tend to only offer solutions within their own products. Similarly, I am deeply suspicious (thanks to my parents) of mutual fund managers.
So… who does that leave? And where do they work?
March 27th, 2009 at 5:41 am
I would like to see a discussion about emergency funds. What do people really do about this (1 month, 3 months, 6 months)? Do they factor in Employment Insurance (here in Canada) when calculating how much it should be? How to trade off saving for this versus retirement versus saving for recurring expenses vs having some money for fun… There are so many pots to put money in, but I liked your recent post on the dangers of over-saving & would love to see what people do about actually finding a balance…
March 27th, 2009 at 5:49 am
I would like to see articles on how to read and understand company financial statements, morningstar reports, etc, so us laymen can get a better grasp on the strength of the financial institutions we trust our money with.
March 27th, 2009 at 5:56 am
I would like to see what investment mix in a 401K or IRA that the professionals recommend - split out by age groups. Whenever I try to do research in this area, it seems a bit daunting.
Also - homeowners insurance is something that I need more education. I know it differs by state but would love to know the steps to get educated on what you need and the different types of insurance.
March 27th, 2009 at 6:03 am
To speak on financial education in schools, I teach in one of the few states where personal finance is a required class before graduation. But, that doesn’t mean that the students’ best interest is being considered. As I was looking at open teaching positions in the area I saw a Personal Finance/Government position posted. I have a degree in Soc. Studies and am half way through the CFP program, so I thought I was a strong competitor for the job. When I called and asked about the position the first question that was asked of me was “Do you coach basketball?”
As the students would text WTF?
To answer your question J.D. I haven’t seen you post a lot on estate planning. I’m taking the course right now for my CFP requirement and that should be a huge consideration in every persons personal life/finances. There is a lot of money to be given to the government on passed on to families or charities depending on how prepared you are for your own mortality.
March 27th, 2009 at 6:05 am
Personal finance for freelancers!
Has anyone ever made a simple list (or detailed analysis, for that matter) of the financial pros and cons of being a freelancer rather than an employee (health insurance, taxes, etc.)? How does one create a budget on a variable income? We all know it’s critical to contribute to company-matched retirement accounts — but what if you’ve never had a job that offers such a thing?
I’m a freelance musician and music teacher: four semi-regular part-time jobs and lots of one-time gigs.
March 27th, 2009 at 6:07 am
How are the “basics” of personal finance different for freelancers?
Has anyone ever made a simple list (or detailed analysis, for that matter) of the financial pros and cons of being a freelancer rather than an employee (health insurance, taxes, etc.)? How does one create a budget on a variable income? We all know it’s critical to contribute to company-matched retirement accounts — but what if you’ve never had a job that offers such a thing?
I’m a freelance musician and music teacher: four semi-regular part-time jobs and lots of one-time gigs.
March 27th, 2009 at 6:09 am
I’d like to know about BUYING index funds, I’ve heard so much about why they’re good, but I don’t know where / how to pick them.
Diversification, what kinds of different asset classes there are and what I should be looking at picking.
ETFs: more information about them. I’ve always wanted to invest in ETFs but I don’t exactly know how they compare to index fund. (The bank says that there’s a fee for purchasing them, except if I go into DRIPs with them)
Thanks!
March 27th, 2009 at 6:10 am
sorry i duplicated my comment accidentally - #19 and #20.
March 27th, 2009 at 6:17 am
I’d love a really basic, beginner’s explanation of the stock market and all the lingo involved. Starting with a little of the history, and explain where exactly our money actually goes when we invest in different things like index funds, mutual funds, and a single stock. (and is it really “invest”, or should the right word be “buy?”
Also I would LOVE more info on socially responsible investing.
Thanks JD!!!
March 27th, 2009 at 6:27 am
My thoughts:
Life insurance: whole vs term
Who needs which and why?
Questions to ask when selecting a policy
————–
More about social lending…perhaps a critique of Pertuity Direct and how it compares to others.
Thanks!
March 27th, 2009 at 6:28 am
One thing that I’ve been interested in lately is whether the common financial ‘rules of thumb’ (e.g., 10-20% for retirement, 6 month EF, a house worth 2-3 times income, etc.) are applicable across income levels or whether people in the highest and lowest income ranges (and tax brackets) need modifications and if so, in what way. Relatedly, how does current net worth affect these rules of thumb? Our household income increased dramatically after graduate school, so while we now have a high income we have little net worth. Does that affect the financial advice?
