Financial planning for the poor?
June 26, 2013 11:13 AM   Subscribe

I'm a formerly broke person who is beginning to become unbroke, although not without stumbling from time to time. I have a few strong goals - buy a house, get my student debt in order (not paid off - just in order), save up enough for a couple of large ($5000) purchases, improve my credit score to mortgage-minimum. I need help getting there.

However, I'm clueless about how to aim myself. I come from a long line of people who are also clueless about money. I would very much like to go to someone, drop my financial information on their desk, and have them give me a series of concrete steps and mini-goals that will cut my Gordian knot. Financial planners in my area tend to be the "$250,000 minimum account" type. I want someone who understands how low-income (sub-$30,000/year) people think and spend, so they can see the possible traps ahead (and won't spend my money selling me stocks for an hour). I understand if my goals are not all realistic - the house probably isn't - but I know I can do more than I am, if I could just get knowledgeable help.

Recommendations for books and software are fine, though I would really prefer a human being. I use right now to track my spending and create budgets, but it doesn't seem to be helping. Credit counselling does sound nice, but apparently I am not in enough debt to quality for it.

Something between a life coach and a financial planner who won't charge an arm and a leg and who understands that my savings aren't over four digits. Please!
posted by Nyx to Work & Money (24 answers total) 22 users marked this as a favorite
Only thing I can suggest here is, don't use Ameriprise (who purports to help people exactly in your situation). They are useless and scammy.
posted by Melismata at 11:27 AM on June 26, 2013

You might read some Dave Ramsey and do the "baby steps." They're designed to help you stay motivated by giving you small, attainable goals, and don't require you to have any savings at all to get started. It'll at least give you some things to work on until you find a real person to talk to.

Also, a lot of churches host a class of his called Financial Peace University which teaches basic money stuff and gives you a support system. If you call around you may find one that has a scholarship available, in case you can't afford to pay for the class.
posted by TallulahBankhead at 11:29 AM on June 26, 2013

The term you might be looking for is "fee based financial advisor" - a financial advisor who works for a fee paid by you rather than on commissions on products they sell. That said, I have to be honest and say that you are not in their target market and they would not be particularly familiar with your situation.

This sounds a bit ridiculous, but one of the best personal finance books I've seen is Personal Finance for Dummies by Eric Tyson. He also has similar books on more specific topics.
posted by saeculorum at 11:30 AM on June 26, 2013 [1 favorite]

I personally like YNAB for budgeting and planning, especially since they have "Rules" behind using the software. Giving every dollar a job is a good way to think about things. And don't sweat the last rule-- that's a while down the road.

Dave Ramsey has good rules as well.

For in-person help-- there's a large organization of financial planners that has pro bono resources available. I have to assume that those are aimed at low-to-moderate incomes.
posted by supercres at 11:31 AM on June 26, 2013 [2 favorites]

I have very good luck going on reddit personal finance subreddit and asking them for advice. They might be a bit brutal about what you can and cannot cut out, but people there like looking at other people's budgets and giving advice. (Bonus: it's interactive!)

Personally, I use a combination of YNAB and Mint to keep track of my progress.

If you have a retirement or investment account, they may give you free financial planning. Don't open an account just for this, and beware that those planners are often commission based and don't really have your best interests at heart. If you have an account with Vanguard and it's available to you, for example, I would totally take advantage of the service.
posted by ethidda at 11:34 AM on June 26, 2013

You can get a free start here.
posted by Mr.Know-it-some at 11:35 AM on June 26, 2013

If you have some free time, it's very possible to pick up a lot of these principles just by researching personal finance tips or following blogs online. I used to read religiously, although the quality seems to have gone down in the last few years. Dave Ramsey's system works for a lot of people too, although I strongly disagree with a couple of his ideas. You can find a lot of general money-saving tips online too, although it seems like you're looking for more of an overall system.

It's really more of a mindset thing (being very careful about where you spend your money, not necessarily being stingy but making every dollar count) than a logistics thing.

(if you want I'm happy to give you some private comments on your budget and/or share mine with you. I'm not a financial planner or anything but I live comfortably and save money every month on well under 30k/year).
posted by randomnity at 11:44 AM on June 26, 2013 [2 favorites]

"The Only Investment Guide You'll Ever Need" by Andrew Tobias sounds like it's, duh, more about investment than financial planning, but its common sense outlook is incredibly contagious, and I'm very grateful I read it right when I got out of college. It's not for, like, day traders trying to play the market. It's about a certain perspective on money, and its' real smart. Also fabulously entertaining to read.
posted by Quisp Lover at 11:45 AM on June 26, 2013

Not threadsitting, but I should add: I'm Canadian. And I do try to save every month - I find a lot of financial tips end up being lists of, "Stop buying your $5 latte every morning" (I don't) and "Brown-bag it to work" (I do) and other unhelpful things that assume I am spending a thousand bucks a month on gewgaws and shoes.

