Where to start with personal finance?
"First thing I'd say is don't start with investing. The foundation of solid finances is cash flow. Making more than you spend, reliably; knowing where your money goes; having a system that works for you to make sure you make more than you spend. Until you have that, your focus may as well be on getting there, because you can't fix much else about your finances until you fix this. A number you want to know is your percentage of income saved, and a good goal for that is about 15%, with 10-12% going to retirement savings and the rest to shorter-term goals and emergency fund and so forth. (Of course the right percentage here depends on your goals and situation, but for most people this is a kind of minimum savings rate to be in good shape.) Focus on your savings rate. This is your profitability, if you view yourself as a business. If it's crappy or negative, your finances will be a mess. Two ways to improve it are to spend less or to improve your earnings power. Doing both is even better. The book Your Money or Your Life by Dominguez and Robin is good for showing how to obsessively focus on cash flow, even though you may not share their zeal for early retirement. A simpler exercise than what they recommend: take 3 months of your checking and credit card statements, go through each expenditure and put them in a spreadsheet column, SUM() that column. Then add up 3 months of after-tax paychecks. Divide both numbers by three and compare. (The 3 months is to average out your spending, which probably varies a lot by month.) After positive cash flow and savings rate, the next thing I'd go through is insurance. Risk management for what you have. This can include checking you have all the important insurance coverages (homeowner's/renter's, auto, potentially umbrella, term life, disability, and of course health insurance, are some highlights); and also adjusting all your policies to be most cost-effective, which usually means raising the deductible if you have a good emergency fund. Often you can raise the deductible on policies you have, and use the savings to add more catastrophe coverage (such as term life if you didn't have it, or boosting the liability protection on your homeowner's, or whatever). Remember, cover catastrophes as cheaply and comprehensively as possible, but don't worry about reimbursement for non-catastrophic expenses. I like this book, Smart and Simple Financial Strategies for Busy People by Jane Bryant Quinn, because it covers all the main personal finance topics, not just investing; and because it is smart and simple. All the main stuff to think about is in the one book and the advice is solid and uncomplicated. Investing can truly be dead easy; most people would be fine with this advice: Honestly, I do micro-optimize and undermine my investing, and I'm guessing most people on this forum do. But it's not something I could defend objectively as a good use of time. It probably is necessary to do some reading to feel financially literate and confident in an investment plan, but the reading isn't really because a good plan is complicated, it's more to understand all the complicated things that you don't need to do, since that's how you'll know not to do them. ;-) Especially when salespeople and publications and TV are telling you over and over and over that you need to know a bunch of crap and do a bunch of things. People who have a profitable ""business of me"" are the ones who end up with a lot of money. Not people who spend a lot of time screwing with investments. (People who get rich investing invest professionally - as their ""business of me"" - they don't goof around with their 401k after work.) Financial security is all about your savings rate, i.e. your personal profitability. No shortcuts, other than lotteries and rich uncles." My reading list for someone just getting into personal finance would include the following I know it's a bunch but I'm trying to cover a few specific things. Yeah it's a bit of reading, but lets face it, nobody is going to care as much about your money as YOU do, and at the very least this kind of knowledge can help fend off a 'shark attack' by someone trying to sell you something not because it's best for you, but because it earns them a fat commission check. Once you've covered those, you have a good foundation, and oh lord there's so many other good books that you could read to help understand more about money, markets etc..  Personally I'd say hit this list, and just about anything on it, is worth your time to read. I've used publishers websites where I could find them, and Amazon otherwise. "This Stack Exchange site is a nice place to find answers and ask questions. Good start! Moving away from the recursive answer... Simply distilling personal finance down to ""I have money, I'll need money in the future, what do I do"", an easily digestible book with how-to, multi-step guidelines is ""I Will Teach You To Be Rich"". The author talks about setting up the accounts you should have, making sure all your bills are paid automatically, saving on the big things and tips to increase your take home pay. That link goes to a compilation page on the blog with many of the most fundamental articles. However, ""The World’s Easiest Guide To Understanding Retirement Accounts"" is a particularly key article. While all the information is on the free blog, the book is well organized and concise.  