What would you want from a book on wealth accumulation?

[Matt]

I've been planning to write a book for some time now. My goals for this are starting to crystallize into a roadmap - going from poverty to wealthy in an efficient manner. I'm still trying to figure out how to plug people into that pipeline since everyone will be on a different part of that scale, but I think it is doable with some online tools.

Topic wise, what subjects do you think need to be discussed? I want to get a person with zero financial literacy to not make the mistakes that put them in debt, and to know when and where to invest, when to rent, buy, and so on..

If you could help me brainstorm with things like "all high school kids should be taught X" or "what I wish I had known about student loans" etc... that would be awesome.

 

[Joseph]

I wish I had known that unsubsidized school loans will continue to accrue interest during the deferment period. I mistakenly thought that interest will temporarily stop accruing when a loan is deferred.

 

[Matt]

I wish I had known that unsubsidized school loans will continue to accrue interest during the deferment period. I mistakenly thought that interest will temporarily stop accruing when a loan is deferred.

And if you had known that what would you have done differently?

 

[Joseph]

And if you had known that what would you have done differently?

I would have paid down the loan quicker or pay it off in full. If I had paid off my loan during the deferment period then I would have paid zero interest.

 

[Joseph]

I think that schools should teach kids how to balance a checkbook, overview of investment terminology, and tax rules/regulations.

 

[VDebs]

I think a big part of that goal is not merely the nuts and bolts, but tips and tricks on how to integrate it into an otherwise well rounded, sane life. Most of my peers are bad with money because they look at it and go "Eeek, I'm scared!" and they ignore it thereafter. They have this notion that if you care about money, it will envelop you in an all powerful web of misery and anxiety, which is a fair point. People on this site get caught up in the game and find themselves with bouts of sudden existential anxiety all the time e.g. "I'm more worried about OBC survival than my own life goals!"

So you should write the book with constant "Priorities in Perspective" reminders. We all gotta remember that money is a mere means and that its accumulation for its own sake is a form of madness.

 

[Madelyn]

That it is not only what you earn, it is what you spend as well.

 

[InstinctX]

I think a section about how saving for retirement should start early for a college grad...maximizing contributions to company's 401K (15% of salary), leveraging company's match; participating in Employee Stock Purchase Plan (15% off) ... these reduce your taxable income and putting money into IRA...I was fortunate that my last employer did a match of up to 9% to my 401K.

And for folks not to panic and make haste decisions when there are dips in the stock market. The "losses" are on paper...don't just sell. The "losses" are only real if you sell. When the economy turned and stocks tanked, I didn't sell. There were also lots of ripe opportunities (I lucked out with Apple when their shares dropped to $90's (which equates to $18 today due to the split... Coulda/shoulda/woulda - wished I had bought more)

 

[Matt]

I think a big part of that goal is not merely the nuts and bolts, but tips and tricks on how to integrate it into an otherwise well rounded, sane life. Most of my peers are bad with money because they look at it and go "Eeek, I'm scared!" and they ignore it thereafter. They have this notion that if you care about money, it will envelop you in an all powerful web of misery and anxiety, which is a fair point. People on this site get caught up in the game and find themselves with bouts of sudden existential anxiety all the time e.g. "I'm more worried about OBC survival than my own life goals!"

So you should write the book with constant "Priorities in Perspective" reminders. We all gotta remember that money is a mere means and that its accumulation for its own sake is a form of madness.

So you have trouble integrating finance into life?

That it is not only what you earn, it is what you spend as well.

You have problems spending?

I think a section about how saving for retirement should start early for a college grad...maximizing contributions to company's 401K (15% of salary), leveraging company's match; participating in Employee Stock Purchase Plan (15% off) ... these reduce your taxable income and putting money into IRA...I was fortunate that my last employer did a match of up to 9% to my 401K.

And for folks not to panic and make haste decisions when there are dips in the stock market. The "losses" are on paper...don't just sell. The "losses" are only real if you sell. When the economy turned and stocks tanked, I didn't sell. There were also lots of ripe opportunities (I lucked out with Apple when their shares dropped to $90's (which equates to $18 today due to the split... Coulda/shoulda/woulda - wished I had bought more)

You have problems with your 401k?

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I ask these questions because I want to know what you would WANT from a book on finance, not what you 'think they should do like you do'. I am looking for gaps.

Doesn't mean your points aren't very salient, but I need something a little different. Hope that makes sense..

 

[RRD]

I don't know how to put it but there should be something on the strategy of investing in retirement accounts for young professionals, which pretty much everyone has. Almost all of my friends do not actively participate in selecting and monitoring the funds that they invest in, in their retirement a/cs: a) Because they think it is confusing b) They don't have the time or inclination and, c) They don't know how to measure the returns. Many also think it is a man's job or that men are more capable when it comes to making the complicated financial decisions.

