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Updated: 2017-09-20T05:05:00-04:00

 



Busy Isn’t Better: How Our Go-Go-Go Lifestyles Hurt Our Finances

2017-09-20T05:05:00-04:00

This post is written by Chelsea, an investment professional and personal finance nerd who founded the personal finance blog Mama Fish Saves. Over at Mama Fish Saves Chelsea aims to provide families with the simple answers to all the money questions they didn’t learn in school, including the basics of budgeting, investing, increasing income, and raising financially smart kids! Busy has become a lifestyle. A false virtue synonymous with important and valued. It’s invaded our workspaces, our homes, and our relationships by making every moment that isn’t multi-tasked somehow unproductive. The answer to, “How are you doing?” has not so...This post is written by Chelsea, an investment professional and personal finance nerd who founded the personal finance blog Mama Fish Saves. Over at Mama Fish Saves Chelsea aims to provide families with the simple answers to all the money questions they didn’t learn in school, including the basics of budgeting, investing, increasing income, and raising financially smart kids! Busy has become a lifestyle. A false virtue synonymous with important and valued. It’s invaded our workspaces, our homes, and our relationships by making every moment that isn’t multi-tasked somehow unproductive. The answer to, “How are you doing?” has not so subtly shifted from, “Doing well, thanks, how are you?” to “Oh man, I am so busy!” Adverse aspects of the busy mindset have been covered in the media and by productivity gurus everywhere. However, we may have overlooked a major part of our lives that faces a long-term risk from all that go-go-go: our finances. Busy means we prioritize the urgent over the important Have you ever had a major task to do and suddenly you find yourself changing that flickering light bulb in the kitchen or cleaning the tile grout in your shower? Sure, those things need to be done. They’ve been on your to-do list for days! But do they need to be done now? Probably not. This “productive procrastination” dynamic is multiplied tenfold when the necessary task is something that won’t impact us for 20 or more years. Most often, our retirement. A few weeks ago, a good friend reached out to me to ask if I could look at her and her spouse’s investments. They worked with a financial advisor from their brokerage a few times a year but wanted a second opinion on fund choice and asset allocation. When she sent over their figures, I was shocked. While she was invested in all index and target date retirement funds, she and her husband were paying a weighted average of 1.15% in fees! I called her immediately to tell her that we could talk about asset allocation, but she had a bigger problem. I explained that since their $54,000 in investments were all in Roth and Rollover Traditional IRAs, they could roll everything into Vanguard, with no tax impact, and lower their fees from 1.15% to 0.16% in an equivalent Target Date fund. Plus, if she was willing to try a three-fund portfolio we could reduce their costs to a weighted average of 0.05%! Even if she and her husband never invested another penny, this simple move would mean over $50,000 more in their retirement account in 25 years. She told me she had to talk to her husband and she would get back to me. Over a week later, I hadn’t heard from her. When I gave her a call, she apologized and said they hadn’t had time to think about it. “We’re just really busy right now. Can we talk about it again in a few months?” I love her dearly, but I won’t be holding my breath waiting for that call. Just like that estate planning lawyer’s business card has been gathering dust on my desk since my son’s birth, moving investments or writing wills tends to take a back seat to all the little things that seem more urgent. When we cram our schedules full each and every day, down to the most minute activities, we don’t leave ourselves time to consider the future. We don’t have the mental capacity or mental quiet to question the tasks we are doing. We just do. As the old saying goes, “too busy chopping wood to sh[...]



