Free Money Finance

How the Wealthy Got Rich

Here's a post listing the five habits of the wealthy that helped them get rich. Their list includes:

1. They take risks.
2. They invest in themselves.
3. They associate with those they want to emulate.
4. They have a dedicated morning ritual.
5. They review their goals consistently.

My thoughts on each of these:

1. I'm not a big risk taker. In fact, I'd say I'm risk adverse/very conservative. That said, the few times I have taken what I consider to be a decent risk, it's paid off. Most notably, my rental properties are now the biggest source of my early retirement funds.

2. Yes, yes, and yes. I have consistently read throughout my working career in an effort to improve myself. And as I did, my career blossomed. Reading later translated into listening (audio books and podcasts) so I could consume even more material. For over 25 years my car was my university. Yes, I could have listened to music or talk radio, but I preferred to listen to non-fiction books. IMO this was one of the key reasons I was able to grow my income so dramatically.

3. I know the "old saying" that your income is the average of the five people you hang out with the most, but this has never been the case for me. Most of my friends are average, middle class people who make a lot less than I do. However, I did try to learn from the more successful people I'd meet at business events, seminars, church, you name it. I am always open to taking the wisdom of those who are where I want to be.

4. I've been reading/implementing The Miracle Morning: The Not-So-Obvious Secret Guaranteed to Transform Your Life (Before 8AM) and I agree, there is power in a morning ritual. Combine that with getting up earlier than usual and you can get far more done than the average person -- and thus get far better results.

5. I have annual goals that I break down into daily habits. I actually set goals for these habits and track them via a point system on a spreadsheet. I know, it's a bit anal-retentive. But I know myself. If I set goals, monitor them, and have a reward (the points), I'll accomplish what I want to. If I don't, I won't. I set the goals at the end of each year and update major tasks quarterly. It works for me.

How about you? Do you follow any of these habits?

Living Expenses Drop Dramatically During Retirement

I think we all know that costs generally go down during retirement, but a couple sources recently challenged me that they go down a lot more than expected.

The first was Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Revised and Updated for the 21st Century where it mentions several costs that should drop dramatically once you stop working.

These include:

• Commuting
• Costuming
• Meals
• Decompression (stuff you have to buy to recover from the stress at work)
• Escape Entertainment (so you can enter a good reality versus a work reality; ha!)
• Vacations and expensive playthings
• Job-related Illness
• Any help you need because you work (housekeeper, gardener, handyman, nanny)
• Job enhancement costs (educational programs, books, tools, and conferences)

I found the second source at Financial Samurai. In his post titled The Fear Of Running Out Of Money In Retirement Is Overblown he lists 10 reasons why costs will go waaaaaaaay down in retirement. These include the facts that you will need less than you think, you don’t need to save for retirement once you are retired, and you will be in a lower income tax bracket.

That's good news for me as saving and taxes are two of my largest "expenses".

So how much are you supposed to be saving in order to finance 20 to 30 years post-work? The commonly accepted rule of thumb is that you’ll want about 70% of your former annual income — at least — to continue living at or near the style to which you’ve been accustomed. Money Boss says this is crazy (and I agree). Why would anyone use INCOME as a guideline for SPENDING? Just another example of mainstream "experts" who make their money writing about money, not actually growing their own net worths.

Instead, you need to create your personalized spending plan ("budget" if you prefer). That's what I've done -- so I know exactly how much I need when I retire.

How about you? Have you done your retirement budget?

Star Money Articles for Week of August 22

Welcome to this week's edition of Star Money Articles.

Let's begin with a list of the six best portfolio management software tools for investors. My favorite is #4 -- Quicken. I've been using it for 20 years now and have TONS of data I can slice and dice concerning our finances.

Would you like to earn some extra money? If so 137 Ways to Earn Your First Side Hustle Dollar is for you! Surely there's something in this piece that can help anyone earn a bit more money.

If you prefer to earn your money in a different way, here's a list of Dividend Kings, those companies that have had annual dividend increases for over 50 years. Good options for passive income investing if that's your cup of tea.

Here's an interesting post where the author lists five teenage decisions that helped make her rich. I wish I had been that smart when I was that age!

This blogger built his nest egg flipping houses. As most of you know, I have rental real estate but I'd like to try house flipping one day. Lots of good tips and GREAT results here!

Finally, my book of the week is The Bogleheads' Guide to Investing, the best investment book I've ever read. If you haven't read it, take the time to check it out.

Have a GREAT weekend!!!

How Much Time Do You Spend Managing Your Finances?

Mixed Up Money spends one day a month managing her finances where she batches all of her financials tasks into a day at either the first or the end of the month.