 

[Free-quent Flyer]

Since you're looking for actionable info, the thing I absolutely would have done differently had I known about it is whenever I had any taxable income, plug in different values of IRA contribution into TurboTax/Taxact/whatever to find my maximum Retirement Savings Contributions Credit and contribute the corresponding amount. People talk a lot about "contribute/save as much as you can" but if I'd known I would get a 100% match from the federal government I would have contributed MORE than I could (i.e. find the money somehow, borrow from mom, whatever). The income cap is pretty low for single folks but plenty of work-study jobs, after-school jobs, etc. would put you comfortably in the 50% credit category. Obviously in a perfect world you'd be maxing out contributions early in life, but even if you're not super-foresightful a 50% tax rebate is pretty convincing.

 

[InstinctX]

You have problems with your 401k?
----
I ask these questions because I want to know what you would WANT from a book on finance, not what you 'think they should do like you do'. I am looking for gaps.

Nope ... quite the opposite! I think it would be cool to have a hands on calculator tool (if online) -- or provide specific examples of how putting x% of your salary into an employer-sponsored 401K would show the difference it makes over the long run. And investing yearly into an IRA (even if just $2K) has an impact.

Amongst my friends, I'm well ahead (I maxed the 15% + my old company matched my contribution with 9% (they had 3 tiers based on the employee's contribution...3%, 6% and 9%). For a while, they were doing 12% match!!! The worth of my 401K is in the upper 6 figure range ... because of the additional money I've set aside for retirement, I may have the luxury of retiring at 50! About 6 months ago, I sat with a financial advisor ... and he did a quick analysis - with assumptions of the ROI for my investments (higher rates if I continue to be aggressive .... and then as I get older, I would be more risk adverse -- so he plugged in lower return rates).

I feel for a couple of my friends ... they're going to have play catch up... when you're 22, "40" seems to be far far away. But "40" is seems much much closer and has a scary feel.

 

[Sunny]

One of the messages that recently hit home for me was "Over the long run, time in market determines returns, not timing the market".

I think in terms of what all high school kids should be taught, I think something basic they need to understand is the power of compounding/time invested. As a highschool/university student, I vividly remember seeing an advertisement that showed 2 bars on a graph. One was Lisa's retirement balance, one was Chuck's. Lisa contributed $1000/year from ages 25-35 and now at 65 has $Y. Chuck contributed $2000/year from ages 35-65 and had less than Lisa. Numbers are made up, but you get the point -- Lisa put in way less money overall, but ended up with way more because she started early.

 

[MK17]

Showing young kids how saving a small amounts (401k, IRA or whatever) out of each paycheck will payoff in the future.

 

[Matt]

One of the messages that recently hit home for me was "Over the long run, time in market determines returns, not timing the market".

I think in terms of what all high school kids should be taught, I think something basic they need to understand is the power of compounding/time invested. As a highschool/university student, I vividly remember seeing an advertisement that showed 2 bars on a graph. One was Lisa's retirement balance, one was Chuck's. Lisa contributed $1000/year from ages 25-35 and now at 65 has $Y. Chuck contributed $2000/year from ages 35-65 and had less than Lisa. Numbers are made up, but you get the point -- Lisa put in way less money overall, but ended up with way more because she started early.

Compound interest is important, and should be stressed...but also is often overplayed. In that example there is a linear ROR - whereas the market fluctuates. If there was a crash towards the end of Lisa's investment horizon here she would have lost out.... I think that it is important to convey that message of compound interest but be careful about the examples we use because if they are flawed (as this one is) people may discount the message.

Ironically, something that has been buzzing around in my head recently is about this topic. For example: would it be smart to work at WM for 8 years saving $5000 per year and not go to college vs not save, take on debt, and start funding late... ?

Sounds crazy I know, but that is also what is being said in the example you cite (its a popular example)

 

[Matt]

Nope ... quite the opposite! I think it would be cool to have a hands on calculator tool (if online) -- or provide specific examples of how putting x% of your salary into an employer-sponsored 401K would show the difference it makes over the long run. And investing yearly into an IRA (even if just $2K) has an impact.

Amongst my friends, I'm well ahead (I maxed the 15% + my old company matched my contribution with 9% (they had 3 tiers based on the employee's contribution...3%, 6% and 9%). For a while, they were doing 12% match!!! The worth of my 401K is in the upper 6 figure range ... because of the additional money I've set aside for retirement, I may have the luxury of retiring at 50! About 6 months ago, I sat with a financial advisor ... and he did a quick analysis - with assumptions of the ROI for my investments (higher rates if I continue to be aggressive .... and then as I get older, I would be more risk adverse -- so he plugged in lower return rates).

I feel for a couple of my friends ... they're going to have play catch up... when you're 22, "40" seems to be far far away. But "40" is seems much much closer and has a scary feel.

