« March 2013 | Main | May 2013 »
Just a programming note that I will be changing my posting schedule for the summer. Instead of a new post every day, I'll now be posting something new every weekday. Yep, I'm taking the weekends off! I'll be doing this in May through August for sure, and may extend it if I like the pace better. :)
Hope you all have a great summer!
Posted in FMF Speaks | Permalink | Comments (1)
Fox Business lists the top 10 reasons you (or anyone else) aren't getting a raise as follows:
What can you do to combat these issues? A few thoughts:
Anyone else have other suggestions to add?
Posted in Career 2011+ | Permalink | Comments (12)
The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.
Next in the series is FMF reader MR. He answered my questions (in red below) as follows:
Please tell us a bit about yourself.
My wife and I are both around 30 years old and live in a mid-sized low cost of living city in the midwest (median household income in this city is ~$41k, typical home price for 3-4 bedroom is $140-$200k). We are expecting our first child later this year. My wife is a veterinarian and works for a good-sized practice with 5 other doctors. I have a background in computer software (BS degree in Computer Science), and now manage a development team for a Fortune 500 company. We live in a house that we built 3 years ago. We love to travel and in the past couple years have been to several places around the world.
I have read FMF for years, and always found the reader profiles fascinating, so I decided I should contribute. I've learned so much from seeing how others have handled their financial situations.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
My wife and I both work full time at the moment, although she already has a slightly unusual schedule (Tues-Friday, with some Saturday mornings) that will alter further after the arrival of our child (same days, but she plans to drop to about 75% time and leave around 3 or 4pm every day). We have been extremely fortunate to find well-paying jobs and to substantially increase our income -- I began working after graduating from college in 2007, and started with a fairly typical salary for my field but was able to increase my income by 150% over the course of 5 years. My wife's income jumps have been less dramatic than some of mine, but steady and significant. All told, we have a base income over $210k/year with another ~$20k or so of annual bonuses distributed via cash or directly into 401(k) accounts.
I manage all finances in our house. I don't keep a really strict budget, because we have wild fluctuations depending on what our priorities are -- some months we'll buy something big we've been holding out for (like a room full of furniture), some months I'll just throw extra money at investment accounts or debts. However, I'll outline the things that are relatively consistent:
Monthly Expenses
Monthly Savings
Debts
Assets
We have several credit cards but always pay them off in full every month. I put everything possible on the cards to maximize rewards. We primarily use a cash back card that nets us roughly $600-$800 a year in rewards, plus another card that gets us a couple hundred a year toward Amazon purchases (which we certainly use -- I'm probably one of Amazon's best customers). Finally, we have a third card that we use when travelling internationally because it has no foreign transaction fees.
What are the current financial issues you're facing (saving, paying off debt, etc.)?
We recently got the one car we had financed paid off, and right about the same time my 401(k) contributions were forcibly cut -- two events that freed up a fair amount of cashflow. So I just recently started putting more into my self-directed investment accounts, and will probably siphon some of the additional extra cash into getting rid of my student loans. The relatively low interest rate on those hasn't set a fire under me to pay them off, because I've gotten a higher return on my investment activities, but it would be nice to have them off the books. I also want to direct more into charitable giving, and am trying to determine the best place to give.
Obviously with our first kid on the way, our finances could look quite different in a year -- although it looks like we're going to be fortunate to not have to pay typical childcare costs, as we have family members that are insisting they can watch the baby while my wife's at work. One very tactical financial issue we'll continue to face is the length of our commutes and the resulting gas bill -- moving isn't an option, as we go in opposite directions. We're already optimally placed. Our vehicles are near the top of their class in fuel efficiency. Spending that much on gas just really bugs me. It's like burning money. By the time we need to replace one of our current cars, I hope Teslas are more affordable :)
Short term significant financial expenses, aside from the baby, include a number of home improvement projects -- we've been in the house for 3 years and have probably averaged $7k-$8k/year in such projects, but have increased the value of the house by a rate of over $16000/year in the same time period, by making smart choices and by doing some of the work ourselves. We purposely built the house with these future projects in mind, anticipating we could increase the value this way over time.
My biggest goal is to be able to enjoy our lives now while still socking away quite a bit for retirement -- I think we're doing decently well there, especially considering I've only been in the workforce for 5 years and my wife for 3 (and for my first 2 years, we couldn't save a thing). I am continually afraid of having to worry about money rather than enjoying life when we reach our retirement years, so maxing out our retirement savings was one of the first things I did as soon as I felt we could afford it. In the last 18 months, I've had to face the (admittedly good) problem of what to do once you've exhausted the usual tax shelters for retirement -- something that's complicated by our high income. As I noted in the outline above, I can't put as much as I'd like into my 401(k), and my IRA contributions aren't deductible because of our income level. I think I'm at the point where I may need to hire a financial advisor to make sure I'm making the most of the options that are out there.
Additionally, I face a constant internal battle because I tend to have expensive tastes and hobbies -- do I indulge a bit to reward myself for success, or do I try to hold back and save even more? I do try to defer gratification as long as possible, but it's difficult. My wife helps me rein some of this in because she's extremely frugal by nature.
What are your plans for the future (retire early, build your career, etc.)?
I would love to retire early and do something low stress where I don't care how much I get paid (who wouldn't, right?). As for my current career, I'm sure I'll move jobs again at some point -- I'm in my third since leaving college 5.5 years ago. However, I would like to find something a bit longer term and slower paced by the time I'm in my 40s. Whether that's really "retiring" and doing something completely different, or just a significant adjustment in workload and responsibility, I'm not sure yet. We'll see. I expect I'll step out of the workforce gradually.
My wife, being a veterinarian, has wanted to be a vet her whole life and will probably continue to be a vet for as long as she can. We may have an opportunity to buy the practice she works at -- another thing that could change our finances significantly. That's going to be a major event, and purchasing a business is something I've been trying to educate myself about. What happens on this front will likely dictate a great deal of our financial future.
Our two huge "fun" goals for later in life are to get few acres of land and build a custom home (designing homes is a hobby of mine and I've been working on our dream home in my head for years), and to travel -- a lot. We have an enormous list of places we want to go. We'll never stop traveling in the meantime, but the list is so long I know we'll never get to it while we're working all the time (and raising kids). The non-retirement investment accounts are intended to fund these goals.
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
I sometimes don't feel that I'm very qualified to offer financial advice, because I only have a few years of experience and because we've been fortunate to have such a high income relative to our expenses. I feel in some ways I've just been lucky. However, there are a few things that I can call out:
Posted in Reader Profiles | Permalink | Comments (17)
Today I'm posting Proverbs 22:29, which is what I consider to be the best verse on your career in the entire Bible. From the NIV:
Do you see someone skilled in their work? They will serve before kings; they will not serve before officials of low rank.
And from the New Living Translation:
Do you see any truly competent workers? They will serve kings rather than working for ordinary people.
And finally from the Message
Observe people who are good at their work -- skilled workers are always in demand and admired; they don’t take a backseat to anyone.
We've talked a lot about how your career is your most valuable financial asset and the fact that with a few, simple steps you can make the most of it. This verse seems to endorse that line of thinking -- that if you are a good worker and can perform well (one of the main criteria in growing your career), you will be rewarded for it. How? You'll serve among the highest positions in the land.
