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Posted in Best Advice | Permalink | Comments (1)
Here's my annual public service reminder that we all need a will!
If you don't have one and pass away, here's what happens. Summary: it's not good.
For reference, here are some past posts on the subject:
Posted in Estate Planning | Permalink | Comments (1)
Here's a list of average debt by age in the U.S.:
Under 35: $67,400
35–44: $133,100
45–54: $134,600
55–64: $108,300
65–74: $66,000
75 and up: $34,500
It includes mortgages, student loans, etc.
I'm thinking it's a lot better than I would have guessed. Maybe the average is lowered by a bunch of people on the low-end with zero debt?
What do you think?
Posted in Debt | Permalink | Comments (4)
CNBC lists two ways to improve your retirement savings as follows:
Two steps — delaying retirement until 67 and putting away at least 6 percent of your salary — can make a huge difference, according to new research from Morningstar.
Here's why these are such good moves:
Just those two actions could boost the chances that American households will have what they need in their golden years to 71.2 percent from 25.6 percent.
This article is a commentary on both the U.S. mainstream media as well as the financial intelligence of the average American.
For the media, this article was enough to get published despite being Personal Finance 01. Yep, that's right, I won't even call it Personal Finance 101 -- it's so basic.
As for the average American, why isn't he already saving 6% of his income? If he was doing even more he could retire well before 67.
It's just another post that says to me how far behind so many are in a basic area of life -- managing their money with success.
Ugh.
Posted in Retirement 2011+ | Permalink | Comments (1)
The following is a guest post from The Master Dukes of Dollars. The two bloggers held court frequently, delving into lifestyle and personal finance discussions as they searched for ways to live an optimal life, eventually deciding to invite a global audience into their mindsets by establishing their own blog together. They believe anyone can build their financial kingdom – start building today!
In our adventure through life, we are constantly making decisions. In fact - a study was done that left me flabbergasted. I mean, who would have thought on an average day, adults make an estimated 35,000 decisions every day!!
Make Independent Decisions Through Rational Thinking
Now many of these decisions are on things that have little consequence, where our habits take over and only a small amount of energy is expended when making them. It's easy for me to decide whether or not my coffee mug will be within reach during breakfast each day - it always is!
But life isn't always so easy, and with the short-cuts we've developed as humans to tackle the onslaught of decisions each day, it is in our best interest to take big decisions heavily! That's where rational thinking comes in. Rational thinking is our ability to draw unbiased conclusions by using logic, rules, and data to justify them.
By utilizing this process, you are able to handle life's tough decisions and we sincerely believe that there's power in doing so. Why? Because we have subconscious biases that go into every decision made. Add a few mental models all happening at once - generalization fallacies, headline nostalgia or emotional responses - you have a lollapalooza effect leading to actions (or beliefs) that may not be beneficial to you!
Want a few examples of news being emotionally charged? Check out Joshua Kennon's article on statistics.
With rational thinking in mind, a new concept can be introduced to help how we make better decisions - Mental Models!
What are Mental Models?
Mental Models are your toolbox for making decisions! Here's a quick video to give a quick overview.
To summarize mental models:
Where Did Mental Models Come From?
Mental models were made famous by Warren Buffet's partner in crime, Charlie Munger. He gave a speech on cognitive biases and how they can influence decision making, even on those who are experts on leadership or physics.
Further, he mentions them throughout a talk he gave to graduates of USC. Charlie believes understanding the world from this broad perspective gives you opportunity to make fast, smart, and reliable decisions - sometimes even finding answers quicker than those who specialize in their field. Which of course can be a very dangerous tool, in other words, use your rational thinking wisely.
Charlie has said because of these mental models and the latticework of them entangled within his brain, he has been awarded with great success in investing and business. He says one can never underestimate the power of incentives, ignore the potential second order effects of decisions or forget the self-bias (story below) each one of us tangles with in our daily decisions.
Learning new mental models is a life-long journey; but that shouldn’t cause any stress, because those who are successful also happen to be life-long learners!
A Mental Model Story...
Account for self-serving bias of others, and use it in persuasion - quote from Charlie Munger's Speech to UCC Graduates in 2007:
"I watched the brilliant Harvard Law School trained general counsel of Salomon lose his career, and what he did was when the CEO became aware that some underling had done something wrong, the general counsel said, “Gee, we don’t have any legal duty to report this but I think it’s what we should do it’s our moral duty.”
Of course, the general counsel was totally correct but of course it didn’t work; it was a very unpleasant thing for the CEO to do and he put it off and put it off and of course everything eroded into a major scandal and down went the CEO and the general counsel with him.
The correct answer in situations like that was given by Ben Franklin, he said, “If you want to persuade, appeal to interest not to reason.” The self-serving bias is so extreme. If the general counsel had said, “Look this is going to erupt, it’s something that will destroy you, take away your money, take away your status…it’s a perfect disaster,” it would have worked!
This story shows the power of using mental models in your life, because sometimes it can be detrimental to your career if you don't!"
Three Mental Models to Heed in Personal Finance
1. Compounding: Amount = (Principle)(interest^(rate of interest*time in years)
2. Confirmation Bias: Reading, researching, and reflecting only on information that confirms pre-existing beliefs or ideas
3. Association: Humans associate feelings to intangible objects
These three are just the tip of the mental model iceberg. The more you learn, the better they can be utilized as you accelerate your path to freedom.
Concluding Thoughts
Personal finance and rational thinking go hand in hand. Mental models help you drive better decisions in your career and life, which lead to compounding results (see what I did there?)! Saving high percentages of income is much easier when your level of income continuously increases! Bosses and businesses love rational thinking, and by taking advantage of mental models – you can become the employee they love because of it!
First time hearing about mental models? That's quite alright. Start conquering them today!
If you are interested in reading more about mental models, we recommend two resources:
Posted in Financial Planning | Permalink | Comments (3)
Here's a list of the 50 best retirement cities from Business Insider:
The top ten:
10. Las Vegas
9. Austin
8. Denver
7. Honolulu
6. Salt Lake City
5. Atlanta
4. Scottsdale
3. Miami
2. Tampa
1. Orlando
A few thoughts from me:
If you were advocating for a "best place to retire", what city would you add to the list?
Posted in Retirement 2011+ | Permalink | Comments (2)
CNN Money has this to say about healthcare spending in retirement:
The average couple retiring today at age 65 will need $280,000 to cover health care and medical costs in retirement, according to an annual estimate by Fidelity, released Thursday.
A few thoughts from me:
What do you think? Do you have any thoughts on healthcare in retirement?
Posted in Retirement 2011+ | Permalink | Comments (0)
Here's a post that says if you paint your house door black, your home's value will increase by $6k:
Zillow released an analysis Wednesday after examining some 135,000 photos from listings across the U.S. since 2010. Zillow found that on average, houses with black or charcoal gray front doors sold for as much as $6,271 more than expected.
And there's more:
It may sound emo, but painting your front door black is actually a tried-and-true way of increasing home value. According to Realtor.com, a black door gives buyers the impression that your house is a serious, stately and safe choice. It’s so popular that two of Sherwin-Williams’ top 50 paint colors fit the bill: Peppercorn and Tricorn Black.
Before you go all dark on me, I'm not sure this really works.
It's probably true that homes with black doors sell for more, but is it because they magically are worth more or is it simply because homes with black doors are more valuable, in fast-growing areas, or whatever.
I'm betting it's the latter.
Posted in Real Estate 2011+ | Permalink | Comments (1)
Here's a piece that says millions of Americans think they will never retire. The details:
A majority of Americans don’t know how much money they need to save for retirement, while 19 million Americans don’t think they will retire at all.
Ok, so this is two different issues:
It's really no surprise to me that 1) most haven't done their homework and 2) many think they'll never retire. It may actually be a larger number than 19 million.
It's pretty sad since saving for retirement is fairly easy. But it does take will power, something many Americans are short on.
Posted in Retirement 2011+ | Permalink | Comments (3)
Bankrate tells us that the average side hustler earns $8k per year. The details:
Side hustlers make $686 per month, on average. Within a year, it’s possible to earn more than $8,200. Those who work a second job at least once per month earn an average of $836 on a monthly basis.
Most survey respondents (59 percent) say they consider the money they earn from their side job to be disposable income. And 38 percent say they use their extra funds to cover ordinary living expenses.
A few thoughts here:
Do you have a side hustle? Why or why not?
Posted in Making Money 2011+ | Permalink | Comments (1)
Here's a piece asking if you should downsize in retirement.
It goes through a discussion of the pros and cons of going from a large house to a smaller one in retirement.
We are having this discussion in our home. We have a large, 3,700 square foot house that is too big for four people, much less two (the kids aren't fully out yet, but both are close).
So we've been batting around whether to stay put or sell and downsize.
For now we've decided to stay put until we see where the kids land. If they remain in our town we'll probably stay in our home since the market is white hot and while we could make good money selling our home, we'd have trouble finding a place we'd like (size, location, etc.) at a reasonable price.
We've also talked about moving to an apartment, which would give us more travel flexibility (not having to worry about a stand-alone house) but we're not sure we could deal easily with close neighbors.
Here are some of the other issues we've been considering:
Those are our random thoughts on downsizing in retirement. What do you think about them? And what about your own retirement? Have you downsized in retirement or are you planning to when you do retire?
Posted in Retirement 2011+ | Permalink | Comments (8)
Putting money into a savings account...that’s pretty boring. Going to Vegas and winning at the blackjack table...now that’s a rush! Unfortunately, gambling at the casino is eventual financial suicide and we all know it...so it’s best to just stay away from the tables.
But what if you could meet your savings goals, and then by doing so, you’d actually have a chance at winning games with cash prizes?? Believe it or not, it’s absolutely possible with a new start-up called, “‘Long Game”.
A new start-up out of San Francisco, Long Game is one of the first apps that actually makes saving fun. Sure, Mint can help you track your money, and Digit gets you to put a few pennies into savings here and there, but admit it, your life is still pretty dull even with these technological advances in your financial life.
