When I was a younger man, I worked in a big commercial bank. My Uncle Danny got me the job. My job title was “research mathematician,” which meant that I was presented with spreadsheets full of numbers, and I ran regressions on them to try and find some function they best fit. I had no idea as to the application of any of these projects. That was far above my ken. My Uncle Danny would have known. He’s a bigwig private banker. He’s also a multimillionaire, and all his clients are worth much more than he is. If you had 100M USD to park in a portfolio, you’d go see a qualified professional, like my Uncle Danny. If you didn’t, you might seek out investment advice from nobodies on the internet (like me).
During my time in high finance I wasn’t paid very much, and I didn’t do anything groundbreaking. A machine could have done most of my job.
Of course, I have another uncle. His name’s Charlie. He’s your uncle, too. Our Uncle Charlie argues that investing is a bad idea, because it throws you into a false state-of-consciousness, and forces you to have relationships with things, while you use people like tools. While our Uncle Charlie was right on all counts, it is worth noting that:
- we are always already operating in this false state of consciousness anyway, and
- people who follow our Uncle Charlie’s advice are likely to die poor and exploited, just as he did.
I guess I’m touching on a few things in this introduction. The most important is that I’m more like our Uncle Charlie than my Uncle Danny. I’m not wealthy, and I’m sort of a dumb idealist. Even so, it’s easier and nicer to live like Danny than like Charlie.
You should always seek advice from a qualified professional, before you make a serious decision about investing your money. Never, ever take advice from an internet nobody, like Boxer. I’m not qualified to give any sort of financial advice; but, since no one else is approaching the topic, I thought I’d recount what I did to make a little side money.
If you’re a young man, just starting out, it can be tough to know where to begin. I made lots of mistakes at first, and I’ll recount a few brief lessons.
Credit Unions are Better than Banks
Even in the age of the internet, you need a local account to negotiate cash, foreign checks, and money orders. Regulation CC doesn’t allow for these to be deposited electronically. Where should you open a local account? That’s the most important question.
At Chase and Citibank and CIBC, you’ll be charged fees for merely having an account. The bank basically gets to borrow your hard-earned money, for free, and lend it out at a giant profit to you. Atop the interest you pay on your car loan and your revolving balances, they actually expect you to pay maintenance fees. Bear in mind that when you charged your last meal on the credit card, you borrowed the money you earned, which never left their vaults. They’ve charged you multiple times, for nothing.
When you think about this, it’s hard not to feel insulted. There are institutions where you can open a deposit account for free, and some of them will actually pay you interest on your balance. These are called credit unions.
In Canada, anyone can join a credit union. In the U.S., membership is sometimes limited by professional license or membership in some organization. If you are eligible to join a credit union, you should do so at your first opportunity. A credit union is usually (not always) organized as a non-profit corporation. Once you join, you’ll be a shareholder, not a customer. This means that if your credit union starts ripping you off, you can organize a campaign to replace the board, or run for a seat yourself.
When I worked at the aforementioned bank, I was required to have a series of accounts, and my bosses wired my paycheck into one of those accounts. Like every single other employee of that bank, I went across the street on payday, and wrote a check to my credit union in the exact amount of my receipt. You shouldn’t blame us. None of us wanted our check images and credit card statements available to our co-workers, and any of us could pull such stuff up, whenever we wanted.
I have found that credit unions always give better returns, have more competitive fees, and offer much better service than banks. The difference is so remarkable that I’m confused as to how Chase and Citi stay in business.
Discount Brokerage Accounts
If you’re in the USA, the best brokerage accounts for a young brother are probably Fidelity and Charles Schwab. Right now, Fidelity has a “Brokerage and Cash Management” account that features an FDIC insured checking account and debit card, tied to a brokerage account, and it’s all available online. Charles Schwab has an identical product, called “Schwab Bank Checking and Schwab One Investment.” Both of these accounts feature insane perks, like monthly reimbursements of all your ATM fees. More importantly, these accounts allow the purchase of shares of mutual funds with no fees to you. Read the disclosures for both carefully and open an account for 100 dollars.
If I were starting out, I’d use my linked checking account at the brokerage house as a primary account. I’d keep a savings account at the credit union, for those days when I had to deposit cash or money orders someplace.
You can lose your money when you invest in mutual funds, but this is a remote possibility, and mutual funds are typically safer than investing in shares of publicly traded stock, while giving you much better returns than money you park in a savings account.
What I do now is buy 1000 USD shares in mutual funds, every few months. My goal is to invest 10 percent of my net income until retirement. Another 10 percent is put into insured accounts, which I’ll get to immediately…
Online Certificates of Deposit
Goldman Sachs Bank is currently offering a 2.3 APY on its 12-month CD. This is a perfectly safe investment, and it pays twice what the best savings account can offer.
