When I was 13, my mom had me invest in my first stock. She sat me down and let me pick one stock that I thought would be a good investment. I chose Disney, and it was, quite frankly, a dud. But it helped me learn about investing, something I believe everyone should have some familiarity with.
My mom is a lady whose moods go up and down with the stock market, Babs (mostly known as Barbara to everyone but me) taught me from an early age about saving, a lesson that has stuck with me to this very day.
I am by no means a financial wizard but I have three tips that I think have helped us out greatly in our quest to be financially savvy. We are 34, so I’m sure these will change as we get older and focus more on retirement rather than paying for a home and childcare.
1. Live on one salary, even if you have two (this is a tip for pre-kids, once you have kids all bets are off)
My mom would always regale me with stories of when she and my dad were first married (at 22!) they pretended my mom didn’t work. They lived exclusively on my dad’s salary and saved every penny my mom brought home (she’s an accountant and actually made more than my dad in the 70’s #girlboss). This allowed them to put down a large down payment when they bought their first house which made their monthly mortgage payments much smaller.
Ryan and I followed this rule and lived on his salary when we were first married, treating my salary like it didn’t exist. This came in handy when Ryan decided to get his MBA — we had the savings to help pay for some of it without having to take out loans.
Now, it was helpful that Ryan had bought a condo before I moved in so he already could afford it on his own. If we had bought a condo together, I’m 100% certain we would have spent more and gotten nicer bathrooms or a bigger deck or something. However, did we need those things? Not even a little. I tell him all the time how glad I am that we didn’t overspend on our first housing purchase.
(Another little tidbit, we took out a 15-year mortgage which worked really well as we paid down a decent amount of principal in the five-years we lived there. Even though we sold it at a loss, we still had some cash from the sale we were able to put into our next home’s down payment.)
2. Make friends with Jim Kramer (or at least watch his show)
Should you be lucky enough to amass a small amount of savings, chances are you’re going to want to invest it in the stockmarket. Be knowledgeable about it! Learn everything you can.
I can give no real tips here because I still refuse to make any stock purchases without running them by my mom first, but I did make an effort to learn a little bit about ETFs vs. Mutual Funds vs. individual stocks.
A lot of our invested money goes into IVV, which is the S&P 500 ETF. This is a fund that tracks the S&P 500 which is very closely linked to the U.S. economy. If the economy is doing well, IVV will most likely do well. If the U.S. economy in the dumps, IVV is not likely to do well. This is not a sexy way to invest. It is fairly steady and while it has ups and downs, it’s a long-term investment. A set it and forget it if you will. Our hope that is in 30-years we will have made a steady but not crazy return.
We also invest in a few other ETFs including IBB (a biotech fund – which is currently sucking (pardon my language)). We bought it a few months ago and it’s down quite a bit. Such is the wild ride of investing.
If you want to go the sexy route, that’s when you look for the next “big” stock. This is, it seems to me, how you lose a lot of money. For example, I was super into Chipotle and bought it right before the ecoli scare. It is STILL down 33%. I have no idea if it will ever rebound. However, if I had bought Chipotle when it first was offered, I’d probably be very rich.
Buying these one-off stocks (rather than an ETF or mutual fund which has many, many stocks combined) is basically like playing in Vegas. It’s a total crapshoot. (I will say we bought some Facebook at its very lowest and currently have a 430% return, so there are some winners out there.)
Bab’s tip to learn more about the markets would be to watch Jim Kramer and his show, Mad Money.
There is SO much more to learn about the stock market including diversifying, but these are the very most basic of the starter points.
3. Be able to answer this question: How much did you spend on groceries last month?
Tracking our spending is the most important thing we do when it comes to saving. I’ve tried a few ways to track our money including Mint, but I always end up back at Quicken. Mint is free but I find it so difficult to use, while Quicken feels very intuitive to me.
I liken tracking your spending towards writing down what you eat. You are just more conscious of it. And the best part of using a tool like Quicken is once you set it up you only need to look as often as you want. It works automatically. I try to take a peek once a week to make sure we are on track with our goals but sometimes I’ll go a full month and then be shocked to see how much we’ve spent.
Also with Quicken, I can go back over months or even years and see how much our spending has gone up or down, what our main expenses have been — like if my Nordstrom habit is getting out of hand, etc. It’s a great way to remind ourselves that we need to cut back on eating out, or even just see how much we spent on a vacation. Everything is put into categories so it’s easy to see.
As my granny used to say, money makes the world go round. It’s so important to everyone’s daily lives and it makes me so frustrated that nobody really talks about it. How are we ever going to learn about investing and saving if nobody will talk about it? So I’m putting it out there.
These are my tips, what works for us. Do you have any tips? What have you done that has either worked for you or been a huge failure?
Image via here.