You need to grow up you know it. It’s time to build up a savings account for your unknown future emergencies and your upcoming large purchases. Not a few pennies, not even a few dollars....tens of thousands of dollars.
Long Game is key to getting you there. Let me explain how and why.
The process is actually pretty simple:
Sounds a little sketchy, right? I mean c’mon, how does Long Game get the money for all these prizes? You must be paying for it somehow, right?
Wrong.
Most banks earn 3% (at least) on your money that’s sitting in the bank. They give you 0.1% to park it there, and then they lend it to someone else, which yields them much more than 0.1%.
Most banks pocket all the earnings, but Long Game found a few banks that want to help people win in life. So these banks give Long Game a portion of those 3% earnings. Long Game then sets up games for you to win and earn some of those gifted bank dollars!
It’s really pretty ingenious actually.
Beautiful. Simply beautiful.
So is there a downside to Long Game? I can personally only think of one.
There are high-yield saving accounts out there that can pay you 1% or more on your money, but you know what? What’s better? Making 1% on $100 (and still being bored out of your mind and saving practically nothing each month) or getting pumped about saving money, putting thousands of dollars into your account, and truly winning with your finances? I don’t know about you, but if I were struggling to save money, I’d choose the latter...
So yeah, you could win some money through Long Game, but is that it? Is that the only draw? Nope, not even close.
This all means that you’ve got more incentive to get started with a bang, and better odds of winning prizes out of the gate.
There’s really not much of a downside here. If you’re still listless with money and just can’t seem to get any of it into the bank at the end of each month, I’d say it’s time to try something new. You never know, you might just get hooked (which means that you’ll just want to save more money so that you can earn more coins to have a better shot at winning more games!) and save more money than you ever thought possible!
Sure, you might become a Long Game addict, but at least it’s an addiction that’s helping you win at your financial life!
Are you ready to get started with Long Game? Why or why not? Give us your opinion in the comments below!
Posted in Financial Planning | Permalink | Comments (0)
Budgets are Sexy asks if you are financially average and shares these ten financial averages in the US:
#1. The average American gross household income is $71,258
#2. The average American household with debt owes $132,529
#3. The average American gave $5,491 to charity in 2015
#4. The average American has a FICO credit score of 700
#5. The average American’s 401(k) balance is $96,288
#6. The average personal savings rate in the U.S. is 5.5%
#7. Only 18% of Americans actively contribute to an IRA
#8. The average American’s tax refund in 2016 was $2,860.
#9. The average American pays an effective federal income tax rate of 13.5%
#10. The average American’s Social Security retirement benefit is $1,363/mo
Here are my thoughts on these:
1. I'm surprised that the income number is so high. I thought it was more like $55k. Anyway, this gives me more hope for Americans overall. With an income of $71k a year, you can certainly build wealth over time.
That said, I passed $71k in income pretty early in my career, probably five years of so out of grad school -- and that was in early 1990's dollars. Yes, earning a good salary is a great way to grow net worth. If you don't believe me, just read what millionaires have to say.
2. We paid off our mortgage over 20 years ago and haven't looked back since.
3. We gave away 26% of our gross income over the 20 years we were building wealth. Even today in retirement we give 20% or so away per year, though we do it through assets (not income) using a donor advised fund.
We are big believers in helping others as much as we can, so giving has always been a big part of our family, as has volunteering.
4. Last time I checked, our credit scores were near 800.
5. I maxed out my 401k for many, many years and surpassed $96k a long time ago.
6. We saved 36% of our gross income. This was pretty good back in the day but many of today's early retirees make that look like slacking.
7. I contributed as much as I could to all my retirement accounts.
8. Our tax refunds had wild swings since we had so much going one every year -- especially after we bought our rental properties. I'm looking forward to the day when my tax return isn't 150 pages. (Yet another reason I use a CPA to do my taxes.)
9. My federal tax rate was way over 13.5% for many years, but one benefit of retirement is that it should be lower now. :)
10. I haven't looked at my Social Security benefits since I have a couple decades before I'll claim them. I'm not even sure they'll be around at that time (which is why I don't have any financial plans based on needing them). That said, if they are around, I should get a decent amount since I paid the max amount to Social Security for many years.
How about you? How do you stack up on these measures?
Posted in Financial Planning | Permalink | Comments (3)
Here's a piece listing what retirees wish they had known before they retired. The highlights:
Many retirees are surprised by the costs they faced in retirement, with health care costs leading the charge.
Thirty-seven percent of those surveyed say health care costs have been higher than expected in retirement, 45% say their total health care costs are just what they expected, and just 9% say they have been lower than expected.
About one quarter of retired investors say living expenses and taxes have been higher than expected after they retire.
Here's why they are surprised -- they don't think about retirement living costs.
I know, this should be the FIRST thing they consider before they retire -- what their retirement budget is -- but the vast majority of people don't do this.
Later on from the article:
According to the Wells Fargo survey, very few people are mapping out their retirement plans, with just 20% of those surveyed saying they have done the detailed calculations to determine how much income they will need in retirement, more than half of those surveyed (48%) are unsure or have not thought much about how much money they will need in retirement.
So they don't think about how much they will spend in retirement? No wonder they are surprised!!! Yikes!
I think most people kind of spitball it when it comes to retirement and say "I think we can make it" with little to no financial calculations to help them decide one way or the other.
I think they also don't build in margins of safety in case their spending (like that for health care) is higher than they expect.
I don't know why I'm even surprised any more...
Posted in Retirement 2011+ | Permalink | Comments (1)
Here's an interesting post from Bloomberg asking how much do you need to become wealthy?
The results:
Interesting how the older you get the more you think it takes to be wealthy. :)
Before you set a number, consider these net worth percentiles in the U.S.:
Now that you have those numbers, what would you say it takes to become wealthy?
I think you could argue that it takes more to be financially comfortable than to be wealthy.
For instance, $1 million makes you wealthy compared to most Americans -- only a bit over 10% have more.
But would you say you'd be financially comfortable with $1 million net worth? Maybe comfortable enough to relax a bit, but not comfortable enough to retire -- unless your spending was really low.
Anyway, what are your thoughts on the issue? What do you say it takes to be wealthy in America?
Posted in Net Worth | Permalink | Comments (5)
Gen Y Finance Guy recently listed his five major milestones of financial independence as follows:
Here's when I hit each of these and my thoughts on them:
1. My Quicken data goes all the way back to 1994 and it shows I was at ground zero. I'm not sure if this really was the case or if I just didn't have the numbers entered into Quicken, but let's go with it.
I had been married for just three years at this point. We were learning about money and wanting to retire all of our debt, but we had two condos we had to sell (at losses) so we could buy a house (which we sold a year later for a loss.) Ugh.
2. By 1995 we had over $100k net worth, which makes me think the 1994 number of zero was simply for a lack of data.
By this time we had sold our homes, moved, bought a new house and were paying down the mortgage, and I had a nice, new job that paid me much more than I was earning previously. We were also maxing out my 401k at this time.
3. We passed $1 million in 2005 and, as they say, the first million was the hardest.
By this time I had changed jobs a couple times, survived the dot-com bust, paid off our mortgage, was earning a very good salary, and was saving a ton.
4. We hit the Magic Zone in early 2011 after fighting through the financial crisis (investing all the way down).
By this time we were actually financially independent, but I did not know it.
5. We hit $3 million in 2015 thanks to the investments we made during the crisis as well as our real estate.
From there our finances have been on a rocket ship upward and we are a hair away from the next million-dollar mark.
So, that's our path through the five milestones. Where are you on this journey?
Posted in Net Worth | Permalink | Comments (3)
The following is a guest post from Aaron of Personal Finance for Beginners.
If you’ve just started to focus on your personal finances, it can be difficult to know where to start. There are many important areas of money management – debt, budgeting, saving, investing – that make it hard to decide where to prioritize your attention and how you should measure your progress.
In this post, we’ll take a look at pros and cons behind four of the most popular numbers used to evaluate your financial success:
Improving any one of these metrics has the potential to improve your financial wellness – but is there one number that rules them all?
Credit score
Your credit score is a number that lenders use to measure how responsible you are with managing debt. A credit score is calculated from five major factors. The two most important factors are making your payments on time each month (payment history) and how much you owe in relation to your total available lines of credit (credit utilization).
Pros: What are the benefits of having the highest credit score possible? Having a high credit score qualifies you for the lowest interest rates available on your mortgage, auto loan, student loans, etc. You don’t need a perfect credit score, but having an “excellent score” (750+) can save you thousands of dollars in accrued interest over your lifetime.
Cons: While having a good credit score is important when you’re buying a house or applying for any other loan, its impact is fairly small in the big picture of your personal finances. A bad credit score will likely hold you back from achieving some of your financial goals far more than a good credit score will be able to help you.
Having good credit opens the door to new financial opportunities and flexibility, but nobody is becoming wealthy or retiring from a perfect credit score alone – it’s just a tool.
Income
What individuals do you see in your mind when asked to think of people who are “rich?” When talking about the affluent in our society and culture, we aren’t always talking about those with a massive net worth – we often imagine the “big earners” like actors, musicians, or tech giant executives.
Because most of us depend on a salary for our income, getting a raise or promotion is the most common way to increase this the number. It’s not the only the way to increase your income, however. You can also take on a second job, find a side hustle that suits your interests, or start your own business.
Pros: Increasing your income allows you to reach your financial goals more quickly. A high income can give you the option to enjoy a higher quality of living, covering your “needs,” “wants,” and even a few luxuries depending on just how much you earn. You can pay down any debt, max out your investment accounts, and have cash available on hand should a good financial opportunity present itself.
Cons: Increasing your income doesn’t guarantee financial success. Just take a look at the celebrities, professional athletes, and lottery winners who receive seven-figure paychecks – many find themselves broke and filing for bankruptcy just a few years later.
How do you adjust your finances after you get a raise? Any dollar without a purpose is likely to go to waste. Without a budget and long-term financial plan, you can find yourself struggling without financial uncertainty regardless of your income level.
