Free Money Finance

Star Money Articles for the Week of December 26

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

ESI Money has a financial advisor who is not an expert.

Physician on Fire likes a job where you take 40 weeks off a year.

Debt Discipline discusses money and work songs.

Budgets are Sexy tells how to make money selling Christmas trees.

The Green Swan asks if he should self-insure.

Finally, my book of the week is Chess: The Complete Guide To Chess, Master Chess Tactics Openings and Chess Strategy. It's been a long time since I got a new chess book -- I need one!!!!

Have a GREAT weekend and Happy New Year!!!

Why Does the Government Have to Get Involved in Retirement?

Ugh. For some people, "get the government involved" seems to be the answer to everything.

In particular, here's a piece from the NY Times saying that the government can be the solution to our country's retirement "problem". 

A summary of their thoughts:

A requirement that employers siphon money out of every employee's paycheck and put it into a retirement plan (unless the worker opts out) would both promote self-reliance and create a foundation for a safety net.

First of all, is there really a retirement problem? I've posted before on how little people have saved for retirement and readers have asked if there really is a problem. Maybe there isn't. Are we trying to solve an issue that doesn't exist?

Second, isn't Social Security a safety net? If not, what is it? If so, why would we need another one?

Third, getting the government involved in just about anything decreases efficiency by about 50%. Or at least that's the number I just made up. But really, it almost never helps.

Finally, what about personal responsibility? What about people saving for themselves, you know, like reasonable people should? Are we so stupid that we don't understand the basics of saving for retirement? Are we so dense that we need the government, who obviously knows better than we do, to step in?

Ok, I'll admit that people are not great savers. In fact, they are not great at a lot of things financially (that's why many commit some of the ten worst money moves anyone could make). But is having the government involved, even at a simple level, the solution?

Maybe it is. What are your thoughts?

Retirement Guidelines: What Your Should Have Saved by Age

Investopedia lists some retirement guidelines that are quite interesting. In particular, here's what they say you should have saved for retirement by given ages:

• By age 30: Accumulate the equivalent of your annual income that year
• By age 40: Three times that income
• By age 55: Seven times
• By age 67: When you say sayonara to the working-stiff life, 10 times your income

A few thoughts here:

• For VERY GENERAL guidelines, these are "ok". They will get you relatively close.
• That said, they make one HUGE assumption: that the income you have now is what you'll need in retirement. That is not correct. My income was a few times higher than what I actually needed annually to retire.
• To know the true numbers, you have to do your own retirement math. Develop your own retirement budget, then look at sources of income and assets that will help you meet your needs. Then plan a savings effort to hit those by the date you want to retire.

Those are my thoughts on general retirement guidelines. Do you have anything to add?

Seven Things to Do Before You Quit Your Job

US News lists seven things to do before you quit your job as follows:

• Make sure you've thought the decision through.
• Find out how your employer has handled other people's resignations in the past.
• Remove any personal files from your work computer.
• Take home any samples of work or contact information that you might want in the future.
• If you're leaving for another job, make sure that you have a formal, confirmed offer.
• Think through your messaging.
• Know how you'll handle a counteroffer.

A few thoughts on these:

• You MUST have a formal written letter before you can decide to leave or stay. Once you get that, then think it through and decide what to do. Pre-decide NOT to take a counter-offer as these rarely work out.
• Take what belongs to you from your current employer -- but not things that are company property. You likely signed an employee agreement that said you wouldn't do that.
• Here's your messaging: You gave a great opportunity and you want to take it. You love your current job, boss, company (say this even if you don't) but the new opportunity is too good to pass up.

That's my take on their suggestions. What are your thoughts?

Merry Christmas

Just wanted to wish all FMF readers a very Merry Christmas!!!! I'll be taking the next few days off but will be back on Monday.

Hope you all have a great holiday!!

Star Money Articles for the Week of December 19

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

ESI Money says to stop acting rich.

1500 Days has an interview with ESI Money.

Equities lists another money saving tip people hate.

Debt Roundup has great New Year's Eve ideas to save you money.