Savings Rate is More Important than Investment Return

2017-09-18T05:05:00-04:00

Here's a piece from MarketWatch saying savings rate is more important than investment return. A summary of their thoughts: The secret to building wealth has less to do with returns and more to do with your savings rate, according to analysts at Pension Partners. In other words, the amount of money you contribute to your retirement fund is far more important than what investment vehicles the money is parked in, as you can control the former but not the latter. It makes sense intuitively. Saving $20,000 a year will grow your wealth a lot faster than saving $10,000 a year....Here's a piece from MarketWatch saying savings rate is more important than investment return. A summary of their thoughts: The secret to building wealth has less to do with returns and more to do with your savings rate, according to analysts at Pension Partners. In other words, the amount of money you contribute to your retirement fund is far more important than what investment vehicles the money is parked in, as you can control the former but not the latter. It makes sense intuitively. Saving $20,000 a year will grow your wealth a lot faster than saving $10,000 a year. But even incremental savings-rate increases play a far bigger role than corresponding increases in the rate of return. To illustrate the importance of savings vis-à-vis investing, Charlie Bilello, director of research at Pension Partners LLC, ran some numbers on what would happen to your wealth if you increased your savings rate by 1% and correspondingly what would happen if the rate of return on a portfolio increased by 1%. Bilello assumed a median U.S. household income of $58,000, which after taxes leaves $49,300 to spend. Saving only 1% of this income every year for 30 years at a 10% return will lead to an accumulation of $81,096. That number is less than your wealth after saving 5.5% of income at a meager 1%, which would grow to $94.319. Ok, let's review a bit: There are three parts to the overall performance of an investment: the amount you save, how long you invest it for, and the return rate Of these three, you can control two of them: how much you save and how long you invest. The best way to maximize your investments is to let them compound over a long period of time.  After that, the amount you invest is most important. There's really very little you can do about return rate. IMO the best option for it is to simply invest in index funds. That way you'll beat 95%+ of the investors out there. Even though it's the least important of the three, most people focus on return rate. It also dominates the financial media. Yes, it's the most exciting of the three (trying to beat everyone else), but it's way over-emphasized by the majority of people. My best advice is to save as much as you can for as long as you can, putting what you save in index funds. That's it. [...]



Star Money Articles for the Week of Sept 11

2017-09-15T05:05:00-04:00

Welcome to this week's edition of Star Money Articles. Mr 1500 lists six phrases that will doom your finances. The Retirement Manifesto is prepared. The White Coat Investor has a tale of two budgets. Bigger Pockets details the first month of early retirement. Retire by 40 lists ten enjoyable side jobs during retirement (and here are more side hustle gigs worth considering). My purchase of the week is Nightwing Vol. 1: Better Than Batman (Rebirth) . How cool does this comic look???!!! Have a GREAT weekend!!!

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

Mr 1500 lists six phrases that will doom your finances.

The Retirement Manifesto is prepared

The White Coat Investor has a tale of two budgets.

Bigger Pockets details the first month of early retirement.

Retire by 40 lists ten enjoyable side jobs during retirement (and here are more side hustle gigs worth considering).

My purchase of the week is Nightwing Vol. 1: Better Than Batman (Rebirth)(image) . How cool does this comic look???!!!

Have a GREAT weekend!!!




How America Pays for College

2017-09-13T05:05:00-04:00

Here are some interesting stats on how America pays for college from SallieMae as well as my thoughts on them: 35% of costs covered by scholarships and grants 23% covered by parent income and savings 19% covered by student borrowing 11% covered by student income and savings 8% covered by parent borrowing 4% covered by relatives and friends A few things to comment on here: We are probably more like 25% scholarships (no grants due to income) and the rest paid by us (parents). As for borrowing, students just need to make sure they are borrowing an appropriate amount for...Here are some interesting stats on how America pays for college from SallieMae as well as my thoughts on them: 35% of costs covered by scholarships and grants 23% covered by parent income and savings 19% covered by student borrowing 11% covered by student income and savings 8% covered by parent borrowing 4% covered by relatives and friends A few things to comment on here: We are probably more like 25% scholarships (no grants due to income) and the rest paid by us (parents). As for borrowing, students just need to make sure they are borrowing an appropriate amount for the degree (and hence the job/income) they will get when they graduate. Parent borrowing? Nope. Why is this even an option? I need to find some friends and relatives willing to kick in some college $$$$$. $23,757 is the average amount families paid in 2017 This is a bit less than what we'll spend each year, but then again we aren't borrowing and have no need-based scholarships. 45% say cost has no relationship to the quality of education Interested to hear your thoughts on this, but I think that costs CAN impact quality of education but there are also some great-value schools that have awesome educations. 69% eliminated a college from consideration due to its cost As they should. If it's not a good investment, then move on to one that is. 86% of families always knew their child would go to college but only 39% of families made a plan to pay for college This does not surprise me in the least. Americans on average are poor financial planners even when they know that an expense is coming down the road. That's my take on these -- what do you think? [...]