Savings rate
Savings rate is likely to be the least commonly discussed financial metric of the four mentioned in this post. Your savings rate is the percentage of your take-home income that you’re contributing toward retirement.
While your savings rate may not receive the same attention as your income or net worth, it’s a popular measuring stick especially among those who are pursuing an early retirement.
Pros: For most people, the end goal of personal finance is reaching financial independence. After you reach financial independence, you may want to continue developing your career, find a different job or volunteer work that better fits your values, or transition into “play lots of golf” or “go travel the world” retirement. Regardless of your end goal, your savings rate is the best direct predictor of how long it’ll take you to pass the finish line.
Cons: Maintaining a high savings rate often depends on keeping your spending low. Even if you’re able to establish a high savings rate early in your career, it’s hard to forecast how a major life decision, such as marriage, children, or relocating to a city with a higher cost of living might cause your living expenses to skyrocket your spending and completely shift your measure of success.
Net worth
Your net worth is the sum of all of your assets minus all your liabilities. This number provides a snapshot of your financial situation at any specific point in time (as it fluctuates in real-time with any personal transactions or changes in the market). If you’ve ever wanted to be a millionaire, it’s your net worth that needs to reach a million dollars!
Pros: Your net worth offers a balanced understanding of your financial situation by considering both the positives (assets) and negatives (liabilities). Unlike the other metrics we’ve discussed, your net worth is by far the most comprehensive. Calculating your net worth requires reviewing all of your financial information in one place, which is becoming easier than ever with tools like Mint or Personal Capital.
Cons: A high net worth, just like a high income, only holds value if you know how to make it work for you. To really optimize your finances, you still need to drill down deeper to identify areas of improvement. If you have significant amounts of student loan or consumer debt, you may have a negative net worth that takes years to reach the positive. Sometimes it’s easier to focus on other financial metrics that can be improved more quickly.
Conclusion
There’s a brief overview of four major measures of financial success. Each number can have a major impact on your finances in its own right, and your interest in each metric will likely shift as your progress through your financial journey.
Here’s how I’d rank these four metrics by importance:
When all is said and done, your net worth dictates when you reach financial independence. It also indicates success in the other metrics: you’ve been able to hold on to the income you’ve earned by saving money, investing toward retirement, and acquiring assets.
Do you agree that net worth is the most important measure of financial success? Why or why not?
Posted in Financial Planning | Permalink | Comments (3)
This is a guest post by Millionaire Mob, a blog focused on investing in dividend growth stocks and travel hacking.
It was August 2011. I was freshly out of undergraduate school and about to start my first day working as an investment banker for a large bank in Chicago. I was eager, motivated and ready to do whatever it took to be the next finance king. The cover of Fortune magazine was so close. I could just see it.
After over 6 years of the grueling gauntlet of financial modeling slavery, I realized that isn’t the way to financial success or making a difference in this world.
Why isn’t a gauntlet of modeling and pitch decks the way of living?
First off, it didn’t take me a long time to realize that I would never truly see the world from an open eyes perspective if I spent 14 hours a day working on a financial model or PowerPoint presentation. The paychecks are great. The ‘bonus day’ is great where you would receive 100% (or more) of your salary in the form of a bonus.
All that came at a price including your Vice President emailing you at midnight telling you that you did everything wrong in a presentation or waking up in the morning saying that you need to recreate an entire deck because it ‘wasn’t even close to being client ready.’ Or, the culture of people bragging how much they earned and how much would be spent in one night.
I found myself being the complete opposite. Wearing beaten down shoes to saving every dollar to pay down student loans. Or, save enough to buy a reasonable home.
I realized this wasn’t the way to truly enjoy the life you live. We all only have one life to live. Making a difference and working with people that also want to change the world is important.
One quote comes to mind that really summed up my experience:
“Being the richest man in the cemetery doesn’t matter to me … Going to bed at night saying we’ve done something wonderful… that’s what matters to me.”-Steve Jobs
I truly learned a lot working in investment banking. You learn several points that are invaluable and can be leveraged into new ventures such as:
I knew this wasn’t sustainable. I had to find a better way, but also pay the bills.
What is the better way forward for freedom (financially too)?
I found myself back to the drawing board. What can I do that I can make a difference AND learn at the same time? Why can’t I take my lessons learned and skills to do a greater good of providing financial expertise to others that have less experience? This lead me to becoming an entrepreneur or a multi-tasked side hustler.
The true meaning of financial freedom (to me) is building an income to cover all of your expenses, traveling the world and learning every day. I’ve been able to keep my expenses as low as possible for travel experiences via travel hacking. This enables me to continue my path of saving and investing.
In addition, our favorite way to secure the most optimal total return is by investing in dividend growth stocks and using all additional income to reinvest in a dividend growth portfolio. The future of work is no longer in a traditional cubicle or desk. The future of work is collaborative and shared work. The freelancer economy is growing at a rapid rate. Find ways to get involved now and start earning some side hustle income to build a better financial future.
When you think about your next move, ask yourself is the timing right? You need to ensure that you’ve built a sustainable future and/or reliable income before making the big move. Develop a prudent plan to hit your goals and do what you love. I like to think of the 3P’s for financial freedom: Patience, Planning and Progress. Obtaining financial freedom is easy.
Do what you love and love what you do
How do you find out what you ultimately want to do in life? Whatever hobbies you have in life, you can earn a living off of. For me, this is travel.
I suggest following the below steps to achieve financial freedom and ultimately live a better lifestyle:
By doing what you love, you put yourself in a position for success at day one. This success is enabled by unlocking your abilities with your passion. I’m a firm believer of if you love what you are doing, you should never worry about money. The money will follow. Focus on doing high-quality work that helps others. Build a source of income that enables you to unlock your true passion.
What are you doing to achieve financial independence? Remove the ‘work’ component to your work life balance equation… by having a life. Don’t be afraid to do something crazy.
Posted in Financial Planning | Permalink | Comments (3)
The following is a guest post from Moose of Making Sense of Life.
There are hundreds of thousands of posts about financial independence and early retirement online. Amongst the how-tos, formulas, in-depth explanations of Roth IRA ladders, and philosophical content out there, one critical aspect of this journey is rarely mentioned: courage.
Courage is essential in all phases to be financially independent and retire early (FIRE). You need courage to embrace this atypical lifestyle, you need courage to sustain it, and you need courage to finally unplug from a typical working life.
Why did you first pursue FI?
I guess that you felt something was amiss. The culture of over-the-top consumerism and "retire at 65" mindset did not leave you fulfilled. You knew something had to change and you sought out various resources, like MSoLife.com, to help you break out of the mold that the vast swathe of society neatly pours itself into.
My first tentative steps toward FIRE emerged out of fear. Fear of running out of money and being unable to provide for my family. I was motivated to seek a solution to my fears, but it took courage for me to turn to the principals of FIRE. I had to have faith that I could curb the horrendous financial habits I established over the course of more than a decade. When I first calculated my Money Multiple, I was horrified by the amount of money I had thrown out of the window on silly frivolities. However, on the flipside, the Money Multiple also shows you the power of compounding interest on any dollar you invest NOW. Forget the past; it is gone. Forge forward with the knowledge of what a dollar invested today is worth to you in your retirement.
Courage is mandatory when starting down the path to FI. You need courage to acknowledge that your previous habits and mentality are not sufficient to earn you the life you envision living. Turning the glaring harsh spotlight on yourself and accepting your flaws is hugely courageous and, frankly, painful. Self-reflection does not come easy, and many people avoid it for this reason. Staying in the same rut is comfortable, familiar, and requires no effort.
The commitment to change is the embodiment of courage. Not competing with the Jones' and rejecting the strong pull to have the latest shiny cars, flat screens, and luxe vacations (all financed by debt, of course) requires a commitment to higher values.
Like any significant feat, it takes more than motivation to become financially independent. We overemphasize the importance of motivation and underemphasize the far less sexy side of discipline and consistency.
Just like a famous athlete didn't "come out of nowhere," your ascendency to financial independence involves years of dedication and practice. It may appear to your coworkers, friends, and family that you "suddenly" retired, but we both know the truth of the matter: it took years of embracing the suck.
How do I maintain my progress toward FIRE? I'll share a few tips that keep that fire in my belly stoked:
Courage keeps you on the straight and narrow path to financial independence. You WILL experience setbacks and unexpected emergencies on your road to FIRE. It's inevitable. But courage and resilience empower you to shake yourself off and keep at it.
So, what happens once you've reached your FIRE number or the amount of money you need to retire? This number is typically between 25 and 33 times your annual expenses. Do you immediately run to your boss and say you quit?
I've noticed a trend in personal finance lately called the "one more year" phenomenon. Several personal finance bloggers recently hit their FIRE numbers and decided to continue working for another year or more. Why?
One reason is that they want to make EXTRA sure that they have the resources they need well into their old age. It's understandable. It takes courage and a giant leap of faith to believe the math that led you to the point of financial independence. Hundreds of what-ifs run through your mind. What if I did the math wrong? Will I run out of money? What if we have significant health issues?
The other common reason retiring can be difficult for people is habit. They're habituated to working that 9-5 gig and being around the same people from Monday to Friday. You may not love working, but there's comfort in continuing to do so. Not having something to retire to is an issue that typically builds to this reticence to finally retire. You need to figure out what you're going to do with your newly-acquired free time or retiring early will be difficult to follow-through with and challenging to sustain.
When I write about personal finance, I always stick with topics I know well from first-hand experience. While I haven't retired (yet), I am currently on a mini-retirement. I'll take up to a year off to test how I respond to not having a full-time job. Will I go stir-crazy and run back to employment? So far, I think I'll take to retirement like a duck to water. Here's why; I:
Regardless of whether or not you decide to test early retirement with a mini-retirement, it's normal to have apprehension around such an impactful life decision. You need courage to let go of the familiar and head off into the exciting unknown.
This post isn't meant as a self-congratulatory and back-patting ode to our egos. No, it's meant to highlight the fact that courage is a prerequisite to FIRE.