I don't do the one day thing, but I can see the benefit of batching all the tasks at once. But to spend an entire day working on money stuff would be a bummer (especially since it would probably kill a Saturday) so I prefer to spread my tasks out. To that end, here's what I do:

• Once a week I pay all the bills received from the previous week, then update Quicken, adding in all my credit card charges, checks written, etc. as well as updating my stock values. This takes maybe an hour and involves charges/checks from my wife too.
• Once a month I review my investments to see how they are performing. I also update my real estate checking accounts (looking over revenue and expenses for the month) as well as any accounts earning interest or dividends. This might take an hour or so as well.
• There are various other tasks that hit now and then, but for the administrative parts of managing my finances, that's about it. Maybe five hours a month total.

That's how I manage my money. I try to keep it simple and quick. What's your process?

New Site Rocking

Hey, all. I hope this message finds you all doing well!

Just wanted to post again that my new site is up and running.

If you want an email sent to you with my new site listed, you have two options:

• You can send me an email asking for the details
• You can leave a comment below like "please send me the URL to your new site". Include your email address in the email box when you leave your comment. I will get both the message and the email address, but no one else will be able to see the email address (no one wants their email to be public, right?)

And if you're wondering why you need to do that instead of me just posting it here, you can read this. 

Have a GREAT day!

The Vast Majority of Americans Will Struggle Financially All Their Lives

The book The Miracle Morning: The Not-So-Obvious Secret Guaranteed to Transform Your Life (Before 8AM) features an interesting money-related comment.

Here's what it said:

According to the Social Security Administration, if you take any 100 people at the start of their working careers and follow them for the next 40 years until they reach retirement age, here's what you'll find:

• Only one will be wealthy
• 4 will be financially secure
• 5 will continue working, not because they want to but because they have to
• 36 will be dead
• 54 will be broke and dependent on friends, family, relatives, and the government to take care of them

Monetarily speaking, that's only 5% of us who will be successful in creating a life of freedom, and 95% who will continue to struggle for their entire lives.

Well, that's a depressing series of points, huh?

A few thoughts on this from me:

• Of course, it's not surprising, especially after the stats we've been covering here on this blog lately.
• They don't define what "wealthy" means, so it's impossible to classify it versus "financially secure".
• I'm guessing that the goal for most people reading this would be to be at least financially secure.
• I'm surprised that only five continue working. I would have guessed that more like 30 would do so. Perhaps more are not working due to physical constraints.
• Over half are broke. Ugh.

So of those alive, 92% (59/64) will struggle financially their entire lives.

Why is this? We've been over it before, but it's caused by not following the basics of growing your income, saving as much as you can, and investing for growth (initially) and then income.

The concepts are not hard to understand, but they sure are difficult to implement for most Americans.

Where are you in this group? What does your life look like at retirement?

Star Money Articles for Week of August 15

Welcome to this week's edition of Star Money Articles. I have lots of good stuff for you!

Here's a post with lots of promise: How to Retire By 55 (or Sooner) on a Salary of $50,000 or Less. To do this, you still need to focus on the basics. One advantage you have is that if you make $50k and are able to save enough to retire at 55, your post retirement expenses are probably in the $30k range or less. Relatively easy to save enough to cover that.

Here's an interesting article on why it may not pay to be a job hopper. It's an interesting look at job hopping and offers pros and cons on the subject. My advice is that it's ok to have a few jobs where your tenure is a couple years or lower, but you also have to show stability. I moved jobs (and often companies) about every five years or so. My shortest was 1 year and my longest was nine years. That seems like a good mix to me.

Raise Your Standards, Increase Your Wealth is a good, basic review of what it takes to become wealthy with more focus on the psychology of money versus the mechanics. I especially like the tips on who you surround yourself with and reading on a regular basis. Good stuff!

Here's food for thought: Are You Your Parents’ Retirement Plan? It's a good list of what you need to discuss with your parents regarding retirement. I'm in the midst of having these discussions with my parents (we are taking them in small doses as they are not easy to have.)

Finally, my book of the week is The Miracle Morning: The Not-So-Obvious Secret Guaranteed to Transform Your Life (Before 8AM). All I can say is 1) get it, 2) read it, 3) implement it. Do it and your life will be better! I'm loving the impact it's had for me.

Have a GREAT weekend!!!

What to Keep in Your Fireproof Safe

Len Penzo lists 13 things to keep in your fireproof safe as follows:

1. Birth certificates
2. Property titles
3. Insurance policies
4. House photos
5. Safe deposit box keys
6. Social security cards
7. Passports
8. Financial account info
9. Spare car keys
10. Wills and living trusts
11. Health care proxies
12. Medical information
13. Emergency Cash

Yikes! I'm missing several of these!

