Free Money Finance

Star Money Articles for the Week of March 27

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

Physician on Fire features a Christopher Guest Post.

Money Smart Guides shares three money moves that led to FI.

ESI Money reviews The Simple Path to Wealth.

Budgets are Sexy shares a guest post from an ex-extreme couponer.

Lauren Greutman lists the best freebies on the web.

Finally, my book of the week is The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich. It's an oldie but a goodie!

Have a GREAT weekend!!!

Americans Continue to be Horrible Savers

Check out this article on America's savings habits. The summary:

Nearly six in 10 Americans don't have enough savings to cover a $500 or $1,000 unplanned expense, according to a new report from Bankrate.
Powered by SmartAsset.com

Only 41% of adults reported having enough in their savings account to cover a surprise bill of this magnitude. A little more than 20% said they would put it on a credit card, the report said, while 20% would cut their spending and 11% would turn to friends and family for financial assistance.

"This is a persistent American problem of how you should handle your finances and spending," said Jill Cornfield, retirement analyst for Bankrate.

The scary fact is that this stat is actually BETTER than what it was last year when only 37% could cover a $500 emergency.

Some people might say that this is a reflection of how bad our economy is. I say it's a reflection of how we can't control our spending.

Want proof? Here are some areas where people could cut spending to save more:

• 95% of Americans own a cell phone. 77% own a smart phone.
• Nearly eight-in-ten U.S. adults now own desktop or laptop computers, while roughly half now own tablet computers and around one-in-five own e-reader devices.
• As of 2014, there were around 100 million households subscribed to some kind of paid TV service, purchased through either a cable, satellite or phone company. This means that approximately 90 percent of Americans had access to paid television services. 83 percent of households are still shelling out money every month for TV.
• The average American family spends $225 a month eating away from home – dinners eaten out, quick snacks grabbed, and coffees ordered and consumed on the run. Sales at restaurants and bars overtook spending at grocery stores for the first time ever.
• The average household spends $2,482 a year on entertainment.
• The average American family spends $1,700 on clothes annually, according to the Bureau of Labor Statistics. "What is significant is whether that money is spent on need or waste. The answer is, largely, waste."

And this is only the tip of the iceberg! Here's a long article from Forbes that details all the wasted spending each year. It's a long, detailed article, but here's the summary:

In other words, we spend money on spending, then we spend money to warehouse and organize the stuff we spend on. Then we pay to discard it. Then we pay to maintain the landfills where it sits for ever and ever. But the expense of shopping doesn't stop there! You pay in time and mental health, too.

Wow. Is that a huge indictment on spending or what?

Needless to say, most Americans could have $500 set aside for emergencies. No doubt, some don't have much and really can't afford the $500. But most spend that money (and more!) simply because we consume, consume, consume.

Average College Degree Pays Off by Age 34

Here's a piece by CNN Money that says the average college degree pays off by age 34. The details:

If you're debating the value of your college degree, rest assured it will likely be worth the cost -- eventually.

It takes an average of 12 years to recoup the cost of getting your Bachelor's degree, according to a new report from The College Board.

In other words, you will have earned enough money to repay the cost of your degree and make up for your time out of the workforce by the age of 34.

I'm a big believer in getting a college degree, but you have to do it the right way. I've detailed how to make the most of a college degree previously, so I won't cover that again. But I will say the summary is to 1) minimize cost of the degree while 2) maximizing the post-graduation earning potential.

I'm not sure where I'd be without my degree but my bet is that I wouldn't be retired. My undergraduate and MBA degrees helped open the right doors for me and from there I took advantage of the opportunities.

How about you? Anyone thankful they did or didn't get a college degree (or sorry they got one)?

Star Money Articles for the Week of March 20

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

Barbara Friedberg lists the pros of being a landlord.

Poorer than You tells the good news and bad news in personal finance.

Mrs. Picky Pincher asks what "frugal" means. 

ESI Money tells how to earn 50% more money. 

Money Q&A asks if you should wait for a stock market correction before investing.

Mighty Bargain Hunter pulled the plug on Republic Wireless.

