So you want to learn more about personal finance but don't know where to begin? Finding information is not a problem. The amount of advice out there is overwhelming, especially when you're first starting out and aren't sure exactly what you're looking for -- or what you're doing. The trick is to find those gems of wisdom that'll teach you the basics of money management without leaving you feeling like you were hit by a bus.
Here are five great books that make finances simple. Whether you're looking for a basic guide to navigate your finances, a self-help book to start investing or a motivating tool to finally take your money habits seriously, there's something for every beginner here.
Each book is easy to understand -- no math major required -- and all come recommended not only from me but from several of my colleagues at Kiplinger's. I've included the list price for each book, but you can find them at drastic discounts on the Web. Either way, they're well worth the investment. (They also make great gifts, parents!)
Life After School Explained
By Cap & Compass ($13.95)
If you're clueless and overwhelmed by what lies in store after you untie yourself from Mom and Dad's purse strings, this is a good book to get your feet wet. It's short and humorous and doesn't weigh you down with a lot of confusing terminology.
I read it cover to cover in about two hours and actually understood what it said -- without my eyes glazing over once. It's sprinkled with witty anecdotes, pop culture references and comic strips to keep the mood light, even though it discusses such heavy-weight topics as choosing a health insurance plan, filling out tax forms and investing your money. It also covers lighter-yet-important subjects, such as how to avoid looking stupid at a business meal, what to wear on your first day of work and what to look for in a good apartment.
Life After School Explained is written by a team of young professionals who draw largely from their personal experiences in the real world. Its focus is for those who don't know anything about living on their own, which, whether we want to admit it or not, is probably most of us. It's basic, straight forward and a cinch to understand.
Get a Financial Life: Personal Finance in Your Twenties and Thirties
By Beth Kobliner ($15)
For a deeper understanding of financial principles to guide you through young adulthood, this is your bible. Here you'll find a collection of life's basic lessons on buying insurance, paying off debt, buying a home, saving money on taxes, managing your daily finances and investing for the long term.
But just because it's comprehensive doesn't mean it'll bog you down. Get a Financial Life is surprisingly readable, yet works well as a reference, too. Chapter one is a 12-page summary of the entire book - "a cheat-sheet for time-pressed readers," Kobliner calls it -- imparting quick financial wisdom on the book's entire range of topics. Then you can read the individual chapters for more information. Plus, the end of each chapter is capped off with a CliffsNotes-type summary to make sure you didn't lose anything in translation.
It's specifically written for the twenty- and thirty- something crowd, so you get tidbits of wisdom on topics and goals that you actually care about (for example, how to protect yourself when renting, how to pay off student loans and how to find the right mix for your investments when you're young). Get it. Read it. Reference it often.
The Wealthy Barber
By David Chilton ($14)
A big turn-off to reading a book about money is the snooze factor. Many are about as entertaining as a textbook. The Wealthy Barber, however, takes a novel approach to the self-help book -- it's written in a narrative.
It's the story of three young adults who realize that they don't know squat about how to create a long-term financial plan for their future. They turn to a parent for help who points them to an unlikely expert: The local barber, who managed to turn a low-wage job into a comfortable lifestyle with millions of dollars in the bank. The secrets imparted are simple and easy to follow, and it illustrates that you don't have to have a six-figure salary to live the good life.
"I have a very good friend who hands it out to almost anyone he knows and to kids when they graduate high school or college," says one of my colleagues at Kiplinger's. "It ain't hip or cool, but it's decidedly simple." Agreed. The Wealthy Barber certainly isn't a John Grisham novel, but at 211 pages it was readable and inspiring. I easily finished it in a weekend with plenty of time to re-evaluate my own long-term financial picture.