March 27th, 2009 at 6:42 am
I’ll second the vote on how bonds work, and I’d also like to see ideas on how to build/manage an emergency fund when you live in a two-income household and can cover all the needs and a few wants on one income - the “x months income” rule doesn’t really seem to fit.
March 27th, 2009 at 6:48 am
@ Writer’s Coin and the Other Ann (#3 and #5)-
Some of this stuff is taught in schools as an option. Personally, I volunteer with Junior Achievement to teach kids about the basics of economics. I find the kids are more receptive than the adults I sometimes coach as a personal favor.
March 27th, 2009 at 6:50 am
I would be really interested in a post on revocable living trusts and other estate planning. Also, I hear talk of diversification all the time, but I would love different examples of how people have wisely diversified.
March 27th, 2009 at 6:52 am
I would like to know about how the “Power of Compounding” effects stocks.
Example: I buy a 100 shares of a mutual fund (w/no dividends)at $10 and hold it for 30 years. It then is at $50 when I sell it at retirement. So all said in done, I make 4 times the initial principal and make only $4,000 profit. Not near the amount that is showcased by compounding.
I understand that dividends might actually be considered compounding, but considering they constantly change and don’t usually hold the magic 5% - 8% guarentee for as long as you hold it, it certainly wouldn’t show the full effect.
So how does compounding actually work for stocks? Thanks.
March 27th, 2009 at 7:05 am
I would like to know how to get started in investing. I really don’t know much about it. I have some money in a Canadian money market (I live in Canada), but other than that I don’t really know what to do when I get out of debt and am really looking to invest.
March 27th, 2009 at 7:07 am
A couple people have mentioned life insurance — I definitely agree. I always get the feeling that I’m being marketed snake oil when reading about life insurance or talking to agents. And I haven’t been able to find any good, *unbiased* explanations of the different types and what’s good for whom.
Are rates fixed at the level you enroll, or do they fluctuate (increase) as you get older? It seems some life insurance policies have current “cash value” — what’s this all about, and what good does it do me?
I have/can buy pretty large supplemental life insurance policies through my employer. From what I’ve seen, my employer’s supplemental life is cheaper than the term life options available elsewhere. Should I also/instead have my own policy?
Including examples of what one might expect to pay for different levels and types of coverage would be useful. Even if the specific example doesn’t apply to everyone, it seems like the relative difference in premiums would be instructive.
March 27th, 2009 at 7:08 am
I would love if someone could explain why sometimes we have to “recharacterize” our Roth IRA contributions into a traditional IRA? What exactly causes that to happen, and is it good or bad that that happens?
Thank you!
March 27th, 2009 at 7:09 am
It may be worth creating an introduction document.
This would go through the basics of financial awareness in one line sentences, with links to previous articles.
Then separate posts could be done, writing about what people want to know about, but hasn’t been covered previously.
This introduction, would also be helpful to you to find out areas you may have missed.
At the end of the month you could even pull all of these articles into a downloadable PDF.
March 27th, 2009 at 7:12 am
I would be interested in practical advice on how to survive a total economic collapse or the collapse of the dollar. I’m not really an alarmist, but as things seem to get worse and worse I think it would be a good idea to be somewhat prepared. We are a one income family of very modest means with about a six-month emergency fund. My husband has been talking a lot lately about buying hard currency such as gold or silver coins to use in the event of the dollar collapsing. I hesitate to take our emergency fund and put it into something not easily liquified. In the meantime, we have been brushing up on our basic skills such as: cooking, baking, gardening, mechanics, carpentry as I think these skills and others will be much more valuable than money in the event of a collapse. What are your thoughts on the likelihood of economic disaster and what can we do to prepare ourselves if it does happen?
March 27th, 2009 at 7:16 am
Also, any ideas / thoughts on long term care insurance? Who needs it? How do you consult with your parents to see if they are covered or have adequate savings, etc? Thanks!
March 27th, 2009 at 7:20 am
Please more information on aligning your money with your values like with Socially Responsible Investing
Thanks - Cliff, GreenMoney.com
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March 27th, 2009 at 7:27 am
After last night’s discussion, would it be beneath GRS to cover the basics? It may be just the thing that parents need to start the discussion with their kids.
• How to balance a checkbook and track your spending
• How to write a check (yes, I have seen teenagers have problems)
• How do credit cards work
• How to compare mortgage rates for the long term
March 27th, 2009 at 7:27 am
I would like to know more about how to get good, affordable life insurance for the chronically ill (like Type 1 diabetes) who are quite healthy except for being chronically ill.