The Simple Dollar is a nice blog with frugal living tips, lifestyle assessments, financial thoughts and reader questions. The author also reviews about a book a week. Investing - hoping to get better returns than savings can provide while minimizing risk. This thread is an excellent list of books to learn about investing. I highly recommend ""The Bogleheads' Guide to Investing"" and ""The Only Investment Guide You'll Ever Need"". The world of investment vehicles is huge but it doesn't have to be complicated once you ignore all the fads and risky stuff. Index mutual funds are the place to start (and maybe end). Asset allocation and diversification are themes to guide you. The books on that list will teach you." First of all, make sure you have all your credit cards paid in full -the compounding interests on those can zero out returns on any of your private investments. Fundamentally, there are 2 major parts of personal finance: optimizing the savings output (see frugal blogs for getting costs down, and entrepreneur sites for upping revenues), and matching investment vehicles to your particular taste of risk/reward. For the later, Fool's 13 steps to invest provides a sound foundation, by explaining the basics of stocks, indexes, long-holding strategy, etc.   A full list Financial instruments can be found on Wikipedia; however, you will find most of these to be irrelevant to your goals listed above. For a more detailed guide to long-term strategies on portfolio composition, I'd recommend A Random Walk Down Wall Street: The Time-tested Strategy for Successful Investing. One of the most handy charts can be found in the second half of this book, which basically outlines for a given age a recommended asset allocation for wealth creation. Good luck! Personal finance is a fairly broad area.  Which part might you be starting with? From the very basics, make sure you understand your current cashflow: are you bank balances going up or down?  Next, make a budget.  There's plenty of information to get started here, and it doesn't require a fancy piece of software.  This will make sure you have a deeper understanding of where your money is going, and what is it being saved for.  Is it just piling up, or is it allocated for specific purchases (i.e. that new car, house, college tuition, retirement, or even a vacation or a rainy day)? As part of the budgeting/cashflow exercise, make sure you have any outstanding debts covered.  Are your credit card balances under control?  Do you have other outstanding loans (education, auto, mortgage, other)?  Normally, you'd address these in order from highest to lowest interest rate. Your budget should address any immediate mandatory expenses (rent, utilities, food) and long term existing debts.  Then comes discretionary spending and savings (especially until you have a decent emergency fund).  How much can you afford to spend on discretionary purchases?  How much do you want to be able to spend?  If the want is greater than the can, what steps can you take to rememdy that? With savings you can have a whole new set of planning to consider.  How much do you leave in the bank?  Do you keep some amount in a CD ladder?  How much goes into retirement savings accounts (401k, Roth vs. Traditional IRA), college savings accounts, or a plain brokerage account?  How do you balance your overall portfolio (there is a wealth of information on portfolio management)?  What level of risk are you comfortable with?  What level of risk should you consider, given your age and goals?  How involved do you want to be with your portfolio, or do you want someone else to manage it? Silver Dragon's answer contains some good starting points for portfolio management and investing.  Definitely spend some time learning the basics of investing and portfolio management even if you decide to solicit professional expertise; understanding what they're doing can help to determine earlier whether your interests are being treated as a priority. The Money Girl (Quick and Dirty Tips for a richer life) Podcast is a pretty good source for this type of information. Some Recent Topics: "I've recommended this book a few times on this site, and I'm going to do it again. Get a Financial Life: Personal Finance in Your Twenties and Thirties by Beth Kobliner  Most of the personal finance advice books and blogs I have found focus too much on investing, or are more about ""lifestyle"" than finances, and left me unimpressed.  I like this book because it covers most of the major personal finance topics (budgets, rainy-day fund, insurance, retirement, and non-retirement investment).  I have not found another book that covers the topics as concisely as this one. It is no-nonsense, very light reading.  Even if you are not a book person, you can finish it in a weekend.  It is really geared for the young person starting their career. Not the most current book (pre real-estate boom), but the advice is still sound. Keep in mind that is is starting point, not the ultimate answer to all financial questions."