Your 401k is in great shape, but I also wonder how the rest of things might be... it could be like that guy that always does arms in gym, and as such the overall strategy is unbalanced. I definitely think getting the free money is smart.. but I wonder if you can have too much (because at some point you had to make choice not to save in a different vehicle).

Just arguing here to hammer out thoughts.

 

[grebel]

I used to have problems grasping how much money things like interest rates and compounding interest could mean in hard dollar amounts. I think a house is a perfect example. a few tenths of a percent doesn't sound like a lot to someone not thinking long term. But when we did the math and I realized how much more money I would be paying on the house with the differing interest rates.

I think you will win if you can teach someone that a 10$ a week fast food habit is really has a $480 a year price tag, or that other seemingly small differences in the present will cost them a ton over the long term.

 

[grebel]

I don't know how to put it but there should be something on the strategy of investing in retirement accounts for young professionals, which pretty much everyone has. Almost all of my friends do not actively participate in selecting and monitoring the funds that they invest in, in their retirement a/cs: a) Because they think it is confusing b) They don't have the time or inclination and, c) They don't know how to measure the returns. Many also think it is a man's job or that men are more capable when it comes to making the complicated financial decisions.

+1 on this. Of course, this is assuming your employer gives you good 401k options. My employer sucks big donkey balls, all the options are laden with fees and they could care less.

 

[Annie H.]

I guess you first have to teach the parents but to me the most important thing is helping parents teach their kids about finance, savings, investment, deferred gratification and goals. The schools aren't going to do it. Also college savings/spending should be a collaborative effort with the kid involved from an early age to understand the decisions about student loans, 529s and other college savings accounts. Too many kids--I've even seen it expressed here--have been told by parents their education will be funded and then expect a cadillac plan. Collaboration and early education and the stark truth that what goes to a kid's college education doesn't go to the parent's retirement fund. It shouldn't be either or-- it should be collaboration.

 

[Matt]

I guess you first have to teach the parents but to me the most important thing is helping parents teach their kids about finance, savings, investment, deferred gratification and goals. The schools aren't going to do it. Also college savings/spending should be a collaborative effort with the kid involved from an early age to understand the decisions about student loans, 529s and other college savings accounts. Too many kids--I've even seen it expressed here--have been told by parents their education will be funded and then expect a cadillac plan. Collaboration and early education and the stark truth that what goes to a kid's college education doesn't go to the parent's retirement fund. It shouldn't be either or-- it should be collaboration.

I like this... but I'm wondering how to implement it.

I envisage building a roadmap/pipeline from poverty to wealth but people will be on varying points on that path. You could certainly say that the kid who is in poverty should have had their parents educated. However, does that mean two books, or ten, or can one concept carry through everything. The latter would be my goal, but I am not sure if it is manageable.

 

[heavenlyjane]

How to plan for near future as well as the distant future.

It took me decades to find the perfect budgeting software, which for me is a forecasting budget calendar. I can pick any date in the future and know a decent approximation of my checking account balance. It's important to know that even though you have $3000 in your check account today, it will dip below $300 on the last Thursday of month, 1 day before your paycheck arrives.

 

[Annie H.]

I like this... but I'm wondering how to implement it.

I envisage building a roadmap/pipeline from poverty to wealth but people will be on varying points on that path. You could certainly say that the kid who is in poverty should have had their parents educated. However, does that mean two books, or ten, or can one concept carry through everything. The latter would be my goal, but I am not sure if it is manageable.

I don't think it has to be *that* difficult. Just incorporate it as part of the plan when educating the parents, emphasize that it's never too early to make kids part of the family budget and planning. Not to burden them but to early on let them start learning the "value" of money and build experiences making choices.
Kids raised in poverty where there parents don't have a lot of money to even make choices (although educating parents to make better choices never help) are way more likely to make better choices with money because they learned values early on out of necessity. You want to help them with knowledge about choices they didn't even know they had.

You're not going to stop at one book anyway are you?

 

[Dkelly1110]

Index funds beat actively-managed funds over the long run. The teachings of John C. Bogle.

 

[MickiSue]

If you start at poverty...

I was there, 25 years ago. Ex had stopped paying child support, and I was underemployed, with four little kids.

One of the tools I wish I had had at that point was both a roadmap to how a single mom, working 40+ hours a week and earning $20/mo over the poverty line, could both support her family and save something, anything for the future. One road on that map would have been the agencies, both public and private, that were in place to assist someone in that position.

Because I'm smart enough and too freakin' stubborn for my own good, sometimes, I found some of those agencies, myself. I was able, 3 years later, to buy a decent house in a good school district. Tiny, but decent.

That, I strongly believe, needs to be the first part of your book, Matt.

A bonus, because help for those in poverty keeps changing, is that you can issue new editions every couple of years to keep your book current!

