Money Magazine's "25 Rules to Grow Rich By"

article: http://money.cnn.com/magazines/moneymag/moneymag_archive/2006/11/01/8392426/index.htm

Home
1 For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.
2 It's worth refinancing your mortgage when you can cut your interest rate by at least one point.
3 Spend no more than 2½ times your income on a home. For a down payment, it's best to come up with at least 20%.
4 Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.
5 Never hire a roofer, driveway paver or chimney sweep who is going door to door.
Invest
6 All else being equal, the best place to invest is a 401(k). Once you've earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.
7 To figure out what percentage of your money should be in stocks, subtract your age from 120.
8 Invest no more than 10% of your portfolio in your company stock--or any single company's stock, for that matter.
9 The most you should pay in annual fees for a mutual fund is 1% for a large-company stock fund, 1.3% for any other type of stock fund and 0.6% for a U.S. bond fund.
10 Aim to build a retirement nest egg that is 25 times the annual investment income you need. So if you want $40,000 a year to supplement Social Security and a pension, you must save $1 million.
11 If you don't understand how an investment works, don't buy it.
Plan
12 If you're not saving 10% of your salary, you aren't saving enough.
13 Keep three months' worth of living expenses in a bank savings account or a money-market fund for emergencies. If you have kids or rely on one income, make it six months'.
14 Aim to accumulate enough money to pay for a third of your kids' college costs. You can borrow the rest or cover it from your income.
15 You need enough life insurance to replace at least five years of your salary--as much as 10 years if you have several young children or significant debts.
16 When you buy insurance, choose the highest deductible you can afford. It's the easiest way to lower your premium.
17 The best credit card is a no-fee rewards card that you pay in full every month. But if you carry a balance, high interest rates will wipe out the benefits.
18 The best way to improve your credit score is to pay bills on time and to borrow no more than 30% of your available credit.
19 Anyone who calls or e-mails you asking for your Social Security number or information about your bank or credit-card account is a scam artist.
Spend
20 The best way to save money on a car is to buy a late-model used car and drive it until it's junk. A car loses 30% of its value in the first year.
21 Lease a new car or truck only if you plan to replace it within two or three years.
22 Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower.
23 Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance.
24 Don't redeem frequent-flier miles unless you can get more than a dollar's worth of air fare or other stuff for every 100 miles you spend.
25 When you shop for electronics, don't pay for an extended warranty. One exception: It's a laptop and the warranty is from the manufacturer.

Get Rich Slowly Book Review

...just read the book review of "Debt is Slavery" from the blog Get Rich Slowly and I must say it was a great review because he summarized all the key points and explained each very well. I'm going to list each point but honestly, to appreciate the post, please read it: http://www.getrichslowly.org/blog/2007/08/07/book-review-debt-is-slavery/

Get the book here:


Here are the points:

1. Debt is slavery.
2. Money is time. (see the book Your Money or Your Life)

3. Possessions are a prison.
4. Don’t let advertising brainwash you.
5. Money buys freedom.
6. Don’t sell your soul for a salary.
7. Own.
8. Spend less than you earn.
9. Save 50% of your salary.
10. Control your money.
11. Start doing this now!

401(k)

If your employer offers you a 401(k), you should contribute the maximum that they will match. Feel free to add more but at a minimum, you should put in what they'll match. For example, lets say that your company will allow you to contribute 6% of your income and they will match 50% of the 6%. If you earn $36K/yr ($3K/month), then you can contribute $180 per month to your plan. That means that your company will GIVE YOU FREE MONEY in the amount of $90 per month. Effectively, that is a 3% raise in your salary. The only downside is that in most plans you must wait a certain period of time (like 3 years or 5 years) to become fully "vested". All that means is that the money the company matches is not completely available until after the vested period. However, even if you leave a company before you are fully vested, the money you contributed is 100% yours and you can move to another 401(k) with you new company. That's called a "rollover".

How to Use Credit Cards

Here are some basic tips for using/getting a credit card:

1. Find the lowest interest rate possible.

2. If you are financially able, pay your balance in full each and every month. If you are riding out a 0% introductory rate, ensure you can pay the full balance at the end of the introductory period.

3. If you are unable to pay your full balance each month, pay as much as possible and always tackle the cards with the highest rates first.

4. Try to find a credit card that offers "cash back" or some other incentive. I have a Chase Freedom Card that has literally EARNED me thousands of dollars over the years.

5. Try to find a card with no fees at all. For some people who've had credit challenges in the past, this may be difficult and you may have to get a card that has fees just so you can start establishing good credit. Ironically enough, bad credit is better than no credit. I used to work at a car dealer and it was easier for customers with bad credit to get a loan than customers with no credit history.

6. Pay your bill online each month if possible. Save the money that you would spend each month on stamps and put it towards your bill.

7. Don't overspend. This will help you meet #2. Sometimes you just need to make a budget so that you know how much you can afford to spend each month on your credit card.

Generation Debt

I ran across an interesting book when I was reading throught the "I Will Teach You to be Rich" blog. The name of the book is Generation Debt, by Anya Kamenetz. Although I haven't read the book yet, she poses some issues that plague many of us in our 20's and 30's.

The book is linked here:

"It's Only"

How many times do you say to yourself "it's only" when you try to buy something. "It's only $10.99." Or, "It's only $6.99/month". Or, maybe you hear it from you significant other when they buy something they want (but don't need). First of all, stop buying things that you simply "want". Buy things that you NEED. I'm not saying to not treat yourself to things once in a while because you should. But, you must stop buying little knick-knack things that are only valuable to you at the time you see them. Before long, those things that seemed so desirable will be collecting dust in a closet. So, there are really two points here. Don't buy something just because you want it (using the "it's only" argument to justify the purchase to yourself or to your partner). Secondly, it's extremely important to realize that all those little things add up over time. Figure out how much you could have left over at the end of a year if you didn't buy the little things that you didn't need!