I started my career over 10 years ago and I work in the financial sector. As a young person from a working class family with no rich uncles, I would prioritize my investments like this: It seems to be pretty popular on here to recommend trading individual stocks, granted you've read a book on it. I would thoroughly recommend against this, for a number of reasons. Odds are you will underestimate the risks you're taking, waste time at your job, stress yourself out, and fail to beat a passive index fund. It's seriously not worth it. Some additional out-of-the box ideas for building wealth: Self-serving bias is pervasive in the financial world so be careful about what others tell you about what they know (including me). Good luck. Also, my wealth manager doesn't like to discuss my money with me. To some extent, I understand this because finances are not my forte This is akin to porn surfing all day at your job instead of writing code, fire him ASAP. For now I would stick it in a bank account until you are comfortable and understand the investments you are purchasing.   Here are some options to consider: The last one is tricky.  You might have to interview several in order to find that one gem.  With you being so young it is unlikely any of your friends have a need for such a service.  I would concentrate on asking older work colleagues or friends of your parents for recommendations.  Ask if they are educated by their adviser.   In the end it would really pay for you to educate yourself about finances.  No one can quite do as good as a job as you can in this area.  You recognize that there was a problem with your current guy, that shows wisdom.  If you have an interest in this area, I would recommend attending a Financial Peace University class.  All my kids (about your age and older) are required to take it.  It will help you navigate debt, mortgages, insurance, and investing and will cost you about $100.  If you don't learn enough the first time, and you won't, you can repeat the course as many times as you wish for no additional cost. Chances are since college is your next likely step I would recommend saving up for it.  Start building an emergency fund. Recommended $1,000 minimum. To start building your credit rating (when 18) get a low interest low limit credit.  Pay off the balance every month. Starting to build your credit rating now can save you hundreds of thousands when buying a house over the course of paying it off.  ie. cheaper interest rate. As for investing, the sooner you can get started the better.  Acquire preferred/stocks/bonds/REITs/ETFs/etc that pay you to own them (they pay you dividends monthly/quarterly/etc).  Stick with solid stocks that have a history of consistently increasing their dividends over time and that are solid companies. I personally follow the work/advice of Derek Foster.  He's not a professional but he retired at 34.  His first book (Stop working - Here's how you can) is great and recommend it to anyone who is looking to get started. Also check out Ramit Sethi's blog I Will Teach You to be Rich. He focuses on big wins which save you a lot over the long term.  He's also got some great advice for students as well. Best of luck! You don't say your level of consumer debt.  You don't say how much of an emergency fund you have. If you have debt, pay it off before you invest.  If you don't have an emergency fund (X months' expenses, pick your own X) get that before investing. If you have neither, get a small emergency fund, and then throw as much as you can to getting rid of debt. Beyond that, look for prudent investments.  They're not the same as conservative investments. To know what's prudent, learn about the ones you listed and what determines their prices.  Learn how or why they go up or down in value. "I think ""Rich Dad Poor Dad"" is a good read for understanding the basics of personal finance in a non-technical format before actually starting investing." Communicate. I would recommend taking a course together on effective communications, and I would also suggest taking a course on budgeting and family financial planning. You need to be able to effectively communicate your financial plans and goals, your financial actions, and learn to both be honest and open with your partner.  You also need to be certain that you come to an agreement. The first step is to draft a budget that you both agree to follow.  The following is a rough outline that you could use to begin.  There are online budgeting tools, and a spreadsheet where you can track planned versus actuals may better inform your decisions. Depending upon your agreed priorities, you may adjust the following percentages, Essentials (<50% of net income) Financial (>20%) Lifestyle (<30%) - this is your discretionary income, where you spend on the things you want Certain expense categories are large and deserve special advice. Try to limit your housing costs to 25% of your income, unless you live in a high-cost/rent area (where you might budget as high as 35%). Limit your expenses for vehicles below 10% of income. And expensive vehicle might be budgeted (partly) from Lifestyle. Limiting your auto payment to 5% of your income may be a wise choice (when possible). Some families spend $200-300/month on cable TV, and $200-300/month on cellphones. These are Lifestyle decisions, and those on constrained budgets might examine the value from those expenses against the benefit. Dining out can be a budget buster, and those on constrained budgets might consider paying less for convenience, and preparing more meals at home. An average family might spend 8-10% of their income on food. Once you have a budget, you want to handle the following steps, Many of the steps are choices based upon your specific priorities. "You can't get started investing. There are preliminary steps that must be taken prior to beginning to invest: Only once these things are complete can you think about investing.  