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Suze Orman's The Money Book for the Young, Fabulous, and Broke

August 26th, 2006 at 12:16 am

Following in the tradition of last Friday, I spent another two hours reading personal finance books today.

I was able to locate many of the suggested titles, and skimmed through a few of them.

The book that I settled on to read this week was Suze Orman's The Money Book for the Young, Fabulous, and Broke. I chose that one this week because it covered the topics that are currently the most relevant to me.

I am handling student loans, building my credit for the first time, looking to milk my (ephemeral) youth for maximum returns in retirement, and starting to save for large future purchases such as a car and house, and accumulating assets for generalized investing.

A few things that I learned:

- I need to get my three free credit reports at annualcreditreport.com before the end of the year to have an idea of where I stand in terms of my FICO score.

- My (what I feel is an) obscenely high credit card limit ($10,000) is actually a good thing, because it lowers my debt-to-credit ratio, since I never carry a balance? I thought I heard somewhere that high credit limits counted against you because it could be seen as 'potential' debt, so I'm still a little confused on this point.

- I've been considering getting a new credit card with more/better rewards, and if I do, I shouldn't cancel my current one to preserve my credit history.

- I shouldn't be in a hurry to pay off my student loans. I've actually been leaning more towards this position myself as I realized that money going into 45 years of compounding interest at >10% returns is much better than reducing 10 years of 4% to 5% student loan interest. Yes, it requires deferring the emotional gratification of shooting down that debt, but I think the numbers justify it.

- "Saving is for a short-term goal that you hope to reach within five years or so. Investing is for the long term." Short term savings can be placed in high interest CDs, money market deposit accounts, and money market mutual funds.

- A Roth IRA is better than a 403(b). I was planning on maxing out my Roths anyway.

I stopped before I got the the investing and car/house buying chapters of the book. I'll finish them off next week.

I also hope to start on some books specifically on investing. I just discovered that there was an entire investing section!

4 Responses to “Suze Orman's The Money Book for the Young, Fabulous, and Broke”

  1. spendless Says:

    Some recommend getting one free report per quarter (this way you can check credit score multiple times per year vs once).

    That will be my approach this year.

  2. Dido Says:

    Mimi, With your time horizon, you are *hardly* screwed. If I recall correctly, you are trying to save more than 10,000/year for retirement, yes? If you do that for 5 years and can manage an 8%/year return (which is a very conservative estimate...traditional estimates of stock market returns are 10-12%/year, but I'll give you a conservative estimate because of the short time frame. At the end of 5 years, you'll have about $58,666 and you'll be, what, 27? Plus if I recall, you already have about 8000 in Roth IRAs, so those will have appreciated $11,755 in 5 years given the same conservative 8%/year return assumption. That gives you about $70,421. If you never invest another penny but leave that money invested at 8%/year for 35 years and retire at the grand old age of 62, you would have a nestegg of $1,0411,987. And given your mindset, I'm sure that even if you take a few years off of retirement saving to get through grad school and get your career started, you'll be back to it. If you want another million in addition to the amount mentioned, save $13,678/year for 25 years, again using the very conservative interest rate. And if you save more or returns over the time frame are back to the 10-12% stock market typical level, you'll have that much more.

    You may or may not want to eventually go into academia. It has its upsides and its downsides. (FYI, I am a "failed" academic, having landed on the adjunct track after not publishing enough and "perishing" at a research university). You have time to decide, and with the tech career possibility, plenty of options. Yes, women traditionally don't do as well as men financially OR in terms of academic career success (although I count among my mentors and their peers at least two women who are Presidents of major research universities). But the time advantage trumps all. You are hardly "screwed."

    By the way, since you are quantitatively oriented, you might want to get a business calculator (I like the TI BA IIPlus for $35) and learn how to do "time value of money" calculations. Very useful for making these kinds of projections.)

  3. Dido Says:

    Hmmm, this WAS in response to your "I am screwed" post...don't know how it turned up here!

  4. amberfocus Says:

    Dido, I'm going to copy/paste your comment to the proper post. I guess WordPress has its occasional hiccups!

    ~mimi

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