March 27th, 2009 at 7:34 am
I would like to know if it is better to pay off your mortgage and invest only a little in the market, or only invest in the market with a little towards your mortgage.
March 27th, 2009 at 7:38 am
I’m currently a law student and my boyfriend and I are considering buying a house within the next year or two. So I’m curious about issues that relate to these circumstance such as saving up for a home, trying to budget/save while you’re still in school, or how much sense does it make to buy a house if you’ll be using student loans for the monthly payments.
March 27th, 2009 at 7:40 am
I’m interested in knowing more about pros and cons of different retirement funds. I know the basics, but have a difficult time knowing if what I’m doing (20% to a 401k; nothing yet to an IRA, Roth or otherwise) is the right thing for me. I’m 28 and want to make sure I’m on the right track for me before I get any closer to retirement. I know I can research this stuff myself, but I haven’t because, well, I guess I’m a little lazy. And intimidated.
Thanks for asking!
March 27th, 2009 at 7:43 am
I stumbled across your blog 3 weeks ago and am now hooked. I am single, early 30’s, good job with good pay. I am now at the point where I have no debt outside my house and a good start on a nice savings nest. I am in good shape retirement wise. And am able to live a comfortable but reasonable lifestyle.
Here is my question/dilemma: My parents are self employed and my dad has never been one to save in the fat years, now with the current economy things look pretty bleak for their retirement. I have the ability to put 400.00 a month toward something for them and am not sure what would be best. I figure I have 10 years to do this and the case may be they will not need it and I will benefit. I need some ideas on what, where and how to put this money to work for them.
March 27th, 2009 at 7:58 am
I think you should do a post on life insurance. When and why you need it, that it is not a savings vehicle, etc.
March 27th, 2009 at 8:04 am
I’d like to see information on starting a business (side-gig or otherwise). What are the concrete steps to get done before you hang out your shingle? If you have the motivation and time, but need a way to generate ideas, what are some good tactics? What pitfalls would experienced entrepreneurs caution you against? How to minimize risk in the beginning so you aren’t “all-in” with your finances until it hopefully pans out?
Second the votes for: Basic stock purchasing steps and terminology, strategies to survive a meltdown or inflation frenzy, and the examination of “rules of thumb” and how they apply across income levels.
March 27th, 2009 at 8:04 am
How about something on how to read a financial prospectus? I get totally lost when trying to evaluate a company for its investment potential.
March 27th, 2009 at 8:04 am
Things I would be interested to learn more about:
1) 401k vs. Roth 401k, my company has both and I know the differences, but sometimes it’s hard evaluating which is best for me. How do I evaluate what my tax rate will be in retirement?
2) Best ways to build credit while you are young and your problem isn’t bad credit, but lack of credit.
3) Asset allocation in 20s, 30s, 40s, etc. and which is best for each age group.
March 27th, 2009 at 8:05 am
JD, I’d be curious to know more about the process of buying a foreclosed home. What things does one need to look out for (such as tax liens). What are other ways of saving money on purchasing a home (such as doing a short sale). I already have a home, so this won’t really help me, but I think it may be a useful part of our recovering economy… and I’ve always been curious about it.
I’d also second Christy’s suggestion about de-mystifying life insurance, but I’d take that a step further to all insurance. Whenever I change my insurance coverage I feel like I’m walking a fine line between the less expensive options and the coverage my agent recommends.
@Christy - I am not really sure you need to do anything different in regards to having a same-sex partner as your life insurance beneficiary. I’m currently not married so I’ve designated my father as my beneficiary. All I needed was his SSN and name.
March 27th, 2009 at 8:08 am
I would like to hear from teachers (maybe a guest post? who teach this stuff in class and how they do it. I am an Economics teacher looking for ways to incorporate more Personal Finance into the curriculum)
March 27th, 2009 at 8:20 am
I’d like to see an in-depth article on municipal bonds, their tax ramifications, typical returns, risk involved and where the heck you buy the things.
I *think* they’re tax-free, but if that’s the case, do you get a 1099 for them, or do you not even count it on your return (which seems odd in the face of big brother)? Do these behave like CDs, tying you in for a time-period?
You’ve mentioned them in passing before, but a dedicated, highly detailed article would make me happy.
Thanks JD! I’m a huge fan of this site.
