Free Money Finance

On Extended Leave

In case it's not completely obvious, I am on an extended leave from this site.

I currently do not plan on posting new content here, nor am I doing any of the following:

• Accepting guest posts
• Looking to add revenue/affiliate partnerships
• Wanting to sell the site (it's my baby, how could I?)

If you email me about any of these you will not get a response since I assume that 1) I've answered your question here and 2) you don't take your time to read/do research on who you are contacting, and who would want to work with someone like that?

If you'd like to read what I'm writing now, check out ESI Money.

And if you have any questions about partnerships with that site, I suggest you read the contact page in detail before you send me a note. ;) 

How To Tithe Correctly And Still Get Wealthy

The following is a guest post from Debt Free Doctor.

Whether you're a Christian or not, the simple act of giving makes you an overall better person and it's a topic that's discussed rather frequently on other personal finance blogs.

My wife and I began teaching this principle to our kids when they were younger. Using one of Dave Ramsey's recommendations, we taught them the three things to do with money:

• Give
• Spend
• Save 

Of the three, we stressed the "giving" part as I believe that everything given to us is on loan from the "Big Guy" upstairs.

Unfortunately, many times we forget about the "giving" part when setting up a financial plan. I'm all about achieving financial freedom, but it still can be accomplished while giving.

"We make a living by what we get, but we make a life by what we give." -Winston Churchill

Honestly, I can't ever remember one instance where I felt bad after giving. Now, that doesn't ring so true about the multiple times I've bought something but felt guilty even before I even got back home. Buyer's remorse anyone?

Speaking of giving, a tithe is a form of giving and seems to be something that people have questions about once they start earning an income.

Let's take a deeper look at what exactly a tithe is...

What's a tithe?

It seems that the word "tithe" and "give" are thought to mean the same thing, but they actually don't.

In the dictionary, a tithe is defined as:

A tenth part of something paid as a voluntary contribution or as a tax especially for the support of a religious establishment.

In other words, it's the first 10% of your income that should be given to your church.

What Does The Bible Teach About Tithing?

Old Testament

The first instance of tithing in the Bible can be found in Genesis 14:20-24 whereby Abraham gave 10% of everything he had to the King of Salem, Melchizedek.

The tenth Abraham gave represented everything he had. In giving the tithe, Abraham simply acknowledged that everything he had belonged to God.

Paying tithes was an essential part of Jewish religious worship. The concept of tithing can be predominantly found in the books of:

• Leviticus
• Numbers
• Deuteronomy

Mosaic law required that the Israelites give one-tenth of the produce of their land and livestock, the tithe, to support the Levitical priesthood as noted in Leviticus 27:30, "A tenth of the produce of the land, whether grain or fruit, is the Lord’s, and is holy."

Actually, there were three tithes that Israel had to pay:

• The first was to support the Levite priests and was the 10% portion of everything that they made. (Num 18:21, 24).
• Secondly, in Deuteronomy 14:22-27, there were the tithes of the feasts each year. These particular tithes were in the best interests of the families who previously tithed. They could use these funds for whatever their hearts desired during the feasts of the Lord.
• Finally, there was a tithe for the poor which was only given every three years (Duet 14:28-29).

These tithes were never commanded to nations other than Israel.

New Testament

There's been much debate that tithing was taught only in the Old Testament and no longer applies to modern day times.

But there are reference of it being taught in the New Testament when Jesus rebukes the Pharisees in Matthew 23:23:

"Woe to you, scribes and Pharisees, hypocrites! For you tithe mint and dill and cumin, and have neglected the weightier matters of the law: justice and mercy and faithfulness. These you ought to have done, without neglecting the others." (Matthew 23:23)

Now the early church was split on this topic as some wanted to remove themselves from the legalistic practices of Judaism while others wished to honor and continue the ancient traditions of the priesthood.

Most scholars agree that the practicing of tithing has changed since originally taught in the Bible but the concept of setting aside a tenth of one’s income or goods for use in the church has remained.

Paul also points out an equivalence between the way priests in the Old Testament made a living and how gospel workers in the New Testament era made a living in 1 Corinthians 9:13-14:

“Do you not know that those who minister the holy things eat of the things of the temple, and those who serve at the altar partake of the offerings of the altar? Even so, the Lord has commanded that those who preach the gospel should live from the gospel”.

Should You Tithe While Paying Off Debt?

The quick (and maybe sarcastic) answer would be yes you should continue to tithe even while paying off debt because most people stay in debt the majority of their lives.

I once remember a lady that called into the Dave Ramsey show to get his thoughts on this subject. At the time, she was paying $2,000 a month towards her debt and was concerned that if she started tithing, it would significantly cut down on her debt repayment.

Dave's answer:

He felt that God doesn't need any money, yours or the lady asking the question either. If that's the case, why does He teach us to give a tenth of our income?

Well for one, it's good for us to learn how to be givers and people tend to want to be around generous rather than selfish people. (I'd agree with him there.)

Selfish people tend to be CHEAP (not frugal) people. There's nothing worse then hanging around or going out to dinner with a cheap person. They don't take others into consideration. It's all about them.

There's some people out there that practice performance-based Christianity. They think God's going to give them money because they gave someone else money or helped them out of a tough situation. It doesn't work like that.

God wants us to tithe so we can start learning how to be generous. Remember, generous people tend to have a better life. God wants us to have a great life and be generous at the same time. And whichever way that the caller chooses to handle her debt, God's not going to be mad at her.

The scripture teaches us to give our tithe (tenth) straight off the top before we do anything else with our money and then start working our financial plan. Which in this case, involves paying off debt.

In her case, Dave recommended that she lower the amount going towards her debt so she could start tithing. He didn't recommended doing it because he said to do it. He recommended it because that's how God wants us to live.

How To Tithe Correctly

I don't think there's one way set in stone on how to tithe correctly. If you ask five people, you'll likely get five different answers.

Remember that God doesn't need our money, he can manage without it. Tithing was put into place for our benefit and not His.

It's no different than how parents discipline their kids such as having them make their beds or wash their own clothes. We as parents can do these tasks ourselves but we're teaching them for our kids's benefits later in life.

Proverbs 19:18 "Discipline your son while there is hope, And do not desire his death."

Whenever someone tithes, it should be done freely without expecting anything back in return.

It teaches us how to live an unselfish life by putting our faith in God and knowing that He will provide no matter what life throws us.

In Mark 12:41-44 Jesus discusses the widow's offering which shows how a poor woman gave out of poverty (all she had) which showed she had total faith in God:

"Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. But a poor widow came and put in two very small copper coins, worth only a few cents."

"Calling his disciples to him, Jesus said, “Truly I tell you, this poor widow has put more into the treasury than all the others. They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on.”

Personal Experience

2 Corinthians 9:7 states, "Each of you should give what you have decided in your heart to give, not reluctantly or under compulsion, for God loves a cheerful giver."

Many people tithe or give grudgingly or think it's necessary even in their heart they really don't want to.

Again, God doesn't need our money, and he wants us to tithe and/or give because we WANT to and not because we have to.

For me, I didn't realize just how selfish I was until I was engaged. I wasn't focused much on giving and especially tithing.