You will face adversity; courage is possible only in the presence of difficulty. You need bucketfuls of courage to pull off this magnificent goal, and I've highlighted where that courage is needed most. Go forth with the knowledge that FIRE is attainable. You've got this!
Posted in Retirement 2011+ | Permalink | Comments (1)
The following is a guest post from Michael Dinich at Your Money Geek.
Retirement takes effort, planning, and consistency. Living an extremely frugal life has never been a requirement. If you love reading financial content, you may have noticed financial experts preaching about the best ways to retire early and be set for life. Their ideas may be good in theory and may work for some, but may not work for everyone.
Extremist may make you feel as if you are behind and not worthy of your own financial goals and aspirations.
Everyone has different ideas of retirement. But the truth is, everyone has different goals for retirement. Some retirees may strive to read 60 books in 6 months and go for daily walks. Others may want to travel the world and enjoy the fruits of their labor.
Is your current lifestyle aligned with your retirement goals?
It's not so important to be extremely frugal to get to where you want to be. What’s important is that your current lifestyle is aligned with your retirement goals.
Let’s say you are 35 and your goal is to retire by 45. You make about 100k a year and you have 200k in savings. If you could pay off your home and have no bills in the next 10 years and live a very conservative lifestyle, you may be able to accomplish early retirement. However, if you plan to take a lavished vacation every other week and have homes in 3 different cities, that may not be enough to retire.
So, decide when you want to retire and the life you would like to live. Be as specific as possible and leave nothing out. Then you may want to sit down with a financial planner to help you determine if your goals are realistic with your spending and saving habits.
You may need to make a few adjustments. If you need to live a bit more frugality to get to where you want to go, that’s a decision you will have to make and feel comfortable with.
Know what is best for your lifestyle
Often you see stories on the news about a couple who quit their job and retired to be world nomads. You think, “wouldn’t that be great”. But what you don’t see, is all of the changes they had to make in their lives in order to get there. You also don’t see all the sacrifices they had to make to be financially free.
If this is how you see yourself in retirement, great! Then extreme frugality may be the way to go, but if you are comfortable with your current job and your 3.5 weeks of vacation, for now, you may need to be as extreme with your savings.
If you are a free spirit you may not enjoy penny pinching, you may just want to live your life and automate your savings. Conversely, some people really enjoy watching every penny, and strive for extreme frugality. It’ a way of life. Remember do what is best for you.
Pay yourself first and enjoy the rest
If you want to retire by a certain date then work with a financial planner to help you determine what you will need to save and invest in order to achieve this goal. Automate your savings and investing. This way you can make sure you pay yourself first. You can use the rest of your funds to enjoy your “latte money” or spend it however you would like.
This lifestyle may be easier to manage and let you feel as though there are fewer restrictions on your life.
Consider the people you surround yourself with
If all of your friends are trying to keep up with the Joneses, you may feel like you need to as well. The people you surround yourself with is crucial to your financial well-being and the accomplishment of your retirement goals.
Surround yourself with like-minded people who support you. People who enjoy doing the same things you like to do and can celebrate your financial victories.
Try not to compare
It’s easy to see the latest internet sensation telling you they paid off $200,000 of debt in 2 years by just eating ramen noodles or they made $150,000 last month by selling a how-to guide. Don’t be swept away. It is great that they were able to achieve these accomplishments but their step 20 may be your step one.
Look for an easy first step and big wins. Instead of comparing yourself to some internet sensation that may or may not is saving 70 plus percent of their money. The key to taking the first step. Cut one thing out of the budget that’s not important to you and save.
You could also consider working with a tax professional to do some tax planning to save a few thousand dollars, or review your insurance policies for the big win. As you save and keeping having “big” wins saving money will become more enjoyable. You will feel one step closer to your retirement goals.
Final note:
Do what is best for you and your retirement goals. There is not one retirement plan that will works for everyone. Establish your goals and then make it happen at your own pace.
Posted in Retirement 2011+ | Permalink | Comments (2)
The following is a guest post from Alexander Voigt. He started his career in the financial business back in 1999. For many years, sharing investment ideas with his readers on his website DayTradingz is an important part of his life. You can almost call it his passion.
Equity Funds
Savings accounts or call money are currently not really suitable to increase one’s own capital by interest. There are other investment opportunities much more efficient, such as equity funds.
As the name suggests, this investment consists of shares, not in individual stocks, but in a portfolio of shares of different companies. The advantage here is that the risk of loss is significantly reduced if the investment strategy is correct.
At the same time, with a correspondingly intelligent selection, there are good chances to increase the various values in the equity fund. Without any need to scan the markets for individual stocks, this makes the investment profitable.
Certainly equity funds are a means of investment that demands more attention from the investor than the well-known savings account, but then an equity fund pays off while a savings account is actually losing money.
The risks involved in different funds can also be assessed with a little knowledge of the stock market. An investor need not be a securities specialist to be able to gauge how risk and opportunity behave in an equity fund.
Safe Investments – Equity Funds
Conventional savings are usually linked to the interest rate of the respective central banks. These are not growth-oriented, which of course is politically correct. Central banks must control the amount of money in circulation, using among other things the key interest rate, which is raised or lowered depending on the situation.
In contrast, public companies are obviously growth-oriented. A small example shows the differences. In the euro zone, the base rate was 3.25% in 2000. This meant that banks on savings deposits paid maybe 4 or 5% interest.
With slight fluctuations, the key rate remained in this area until 2009. After the global economic crisis in 2008, the key interest rate fell to currently zero percent. Even with generous calculation a savings balance of 100 euros would, including compound interest, result in 40 euros interest in the best possible case after 17 years.
Assuming that the 100 euros were invested in the DAX, which with its industrial heavyweights is by no means a very dynamic equity fund, but extremely conservative in the area of equity investment. Nevertheless, the DAX achieved an average performance of just over 5% per annum over the same 17-year period.
Invested in the DAX the 100 euros would have made almost 130 euros with compound interest. Other, more dynamic equity funds are still far above that. It should be noted that the past 17 years produced particularly mixed results for the stock market.
For whom are equity funds suitable?
While day trading belongs to the most speculative approaches to make money in these days, investments in equity funds give the investors more safety. So, they are also connected with less emotional stress.
Especially people looking for an alternative investment to the usual bank products are well advised to turn to equity funds, especially when it comes to long-term investment objectives with an overall low risk.
The management of an equity fund usually follows a specific investment concept with considerable diversity, such as investment in certain industries. In this case the companies of one or more industries are rated in terms of their growth, but also in terms of their stability.
If a company meets the specified criteria, its shares are integrated into the fund. Another concept is tied to dividend stocks or specific regions, which may be a whole continent like Europe or a single state such as Japan.
Another distinguishing feature may be a focus on small or large companies. The advantage of investing in small caps, in smaller stock companies, lies in the faster performance of their stocks. Especially in recent years, funds have achieved excellent value growth with this investment concept.
For example, the best small-cap funds made gains of between 13.8% and 15.76% between 2014 and 2016. The risk can be cushioned by a wide spread. But the success of such a fund may also turn out to be a handicap.
If the fund reaches a certain size thanks to multiple investors, it may be difficult for the managers to invest the amount of money according to their own criteria. In this case what’s lacking are simply suitable public companies.
Are there high risks in equity funds?
In fact, the risks are minimal if the investor or investor avoids certain types of funds, like sector funds with a very high degree of specialization. Of course just these equity funds offer the same promise of return, but the risk is very high that the forecasts for development will not materialize. With investments in a single industry even a company getting off the rails can pull down others.
Although the stock market and in particular equity funds have shown a positive performance over decades and are thus actually ideally suited for asset accumulation, skepticism remains high. This is clearly shown by the shareholder rate, the proportion of people in a country who invest their money in shares or equity funds.
Focusing on the goal instead of the way
Of course the daily price performance is a problem when investing in equity funds. With long-term investment periods of perhaps 10, 15 or 20 years, it may well happen that the price of the fund slips below zero on some days.
But this is by no means significant for the overall development. This is demonstrated very well by the world's oldest stock index, the Dow Jones. This index of the 30 largest industrial companies in the United States records their price development since 1928.
In these almost 90 years including a world war, several stock market crashes and other economic and political difficulties, the Dow Jones index climbed from about 30% to 10,170%. If somebody had theoretically invested only 100 euros in the Dow Jones equity fund in 1928, they would have achieved a whopping 10,270 euros in 2017, mind you, without compound interest.
With compound interest, it would be an amount with 29 digits. At 10 digits one reaches a billion, at 13 digits a trillion. Of course this is just as abstract as the assumption of an investment over the course of 90 years.
But it shows a very clearly that buying stocks beat every other investment working with fixed or floating rates. Because behind stocks there are people with ideas, with experience and with knowledge, working every day to move ahead, thus advancing the stock corporation.
An equity fund is in this sense not just a mix of shares of different companies, but a representation of the employees of these companies.
Investors who are searching for a more self-managed approach may profit from reading the article Best Stock Screener. The article explains the difference between stock screeners, stock scanners and charting tools. It also presents 40+ different investment tools that are available and it tells you how to use them effectively.
Posted in Investing 2011+ | Permalink | Comments (2)
The following is a guest post from The Financial Journeyman.
Do you earn a high salary or a high combined high household income and feel like you cannot get ahead? The average household income in 2017 was $59,000 for Americans. There are many households who earn $150,000, $250,000, or much more and feel like they cannot get ahead of their spending habits.
When I hear about these households, one thing comes to mind. They do not know how to budget. The salary amount that a family earns is only part of the equation. Without having a well-planned budget as part of your financial plan, it does not matter if your household income exceeds $1,000,000.
Earnings are finite. If you spend what you earn, you will always feel poor. If you spend more than you earn, you will be poor.
Like with most topics in personal finance, there is a solution. The solution is simple, but it might not be easy. It is not easy because it will require a person to make changes to how they budget and spend. When setting up a budget, there are a few general guidelines to follow as to how much you should be spending per category.