Finally, my book of the week is The Miracle Morning: The Not-So-Obvious Secret Guaranteed to Transform Your Life (Before 8AM). It's a life-changing book!

Have a GREAT weekend!!!

You Can Live in a Great, Inexpensive City

US News lists the best places to live.

I liked the list because it listed several places I've lived and I can attest that they are nice to live in.

And as you know, I've also lived in inexpensive cities all my life.

Put the two together and you discover that you can live in a great, inexpensive city. You don't have to give up quality of life to save money on the cost-of-living. In fact, most of the best cities to live in are very affordable.

So what's the big deal about this?

The big deal is that where you live has a big impact on your net worth. If you live in a low cost-of-living city, you can save a TON of money over the course of your lifetime. And if you can couple that with a high salary, you can really amass a fortune.

Many will argue that more expensive cities are "better" cities. Those people will have to take that argument to US News as they definitely disagree with that sentiment.

Are Millionaires Smarter than Others?

Money asks if millionaires are smarter than the rest of us. 

I changed the title of this post because I'm not one of the "rest of us". :)

Anyway, here are their key thoughts:

It does seem, in general, that smart people pull down fatter paychecks. Jay Zagorsky, an economist and research scientist at The Ohio State University, found that every additional point a person scored on an IQ test correlated with between roughly $200 and $600 a year in income. In other words, a person with an IQ of 130 would earn between $6,000 and $18,500 a year more than someone with an IQ of 100.

But Zagorsky also found that the same isn’t true when it comes to wealth. “There seems to be no relationship between intelligence and net worth,” he said, because there are different factors at work.

“In general, businesses tend to want to hire smarter people and pay people more, but just because you have a higher income doesn’t mean that you’re more likely to save it or are better at building that wealth,” he said.

In fact, when Zagorsky charted IQ against people’s likelihood to have financial struggles like paying bills late, declaring bankruptcy and maxing out their credit cards, people with the highest IQs were more likely to have financial instability than those with just slightly above-average scores.

Several thoughts on this:

• We've talked about the relationship between intelligence and income previously. For details, see Intelligence is Linked to Income, but Not to Wealth and Intelligence Still Linked to Income, Not Wealth.
• As those posts also detail, intelligence is not tied to wealth. Just because you're smarter and make more money doesn't mean you have the skills to build wealth.
• In fact, it appears that intelligence may be inversely related to wealth generation. A good example: doctors and lawyers generate much lower levels of wealth than expected based on income.
• Why is this the case? My guess is that smarter people earn more because they are, well, smarter. And as such they likely add more value to their employers. More value = higher pay. But the skills needed to become wealthy don't focus as much on intelligence. Here you need traits like self-control, patience, and discipline. If you look at the seven traits of The Millionaire Next Door, you'll see that intelligence is not on the list.

IMO, it's good to be both smart but disciplined as well. If you can combine these two traits, you can generate substantial wealth.

Star Money Articles for the Week of March 13

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

ESI Money recommends working the ESI scale to financial independence.

Centsibly Rich shares five simple ways to save on gardening.

The Wild Wong says you need to negotiate salary increases.

Mr Fire Station completed the first year of early retirement.

Gen Y Finance Guy is putting $250k to work.

Finally, my book of the week is How Much Money Do I Need to Retire? It's one of the only five money books you'll ever need.

Have a GREAT weekend!!!

How to Keep Your Brain Healthy

Here's an interesting article and video about how to keep your brain healthy as you age.

The summary:

• Exercise -- "What's good for the heart is good for the brain."
• Sleep -- "Your brain cleans itself out during sleep. If you don't get seven or eight hours of sleep a night you might as well be smoking cigarettes or sitting on the couch eating two bags of potato chips a night -- it's the same thing."
• Diet -- "The Mediterranean diet has been shown to be most effective at reducing risk."
• Keep moving -- "Not just physically but socially and intellectually."
• Managing stress -- "Meditation and stress-relieving activities are very beneficial."

This is an issue as we all get older (of course) and retirement itself poses some issues to overcome. For instance, it's often easy to totally down-shift in retirement (which is great for stress management but might not be for the other suggestions.)