Money Qanda discusses unusual money habits of the uber-rich and powerful.

Family Money Plan asks what is your daily spending rate.

Power Over Life details your permanent vacation.

Finally, my book of the week is Dave Ramsey's Complete Guide to Money: The Handbook of Financial Peace University I'm reading it for a class I may teach in the new year.

Have a GREAT weekend!!!

What's Your Take on Store Credit Cards?

Bankrate recently shares the pros and cons of store credit cards.

Overall there wasn't much new information there, but it got me to wondering what FMF readers think about store credit cards.

Personally, my credit card strategy does not involve many store credit cards. Here's why:

• I want to carry/have as few cards as possible. As such, the cards I do have need to be flexible (i.e. accepted at a wide variety of locations). Store cards are not flexible since they can only be used in one place (usually).
• I do not shop at many places enough to have a store credit card. If I spent a gazillion dollars at Kohl's, Best Buy, or Sears, maybe I would have their cards. But I don't shop that much so I don't have the cards.
• My two exceptions are Amazon and Costco. I shop a TON at both places. The Amazon card gives me 5% back on all purchases there and is virtual, so I don't need to carry anything. The Costco card is a Visa, so it can be used anywhere and it saves me 4% off on already cheap gas. It also serves as my member card, so I don't have to carry an extra card.

Other than that, I rely on my Fidelity 2% cash back Visa and Chase Freedom Visa (with its 5% quarterly categories) to make all my purchases.

How about you? Do you have/use store credit cards?

Is It Possible to Retire in Your 30s or 40s?

Fox Business asks if it's possible to retire in your 30s or 40s. They answer it in two ways: 1) you shouldn't really even try and 2) it's very difficult.

But they do have some thoughts that I like including these:

"I'm all about retiring early if you can afford it, though I like to think of early retirement as financial independence or financial freedom," says Cathy Derus, financial planner and founder of Chicago-based Brightwater Financial. She likes the definition that comes from fee-only financial planner Matt Becker of Mom and Dad Money. "He says financial independence is the freedom to make decisions based on what makes you happy instead of what makes you money."

When you're financially independent, you have options, she says. You can choose to spend more time with your family or travel or volunteer. You can also decide to work, but you might want to find something more fulfilling than a standard 9-to-5 job -- perhaps working reduced hours.

They go on to suggest the 4% rule should be your guide. So if you're going to take 4% out of your savings every year, divide your annual income need by 4% and that's the amount of saving you need.

Here are some examples:

• If you need $30k per year, your savings needs to be at least $750k ($30k / 4%).
• If you need $75k per year, your savings needs to be at least $1.875 million ($75k / 4%).
• If you need $125k per year, your savings needs to be at least $3.125 million ($125k / 4%).

You get the idea.

I have a few different thoughts:

1. Can you retire in your 30s or 40s? Of course. Knowing if you can or not is simple retirement math.

2. Financial independence may or may not be linked with retirement. They are two separate things.

3. If you have assets that produce higher returns and/or levels of income, you don't need as much as the 4% rule suggests. For instance, if you have $1 million of rental real estate that earns you 9% back a year in income, that's $90k. The 4% rule would suggest you need $2.25 million to retire needing $90k. That just isn't true in this situation as you not only can retire with less than half that, but those assets generate enough so that you don't even have to draw them down into retirement.

4. If you want specifics about whether or not you have enough to retire, I recommend the book How Much Money Do I Need to Retire?. It's the best retirement book I've ever read.

So, what's your take on this issue?

Star Money Articles for the Week of December 12

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

ESI Money has some great gifts for the holidays.

Money Boss asks what is the best way for couples to manage money.

Physician on FIRE tells the best way to donate $100k.

Centsibly Rich has alternatives to eating out.

Think Save Retire has a solar powered Airstream.

The Ways to Wealth lists the top 100 posts of 2016.

Finally, my book of the week is Tools of Titans: The Tactics, Routines, and Habits of Billionaires, Icons, and World-Class Performers. This is the next book on my reading list!!!!

Have a GREAT weekend!!!