Where You Live Can Kill Your Finances

2017-09-11T05:05:00-04:00

I always find these sorts of pieces entertaining. Here's a piece from MSN about a couple who finds it difficult to make ends meet even though they earn $125k per year. The overview: Sharon Winick, 49, and her husband Michael have three children and own a home in Chevy Chase, Maryland, where Michael is a network administrator. Sharon is a paralegal turned stay-at-home mom. Between his work, her occasional side jobs and their investments, they bring in roughly $125,000 a year. Yet they struggle to make ends meet. "The amount of money we spend every month is more that we...I always find these sorts of pieces entertaining. Here's a piece from MSN about a couple who finds it difficult to make ends meet even though they earn $125k per year. The overview: Sharon Winick, 49, and her husband Michael have three children and own a home in Chevy Chase, Maryland, where Michael is a network administrator. Sharon is a paralegal turned stay-at-home mom. Between his work, her occasional side jobs and their investments, they bring in roughly $125,000 a year. Yet they struggle to make ends meet. "The amount of money we spend every month is more that we make, it's been that way since we had our first daughter," Winick said. The main reason they are struggling: they live in a high cost-of-living area. Here's a list of the highest-cost cities in America. Number 6 is Washington, D.C., the area where the couple lives. Here's what the article said about the costs there: Housing-related expenses including rents and mortgages are by far the most burdensome at more than double the national average. Imagine how your budget would be impacted if your housing costs, which are generally the highest costs a family has, were DOUBLE what they are now. That's a budget buster for sure! In the rest of the U.S. where most of us live, $125k can be quite a large amount. It is, after all, over twice what the average family in America earns, so somewhere you can certainly make it on $125k. Yes, where you live has a big impact on your net worth -- for better or for worse. My recommendation is to earn a high income like this couple does, but do it in a low cost-of-living city. If you can do that (and yes, it can be done) you can become wealthy. [...]



Star Money Articles for the Week of Sept 4

2017-09-08T05:05:00-04:00

Welcome to this week's edition of Star Money Articles. Physician on Fire lists the ultimate hedge against future uncertainty. Life Zemplified tells how to recover after a setback. ESI Money offers a great example of working the ESI scale. Money Q and A suggests a retirement rehearsal. Retire by 40 asks if your risk tolerance is too high. My purchase of the week is Assassin's Creed Origins - PlayStation 4 . Can't wait for this game to come out! Have a GREAT weekend!!!

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

Physician on Fire lists the ultimate hedge against future uncertainty.

Life Zemplified tells how to recover after a setback.

ESI Money offers a great example of working the ESI scale.

Money Q and A suggests a retirement rehearsal.

Retire by 40 asks if your risk tolerance is too high.

My purchase of the week is Assassin's Creed Origins - PlayStation 4(image) . Can't wait for this game to come out!

Have a GREAT weekend!!!