Anyway, here's how I handle each of these in retirement:

• Exercise six times a week -- three cardio and three weights. I also get in at least 7,000 steps per day, even in winter, and closer to 15,000 per day in summer. Throw in some swimming and hiking here and there and I'm fairly active.
• Have never slept better since I retired. I think it goes along with less stress.
• I tend to eat low carb as I want to lose a bit of weight and encourage muscle growth. But I've eliminated sugar and soda and working on caffeine.
• I continue to read and blogging itself keeps me learning (the tech side of things can be a real pain and of course writing is always a unique, creative process). I also do chess puzzles but not sure that qualifies given his guidelines.
• Stress is low since I stopped working. There's a different kind of stress -- the "yes I have a gazillion dollars but I don't have a job can I make it?" sort of stress that's a bit subtle but always around.

So, that's how I am trying to keep my brain healthy. How about you?

Free Money Ebooks

Today I have a treat for you -- FREE STUFF!

Here are five free ebooks that several personal finance bloggers are offering. I thought you all would enjoy these:

ESI Money offers three steps to financial independence. 

Financial Mentor has 18 lessons from a self-made millionaire. 

Barbara Friedberg Personal Finance has free investing resources.

Bayalis is the Answer tells how to superfund your 529.

Mama Fish Saves details common budgeting fails.

Intentionality Ink offers a DIY investing picture-book.

Rachel Hernandez shares 10 dos and don'ts to get started in mobile home investing.

Enjoy!!!

Star Money Articles for the Week of March 6

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

ESI Money wants financial writers to publish their net worths.

Canadian Budget Binder gives the dangers of role-playing.

Wallet Hacks tells how to buy physical gold. 

Slowly Sipping Coffee says retiring early creates a perspective shift at work. It also makes Monday the best day of the week.

The Green Swan gives an update on his small business.

Financial Samurai claims that blogging is the best business in the world. 

Finally, my book of the week is The Bogleheads' Guide to Investing It's one of the only five money books you'll ever need.

Have a GREAT weekend!!!

Retire in Style Outside the US

Here's an interesting piece from the Detroit News.

It details people who are retiring outside the US. Why are they doing this? Here are the highlights:

“I wanted to find a place where I could afford to live off my Social Security,” she said. “The weather here is so perfect, and it’s a beautiful place.”

McCowen’s rent in Ajijic, a community outside Guadalajara near Mexico’s Lake Chapala, is half of what she was paying in Texas. And since the weather is moderate, utility bills are inexpensive.

Retirees most often cite the cost of living as the reason for moving elsewhere said Olivia S. Mitchell, director of the Pension Research Council at the University of Pennsylvania’s Wharton School.

“I think that many people retire when they are in good health and they are interested in stretching their dollars and seeing the world,” Mitchell said.

Yes, that's correct. You can retire to a foreign country and dramatically lower your cost of living. Who would have guessed that? ;)

Alternatively, for those who wish to move to a retirement destination to retire within the US you may find the reverse mortgage for home purchase option attractive in that you can purchase a home with no mortgage payments without having to pay all cash.

A few other facts from the piece:

• The number of US citizens retiring outside of the US grew 17 percent between 2010 and 2015 and is expected to increase over the next 10 years.
• Just under 400,000 American retirees are now living abroad, according to the Social Security Administration.
• The countries retirees have chosen most often: Canada, Japan, Mexico, Germany and the United Kingdom.

Of course there are pros and cons to this idea as we've discussed time and time again here over the years.

I actually considered moving outside the US (at least the continental US), but not for the sake of saving money. We discussed moving to a warmer climate, perhaps to the Caribbean. But then we moved to Colorado and it's awesome here! I think we've decided on just visiting the Caribbean for a month or so every winter. We'll see if that happens or not.

FYI, if you want to become a citizen of a Caribbean country, seems like all it takes is money. ;)

Anyone ever consider retiring abroad? Why or why not?

Straying from the Herd

The following is a guest post by Chris Cagle from Retirement Stewardship. 