March 27th, 2009 at 8:37 am
You may have written about these already, but…
1. Life Insurance Policies, cash-value (bad?) vs. term (good?)
2. Retirement savings for people in their 20’s who don’t know where to start and don’t have 401k options (me).
3. Maybe a good review about a book for first time homebuyers.
4. Saving for care of others who are incapacitated adults.
In case you can’t tell by my posting, I am in my 20’s, will be caring for both my adult brothers when my parents are no longer around (and I am debt free January 2010!)
March 27th, 2009 at 8:39 am
How about the differences between
- Capital Gains and Cash Flow
- Preferred Stocks
- Mutual Funds
- Hedge Funds
- Difference between Stocks and Bonds
Now am I asking for too much?
March 27th, 2009 at 8:39 am
@Christy. I think you should be okay as life-insurancce beneficiary as well. I have my domestic partner/boyfriend as my beneficiary, and I just needed their name SSN, and then for changing the form, it did have to be notarized because I didn’t change it at their office.
March 27th, 2009 at 8:39 am
I’m with Sabrina. I would really like to see a plan for beginning investors with a “baby steps” approach. I know the we can use “The Power of Small” philosophy to guide our financial decision making process, but when it comes to the nitty gritty of simple things like how to buy stocks and what are good first time investments, I could really use some help. Basically, I would love to know the answers to those simple questions that us finance newbies are too afraid to ask!
March 27th, 2009 at 8:40 am
I saw several requests for info on life insurance, but a discussion on other forms of insurance (auto, home, etc.) would be equally valuable. The details of those policies are often difficult to understand. I worry that I’m missing something and won’t discover that I’m underinsured until after a disaster occurs.
I think I could also use some articles on how to boost human capital. I have a college degree that is of limited value. Since graduating I’ve worked some lower end white collar jobs and am now a stay at home mom. What sort of things can I do in the next five years, while I am not working, to improve my future career prospects? Learn a particular computer program? Study Spanish? Join a service organization to make connections? I need practical advice on how to deal with a stalled, dead-end career.
March 27th, 2009 at 8:41 am
I’m interested in ETFs, because I hear a lot about them. I’m very interested in preparing myself for potential inflation, which I expect may follow the current crisis. I’d also love to know about how others plan for Katrina-style emergencies, in terms of their finances. (Do they keep data in online vaults, send it to a relative for safekeeping?)
Thanks, JD.
March 27th, 2009 at 8:43 am
I’m always interested in budgeting/cash flow optimization (while continuing to put money in all the necessary spots like 401K, etc., of course). I like the “real” stories on how it’s done with day-to-day examples. I know how you divide annual payments into 12, etc. I know there are spreadsheets (and lots of them!), but want more of a working example of the best way.
Shirley
Shirley
March 27th, 2009 at 8:59 am
1. I’d like to know more about retirement investments beyond the 401(k), and their tax ramifications. I am now hitting the 401k max each year ($15,500) so I can’t contribute above that. But I can put money into another retirement fund. Do I just do a standard IRA and pay taxes, or is there a smarter option? In the meantime I’m just overpaying my mortgage but I feel sort of at sea here.
2. Wills. Can I truly write up my own will and have it be binding, or do I need to pay a lawyer? Are any of the online or will “kits” really reliable?
3. Emergency funds. Can I include unemployment when figuring out my 6-month cushion? I am not someone who is likely to be fired, so I feel like job loss would almost certainly be a layoff or closure, making me eligible for unemployment. If your EF needs to be over $20K, doesn’t it become inefficient to keep that money in a high-interest savings account? How do people handle this? Maybe keep 3 months’ worth in savings, the rest in a rolling 3-month CD since you’ll have time to access it?
4. Marriage/relationships and money. There have been postings about parents and siblings, but not much about spouses or spouses-to-be. I am struggling with that right now — can two people who treat money so differently really have a successful marriage? It’s the biggest cause of divorce (or so I hear) and I would love to read real-life stories or hear advice from people who “made it,” or didn’t. I’m in a relationship that is moving towards marriage; I am very responsible with saving/spending, and my partner is over 10K in debt, has almost no savings, and is not actively trying to change that. When I try to talk about money, it comes off as judgmental.
March 27th, 2009 at 9:01 am
In reference to teaching in school. I do think that personal finance is just as important as any of the life skills they teach in school. (Do they even do that anymore?) I am a strong beliver that like most things, it needs to start at home. Although I am sure they will make mistakes too, I started teaching my kids about money at about 5 years old. I taught them about earning and paying interest (we used candy as an example) and very early they learned what happens when they buy a toy on “credit”. It might be intersesting to see what people think are the biggest mistakes they made and how to teach their kids to not make them too.