My thoughts were, "My money was mine and I was the only one that was going to benefit from it." Reflecting back, getting married was the BEST thing that could happen to me both from a relationship standpoint but also to change my heart just like the Grinch had a change of heart in Who-ville.

Remember, people like being around generous people and back then, I wasn't too generous. My wife loves telling the story about how she would drive three hours a week (six hours round trip) to visit me while in my first year of residency.

Whenever she got ready to leave to go back home, I would take her car to gas it up but NEVER paid for it. I know what you're thinking and you're right. What a selfish dude!

At that time, it never crossed my mind that I should give some of MY money to someone that I was getting ready to spend the rest of my life with. I was always so focused on myself that it was starting to show up in my relationships in a negative way.

It took me getting married and having kids to really change my heart and to LOVE to give and tithe. Honestly, doing these two things brings me more joy than anything else.

Take Home On Tithing

Remember that the act of tithing was put into place for our benefit and not God's. He's got all He needs and doesn't want our money, because it's already His. But the one thing that he does want is our hearts.

Tithing teaches us how to keep God first in our lives, live unselfishly, focus on helping others without expecting anything back in return.

Six Reasons Why You Shouldn’t Take FIRE Too Far

The following is a guest post from Sam at How to FIRE.

If you’re not already familiar with the FIRE movement, there’s a good chance that you soon will be. It is a concept that is gathering pace, with people all over the world looking to achieve financial freedom. FIRE is an acronym that stands for “Financial Independence Retire Early,” but what exactly is it, and is there a risk of going too far?

What Does It Take To Achieve Financial Independence?

FIRE is a financial movement, which can involve working towards early retirement by saving a substantial amount of your income. Typically, people retire at the age of around 60-70, but many FIRE followers pursue early retirement. They often aim to retire in their 20s, 30s, or 40s instead.

The ultimate goal for FIRE enthusiasts is to be financially independent, but this usually means making significant sacrifices along the way. Every person is different, but generally speaking, someone who embraces the FIRE movement will try and save up to 70% of their annual income and utilize a FIRE calculator to track their progress. In addition to living frugally, FIRE followers also look for ways to invest in their long-term future.

Saving up to 70% of your annual salary is undoubtedly difficult for many people, but there are additional concerns. For some, saving can become an obsession, and it can impact every area of your life. If all you think about is saving and working towards early retirement, there is a risk of taking it too far and suffering in the short-term. There are many positives to being financially independent, but it’s crucial to be aware of the potential dangers of letting FIRE take over. This guide will examine some of the main reasons you should proceed with caution and avoid taking FIRE too far.

Why Shouldn’t You Take FIRE Too Far?

Being financially independent and giving up your job at 36 may seem like the ultimate life goal, but what happens if your plans start to infringe on your quality of life in the present? Sure, some short-term sacrifices are completely tolerable and expected. But, here are six reasons to consider adopting a measured approach to FIRE.

1. You’ll End Up Working a Job You Hate Just for the Paycheck

To be able to save enough to retire at an early age, there’s a chance that you’ll end up doing a job you don’t particularly enjoy just for the wage. There are apparent benefits to earning a high salary, but if you’re working long hours or don’t have any passion or enthusiasm for the job you do every day, you might start to dread getting up in the mornings. You’ll want to quit your job every day, and this routine will leave you wondering whether your efforts are really worthwhile.

The average person spends around 37 hours a week at work, and if you add overtime, that’s an awful lot of time to devote to doing something you don’t like. If every day is a challenge, and you never arrive at or leave work with a smile on your face, even the thought of retiring early may not be enough to keep you motivated.

2. Minimalism Gets Weird Sometimes

Many people choose to live frugally, but there’s a difference between trying to save money and adopting an extreme approach to budgeting. Minimalism is designed to simplify financial management, and it can offer a raft of benefits. If you’re on a mission to save, there’s a lot to be said for identifying priorities and setting boundaries in other areas. The trouble is that there’s always a risk of taking minimalism to a point where life can become a little weird.

Financial experts are all for people making an effort to save. But you’ve probably taken it too far if you’re recycling Ziploc bags time and time again, surviving on tasteless, bland meals because they’re cheap, or rushing to take advantage of yellow sticker sections at the store after a 12-hour day at work. Saving may be the priority, but it shouldn’t impede your health or enjoyment of life.

3. FOMO is Real

FOMO (fear of missing out) is a relatively new concept, but it’s one that can be a genuine consequence of following the FIRE movement. If you’re saving every single cent you can, intending to enjoy financial freedom in the future, it’s highly likely that you’ll miss out on both the big and small stuff now. However, financial independence and early retirement is certainly an admirable goal, and one that I have made for myself.

Sticking to your plan is crucial, but where do you draw the line when deciding whether something is worth spending money? Are you going to miss out on opportunities or experiences that may never come around again because you don’t want to part with any more cash than you absolutely have to?

It’s incredibly beneficial to think about the future, but going too far with FIRE means that you might miss out on the present. While your friends and family are socializing, going to weddings, organizing trips together and celebrating births, marriages, and landmark birthdays, for example, is it worth missing out to retire as early as possible?

4. A Lack of Flexibility Contributes to Disappointment

When you take control of your finances, you have a say as to how you spend your money. If you jump on board the FIRE movement approach, though, flexibility in terms of spending can seem significantly reduced in some aspects. Most people who follow FIRE try and save up to 70% of their income, withdrawing around 4% of their savings and investment gains.

If you take FIRE too far, life can become very rigid and routine. A lack of flexibility could compromise your freedom, contributing to disappointment. There’s also a worry that once you adopt a way of life that complies with FIRE guidelines, there’s no way back. If you want to change your mind either during the saving process or once you’ve retired, would you have the strength and conviction to do that?

5. Someone Else’s FIRE Timeline May Not Be Realistic For You

If you search for content related to FIRE on the Internet, you’ll find all kinds of stories and video clips that talk about retiring in your 20s, but this is not a realistic timeline for the vast majority of people. Everyone is different in terms of their expectations and the amount of money they’re able or willing to save. What works for one person may not be viable for another, and sometimes, timelines can encourage people to set unrealistic targets and to put excessive pressure on themselves. The reality is that you should only ever follow a timeline that is relevant to your situation.

6. Mental Health and Wellbeing Should Be a Top Priority

We live in a day and age where there are too many stressors, which can cause significant anxiety and depression in everyday life. Sometimes the pressure of hitting a specific savings target and spending goal can be too much to bear. Even worse, not accomplishing them regularly can contribute to immense guilt, which isn’t helped by the blunt expectations laid out by web gurus.

Putting this pressure on yourself and having a one-track mind can take a serious toll on your mental health and wellbeing. While you may be motivated and energized by the idea of achieving financial independence and even early retirement, there’s always a risk of becoming too consumed by saving and scrimping. If things don’t go to plan, this can be detrimental to your health and happiness.

Balance FIRE With Living for Today

There are many benefits to saving money and planning for the future. Reaching financial freedom is one of the best things you can do for yourself. But, it is possible to take FIRE too far. In truth, you’re already making much better progress than the majority of the population by taking control of your finances. So, try to relax and enjoy your journey while setting realistic targets. Don’t miss out on the present because you’re too fixated on the future.