Here's how we rate on keeping those in our home safe:

1. Birth certificates -- Yes.
2. Property titles -- Car titles are in the safe but home titles are in my (wooden) file cabinet.
3. Insurance policies -- Also in the file cabinet.
4. House photos -- I need to take pics of all the rooms in our house.
5. Safe deposit box keys -- We don't have a safe deposit box.
6. Social security cards -- Yes.
7. Passports -- Yes.
8. Financial account info -- this is in my files and my office desk.
9. Spare car keys -- In office desk.
10. Wills and living trusts -- In files.
11. Health care proxies -- In files.
12. Medical information -- In files.
13. Emergency Cash -- Not sure about this.

Other things in our safe include:

• Checks for both a personal and real estate account (yes, we still write checks)
• Some old coins that have dubious value, but could be worth something
• Various official documents like marriage certificate
• Some small, personal keepsakes I wouldn't want to lose in a fire

In other words, I've got some work to do to get up to speed.

Oh, and our safe is located in the most-obvious place to find it -- the bedroom closet. While I'm updating it, I'll move it too. :)

 

Zillow's Numbers Not What You Think

I was reading a local newspaper (one of those half-page jobs you get for free in the mail) the other night and an article about Zillow caught my attention.

In particular, here's a quote that got my attention:

When questioned about the reliability and accuracy of information available [on the site], the CEO of Zillow made a statement last year that "while Zestimates are a good starting point, nationwide Zestimates have a 'median error rate' of about 8 percent."

Uh, yeah.

First of all, I've noticed this as well. It always seems that any house I own is vastly under-priced on Zillow and when I want to buy and look up the home it's always vastly over-priced. Ugh!

Second, price updates are very sporadic. I remember living in my last house for a year before I saw my purchase reflected in Zillow.

Third, 8 percent!!! Yikes!!! A $500k house could be on Zillow for $540k or $460k -- and that's just the median! It could be worse!!

Finally, the article says the primary purpose for Zillow is a lead generation tool for real estate agents (which I figured, but it was nice it was confirmed).

Ok, I didn't really mean for this post to be a rant against Zillow. The article just confirmed some things I had been wondering about and I thought I'd share them.

Any big Zillow users out there?

Star Money Articles for Week of August 8

Welcome to this week's edition of Star Money Articles, posts from around the web that I've found interesting and hence have given a "star", just like your first grade teacher used to give you. :)

We'll start with Tips for Reducing College Debt which is something I need -- my daughter heads to college in a year. Yikes! (Don't worry, I have a ton of money saved already.) Whether or not you have anything saved, this articles has several tips that could save you some big bucks here and there.

If you're the sort of person that reads blogs because you like personal stories, check out A Mortgage Refinance Just Saved Me Thousands. Key statement: "Even a small change in rates can save you big money. The rule of thumb is to explore a refinance if you can drop your interest rate by at least one percentage point." I hope the author now strives to be debt free -- how cool would that be?

It took me a long time to cut my phone cord (used to have landline AND cell phone) and now I need to cut cable? Ugh. Here's a post titled The Great Big Cord Cutting Manual For Cost Conscious Consumers for those of you so inclined. I think I'm still a year or so off from this, though with both Netflix and Amazon Prime we are moving closer.

Here's an interesting post titled Your Success is All in Your Head and is about the psychology of personal finance, which, as I'm sure you know, is a key part to being successful at growing your net worth. It's worth the time to check it out.

I just found this film on payday loans in Texas. Interesting situation/debate.

Finally, my book of the week is still Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Revised and Updated for the 21st Century. Loved it again for the fifth time or so and I'm pretty sure I'll be posting on it again someday soon.

Have a GREAT weekend!!!

Cost of Weddings

Anyone remember the days I used to rail against the cost of weddings? No? Well how about these as a reminder:

• Cost of Average Wedding Almost $30,000
• Weddings Cost Much More than You Imagine
• Wedding Markups are Out of Control

Well, my wrath was stirred up recently as Money magazine shared a page full of stats about wedding costs. Some highlights:

• 29% plan to spend between $10k and $25k on their wedding while 12% are planning for more than $25k
• 30% is the typical venue markup when the event is a wedding
• The average spent on a wedding gift for a close family member is $180 while a close friend gets $120 and a friend gets $80
• Saturday is the prime wedding day -- Sunday weddings cost 10% less
• 43% of weddings are paid for by the bride's parents while 43% are paid for by the bride and groom. Only 12% are paid by the groom's parents.
• The average cost to be a bridesmaid (outfit, party, shower, travel, lodging, gift) is $1,179

Ok, here's my take on these:

• I'm thinking $10k would be the MAX I'd personally spend on a wedding.
• Don't tell the venue it's a wedding and save yourself 30%. I'd ask for the rental rates up front and if they ask what it's for ask back "Does it matter?"
• I haven't been to a wedding for a long time, but when I do go I usually give cash. I figure all couples can use that. But I'd probably top out at $100 for all but my kids.
• Sunday looks like a good day for a wedding! I bet Wednesday is even cheaper! :)
• As the father of one daughter and one son, looks like I'm going to pay for one wedding and get one free. Ha! For my daughter, I'm going to make her a "take the cash or have a wedding for this much" offer and I'm almost 100% sure she'll take the cash.
• Thank goodness I never have been and never will be a bridesmaid!!!