And do you think the highest positions in the land pays better or worse than other jobs? :)
Posted in The Bible and Money | Permalink | Comments (4)
The Wall Street Journal lists four big 401k mistakes as follows:
1. Under- or over- contributing
2. Ignoring fees
3. Taking a 401(k) loan to pay off debt
4. Ignoring allocation
My thoughts on these:
1. I've been contributing the max to my 401k for years. But I've also been saving in non-401k accounts as well. The best bet is to at least cover the full match your employer is giving you while also saving for emergencies, your next car, and so forth. Putting too little (and not getting the match) or too much (and not having money accessible) are both problems you will certainly want to avoid.
2. My experience is that even an index fund in a 401k is expensive. Then again, I'm comparing that to the expenses I pay in my Vanguard accounts -- so not sure that's fair. Anyway, look at the expense ratios of all the choices you have in your plan and pick the best option for you. The piece says to complain to your company if the fees are too high, but my experience is that 1) companies aren't going to change a plan for just one person and 2) most people in charge of 401k plans (and yes, this includes executives) don't understand or give much weight to the impact that fees can have on total return over time.
3. 401k loan -- LAST RESORT!!! VERY LAST RESORT!!! I would have to be desperate to take a loan from my 401k. Even if it was a "better deal" to do so, I'd leave that money alone unless I had no other choice.
4. I struggle with keeping my asset allocation up to date. I generally review it once a year and did so a couple weeks ago -- it was "ok" but needed some changes. I also look at asset allocation over all our investments. Any one account could be totally out of whack (for instance, my wife's IRA rollover is all in an international stock index fund), but as a group our investments are where I want them to be.
Anyone else with words of wisdom regarding 401ks?
Posted in Retirement 2011+ | Permalink | Comments (16)
Money Magazine recently asked its readers how many credit cards they carry. The responses:
Here's where I stand on this question:
Money's piece also had a couple interesting credit card facts as follows:
As you know, I never carry a balance and 100% of my purchases are made using a rewards card. :)
How many cards do you carry? Do you use a rewards card? Which one(s)? And do you ever carry a balance?
Posted in Making Money 2011+ | Permalink | Comments (26)
The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.
Next in the series is FMF reader LS. She answered my questions (in red below) as follows:
Please tell us a bit about yourself.
I'm a recent college grad, age 23, living in a large US city and supporting myself for the first time. By "supporting myself" I mean that I live entirely off my own income, but I also was fortunate enough to receive a large sum of money which I don't touch (more about that below).
I actually work two jobs, one that is part-time and seasonal and one that is more steady. I enjoy the seasonal job very much but don't see much room for growth there; I do not enjoy the steady job and am planning to leave it in the next year or two. At this point I have no idea what career or field would be more rewarding for me.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
My situation is unique because when I was 20 I unexpectedly inherited a large sum of money (over $100K) from a relative. My parents (who are very financially responsible) encouraged me to put it all in the hands of a financial advisor, so I did. After I graduated from college I used some of it to pay the bulk of my student loans; the rest is split between a Roth IRA and a non-tax-advantaged investment account. I eventually would like to move away from having the advisor, but since I have a large sum to potentially squander and not much investment knowledge, it seems to make sense for now.
As for the nitty gritty: I net about $2400 every month from the steady job; the seasonal work varies quite a bit (as one would expect from seasonal work), so I've had months where I've made another thousand+ on top of that, and months where I've made nothing additional.
I still live like a college student, and I keep my expenses below $2000/mo, excluding repayments on my student loan and charitable donations. (That's pretty good for my area, which has a high cost of living - I spend almost $700 on rent and live with three other people.) I donate at least $200/mo to my nonprofits of choice. At the end of the month I usually have about $200 to throw toward my student loan when living off only the steady income. I also am trying to put everything from the seasonal work toward my student loan, so I'm expecting to pay it off by the summer, at which point I'll start investing the money from the seasonal job.
If you're like me, you probably enjoy the reader profiles in part because you're a little nosy about how others are doing, so here's the full breakdown of my current net worth:
What are the current financial issues you're facing (saving, paying off debt, etc.)?
Financially, I really am in a fortunate position. My student loan should be paid off soon, and I have about five months' expenses as an emergency fund. My biggest struggle is actually striking a balance between wanting to spend as little as possible, and making the most of this opportunity I've been given. I feel guilty when I take trips or buy a fancy meal, but on the other hand, there's more to life than money and I often feel that I should be more willing to spend on experiences. I try to save as much as I can, but I'm not sure there's a good reason for me to be saving so much. Any input the readers have would be helpful - and yes, I realize and appreciate how fortunate I am, and I know these are nice problems to have.
What are your plans for the future (retire early, build your career, etc.)?
I really have no plans at this point. I haven't settled on a career, so I don't know how long I'll want to work. I plan to move around more before settling down, so I'm not worried about saving up for a house (although if and when I do buy a house, I'd probably liquidate some investments to make a big down payment). I've been considering grad school, so I'd probably pay as much tuition out of pocket as I could, but at this point I'm leaning away from grad school anyway.
I think that's probably part of why I feel unfocused - I'm not really saving for anything or spending for anything in particular.
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
I don't think I have any tips that FMF readers don't already know, but I will say that setting a good example for your kids is invaluable. My parents are extremely frugal and have saved a lot for retirement. But, when they do spend money on dinners out or trips, they are willing to spend to have an enjoyable experience. I am still trying to be as frugal as them, but I'm very grateful to have them as financial role models.
Posted in Reader Profiles | Permalink | Comments (37)
In my recent post about over-spending, a reader made the following comment:
Re spending, I am curious how much people spend for lunches at work each month (for people who work full time outside their homes). I hate brown bag sandwiches and microwaved leftovers with a passion, plus I need a break from the office. But I feel guilty eating out every day.
It's true that lunches can add up to a small fortune. $7 per day for 250 working days a year is $1,750. $10 a day is $2,500!
Here's what I do:
I very rarely go out and grab lunch just for myself. I either bring it or have a planned lunch as noted above.
What about you? What do you do? How do you balance the need for a break with the cost of eating out?
Posted in Saving Money 2012+ | Permalink | Comments (27)
The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.
Next in the series is FMF reader BW. He answered my questions (in red below) as follows:
Please tell us a bit about yourself.
I'm a 26 year old male, married 2.5 years to a 26 year old female and we live in a Midwest city. I am a CPA and recently passed the CFP exam. I currently work for a RIA firm, while previously working in the tax department of a public accounting firm. My wife works in the office for a mid-sized corporation. We have no children yet, but plan to have one in 2014. We will probably have a total of 2 or 3 children, each about 1.5 to 2 years apart.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.)
Gross income combined: $87,000 ($55,000 me, $32,000 wife)
2013 Expenses and Savings:
Net Worth:
Insurance:
What are the current financial issues you're facing (saving, paying off debt, etc.)?
Big Picture: We saved a bunch of cash to pay off some student loans, save cash for house down payment and purchase a new (used) vehicle. We are now starting to get retirement more under way and put things on auto pilot. We could (should?) be more disciplined with are budgeting. We could cut back on the general living expenses and save a few hundred dollars more a month pretty easily, I think. With having a child in the near future, we will need to decide if wife will keep working or not. I think at this point, the answer is yes, but the cost of child care will be a large factor and deciding if we will want to make the additional budgetary sacrifices (also depends on my wages over the next 12 to 18 months). Anyone experience this and have any general suggestions, besides increasing emergency fund and try living on my salary alone to see how the adjustment goes?