Often, the best way to strike a balance between now and the years to come is to practice intentionality. You can be intentional in both your spending and savings. There are some things in your life that won’t be worth spending money on, and others in which you should spend unapologetically. For instance, I value traveling the world, so I use travel hacking to make it a possibility. In essence, only spend money on what you value, so you don’t miss out on what is truly important. This is how you can have the best of both worlds.

Robo-Advisors vs Online Brokers

The following is a guest post from Kevin at Just Start Investing.

Today we have a title fight between robo-advisors and online brokers.

In one corner, we have the fresh rookie looking to shake up the investing world. Their speciality is automation and giving you an end to end experience to save you time and stress. Put your hands together for… Robo-advisors!

In the other corner, we have a seasoned verteran. They’ve been around a few years and know how to deliver a customizable portfolio for cheap. That is, if you’re willing to put in the work. Give it up for… online brokers!

Stick with us to see who will win this evenly matched fight. But first, a quick backstory on each competitor is below.

What is an Online Broker?

In simple terms, a brokerage account acts as a middle-man between you and the investing market. Online brokerage accounts allow you to buy and sell investment vehicles easily and quickly online with the click of a button.

Traditional online brokerage accounts give you control over your investments – you can select exactly which investment vehicles to purchase. Plus, if you choose an online broker like Charles Schwab or Vanguard, fees will be very low – making it easy to set up a portfolio on your own.

What is a Robo-Advisor?

Robo-advisors are online investing platforms that do 99% of the work for you.

Most robo-advisors start by asking you to complete a series of questions to get a sense for your risk profile, goals, and to gather some basic information. Then, the robo-advisor will automatically open an account and select investment vehicles for you based on your answers.

Behind the scenes, robo-advisors are employing an algorithm that buys and manages investments for you – optimizing and reallocating your portfolio to match your goals.

The Pros of Online Brokers and Robo-Advisors

With backgrounds out of the way, it’s time to start round 1 of 2 of this title fight. Both of these investing options have different advantages that are unique to one another.

Online Broker Pros

 

• Low Fees: Reputable online brokers such as Charles Schwab, Vanguard, and Fidelity offer rock bottom fees on their index funds and ETFs.

• Customizable: When using an online broker, you have control over the exact investment allocation for your portfolio.

• Variety of Options: Most online brokers have a large variety of investment vehicles. From stocks to bonds to index funds, there is no shortage of options.

 

Robo-Advisor Pros

1. Easy Set Up: Robo-advisors make it extremely easy to get started. You simply answer a few basic questions regarding your personal information and finance goals, and they handle the rest. 
2. Automation: Obviously, robo-advisors automate your investing for you. From your initial investment to ongoing management, they make sure you’re investment portfolio is always in line with your goals.
3. Tax Optimization: Many robo-advisors offer tax optimization services, most commonly in the form of tax loss harvesting. While you can do this on your own as well, it is a complicated and time consuming task, and robo-advisors can do it much more easily.

The Cons of Online Brokers and Robo-Advisors

For round 2, we’ll look at things from another angle - what are the weaknesses of each of these options. Not surprisingly, in a lot of cases, the advantages of one are the disadvantages of the other.

Online Broker Cons

1. Oversight Required: Managing your own investments takes time and effort. While it can be simplified by setting up a 3 fund portfolio using index funds, you still have to take the time up front to set it up, in addition to keeping an eye on it ongoing.
2. Human Error: People mess up. You could mis-calculate something along the way and end up costing yourself money in the long term, be it from taxes, portfolio allocation, or any number of things.

Robo-Advisor Cons

1. Higher Cost: Robo-advisors cost more money than investing on your own. For one, they charge a management fee (usually around 0.25%). Second, their funds are typically more expensive than the ones you could find on your own (they average around 0.05% - 0.25%). 
2. Restricted Investments: Robo-Advisors often only have a handful of index funds and ETFs that they invest in (usually less than a hundred). 
3. Lack of Control: You are giving up control of your investments to the robo-advisor. While this does save you time, it also means you have less authority over your portfolio.

So, Who Wins? Robo-Advisors or Online Brokers?

Through two rounds, we have learned that both robo-advisors and online brokers have unique pros and cons. But I’m not sure that we have found a clear cut winner.

If you are someone seeking simplicity and want to take a hands off approach, then robo-advisors are likely right for you.

If you are ‘Type A’ and like to have control of your personal finances, setting up your own portfolio through an online broker will probably work better.

From a dollar and quantitative standpoint, it can be hard to tell who is the better choice. I ran a couple scenarios below, but as you will see, the “winner” varies depending on how the variables below shake out.

In both of the scenarios below, I looked at a few variables that I held constant:

• Starting Investment: The total amount at the beginning of each scenario. In this case, $10,000.
• Annual Addition Investment: How much money is being added at the end of each year. I used $5,000 across all scenarios.
• Stock Market Returns: The average annual return of the market (7%).

I also looked at a few variables that I manipulated in the examples:

• Management Fee: For online brokers, this is always $0. For Robo-Advisors, I modeled it based off of Betterment, who charges 0.25% for their basic plan and 0.40% for their premium plan.
• Expense Ratio: In theory, it is possible to get to a 0.00% expense ratio (thanks to Fidelity). Though, for these scenarios, I modeled the online brokers based on Schwab and Vanguard funds, which get to roughly a 0.05% expense ratio at best and 0.25% at worse. For Robo-Advisors, I again modeled off Betterment who predicts an average expense ratio of 0.11% (best case) but has ETFs as high as 0.25% (worst case).
• Tax Loss Harvest: While it is possible to tax loss harvest on your own, I assumed a 0.00% benefit across both online broker scenarios. For Robo-Advisors, I once again modeled it based on Betterment who claims this benefit can be as large as 0.77% annually (best case), which I then took a 75% haircut to for the worst case scenario (0.19% benefit).

Example 1: Online Broker Winning

Overall Variables:

• Starting Investment: $10,000
• Annual Additional investment: $5,000
• Stock Market Returns: 7.00%

Online Broker Best Case Variables:

• Management Fees: 0.00%
• Expense Ratio: 0.05%
• Tax Loss Harvest: 0.00%
• Net Annual Gains: 6.95%

Robo-Advisor Worst Case Variables:

• Management Fees: 0.40%
• Expense Ratio: 0.25%
• Tax Loss Harvest: 0.19%
• Net Annual Gains: 6.54%

Outcomes:

 

• Online Broker Ending 40 Year Value: $1,054,113

• Robo-Advisor Ending 40 Year Value: $946,925

 

In this scenario, the online broker drastically outperformed robo-advisors. With an ending 40 year balance that is over $100,000 higher than robo-advisors, which is 11.3% more.

The lower costs of online brokers kept the net annual gains higher, with the robo-advisor tax-harvest benefit not enough to offset it’s hefty fees.