Another way to phrase all this is: how do I plan like a grown-up for retirement/emergencies/long-term goals, while not actually making the money that financial planners expect from their clients at my age? (thirties)
posted by Nyx at 11:53 AM on June 26, 2013 [1 favorite]

Pick up a copy of "How to get out of debt, stay out of debt and live prosperously."

A house is an attainable goal. My sister calls a mortgage "paying rent to the bank." You need a good credit score and you need to read some real estate books and consider all angles. If you cannot come up with 20% down and qualify for a conventional mortgage, you are not dead in the water. There are other options. Some employers help with down payments or closing costs. Some programs help. There are foreclosure properties and other more exotic options.

(I bought a house with my husband at age 27. We had no savings. His employer (the U.S. Army) meant we didn't need a down payment and we negotiated for the seller to pay closing costs. We qualified on his pay raise/promotion and had to document that because we didn't yet have pay srubs for that much income. It can be done. I read a lot of real estate books when I was younger. Knowledge is power.)

If tracking your numbers in Mint is not helping, consider trying to go as close to all cash as you can manage and carry a small notebook and pen. For two mobths, write down every penny spent.

Money is a pretty abstract concept. Some people have trouble with it. My oldest has dyscalculia. He literally has trouble with numbers. For a time, I left him cash and he did most of the grocery shopping. He now can cope with a bank account and debit card. The numbers make more sense to him. Learning to spend and budget cash, which is more tangible, helped him get to the point where a bank account is not a catastrophe waiting to happen.

You also need to learn to think in terms of "total cost over the life of the item." Poor people get bled because they buy the cheapest thing they can find in terms of up front cost and get bled on carrying costs. Just before I bought a house, I lived in a trailer. It was half the size of the house but so poorly insulated that the electrical bill for the house was about the same as the bill for the trailer. The low rent was not really a bargain, for a whole lot of reasons. Being poor is very expensive. The dying middle class in America represents and grows out of the death of rubrics for how to take care of people properly for a minimum of resources. But that's a whole 'nother discussion, I suppose.
posted by Michele in California at 11:53 AM on June 26, 2013 [1 favorite]

This Cracked article about attitudes about money when you've grown up poor may be of some help.
posted by NoraCharles at 11:59 AM on June 26, 2013 [1 favorite]

I kind of started out like you and taught myself the basics from blogs like getrichslowly, thesimpledollar etc, and forums like the bogleheads.

I also read some of these books, borrowing them from libraries.

Aside from that, it was a lot of consistent self discipline. I set up online accounts where a third of my stipend would be deposited every month, the day I got it. I just had to make do with what I had left of my stipend that way. That helped me build most of my savings over the last 2-3 years. Once that was done, I've started setting aside money for house/retirement accounts etc...

I am not a financial planner or anything, but taught myself these things because of an interest in personal finance and the need for security once I realized no one was coming to help me... I guess that sort of psychologically helped me stick to this.

I am in the same under 30K/year category, and will be happy to share specifics/tips if you like.

Hang in there, its a difficult road, but the financial independence is so worth it. Good luck!
posted by greta_01 at 12:03 PM on June 26, 2013

I learned a lot from Get Rich Slowly (a blog that was started by Mefi's Own J.D. Roth) and I follow Wise Bread for day to day tips. I certainly don't have all my stuff in order but I was able to learn a lot over the years just from reading things online. I've also found Mint was really helpful for figuring out where everything was going and getting a snapshot of the status of all my debts in one place.

If I was starting from scratch again, my first priority for extra money after bills would be to start making an emergency fund. 3-6 months is the typical recommendation. I can keep yapping about this for a while so feel free to memail me if you like!
posted by brilliantine at 12:07 PM on June 26, 2013 [1 favorite]

The Everything Personal Finance in Your 20s and 30s book has been really helpful to me. My boyfriend is a financial adviser for a government agency and purchased this for me for my birthday this year (among a few other less practical gifts :) ). I've really started working hard to put a dent in my credit card debt and to start being more serious about saving, and this book has shown me clearly how to go about doing these things.

I agree with what others above have said about setting up an automatic deposit to a savings account so that you're saving money before you really have a chance to remember you're getting it through your paycheck each month. Dave Ramsey is a great place to learn the basics. But yes, a lot of it boils down to making smart decisions and always keeping your long-term financial goals in mind.
posted by singinginmychains at 12:31 PM on June 26, 2013

Servus Credit Union is based in Alberta; they started the "Young & Free Alberta" financial education programs/blogs which have now expanded to other cities. It's good stuff. It's designed for people just starting out but the info is good no matter your age. Servus will surely have credit-builder programs to put you on track to save, borrow, and invest over time.

(Full disclosure: I work for a credit union, although not that one and not in Canada.)
posted by headnsouth at 12:33 PM on June 26, 2013

Dave Ramsey is a good source to help you get started. No one has mentioned Suze Orman. She presents info in a really accessible way (but find her voice incredibly grating).