Doing so before hand will only likely lose money in the long run.  Figure these steps will take about 2.5 years.  So you are 2.5 years from investing. Read now:  The Total Money Makeover.  It is full of inspiring stories of people that were able to turn things around financially.  This is good because it is easy to get discouraged and believe all kind of toxic beliefs about money:  The little guy can't get ahead, I always will have a car payment, Its too late, etc...  They are all false.  Part of the book's resources are budgeting forms and hints on budgeting. Read later:  John Bogle on Investing and Bogle on Mutual Funds One additional Item:  About you calling yourself a ""dummy"".  Building personal wealth is less about knowledge and more about behavior.  The reason you don't have a positive net worth is because of how you behaved, not knowledge.  Even sticking a small amount in a savings account each paycheck and not spending it would have allowed you to have a positive net worth at this point in your life. Only by changing behavior can you start to build wealth, investing is only a small component." "You don't state where you are, so any answers to this will by necessity be very general in nature. How many bank accounts should I have and what kinds You should have one transaction account and one savings account. You can get by with just a single transaction account, but I really don't recommend that. These are referred to with different names in different jurisdictions, but the basic idea is that you have one account where money is going in and out (the transaction account), and one where money goes in and stays (the savings account). You can then later on, as you discover various needs, build on top of that basic foundation. For example, I have separate accounts for each source of money that comes into my personal finances, which makes things much easier when I sit down to fill out the tax forms up to almost a year and a half later, but also adds a bit of complexity. For me, that simplicity at tax time is worth the additional complexity; for someone just starting out, it might not be. (And of course, it is completely unnecessary if you have only one source of taxable income and no other specific reason to separate income streams.) how much (percentage-wise) of my income should I put into each one? With a single transaction account, your entire income will be going into that account. Having a single account to pay money into will also make life easier for your employer. You will then have to work out a budget that says how much you plan to spend on food, shelter, savings, and so on. how do I portion them out into budgets and savings? If you have no idea where to start, but have an appropriate financial history (as opposed to just now moving into a household of your own), bring out some old account statements and categorize each line item in a way that makes sense to you. Don't be too specific; four or five categories will probably be plenty. These are categories like ""living expenses"" (rent, electricity, utilities, ...), ""food and eating out"" (everything you put in your mouth), ""savings"" (don't forget to subtract what you take out of savings), and so on. This will be your initial budget. If you have no financial history, you are probably quite young and just moving out from living with your parents. Ask them how much might be reasonable in your area to spend on basic food, a place to live, and so on. Use those numbers as a starting point for a budget of your own, but don't take them as absolute truths. Always have a ""miscellaneous expenses"" or ""other"" line in your budget. There will always be expenses that you didn't plan for, and/or which don't neatly fall into any other category. Allocate a reasonable sum of money to this category. This should be where you take money from during a normal month when you overshoot in some budget category; your savings should be a last resort, not something you tap into on a regular basis. (If you find yourself needing to tap into your savings on a regular basis, adjust your budget accordingly.) Figure out based on your projected expenses and income how much you can reasonably set aside and not touch. It's impossible for us to say exactly how much this will be. Some people have trouble setting aside 5% of their income on a regular basis without touching it; others easily manage to save over 50% of their income. Don't worry if this turns out a small amount at first. Get in touch