Debt-Free By 30
By Jason Anthony and Karl Cluck ($14)
Most of the personal finance books for young adults are about how to get started on the right foot. Which is great, but what if you've already taken a misstep? This book is written by two self-described money misfits who spent their twenties piling up credit card and other debt, only to find their lives were being controlled by their poor money choices. "Death by plastic," Anthony and Cluck call it, and it wasn't pretty. Debt-Free by 30 is their first-hand tale of how they dug themselves out of the hole and got on the path to financial freedom. The job wasn't easy, as the authors are quick to point out, but it was worth it.
Don't let the word "debt" in the title stop you in your tracks. Anthony and Cluck know the topic is a weighty one, but they keep the mood light with jokes, financial IQ quizzes and humorous, blunt language that'll awaken your inner financial slacker to the error of its ways -- and motivate you to take action. (Hint: "Make your own damn frappuccino!")
Debt-Free By 30 covers the basics of prioritizing your debt, finding extra money to pay it down faster and handling situations in which you might be tempted to rack up more debt. Methodically paying off your credit cards may not sound sexy, but this book will make you a believer and give you the tools to pull it off.
Saving for Retirement (Without Living Like a Pauper or Winning the Lottery)
By Gail MarksJarvis
What the heck is a stock or a mutual fund anyway, and why should I care? Pick up almost any book about investing, and you'll soon drown in a tsunami of terminology and complicated math to answer that question. But here is a book that actually manages to make sense of investing without confusing you along the way. MarksJarvis gives you a solid foundation of understanding of how investments work -- and how to make them work for you -- before diving in to the different kinds of investment products and accounts. What a crazy concept.
MarksJarvis doesn't try to impress you with her well of knowledge. Instead, she comes across as a patient and humble parent or teacher taking the time to make sure you know what you're doing. Saving for Retirement is a good size (228 pages) and the table of contents looks intimidating at first. But that's just because the book is broken down into small, easy-to-digest headings. That makes for quick referencing later.
Investing for the long-term should be a top goal for every young adult, and this book gives you the nitty gritty details you seek without sending your head into a spin. It's very thorough, yet simple to understand without making you feel like an idiot.
By Erin Burt
Monday, September 10, 2007
Wednesday, September 5, 2007
Five Things You Must Know Before Buying a Car
Car Dealer Reveals Insider’s Credit Secrets to Save You Money
The offers sound enticing—0% interest, no money down, low monthly payments and huge discounts. With offers like these, you’re sure to get a good deal on a car, right? Not necessarily. Seems like there’s always a catch or fine print. And that’s why most people hate buying a car. They rank it right up there with getting a root canal—downright painful. The basic problem is that most people don’t understand how car dealerships operate. So they wind up paying too much.
That’s where Mark Marine comes in. A long-time car dealer and author of the book, “Kick the Dealer...Not the Tires!” (Motom Publishing), Marine believes consumers need to understand the role their credit plays when buying a car. And shocking as it may sound having good credit does not automatically mean you’ll get the best deal. “You may not want to hear this but the people getting the best price on a car are people with bad credit,” says Marine. “The car-buying experience is designed to allow dealers to make up profits lost on bad-credit sales by making bigger profits on good-credit sales.”
That’s why Marine stresses the importance of understanding credit. He offers five key points that he thinks all consumers should know before they even consider buying a new vehicle:
1. Check your credit report. Most credit reports contain inaccurate information. It’s up to you to correct it—there’s no government agency that requires the credit report companies to amend mistakes to your report.
2. Good credit means you’re ripe for abuse. When you have good credit, banks place fewer restrictions on your loan and that allows dealers to charge you more. So it’s crucial to know your lender’s conditions on your loan up-front.
3. Bad credit means the bank protects its money. When you have bad credit, the bank places more restrictions on the loan. That gives dealers less wiggle room to add on extras and options. But bad credit still means you have fewer options when borrowing money.
4. Get pre-approved before you visit any car dealer. That way you know the conditions placed on your loan up front. Then the dealer is forced to make a deal that fits the conditions outlined by the bank—again, eliminating that profit wiggle room.