How to Come Back from Bankruptcy

2017-09-07T05:05:00-04:00

The following post is from FMF contributor Jess Holmes. After spending several years fighting with creditors, you decided to file for bankruptcy. You never thought to find out how long bankruptcy can affect your credit score. And now that your credit score and confidence have taken a hit, you feel hopeless. But don’t fret because there’s a light at the end of the funnel. Keep reading to discover how to start rebuilding your financial life. Ways to Recover From Bankruptcy 1. Shift your mindset If you’re going to pick up the pieces and rebuild, a mindset shift is paramount. It’s...The following post is from FMF contributor Jess Holmes. After spending several years fighting with creditors, you decided to file for bankruptcy. You never thought to find out how long bankruptcy can affect your credit score. And now that your credit score and confidence have taken a hit, you feel hopeless. But don’t fret because there’s a light at the end of the funnel. Keep reading to discover how to start rebuilding your financial life.  Ways to Recover From Bankruptcy 1. Shift your mindset If you’re going to pick up the pieces and rebuild, a mindset shift is paramount. It’s normal to feel like a failure. But the goal is to focus on getting to the root of the problem so you can move forward. 2. Create a spending plan  Once you’re committed to improving your financial situation, create a budget. A few factors to keep in mind: Expenses should always be lower than income. If not, trim unnecessary expenses. Filing for bankruptcy should have alleviated some of those debt payments.  So, use the extra money to pay off other debts and start saving. Always be realistic with your expenses and income or you’re setting yourself up for failure. 3. Build a cushion Each time you get paid, it’s important to set aside a part of your income into a savings account. As the balance builds, you’ll have an even greater cushion to fall back on if a financial emergency arises. Even better, you won’t have to rely on debt to get by or put yourself at risk of falling back into the same trap that led to the initial bankruptcy. 4. Start rebuilding credit  Are you thinking that filing for bankruptcy bans you from the credit world for several years? Think again. The easiest way to start rebuilding credit is by using credit responsibly. There are lenders that will give you a second chance without charging a fortune in interest. But it’s usually in the form of a secured credit card or loan product. Both need a deposit for collateral in the event you default. Start with your financial institution when researching options. They may be more willing to approve you on the strength of your positive account history. But be sure to keep your balances low to derive the greatest benefit. You could also become an authorized user on some else’s credit card to start rebuilding credit. You’ll benefit from positive account activity without being liable for the debt.  Lastly, don’t forget to see investigate chexsystems to see if have an account listed. It may have been removed but if it hasn’t, now is the time to take care of it.  5. Avoid late payments at all costs Payment history accounts for a whopping 35 percent of your credit score. In fact, one late payment on a credit card or installment account can tank your credit score by up to 100 points. Even worse, the negative mark will remain on your credit report for seven years. So, if you’re serious about rebuilding your credit score post-bankruptcy, you can’t afford to let accounts slip through the cracks. Instead, use your budget to stay on top of your expenses and due dates. You may also want to take it a step further by automating payments to avoid missing any due dates. And if you know you’re going to be short on funds, call the creditor in advance to set up a payment arrangement. 6. Keep an eye on your c[...]



Reach Your Goals Together

2017-09-06T05:05:00-04:00

The following is a guest post from Mr. Xyz from Our Financial Path. We met about 4 years ago and from day one, it was love at first sight. We have a lot in common and enjoy spending time together but what quickly found out, is that we had very different finances. I enjoyed spending and used to go shopping just to pass time while she, to my great surprise, had a healthy savings account. I was brought up in a very financially savvy, frugal, middle-class family who thought me about the importance of savings at a very young age...The following is a guest post from Mr. Xyz from Our Financial Path. We met about 4 years ago and from day one, it was love at first sight. We have a lot in common and enjoy spending time together but what quickly found out, is that we had very different finances. I enjoyed spending and used to go shopping just to pass time while she, to my great surprise, had a healthy savings account. I was brought up in a very financially savvy, frugal, middle-class family who thought me about the importance of savings at a very young age but when I started making good money, I did spend every penny I earned. I just did not have a goal, anything to look up to. Then, I discovered the Financial Independence movement, a whole concept that allows one to be financially free relatively quickly (a decade or so) by saving a large part of income and investing it in the markets for long-term prosperity. I was amazed by the concept and math behind it so I immediately showed my spouse and started planning our future for early retirement in the next ten years (we are currently saving over half our incomes). Getting her on board was just the first step, and then we have to follow through. Having a grand, long-term, goal is great but it is the little things that will eventually add-up to it. Working on Money Together Communicate with your spouse to see if you are on the same track. Without communication, you will never know if you share the same goals and values. If you are both savers and wish to reach financial independence early, you can work together toward that goal and speed up the journey. If you are both natural savers like me and my wife, having a common goal will motivate you and keep you accountable. The thing is; things do not cost twice as much when you are two living together. Housing, for example, is much cheaper as a couple since you can split the expenses while basically living in the same space as when you were single. You might also end up saving a ton of alcohol and bars now that you are out of the single's scene now! If you both have different goals, it can work out too. Keeping separate finances and separate goals might be the best thing to do if you and your spouse are not in the same boat. If you are ready to sacrifice a little to buy yourself freedom later, that’s great, but not everyone is ready to do so and that's completely fine. Instead of arising constant stress and concerns about your finances, simply do your own thing and let your spouse manage their own side of things. Even if we share the common goal of reaching financial independence early, we use the three-bucket system. Your Bucket - My Bucket - Our Bucket With spending buckets, we each have our own separate bank account and our own spending but share a third bucket for the shared expenses such as our mortgage, bills, and maintenance. This lets us focus on our long-term objectives rather than nit-picking each other’s spending every time a few dollars are spent. The easiest budget to follow is having no budget at all. We simply automate our savings to max out our registered plans (401k, Roth IRA…), attain our desired savings rate, and then we live off the rest. Total Income – Total Savings = Your Budget for the Month Spending only what is left after your savings forces you to reach your goals but it only works if you do not go into [...]



