Last week, a coworker in her mid-40’s asked me if I knew anything about mutual funds. While I know the basics of mutual fund investing, and I know specific stats on the mutual funds I own, I can’t say that I’m anywhere near an expert. Still, I asked her what she wanted to know.
I knew she had just come into some inheritance money, though I’ve never asked how much, and I was glad to see that she was really investigating her options for where to put her money. She was looking specifically at Sharebuilder and buying mutual funds that way. She had picked out a few, both general funds and industry specific funds. I advised her to do more research, but from what I knew, the industry specific funds she selected were likely riskier, but with more risk comes the potential for more reward.
I also asked her what her timeframe was. Investing should always be a long term effort, but I wondered if a Roth IRA was the way to go for her. I suggested she do some research on that, but that a Roth (for the most part) meant she was locking up her money for a number of years.
She then mentioned that she was looking at putting her money into CDs, but her bank was only offering large CDs, and she wasn’t sure she wanted to lock up all of her money that way. I told her that there were a number of other banks that offered CDs at perhaps a lower rate, but where she could put in as much money as she wanted. Since she had Sharebuilder, I suggested ING Direct.
She wrote all of this down, and then a while later, said “Oh, wait, ING Direct isn’t FDIC insured? You mean my money’s not safe there?” I’m not sure where she got that – ING Direct is absolutely FDIC insured or I wouldn’t have my money there. But the statement raised a flag for me. If she was that worried about loss, she probably shouldn’t be looking into investments and definitely not into those specialty funds.
I made sure she realized the difference between CDs and mutual funds and that with a mutual fund, she could very possibly lose everything (not likely, but possible). I’m not sure she realized what she was getting into with investing and she decided to go the CD route, probably something in the one to two year range, with the expectation that by then, interest rates will go up (cross your fingers, savers).
I was really glad that I was able to help my coworker (who I also consider a friend as she’s a crazy runner like me), and I’m glad I got to share what knowledge I have.
We don’t talk about money a lot with our friends and coworkers, but I do think it’s important to help each other out and share what we know. Not everyone spends time reading personal finance blogs, after all, and I know I’ve picked up a few nuggets of information over the years.
Before I started PF blogging, I knew very little about Roth IRAs, for example. Definitely the most important thing I’ve learned thus far. What’s your favorite tip that you’ve picked up?
Megan is a 30-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.