Example 2: Robo-Advisor Winning

Overall Variables:

• Starting Investment: $10,000
• Annual Additional investment: $5,000
• Stock Market Returns: 7.00%

Online Broker Worst Case Variables:

• Management Fees: 0.00%
• Expense Ratio: 0.25%
• Tax Loss Harvest: 0.00%
• Net Annual Gains: 6.75%

Robo-Advisor Best Case Variables:

• Management Fees: 0.25%
• Expense Ratio: 0.11%
• Tax Loss Harvest: 0.77%
• Net Annual Gains: 7.41%

Outcomes:

 

• Online Broker Ending 40 Year Value: $999,939

• Robo-Advisor Ending 40 Year Value: $1,191,198

 

In this scenario, the robo-advisor drastically outperformed online brokers. With an ending 40 year balance that is over $190,000 higher, which is 19.1% more.

The tax loss harvest benefit made all the difference in this scenario. It more than offset the robo-advisor fees, and the higher online brokerage expenses expanded the gap even further.

Summary: How to Make the Final Decision

So, who’s the true winner? Is there one?

As alluded to earlier, it really depends on your situation. For some people, robo-advisors will be the clear choice. For others, online brokers might work better.

As you can tell from the quantitative analysis - variables that are sometimes out of your control can affect who the winner is. So I’d recommend basing your decision more heavily on qualitative analysis and how badly you want to manage your investments versus let someone else take the reigns.

5 Things Business Owners Can Learn From the FIRE Movement

The following is a guest post from Mr. SR at Semi-Retire Plan. 

There’s a growing movement in the personal finance community called FIRE -- Financial Independence, Retire Early. Basically, the FIRE movement promotes an ultra-high savings rate during your early career, so you can then live off of that money for the rest of your life without working anymore.

FIRE Burnout

If you start to follow the early retirement movement closely, you’ll find that a lot of the core advice is repeated often, becoming community mantras. 

I’ve been following personal finance forums for several years now, and I’ve found that some readers have grown tired of these advice cliches. One subreddit group called PF Jerk, for example, satirically pokes fun at the oft-repeated opinions in other Reddit personal finance-related communities.

The FIRE movement is controversial. Suze Orman famously criticized FIRE last year. II’m not here to tell you that you need to follow the movement. Personally, I prefer a more moderate early retirement approach like intentional semi-retirement. 

Business vs Personal

I’ve worked in several different corporate settings so far in my career, and I’m close to completing my master’s degree in business. Through these experiences, one thing that often strikes me as strange is how the higher education system, and American culture in general, seem to view business finance and personal finance so differently.

For example, I’ve never been taught about personal investing strategy or budgeting in school. Plus, businesses are incentivized to keep their expenses equal to their revenue so that they can avoid posting a profit which will create a tax burden. In personal finance, though, having money leftover to save for the future is, of course, a good thing to do. 

It’s funny, to me, how different personal and business finances are. Ultimately, the difference is that businesses must produce results now because their owners/investors demand it. Personal finance, in contrast, should be viewed as a long-term effort. 

In reality though, many of the popular FIRE strategies, specifically, are worth considering and can be applied to business ownership to gain a competitive advantage over competitors. I want to share some of those strategies with you today. 

These are five things that business owners can learn from the FIRE movement.

1. House Hacking

FIRE followers and future real estate moguls love the concept of “house hacking.” The idea is to purchase and live in a multi-unit home, or just have roommates -- in essence, your roommates can pay your mortgage payment and you will essentially reduce your monthly housing costs to nothing.

In a real estate sense, businesses can do the same thing. Consider leasing out unused space in your building to another business or as a short-term coworking space. 

The house hacking mindset can be applied even more broadly. In essence, this process is just a licensing or subscription model.

Do you have extra equipment, employees with a bit of extra time, or under-utilized intellectual property? Another company would likely be willing to pay you for short-term use of those assets -- and you can capitalize on them.

2. High Tax Efficiency

When it comes to building personal wealth, managing your retirement savings strategically to minimize taxes can make a significant, compounding difference in long-term outlook. The same is true for your business. 

Are you fully deducting your expenses so that you minimize your taxable profit? Are you taking advantage of all possible state tax incentives? A good accountant can save you much more in taxes than what you will pay them for their time.

Many new entrepreneurs overlook the value in tax efficiency early in the life of their business.

3. Credit Card Rewards

FIRE followers and financial bloggers alike tend to really like leveraging credit card rewards programs. Some will call this “travel hacking” -- no, coding is not required for any of the hacking I keep talking about today! 

For many people, using the right airline rewards cards for most everyday expenses means that they can fly for free when they travel with their family.

The key here is to always pay off the monthly balance in full, to avoid the high credit card interest rates.

If your employees make a lot of work-related transactions in their jobs, why not let them use a rewards card and keep the benefits for personal use? If you’re planning to pay for the expenses anyway, this can be a nice perk that your employees will appreciate.

On a broader scale, is there a rewards program that you could implement for your business? You may want to consider it. Offering a small incentive to your customers to repeat purchases from you can be more than worth it. 

You should set up the program so that incentive to retain the customer will cost you less than your average customer acquisition marketing costs. Then your business will come out ahead, and the customer will be getting a nice bonus for their loyalty.

4. Simple, Low-Cost Investments

Low expense ratios are a hot topic in the finance world. With that, many people in the FIRE movement are now big fans of Exchange Traded Funds (ETFs). These funds track indexes (like the S&P 500, for example). ETFs are not actively managed, like mutual funds are, so they are able to offer lower expense ratios. 

Over time, even a few tenths of a percentage point difference in expense ratios can slowly eat away at an investor’s compounding returns. So, ETFs are increasingly popular now.

Similarly, you should consider low-cost investments for your business. Consider these application points:

• Are your suppliers all offering you competitive prices? Shop around occasionally to make sure you’re still getting the best rates.
• What are the key features in your products or services that customers care about most? Don’t cut corners for those features. But, you may be able to reduce costs associated with the other features that aren’t as important to your customers -- without significantly impacting your customers’ satisfaction level.
• Sometimes simpler, more focused pursuits are better than many, less focused pursuits. Do you have too many new product initiatives, too many customers on the prospecting list, or too many stops on the talent acquisition recruiting trail? Consider cutting down the lists to the few options that you’ll get the most benefit from. Each of these areas can have diminishing returns.

5. High Savings Rates

A big part of the early retirement formula is having a high savings rate and investing early. On a related note, many people in the FIRE community are very frugal in order to achieve these high savings rates. In the long run though, investing early and often creates serious wealth and, therefore, flexibility.

How can you be more frugal with your business? Do you have unnecessary or unhelpful expenses in your budget that could be cut? 

What can you do to save or invest more back into your business? Is there technology or a new employee position you could spend money on now that would result in significant increases in productivity long-term?

The FIRE movement is not for everyone. But, even if it’s not a fit for your lifestyle or ambitions, there are several valuable techniques that can be applied in your life and your business. 

A Great Way to Invest in Art

The following is a sponsored post from Masterworks.

Once you have the basics of investing covered (like index funds and real estate), you'll probably want to consider alternative investments in order to round out your portfolio.

And with good reason...because alternative investments produce strong returns.

Over the past 20 years alternative investments have outperformed more traditional asset classes like stocks and bonds. In fact, since 1999, an alternative portfolio has generated slightly higher long-term returns than equities, fixed income or a traditional 60%/40% split of the two, according to Invesco. At the same time, alternatives were much less risky than the other options.