Short Term: After the deck is finished (by July 1st), I am thinking about putting more money towards the house to get out of PMI. We pay $45 per month to it and will need to get below $148,000 on mortgage to get there. I am more inclined to start the Roth IRA. Thoughts? Also, we might start allocating a portion of sinking funds (maybe emergency fund) to Wellesley Income Fund or Wellington (Vanguard). Does anyone have thoughts/suggestions on how they handle sinking fund accounts balances that they do not use every month? We are savings enough that it is just a big savings account that I allocate to different cells in excel every month. We have enough (generally speaking) to cover any expenses that come up every month out of the cash flow that is allocated to the sinking funds every month.
Medium Term: If we have extra money remaining in the budget after child is born, does anyone think it would be best to start on the mortgage, rather than saving for college? As of now, I am thinking about trying to save $200 to $250/month/child for college. I think at this low level, it is probably best to save in 529 plans (I receive state tax deduction) or taxable accounts. Anyone have experience with paying off house before kids go to college and using old house payment (and maybe even slowing or stopping retirement) to fund college? What about 529 plan vs. taxable accounts?
Long Term: In the next 7 years or so, we will have to decide if we want to send children to private, catholic school. Cost for K-8 is about $4,500 per child, per year and increasing. High School is $12,000 per child, per year. We live in a school district with great schools, so we always have that to fall back on. The cost/benefit in my mind does not work out, but wife is really pushing for it. Thoughts?
Any other thoughts/ideas/suggestions for us?
What are your plans for the future (retire early, build your career, etc.)?
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
Posted in Reader Profiles | Permalink | Comments (43)
Here we go with the final round of Free Money Finance March Money Madness (to follow all the action click on my March Money Madness category link and scroll down to read all the posts involved in this subject.)
Today's game is brought to you by the Citi ThankYou® Preferred Rewards Card which is currently offering 15,000 bonus ThankYou Points after you make $1,000 in purchases within the first 3 months after account opening—good for $150 in gift cards.
I've listed each "game" (one post versus another) in segments along with the wording provided by the author when the post was submitted. I've also listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Game 1: Saving; Game 2: Investing, etc.) Be sure to comment which one you like the best out of each set of two -- you will help determine the winner! Criteria for the best article is somewhat subjective, but you can use these factors as a guide: 1) practicality of the post 2) how interesting/provocative/unique it is, 3) the "personal-ness" of it and 4) its impact on net worth.
Here is the Championship game:
VERSUS
Posted in March Madness | Permalink | Comments (55)
The NY Times recently published a piece on rental real estate that listed the pros and cons of this investment opportunity. I thought I'd share some of their conclusions (in bold below) and offer my take on them.
"If you have a $600,000 portfolio, putting $300,000 into one asset is a highly concentrated bet."
By the time I'm done investing in rental real estate, I want to have my properties diversified by type of home (single family versus multi-unit), area of town (north, south, east, west), and type of renter (larger families, young professionals, etc.) Of course I'll still have real estate in the same city, so that won't be diversified, but I do want to try and spread the risk out as much as possible.
There are the traditional risks that come with being a landlord, like a prolonged vacancy, the possibility that the water heater will die right after you’ve installed a new roof, or that the tenants will lose their jobs or fail to pay for some other reason, which could lead to eviction. But several experts also said not to discount even more remote possibilities. If your property was in an area ravaged by Hurricane Sandy, for instance, could you financially withstand several months of no rental income and the cost of repairs that might not be covered by homeowner’s insurance (and how much insurance is enough, and at what cost)?"
This is a decent point. Just think of all the things you have to consider if you own your own house -- the lawn, the furnace/AC, the appliances, the roof, and on and on and on. The same is true for rental units you own. You have to consider and budget for items like roof replacement (eventually), lawn care, and any other regular or irregular maintenance that may occur. In looking at the financials sellers send to me (when they even have/provide them), almost everyone leaves out expenses for long-term maintenance like roof replacement and the like.
Buying a rental property isn’t solely a financial decision. You need to be prepared to screen tenants, run credit checks and get the water heater repaired at a moment’s notice. That means you’re going to need to establish relationships with a variety of service people, or, if you have the time and ability, do it yourself. So be honest about how big of a commitment owning a house will really be. “I have never had pipes burst at a convenient time — they almost also go out in the middle of the night when you are out of town,” said Alan Moore, a financial planner in Milwaukee who has owned rental properties and counseled clients about the pros and cons of buying investment properties.
So far, I've only used a management company. They have had some emergency calls (tub leaking) and I haven't had to deal with the issues at all (though I have had to pay for them). It's a double-edged sword with both pros (ease of management for me and time) and cons (costs) to the arrangement. For now, I have to use them as I don't have the time to manage the properties. Will I ever? Perhaps. But even using a management company I'm still making a good return on my money and have complete freedom of movement (for instance, if I want to go to the Caribbean for two weeks). So I may always use one. We'll see.
Rental income is taxed at ordinary income rates, but experts say you can often post a tax loss while still generating a profit. That’s because you can deduct the depreciation of the rental — but not the underlying land — to account for wear and tear (the cost of improvements, closing costs and the cost of appliances are all depreciable, too). In most cases, the building is depreciated over 27.5 years. So if the actual structure is worth $200,000, you can deduct about $7,200 a year. Coupled with operating expenses, that is often enough to wipe out any profit on paper.
Yes, there's depreciation which gives you some immediate benefit. But I am not interested in being anywhere near a loss -- even counting it. I intend to earn a good return on my properties just for operating them, then I am hoping for (not counting on) some appreciation in them as well. If I buy them at decent prices and/or make good improvements to them, I think this is reasonable.
You may be tempted to view this sort of investment differently, meaning you may be more likely to continually dip into your personal assets to cover costs.
My investments are currently more than self-sufficient on an operating basis, but I will need to invest more into one of them as tenants move out and I want to upgrade. I have planned on this from the time I bought the place, so the costs all figured into my calculations.
I know there are several rental real estate investors who read FMF. Anything you'd like to add to these thoughts?
Posted in Real Estate 2011+ | Permalink | Comments (15)
Today I'm posting Proverbs 22:9, a great verse about sharing with the poor. From the NIV:
The generous will themselves be blessed, for they share their food with the poor.
Another phrasing from the Contemporary English Version:
The Lord blesses everyone who freely gives food to the poor.
And from the New Living Translation:
Blessed are those who are generous, because they feed the poor.
And finally from the Message:
Generous hands are blessed hands because they give bread to the poor.
This verse rings very true to me. Every single time I have given money or volunteered my time to help the poor (or anyone for that matter), it seems like I am the one who is blessed. It's a strange concept -- you "lose" (or seemingly so) by giving up something. But in reality, you gain -- from the feelings you have resulting from helping others.
Anyone else out there experience the same thing?
Posted | Permalink | Comments (6)
Recently the Wall Street Journal posted what I consider to be a decent question and answer piece on Social Security. A couple of the highlights:
Will I receive Social Security benefits?
That's a big "It depends." If you're over 65, no sweat. If you're 45-65, you might see some changes from the relatively generous benefits enjoyed by your parents. If you're under 45, you have plenty to worry about.
I am just under 50, so I'm likely in the "transition group." I say "likely" because I'm also high income and high net worth, which could result in low or no benefits when retirement time comes around.