Top Five Signs You Should Leave Your Job

LinkedIn lists the top five signs you should leave your job as follows:

1) You Hate Going to Work
2) You Don't Respect Your Boss or They Don't Respect You
3) You Find Yourself Searching for Jobs Constantly
4) You are Envious When Others Leave
5) You Experience Issues Away from Work

Ha! I've had all of these signs appear throughout my career. Sometimes much worse than others.

My take on these:

1. I have only had a few jobs where I really liked going to work and that was only for periods of time -- not my entire stay at a place. That said, I've only had a few times when I really HATED the job as well.

2. This has happened to me several times, unfortunately. I get a boss who just doesn't get it. It's usually after I've been at a company for some time and a new guy comes in. It hardly ever works out.

3. This was common early on but the second half of my career was pretty stable. I liked what I was doing for the most part and thus never really looked for a job until I had to.

4. I'm not really the envious type. I am happy for those who leave as it means they've found something better.

5. If you can't sleep, can't eat, etc. because of work, then work is out of control. Period. Been there, done that. Glad it's in my past.

So yes, I've experienced most of these. And they sure were signs that I at least needed to reconsider my employment at a given place.

How about you? Have you experienced any of these five?

Live Longer by Reading Books

Here's a follow up to my post on becoming wealthy by reading.

A reader sent me this study which says reading can actually help you live longer! The highlights:

• Book reading provides a survival advantage among the elderly.
• Books are more advantageous for survival than newspapers/magazines.
• The survival advantage of reading books works through a cognitive mediator.
• Books are protective regardless of gender, wealth, education, or health.

In other words, reading books helps you live longer (by almost two years). It does so by stimulating our minds.

Interesting that other types of reading do not do this. I'm not surprised that newspapers or magazines don't add anything to your lifespan. They are both more like "reading candy" than "reading meat." I wonder if reading websites are in the same group. Maybe it depends on what you're reading in each? (i.e. People magazine versus The Wall Street Journal.)

I've gotten away from reading books (I listen to them -- does this count?) but maybe I should go back to it. I do like reading, just can't seem to find the time for it.

How about you? What do you think of the info above? Are you a book reader?

The Benefits of Writing

Here's an interesting post on the benefits of journaling. The part I want to highlight is as follows:

One effective way researchers have found to reinforce learning is through reflective writing. It turns out that regular journaling can be used to train our attention and strengthen neural pathways. As neurologist and teacher Judy Willis explains:

The practice of writing can enhance the brain’s intake, processing, retaining, and retrieving of information… it promotes the brain’s attentive focus…boosts long-term memory, illuminates patterns, gives the brain time for reflection, and when well-guided, is a source of conceptual development and stimulus of the brain’s highest cognition.

Reflective writing has also been shown to improve decision making and critical thinking in a number of medical professions, including physical therapy and nursing. For practitioners, journals proved to be invaluable tools for examining past experiences, evaluating their own actions, and drawing insights for encountering future challenges.

I have a few thoughts on this:

• I have certainly found that writing helps me crystalize my thinking. Much of the personal value of this blog to me has been gained by writing posts. It's helped me decide what I REALLY believe, learn more about available alternatives, and, ultimately, take action. It's probably been worth an extra half million dollars to my net worth.
• Journaling is recommended in The Miracle Morning: The Not-So-Obvious Secret Guaranteed to Transform Your Life (Before 8AM), a book I LOVE, likely for the reasons noted above.
• The more you write, the better writer you become. And being great at writing has several advantages. For instance, it's a skill that employers will pay you more for. Or you could use it to develop a nice side income (as a freelance writer). Or maybe you even write a book!
• Writing is hard. I had to include this to be honest. Writing is not easy, especially if you want to do it well. The nice thing about writing in a journal is that it makes writing a lot easier. You don't need to worry about spelling, grammar, or trying to make the writing sound pretty or even make sense. You just write for yourself!

So, those are my thoughts. What's your take on journaling?

Star Money Articles for the Week of December 5

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

ESI Money offers some great gift ideas for the holidays. 

