Money Management for Hipsters

I should be clear up front here: my writings here are going to be completely unconventional and are not what 99% of Wall Street folk will tell you. I tend to think that 99% of Wall Street is wrong about most things, but that’s a different topic. In my day job, I don’t sit around giving advice to people about how much to save and how much to allocate to various assets. I spend all day, every day trying to find the best stocks to own in my fund to make my partners and me as much money as possible.

The thing with all of these examples is this --- people under the age of 30 (or in some cases 40) should worry more about playing and having fun and taking risks with their money than about saving and investing for their retirement. Each of the examples below are about young people who have their whole professional lives in front of them. If each is successful in his/her career, they’re going to make a whole lot more money in the next 30, 40, 50 years than they’ll ever really need. See below for more details. And again, to be clear, what I’m saying here would be considered sacrilege among most Wall Streeters --- but maybe they’re all praying to a false idol anyway.

1 - A 22 yr.old conde nast editorial assistant on a $25,000/yr salary.

I relate to this one. My first job on Wall Street, back in 1996, came with a $22,000/year salary that I negotiated up to $24,000. I lived in Harlem at the time in an 600 sq ft apartment with a mattress on the floor. I took the advice of my bosses and set aside a tiny fraction of my salary for a 401(k). Over the next few months, I scraped by, barely able to make ends meet in this city -- but I had whopping $2,000 put away in that 401(k) after my first year on the job. I then became a partner in the firm and my next check was for more than my entire first year’s salary. Though I quit that job and walked away from all that money the very next month, I never was able to figure out why I bothered saving money when I couldn’t even afford a burger from the diner most nights. I took the penalties and paid the taxes when I cashed my 401(k) out a few years later. I wouldn’t worry one iota about saving a dime if were this person.

2 - A young rock band that just received a $100,000 signing bonus from arecord label. and“Rock” band.

This one’s easy --- live like the damn rock star you want to be. Push it hard, take all the risks, put it on the line, and have as much fun as you possibly can. You’re living 90% of American’s dreams.

3 - A hip hollywood starlet who just got half amillion to star in the new Louis Vuitton ad campaign.

So she’s already making good money. She needs to worry first and foremost about staying hip. Then she needs to ask every single one of her trusted friends if they have a trust-worthy money manager whom she can talk to. And then she should sit down and put together a strategy that will likely entail some of what most of Wall Street would tell all of these examples to do --- some bonds, some real estate, some mutual funds. She should probably stay away from investing in common stock and leave that to the professionals who spend 70 hours a week for years on end trying to figure out the right stocks to buy – you know, people like me! As a matter of fact, some of the partners in my fund are indeed Hollywood stars.

4 - 18 year old Russian model just landed 2 mil lingerie contract. She has working visa through her model agency. Should she get an investor's visa first before consider investing? What she should do with all the money?

I think I dated her once ;). She should take a million bucks and put it in some sort of bond portfolio that will crank out 10% interest per year. And whatever’s left after taxes? Spend it on or invest in whatever she likes. This way she’ll have her cake and eat it too. $1 million at 10% per year will appreciate into a nice nest egg over time and she’ll still have the opportunity to enjoy the “good” life while she’s young.

5 - I have credit card debt. does it make more sense topay down that debt, or to use that money to invest?

Pay down the debt. No reason for anyone who has sustainable credit card debt to bother looking to invest. Get out of credit card debt – then worry about any surplus.- i'm a freelancer without a 401(k). but i also wantto make sure i don't have to be a 70-year-oldprostitute. what do i get - an annuity? IRA? CD orjust savings? What, pray tell, is wrong with being a 70 year old prostitute? That said, if you don’t want to be one, then you should focus on building your career and making as much money as you can along the way. When you’re making enough cash flow to actually save a decent amount of money, then you should probably open some sort of retirement account. An IRA is probably the best bet for you, but again, you should ask all your friends until you find a money manager you trust who can set up some specifics for you.