March 27th, 2009 at 9:14 am
I’d like to hear about all the different financial software that surely must exist out there. I know about Quicken and MS Money and using spreadsheets. I’m looking for something that can include virtually unlimited “what if” scenarios for retirement planning, Monte Carlo simulations, and that’s expandable/adaptable for the many different types of income and expenses people have.
@Jen #36 I had to recharacterize this year because my MAGI turned out to be above the limits for Roth IRA contributions. I’d say that’s a good thing because the income was too high, and a bad thing because now I will have to pay taxes on the money when I convert it back to a Roth IRA in 2010 when the income limits are reduced to zero. The other reason you would recharacterize is if your investments dropped after you made the contribution. You can find many good explanations for recharacterization at most big financial company websites.
March 27th, 2009 at 9:17 am
First, let me apologize right off the top for the length of this post. Second, I was a History major in college, so my first two questions (or suggestions) are a bit more detailed than the rest.
1. All my life I’ve heard that Thomas Jefferson ran into financial difficulties after he left the White House, but I have found very little material that discusses how Jefferson (mis-)managed his finances. I’ve found a reputable biography (from 1981) of Jefferson’s twilight years, but I have yet to read through it as my local library has requested an out-of-state copy. I’ve also found a citation for a 1987 doctoral dissertation which is a “financial biography” of Jefferson, but the copy available is at the University of Virginia, which does me no good since I live in Louisiana. At any rate, if someone with the intellect of Thomas Jefferson can go into debt late in lfe, then anybody can go into debt. I wonder if any history teachers or social studies teachers out there might have any insights into the financial mistakes that Jefferson made and how those mistakes can be avoided.
2. On a somewhat similar note, I’ve heard pundits and other talking heads on TV lately cite a statistic that I’ve heard many times before. In 1933 at the pinnacle of the Great Depression, unemployment stood at 25 percent. It’s often occurred to me that if 25 percent of people were UN-employed in 1933, then that ought to mean that 75 percent of people *were* employed in 1933. Likewise, FDR’s line (if I’m recalling it correctly) about “one-third of a nation ill-housed, ill-nourished, and ill-clothed” ought to mean that two-thirds of the people were survivng and perhaps even thriving during the Great Depression. What exactly were these 75 percent and/or two-thirds doing to weather the Great Depression, and why is it that we never get to hear that side of the story?
Now on to (hopefully) lighter things.
3. IRA’s: Once money is deposited into an IRA (traditional or Roth), exactly what is done with that money? How is that money actually put to work “behind the scenes”?
4. How wise is it to make foreign investments with one’s money? What ramifications could I expect (with regard to taxes, for example) if, say, I put some money into a Canadian money market and *don’t* live in Canada?
5. Much has been said and will continue to be said about stocks and bonds, but has GRS ever posted anything on commodities? Just how does one buy into the commodities market, and is it worth the time and trouble?
6. State and federal tax refunds: aside from an IRA, what is the single best thing to do with them?
And finally . . .
7. Gold: exactly how does one go about buying gold as an investment?
March 27th, 2009 at 9:21 am
Thanks for all of the great suggestions. I just wanted to drop a quick line to let you folks know that I already have guest posts on a few of these topics: life insurance, reading a prospectus, and teaching financial literacy in a classroom. It’s awesome that you guys are requesting these, because I know for a fact your requests will be fulfilled.
March 27th, 2009 at 9:35 am
I would like to learn about how to speak to my parents about their finances when they have no concept of what their net worth is and one is “afraid” of talking about money. I have one parent that handles the money & the other has no idea about it.
I have tried to broach the subject many times but can’t seem to get through to them.
March 27th, 2009 at 9:43 am
I think it would be great to talk not just about how to set up a budget, but how to set up some of the spreadsheets to help keep track of the budget. I know there are plenty of programs out there to help with money management, but they rarely do what I want. I *know* there must be a way to set up things pretty easily in say Excel, but a quick tutorial on how to do this would be fabulous. It doesn’t even have to relate to a budget… some of the spreadsheets you’ve mentioned for figuring out different scenarios seem really valuable, and yet I’ve no idea how to go about constructing them.
March 27th, 2009 at 9:48 am
Sorry if someone else posted this as I did not read through all of the comments.
How to get a Will done cheaply. Through a lawyer or go the online or software route? Also for power of attorney and any other legal documents I should have done. Got the term life insurance I just need to get the other stuff done!