If you read the financial press or investing blogs these days, you are sure to see an article about how the stock market has risen to record highs. Many are sounding the alarm that the market has reached such rarified heights that a major correction or crash is imminent.

A few are expressing concern that we are in a stock market “bubble,” which is a subject of some disagreement among those who closely track such things. There are analysts who say that although the market has hit record highs, it is far from “bubble” territory. Others who look at various price-to-earnings ratios as predictors of things to come are more concerned.

So the big question is, "Where will it go from here? Are we headed for a major correction or even a crash? Or perhaps we are heading toward heights we have never even dreamed of?"

The certainty of uncertainty

Most people get spooked about big market declines. About a year ago, I wrote about stock market volatility and what to do about it. At one point, the markets were down almost 10 percent from the start of 2016. I expressed my usual sentiment of “don’t just do something, sit there” as I generally hold to the premise that if you have a diversified portfolio that accurately reflects your risk tolerance, you will be well positioned to weather most any storm that comes along.

But the current situation is different. Although it seems counterintuitive, some people are getting a little nervous about the dramatic rise in the markets. And they’re certainly wondering how long it can continue.

Well, there's only one thing we know for sure: We can’t know for sure. But we do know that markets are cyclical; they never go in the same direction forever. So, it's with a high degree of confidence that we can assume that they will, eventually, go down. When and by how much is anybody's guess.

In fact, some historical declines, if not unforeseen, have been unprecedented. The 2008 crash was one of them – it was more than any other decline since 1929. But things were very different in 2008 than they are in 2017. Plunging real estate prices and collapsing credit markets were the main causes of the 2008 market crash.

But does that mean that a major correction or even a crash is any less possible? Not necessarily as it would be fantasy (and therefore pretty foolish) to assume that the stock market trends of the last nine years will go on without end. Does that mean that you should sell all the stocks in your retirement portfolio? Probably not, but taking some profits off the table to "keep some powder dry" for the next big buying opportunity might not be a bad idea.

Straying from the herd

I recently went against my usual “buy and hold” philosophy and sold about 15 percent of my shares in my large value domestic stock dividend fund to add to my cash reserves. Although it is a somewhat conservative fund, it is up over 60 percent in the last five years. In doing so, I raised my cash position to almost 30% of my portfolio, which is higher than its been in a long time.

Of course, I could just sit still and do nothing, which is what I do most of the time. And I suppose that some would say that this is really just trying to time the market. There may be some truth to that, but I am very aware of the many risks that folks like me who are getting close to retirement face, especially “sequence of returns risk.” Therefore, I am scaling back my stock allocation just a bit. I am also giving myself a little flexibility to buy more shares of a fund I really like when the right time comes.

I will admit that I am diverging somewhat from my own investing principles. As I wrote in an article about saving and investing,

Some people’s strategy for investing is to “play the markets.” They buy and sell and try to time market ups and downs in order to make a profit. Although there is the occasional success story, this has been proven to be a losing strategy in the vast majority of cases.

The fact is I do not “play the markets,” and I have only “sold high in order to buy low” a few times. I don’t think I can time the markets, so I am content to sit patiently and wait to put some of my cash back to work.

Straying can be scary

I will confess that I found selling some shares when things seem to be going so well felt a little uncomfortable, especially as I watched the fund that I had sold go even higher in the days since.

But reassuringly, Carl Richards, in a recent article titled, Sticking with the Herd: A Risky Proposition, reminds us that it could actually be the most dangerous just when it feels the safest to keep running with the heard. He wrote,

“…maybe we should think very carefully about doing the same thing as everyone else. Does it really keep us safer to stick with the herd, or are we risking everything by continuing to look at the world through an outdated lens?

He goes on to remind us of Warren Buffet’s advice to be greedy when others are fearful and fearful when others are greedy. Interestingly, the Fear and Greed Index is currently at 83, which is in the “extreme greed” territory -- the highest category. For me, it just seemed like a good time to apply Mr. Buffet’s advice.