Why Americans are not Saving for Retirement

2017-09-05T05:05:00-04:00

Here's a piece from GoBankingRates on how Americans are saving for retirement. The highlights: The most common reason survey respondents gave for not having any retirement savings is, "It is not a priority for me." About 40 percent selected this option, which suggests everyday expenses are likely taking priority over saving for the future. "We're so focused on today," said Tom Zgainer, CEO of America's Best 401k, a workplace retirement plan provider. As a result, many people aren't thinking about how they'll be able to cover their expenses in the future when they stop working. "It's astounding that we're not...Here's a piece from GoBankingRates on how Americans are saving for retirement. The highlights: The most common reason survey respondents gave for not having any retirement savings is, "It is not a priority for me." About 40 percent selected this option, which suggests everyday expenses are likely taking priority over saving for the future. "We're so focused on today," said Tom Zgainer, CEO of America's Best 401k, a workplace retirement plan provider. As a result, many people aren't thinking about how they'll be able to cover their expenses in the future when they stop working. "It's astounding that we're not thinking forward," he said. The second most common response also shows a lack of foresight. Nearly 22 percent of respondents said they have no retirement savings because they raided their accounts for a financial emergency. It's not surprising, though, that so many had to tap their retirement funds to cover emergencies. Another GOBankingRates survey found that one-third of Americans have $0 in a savings account — which means they likely don't have cash saved for emergencies. Lack of access to a workplace retirement plan is also a big reason many Americans don't have savings. Almost 19 percent of survey respondents said, "My employer does not offer a retirement savings plan." But the fact that they don't have any retirement savings suggests they might not be aware there are several ways to save for retirement without a 401k, including a traditional IRA and Roth IRA. Several thoughts here: The comments above reflect the house of cards most Americans have for their finances. They spend like crazy, don't have an emergency fund, and think a lot more about today than 20 years down the road. Sure, there are some who have no choice and literally can't afford to save for retirement, but the majority certainly can. They simply don't see it as a priority compared to driving new, fancy cars, living in a big house, and having all the latest electronic gadgets. I'm wondering what people consider to be a "financial emergency." To me, a medical expense or major repair is an emergency. Getting a new big-screen TV to watch the Super Bowl or taking that family trip to the Caribbean do not count as emergencies IMO. I had access to a company retirement plan throughout my career. But I always saved additional dollars outside of it. If I hadn't had a plan, I would have saved even more in brokerage accounts, investing as much as I could in index funds. If you don't have a plan, don't let that stop your retirement savings! There are plenty of other options. Much of this goes back to a lack of financial education as well as not implementing a financial plan. People simply aren't thinking about and taking action on retirement. But one day they will need to retire, and a cold, hard reality is going to hit them. [...]



Star Money Articles for the Week of Aug 28

2017-09-01T05:05:00-04:00

Welcome to this week's edition of Star Money Articles. ESI Money wonders if travel hacking is worth it. Financial Samurai suggests you conform or perish. Picky Pinchers hates 9-to-5. Budgets are Sexy asks if you're saving like the Titanic. Money Boss is enjoying his time freedom. My purchase of the week is Pro Packing Cubes - 6 Piece Lightweight Trave Cube Set - Organizers and Compression Pouches System for Carry-on Luggage, Suitcase and Backpacking Accessories . I'm trying to be an organized, light traveler and hope these will help! Have a GREAT weekend!!!

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

ESI Money wonders if travel hacking is worth it.

Financial Samurai suggests you conform or perish.

Picky Pinchers hates 9-to-5.

Budgets are Sexy asks if you're saving like the Titanic.

Money Boss is enjoying his time freedom.

My purchase of the week is Pro Packing Cubes - 6 Piece Lightweight Trave Cube Set - Organizers and Compression Pouches System for Carry-on Luggage, Suitcase and Backpacking Accessories(image) . I'm trying to be an organized, light traveler and hope these will help!

Have a GREAT weekend!!!