To keep it simple, let’s examine how a household should budget a net annual income of $100,000 per year (after taxes). That would come out to $8,333 per month.
Below are some budgeting guidelines to break the feeling of not being able to get ahead:
Housing
Housing costs should not exceed 25% of your budget. That comes out to 2,083 per month. That does not mean you can take out a mortgage where the payments equal $2,083 per month. This amount must cover all your housing expenses. This amount needs to cover taxes, insurance, and miscellaneous expenses.
For those who rent, the same percentage applies. 25% needs to cover rent, renter’s insurance, deposits, or any other expenses. Rent can be almost as expensive as a mortgage in desirable neighbors. The one break that renters do get is that renters insurance is far less expensive than home owners insurance.
Housing is the largest percentage category in this template. For most people, it is normally their largest expense. If you are exceeding 25%, you might have bought too much house or are living in a neighborhood that is beyond your means. To fix this, the best option is to downsize to a home that is more suited for your earnings.
Transportation
Transportation costs should not exceed 11% of your annual salary. That comes out to $916 per month. If you live in an urban area this percentage is for public transportation. If you own one or more cars, this amount needs to cover car payments, fuel, insurance, and repairs.
Food
Your food budget should not exceed 14% of your budget. That would allow you to spend $1,166 per month on food. That is a generous amount. Even with a family of four, that amount can be reduced to $800 per month. Look for coupons. Eat out less. Use coupons when you do go to a restaurant. Buy your groceries at Aldi or other discount stores. There are plenty of ways to save money in this category.
Entertainment
Entertainment is a want and not a need. It should be capped at 5% of your budget. That would allow you to spend $416 per month on entertainment. This includes TV, internet, movies, books, ball games, nights out with friends. There are many great ways to maximize your entertainment budget. Cut the cable cord and use streaming sources. Rent books from the public library. Watch the game at home instead of paying for high price tickets. Have pot-luck dinners with friends instead of going out to eat at fancy restaurants. That 5% can be stretched a long way and provide you with a tremendous amount of fun if you manage it correctly.
Savings and Investing
Your savings rate should be at least 15% of your budget. You might think this rate is high, but this is how much you need to save if you plan on being able to have a decent quality of life in retirement and to be financially independent. 15% would equal $1,249 per month. First, create an emergency fund with 3-6 months’ worth of expenses. While you are building up your emergency fund, be sure to invest the required amount in your employer’s retirement plan to capture the matching contributions. After you have your emergency fund established, contribute this allocation of your budget to your retirement accounts (401K/IRA).
Healthcare
Healthcare costs can range between 5-10% of your household budget. That would equal $416 at 5% or $832 at 10%. The difference between 5% and 10% would be the size of your household. If you have children and are on a family plan, it would be closer to 10%. If you are in the 5% range, consider allocating the other 5% into a Health Savings Account (HAS) for future healthcare costs.
Everything Else
You have 20% left. Make it count. This is to be used to cover utilities, personal expenses, phone, charity, consumer debt, vacation fund, education fund, and whatever else you need to pay for. The good news is that you are left with $1,666 to cover these other expenses. Try to get creative and get the most for your money. Shop around for the lowest cost utilities provider as well as reducing consumption. Cut coupons and look for sales on personal items. Charity can be money, but you can also volunteer your time. Pay off consumer debt. Practice travel hacking and vacation for free. You already pay high taxes, so you might as well take advantage of the public education system. Get creative and do more with less. With some effort, you can spend far less than 20% in this category.
Conclusion
By having a budget, you know how much you should be spending and saving. Without a budget, it is easy to spend more than you earn, not have adequate savings, and fall into debt. If that is your current situation, it is easy to empathize with your feelings of not being able to get ahead even though you earn an above average salary.
The above template is a good place to start. Here is how to use it. Take all your spending and bills from last month. Add them to the categories that best matches the expenses. Calculate your household net income for the month. Measure what your percentages are compared to what is recommended. Once you see where your money is being spent, it is much easier to optimize your budget.
Every household has different and unique situations. If you find that your percentages are way out of line with what is suggested, don’t panic or judge yourself harshly. It might take one year or longer to get your budget optimized to reflect the suggested percentages.
When dealing in percentages, you can track progress. As you start adjusting your budget, track the improvements you are making. A positive increase in savings or reducing an expense by 1% is a step in the right direction. This is not about being perfect. It is about right sizing your life to fit your income.
Posted in Financial Planning | Permalink | Comments (4)
The following is a guest post from Bernz JP who writes at Moneylogue.
More importantly, Should You?
When “life happens” it can be extremely tempting to use retirement accounts as emergency savings accounts. And while in an ideal world, you would never need to do this, sometimes it may be necessary. Statistics state that a little over 30% of 401K investors in the last decade have cashed out before reaching the minimum age of 59½ that let them avoid the 10% early distribution penalty.
IRS rules do make room for retirement plan loans if the maximum amount of the loan is either under half of the amount of your vested balance or $50,000, whichever amount is smaller. This means you won’t be able to borrow more than $50,000 from your 401K, no matter how much your plan is worth.
So, the question is, what counts a necessary and what doesn’t?
If your financial situation has become problematic and you're eyeballing your 401K plan as a possible out, most financial advisors will tell you; you need to have a full understanding of the consequences before you move that direction. While borrowing from yourself might initially appear harmless and convenient, the long-term costs can end up being more expensive than you may realize. Here are some reasons to rethink borrowing from your 401K.
You’re Paying Taxes on the Same Money Twice
Yes, you will be paying yourself back with interest, but you’re using your taxable income to do it. This means you’ve paid taxes on the money you use to pay back the loan AND you’ll be paying taxes on that same money when you finally start using it for retirement.
Lost Income from Compounding Interest
Even with the interest, you pay back, no amount you can afford to pay will make up for the lost compounding interest the loan amount won’t make once it's withdrawn from the 401K.
A Loan May Prevent You from Making Future Contributions
Not only will you lose the compounding interest from the principal you withdraw, depending on your plan's regulations, but you may also be prevented from contributing new funds for up to six months. This ban on contributions means you will lose the pre-tax benefits from that money as well.
Once You Start – It’s Hard to Stop
Once you make the first loan and pay it back, it sometimes is difficult not to keep doing it again and again. Over time, this could greatly reduce the amount of income you’ll have available in retirement. As we stated above, once you lose the principal that is contributing to higher compound interest income, it’s virtually impossible to get it back.
Your Repayment Period May be Reduced If You Leave the Company
If you have to leave the company that holds your 401K before you’ve had a chance to pay back the loan, you may have to come up with the entire remaining balance in as little as 60 days.
This requirement will hold true whether you are leaving by choice or by force. Getting laid off will not protect you, which means you’ll be required to come up with the money at the worst possible time to be short on funds.
Scenarios That 401K Loans Could be a Good Idea.
Despite the drawbacks of 401K loans, there are some situations they might be a good idea, especially if all other options aren’t viable.
If You Own the IRS Back Taxes
Because of the penalties and interest that can build-up on overdue taxes, and the threat of wage garnishment to resolve the situation, a 401K loan may be your ticket out.
The additional money taken out of your paycheck to cover it probably won’t be any more than a federal garnishment would be, and you’ll stop accruing the higher interest amounts on the amount owed.
Before you go this route, double check with the other tax relief programs for alternative options.
If You are Close to Eviction and/or Bankruptcy
If you are facing a severe cataclysmic event financially, make an appointment to speak with a counselor from the National Foundation for Credit Counseling (NFCC). They will be able to assist you in determining what directions you can take to possibly get out of debt. If your 401K can help you buy some time to restructure your financial situation, they’ll be able to advise you on the best way to use the money. You can find a counselor in your area by visiting the NFCC website at www.nfcc.org.
If You are About to Default on Student Loans
Defaulting on your student loans can have a negative effect on your credit record, which can have an effect on future plans for quite some time.
Plus, if you’ve already had to declare bankruptcy and are also about to default on your student loans, you could end up with a double whammy on your credit record. In most situations, student loans don’t fall under the umbrella of bankruptcy, so you’ll still be responsible for them.
Weigh the Pros and Cons Carefully Before Moving Forward
Financial difficulties are usually a part of life at one time or the other. Getting them taken care of and quickly and painlessly as possible is the ideal way to overcome them. When considering using your 401K for this, you need to make sure the ends actually do justify the means. With the possibilities of penalties, loss of interest, and delay in additional contributions, the result could mean a greatly depleted retirement income.
Additionally, unless you are EXTREMELY secure in your current job, the possibility of having to come up with the balance of the loan in a short period of time, or suffer even greater consequences, could lead to more harm than the original loan did any good.
As most counselors will tell you, the only time you should seriously consider taking a loan out on your 401K is if your financial situation has come to an extremely bad point and it is the only option left to you to dig your way out. In those cases, make sure you know exactly what the effects could be so you can be as prepared as possible for any and all outcomes.
Posted in Retirement 2011+ | Permalink | Comments (6)
Check out this video:
The key point in it:
Exercising for 30 minutes a day, 5 days a week saves you $2,500 a year.
And this is only heart health savings! If you add in all the other health-related savings, it's much higher than this.
Couple this with the fact that people who exercise more make more money and exercising is a no-brainer!
I am at the gym six times a week and am active in addition to that (I try for about 15k steps per day). I feel better by working out as well, so my quality of life is improved to boot!
How about you? Do you exercise? Why or why not?
Posted in Saving Money 2012+ | Permalink | Comments (6)
As tax season gets close to wrapping up, I thought this piece from Business Insider was timely
It gives a flowchart, decision-tree on whether you should do your taxes yourself or have someone else do them for you.
The times they suggest you should hire someone include:
Other than the major life changes, all of these pertained to my family for most of the past 20 years. That's why we've used a CPA to do our taxes for most of that time.
This year it took me a fraction of the time to get everything together for my CPA. Once I retired things did get a bit less complicated in some ways, but more complicated in others (like having a daughter in college.) So unless things shift drastically for us, we'll probably keep using a CPA for taxes for the foreseeable future.