Richards himself acknowledged that it can make you feel “wildly uncomfortable” when you separate yourself from the herd. That’s because we lose the perceived safety what we feel when we run with the pack. It did feel “funny” to sell even a few shares when everything seems to be on a steady march upward. But, as he also wrote,

“…then the market adjusts, and suddenly all the people who chase each other into it are chasing each other back out. Suddenly, sticking out doesn't seem like such a bad idea.

Straying, but not too far

It is important to note that I am not talking about gloom and doom here. I only sold some shares of two of my favorite funds to raise some additional cash; I didn't liquidate my entire portfolio and plow it into my gold ETF (GLD), which I maintain only a small allocation to (although I did add a little to it).

Simply based on current valuations, and the duration of the current market bull run, I don't think this was a bad idea. In fact, some would say that this is a good time to have 15, 20, or even 30 percent in cash for the next buying opportunity. When it may come is anybody's guess - I'm certainly not going to try. It may be a week, a month, a year, or longer. But it will come.

How do I know? Well, they always do.

Star Money Articles for the Week of February 27

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

Reach Financial Independence lists three things that allowed a reader to retire with millions in the bank.

ESI Money continues his interviews with millionaires. (Plus he's giving away a FREE ebook on Financial Independence.)

iVigilante tells how to become a 529 wizard.

Retirement Manifesto asks if you're a financial tough guy. 

Get Rich Quickish says to make it a good day.

Lauren Greutman tells how to budget your bills. 

Finally, my book of the week is Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Revised and Updated for the 21st Century. One of the only five money books you'll ever need.

Have a GREAT weekend!!!

No Matter How Much You Make, You Can Spend It All

I love Denzel Washington! He's probably in my top five leading actors of all time along with Leonardo Dicaprio, Russell Crowe, Christian Bale, Tom Hanks, Hugh Jackman, and Chris Pratt. Ok, I know that's more than five. And I've probably left some out. :)

Anyway, I was thrilled to watch this interview Denzel did with 60 Minutes at the end of last year. But the end of it gave me pause. Here's the exchange between Denzel and interviewer Bill Whitaker:

Bill Whitaker: So what’s next? I mean, are you enjoying this, directing?

Denzel Washington: I won’t be directing anytime soon.

Bill Whitaker: You will not be?

Denzel Washington: No. No.

Bill Whitaker: Going back to the acting?

Denzel Washington: What’s your first name?

Bill Whitaker: Bill.

Denzel Washington: Right. Put a “s” on it.

Bill Whitaker: Gotta pay a couple of ‘em.

Denzel Washington: That’s-- that’s correct.

Bill Whitaker: Acting pays the bills, so—

Denzel Washington: Acting pays the bills. Do what you gotta do, so that you can do what you want to do. I’ve just done what I wanted to do. Now I gotta get back to what I gotta do.

Let me tell you why this exchange gave me pause: my guess is that Denzel Washington has made a lot of money in his lifetime. That seems reasonable, right? So why does he need to do anything to "pay the bills"? Shouldn't he have more than enough to last several lifetimes?

So I did a bit of Googling and found several sites reporting on Denzel's wealth. This one says his net worth is $140 million. Another one says $190 million. This one says he makes $20 million per movie and has been in 54 movies.

So let's agree that Denzel has many, many millions of dollars. Probably at least $100 million, maybe much more. So again, why does he have to do anything to "pay the bills"?

It's probably because he's spending like crazy! Yes, you can spend it all even if you make a fortune! I've posted on this time and time again -- here's a list of rich people who lost it all, here's a piece on star athletes who lost over $1 billion, and here are stars who have lost fortunes. Why? Because they all couldn't control their spending.

And it's not just the fabulously wealthy. My post titled News Flash: $225k Not Enough to Live On links to a host of people who can't make it work on $100k, $250k, or even $1 million a year. Boo-hoo for them!!!!

On the other hand, I also list people who can become wealthy on $60k a year or even $40k. The difference? These people SPEND LESS THAN THEY EARN. It's that simple.

Now I hope Denzel isn't in the over-spenders group since I like and admire him so much. But his comments lead me to believe he may be. And if that's the case, I'm really sorry.

What's your take on the issue?