Article: Personal Finance for Freelancers Thread poster: ProZ.com Staff
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Nice article, which must have taken you some time to write.
I personally find the "Motley Fool" guides (online and books) a useful, down-to-earth resource.
One point they make time and time again is - clear your debts first. The "miracle of compound interest" works both ways, and unfortunately, the interest you're paying on loans is likely to be higher than the interest you earn on savings and investments (unless you're a stock-picking genius, in which case you probably... See more Nice article, which must have taken you some time to write.
I personally find the "Motley Fool" guides (online and books) a useful, down-to-earth resource.
One point they make time and time again is - clear your debts first. The "miracle of compound interest" works both ways, and unfortunately, the interest you're paying on loans is likely to be higher than the interest you earn on savings and investments (unless you're a stock-picking genius, in which case you probably wouldn't be here!). If you don't clear debts first, you'll end up worse off than when you started.
Second, pensions are the big issue of the day here in the UK, and a rule of thumb we hear often is that when starting your pension provision, the ideal amount to put aside is a percentage equal to half your age. Hence your 10-15% guideline works fine if you have the foresight to start in your 20s; if you're starting late, you need to put away more. As I said, this is the ideal; obviously not always practical. ▲ Collapse
| | | | | 15-20% and the issue of debt | Dec 22, 2005 |
Charlie,
The 10 to 15% guideline is what you usually hear recommended for employees. I recommend 15-20 as a *bare minimum* for young self-employed savers. You are right that this will only increase as retirement approaches (if you hope to maintain your current standard of living). Thus the importance of starting now.
I love the Motley Fool radio show. You can listen to it... See more Charlie,
The 10 to 15% guideline is what you usually hear recommended for employees. I recommend 15-20 as a *bare minimum* for young self-employed savers. You are right that this will only increase as retirement approaches (if you hope to maintain your current standard of living). Thus the importance of starting now.
I love the Motley Fool radio show. You can listen to it here:
http://www.npr.org/templates/rundowns/rundown.php?prgId=15
I was not familiar with their books. Can't wait to read them!
As for debt, well, maybe I should write another article on that one. There's good debt and bad debt. Good debt is money you borrow to purchase something that creates equity (a home, student loans--assuming that they boost your future earnings through a good education). In theory, this is smart debt. Bad debt is consumer debt. It is debt you accumulate to acquire "things" or "stuff" that has little or no value once it leaves the store. This is credit card debt, store credit card debt, etc.
The conventional wisdom says clear your debt first. However, it really does depend on the interest rate you are paying on your debt vs. the returns you can get investing the money you'd use to pay off your debt. My student loans came at a time when interest rates were high in the US (around 9%) so I paid them off as quickly as possible. If they had been at 3% I might have done things differently. The credit card debt at 19.8% definitely must be the first to go! You also have to consider your own peace of mind. While it might have been smarter to build up some savings and pay off my debt a bit more slowly, it just *felt good* to get that debt cleared so that I could get on with my life.
In her book "The Money Book for the Young, Fabulous & Broke" Suze Orman has a different take on debt that breaks away somewhat from the conventional wisdom. This book is geared toward the really young, however, meaning just out of college.
Thanks for reading my article. I hope more people will join the discussion with their own tips and recommendations!
Sara ▲ Collapse
| | | | | wonderful advice! | Jan 25, 2006 |
Hi Sara,
Just read your article - great work, most useful indeed!
Orla
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| Thanks, Orla | Jan 25, 2006 |
And feel free to contribute any success stories, tips or tricks that have worked for you.
I was hoping that the thread would provide an opportunity for that, but the articles and associated threads don't seem to have much visibility on the Proz home page!
Thanks for taking the time to read it!
Sara
| | | | Carolyn Brice 
Greece
Local time: 03:11
Member (2005)
French to English
+ ...
As I am three years out of university, and with a student debt hanging round my neck, this is a subject close to my heart. I am currently trying to plan for the future (mainly for housing and retirement) and finding it rather difficult. Your article was very encouraging at a time when I felt it would be impossible to repay my student loan (curently around £12K) and even think of ever owning a property (especially here in Athens, where prices are astronomical!). Well, there is light at the end o... See more As I am three years out of university, and with a student debt hanging round my neck, this is a subject close to my heart. I am currently trying to plan for the future (mainly for housing and retirement) and finding it rather difficult. Your article was very encouraging at a time when I felt it would be impossible to repay my student loan (curently around £12K) and even think of ever owning a property (especially here in Athens, where prices are astronomical!). Well, there is light at the end of the tunnel!
Thanks! ▲ Collapse
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