5. Have an exit strategy. Don’t let the lust for leather seats and a premium sound system melt your brain. When buying a car, keep in mind at some point you’ll sell that car. So you have to be smart. You’ll pay much more for options than you’ll recoup when selling it down the road.
Marine says he also wants people to know that when it comes to their credit, the best thing they can do is pay their bills on time. If they fall behind, he warns them to beware of ‘credit repair’ scams. “There is no such thing as credit repair,” says Marine. “These companies claim they can hide or remove negative information from your credit report, even if that information is true. But they can’t. What’s even worse is that after they’ve ‘repaired’ your credit, your score drops even lower than before you went to them.”
When it comes to your credit and buying a new car, Marine advises consumers to be informed. Check your credit score, get pre-approved first, and plan your exit strategy. “A car purchase will affect your economic life for roughly three to seven years,” says Marine. “That’s a long time to be stuck in a bad deal. Get pre-approved.”
Visit www.kickthedealer.com for more information about Mark Marine.
By Editor
The offers sound enticing—0% interest, no money down, low monthly payments and huge discounts. With offers like these, you’re sure to get a good deal on a car, right? Not necessarily. Seems like there’s always a catch or fine print. And that’s why most people hate buying a car. They rank it right up there with getting a root canal—downright painful. The basic problem is that most people don’t understand how car dealerships operate. So they wind up paying too much.
That’s where Mark Marine comes in. A long-time car dealer and author of the book, “Kick the Dealer...Not the Tires!” (Motom Publishing), Marine believes consumers need to understand the role their credit plays when buying a car. And shocking as it may sound having good credit does not automatically mean you’ll get the best deal. “You may not want to hear this but the people getting the best price on a car are people with bad credit,” says Marine. “The car-buying experience is designed to allow dealers to make up profits lost on bad-credit sales by making bigger profits on good-credit sales.”
That’s why Marine stresses the importance of understanding credit. He offers five key points that he thinks all consumers should know before they even consider buying a new vehicle:
1. Check your credit report. Most credit reports contain inaccurate information. It’s up to you to correct it—there’s no government agency that requires the credit report companies to amend mistakes to your report.
2. Good credit means you’re ripe for abuse. When you have good credit, banks place fewer restrictions on your loan and that allows dealers to charge you more. So it’s crucial to know your lender’s conditions on your loan up-front.
3. Bad credit means the bank protects its money. When you have bad credit, the bank places more restrictions on the loan. That gives dealers less wiggle room to add on extras and options. But bad credit still means you have fewer options when borrowing money.
4. Get pre-approved before you visit any car dealer. That way you know the conditions placed on your loan up front. Then the dealer is forced to make a deal that fits the conditions outlined by the bank—again, eliminating that profit wiggle room.
5. Have an exit strategy. Don’t let the lust for leather seats and a premium sound system melt your brain. When buying a car, keep in mind at some point you’ll sell that car. So you have to be smart. You’ll pay much more for options than you’ll recoup when selling it down the road.
Marine says he also wants people to know that when it comes to their credit, the best thing they can do is pay their bills on time. If they fall behind, he warns them to beware of ‘credit repair’ scams. “There is no such thing as credit repair,” says Marine. “These companies claim they can hide or remove negative information from your credit report, even if that information is true. But they can’t. What’s even worse is that after they’ve ‘repaired’ your credit, your score drops even lower than before you went to them.”
When it comes to your credit and buying a new car, Marine advises consumers to be informed. Check your credit score, get pre-approved first, and plan your exit strategy. “A car purchase will affect your economic life for roughly three to seven years,” says Marine. “That’s a long time to be stuck in a bad deal. Get pre-approved.”
Visit www.kickthedealer.com for more information about Mark Marine.
By Editor
The 5 Secrets to Buying Stocks
Quite a couple of weeks, eh? While not quite the chain of 25-sigma events the folks at Goldman Sachs think they saw, this is the most volatile the stock market's been in five years ... and the exotic hedging techniques we've invented over the past few years don't actually seem to be protecting anyone from anything.