How about you? Do you hire someone or DIY? Why did you decide to do it this way?
Posted in Taxes 2011+ | Permalink | Comments (5)
Just look at this interesting chart.
There are several things that stood out to me here, but most notably these:
In fact, if you look at these three costs, they make up half the spending at almost every income (much more than that at lower income levels).
Here are some quick thoughts on how to reduce the spending in each area:
Doing these will make a MASSIVE difference in your budget and free up resources you can use to save and ultimately retire early.
Posted in Saving Money 2012+ | Permalink | Comments (3)
Do you think it's possible to retire on $1 million?
A cool $1 million has long been considered the gold standard of retirement savings. These days, it's only a fraction of what you will really need.
For instance, a 67-year-old baby boomer retiring now with $1 million in the bank will generate $40,000 a year to live on adjusted for inflation and assuming a sustainable withdrawal rate of 4 percent, said Mark Avallone, president of Potomac Wealth Advisors and author of "Countdown to Financial Freedom."
It's worse for a 42-year-old Gen Xer, whose $1 million at retirement will only generate an inflation-adjusted $19,000 a year when all is said and done. And a 32-year-old millennial planning to retire at 67 with $1 million would live below the poverty line.
That's what Avallone, a certified financial planner, calls "million-dollar poverty."
LOL! This is written like a journalist (who knows nothing about money) who consults with a financial planner (who knows nothing about money) wrote it!
First of all, why are they assuming the millionaire today can't live in $40k? That's completely reasonable, especially if they live in a low cost-of-living city https://esimoney.com/where-you-live-has-a-big-impact-on-your-net-worth/ and/or have their house paid off https://esimoney.com/how-to-buy-a-house-and-pay-off-the-mortgage-in-less-than-10-years/.
Second, let's say the 42-year-old retired NOW with $1 million. He could take $40k out of that PLUS it's highly likely he will earn more money here and there. Very few young retirees never earn another penny in their lives once they retire. And if they have something like a small side hustle, that makes retirement MUCH more affordable.
On the opposite end of the spectrum is a post that says you can retire on $1 million or less -- and gives examples of just that, listing how to reach financial independence by age 35.
So which is it? Is $1 million enough to retire on or not?
The truth is, it depends on:
Those are my thoughts. What's your take on the situation?
Posted in Retirement 2011+ | Permalink | Comments (7)
I've been blogging for almost 13 years now and I get the question quite often: "How can I make money blogging?"
So today, I have an answer for that question.
For those of you who want to get started blogging immediately and learn as you go, here's a post on how to set up a blog.
For those of you who want to know the details and learn a bit before you jump in, check out the series of blogging posts starting here.
Blogging has been very good to me over the years and with a bit of time and effort, I believe almost everyone can turn it into a decent side hustle.
If you decide to jump in, best of luck to you on your journey.
Posted in Making Money 2011+ | Permalink | Comments (1)
Wow.
I don't know why it surprises me when I see articles on how people can't manage to survive on $100k income or more.
I've been writing on this issue for years so you would think I'd be numb to it by now.
But every time they come around, I shake my head like it was the first time I've ever heard stories like these.
And they always seem to come in bunches -- so I have a few to share today.
We'll begin with this couple who makes $100k and says they don't ever expect to retire:
Theresa Sahhar and her husband make a combined $100,000, which is nearly double the median annual income in the United States.
They live in Olathe, Kansas, where the cost of living is "pretty reasonable," Sahhar told NPR's Lulu Garcia-Navarro during a segment on living on $100,000 a year. Still, they're "struggling to make enough money to do all the things that we normally do."
I don't need to go any farther into the article to know that these people are spending way too much.
I've been to Olathe, Kansas several times and it's not that expensive -- 5% above the average US location according to Best Places.
At the same time, as mentioned, $100k is twice the average income.
If you make twice what most people make and live in an average cost-of-living city, you have some BIG expense outflows in some area.
But we'll get to that in a minute. For now, let's move on to later in that article where it says:
They aren't the only residents earning six figures and struggling to set aside money for retirement, college and other major expenses. Some living in the area who earn $100,000 "are living paycheck to paycheck," the Post reports, and even families earning up to $250,000 "don't consider themselves to be high-earners."
My goodness. Not higher earners at $250k?
On to the next article. Here's a couple making $180k per year who don't feel like they are doing well:
On the income distribution charts at the center of tax overhaul plans, Courtney Mishoe knows she’s doing well. She works as a tax manager at a firm in the Atlanta suburbs. Her husband is a police officer. Together, they make more than $180,000 a year. They are solidly in the upper middle class. But they have a mortgage and three kids, including one in day care and another in high school with plans to go to college. It all adds up. They depend on tax deductions to make their budget work.
“I don’t feel wealthy,” Mishoe said. “I don’t have a bunch of money stashed away anywhere.”
They depend on tax deductions to make their budget work? Really?
Things are that tight on earnings of $180k?
And yet it gets worse.
If you think you can stomach it you can watch this:
It's a boo-hoo interview with a writer who talks about how hard it is to make things work financially.
He admits that he's made some bad financial decisions including:
Uh, yeah. Those things do impact your finances!
But then he doesn't really take responsibility saying, "But those choices are what I call life."
No, they are not simply "life". It isn't life to live in a resort area, high tax state, and send your kids to Harvard and Stanford.
BTW, he never gives his income but I don't think he's a starving writer. My guess is that he "only" makes $100k or so.
Towards the end of the piece he quotes USA Today as saying that a "middle class existence would cost $130,000 a year."
He then goes on to say that most people make $50k, so there's the problem.
But that's not what USA Today said. (I can't believe he as a writer or PBS as the interviewer didn't fact check this.)
They said the cost of the "American Dream" is $130k:
In fact, three-quarters of Americans polled by the Brookings Institution in 2008 said the dream was harder to attain.
They're right to worry. An analysis by USA TODAY shows that living the American dream would cost the average family of four about $130,000 a year. Only 16 million U.S. households — around 1 in 8 — earned that much in 2013, according to the U.S. Census Bureau.
They basically make a bunch of over-priced assumptions (more than I've ever paid in almost every category) to "prove" that it takes $130k to make the American Dream work.
I'm thinking there's an agenda here...but we move on.
The video above is an interview with the writer who is covered in this Atlantic piece.
If you read far into that article you'll find this:
Lusardi, Tufano, and Schneider found that nearly one-quarter of households making $100,000 to $150,000 a year claim not to be able to raise $2,000 in a month.
It also states this -- which I can agree with 100%:
Basically, a good many Americans are “financially illiterate,” and this illiteracy correlates highly with financial distress. A 2011 study she and a colleague conducted measuring knowledge of fundamental financial principles (compound interest, risk diversification, and the effects of inflation) found that 65 percent of Americans ages 25 to 65 were financial illiterates.
Then there's this piece from NPR about what it's like to live on $100k. A summary:
NPR's Lulu Garcia-Navarro spoke to a variety of people in different cities about what their lives look like on $100,000 a year. On paper, that kind of salary is considered well-off. But as we heard from many, it often takes just one major expense for that to not feel like enough: student loans, health care, childcare or housing costs.
They try to make a good story but when you read between the lines you see "credit card debt" and high cost-of-living cities.
But hold on to your hats. We're about to take this to a whole new level!
Check out this post:
Vanamee consulted experts to estimate the "happiness number" for a hypothetical, wealthy, non-working couple in their 40s with two teenage kids in an expensive private school in New York City. They live in a parkside Fifth Avenue apartment, buy art, take private jets, donate to charity, and have a household staff — a chef, a driver, and a housekeeper — plus two vacation homes. They're also setting aside $25 million for each child to inherit.
An analyst from US Trust cited in the Town & Country report estimated the hypothetical couple would need to have a net worth of $190 million to sustain this lifestyle.
Of course! I know I certainly wouldn't be able to be "happy" on anything less than $190 million!
Are these people real???!!!
As you might imagine, I have a lot to say about these stories:
In the end, the fact that someone can't make it on $100k, $180k, or $190 million isn't an earning problem, but a spending problem.
I want to close with a quote from a podcast interview I heard recently with Jonathan Clements, a personal finance journalist and writer for the Wall Street Journal, and one of the few financial writers who IMO actually knows what he's talking about.
In the interview he's asked, "What’s the most important thing that you’ve learned since you’ve started writing about personal finance?"
His reply:
It sounds ridiculously simple, but the one lesson that’s been driven home to me year after year, is the importance of being a good saver, everything else is secondary. Over the years, both when I was at the Wall Street Journal, when I was at Citigroup and even now, I’ve spoken to thousands of every day investors who have accumulated seven figure portfolios. Many of them have modest incomes, most of them were mediocre investors but almost all of them shared one attribute in common, they were extremely frugal, otherwise known as cheap.
The way they achieved financial success was living way beneath their means and saving great gobs of money every month. If you wanna be financially successful, it is indeed as simple as that, everything else is gravy. If you have great savings habits, you could afford to buy advantage funds. I wouldn’t suggest you do it but you could take that risk and end up with market lagging returns. You can pay too much to a financial advisor and you’ll still be fine. If you have great savings habits, good things are gonna happen, everything else is gravy.
So true. Because the fact is that without saving, you can simply spend all you make -- even if you make a fortune.
Posted in Spend Less than You Earn | Permalink | Comments (2)
Here's an interesting infographic on the crazy way we work.
I'm going to pick out a few of their facts and comment on them.
70% of American workers experience stress-related illnesses.
I can relate to this.
I never knew what a toll stress was taking on my body until I retired. I could literally feel the stress melting away over time. It took about six months for me to fully de-stress after working almost 30 years.
Of course, too much stress is not good for any of us. In this way, our jobs are slowly killing us every day.
33% more heart attacks occur on Monday mornings.
Uh, yeah. Because 1) people hate their jobs and 2) there's a lot of stress there. No surprise here.
In retirement, Monday becomes your favorite day. Why? Because everyone else goes back to work. The stores are quieter, the gym is quieter, the theater is quieter, and so on.
