This Week in Your Wallet: May 8, 2012

Posted by Jean

Sometimes, sticking to what’s familiar is good. Eating a favorite meal at the end of a long day, watching a favorite movie when you’re sick — these things bring you comfort in some way or another. They’re safe.

However, when it comes to managing your money, there are some “comfortable” behaviors that aren’t so safe at all. In fact, as the New York Times recently suggested, certain habits could be costing you money. Here’s a look at some of the things that might be making you comfortable now, but costing you in the long-term:

Automated bill-paying. Sure, it’s okay to automate payments to your mortgage provider, because that’s a bill you will need to pay for the next 20 to 30 years, most likely. But direct payments to that monthly magazine you stopped reading years ago? That’s the sort of habit you can — and should — purge fromyour financial life.

Inheriting an opinion. Our families are important to us, and when it comes to advice on life and love, absolutely pay attention to what your wise Grandma told you. But when it comes to products you use or stocks you invest in, don’t be so quick to follow the leader. Are you holding onto a losing stock just because you inherited it from your grandfather? It might be more profitable for you to honor his memory in other ways.

Falling in love with your company. So you love the company you work for and really believe in what they do. That’s great! But don’t be so blinded by this love that you invest all the money in your 401(k) into your company’s stocks. If something happens to your employer, it’s not just your job at stake — it’syour retirement funds, too.

For other financial habits that could be costing you in the long-term, check out the full New York Times article here. And now, here are the other headlines of the week:

 

Facebook Going Public

Facebook announced its intention to become a publicly-traded company back in the winter, but didn’t set a date for its initial public offering (IPO). According to the Wall Street Journal, investors will be able to buy and sell shares of Facebook (ticker symbol FB) starting May 18. Shares will be priced at $28 to $35 per share, which is a bit lower than some analysts expected. In fact, you might be looking at those numbers and thinking, “Hey! I can afford to get in on the action!”

Well, before you do, SmartMoney magazine has some advice for you. For one, don’t buy at the open. SmartMoney reports that other dotcom IPOs — LinkedIn, Groupon, Zynga — closed at a price lower than where they opened on their first day. Paying $35 per share for Facebook might sound like a bargain now, but if it drops to $25 per share by the end of its first day, you will be kicking yourself home from the bank. Also, bet small. It’s easy to be swayed by romantic predictions of roaring success based on present-day valuations, but fight the urge to picture huge returns coming your way in five or ten years. Valuations are best for shorter-term trading periods. Plus, we all know it’s impossible to know what the market will be doing five years from now.

 

Advice for College Grads

This month, college students across the country are going to receive their caps, gowns, diplomas… and a lot of advice. If they’re anything like me, they’ll probably forget half of what their graduation speakers say by the time they’ve started their first job. However, maybe they’ll remember some written advice. Reuters recently published a great financial checklist for these young adults, and I thought it was worth passing on. It includes tips like, “learn to budget,” “find a better bank,” and “organize yourdebt.” These are things you surely have a handle on yourself, but the Class of 2012 has probably not had to think about most of this before. I think it is advice they’ll be happy to receive!

 

Speaking of Advice… 

In next week’s episode of Cash Call, we’ll be talking all about the financial advice grandparents can give to their grandchildren. Grandparents have such wonderful gifts they can pass on — nuggets of wisdom accumulated over the years, lessons learned, not to mention the occasional $20 bill here and there. So, as I prepare for this episode, I’m curious: what are the best financial lessons yourgrandparents gave to you? If you’re a grandparent yourself, what do you plan on passing on to yourgrandkids? I’m sure many of you out there would like to help by giving more than just advice, too. If that’s the case, what questions do you have about helping your grandkids save, or helping to put them through school? Send your questions, comments and concerns to jean@jeanchatzky.com, and I’ll happily answer them on the show.

Have a great week!

Jean