As noted money manager Wally Weitz wrote in a recent shareholder letter, "These are the times that active money managers earn their fees."
Or are they the times that try men's souls?
Still, you don't need to be a professional money manager to start protecting your portfolio against short-term volatility, and positioning it to achieve superior long-term returns. Many of the best money managers, including Wally Weitz, have achieved their fantastic performance without doing anything quite so fancy.
Take Martin Whitman, for example. His Third Avenue Value (TAVFX) fund has crushed the market by more than seven percentage points annually over the past five years, and it's trailed the S&P 500 index just once since 2000.
That's an incredible track record that we'd all be wise to replicate -- and Marty's happy to let us do so. In his last shareholder letter, he revealed five of the key secrets to his success.
In no particular order
To be your own expert money manager, simply:
1. Buy cheap.
2. Buy quality.
3. Buy to hold.
4. Buy with minimal expenses.
5. Buy without leverage.
If you can consistently follow all five of those tenets, you're on your way to making more money in the stock market -- and three of them are so simple that you'd be silly not to be doing them already.
The three easies
"Buy to hold" means sticking with stocks unless, as Whitman writes, "there has occurred a permanent impairment in underlying value" of a stock. Such an impairment would occur, for example, if all 11 of Pfizer's (NYSE: PFE) drugs in late-stage testing were rejected by the FDA, or if Disney (NYSE: DIS) lost a challenge to its Mickey Mouse trademark.
Having the patience and confidence to hold the stocks you buy through inevitable volatility (except when a permanent impairment has occurred) will automatically reduce your tax bill and trading expenses. Do even better by keeping commissions to 1% to 2% of your investments.
Finally, don't invest money you can't afford to lose, and don't borrow money to invest. While leverage can increase your returns in good times, it will dramatically increase your losses in bad times. That's not the way to preserve capital and earn steady returns.
The harder two
Buying cheap and buying quality are more esoteric concepts. Put them together, and Whitman's essentially demanding that we all be smart investors.
But Whitman has a very clear definition of cheap: "Issues at prices that reflect substantial discounts from readily ascertainable NAVs [net asset values] ... [and whose] NAVs will increase by not less than 10% per year compounded." The classic Whitman example here is Brookfield Asset Management (NYSE: BAM), which Whitman bought cheap, and which has returned nearly 45% annually over the past five years.
To find stocks like Brookfield, start with companies such as Time Warner (NYSE: TWX), Bear Stearns (NYSE: BSC), and Sprint Nextel (NYSE: S), which are already trading for low-ish price-to-book multiples, and decide whether they're quality.
Easier said that done?
While "quality" will always be in the eye of the beholder, Whitman's definition is clear. It means having a strong financial position, competent management, and a business that is understandable.
Perhaps that's why Whitman has opened a position in homebuilder MDC Holdings (NYSE: MDC). It's trading for a little more than its book value, but it boasts $668 million in cash and more than 20% insider ownership, and it's poised to weather the real estate downturn. It may also explain why Whitman has steered clear of Bear Stearns, a complicated financial institution that has seen several hedge funds collapse over the past few weeks as a result of links to subprime lending.
Johnny 5 functioning 100%
At our Motley Fool Hidden Gems small-cap investing service, we follow every one of Whitman's tenets; not coincidentally, we share the opinion that MDC Holdings is a "buy." But we focus exclusively on small caps, because we believe they represent one of the few sectors where individual investors can gain an informational advantage over institutional money.
While recent volatility has our small caps often running up or down 10% in a single day, our long-term returns have us more than 30 percentage points ahead of the market on average. That's what happens when you buy cheap, buy quality, and buy to hold.
You can take a look at all our Hidden Gems research and recommendations -- including today's brand-new issue, releasing at 12 noon ET -- by joining the service free for 30 days. Click here for more information.