The Ways to Wealth lists the best investing books. My two favorites are unfortunately not listed (The Bogleheads' Guide to Investing and The Sound Mind Investing Handbook: A Step-by-Step Guide to Managing Your Money From a Biblical Perspective).

Gen Y Finance Guy has a humble beginning in P2P lending. 

Be Net Worthy lists three steps to teach kids the value of money. 

Budgeting in the Fun Stuff says positivity and persistence can make you rich. 

The Green Swan talks about the investment inflection point. 

1500 Days covers his interesting trip to Ecuador. 

Finally, my book of the week is Building Wealth (For the Rest of Us). This was written by an FMF reader and is pretty much in line with what you read here. Great for someone who wants the basics of personal finance.

Have a GREAT weekend!!!

The Highest Earning Dead Celebrities

Bankrate lists the highest earning dead celebrities as follows:

• No. 1: Michael Jackson, "King of Pop"; Annual payday: $825 million
• No. 2: Charles Schulz, "Peanuts" cartoonist; Annual payday: $48 million
• No. 3: Arnold Palmer, golfing star; Annual payday: $40 million
• No. 4: Elvis Presley, rock music legend and actor; Annual payday: $27 million
• No. 5: Prince, singer/songwriter; Annual payday: $25 million
• No. 6: Bob Marley, reggae music star; Annual payday: $21 million
• No. 7: Dr. Seuss (Theodor Geisel), author and cartoonist; Annual payday: $20 million
• No. 8: John Lennon, singer/songwriter; co-founder of the Beatles; Annual payday: $12 million
• No. 9: Albert Einstein, Nobel prize-winning physicist; Annual payday: $11.5 million
• No. 10: Bettie Page, iconic pin-up model; Annual payday: $11 million
• No. 11: David Bowie, singer/songwriter; Annual payday: $10.5 million
• No. 12: Steve McQueen, actor; Annual payday: $9 million

A few thoughts here:

• Michael Jackson earned almost $ billion last year! Wow!!!
• I can see how the musicians made so much. I still have Michael Jackson, Elvis, and Bob Marley on my phone after all these years.
• Prince probably bumped up there because he just passed away recently.
• I'm surprised that Einstein is on the list. Let's hear it for smart guys!!!
• I had no idea who Bettie Page was. Still don't.

Not much else to be gleaned from these -- just thought it was a "fun" money topic to consider today. Hope you enjoy!

A Frugal Star

Mashable tells the story of a frugal star, Daniel Radcliffe of Harry Potter fame.

It starts with a guess of how much he's worth (somewhere around £60 million) and then transitions to the fact that he doesn't spend any of it.

The highlights:

"I don't really do anything with my money," Radcliffe told the Belfast Telegraph.

"I'm very grateful for it, because having money basically means you don't have to worry about it, which is a very lovely freedom to have."

"It also gives me immense freedom, career-wise."

From the sounds of it, Radcliffe is essentially keeping his money as a buffer-zone in order to give himself as much creative freedom as possible when it comes to choosing acting projects.

A few comments here:

• Good for him! We seem to find stories quite often of celebrities who make a ton of money and spend it all. Finally one of them has some financial sense -- and someone so young too. Bravo!
• Of course he isn't hurting even if he spends none of it. As of this writing one pound is equal to $1.22. This means he has roughly $73 million. At a 3% return, his annual income is $2.2 million. Not bad.
• He hit the nail on the head -- having enough money to do whatever you please is a great sense of freedom. It allows you to choose what you want to do with your life versus being dictated to (or at least highly influenced) by others. There's a reason they call it financial FREEDOM!

Ok, so he may not be "frugal". But he's certainly living within his means and I for one applaud him!

Focus on Financial Tasks with the Biggest Payoffs

Here's an interesting article from the NY Times titled How to Pinch Pennies in the Right Places. But to me the piece is more about allocating time properly to tasks that have the biggest payoff.

The article highlights how people often are lured into spending time and effort to get a big percentage off a purchase but may then ignore a better opportunity with a lower perceived "deal" that's actually much more valuable.