March 27th, 2009 at 9:49 am
I couldn’t read all the responses, so I pray I haven’t repeated, but here is one: “Never again, will I be in a position to lose 50% of my money. There MUST be a way to see the “big picture” and lighten up on areas that are over valued, but still enjoy an average return at least approaching that of the market as a whole.” (Ben Stein approaches the subject pretty will in “yes, you can time the stock market”) — But I’d LOVE to hear some simple strategies that require a little though, and don’t just focus on keeping alot of money in cash and short term bonds.
March 27th, 2009 at 9:49 am
I think an article on how to financially plan for a growing family would be great.
March 27th, 2009 at 9:53 am
I’d also like to see a basic interpretation of stock market terminology. I don’t understand most of the lingo. For example; What exactly is a P/E ratio and how should it be weighed when deciding to buy a stock.
Like Cely, I’d also like to read more about something about Money and relationships. More specifically, on Ex-spouses and Bankruptcy. My boyfriend’s ex has filed and it’s causing him all kinds of problems. Loans and credit cards with which he’s up to date with paying are being seriously affected. I’ve been trying to educate myself, to help him, but I’m having trouble finding good information of what he can do and what are his rights.
BTW, JD your site is great. Keep it up!
March 27th, 2009 at 9:56 am
@T.K.- comment 64
My understanding is that Thomas Jefferson had financial problems pretty much his whole life, but the consequences of his financial neglect came to a head in his later years. He was an incredibly bright man with grandiose ideas who did not wish to be bothered by pesky financial details. One interesting bit of trivia: Many people wonder why Jefferson did not free his slaves as he professed to be morally opposed to the institution of slavery and spoke out for it’s abolition while the laws of the new country were being crafted. In short, he couldn’t because they were considered a part of his estate which was heavily mortgaged.
It is easy to avoid Jefferson’s fate. Live beneath your means.
March 27th, 2009 at 10:08 am
I think I’d like more information on estate planning and wills. At what age to get one, “home made” with a kit vs. created by a lawyer, etc. I’ve just entered my 30’s and have started to really think about that.
Also, I’d love a US-UK-Canadian (especially Canadian) translator (e.g. a Roth IRA and 401(k) are equivalent to what in Canada and in UK?).
And finally more on life insurance, when to get it, when not to get it, etc. Thanks for asking J.D.!
March 27th, 2009 at 10:09 am
I will echo Krystal (#54) with the request for how to handle saving to care for someone who will continue to need full-time care as an adult. We have a special needs child who falls into that category. We did start a college savings plan when he was a newborn (before diagnosis) and are working towards setting up a special needs trust to move that money into. I did talk to our investment advisor recently about this subject, but would appreciate another take on it.
March 27th, 2009 at 10:27 am
RE: #64 by TK…
I agree with his request about positive information from the Great Depression.
March 27th, 2009 at 10:35 am
I know a lot of people have mentioned bonds, but my problem is the US Bond website. I’m never really sure how to navigte through it, I suppose. I ended up getting a bond fund, but I’ve read that buying them that way isn’t the best way.
Also, if anyone has any help with people leaving the workforce to go back to school knowing they would take a huge pycut, I’d love to hear it. And JD, you’re transistion to a full-time writer is an inspiration! Thanks
March 27th, 2009 at 10:44 am
I’ve just started using Quickbooks this year, and I’d like to see write ups on 1)basics 2)tips on what parts you’ve found useful 3)report generating — what’s most useful, why, and how to generate them. It might be good to have personal vs. business use separate.
Thanks!
March 27th, 2009 at 11:02 am
@Oblivious Investor (#16)
The ‘unlimited loss’ on short sales is kind of a fallacy. Anyone who trades on both sides should have a bit of an understanding of other parts of the trade.
As a very successful trader once said, “The risk is the same either way, because I always cut my losses once they reach 7%.”
And my question: Given the state of credit markets, how important is good credit? What can you do without it?
March 27th, 2009 at 11:14 am
Thanks for asking for our ideas.
I’d like to learn more about retirement savings options for people that are self employed. IRA, ROTH IRA, SEP IRA, 401k what are they best choices for a sole proprietor without employees?
Most articles about retirement savings are written for employees.
Thanks,
LindaB
March 27th, 2009 at 11:47 am
J.D.