By Tim Hanson
As noted money manager Wally Weitz wrote in a recent shareholder letter, "These are the times that active money managers earn their fees."
Or are they the times that try men's souls?
Still, you don't need to be a professional money manager to start protecting your portfolio against short-term volatility, and positioning it to achieve superior long-term returns. Many of the best money managers, including Wally Weitz, have achieved their fantastic performance without doing anything quite so fancy.
Take Martin Whitman, for example. His Third Avenue Value (TAVFX) fund has crushed the market by more than seven percentage points annually over the past five years, and it's trailed the S&P 500 index just once since 2000.
That's an incredible track record that we'd all be wise to replicate -- and Marty's happy to let us do so. In his last shareholder letter, he revealed five of the key secrets to his success.
In no particular order
To be your own expert money manager, simply:
1. Buy cheap.
2. Buy quality.
3. Buy to hold.
4. Buy with minimal expenses.
5. Buy without leverage.
If you can consistently follow all five of those tenets, you're on your way to making more money in the stock market -- and three of them are so simple that you'd be silly not to be doing them already.
The three easies
"Buy to hold" means sticking with stocks unless, as Whitman writes, "there has occurred a permanent impairment in underlying value" of a stock. Such an impairment would occur, for example, if all 11 of Pfizer's (NYSE: PFE) drugs in late-stage testing were rejected by the FDA, or if Disney (NYSE: DIS) lost a challenge to its Mickey Mouse trademark.
Having the patience and confidence to hold the stocks you buy through inevitable volatility (except when a permanent impairment has occurred) will automatically reduce your tax bill and trading expenses. Do even better by keeping commissions to 1% to 2% of your investments.
Finally, don't invest money you can't afford to lose, and don't borrow money to invest. While leverage can increase your returns in good times, it will dramatically increase your losses in bad times. That's not the way to preserve capital and earn steady returns.
The harder two
Buying cheap and buying quality are more esoteric concepts. Put them together, and Whitman's essentially demanding that we all be smart investors.
But Whitman has a very clear definition of cheap: "Issues at prices that reflect substantial discounts from readily ascertainable NAVs [net asset values] ... [and whose] NAVs will increase by not less than 10% per year compounded." The classic Whitman example here is Brookfield Asset Management (NYSE: BAM), which Whitman bought cheap, and which has returned nearly 45% annually over the past five years.
To find stocks like Brookfield, start with companies such as Time Warner (NYSE: TWX), Bear Stearns (NYSE: BSC), and Sprint Nextel (NYSE: S), which are already trading for low-ish price-to-book multiples, and decide whether they're quality.
Easier said that done?
While "quality" will always be in the eye of the beholder, Whitman's definition is clear. It means having a strong financial position, competent management, and a business that is understandable.
Perhaps that's why Whitman has opened a position in homebuilder MDC Holdings (NYSE: MDC). It's trading for a little more than its book value, but it boasts $668 million in cash and more than 20% insider ownership, and it's poised to weather the real estate downturn. It may also explain why Whitman has steered clear of Bear Stearns, a complicated financial institution that has seen several hedge funds collapse over the past few weeks as a result of links to subprime lending.
Johnny 5 functioning 100%
At our Motley Fool Hidden Gems small-cap investing service, we follow every one of Whitman's tenets; not coincidentally, we share the opinion that MDC Holdings is a "buy." But we focus exclusively on small caps, because we believe they represent one of the few sectors where individual investors can gain an informational advantage over institutional money.
While recent volatility has our small caps often running up or down 10% in a single day, our long-term returns have us more than 30 percentage points ahead of the market on average. That's what happens when you buy cheap, buy quality, and buy to hold.
You can take a look at all our Hidden Gems research and recommendations -- including today's brand-new issue, releasing at 12 noon ET -- by joining the service free for 30 days. Click here for more information.
By Tim Hanson
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