For this reason, alternative investments are becoming increasingly important as tools for everyday investors to grow their investment returns while simultaneously protecting their portfolios.

And these assets can be quite powerful. Yale University famously committed a large portion of its endowment to alternative investments in the 1980s, and has to-date seen industry-beating results. In 2014, for instance, Yale’s endowment posted returns greater than 20%.

The problem is, there's generally a lot of time, effort, and unknowns involved in alternative investments which make them inaccessible for the average investor.

But things are changing -- at least with one form of alternative investment (artwork). A new platform from Masterworks allows everyone to invest in art both easily and cost-effectively.

Why Invest in Art? Strong Returns!

Many people overlook art as a viable investment option since the average investor doesn't have access to the kind of capital and connections it takes to buy art. But forgetting about art as an investment could be a mistake. Here's why:

Since 2000, blue-chip art (defined as those paintings by the top 100 artists in terms of sales volume) have exhibited strong risk-adjusted returns, and outperformed the S&P 500 by over 250% without dividend reinvestment (and 180% with reinvestment). At the same time, art is not all that correlated with financial markets – in a recession high end art is relatively stable. Not to mention that over time, the number of famous and expensive works available for purchase dwindles as masterpieces become absorbed into permanent museum collections (or sometimes destroyed), so the demand for the scarce works still in private hands becomes concentrated.

Bottom line: Art produces strong risk-adjusted returns.

Why Diversifying Your Portfolio is Essential

Today's highly priced markets seem to have many people worried, so where can you put money besides stocks? And when the markets are all over the place you want to keep your money in several investments that don’t move in the same exact way. Research by Citigroup suggests that art has one of the lowest correlations with the stock market, along with Cash and 10-Year US Treasury Notes. Meanwhile, Art appears to be the most correlated with Commodities – which reaffirms the view that it is a “hard” asset.

Art Was More Stable than the S&P During the Last Financial Crisis

The performance of the art market is determined by the number of sales and the prices paid for individual works. As it turns out, Art is pretty resilient during financial downturns, because its supply is self-regulating, so prices remain relatively stable. When times are tough, owners hold onto their artworks until the market becomes favorable again. The reduction in market supply means that prices see fewer fluctuations in the top tiers, because owners are relatively insulated from economic downturns.

Looking back to the 2008 Financial Crisis, auction records actually broke $2.2 billion that year. The contraction in the art markets began with a six-month lag, and between 2008 and 2009, the art market declined an estimated 26% (based on the Mei-Moses index), while the S&P 500 declined 57% from its peak on the worst day of trading. The art market bounced back swiftly by 2011, while equities didn’t reach pre-recession levels until 2013.

How Much of Your Investments Can or Should You Hold in Art?

Being aware of your investment time-horizon and expectations is incredibly important. For example, the British Pension Railway Fund allocated?40 million (roughly 2.5% of their total assets) to art and collectibles, in what turned out to be one of their best investments. The art holdings were liquidated between 15 and 25 years later, but not all investors want to keep their money locked up quite that long. Based on the Citigroup research allocating 1.4% to 4% of your portfolio to fine art is recommended, if you’re willing to hold between 10% and 15% in liquid assets.

How Masterworks is Changing the Industry

Now, you’re probably thinking that art is an interesting investment, but you just don’t have the capital to go and hire an art advisor and drop $2 million + on a Warhol. Thankfully a start-up called Masterworks is making this possible for you.

Masterworks purchases blue-chip paintings with strong appreciation histories from auction houses and then files them as Reg A+ Public Offerings with the Securities and Exchange Commission to take their paintings public. Masterworks attempts to purchase artwork at or below their appraisal values so that you can get the most out of your returns.

Masterworks also helpfully provides a resource center where you can learn more about the art market to help you make informed investment decisions. If you are interested in this kind of investment, Masterworks is certainly worth a look.

See disclaimer at www.masterworks.io/disclaimer.

15 Personal Finance Rules to Live By

The following is a guest post from Marc at VitalDollar.com.

Have you ever wondered what separates those who are successful financially with those who are not? Have you felt like your income should allow you to live a much more comfortable life than what you are experiencing?

Personal finance doesn’t have to be complicated. There are a few basic rules that you should follow, and if you do that, everything else falls into place.

This article covers some of the most basic and most powerful financial rules that should impact your everyday life.

1. Spend Less Than You Earn

Arguably, the most important financial rule is to spend less than you earn. Regardless of how much money you make, it’s impossible to get ahead if you’re spending it all. Even worse, you could be going backward and accumulating debt if you’re spending more than you earn.

Lifestyle creep is when your spending increases at the same rate as your income. Ideally, as you progress through your career your income will rise. If you’re able to minimize lifestyle creep and keep your expenses at the same level, you’ll be able to save and invest the excess.

Ultimately, how much you keep is far more important than how much you earn. Someone with a $50,000 income can wind up in a better spot than someone with a $500,000 income based on how much is spent and how much is kept.

2. Know Where Your Money is Going

Establishing a budget is common financial advice. A budget gives you control over the way your money is spent, which helps you to make the most of the money that you have.

While budgeting is important, it’s equally important to track your expenses. If you’re not tracking your expenses, you won’t know if you are truly sticking to the budget.

Knowing where your money is going is a critical aspect of managing your money wisely. If you haven’t budgeted or tracked your expenses in the past, it can be an eye-opening experience. When you see how you are really spending money, you’ll probably be able to quickly identify a few areas where you’re spending too much and could easily cut back (with a little bit of discipline).

3. Avoid Impulse Purchases

Most people spend their money based on emotions. Impulse buys can be small things (like picking up a few items when you’re checking out at grocery store, or it can be bigger things like a timeshare.

Large impulse purchases can obviously have a damaging impact on your finances, but even the small purchases add up.

To get control over the small impulse buys you can commit to grocery shopping with a list, and sticking to the things on your list.

For larger purchases, get in the habit of waiting at least 24 hours (or longer, if possible) before making a buying decision. When you take time to evaluate the purchase based on all of the factors involved, you’ll often find that you don’t really want or need that thing that you almost bought. You’ll reduce buyer’s remorse and keep more money in your pocket.

4. Shop Around

Get in the habit of comparing prices and looking for the best options. This can be useful for anything from buying a new TV to buying a car, but it can also apply to things like your monthly recurring bills.

Some of the easiest ways to save money involve switching or eliminating monthly payments. For example, switching to a discounted wireless provider allowed my wife and me to cut our bill in half, resulting in more than $800 per year in savings.

When you reduce your recurring monthly (or yearly) expenses you will be saving money on an on-going basis, so even small savings can add up.

Some of the things you can shop around for include insurance, utilities (if you live in a de-regulated state), and TV service. Cable TV can be very expensive, and there are a number of cable alternatives that will significantly reduce your bill.

5. Establish an Emergency Fund

An emergency fund isn’t the most exciting part of a personal financial plan, but it’s important. You never know when an emergency could arise, so it’s best to be prepared.

We don’t like to think about the possibility of losing a job, experiencing major health issues, or dealing with family situations that could impact us financially, but these types of things happen all the time.