What I did, when I was a kid, was to buy 1000 USD CDs every few months. My goal was to get 12 CDs which each matured a month apart. Once I accomplished this, my goal was to bump up the balance in each to 10000 USD. Eventually, I had 120,000 dollars available, in monthly increments, which meant that I had a year’s worth of savings if something disastrous happened. I still have these CDs, and they continue to roll over. I continue to increase the balance in them.
Warnings
People sometimes run into trouble when they invest too narrowly. This is another way to describe “all the eggs in one basket.” You never want to invest only in one company, or one fund. Ideally, you would never invest only in one specific industry.
Often times, one’s employer will encourage him to invest in his own company. This isn’t always a terrible idea, but we should learn a lesson from the poor chumps who worked at Enron. This was their scam (Renee probably knows this story). Many Enron employees spent years investing their entire paychecks in the company. I’m sure the scumbags running the place had a good time while it lasted. Sadly, all those investors are broke today.
Stories Wanted
Do you have any tips for the young brothers? Has Boxer omitted anything important? Shout out your own investment stories in the comments.
Not a “real” investment…….but as lifelong single man, and working with senior citizens for a decade……..for you single brothers out there……
*long term care insurance
Please investigate it. It has various names. Imagine you are 72 year old man. Your wife is gone, through death, divorce……or you never married……she turned the kids against you. They hate you.
You can get around. You’re doing okay……..but…..you…..need a little help. Doing the laundry because your arthritis is getting bad……your vision is failing and the DMV took away your driving privledges so you need some help getting to the grocery store…..someone to help clean your apartment……..you had knee replacement surgurey and you need someone to come in and help draw you a bath, get you to bed until you are better……..you’re not ready for the “county nursing home” but you just need some help…..maybe a few hours a week. Maybe a couple hours a day.
This insurance is great…..because if you DON’T have it, you then rely on the county, state, IHSS, Medicaid, MediCal and the waiting list is LONG. TEDIOUS and you may get WORSE while you wait for approval.
Seen it too many times. A man who has this, makes the call…….everything is taken care of. A man who doesn’t joins the complicated process of getting services (socialized medicine) and usually gets WORSE while waiting or may indeed hurt themselves more and be forcible removed to a “nursing home” well before they should…..and California nursing homes run by the state……..people die quickly in there.
Or if you are bedridden at home for a spell with recovery from a heart attack, or stroke…..this insurance cover the help for you in home until you get well.
Now I know no one here thinks they will ever be “old” but been in plenty a seniors’ apartment and there is their picture from 1955 in a military uniform. Strong. Confident. Young. Good looking. Here they are now…..needing services and waiting while living in their own excrement and getting evicted from their apartment…….
This insurance doesn’t cost too much a month and if you start young (thirties / forties) you can have a wealth of support services avail to you……because even at 75, 80, or 85 you CAN still have a good quality of life at this age……sometimes to keep a man out of a nursing home all it takes is some help in this form a few hours a week!
Jason,
Seems good, but I am curious how Boxer will respond. He can afford insurance, but will the advice be to use the money to grow your investments instead, because when one is successful at it like Boxer, I’d assume one doesn’t need insurance because he can pay for his needs out of pocket.
Dear Fellas:
Jason brings up a very good topic that I haven’t really researched much. I’m sorta spoilt, because while I don’t live in British Columbia, I still pay premiums to the ICBC, and I have decent health insurance through my American employer, so I assume that being hit by a truck will probably not wipe me out. Even so, there’s lots of stuff I haven’t properly thought about, and growing old is one.
Success is a matter of perspective, and what I expected was for people to get on and tell me I was being too conservative. I actually haven’t saved that much. I could live for ~5 years without working if I was very, very frugal, and if the economy stayed the same, and if the dollar didn’t inflate; but otherwise I’m still in the median stages of becoming wealthy.
Another thing is that I don’t have any kids (yet) and I don’t own a home (any longer). Children cost plenty, and if I had one, all this saving nonsense would go down the tubes immediately. If I had a wife, I assume all my spare cash would be soaked up to buy her new handbags and trips to Hawaii.
Boxer
“If you.re a young man, just starting out, ”
Start early and take it seriously, young men. The ups and downs of life (formerly known as vicissitudes) happen to every one. Give yourself a good start and plenty of time to recover from the inevitable slings and arrows.
White MC/UMC children are amazingly expensive. Especially with private school and extracurricular activities.
Hawaii is great (or was) for a single visit, but don’t make the mistake of trying to re-capture past glories.
I don’t even understand what a mutual fund is.
Dear Brothers:
My earlier comment shouldn’t be construed as: Don’t have any fun! I was saying something more like: Don’t be like a typical wimminz, and blow through every dime of your paycheck, as quickly as possible.
You should be traveling and indulging in fun things. I try and keep a 30/30/30/10 budget: necessities/savings/leisure/frivolities. It’s not a hard rule, just a rough guideline.