I realize that this is a personal finance blog, but I think it might be beneficial to every once in a while to post an article that deals with basic macroeconomic principles. I think very few people have a good grasp on the bigger picture. They make decisions that seem good at the time, but come back to bite them years later. This is particularly true of our governing representatives. Maybe if fewer people were hoodwinked by politicians (some well meaning, some not) we could prevent many economic disasters from happening in the first place. Our current economic melt down has its roots in urban planning laws, anti-discrimination laws, and the feds push for an ownership society (Fannie Mae, Freddie Mac). Likewise many laws aimed at helping people during the great depression probably deepened it. I find the short term viewpoint of many people to be utterly maddening.
If you don’t want to do this kind of article, maybe you could add a basic economics category to your top recommended books section. My favorites are Basic Economics, Applied economics: getting beyond stage one thinking (both by Thomas Sowell), Free to choose (Milton Friedman), and the granddaddy of all economics books Wealth of Nations (Adam Smith). I think Alan Greenspan’s Age of Turbulence had some value too although it is not a straight economics book.
March 27th, 2009 at 11:51 am
I’m relatively new to this blog (and I’m loving it) and I don’t know if you’ve covered asset allocation in the past, but I would like to know more about it. I am currently in the “wealth building” phase and am in my mid-30s, and I’d like to know the best methods for periodic asset allocation to make sure I’m getting the most of my investments.
I think, as you move through this stage in your own life, you would do a great job of writing about it.
March 27th, 2009 at 12:06 pm
I just started reading your blog, and I think your perspective is already very different and more intellectual than other personal finance resources. Do you have any advice for ways to keep track of and organizing daily expenses? I ask because we recieve receipts for purchases all the time, but the purchase can also show up on your monthly bank statement because most of my purchases are made with my debit card. Which is more important for record-keeping? Should I be using this information in other ways pertaining to my personal finance and/or budget?
Thanks.
March 27th, 2009 at 12:07 pm
This may be a bit far-flung for personal finance, but I would like to learn about alternative investment approaches that largely bypass middlemen and the crooks, er, bankers on Wall Street. For example, do lending clubs or microloan ventures deliver what they promise? How do you go about evaluating them? Thanks, J.D.
March 27th, 2009 at 12:14 pm
I want to know why a Roth IRA is supposed to be WAY better than a traditional 401(k). Some financial people on TV almost make it sound like a sin if you aren’t FULLY funding $5000 a year into a Roth. I don’t get it!
Lets say I have exactly $5000 of after-tax money to put into a Roth IRA. This is after all the taxes and everything come out.
I am in the 25% federal tax bracket, meaning every dollar above $33,950 gets taxed at 25%. If I instead were to put $6666 (which is the pre-tax amount of $5000) into my tax-deferred 401(k) and let it grow, then take it out when I retire and be in the same tax bracket, it doesn’t seem to me like the money would be any more or less AFTER taxes.
What is the deal?
March 27th, 2009 at 12:19 pm
INSURANCE:
Term Life, Whole Life, Disability ADD etc
Car - How to find a good one that fits your needs
Health - Where to go if you are self-employed, retired, etc
Home/Renters - How to find the right coverage
Pet - We have the Pet Wellness plan from Banfield. Is there a better option?
WOULD ALSO LOVE TO SEE REAL LIFE SUCCESS STORIES OF GOING BACK TO BASICS AND BUILDING WEALTH OR GETTING OUT OF DEBT ETC.
March 27th, 2009 at 12:22 pm
I’d like to know how to make the most of a crappy 401k offering.
Right now, I have my $ in the funds with the lowest expense ratios, but is that as important in a 401k as it is in an IRA or a taxable account?
Bogleheads advocate an all-bond 401k, but I don’t understand exactly why.
My employer used to offer a 50% match (sweet!) but won’t match at all this year (unsweet!) so I’m trying to figure out the best course of action.
March 27th, 2009 at 12:53 pm
Dividend investing. Is there a place for it in the “normal” person’s portfolio (someone with index funds)? How do you find and pick them? How do dividend funds work? What are the tax ramifications? Can you have them as part of a retirement account? How do you buy stocks directly from companies?
I’d love to hear the point of view of individuals who have a lot of this type of investment as well as what the “experts” think.
March 27th, 2009 at 12:59 pm
I’ll also second Krystal’s “a good review about a book for first time homebuyers” and, while certainly not “basic”, I’d also be interested sometime in Matthew’s request for practical info about finding/buying a foreclosed home.