My point of view has been that I will save for retirement assuming I got zero benefit from Social Security. The level of benefits seems so uncertain now, this appears to have been a wise decision. Then if I get any money from Social Security, it will all be gravy.
What can I do about [the uncertainty surrounding Social Security benefit levels]?
A: Save. Save. And save some more. Social Security was always meant to be a supplement to savings, family support and pensions.A recent survey from Banker's Life and Casualty found that two-thirds of middle-income wage earners believe Social Security will pay at least half and some as much as 75% of their retirement costs. Some Americans consider Social Security their major income stream during retirement. Bad idea.
Several good points here:
1. You need to save, save, and save for retirement. That advice never goes out of style.
2. "Social Security was always meant to be a supplement to savings." Yes, it was meant as a supplement -- not complete retirement savings. And yet many people treat Social Security as their one and only (or at least major) source of retirement income. Bad move.
3. "Some Americans consider Social Security their major income stream during retirement." SS is a supplement and that's it. It's not a "major" income stream unless you can live on very little money. As such, we should all plan on it just to be "a little extra" in retirement -- certainly not be 50% to 75% of what we'll need.
Anything else to add?
Posted in Retirement 2011+ | Permalink | Comments (25)
Here we go with the fifth round of Free Money Finance March Money Madness (to follow all the action click on my March Money Madness category link and scroll down to read all the posts involved in this subject.)
I've listed each "game" (one post versus another) in segments along with the wording provided by the author when the post was submitted. I've also listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Game 1: Saving; Game 2: Investing, etc.) Be sure to comment which one you like the best out of each set of two -- you will help determine the winner! Criteria for the best article is somewhat subjective, but you can use these factors as a guide: 1) practicality of the post 2) how interesting/provocative/unique it is, 3) the "personal-ness" of it and 4) its impact on net worth.
Here are today's games:
GAME 1
VERSUS
GAME 2
VERSUS
Posted in March Madness | Permalink | Comments (129)
The Financial Samurai has been retired for a year now. Well, at least kind of. It's not really retirement since he's still working (he runs a successful money blog). It's what I'd call early semi-retirement (where you quit your job/career and downshift a bit, but still work). I've written about it several times as follows:
Anyway, FS shares the positives, negatives, and other learnings from early semi-retirement. The highlights:
It's pretty much what I expected. But since I'm working towards early semi-retirement, the glimpse into what it's really like was a worthwhile read for me.
I'm still a few years away from down-shifting to a great degree. I also want to be REALLY sure that I have enough money saved up as well as income being generated, and I think it will take some time to get my real estate holdings to the point where I'm comfortable with their performance (which will be a key source of my income).
How about you? Anyone out there planning on (or getting close to) early semi-retirement?
Posted in Retirement 2011+ | Permalink | Comments (15)
MSN Money lists seven retirement savings busters as follows:
Here's what I hate about these two things: they are often unexpected (and generally can't be planned for) and could be HUGE budget hits.
Of course this doesn't hold true for all of them. But most of these have at least some aspect of uncertainty -- and they all could involve significant amounts of $$$$$$$$$$$$.
So, how can we plan for these? A few thoughts:
Anyone else have any thoughts on these?
Posted in Retirement 2011+ | Permalink | Comments (8)
Here we go with the fourth round of Free Money Finance March Money Madness (to follow all the action click on my March Money Madness category link and scroll down to read all the posts involved in this subject.)
I've listed each "game" (one post versus another) in segments along with the wording provided by the author when the post was submitted. I've also listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Game 1: Saving; Game 2: Investing, etc.) Be sure to comment which one you like the best out of each set of two -- you will help determine the winner! Criteria for the best article is somewhat subjective, but you can use these factors as a guide: 1) practicality of the post 2) how interesting/provocative/unique it is, 3) the "personal-ness" of it and 4) its impact on net worth.
Here are today's games:
GAME 3
VERSUS
GAME 4
VERSUS
Posted in March Madness | Permalink | Comments (43)
The following is a guest post by Bryan, a personal finance blogger and freelance writer at Gajizmo.com. Bryan graduated from a top-ranked university with a finance degree and has worked in M&A and private equity for 3 years.
As a member of Generation Y, I don’t find money a taboo subject. I discuss my financial plans, investments, long-term goals, and the current status of my business with my parents and siblings on a regular basis. My parents, on the other hand, don’t openly discuss their income or assets, but at least don’t hide every financial statement from us either. Maybe it’s an issue of superstition (that talking about a good financial year will bring a downturn of luck), privacy, or that it is just not something they want to discuss with us. This seems to be the norm in American families, with most leaning closer towards secrecy and discretion. Of more than 100 individuals and families with a net worth of more than $20 million, only about a third of wealthy parents discuss money with their children before the age of 21, according to a study by SEI Private Wealth Management. At this level, wealth is harder to hide, so offspring may be tacitly aware of their family’s financial means, but for others with more modest millionaire status, children may be kept completely in the dark. And I can understand why.
Parents are worried about destroying their children’s motivation, independence, and self-reliance. My father has regularly explained to me that the greatest thing he has ever tried to teach me is survival. When you experience unexpected hardships, monetary or otherwise, the ability to innovate, be resourceful and keep providing for your family and avoid financial failure is an essential life skill. How will a child ever stand on his own two feet if there is a cushion to fall back on? Eventually, the child will realize that every time he falls, someone will be there to save him, so what’s the point of actually trying to do it on his own? If you have children like this, and parents can always recognize the signs, I don’t blame you for not sharing your finances with them. Your kid will likely take up a low-stress job that requires no hard work or mental stimulation, wait for you to pass and then collect their inheritance. Afterwards, they will likely squander your wealth and destroy your legacy, all the while blaming you for ruining their lives. Like King Solomon warned, “An inheritance quickly gained at the beginning will not be blessed at the end.”
Like my parents, I want to be self-made. I don’t want an inheritance and I don’t want a single penny of theirs left behind. In fact, I insist that they spend every cent enjoying the rest of their lives; after all, they’ve worked so hard for it all. The entire concept of working like crazy till you’re 65 and then retiring to enjoy what remains of your life has always baffled me, but that’s a discussion for another time. While I may not want their money, I can’t say I want nothing from them. In fact, I constantly solicit and request their counsel – the wisdom, experiences, and business strategies that have made them successful.
One quote that comes to mind is by Jim Rohn, which he states: “Time is more valuable than money. You can get more money, but you cannot get more time.” Young adults and entrepreneurs can take a bet, make a mistake, learn from it, and make another bet in the future after they've rebuilt their portfolio and savings. Simply put, I can always make more money, but what I can't recover is the lost time that the mistake cost me - time that could have been applied to a more productive task had I been mentored. This is one of the many reasons early stage venture capitalists are so crucial to the success of start-ups.
To overcome this deficit and pave the way for open communication, for my birthday last year, I asked for only one thing – my dad to discuss his investments with me. When he buys a stock, tell me about it and explain the reasoning behind his purchase (though he made a killing on some of my recommendations during the year, he just never told me he actually took my advice until 18 months later). When evaluating a potential business acquisition, what are the financial metrics he focuses on for insight into the company’s future performance.