The average commute time is 47 minutes round trip.
That is BRUTAL!
Most people don't factor the physical (more stress!) and monetary (like taking a big pay cut) impact of a long commute.
Think about it this way: 47 minutes per day * 5 days per week * 50 weeks = 11,750 minutes or 196 hours or 8.2 days per year commuting. Ugh.
I never had a commute more than 20 minutes one way and if I had I would have probably hated it completely.
41% of tasks on to-do lists never get completed.
What a shock here...not really.
Most people are so busy getting to the urgent things each day that they don't get to the important things.
There's a reason Covey addressed this in his 7 Habits book.
Interesting stuff all the way around. If you want more, check out the infographic for yourself.
Posted in Career 2011+ | Permalink | Comments (5)
Here's a very interesting post and infographic on what people think it takes to "make it" in America.
2,000 people were asked what “making it” means to them. Their answers provide some interesting results.
Here are a few of the money-related ones and my thoughts on them:
Average annual income: Now: $57,426; Made it: $147,104
So while the average person in the survey makes $57k, they feel they would have "made it" is they earned $147k.
Wow, that's a big gap.
And one that is not achievable by most people.
According to WalletHacks, the top 5% of earners earn $130k or more.
So in other words, the vast majority will never "make it" to their desired income.
That said, if they want to, they need to get started asap at growing their careers as well as begin a side hustle.
Average home value: Now: $248k; Made it: $461k
First of all, these people are either living in high cost-of-living areas or they want HUGE houses! Yikes!
They should be careful since houses costing over $300k can actually lower your net worth.
Second, I think I have "made it" and I've never owned a home I purchased for over $400k (my current home might be worth that now, but I bought it for under $400k -- and we don't live in the high rent district).
That said, I do own $600k of rental property, so don't know if they're counting that (I assume not).
Average car value: Now: $15,789; Made it: $41,986
Uh, no.
Really? Really, America?
Maybe it's because they associate "making it" with an expensive, luxury car. Otherwise, I don't get it.
Two other pieces of information worth sharing:
Check out the piece for a ton more interesting facts presented in a very nice infographic.
Posted in Financial Planning | Permalink | Comments (1)
Unless you've been hiding under a rock for the past few years, you've heard about the "student loan crisis"
I put that in quotes because it's not a crisis IMO. It's a problem caused by people who do not understand basic financial principles. But more on that in a minute.
For now, let's begin with what Wikipedia says about student loan debt:
The Economist reported in June 2014 that U.S. student loan debt exceeded $1.2 trillion, with over 7 million debtors in default. In 2014, there was approximately $1.3 trillion of outstanding student loan debt in the U.S. that affected 44 million borrowers who had an average outstanding loan balance of $37,172.
This level of debt in and of itself is not a problem -- as long as that debt can be covered by the salaries of the graduates with the debt.
The problem comes when a person borrows a huge amount that has no chance of being repaid given his expected graduating salary.
Here's a perfect example of what I'm talking about:
A Wilmington woman has reached her wits' end trying to pay off nearly $200,000 in student loan debt with a $38,000 salary.
And it's not isolated by any means. I've seen these sorts of situations for years and years and years.
Dave Ramsey deals with this sort of issue all the time. Here he is addressing it on a video:
And if you really want to hear him go off on the subject, listen to him have a meltdown over student loan debt. It's a classic. ;)
I've written several times about how to avoid this problem -- it boils down to making sure the debt is reasonable given the expected earnings upon graduation.
I only had a general suggestion on how to deal with this until I recently ran into this suggestion from Suze Orman:
Kids should not borrow more than they expect to make in their first year out of school.
In other words, if you expect to make $30k in your first year out of school, you shouldn't borrow more than $30k for the degree.
This seems like a good rule-of-thumb to me. What do you think of it?
And for those interested, here's a piece on how to select a college and another on how to save on college.
Posted in College | Permalink | Comments (0)
MSN gives some details on how much the average 40-year-old has saved.
The summary:
Among U.S. households headed by someone aged 44 to 49, the average retirement savings balance is $81,347, according to the Economic Policy Institute. But while that number may not seem all that bad, it's also a bit misleading. A small number of wealthier people who are financially able to set aside very large amounts can easily pull an average up. And in fact, they do. If we take a look at the median retirement savings balance -- signifying that half of these households have more saved, and half have less -- it's just $6,200. And what this tells us is that there are far more 40-something families whose nest eggs are below the average than above it.
Yikes! The median is $6,200???? That is totally pathetic!
But there's more -- they continue:
But even if you're between 44 and 49 and have managed to amass $81,000 or so, you still have some catching up to do. According to Fidelity, by the time you reach your mid-40s, your retirement savings balance should be equal to four times your salary. Since the average salary for American workers in their mid-40s is somewhere around the $50,000 range, to have accumulated just $81,347 at this point means you're not where you need to be. And if you're among the countless Americans who have yet to set aside a single dime for retirement, let this serve as a wake-up call.
In other words, you should have $200k saved by your mid-40's.
IMO this is not anywhere close to being enough (at 4% withdrawal, you can take $8k out per year). I'd prefer at least double that by mid-40s for sure -- hopefully even by the time you reach 40. That would allow $16k per year withdrawal at retirement. Add in savings from 40 to retirement age plus Social Security and you should have more than enough to retire -- and do so early!
One more thing: I suggest you start a side hustle because it can get you to retirement MUCH faster than you can without one. Even if you haven't saved much so far, creating a side business can help you catch up quickly and retire faster.
Posted in Retirement 2011+ | Permalink | Comments (5)
Kiplinger lists five countries where you can retire for $1,000 a month as follows:
1. Thailand
2. Bolivia
3. Nicaragua
4. Malaysia
5. Georgia
Here's my take on this:
Those are my thoughts. What would you like to add?
Posted in Retirement 2011+ | Permalink | Comments (1)
Business Insider lists 19 cities where you can live on $50k per year.
Here are my comments related to this:
I know there are other reasons to live in a spot than money (like family). But if you have the choice and are mobile, moving to a low cost-of living city will help you grow your net worth and ultimately retire much faster than a high-cost city.
Posted in Saving Money 2012+ | Permalink | Comments (2)
CNN Money lists five signs you retired too early as follows:
1. You're bored
2. Your expenses are unpredictable
3. You don't qualify for Medicare
4. You're withdrawing early Social Security benefits
5. Your financial planner isn't happy
Here's my take on these:
Anyway, that's my take on these five. What do you think of them?
Posted in Retirement 2011+ | Permalink | Comments (2)
This piece by financial "expert" Suze Orman came out a bit ago.
Here's the headline statement:
If I resurrected "How Am I Doing?" today, I'd be handing out plenty of failing grades to anyone who thinks they will be able to retire before they turn 70. Yes, you heard me right: 70 is the new retirement age—not a month or year before.
She goes on to elaborate:
Look, I totally get that if you are reading MONEY you're probably a diligent saver. But it's always dangerous to assume you're better off than you really are. You likely have plenty saved up to breeze through 15 years or so of retirement. But, people, if you stop working in your 60s, your retirement stash might need to support you for 30 years, not 15.
Then she details her three steps to retirement:
Step 1: Delay Tapping Social Security Until 70
Step 2: Lay the Foundation Now to Work Longer Later
Step 3: Truly Enjoy a Secure Retirement
Several thoughts on this one:
Anyway, that's my take on her thoughts. What's yours?
Posted in Retirement 2011+ | Permalink | Comments (1)
Just want to wish you all a very happy New Year!
May 2018 be your best year yet!
I'll be back next week. As of now I'm in college football heaven. ;)
Posted in FMF Speaks | Permalink | Comments (3)
Just wanted to wish all FMF readers a very Merry Christmas!!!! I'll be taking the next couple weeks off to enjoy the season.
Hope you all have a great holiday!!
Posted in FMF Speaks | Permalink | Comments (2)
Money magazine ran a piece on "Four Ways to Cut Your Medical Bills" which inspired this response in a letter to the editor:
Here is my list of free measures that can be taken to save on health care costs that are usually underutilized:
1. Don't get overweight.
2. Do get some regular exercise.
3. Don't smoke.
4. Don't overuse alcohol or don't use it at all.
5. Don't use illicit drugs.
6. Do get enough sleep.
7. Do wear your seat belt.
Over my 31 years as a practicing internal medicine physician, most of my patients would have been better off just following these rules.
My thoughts on these:
1. I work out six times per week (three days of weights and three of cardio.) I also have a trainer that I meet with regularly. I have lost 20 pounds and am in the best shape of my life. I know that there are health reasons to be the right weight. I also know that not being overweight can help you save money and earn more as well.
2. In addition to what I said above, I feel better when I exercise too. There are many financial benefits to being healthy and in good shape. For one thing, it makes you more attractive which is one step in making more money.
3. I've been writing a long time about not smoking. Check out this post from 2005. My summary then holds true today: You're paying a lot of money to kill yourself. ;)
4. I don't use alcohol as I have a policy against drinking my calories. Besides, I generally don't like the taste.
5. Uh, no drugs.
6. If you work out, you'll probably sleep better (I do). And sleeping better has a whole host of positive benefits.
7. Of course. Does anyone NOT wear their seat belt these days?
How about you? How do you rate on these seven tips?
Posted in Saving Money 2012+ | Permalink | Comments (1)
Here's a piece from Money that says Americans paid $15 billion in overdraft fees last year. The details:
In 2016, U.S. consumers paid a total of $15 billion in fees for bouncing checks or overdrafting -- which is when a customer tries to make a purchase without enough money in their account to cover the transaction -- according to new data released by the Consumer Financial Protection Bureau.
He also pointed out that the average amount of money consumers overdraft by is about $24 -- but that banks often charge fees of around $34 for each overdraft incident.
I don't know why I'm surprised at stuff like this any longer.
You'd think that after all these years of blogging that I'd have it ingrained how poor Americans are at money management and nothing would shock me.
Then something like this comes along.