An emergency fund is money set aside for something unexpected that cannot be planned for or predicted. For example, paying for new brakes on your car is not something that should be paid out of an emergency fund because you can plan for that expense, even if you don’t know exactly when it will be needed.

Most experts suggest that you have enough money in an emergency fund to cover at least 3-6 months worth of living expenses. If you’re at a higher risk (a family living on a single income, or anyone with an unpredictable income), you should be at the higher end of that range.

6. Start Saving for Retirement Now

It’s never too early to start saving for retirement. Many young people don’t take retirement savings seriously because they think they’ll deal with it later. But the younger you are, the more time you have for your investments to grow and compound. The younger years are the best time to be saving for retirement, thanks to compounding interest.

Regardless of what age you are, if you haven’t already started to save for retirement, you should start now. And if you have already started, it wouldn’t hurt to increase your savings.

7. Save Wherever Possible

There are a lot of different ways to save money. If you’re always looking for ways to cut expenses and increase your savings rate, you’ll find plenty of opportunities.

One fun way to find new ways to save is to take a money saving challenge. There are plenty of different options, like the popular 52-week money challenge. With this one, you’ll save $1 the first week, $2 the 2nd week, $3 the third week, and so on. By the end of 52 weeks, you will have saved $1,378!

8. Eliminate Debt

Debt is one of the most common financial problems. High-interest debt, like credit card debt, is especially damaging and challenging to overcome. Other debt like student loans, car loans, and personal loans may not be as bad as credit card debt, but it can still prevent you from saving and getting ahead.

Paying off consumer debt will free up more money in your monthly budget, so you’ll be able to save and invest more each month.

There are a few different approaches that you can take for paying off debt. Two of the most popular options are the debt snowball and the debt avalanche. With the debt snowball approach, you will pay off the smallest debts first, giving you some confidence from “quick wins”. With the debt avalanche approach, you will pay off the highest interest debt first. You can see a comparison of the debt snowball and debt avalanche here.

Paying off debt is a key step, but you also need to avoid more debt in the future.

9. Know Your Priorities

Many people think that personal finance can be boring because it always involves cutting back or saving money. In reality, you don’t need to cut back in every aspect of your life. The key is to know your priorities. Save in the areas that aren’t as important to you and you’ll have more money for the things that matter the most.

You don’t need to feel guilty about spending money, and knowing your priorities can help with that. If you know that you’ve been cutting back in other areas so you’ll have the money to afford the things that mean the most to you, you can manage your money confidently.

10. Maximize Your Income

Reducing your expenses is great, but increasing your income can be even more powerful. You can only cut back so much. At some point, you’ll run out of ways to reduce your expenses, or you’ll see only very small savings from your efforts. However, you can always make more money.

There are a few different ways to go about increasing your income. One of the best ways is to get a raise, because you’ll be getting more money for the same amount of work. See this guide for advice related to asking for a raise.

If getting a raise isn’t possible, you may be able to find a higher-paying job, either with your current employer or with a different employer. Working overtime may also be an option, depending on your job.

If getting more money through your job isn’t possible, starting a side hustle can be a great decision. There are all kinds of things you can do for money, and there are options that will fit with any schedule. If you have a traditional Monday through Friday job, you can see this list of the best weekend jobs.

11. Don’t Buy Too Much House

Housing is the biggest expense in most budgets. One of the most common financial mistakes is spending too much for a house.

Don’t assume that you can afford a house just because the bank approved the mortgage. Even if you can afford to make the mortgage payment, buying too much house will reduce the amount that you’re able to save and invest.

Be sure that you’re living well within your means and buy a home that will still leave plenty of breathing room in the budget.

12. Pay Attention to Fees

Investment fees may seem small, but they can have a damaging long-term impact on your results. NerdWallet analyzed the impact of fees and found that a 1% investment fee could cost more than $590,000 over 40 years of savings.

Check the details of any investment to be sure about the fees that will be assessed. Opt for low-fee investments when possible. Vanguard and Fidelity both offer excellent mutual funds and ETFs with very low fees.

13. Invest in Income-Generating Assets

Income-generating assets are ideal for retirement because they can (potentially) replace the income from your job.

There are a lot of different types of income-generating assets, including real estate. Rental properties and real estate crowdfunding are two popular options for generating income from real estate investments. It’s even possible to invest in real estate without using your own money.

Aside from real estate, investing in dividend stocks is another popular option.

14. Set Goals

Setting financial goals is extremely important because without goals you will lack direction. Goals help you to have something to work towards, increase your motivation, and give you something to gauge your progress.

You can work backward from your goals and create a plan that allows you to reach those goals. If you stick with your plan, you’ll find that you make consistent progress and goals that seemed lofty will seem much more achievable over time.

15. Get Help if You Need It

When it comes to your finances, you can either take a DIY approach, or you can hire a financial advisor. If you feel overwhelmed, or if you’d simply like a little bit of help or advice from a professional, you may want to consider hiring someone.

If you make an effort to live by the financial rules covered in this article, you’ll be well on your way. If this all seems overwhelming, don’t feel like you need to become a financial expert overnight. Start with the first rule of spending less than you earn. The impact of simply following that one rule will go a long way.

Millennials Should Look at Retirement in a New Way

The following is a guest post from Riley at Young and the Invested.

Everywhere you look, Millennials seem to be killing something.  Whether it’s traditional products, definitions of convenience, working demands, or some other societal convention -- we constantly receive a bad rap. 

Despite this, we manage to get by.  Though I’ll admit to seeing some chronic problems among my peers when it comes to establishing good financial habits.  Nobody’s perfect.  I’m certainly not without error.

Things as common as living within our means, saving money, or setting aside enough to fund a traditional retirement fully. We make a lot of mistakes with money it would appear.

But why is that? What is driving this? Allow me to share my perspective as a millennial.

What We Want

I’ll be the first to confess, much like my peers, I don’t enjoy the idea of delaying my gratification and saving consistently to reach some eventual goal 30+ years in the future.  If pressed to place blame, I’d highlight things like long-term unpredictability, social media, and our on-demand culture.  

However, allow me to say this clearly: I don’t pretend to speak for my generation.  These are just some of the drivers I see -- ones I don’t see going away anytime soon.

Regardless of the culprit, it doesn’t look as though we’d do well with a modern marshmallow test.  Instead, we desire a life of convenience and immediate fulfillment because we have a high discount rate on what the future will provide. 

Simply put, we don’t know what tomorrow will hold.  For a generation who’s hooked on binge-watching television shows seasons at a time, we aren’t the most patient bunch.

I don’t say this to shirk responsibility for being patient. Rather, this post intends to demonstrate how we operate the best we can within our expectations for what life can deliver and what we’ve come to expect based on other areas of our lives.

Understandably, our circumstances differ from those who came before us.  What we have come to expect above all else are convenience, low-costs, and choice.

Preferably, we’d want these all wrapped up in an unforgettable experience, because they tend to make us happier. In short, we want a life with fulfilling experiences at a reasonable price when we want them. 

Retirement, What Retirement?

After seeing how the traditional demands of life have changed, why would this not also extend to reshaping our definition of retirement?  What I have come to find is I do not enjoy feeling constrained in my decision-making.  But then again, who does?