While you're getting started let me toss out suggestion. Goals are good, but you can't work all of them at the same time. Snowballing or working in a smart sequence is important. Also, you're missing a really important goal which is building a cash cushion. If you've come from a family of weak financial planners, then a cash cushion can seem foreign. It's the thing you need to live with confidence and stability.

Here's an alternative sequence.

1. Establish a cash cushion. - This is first unless you are defaulting on existing debt
2. Get my student debt in order
3. Improve my credit score
4. Save up enough for a couple of large ($5000) purchases - these savings are separate from your cash cushion.
5. Buy a house

While you're finding a planner to help you, I encourage you to get comfortable with your new self-image as someone with savings in a cash cushion.
posted by 26.2 at 12:36 PM on June 26, 2013

Nyx, if you're Canadian, get a TD Canada Trust account, and go in and talk to their advisors. It's free and they are GREAT. I'm killing my last debt sink right now with their help, and I've gone in with just speculative future questions (if I want to be able to buy a house in 10 years, what do I need to be doing now?) and they've given me half an hour of advice. Seriously, best bank in Canada for customer service and they've always been fantastically helpful for me.
Memail me if you want more info or details!
posted by L'Estrange Fruit at 12:51 PM on June 26, 2013

YNAB is amazing. Helped me go from the 'put the card in the ATM and see if anything comes out' system of budgeting (and a lot of debt) to solvent and saving, supporting two people on one income. Literally changed my life. Motivation-wise I used to listen to some Dave Ramsey stuff, although the religious angle and the occasional ceaseless 'poor people are making a choice' shite turned me off of that pretty quick.
posted by Happy Dave at 1:05 PM on June 26, 2013 [1 favorite]

A Canadian solution: read the Wealthy Barber. Its a fast easy read that will give you some decent advice.
posted by saradarlin at 1:42 PM on June 26, 2013 [1 favorite]

You might also look at Mr. Money Mustache and Reddit's /r/frugal
posted by cnc at 2:07 PM on June 26, 2013

Canadian? I'd recommend Money Rules by Gail Vaz-Oxlade. She also blogs and has a couple of TV shows. She gives simple, sensible advice.
posted by futureisunwritten at 2:47 PM on June 26, 2013

Thirding YNAB. (Also, their forums have some really good advice, and a lot of the people in there are in the kind of position you're in - because I am also there, so I notice it.)

I also found Elizabeth Warren's and Amanda Warren Tyagi's "All Your Worth" really helpful in figuring out how to do larger scale planning that's more or less scalable to budget. (They advocate working your way towards living on half your salary for necessary expenses - rent, food, stuff you can't get out of contracts quickly) and then putting 20% to debt and then savings, and 30% for wants.

(It's a bit more complicated than that: student loan debt is weird, food obviously has a range of ways you can spend money on it. But I find it really helpful to know that if something happened to my job, or I ended up on short term disability or something, I could still pay the basic bills. And yet, it's not absurdly restrictive, which is the point at which it gets hard for lots of people to sustain.)
posted by modernhypatia at 3:55 PM on June 26, 2013 [1 favorite]

'The Wealthy Barber' and 'The Wealthy Barber Returns' are two perennial favourites in the field.
There are several Dummies books specifically about Canadian personal finance. Chapters Indigo sells them at a discount on a regular basis.
A lot of people don't like Ben Stein, but his book 'How to Ruin Your Financial Life' is a useful short read.
posted by Multicellular Exothermic at 4:51 PM on June 26, 2013

Nyx: "Not threadsitting, but I should add: I'm Canadian. And I do try to save every month - I find a lot of financial tips end up being lists of, "Stop buying your $5 latte every morning" (I don't) and "Brown-bag it to work" (I do) and other unhelpful things that assume I am spending a thousand bucks a month on gewgaws and shoes.

Another way to phrase all this is: how do I plan like a grown-up for retirement/emergencies/long-term goals, while not actually making the money that financial planners expect from their clients at my age? (thirties)

I don't know the specifics about Canadian retirement plans, but social security in the US slants payments to the poor; for every dollar a poor person puts in, they get more back every year on average, compared with a middle class or rich person. If Canada's plans work similarly, retirement savings is less of a concern.

Go to your local library and pick out a couple books by different authors. I'd try to avoid anything with the author's face on it; a lot of the personal finance authors run sketchy side businesses (conferences, multithousand dollar seminars, referrals to high fee financial planners) that the books feed into. Elizabeth Warren's books might be valuable, but I recall it being more anecdotal than tactical. There's some high level budgeting rules, and gives serious consideration to the fact that bankruptcy may be the proper option for those in severe debt.

I recommend you start with an annual budget in a spreadsheet. I publish a pretty good one on Google Docs you can download or copy into your own google drive.
posted by pwnguin at 11:33 AM on June 27, 2013

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