Unfortunately, as close as we are, he doesn't ever approach me to fulfill my birthday wish. I grew up learning math and science from him, all of which made me excel in school, but for some reason, when it comes to this topic about investments and business decisions, it is like pulling teeth to get him to explain his thoughts. Maybe it has nothing to do with me or how he feels about money. Maybe it’s just the fact that he works hard all day, wants to come home to relax and not think about business.
In the end, I urge anyone who is a parent: the greatest gift you can bestow upon your kids is tangible wisdom applicable to the real world. Whether it is requested or not, just give it. Most of the time, your kids are listening, and even if they don’t immediately respond to or implement it, trust me, it’s on their mind. And lastly, after your kids graduate from college or leave the home, it shouldn’t be an “every man for himself” mentality. If your kids join the work force, talk about office politics, how to maximize their 401K and IRA contributions to minimize tax liabilities, or what kinds of projects to take on to ensure advancement within the company. If they want to buy a home, discuss the importance of calculating property taxes, home insurance, and maintenance. If they plan on investing in the stock market or themselves by starting a business, guide them on the types of research they should undertake before making the leap, the advantages and disadvantages of mutual funds, ETFs, bonds, commodities, and options investing, or choosing Fidelity vs. Vanguard for their index fund needs. More important than helping them with their jump shot or algebra homework in 7th grade, guide them as adults, when the stakes are much higher and the mistakes much costlier.
How do you discuss financial, business, or life issues with your adult children?
Posted in Kids and Money | Permalink | Comments (14)
It's been some time since I've opened up a post for general feedback, so I thought I'd do so today.
I generally write about what's going on with me financially, what I'm thinking about, what I'm interested in and so forth. And in many cases, I believe these topics interest you.
But not always, of course. And since there's no other way of really determining what you like/dislike (I can get some feedback through comments and email but it's incomplete), I thought I'd ask you.
I will start the discussion by listing what I believe FMF readers like to see here (by subject area, but not in any specific order) as well as what I like to write about:
Did I get it right? If not, which of the above do you like and which don't you like? Also, what topics would you like to see more/less of here on FMF?
This is your site too, and now's your chance to give me feedback on what you'd like to see. I'm not promising that just because you mention it, I'll write about it (the topic has to appeal to me as well), but I will listen to your suggestions.
Fire away...
Posted in FMF Speaks | Permalink | Comments (42)
Here we go with the fourth round of Free Money Finance March Money Madness (to follow all the action click on my March Money Madness category link and scroll down to read all the posts involved in this subject.)
I've listed each "game" (one post versus another) in segments along with the wording provided by the author when the post was submitted. I've also listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Game 1: Saving; Game 2: Investing, etc.) Be sure to comment which one you like the best out of each set of two -- you will help determine the winner! Criteria for the best article is somewhat subjective, but you can use these factors as a guide: 1) practicality of the post 2) how interesting/provocative/unique it is, 3) the "personal-ness" of it and 4) its impact on net worth.
Here are today's games:
GAME 1
VERSUS
GAME 2
VERSUS
Posted in March Madness | Permalink | Comments (21)
CNN Money recently posted a piece on the costs of buying a house versus renting. An overview:
Figuring out whether it's better to buy or rent rests on three main factors: where you live, how long you plan to stay and how home prices compare to rents in the area.
While markets vary wildly, prices are so reasonable and interest rates so low that buying is the better option in most of major U.S. cities, said Jed Kolko, Trulia's chief economist. Nationwide, home buyers who remain in their homes for three years will save an average of 19% over renting. If they hold onto their homes for 7 years, the savings advantage grows to 44%.
That means all of the initial transaction costs of buying -- the broker's commission, title insurance, legal fees and other closing costs -- will be offset by benefits, like tax write-offs and price appreciation. And those costs will become cheaper than the total costs of renting, which include insurance and agent commissions.
But the math is changing. Home prices rose 7% year-over-year last month while rents went up only 3.2%, according to Trulia. "Buying is still cheaper than renting but the gap is closing," said Kolko.
The piece then shares 10 key markets and whether it's better to buy or rent. Here are two examples -- one where it's best to buy and the other where it's best to rent:
San Francisco
Buy or rent?: Rent
After 3 years: Buyers pay 28% moreDetroit
Buy or rent?: Buy
After 3 years: Buyers save 62%
A few thoughts:
What about you? Any renters out there thinking about buying? Or buyers who are thinking of renting?
Posted in Real Estate 2011+ | Permalink | Comments (19)
Today I'm posting Proverbs 22:7, a verse that talks about the impact of being in debt. From the NIV:
The rich rule over the poor, and the borrower is slave to the lender.
Another phrasing from the Contemporary English Version:
The poor are ruled by the rich, and those who borrow are slaves of moneylenders.
And from the New Living Translation:
Just as the rich rule the poor, so the borrower is servant to the lender.
And finally from the Message
The poor are always ruled over by the rich, so don’t borrow and put yourself under their power.
This is the classic verse that so many use about being in debt. It gives a unique perspective on being in debt -- that when you owe someone something, you are a servant to them. How is this? It results because they now control at least a part of your life, telling you what you can and can't do with your money.
If you have just one loan and it isn't too much, you can likely manage it. But many Americans go overboard, stretch themselves too thin, and end up with many debts. Ask these people if they feel like they are in bondage and most will say "YES!"
This is one reason why I've been debt free for over 15 years now. Let me tell you, the emphasis is on the FREE part.
All this said, there is a debate about what being in debt is. Does it mean anything you owe anyone? Does it mean only amounts you can't pay back? Or something else?
What are your thoughts on this verse and the concept of debt?
Posted in The Bible and Money | Permalink | Comments (5)
Fox Business has a piece on how to hire a contractor. They list crucial questions to ask before you hire a contractor as follows:
I've hired several people to do work on my various rentals over the past few months, so I have at least a somewhat informed opinion on this issue. Here's what I have to add:
Anyone else have thoughts on what to do when hiring a contractor?
Posted in Real Estate 2011+ | Permalink | Comments (3)
Here we go with the third round of Free Money Finance March Money Madness (to follow all the action click on my March Money Madness category link and scroll down to read all the posts involved in this subject.)
I've listed each "game" (one post versus another) in segments along with the wording provided by the author when the post was submitted. I've also listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Game 1: Saving; Game 2: Investing, etc.) Be sure to comment which one you like the best out of each set of two -- you will help determine the winner! Criteria for the best article is somewhat subjective, but you can use these factors as a guide: 1) practicality of the post 2) how interesting/provocative/unique it is, 3) the "personal-ness" of it and 4) its impact on net worth.
Here are today's games:
GAME 7
VERSUS
GAME 8
VERSUS
Posted in March Madness | Permalink | Comments (21)
Money Wise Pastor lists six things to consider before buying a museum membership as follows:
1.Is it tax-deductible?
2.What’s the difference in price between the one-day cost and the annual membership?
3.What if you buy the annual membership but don’t go enough times to save money – isn’t that a waste?
4.What kind of special offers or discounts would you receive as a member?
5.Are there reciprocal benefits?
6.What is the entertainment or educational value?
It's a pretty good list IMO.
We have been members at a few museums over the past few years, and here's how we evaluate the costs:
Are you a member of any museums? Why or why not?
Posted in Saving Money 2012+ | Permalink | Comments (9)
Here's a piece from CNN that details where Americans keep their wealth (what there is of it -- the median net worth is $69k). The summary:
The composition of that wealth has changed over time. Back when Ronald Reagan was president, home equity made up nearly half of young adults' net worth, while interest-earning accounts, like those at a bank, accounted for a quarter of senior citizens' wealth.