with your bank and set up an automatic transfer from your transaction account to the savings account, set to recur each and every time you get paid (you may want to allow a day or two of margin to ensure that the money has arrived in your account before it gets taken out), of the amount you determined that you can save on a regular basis. Then, try to forget that this money ever makes it into your finances. This is often referred to as the ""pay yourself first"" principle. You won't hit your budget exactly every month. Nobody does. In fact, it's more likely that no month will have you hit the budget exactly. Try to stay under your budgeted expenses, and when you get your next pay, unless you have a large bill coming up soon, transfer whatever remains into your savings account. Spend some time at the end of each month looking back at how well you managed to match your budget, and make any necessary adjustments. If you do this regularly, it won't take very long, and it will greatly increase the value of the budget you have made. Should I use credit cards for spending to reap benefits? Only if you would have made those purchases anyway, and have the money on hand to pay the bill in full when it comes due. Using credit cards to pay for things is a great convenience in many cases. Using credit cards to pay for things that you couldn't pay for using cash instead, is a recipe for financial disaster. People have also mentioned investment accounts, brokerage accounts, etc. This is good to have in mind, but in my opinion, the exact ""savings vehicle"" (type of place where you put the money) is a lot less important than getting into the habit of saving regularly and not touching that money. That is why I recommend just a savings account: if you miscalculate, forgot a large bill coming up, or for any other (good!) reason need access to the money, it won't be at a time when the investment has dropped 15% in value and you face a large penalty for withdrawing from your retirement savings. Once you have a good understanding of how much you are able to save reliably, you can divert a portion of that into other savings vehicles, including retirement savings. In fact, at that point, you probably should. Also, I suggest making a list of every single bill you pay regularly, its amount, when you paid it last time, and when you expect the next one to be due. Some bills are easy to predict (""$234 rent is due the 1st of every month""), and some are more difficult (""the electricity bill is due on the 15th of the month after I use the electricity, but the amount due varies greatly from month to month""). This isn't to know exactly how much you will have to pay, but to ensure that you aren't surprised by a bill that you didn't expect." "What I would do, in this order: Get your taxes in order. Don't worry about fancy tricks to screw the tax man over; you've already admitted that you're literally making more money than you know what to do with, and a lot of that is supported, one way or another, by infrastructure that's supported by tax money.  Besides, your first priority is to establish basic security for yourself and your family.  Making sure you won't be subjected to stressful audits is an important part of that! Pay off any and all outstanding debts you may have.  This establishes a certain baseline standard of living for you: no matter what unexpected tragedies may come up, at least you won't have to deal with them while also keeping the wolves at bay at the same time! Max out a checking account. I believe the FDIC maximum insured value is $250,000.  Fill 'er up, get a debit card, and just sit on it.  This is a rainy day fund, highly liquid and immediately usable in case you lose your income. Put at least half of it into an IRA or other safe investments.  Bonds and reliable dividend-paying stocks are strongly preferred: having money is good but having income is much better, especially in retirement! Quality of life.  Splurge a little.  (Emphasis on a little!)  Look around your life. There are a few things that it would be nice if you just had, but you've never gotten around to getting.  Pick up a few of them, but don't go overboard.  Spending too much too quickly is a good way to end up with no money and no idea what happened to it.  Also, note that this isn't just for you; family members deserve some love too! Charitable giving.  If you have more money than you know what to do with, there are plenty of people out there who know exactly what to do--try to go on living and build a basic life for themselves--but have no money with which to do so.  Do your research.  Scam charities abound, as do more-or-less legitimate ones who actually do help those in need, but also end up sucking up a surprisingly high percentage of donations for ""administrative costs"".  Try and avoid these and send your money where it will actually do some good in the world. Reinvest in yourself.  You're running a business.  