 

[Matt]

If you start at poverty...

I was there, 25 years ago. Ex had stopped paying child support, and I was underemployed, with four little kids.

One of the tools I wish I had had at that point was both a roadmap to how a single mom, working 40+ hours a week and earning $20/mo over the poverty line, could both support her family and save something, anything for the future. One road on that map would have been the agencies, both public and private, that were in place to assist someone in that position.

Because I'm smart enough and too freakin' stubborn for my own good, sometimes, I found some of those agencies, myself. I was able, 3 years later, to buy a decent house in a good school district. Tiny, but decent.

That, I strongly believe, needs to be the first part of your book, Matt.

A bonus, because help for those in poverty keeps changing, is that you can issue new editions every couple of years to keep your book current!

Yeah I think that should be covered too. Frankly it would be a little outside of my immediate knowledge since I would have research those agencies here in the US. That said, it is the concept I was thinking to run with.

I just feel that there is a generic guide and perhaps the one you are outlining here would be a niche within that? Another niche might be students graduating with debt etc... these are all people that are at a point in their life where a drastic change/control is needed, but the implementation of this would be different.

I wonder if I could address both a grad student and a single mom in just one book - in terms of actionable help?

 

[MickiSue]

I would hope so, Matt...the need is great for both, but there's less currently available for her.

 

[Matt]

I would hope so, Matt...the need is great for both, but there's less currently available for her.

Certainly. But would the Grad student stuff dilute her need?

Its something I'd be happy to do, but I do worry if I am qualified... I could gather the data, but at the end of the day I'm a bloke, and I wonder if this job is better left for a woman? At the least i'd have to interview a ton of women to get their input.

 

[MickiSue]

Fair question. Do what you know, first. If it's successful, you could try co-writing the one for the single parent, or anyone else who is *suddenly* poor. That might be a better name for it, anyway. Lots of people find themselves, not only d/t single parenthood, with drastically reduced income. They need the roadmap, as well.

 

[Matt]

Fair question. Do what you know, first. If it's successful, you could try co-writing the one for the single parent, or anyone else who is *suddenly* poor. That might be a better name for it, anyway. Lots of people find themselves, not only d/t single parenthood, with drastically reduced income. They need the roadmap, as well.

If I was to write one for that target I would likely want to be careful about titling it in a manner that is discrete. I do believe that withholding financial knowledge is a form of spousal abuse (a tool an abusive spouse would use to trap a partner) as such it would be amazing to create a book that sounded innocent like 'The Key' that a friend could give to them and they could read within the relationship without the partner noticing... then it could empower not only the single parent, but the parent who wanted to be single but felt trapped.

 

[MickiSue]

Exactly.

 

[R.R.]

building a roadmap/pipeline from poverty to wealth

Debt should also be addressed as part of this roadmap, since it occurs at so many points along this path, and there are so many different kinds, uses, and levels of debt (not just student loans).

 

[Hanaleiradio]

Adding to your dialogue with MickSue, I do think it's wise to hone in on a clear definition of the audience you're targeting for the book. There are many reasons why some individuals and households are without assets or significant income, although a long long time ago the Ag schools boiled them down to the five D's that can severely impact a farm family or a family business: death, disability, disaster, divorce and disagreements. We were also taught the strategies one should use to mitigate each of the D's. For some there are few strategies available; for others its about choosing from several possible pathways, and timing. (One of the strategies taught for sudden death of or divorce from the breadwinner was to temporarily rely on public safety net programs and private charity, as MickiSue stated.) Of course someone who falls into poverty as a result of one of the D's is often not in the same boat as someone that's 3rd generation very low income. Moving out of poverty is not a matter of one size fits all!

There's already an enormous amount of research and publication on this topic--both on the policy level and on the level of what individual behaviors and actions are most effective. Many of its been written by people who have made it their life's work. No snark intended, but I'm wondering what value your book will add? What's the unique contribution you'll make?

 

[Matt]

I'm wondering what value your book will add? What's the unique contribution you'll make?

That's a great question to ask, and what will keep me honest. Frankly, I can't say what value it will add yet. I think my unique perspective could be that I've been through it, made a lot of mistakes, educated myself and now know a lot more about money than I did growing up.

 

[Annie H.]

That's a great question to ask, and what will keep me honest. Frankly, I can't say what value it will add yet. I think my unique perspective could be that I've been through it, made a lot of mistakes, educated myself and now know a lot more about money than I did growing up.

Maybe you should write a book for kids. And I'm not being snarky!

 

[Matt]

Maybe you should write a book for kids. And I'm not being snarky!

For the same reason I hesitate for women that @MickiSue outlined. I'm not sure I am qualified. I take this seriously, and the last thing I would want to do is half arse a book for kids because getting that right would be epic... and the flip side is getting it wrong could do a lot of harm.