Those figures are very different today, with retirement account assets playing a larger role in the portfolio of Americans of all ages. This comes as folks become ever more dependent on 401(k) accounts -- which companies started offering in the early 1980s -- to see them through their Golden Years as traditional pensions dwindle.
Here's how my net worth breaks down:
And a few notes:
So I guess I fit the mold of having more money in retirement accounts and less in real estate (compared to past years). That said, I see the real estate portion growing a bit more -- maybe to 30% or so.
What's your net worth breakdown look like?
Posted in Net Worth | Permalink | Comments (30)
Here we go with the third round of Free Money Finance March Money Madness (to follow all the action click on my March Money Madness category link and scroll down to read all the posts involved in this subject.)
I've listed each "game" (one post versus another) in segments along with the wording provided by the author when the post was submitted. I've also listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Game 1: Saving; Game 2: Investing, etc.) Be sure to comment which one you like the best out of each set of two -- you will help determine the winner! Criteria for the best article is somewhat subjective, but you can use these factors as a guide: 1) practicality of the post 2) how interesting/provocative/unique it is, 3) the "personal-ness" of it and 4) its impact on net worth.
Here are today's games:
GAME 5
VERSUS
GAME 6
VERSUS
Posted in March Madness | Permalink | Comments (28)
I recently had a reader send me the following email:
I have three sons who are 10, 8 and 5. Like many families we have several iPads/iPhones. My boys ask me daily if they can get (XYZ) app. All our devices have a password so my wife and I can control what they are getting. Many times we say yes, especially if it is free. If it's a 99-cent app or a $1.99 we often say yes as well. When we get into the $5 and up range, we typically say no and give them the option to pay for it themselves from their allowance money. As you might guess, it is easy to say "yes" many times in a week or a month, and that can start to add up.
That got me thinking about our society's transition from cash-based to e-commerce/e-spending/virtual spending has removed some of the older safeguards against free-wheeling spending. In my grandparent's day, and probably a lot of my parent's day, if you wanted to buy something, you paid cash or perhaps wrote a check. The physical act of getting out your wallet or checkbook and actually handling the cash or writing the check gave you a chance to mentally evaluate and accept the fact that these funds were going out and perhaps made you think through the decision a little more carefully.
For several years I resisted setting up online bill payment because I liked the fact that by getting a bill in the mail, it (A) forced me to review the charges and verify their accuracy and think about why we are spending that much and how we might reduce it in the future, and (B) the physical act of writing the check made it a bit more real than we were really spending that money and that it was flowing out and we (in most cases) would not be seeing it again.
Now, with credit cards and online commerce, that level of careful consideration is gone. (Don't get me wrong - I love the convenience and rewards of credit cards, and virtual payment systems have many benefits). But, it's easy to spend more than you realize in any given time period because it's all done with a click of the mouse (or a finger to the touch-screen). Online banking, online bill pay, automatic bill pay via credit card - it's easier than ever to spend money without really thinking it through in a thorough and considered way.
He then went on to suggest this topic as a potential post for FMF and asked:
[How do we] remain vigilant with our spending in a world that makes it easier and easier to spend?
This is a very good question.
I've noted the same in our family since my daughter got her iPad. The difference for us is that we make her pay for any of her apps.
However, I find even for myself that it's easy to get a $2.99 app here and a $3.99 (or more) e-book there. Yes, the library has some e-books and most apps are free, but the ones that aren't can add up. And we all know that it's oh-so-easy to buy electronically. Just a tap here and there and you're all set.
I've written about "small spending" like this several times. For instance:
But the reader above is right -- nowadays there are even more ways for small spending to add up -- and sink your budget.
What are your thoughts on this subject? Is anyone else out there grappling with the same sort of issues?
Posted in Saving Money 2012+ | Permalink | Comments (26)
Rich Habits author Tom Corley spent 5 years studying the daily activities of 233 wealthy people and 128 poor people. He discovered that wealthy people have vastly different daily habits than poor people (not a big surprise). Anyway, he tracked and listed the various activities that the rich do with the idea that if anyone else would do them too, they could become rich.
Whether you agree with this methodology or not, you have to admit that the premise is interesting. You've probably heard it said that you are the sum total of the five people you hang around with the most (or something similar), so why wouldn't "do what the rich do and you'll be rich" work as well?
In fact, that's what the book The Millionaire Next Door did. It tracked the wealthy and ultimately found a handful of characteristics that made people millionaires. I know that this works because I applied those concepts early on in my life and they have served me quite well.
In a recent post Tom said that if you want to be wealthy, you need to read. His thoughts:
In my five-year research study on the daily habits of wealthy and poor individuals, I made a profoundly important discovery: 88% of the wealthy individuals in my research read self-help books and articles and industry-related books and articles. In my study it was obvious that the wealthy were fanatics when it came to daily career-related, self-improvement. The reason? Wealthy people told me that by increasing their knowledge base they are able to uncover more opportunities and these opportunities translate into more money. Wealthy people are in constant pursuit of self-help reading material. Engaging in career-related, self-improvement makes individuals more valuable to their employer, customer or clients and helps them to rise up the ladder of financial success.
Comparatively speaking, only 2% of the poor in my study engaged in this self-help reading. One of the interesting things that I found in my study was that the poor who did receive periodicals invariably set them aside with the intent that they would read them later. Unfortunately, very few actually ever got around to this reading.
The wealthy have a different tact. They set aside time every day for their self-help reading. They read every one of their periodicals and more. Why? Successful individuals understand the value of timely information and continuous life-long learning. They are in constant pursuit of opportunities to make more money and advance their careers. Often such opportunities are found inside industry periodicals and self-help books.
Successful individuals, on average, set aside thirty minutes of every day for this self-help reading. They do this day in and day out, like brushing their teeth. They understand that self-help reading increases their knowledge base and helps set themselves apart from their competition. This reading often leads to the discovery of hidden opportunities that they are able to capitalize on. Reading helps make you more valuable to your employer, customers or clients.
I have several comments on these thoughts:
As you can tell, I'm a big believer in reading and I do think it gives a person an advantage over others in the marketplace. Whether or not this translates to wealth is debatable, but IMO I think it does.
How about you? Do you read a lot? Do you think reading has an impact on wealth?
Posted in Financial Planning | Permalink | Comments (20)
Here we go with the third round of Free Money Finance March Money Madness (to follow all the action click on my March Money Madness category link and scroll down to read all the posts involved in this subject.)
I've listed each "game" (one post versus another) in segments along with the wording provided by the author when the post was submitted. I've also listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Game 1: Saving; Game 2: Investing, etc.) Be sure to comment which one you like the best out of each set of two -- you will help determine the winner! Criteria for the best article is somewhat subjective, but you can use these factors as a guide: 1) practicality of the post 2) how interesting/provocative/unique it is, 3) the "personal-ness" of it and 4) its impact on net worth.