I think Millennials feel acutely annoyed by restrictions because we’ve grown up in a world where convenience is king.  We constantly seek methods to automate, scale, and reduce time commitments to time-intensive tasks when more expedient options exist.

From a retirement perspective, this means not wanting to stick to a strict schedule.  Why wait until our golden years to hit travel the world without consequence when we can travel hack with help from Reddit Churning there for less?

What millennials desire is to expedite our financial security thereby allowing us the independence to make decisions irrespective of financial concerns.  This would change our path and free us from a traditional retirement course.

Why do we want this?  The reasons should be self-evident: we want what we want when we want it.  That means cashing in those freedom chips sooner rather than later. 

After all, because we don’t know what tomorrow will hold, we want to live more today.  This makes us more inclined to delay gratification a bit less than our predecessors.  YOLO (you only live once), right?

Reaching Financial Independence Sooner Than Traditional Retirement Age

Millennials must confront unique resistances other generations didn’t have to face. Namely exorbitant student debt, stationary wages, increasingly-expensive homes, and impediments in career advancement.

As a result, I’m not of the mindset traditional financial advice applies to our generation in the way it did to our predecessors.

When people advocate for saving 10% of your earnings in perpetuity and relying on Social Security and Medicare to cover the rest in retirement, I’m not certain this will be enough for us to live comfortably in retirement.

Because we cannot afford to start saving for retirement as early as previous generations (see problems above) and we have less certainty of having entitlement programs existing in their current forms, we need to find another way to reach retirement.

As such, I advocate for pursuing financial independence rather than a traditional retirement.  And in order to do so, we should:

• Develop unique, in-demand skills to take up side hustles. Doing so will provide lucrative opportunities to reach financial independence sooner.
• Make investments in assets which provide passive income to cover our costs of living. This can come from investments like dividend-paying stocks, buying rental real estate like condos or apartments, or finding alternative investments which provide diversification for your investment portfolio.
• Learn to live within our means. By living on a budget, we can begin to improve our financial picture and prioritize the items in our lives which create sustaining happiness.
• Discover how to build wealth through investing in index funds. Building wealth begins with making wise choices, allowing those to play out over time, and remaining invested for the long-term. Compounding returns over extended periods of time are the surest pathway to wealth.

Financial Independence Sooner than Traditional Retirement Later

Using these four actions to guide your route to financial independence will be easier said than done.  Inevitably, all take time to develop but can be accomplished by anyone dedicated to living in a more financially-savvy way.

These should items can easily combine to cover our cost-of-living as well as leave room for financial growth. And because our efforts compound, I suggest seeking financial independence sooner, rather than later.

Looking at retirement in this manner will help millennials reach a state of financial peace of mind.  However, getting there requires steps which greatly differ from conventional retirement advice. 

Learning and adopting these strategies will free millennials to pursue their passions and give them the lives they want.

How to Sell Your Old Mobile Devices for Top Dollar

The following is a sponsored post.

I don’t know about you, but I have several old cell phones and an iPad laying around the house. They’re laying around because I haven’t figured out what to do with them. Wouldn't it be great if there was a way to sell your old mobile devices that were easy and available online?

Of course, the carriers would love to take them off your hands for you. But that’s kinda like trading in your used car. You get low balled and don’t get nearly what it’s worth. After all, they have to resell the car at a profit.

I’m not sure whether it works that way with the major carriers. All I know is few seem to want the old phones.

Another option is to sell it on the various marketplaces (Facebook, Craigslist, Letgo, etc.). The problem with that is, well, it’s a hassle. You have to create the listing, take pictures, post it, put up with all the crazy people that live on these sites, and, if you reach an agreement, find a way to get the phone to the buyer.

There is no guarantee you got the best price. There is are risks in dealing with people you meet on social media. Have you noticed all the scams executed on social media? No thanks. I have good news. There is a way to sell your old mobile devices AND get top dollar for them. Here's how to do it.

Sell Your Old Mobile Devices

Sell Cell: A better alternative

You’re probably holding onto your old phones or tablets for one of two reasons: you’re procrastinating or you don’t want to put in the time and energy into actually selling them. Well if you’ve been putting this off because you’re afraid of the work involved, you’re in luck. With Sell Cell, the process is simple.

The process

You can complete the process in four easy steps:

• Step 1: Search for your device: You can use the search box to find the device you want to sell. You can’t miss the search bar. It jumps out at you on the homepage. Take a look:

• Step 2: Choose the best deal: SellCell compares prices from US phone recycling companies to find the best price for your phone. In fact, they have over thirty pre-screened, trusted buyers. They submit bids to these buyers to get the best price.
• Step 3: Ship your device: Once you have discovered the best price for your phone or tablet, follow the shipping instructions given by the recycling company.
• Step 4: Sit back and collect your cash: Once the company has inspected the phone, they will send your money to your chosen payment method.

Sounds easy right? Well, it is. Who doesn’t like to earn extra cash for putting in minimal work? And the best part about using Sell Cell is their price guarantee. Yup. They guarantee the best price. More on that shortly.

Instilling buyer confidence

If you’re looking to trade in your old phone, there can be a drastic difference between the highest and lowest price. Since SellCell compares prices from companies around the nation, they can offer the best deal for your used phone. They are so confident about finding the best price, that if you find a better price within 24 hours of your sale, they will double the difference. That’s right, double the difference. Check it out:

Protecting the environment one cell phone at a time

SellCell is not only great for your wallet, but it’s also great for the environment as well. A lot of phones are re-sold and re-used. This keeps them out of landfills, which in turn, is good for the environment. Cell phones tend to contain toxic chemicals that may pollute the environment if they end up in landfills. If there is no demand for your older phone you can rest assured your phone will be safely disposed of in an environmentally friendly way.

The best time to sell your device

The simple answer is: right now. The longer you wait the less valuable your device will be. It will collect dust in your closet and you may even end up forgetting about it. If you want to maximize your dollars, you need to sell it today. Manufacturers are constantly producing new models to capitalize on profits. When they put out new models, therefore making the older models become less and less valuable.

Final thoughts

If you’re like me, you’re probably holding onto a mobile device that you no longer use. Let’s face it, trying to sell these phones on your own is a pain. That’s why my old phones have been laying around for several years. I just don’t want to spend my time trying to nickel and dime with people online. Not to mention trying to sort out the scams. Until discovering companies like Sell Cell, I didn’t know there was a good alternative. I bet you didn’t either. Here’s what I’ve learned. A lot of these devices hold some sort of value. Even if they have damage, you should still consider selling them. That’s what I plan to do. And I’m choosing to use Sell Cell over the other competitors for two main reasons.

1. They have over thirty sites that compete for the business.
2. Their price guarantee takes most of the risk away from the process. Remember. They don’t just pay you the difference. They double it. That says a lot about the confidence they have in their process.

If you have cell phones laying around, here’s what I’d suggest. Collect the device and then hop over to Sell Cell. Sell them for a little extra cash while decluttering your home. Not only are you making a little extra cash you're putting your outdated device in the hands of someone who will appreciate it a lot more. I don’t know about you, but I love these kinds of win-win deals.

7 Reasons Why Retirement Scares Rich People

The following is a guest post from Bernz JP, the blogger behind Moneylogue.com. 