Some thoughts that highlight the points:

Consider this situation: You’re shopping for headphones. An electronics store has the model you want for $50, a reasonable price. But a sales clerk says: “You know our other branch has this item on sale for $40.” Going to that store will take 30 minutes, and you can’t buy the headphones for that price online. Do you go to the other branch? Before you answer, consider a slightly modified version of the same situation: Instead of headphones, you are buying speakers. You go to the same store and find the model you want for $400. Again, the price seems reasonable but the sales clerk says it’s on sale at the other branch for $385. What do you do now? Research by Daniel Kahneman and Amos Tversky, the psychologists whose work helped spawn behavioral economics, suggests that people are more likely to make the trip for the $40 headphones than for the $385 speakers.

At first glance, this makes sense. By taking the trouble to go to the other store, you can save 20 percent on the headphones and only 3.75 percent on the speakers. The bigger percentage in savings is more appealing.

Though intuitive, this way of looking at the choices is mistaken. In each case it will take 30 minutes to save some money. But with the headphones, you save $10; with the speakers, you save $15. It’s as if you had two identical job offers, but one paid $20 an hour and the other $30. Yet you consistently chose the lower-paying job.

So you actually save more with the lower percentage off, but that's not how most consumers think.

Now this is bad enough when we're talking $5 here and there, but consider this trade-off:

This kind of foolish frugality is common. Consider how easy it is to fritter away time surfing the web for, say, a great deal on a $50 pair of jeans. Yet many of us spend no time at all on our investments. The result is that we barely glance at the fees charged by mutual funds: Without thinking much about it, we will choose a fund that charges an extra 0.25 percentage point rather than spend the time to find a cheaper one. That’s reasonable on the face of it. What’s a quarter of a percent? But that seemingly tiny percentage difference can easily amount to thousands of dollars of lost money. We brag to our friends about how much we saved on the jeans — “30 percent off!” — never mentioning (or even registering) the money we threw away on our investments.

This is where it's a real killer. Imagine what 0.25 percent over hundreds of thousands of dollars and a few decades is worth. And yet we spend our time saving on the jeans. Ugh.

The book The Millionaire Next Door: The Surprising Secrets of America's Wealthy (review) includes the ability to differentiate between perceived and real value as a key to growing wealth. Their #2 point (of seven) on how to become wealthy is as follows:

They allocate their time, energy, and money efficiently, in ways conducive to building wealth.

These people spend time and effort where they can gain big (careers, businesses, investments, etc.) and where they can save big (homes, cars, etc.). Sure, they'll take 30% off jeans too, but they won't do it at the expense of the big-ticket moves that really drive wealth.

How about you? Are you focusing your time and energy in the right financial areas?

Star Money Articles for the Week of November 28

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

ESI Money lists his worst money mistakes. 

The Retirement Manifesto shares the best money advice ever received. 

Our Financial Path says shopping makes you happy.

Coach Carson suggests we all slow down.

Finally, my book of the week is Team of Rivals: The Political Genius of Abraham Lincoln Haven't read it yet but I'm dying to!!!

Have a GREAT weekend!!!

Higher Paying States Do Not Make Up for Higher Costs

The Business Insider lists the best and worst states to make a living. The summary of their findings:

Not all states are created equal when it comes to making a living. While your income might be greater in places like New York or California, high tax rates and cost of living can greatly affect your lifestyle.

Of the top ten best states, all but three have costs of living below the national average. Of the ten worst states, nine have costs above the average -- most with costs FAR above average.

It's been an on-going debate about whether or not higher-paying cities/states cover the higher costs often associated with living in those states. The data is mixed for sure but more often than not the facts fall into the lower cost markets being a better option financially.

For more on this issue, see these posts:

• Where You Live Has a Big Impact on Your Net Worth
• Move, Save Money, Become a Multiple Millionaire -- All in One Step
• ​Great Money Saving Tips People Hate: Move to a Cheaper Area

But why settle for either high costs/high income or low costs/low income? My suggestion would be to have a high income in a low cost area. That's how you can really become wealthy.

Now that's better, isn't it? :)