Investing in Your 20s & 30s For Dummies. Eric Tyson
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Название: Investing in Your 20s & 30s For Dummies

Автор: Eric Tyson

Издательство: John Wiley & Sons Limited

Жанр: Личные финансы

Серия:

isbn: 9781119805427

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СКАЧАТЬ advisor. How can you possibly evaluate the competence of someone you may hire if you yourself are financially clueless? You’ve got this book, so read it before you consider hiring someone for financial advice.

      

Finding a competent and objective financial advisor isn’t easy. Historically, most financial consultants work on commission, and the promise of that commission can cloud their judgment. Among the minority of fee-based advisors, almost all manage money, which creates other conflicts of interest. The more money you give them to invest and manage, the more money these advisors make. That’s why I generally prefer seeking financial (and tax) advice from advisors who sell their time (on an hourly basis) and don’t sell anything else.

      Because investment decisions are a critical part of financial planning, take note of the fact that the most common designations of educational training among professional money managers are MBA (master of business administration) and CFA (chartered financial analyst). Financial planners often have the CFP (certified financial planner) credential, and some tax advisors who work on an hourly basis have the PFS (personal financial specialist) credential.

      

Advisors who provide investment advice and oversee at least $100 million must register with the U.S. Securities and Exchange Commission (SEC); otherwise, they generally register with the state that they make their principal place of business. They must file Form ADV, otherwise known as the Uniform Application for Investment Adviser Registration. This lengthy document asks investment advisors to provide in a uniform format such details as a breakdown of where their income comes from, their education and employment history, the types of securities the advisory firm recommends, and the advisor’s fee schedule.

      You can ask the advisor to send you a copy of his Form ADV. You can also find out whether the advisor is registered and whether he has a track record of problems by calling the SEC at 800-732-0330 or by visiting its website at www.adviserinfo.sec.gov. Many states require the registration of financial advisors, so you should also contact the department that oversees advisors in your state. Visit the North American Securities Administrators Association’s website (www.nasaa.org), and click the Contact Your Regulator link on the home page.

      Using Investments to Accomplish Your Goals

      IN THIS CHAPTER

      

Investing for short-term consumption goals

      

Working toward a home purchase

      

Planning for financial independence/retirement

      

Assessing your desire to take risk

      Saving and investing money can make you feel good and in control. Ultimately, most folks are investing money to accomplish particular goals. Saving and investing for a car purchase, expenses for higher education, a home purchase, new furniture, or a vacation are typical short-term goals. You can also invest toward longer-term goals, such as your financial independence or retirement decades in the future.

      In this chapter, I discuss how you can use investments to accomplish common shorter- and longer-term goals.

      Unless you earn really big bucks or expect to have a large family inheritance to tap, your personal and financial desires will probably outstrip your resources. Thus, you must prioritize your goals.

      In this section, I discuss common “shorter-term” financial goals — such as establishing an emergency reserve, making major purchases, owning a home, and starting a small business — and how to work toward them. Accomplishing such goals almost always requires saving money.

      Accumulating a rainy-day fund

      The future is unpredictable. Take the uncertainty simply surrounding your job: You could lose your job, or you may want to leave it.

      Consider what happened in 2020 with the COVID-19 pandemic and the unexpected and lengthy government-mandated shutdowns in some parts of the country, which led to large layoffs in particular industries like restaurants, retail, and travel-related businesses. While the 2020 recession was unusual in many respects, recessions aren’t unusual and even when the overall economy is growing, some employers let employees go. Suppose an elderly relative, for example, needs some assistance for a period of time? Look, I’m not trying to be a pessimist or negative, but problems happen, and sometimes there are financially downsides that can come with them.

      Because you don’t know what the future holds, preparing for the unexpected is financially wise. Enter the emergency or rainy-day fund.

      The size of your emergency fund depends on your personal situation. Begin by considering how much you spend in a typical month. Here are some benchmarks for how many months’ worth of living expenses you should have:

       Three months’ living expenses: When you’re starting out, this minimalist approach makes sense if your only current source of emergency funds is a high-interest credit card. Longer-term, you could make do with three months’ living expenses if you have other accounts, such as a 401(k), or family members and close friends whom you can tap for a short-term loan.

       Six months’ living expenses: If you don’t have other places to turn for a loan, or if you have some instability in your employment situation or source of income, you need more of a cushion.

       Twelve months’ living expenses: Consider this large a stash if your income fluctuates greatly or if your occupation involves a high risk of job loss, finding another job could take you a long time, or you don’t have other places to turn for a loan.

      Saving СКАЧАТЬ