The impending retirement crisis in the US has most of the population quaking in fear, imagining a bleak future where they clutch shakily to a wooden staff with all their worldly belonging tied in a bunch at the end, trudging the payment on old tired feet, begging for handouts….

Ok. Maybe nothing so dramatic.

But for most people, the fear that their retirement savings might not see them through their golden age is very real. So many workers today are unable to put away enough nest-egg for their retirement.

It is one thing to adapt and cope with the challenges of retirement and retirement…and quite another to add poverty to the mix.

Does this mean that only the wealthy remain unperturbed in the approaching national retirement storm?

Well, not quite.

Despite having saved up about 200 times more savings than their less fortunate countrymen, the rich are just as bothered about retirement; but for different reasons.

According to Voya Financial, 59 percent of the American labor force is seriously worried that their retirement savings will run out on them and 74 percent have no idea of how much they will need each month to live in retirement. Both Voya and U.S Bank agree that retirees will need a whopping 70-80 percent of their current annual income to maintain their present standard of living while in retirement.

However, those that are more prosperous are generally more positive that their savings will properly provide for them in retirement. The UBS Wealth Management believes that 45 percent of wealthy pre-retirees aim to put away $1 - $3 million for their retirement, while roughly 91 percent are confident that they possess the financial know-how and tools needed to craft a solid retirement plan. And 89 percent are very sure they will have saved enough before retirement.

Yet another 91 percent claim they can accurately predict how long their saving will last once they leave active work.

The retirement concerns that tend to worry wealthy workers while common to most pre-retirees (rich or wretched) rank far below for those with less padded portfolios.

Yeah. Even on the retirement question, all worries are not equal.

The wealthy tend to worry more about leaving their careers behind and how their lives will be without it. The rich, while not always secure in their financial status in spite of high paying jobs and a huge retirement savings stash, are more concerned about the emotional impact of retirement and what to do with themselves in retirement.

While the less fortunate workers may tear themselves up about not starting to save for retirement early enough and are scared they may be unable to retire to start with; the well-to-do do not dwell on such depressing details.

It’s not as if the wealthy do not have fears; it’s simply amazing what their money can do about these fears. According to reports, 50 percent of rich retirees didn't have any problems adjusting to the retired life, and a third took less than a year to blend in. A staggering 84 percent admit they have never been happier. And when questioned, only 19 percent of these successful seniors said they would have delayed retirement if given a chance to do it all over again.

Furthermore, wealthy investors in their sixties and seventies were quite contented with their lives, being as they were, still healthy and debt free. This figure is much higher than for any other age group of investors, even for those in their 30’s and 40’s.

So even if well-off workers face retirement with some trepidations, the real retirement often quickly proves their fears to be baseless.

Therefore, based on the experience of current retirees, the report concluded, the wealthy do not have to fear retirement, and for most, it could prove to be the happiest time of their lives.

So if the rich end up as a happy as overfed WhatsApp smileys in retirement, then what do they actually have to fear?

1. Destabilized Routine

The typical worker arrives at work by 8 a.m., goes for a 20 minutes coffee break, goes back to work, goes for an hour lunch by noon, goes back to work, and then drive home by 5 p.m each day.

OK, let's admit it, the everyday routine of a job can be oddly comforting. Yes, even the ones you swear you can’t wait to quit. And a surprising number of wealthy workers, about 68 percent, admit they are afraid of the “structureless days” they will have in place of the familiar 9 - 5 daily grind. It seems that people balk at the idea of being responsible for filling their days with purposeful activities.

2. Missing their Colleagues  

One of the major attractions of a workplace is the camaraderie which develops amongst people who spend a large part of their workday together. Human beings are social in nature, and no place is more social than a workplace.

Would-be retirees fear being separated from their soon-to-be former colleagues who they have developed close relationships with. They also fear to miss the office banter which they traded daily with colleagues.

3. Lifestyle Adjustment 

While, as we’ve already seen, the wealthy ease into retirement with hardly a ripple, many of them do not seem to believe it will be so before their retirement. Wealthy pre-retirees are scared of adjusting to retired living. The problem could be that retirement is one of the biggest life changes and humans are traditionally afraid of change and the unknown.

People are hardwired to resist change. Especially when it comes to doing something different than what they had been used to daily for over 35 years of their lives. For pre-retirees, this could be a troubling thought.

4. Loss of a Sense of Purpose

A good number of wealthy workers are afraid that once they leave their job, they’ll have nothing to keep them going. While in employment, there’s always a compelling reason for you to get out of bed each morning and go to work. Maybe a career growth or to make more money to live the life you wanted. These reasons give you a sense of accomplishment and fulfillment.  

Wealthy would-be retirees fear not having that sense of fulfillment that comes with being part of a larger vision. They feel they will no longer be as important as they once were, that their advice won't be sought, and their expertise will no longer be required – becoming basically “a nobody.”

With people living much longer than before, it is imperative retirees immediately seek to become involved in activities which will give meaning to their lives. This will help them live longer and happier lives. Some people die within a few years after retirement simply because of the sudden absence of enthusiasm in their lives.

5. How to Keep Themselves Occupied

With a greater part of their time spent on the job, some wealthy workers are worried about how to fill in all those idle hours once they retire. This shouldn’t be so hard if they’ll just redirect all the energy and imagination they used daily on their jobs to find activities that will keep them engaged.

Baby boomers are notoriously known to be hooked to their careers – basically “living to work.” As they approach retirement, apart from fixing up their finances, the need also to figure out how to fill their time with meaningful activities.

6. Falling Ill

This is about the most prominent fears of wealthy workers. And unfortunately, one of the most likely to come to pass as they get older, and aging takes a toll on their bodies. Majority of well-to-do workers are afraid of falling ill with degenerative diseases usually associated with old age.  The fear also encompasses the deprivations they might have to go through as a result of potential ill-health.

7. Fear of Missing Out (FOMO)

Fear of missing out is the anxiety brought on by the belief that one is not part of an ongoing excitement. It’s popularly referred to as FOMO by its perennial sufferers – millennials.  

FOMO is exacerbated by social media; lounging on a couch and being only able to click ‘like’ to pictures and videos of friends visiting the latest restaurants, holidaying in a faraway paradise island, getting married, selfies with celebs at a concert. Like everyone else is in the middle of the excitement except you.

While pre-retirees’ fear of missing out might not be social media based, it is just as anxiety ridden. Many wealthy pre-retirees who have been at the center of their work world, now fear a future where they will be no longer in the thick of the action.

A series of interviews conducted by MIT AgeLab found that retirement FOMO may be causing many people to put off retirement. They found it difficult to retire and miss all the action, the energy, the people.

A recently retired executive rued the fact that while he was working, everything revolved around him, people sought his approval and input. The latest information of every type was at his fingertips, and people and ideas flowed freely through his office.  

Wealthy retirement evokes imagery of relaxed silver-haired seniors strolling exotic beaches, trying out the latest gourmet cooking, or playing golf in a lush course. But it doesn’t allay the fear of many that they will be missing out on an activity, people, and for some the exercise of influence, authority, and power.

That is it. The rich aren’t much different from others when it comes to the fear of retirement. What is different is the form those fears assume.