$15 billion in WASTED MONEY. That's what this is saying. People spent money they didn't have and ended up not only paying the original bill but actually paid $15 BILLION more.
Ugh. When will these bad decisions end????
Posted in Consumer News | Permalink | Comments (2)
Here's a piece by Money magazine which rates the various meal-kit delivery options:
A summary of what they found:
1. Plated
2. Blue Apron
3. Sun Basket
4. Green Chef
5. Martha & Marley Spoon
6. HelloFresh
Here's my take on them: VERY EXPENSIVE!!!!
Our friend at ESI Money did an analysis on Blue Apron and found these kits cost a fortune:
Exactly. We spent $11k on ALL our meals (at home and eating out) last year. Just one Blue Apron meal a day would put us $3k over that. Yikes!!!
And yet these meals are growing in popularity. Anyone out there using them? If so, why do you do so?
Posted in Saving Money 2012+ | Permalink | Comments (5)
Here's an interesting piece from MSN Money about paint colors and how they impact home selling prices
A summary:
Homes with blue bathrooms — specifically light shades like powder blue or periwinkle — fetched $5,400 more than expected when sold, according to a paint color analysis from real estate website Zillow. The analysis looked at more than 32,000 sold homes, comparing the sales prices of ones painted certain color versus similar properties that had white walls.
Blue paint isn’t just effective at boosting a home’s selling price when used in a bathroom though. Dining rooms painted in darker blue hues will cause a house sell for $1,926 more than anticipated on average, while homes with light blue kitchens and blue bedrooms will garner a price that is $1,809 higher than expected.
But not all paint colors have this positive effect on sales prices. For instance, a brick red dining room will slash a home’s price down by more than $2,000 versus what was expected. Other ill-advised paint choices — at least where a home’s value is concerned — included yellow, pink and brown.
Where a paint color is used is also important. While blues may wow in kitchens and bathrooms, when used in a living room it decreased home prices by $820 on average.
Those poor color choices all pale in comparison to leaving a bathroom’s walls white though. That decision can reduce a home’s sales price by more than $4,000.
Some thoughts here:
Any other thoughts from the facts above?
Posted in Real Estate 2011+ | Permalink | Comments (1)
Just want to wish you and your family a blessed and very happy Thanksgiving.
May we all take a break from talking about money and focus on the things that really make us thankful (like football!). ;)
Have a great, relaxing, joyful, thankful day!
Posted in FMF Speaks | Permalink | Comments (3)
Here's an interesting piece from Time about moving in retirement. Here are some of the stats they share:
And one quite interesting stat:
This topic is a relevant one for us as we transition in life.
As of now we are in a large home in a suburban area of a beautiful city (many people come here for vacation).
We have one child at college and one at home plus we love our location and house. For now we're going to stay put until we see where the kids land, but after that, we have some decisions to make.
Some thoughts we're working through:
But who knows what we'll actually do. Time will tell.
Anyone out there who's been through this decision-making process? What did you do and why?
Posted in Real Estate 2011+, Retirement 2011+ | Permalink | Comments (4)
The following is a guest post from Evan Tarver, a small business and investments writer for Fit Small Business, fiction author, and screenwriter with experience in finance and technology. When he isn't busy scheming his next business idea, you'll find Evan holed up in a coffee shop working on the next great American fiction story.
Not everyone is ready to start a full-time business. Some people just want to start something on the side of their current job so they can generate an additional income stream. This is known as a “side hustle.” What many of these people don’t know is that you can actually buy a franchise that works as a great side gig.
However, finding the right side hustle franchise can be tough. You need to find a passive business that can largely run without you, and you’ll need to follow a specific road map when identifying and buying one. Below are the 7 steps you should take when buying a franchise as a side hustle:
1. Find a Passive Franchise Business
Finding a franchise that can be run on the side while you work another full-time job is the first step to buying your side hustle franchise. Online sources like as FranchiseGator, Franchise Direct, Franchise.org, and Franchising.com can help you find a franchise business that can match your specific needs and personal preference.
When searching these online directories, make sure you consider the following when choosing your side hustle franchise:
Common types of passive income franchises include the following:
2. Do Your Due Diligence
Once you identify a franchise that works as a side hustle, the next thing you’ll want to do is conduct the proper due diligence. Ensure that you choose a franchise that you can actually run passively. For instance, you can likely run a vending franchise on the side no problem, but for a larger operation like a fitness center, you’ll need to go into the finer details.
Here are few of the important things that you need to find out when doing your due diligence:
3. Submit Franchise Application
Franchisors are always interested to know more about you as a prospective franchisee, even if you’re just looking for a side hustle. The initial franchise application process involves a screening procedure where franchisors determine your qualifications and level of interest in the business. In this stage, you should make it clear that you plan to run the franchise as a side-hustle and not as a full-time business.
Franchise application requirements vary from one company to another. Some franchisors require you to submit a basic application and then call to meet with you for a formal presentation and interview. Other franchisors require you to submit a complete application, including business plan and financials.
4. Attend Discovery Day
Franchise discovery day is your opportunity to meet with the franchisor to learn more about the company in an informal setting. Discovery days are often held in the corporate headquarters. During this event, the prospective franchisee learns more about the operation of the business, its products and services, the training and support it provides to the franchisees, and the overall financial investment needed.
This is your opportunity to ensure that the franchise doesn’t demand too much of your time and attention, and that you can run it on the side while keeping your full-time job. You have to make sure that it can operate and generate income even if you cannot always be there physically to manage the business.
5. Pay the Franchise Fee
Franchises typically charge what’s known as a franchise fee for starting a new franchise. You can think of it as a startup cost. For example, McDonald’s charges their franchisees as much as $750,000 or more to start a new franchise. For KFC, the fee can run you $1.5 million plus. However, for a side hustle franchise, the franchise fee will be much less.
In fact, you can probably find a franchise that costs between $0 - $25k to start. Which means that there are a wealth of financing options available to you. For example, a short-term line of credit would cover the necessary startup costs. However, if you have a retirement account, you can use a Rollover for Business Startups (ROBS) and cover the franchise fee with retirement savings, penalty and tax-free. No need to go into debt.
6. Hire Competent Employees
Hiring competent employees is another very important - and perhaps the most challenging - step in this process. Since you won’t always be there to supervise and manage your employees, you need to make sure you hire the right people who have the right skills and who you can trust to run your franchise if/when you’re not there.
Determine the positions that you need to fill and the skills needed for the job. You can learn this during the training. The franchise will tell you the necessary qualifications you need and when to hire. You can then advertise your job vacancies through different online HR platforms like Indeed.com, Dice.com, and Allretailjobs.com. Be sure to meet and interview your potential candidates so you can personally assess their qualifications.
For example, if you choose to start a food cart franchise, you need to ensure that the people you hire can maintain the sanitation of your area even with less supervision.
7. Open for Business
Considering everything is settled, the final step is to get your franchise ready for business. At first, you may need to spend more time and give more attention to your side-hustle franchise while your employees are still getting themselves familiar with the operation. This is also the time where you actually see whether the people you hired are really competent to run the business on their own.
While this business is only part-time, you still have to set a few hours a week to monitor it. The franchise is still yours, after all. This means you must still provide it with the attention and effort that it needs so it will become successful. Send your employees to ongoing training as needed, meet with them regularly, and monitor your cash flow consistently.
Bottom Line
When you want to be your own boss but are not yet ready to leave your full-time job and let go of your fixed monthly income, starting a side-hustle franchise is a good option. All you need to do is find a franchise that can be run on the side and hire the right people who can be trusted to run your business.
Posted | Permalink | Comments (1)
Investopedia lists eight ways retirement has changed in the last 20 years as follows:
1. Rising Retirement Age
2. More Retirees Working
3. Less From Employers
4. Lower Savings-Account Balances
5. Retiring Abroad
6. Inheriting Less
7. Living Longer
8. Healthcare Costs Rising
My thoughts on these:
1. As I've posted time and time again, people are saving less which means they need to work longer. Hence the rising retirement age. This is surprising in some ways since I read so many "retire early" blogs that the average seems like it's getting lower, but it's not.
2. Again, it's savings related. If you can only fund a portion of your retirement from savings, the rest needs to come from work.
3. You are responsible for your retirement even if you do have an employer plan.
4. Been saying this for a long time now -- Americans are saving less. Said another way, they are spending more during their working years.
5. I think there are two kinds of people who retire abroad: 1) those who need the lower cost-of-living to make the numbers work and 2) those who want to see the world a bit and experience life somewhere new.
6. Does anyone count on inheritances these days? Surely they aren't part of a retirement plan for most, right?
7. Of course. We are living longer and thus...
8. ...paying more for healthcare. I think both the annual costs are going up PLUS people are living longer, making it a bigger portion of overall retirement costs.
Anyone want to add anything else?
Posted in Retirement 2011+ | Permalink | Comments (4)
Money lists four questions to ask yourself before retiring as follows:
My take on these:
To me, this could have easily been titled "two questions to ask yourself before retiring" (the first two) and it would have covered the most important points.
Your thoughts?
Posted in Retirement 2011+ | Permalink | Comments (0)
Nerd Wallet recently did a study on how much cash Americans carry. The highlights:
More than three-quarters of respondents to a recent U.S. Bank survey said they never carry more than $50 in currency with them.
Nearly one-quarter said they keep $10 or less.
Ok, I am waaaaaaaaaay in the minority here.
I usually carry $100 or more on a money clip.
It's probably because of my "just in case" mentality that I do so. Also it's easy to do as my money clip is combined with my credit card holder, so why not?
How about you? How much cash do you usually carry?
Posted in Money Stats | Permalink | Comments (3)
Welcome to this week's edition of Star Money Articles.
Money Q&A says investing in a 401k is a no-brainer.
ESI Money suggests starting with a high salary.
Big Law Investor tells of a fate worse than death.
Life Zemplified tells us not to let our big but get in the way.
Picky Pinchers says to move!
Have a GREAT weekend!!!
Posted in Star Money Article | Permalink | Comments (0)
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