04.14.13

Financial Advice, 10 years late

Posted in finance at 7:47 pm by wingerz

I’ve never been great with financial planning. The only lesson (which, it turns out, was probably one of the most important ones) that I learned from my parents is to save a lot and spend a little. I’ve made a good number of avoidable mistakes along the way, mostly in the form of small 1-2 year experiments – working with a financial advisor and playing around with individual stocks.

Last year Andy Rachleff came to Yelp to give a talk on portfolio theory. It was the kick in the pants I needed, so I spent some time reading and getting our financial things in order. I’ve been sharing bits and pieces with some of the younger engineers that I work with, but figured it would be nice to summarize some of it for future reference. Here are a few things that I wish someone had told me to do in my first few years out of college:

  • Understand that this is important, and you’re the only one who cares. Retirement is a long way away, but you want to start planning immediately, even if your plan is to have someone else do this for you. As many books point out, the guy who is best at managing money is going to have much bigger fish to fry than your little retirement account. [Edit: Great point from Grant: once you get things set up, you can let it do its thing and check back 1-2x/year.]
  • Spend some time reading. This isn’t the sexiest material in the world, but it is interesting – most of the books cover a lot of history and psychology of investing (super-relevant given the two bubbles that I’ve already seen). There are a lot of great books to get started. “The Four Pillars of Investing” by William Bernstein is probably where I’d start (by the same author: “The Intelligent Asset Allocator”, also a good read).
  • Save, save, save. Contribute to retirement in every way you can (Roth IRA, 401k, even if there isn’t a match). These accounts give you a ridiculous amount of flexibility later on because you can, for the most part, shuffle things around without worrying about tax implications. Save and invest in addition to this if possible, but keep in mind where your investments live.
  • Understand your options. Read “Consider Your Options” by Kaye Thomas. It’s good to know about things like AMT kicking in for options that you exercise and don’t sell by the end of the year.
  • Get all of your accounts in one place. Also, that place should probably be Vanguard. Their costs are really low, and they have a lot of investing options. If your 401k isn’t with them, consider rolling it over to them when you leave your current company (I’ve done this with both of my previous 401ks).