And back on the insurance line of thought — flood insurance? I live in a low risk area, but a little creek runs behind my house. If something were to clog up the drainage route for the creek causing it to flood my house, I gather I’m SOL without flood insurance. Flood insurance for this remote possibility costs nearly as much over again as my homeowner’s insurance. Is this really worth it?
March 27th, 2009 at 1:04 pm
to quote a very small mind in a very different field: I don’t know what I don’t know.
I found your recent explanation of marginal tax rates very helpful. This was something I did not no existed before you posted on it, and now I feel like I understand it well.
Something I know I don’t understand is strategies for college savings.
March 27th, 2009 at 1:04 pm
I don’t know what I don’t know.
I found your recent explanation of marginal tax rates very helpful. This was something I did not know existed before you posted on it, and now I feel like I understand it well.
Something I know I don’t understand is strategies for college savings.
March 27th, 2009 at 1:24 pm
@LindaB (#79): Here’s an article explaining the retirement plan options for self-employed individuals (in the US that is).
http://www.simplesubjects.com/tax/business-retirement-plans-sep-vs-simple-vs-keogh.html
March 27th, 2009 at 1:26 pm
To all the Canadian investors asking about retirement accounts, one of my favorite bloggers has a reference on it here:
http://www.four-pillars.ca/resp-reference/
I’m not Canadian, so I don’t know much about it, but Four Pillars writes good stuff.
Hope that helps.
March 27th, 2009 at 1:45 pm
Similar to Jessica’s question (23) - I’d like more info about budgeting with reduced or variable income.
I was recently laid off and received a large severance package. That $ and what I can pick up from contract jobs will need to last me until I’m able to file for unemployment or find another position.
In the past, I’ve had quite a bit of discretionary income each month so I’ve only played at budgeting (Real spending never matched the plan). So going from that lifestyle to having to stretch my severance & 6 month emergency fund over a potentially long period of time is quite daunting. Any tips you can give to ease that transition would be appreciated.
March 27th, 2009 at 2:07 pm
For Financial Literacy Month, I’d like to see columns on two topics:
1. How do people stick with a financial plan over a long period of time?
2. Do people find joy in sticking with a financial plan?
My wife and I have no debt except our mortgage. We make double payments on the mortgage, live on a budget, and invest 15% of our income. None of this is fun.
March 27th, 2009 at 2:32 pm
Information on estate planning, revocable & irrevocable trust would be great. This site is a wealth of great information on financial planning for our lives & retirement, but what about moving beyond retirement to our future generations etc.
March 27th, 2009 at 2:34 pm
JD, has anyone ever told you that “YOU ROCK!?” YAY for financial literacy month!
I’m in my mid 40s, I’ve read some books, and I’ve really tried to comprehend the basic investment info - bonds, treasuries, muni’s, Roth vs traditional IRA, but it does get extremely confusing. There was nothing taught in highschool about any of this! Nada, zip, zilch.
I’d love to understand more about the basics of: Bonds (including the different ratings), ETFs, Treasuries, etc., and how to purchase these things directly versus through an advisor. I’m also interested in options for the self employed, and how exactly a SEP IRA functions. My fiance is self employed.
Example budgetary spreadsheets would rock, I’m a techno dork at that.
Between my employer contribution and my own efforts, I’m saving 18% of my income for retirement (including maxing a Roth) and I have one RE investment property. Yet I feel panic stricken thinking about retirement!
Best to all - enjoy the weekend.
March 27th, 2009 at 2:41 pm
Agree that GRS already does a great job of informing readers, but found a number of topics listed by readers that i could stand to learn more about.
good for GRS.
March 27th, 2009 at 3:42 pm
Great suggestions above…
I would love to see the posts requested in #’s 8, 14, 40,81, 94 above. Another topic I think would be interesting - how to be frugal without being obsessed with money & having it taking over your life.
March 27th, 2009 at 4:51 pm
I guess I don’t really need it now because I just finished John Bogle’s mutual fund book and am picking up “mutual funds for dummies” tomorrow with a Borders coupon.
But I would love a post “What to do when you’re presented with your company 401k/403b/SEP plan documents.” Having just made the decision I’d be happy to put in my two cents.
I am planning to index my roth IRA and had read up on that surprisingly little information was useful when presented with a fixed list of available fund families. And a lot of the information out there is “How to pick the best mutual funds!” Or “Indexing is the only way to financial peace.” But no: “So, your 401k options stink, here’s how to pick the best of a bad lot.”
March 27th, 2009 at 6:37 pm
@ObliviousInvestor:
Thank you so much. I think that may be what I need.
LindaB