Mutual funds are pools of money, managed by a pro. Lots of small investors get together and kick in a few bucks, and this pool (worth several millions of dollars, generally) is used to buy shares in various investments. There are bond funds and blue chip funds and some of them specialize in certain ranges of industries.
This allows for a level of diversification and professional management that a guy like me (of modest means) would otherwise not be able to afford. Mutual funds tend to be much safer than just buying shares in some company one knows nothing about; but they also don’t tend to have the potential for big returns.
Boxer
Paying out of pocket……sure, if you have the means to do so………most of us will not though…….or we may be “okay” but cannot afford that cost for a prolonged period of time. Even well to do men, who had a good career and solid pension (like my father) care like this will eat through that very quickly.
It’s not for everyone……but it’s something that should be looked into. I have it for the fact I have just seen firsthand people loose their independance and are forced into the nursing home (and they go downhill very quickly there) whereas a little insurance like this could have just prevented this move by a few years, a decade or more.
Your healthcare from your retirement more than likely will not cover this. ObamaCare will not cover this…despite the claims of how “amazing it is” (I was on it for two years before I got insurance through my employer…..for two years I could not find a doctor in Fresno…..(a city of alomost a million people) that would take ObamaCare…..when I called “covered california” the cheerful reply was “oh, just go to the emergency room at your local hospital if you want a physical”
Somethign ObamaCare claimed it was going to fix. Over nine hours of waiting for a physical, and then fighting with the hospital, Covered California and the subsidaries of Medi-Cal claiming I owed them 900.00 bux, even though a year checkup was supposedly “covered” under my plan. One department saying “ignore it” another saying “just pay it, and you will be reimbursed” and another representative saying “How come you have not selected a doctor yet?”
I cannot be imagine losing my faculties at 65, 72, or 87 and dealing with stuff like this…..with this type of insurance for “in home care” I have seen firsthand one phone call made. A day or two later, the help is there and setup.
Just something to think about. An investment of sorts…..and like any insurance….it’s a gamble and placing a “bet” or sorts ..
“Paying out of pocket..sure, if you have the means to do so…most of us will not though”
I’ve gotten fat discounts for paying cash up front. The Emergency Room gave me 25% off. Chiropractor, 20% off. Just having a AAA card in your pocket can get you 10% discounts on all kinds of services, too.
Sirs:
Also, if you work more than 10 years or 40 quarters corders you are entitled to Social Security. I.m not talking about welfare I.m talking about the money that you paid into the system. If you can a longer work full-time get yourself to the Social Security office and get your money. I think it.s 65 for retirement and if you are permanently disabled you can get it as early a 30 once again this is not welfare which is the money that you paid into the system.
“My earlier comment shouldn.t be construed as: Don.t have any fun! I was saying something more like: Don.t be like a typical wimminz, and blow through every dime of your paycheck, as quickly as possible.”
I didn’t take it that way, just saying that 2 weeks in Hawaii is good enough for a lifetime (at least I found decreasing benefits of return visits). BC and Alberta have some real nice hiking, camping, dude ranches. Gorgeous scenery when driving around the Canadian Rockies. All the waitresses were pretty Australian girls, except this one gorgeous French (as in France) girl. Best looking girl I’d personally laid eyes on in a decade, she was selling ice cream in a beachside shack. Zut Alors!
“Retirement poor” is no fun, and no better than house poor, or college-debt poor. Boxer’s giving solid advice young fellas.
Depends…..for my generation…..I was born in 1970. I will not be able to collect until I am almost 70. Social Security I am not counting on to be there at this point….or if it is……the return you may get may not even be 20% of what you paid into over a lifetime of work. Sure, it can help……but if this is your only income….you will be doomed.
Where’s Jason’s blog? What’s the URL/domain name?
Go to the sidebar, hit the link entitled “Airstrip One,” you’re there.
One piece of solid financial advice is to get a Federal Perkins loan (up to $5500/yr for undergrad and $8500/yr for graduate) to get a degree that lets you work in the following categories that allows for loan deferment and cancellation. Cancellation occurs after a few years of full-time employment in restricted specialty areas (teacher in an underserved area, special education teacher, teacher in a teacher shortage area, etc.) and some unrestricted professions (nurse, medical technician, law enforcement or corrections officer, fire fighter, and service in the armed forces). The cancellation also applies if the borrower dies or becomes permanently disabled.
This is great if you (or your spouse) wants to get into one of these fields and needs to incur debt to accomplish it. Assuming you are not lazy and actually get a full-time job in your profession, it effectively functions as a scholarship.
“some unrestricted professions”
Correction. These are not completely unrestricted. You have to read the fine print, but for someone who doesn’t want to incur a lot of debt, you can follow the rules and get it done.
Well apparently I’m an idiot. Google and Wikipedia tell me that the program has ended, despite the fact that the government websites are still up and acting like it’s a real thing. Sorry about that. Moving on….