Make sure you have the best tools and training you can afford, now that you can afford more!" There are a lot of great suggestions here on how to get and keep your finances in shape. But I have to say, I disagree with some on the starting point. The first step to living frugal is to convince yourself that it is worth it. That it is the way to go and the way you want to manage your finances. As @DrFredEdison and @fennec stated, the reason we frugal people don't spend wildly is because of what we believe. So I would suggest buying a book or video/audio series from someone like Dave Ramsey who will encourage and motivate you to spend wisely and show you practical ways to get started. With that said I do agree with a lot of the practical suggestions that have been given here. Can someone recommend a textbook (or other resource) that provides a rigorous introduction to finance for someone with a mathematical background? Ideally, something that provides both a theoretical background for the pricing of assets generally and moves to mores specific instruments with quantitative exercises along the way? "Make a list of all your expenses. I use an Excel spreadsheet but you can do it on the back of a napkin if you prefer. List fixed expenses, like rent, loan payments, insurance, etc. I include giving to church and charity as fixed expenses, but of course that's up to you. List regular but not fixed expenses, like food, heat and electricity, gas, etc. Come up with reasonable average or typical values for these. Keep records for at least a few months so you're not just guessing. (Though remember that some will vary with the season: presumably you spend a lot more on heat in the winter than in the summer, etc.) You should budget to put something into savings and retirement. If you're young and just starting out, it's easy to decide to postpone retirement savings. But the sooner you start, the more the money will add up. Even if you can't put away a lot, try to put away SOMETHING. And if you budget for it, you should just get used to not having this money to play with. Then total all this up and compare to your income. If the total is more than your income, you have a problem! You need to find a way to cut some expenses. I won't go any further with that thought -- that's another subject. Hopefully you have some money left over after paying all the regular expenses. That's what you have to play with for entertainment and other non-essentials. Make a schedule for paying your bills. I get paid twice a month, and so I pay most of my bills when I get a paycheck. I have some bills that I allocate to the first check of the month and some to the second, for others, whatever bills came in since my last check, I pay with the current check. I have it arranged so each check is big enough to pay all the bills that come from that check. If you can't do that, if you'll have a surplus from one check and a shortage from the next, then be sure to put money aside from the surplus check to cover the bills you'll pay at the next pay period.  Always pay your bills before you spend money on entertainment. Always have a plan to pay your bills. Don't say, ""oh, I'll come up with the money somehow"". If you have debt -- student loans, car loans, etc -- have a plan to pay it off. One of the most common traps people fall into is saying, ""I really need to get out of debt. And I'm going to start paying off my debt. Next month, because this month I really want to buy this way cool toy."" They put off getting out of debt until they have frittered away huge amounts of money on interest. Or worse, they keep accumulating new debt until they can't even pay the interest." Firstly, make sure annual income exceeds annual expenses. The difference is what you have available for saving.  Secondly, you should have tiers of savings. From most to least liquid (and least to most rewarding): The core of personal finance is managing the flow of money between these tiers to balance maximizing return on savings with budget constraints. For example, insurance effectively allows society to move money from savings to stocks and bonds. And a savings account lets the bank loan out a bit of your money to people buying assets like homes.  Note that the above set of accounts is just a template from which you should customize. You might want to add in an FSA or HSA, extra loan payments, or taxable brokerage accounts, depending on your cash flow, debt, and tax situation. You can only lose your 7%. The idea that a certain security is more volatile than others in your portfolio does not mean that you can lose more than the value of the investment. The one exception is that a short position has unlimited downside, but i dont think there are any straight short mutual funds. "Most companies are taken over. One can reasonably guess that company X will be taken over for a price P, at some future point in time. Then the company has a value today, that is less than price P, by a large enough margin so that the investor will likely ""make out"" when the company finally is taken over at some unknown point in time. The exception is a company like Microsoft or Apple that basically grow too large to be taken over. But then they eventually start paying dividends when they become ""mature."" Again, the trick, during the non-dividend paying period (e.g. ten or fifteen years ago) is to guess what dividends will be paid in some future time, and price the stock low enough today so that it will be worthwhile for the buyer."