Here are today's games:
GAME 3
VERSUS
GAME 4
VERSUS
Posted in March Madness | Permalink | Comments (33)
US News has a piece detailing investing lessons from the game Monopoly. They interviewed the author of a new book who has "30 years judging the United States and World Monopoly Championships" (who knew there were such things?) Anyway, he offers some investing advice based on what he's learned from the game. Some highlights:
I think Monopoly is the first and perhaps most significant training ground kids get in learning the importance of the art of negotiation and how to do it. It's the safest way imaginable to learn the impact of financial dealings, because you don't lose real money if you make a mistake. Along the way, you pick up how to be an appealing trading partner—meaning you don't rub people the wrong way when brokering a deal—and at the same time be able to get a little more out of the deal than your opponent does.
Monopoly is reflective of the impact of chance in real life. The game is more significant in teaching life lessons than a game like chess, where there is virtually no luck. No matter how much control we think we have over each day, or each fiscal year, in reality we don't have control over all the unforeseen events that will happen.
Timing is seldom under your control. For example, there may be a time you want to buy a new home in six months, but lo and behold, the home becomes available today and you're not in the right financial position to buy it. You have to know when the window of opportunity is closing. In Monopoly, real estate is the same way: You land at a property you may not want to buy yet, but you realize you have to put it up for auction, which may be a risk you're not willing to take.Monopoly requires you to have diversification. You want to buy a blend of properties; don't put all your eggs in one basket. One lesson is you're going to need one color group you need to develop, but that probably is not enough to win the game. You're in good shape if you have utilities and railroads to earn cash to fund your Monopoly.
It teaches you debt can control your life. If you owe $10,000 in credit card debt, you not only owe the principal but you're paying a stiff fee for interest. Suddenly, you're not working for money—money controls you. Now, in Monopoly, you have a credit reserve in a mortgage value. Let's say you have 10 properties, so you have 10 opportunities to lean on the bank for setbacks or if you want to mortgage properties to bankroll more investments. But when you mortgage a property, you lose its income. So now you owe the bank a lot of money and you have no money coming in. The same can happen in the real world.
It's a fascinating piece and (probably) an interesting book. I have requested a copy from the publisher and perhaps I'll post more on it in months to come.
Some of you "old timers" may recall when I published Money Lessons from Monopoly back in 2009. It has a broader but similar perspective to what's written above.
We play a decent amount of Monopoly. It runs in fits and spurts -- a ton of games over the course of a month and then none for several months. My daughter really likes the game and plays it on her iPad quite often.
I grew up playing the game. My dad and I would start a Monopoly marathon around 9 pm on a Friday or Saturday night and end up playing until 3 am or 4 am in the morning. He won more than I did -- but just because he is the LUCKIEST man alive when it comes to rolling the dice. He'd say, "I need a three" and he'd get it. Then he'd say, "I need a nine" and he'd get it. It was very frustrating for me. It's one reason I took up chess. :)
Do any of you play Monopoly? Do you think it's taught you anything about managing money?
Posted in Investing 2011+ | Permalink | Comments (10)
For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.
Today I'm posting Proverbs 21:20, a verse that talks about the impacts of over-spending. From the NIV:
In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.
Another phrasing from the Contemporary English Version:
Be sensible and store up precious treasures—don’t waste them like a fool.
And from the New Living Translation:
The wise have wealth and luxury, but fools spend whatever they get.
This is my personal favorite "over-spending" verse. It basically says that you get wealthy by being wise and saving, while you become poor if you spend all that you make. It's a message (as you know) that I'm quite fond of! :)
What are your thoughts on this verse?
Posted in The Bible and Money | Permalink | Comments (4)
Here's a piece from CNN Money that says most Americans think they won't be able to afford retirement. The details:
And here's why they aren't confident:
A large chunk of the workers surveyed have little or no retirement savings. Of those who provided estimates, 57% reported household savings and investments of less than $25,000, which included 28% of respondents who said they had less than $1,000. Only 24% reported savings of $100,000 or more.
Debt is standing in the way of saving. More than half of workers reported having a problem with their level of debt, while only about half of those surveyed said they could definitely cover $2,000 worth of unexpected expenses within the next month.
The survey results were from over 1,200 Americans 25 and older, so take some of this with a grain of salt. After all, no savings at 25 is much different than no savings at 65.
Come to think of it, I didn't have much savings at 25 myself. I graduated from business school at 24 and really hadn't had much time to save anything. Oh yeah, and I bought a brand new car as well. That added some instant debt to the situation.
Fortunately I've made some better choices since then and I'm feeling fairly confident that I can retire. In fact, I'd say:
How confident are you that you'll be able to retire on time or even early?
Posted in Retirement 2011+ | Permalink | Comments (23)
Here we go with the third round of Free Money Finance March Money Madness (to follow all the action click on my March Money Madness category link and scroll down to read all the posts involved in this subject.)
I've listed each "game" (one post versus another) in segments along with the wording provided by the author when the post was submitted. I've also listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Game 1: Saving; Game 2: Investing, etc.) Be sure to comment which one you like the best out of each set of two -- you will help determine the winner! Criteria for the best article is somewhat subjective, but you can use these factors as a guide: 1) practicality of the post 2) how interesting/provocative/unique it is, 3) the "personal-ness" of it and 4) its impact on net worth.
Here are today's games:
GAME 1
VERSUS
GAME 2
VERSUS
Posted in March Madness | Permalink | Comments (32)
The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.
Next in the series is FMF reader JB. He answered my questions (in red below) as follows:
Please tell us a bit about yourself.
I’m a single male in his mid 30’s working in technology industry; in the Boston area. I have a bSci and recently earned a masters degree. Both are related to my current career.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
Income is generated entirely from my career; which has been growing yearly since undergrad. Currently I take home about $4800 net, per month. This is after all taxes, as well as maxing out the full $17,500 in my 401k and $3,250 in my HSA.
Expenses per month are:
Total monthly is about $2,460. Given my income, I have about a $2,350 per month cash surplus. I also get about a $1,000 tax return each year as well.
Yearly cash surplus 2340 * 12 + 1000 = ~29k
But I also have some once per year expenses as well:
Net cash surplus ~21k
Assets
Debt
What are the current financial issues you're facing (saving, paying off debt, etc.)?
I owe about 130k on my mortgage valued at 140k. The second mortgage about 20k of debt or 350/m will be paid off in 2020 at the current plan. The first loan runs to about 2034.
Should I pay off the second mortgage now? Half of the 46k is earning 3% in a CD, but the other half is earning less than 1%. The funds are actually planned for my next car in 2-3 years. Im very risk adverse and prefer not to take on additional debt.
What to do with the yearly surplus? Given an adequate emergency fund and funds for a new car should my surplus go into the stock market? Long term I should come out ahead, but what if? I want to bank up these funds for the timing flexibility to act if something comes up (see plans).
What are your plans for the future (retire early, build your career, etc.)?
Retire early/change career. I would like to be in a position where I could retire or more likely switch careers at age 45 to 50 time frame, possibly do part time work. My significant other she is currently working, but our finances are separate at this time. I believe starting a family should remain a net positive on the finances if she continues to work, no?
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
Make a wish list. Credit cards enable people to fulfill the instance gratification on items that only add a few days of value to their life. If they added the item to a wish list something else would eventually take a higher priority. You would be surprised returning the wish list to add something new, see the previous items on the list and say, “oh wow I’m glad I didn’t buy that”. Consumers would save thousands.