So, any thoughts from FMF readers on weddings and their costs?

Money Magazine and Kiplinger: A Tale of Two Magazines

A few months back I subscribed to Money magazine. It had been years since I had a subscription to it but since I needed regular reading material for the sauna, I decided to take the plunge.

A month or so later I did the same with Kiplinger Personal Finance magazine.

It's been a decade since I used to rate the magazines against each other but there's such a stark contract to them now that I wanted to resurrect the old practice.

Money magazine is still as awesome as it's ever been. Full of good, useful content. In fact, I get several blog post ideas from every issue, making the magazine well worth the cost. They have tons of money-related stats which I especially like.

Kiplinger's was always #2 to Money back in the day, but boy has it taken a turn for the worse.

The articles were puff pieces with very little useful information. And the magazine was very thin -- not much content (or at least it seemed that way). It certainly made me think back to why I canceled my subscription in the first place.

Yes, I know I can get articles from both of these online (and I read there too -- in fact, Kiplinger seems better online than in print), but I need a physical copy for the sauna (some guys bring their phones in but I'm afraid the heat will hurt my phone).

How about you? Do you subscribe to any personal finance magazines? If so, what do you think of them?

FMF Back Up and Running

As many of you have noticed, I have been posting more frequently here on FMF.

I plan to continue that trend and begin posting here three times a week. The posts will be more "commentary-like", just like I used to post back in the day.

Let me know if you have any questions or thoughts.

Star Money Articles for Week of August 1

I'm posting a second time this week as I have some good articles I'd like to pass along.

The first two, in particular, are time sensitive. Here's one from Lifehacker with some back-to-school savings tips as well as one from Bankrate on the same topic.

Here's a GREAT article from my favorite retirement blog on 12 Dangerous Retirement Myths That Turn Your Golden Years Into Lead. A key warning: "Beware of formulaic rules of thumb masquerading as truth because it doesn’t matter how often they’re repeated… they can still be wrong."

This is a fun one: How to Quit Your Job in Style. It lists "interesting" (and often funny) ways people have quit their jobs. Good medicine for those who hate their jobs and just want to be done with it.

On the investing side, here's an interesting question: is buying a new house every year for 20 years a good investment strategy? What do you think?

Rich Habits lists reading habits of the rich. Not surprising, but the contrasting data is compelling.

Finally, I'm enjoying reading myself. In particular I just finished Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Ind ependence: Revised and Updated for the 21st Century again for the who knows how many times. What an awesome book! If you haven't read it, please do so as soon as possible. You will thank me for suggesting it.

Americans Have Low Net Worths

After posting Americans Have Way Too Much Credit Card Debt, here's another set of facts that show the average American isn't very good with money.

Time lists the average net worths of Americans by age as follows:

• Less than 35 years old: $6,676
• 35-44 years old: $35,000
• 45-54 years old: $84,542
• 55-64 years old: $143,964
• 65-69 years old: $194,226
• 70-74 years old: $181,078
• 65 years old and older: $155,734

Not great numbers.

But wait, it gets worse.

Here are the net worth numbers excluding home equity:

• Less than 35 years old: $4,151
• 35-44 years old: $14,226
• 45-54 years old: $25,005
• 55-64 years old: $45,447
• 65-69 years old: $43,921
• 70-74 years old: $31,823
• 65 years old and older: $20,366

So when you look at it, Americans have saved very little once the value of their homes is excluded.

That's not good for retirement.

Here's Time's commentary on this situation:

"Generally, the rule of thumb is that retirees should plan on tapping retirement saving to the tune of 4% annually. However, following that advice means that if you’re retiring with a $100,000 retirement nest egg, you’ll only be taking out $4,000 per year. If you combine that income with Social Security income — the average retiree receives $1,333 per month — then you’re talking about less than $20,000 per year in income. That’s unlikely to be enough to live on."

Uh, yeah.

Again, not a shocker that it's bad news.

Overall, Americans need to live within their means and widen the gap between income and savings. Then they need to invest the gap so it grows into a substantial asset base. Those few steps would go a long way to correcting the disturbing numbers shown above.