Combine above-average intelligence, hard work and self-confidence, and you’ll have a stellar career—and truly terrible investment results.
WHAT DOES IT take to succeed financially? Pundits love to parse stock market returns, dig into the minutiae of Roth conversions and debate retirement withdrawal strategies. Yet, when asked what’s the most important financial virtue, almost all give the same answer: great savings habits.
That mundane reason certainly explains my financial success. Yes, I’ve benefited from owning index funds, holding a stock-heavy portfolio and buying enthusiastically during market declines. But all of that has been gravy.
WE HAVE a hardwired biological incentive to promote the wellbeing of our kids, so that the family line will continue. This is the selfish gene in action. Yet modern human behavior suggests that the wiring may be at least a little faulty—for three key reasons.
Environmental. Our domination of natural resources continues to create tremendous improvements in global wealth, but it sometimes comes at the expense of the only confirmed habitable space that’s practical for our species.
FOR MANY YEARS, I didn’t own bonds or anything similar, except some bank certificates of deposit. Frankly, I was clueless.
My first dilemma: Should I invest in bonds if I have a mortgage? It didn’t make sense to me to borrow from the bank and, at the same time, lend out my money at a lower interest rate to a bond issuer. I felt I should pay off my mortgage first. A few friends and even a financial advisor recommended otherwise.
I’M GUESSING our credit cards are excited. It’s the holidays, so they’ll get to see the light of day more often. December is a time for spending, for throwing caution to the wind, for rationalizing what we and our children need or deserve. It doesn’t help that we’re barraged with advertising tugging at our heart strings.
Perhaps it’s time to counterattack, to apply logic and to think not about the joys of Christmas morning presents or the next Chanukah gift,
TRADITIONAL or Roth retirement accounts? Below are eight key questions to ask. Your decision should be based on your answers to these eight questions—including the importance you put on each.
Do you want a tax break now? Assuming you qualify, a traditional IRA allows you to deduct your contributions, resulting in a lower taxable income for the year. Ditto for tax-deductible contributions to an employer’s 401(k) or 403(b) plan. But with Roth accounts, you don’t get this tax benefit.
BEEN DISTRACTED by Thanksgiving? Maybe it’s time to catch up on your reading—by checking out last month’s seven most popular articles:
Are you on Medicare and own a Medigap policy? James McGlynn argues that Plan G is the way to go—assuming you can qualify.
“There’s no need to think about my money because, according to Carl, I’m not going to run out,” writes Dennis Friedman. “For the first time in my life, I realize I’m financially secure.”
AMONG AMERICANS with retirement accounts, 49% say they have withdrawn money before retirement age, found a Bankrate survey. The most common reasons cited were unemployment, medical bills or other unplanned expenses, and debt repayment.
NO. 21: A HIGH income makes it easier to grow wealthy. But no matter how much we earn, we’ll struggle to amass a healthy nest egg—unless we learn to spend less than we earn.
NO. 125: BORROWING early in our adult life can be a rational strategy. It allows us to buy items for which we don’t currently have the cash, including college educations, homes and cars, thereby jumpstarting our financial life. But we should be careful not to overdo it—and we should aim to get all of our debts paid off before we retire and give up our paycheck.
DON’T BUY a distribution. Toward year-end, stock mutual funds—especially active funds—can make large distributions, on which you’ll owe taxes if you hold the fund in a taxable account. This shouldn’t stop you from making a regular monthly investment. But if you’re looking to add a big sum to a fund, find out the distribution’s size—and, if it’s large, consider delaying.
MORAL HAZARD. When we know someone else will pick up much or all of the financial tab, it’ll often change our behavior. For instance, those with health insurance are quicker to seek medical help, while those with long-term-care insurance are more inclined to enter nursing homes. The downside of this moral hazard: It means insurance costs more.
WHAT DOES IT take to succeed financially? Pundits love to parse stock market returns, dig into the minutiae of Roth conversions and debate retirement withdrawal strategies. Yet, when asked what’s the most important financial virtue, almost all give the same answer: great savings habits.
That mundane reason certainly explains my financial success. Yes, I’ve benefited from owning index funds, holding a stock-heavy portfolio and buying enthusiastically during market declines. But all of that has been gravy.
WE HAVE a hardwired biological incentive to promote the wellbeing of our kids, so that the family line will continue. This is the selfish gene in action. Yet modern human behavior suggests that the wiring may be at least a little faulty—for three key reasons.
Environmental. Our domination of natural resources continues to create tremendous improvements in global wealth, but it sometimes comes at the expense of the only confirmed habitable space that’s practical for our species.
FOR MANY YEARS, I didn’t own bonds or anything similar, except some bank certificates of deposit. Frankly, I was clueless.
My first dilemma: Should I invest in bonds if I have a mortgage? It didn’t make sense to me to borrow from the bank and, at the same time, lend out my money at a lower interest rate to a bond issuer. I felt I should pay off my mortgage first. A few friends and even a financial advisor recommended otherwise.
I’M GUESSING our credit cards are excited. It’s the holidays, so they’ll get to see the light of day more often. December is a time for spending, for throwing caution to the wind, for rationalizing what we and our children need or deserve. It doesn’t help that we’re barraged with advertising tugging at our heart strings.
Perhaps it’s time to counterattack, to apply logic and to think not about the joys of Christmas morning presents or the next Chanukah gift,
TRADITIONAL or Roth retirement accounts? Below are eight key questions to ask. Your decision should be based on your answers to these eight questions—including the importance you put on each.
Do you want a tax break now? Assuming you qualify, a traditional IRA allows you to deduct your contributions, resulting in a lower taxable income for the year. Ditto for tax-deductible contributions to an employer’s 401(k) or 403(b) plan. But with Roth accounts, you don’t get this tax benefit.
BEEN DISTRACTED by Thanksgiving? Maybe it’s time to catch up on your reading—by checking out last month’s seven most popular articles:
Are you on Medicare and own a Medigap policy? James McGlynn argues that Plan G is the way to go—assuming you can qualify.
“There’s no need to think about my money because, according to Carl, I’m not going to run out,” writes Dennis Friedman. “For the first time in my life, I realize I’m financially secure.”
AMONG AMERICANS with retirement accounts, 49% say they have withdrawn money before retirement age, found a Bankrate survey. The most common reasons cited were unemployment, medical bills or other unplanned expenses, and debt repayment.
NO. 21: A HIGH income makes it easier to grow wealthy. But no matter how much we earn, we’ll struggle to amass a healthy nest egg—unless we learn to spend less than we earn.
DON’T BUY a distribution. Toward year-end, stock mutual funds—especially active funds—can make large distributions, on which you’ll owe taxes if you hold the fund in a taxable account. This shouldn’t stop you from making a regular monthly investment. But if you’re looking to add a big sum to a fund, find out the distribution’s size—and, if it’s large, consider delaying.
NO. 125: BORROWING early in our adult life can be a rational strategy. It allows us to buy items for which we don’t currently have the cash, including college educations, homes and cars, thereby jumpstarting our financial life. But we should be careful not to overdo it—and we should aim to get all of our debts paid off before we retire and give up our paycheck.
MORAL HAZARD. When we know someone else will pick up much or all of the financial tab, it’ll often change our behavior. For instance, those with health insurance are quicker to seek medical help, while those with long-term-care insurance are more inclined to enter nursing homes. The downside of this moral hazard: It means insurance costs more.