Posted in Reader Profiles | Permalink | Comments (14)
I've often suggested that a great way to earn some extra money is to turn your hobby into an income. For some of my thoughts on this subject, see these posts:
Along the same lines, Dr. Thomas Stanley recently posted on a young man named T.C. who turned his gun collecting hobby into a huge asset. The details:
At that time he already had 12 years of training by his mentor, his grandfather, who was an amateur gun collector. At the age of 21, T.C. had a nice collection which included early model Colt revolvers and Winchester rifles. That collection alone in a good market today would be worth more than $2M. From the start, T.C. enjoyed reading and researching guns, buying and trading guns, and visiting gun shows with his grandfather. He loved American history which related well to his interest in gun collecting.
Not bad for a "hobby", huh?
Dr. Stanley goes on to note the following:
Ask a national sample of self-made millionaires the following question: In terms of net market value, what is your number one most valuable asset? About 5% will answer: tangible collectibles (TC). In other words, these people are collectors of certain types of tangible and/or collectible assets. These include everything from antique firearms to coins, gems to precious metals, and stamps to artwork. Most, 6 in 10, of these millionaires are part-time collectors who have other full-time occupations.
If you asked me what my most valuable asset is I would say my career. (Yes, even though I "only" have 15 to 20 working years left -- if I wanted to use them all.) If you wanted a tangible asset, I'd then say my retirement accounts, followed by my real estate holdings and then my taxable investment accounts.
I don't have any collections of value. No coins, precious metals, artwork, stamps or anything more exotic like guns.
That's where I stand -- how about you? Two questions for you today:
Posted in Making Money 2011+ | Permalink | Comments (8)
Here we go with the second round of Free Money Finance March Money Madness (to follow all the action click on my March Money Madness category link and scroll down to read all the posts involved in this subject.)
I've listed each "game" (one post versus another) in segments along with the wording provided by the author when the post was submitted. I've also listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Game 1: Saving; Game 2: Investing, etc.) Be sure to comment which one you like the best out of each set of two -- you will help determine the winner! Criteria for the best article is somewhat subjective, but you can use these factors as a guide: 1) practicality of the post 2) how interesting/provocative/unique it is, 3) the "personal-ness" of it and 4) its impact on net worth.
Here are today's games:
GAME 15
VERSUS
GAME 16
VERSUS
Posted in March Madness | Permalink | Comments (19)
Here's an email I recently received from a reader:
I am divorced and about 6 years ago I bought a 20 yr term life ins. policy for my son (now 17) so I would have something to leave him if I died unexpectedly.
I just re-married and my wife and I are shopping life ins. She has 3 grown children and 1 age 14. I want to keep that policy for my son, solely for him. He has been diabetic for 12 years so he could have medical costs, also he is planning on medical school.
I don't want to appear to play favorites, but her family has inheritance money that she will get someday. Not knowing if my son will be included or taken care of fairly, I want to make sure I leave my son something.
How do I approach this sensitive topic with logic and yet not appearing unfair or selfish?
What's your advice for him?
Posted in Help a Reader | Permalink | Comments (13)
The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.
Next in the series is FMF reader KG. She answered my questions (in red below) as follows:
Please tell us a bit about yourself.
I and my husband are a young couple with a five-year-old boy, and a girl that is expected any day now! We rent and live with my grandmother, in a house that my parents own. They give us a fantastic deal on rent so that we can live nearby, save money, and keep my son in a good school district until we've saved enough to get a house of our own. In return, my husband does small repairs on the house, and we do general upkeep and maintenance on the house and appliances. We hope to repay their generosity by completing several renovation projects before we move out.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
As of right now, I'm working full-time and working on my degree online. Don't let anyone tell you that delivering pizzas is demeaning! I have great fun doing it, and it keeps the lights on. My husband had been in school full-time until recently, when he realized that the vocation he was learning (photography) was not something he enjoyed enough to commit to as a career. He just this week was hired by a security firm, and will be starting officially next week. Our finances are as follows:
Around the time my husband begins work, I will be going on leave to have our daughter and take care of her. His income will be roughly equivalent to mine, and the budget will stay the same but for $60, which will be going to gas once mine is no longer paid for by my company. We own our two cars- mine is a 2009, his a 1996 with 230+ miles on it. We have a Roth IRA with about $6k in it, I have a 401k through my employer with about $1.5k in it, and when my husband is eligible he will be starting a 401k with his company as well. I currently contribute 10% of my pre-tax income, and he will as well when he starts his new job.
What are the current financial issues you're facing (saving, paying off debt, etc.)?
We don't have any debt, and we have a $4k emergency fund as well as $2k in savings. Our current goal is to save enough to replace his car when it finally bites the dust. After allocating about $3500 to that, we plan to save for a down payment on a home of our own. When the baby is three months old, I'll be going back to work part-time, which should net about $600 a month, all of which will go straight into savings.
What are your plans for the future (retire early, build your career, etc.)?
I'm attending school online for my intended career, which will be something along the lines of counseling people on their financial lives. (I'm thinking accountant, or financial planner. I'd love to do something like Dave Ramsey does, which is help people through financial difficulties in their lives and teach them about the numerous financial products available. Maybe I'll start a business?) We're setting March of 2014 as a tentative goal for buying a home- that particular time frame because, first, around then the only derogatory mark on my credit report will be dropping off, bumping my score up, and second, because that will give us about a year to throw all of the money we can spare into savings for a down payment. Foreclosures in a nearby area, adjacent to a great school, generally run between $50k and $60k for older homes. We're going to get as close to a 20% down payment as we can, to avoid PMI.
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
Watch what you spend your money on very carefully. We're a very frugal family, getting our shoes, clothes, toys, and etc. from nearby thrift stores. We don't buy expensive electronics, don't have cable, and get our entertainment from libraries and dollar theatres. I know our rental situation is very lucky compared to most people's, and we take full advantage of that to pump up our savings. I guess it comes down to this- so many things in life that cost money are not important, and saving money by not buying them is the best way to control your finances.
Posted in Reader Profiles | Permalink | Comments (12)
Here we go with the second round of Free Money Finance March Money Madness (to follow all the action click on my March Money Madness category link and scroll down to read all the posts involved in this subject.)
I've listed each "game" (one post versus another) in segments along with the wording provided by the author when the post was submitted. I've also listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Game 1: Saving; Game 2: Investing, etc.) Be sure to comment which one you like the best out of each set of two -- you will help determine the winner! Criteria for the best article is somewhat subjective, but you can use these factors as a guide: 1) practicality of the post 2) how interesting/provocative/unique it is, 3) the "personal-ness" of it and 4) its impact on net worth.
Here are today's games:
GAME 13
VERSUS
GAME 14
VERSUS
Posted in March Madness | Permalink | Comments (21)
Today is the 8th anniversary of Free Money Finance! Yes, eight short years ago I began this blog with one simple post -- on how to contact me. :) I followed that one up with a short piece noting what the site would be about. I summarized it as follows:
This site is about one simple thing: growing your net worth.
And that's what I've written about for the past eight years.
I'd like to take this chance to thank all the readers, commenters, gust posters, and everyone else who has helped make Free Money Finance a resource for us all. You all have helped make this site much more than I ever thought it could be.
I'm celebrating today by taking the day off! In fact, I'm spending the day driving back from a visit in Iowa with my parents. So for those of you who need a personal finance fix, here are some of the best pieces published on Free Money Finance throughout the years.
Spend some time, dig around, and enjoy the posts!
Posted in FMF Speaks | Permalink | Comments (13)
Recent Comments