FREE NEWSLETTER

The markets give—and inflation, taxes and investment costs take away. But where does that leave you?

Never Too Late

FOLKS OFTEN feel that, because they’re a certain age, their time has passed and it’s too late for them to pursue new goals, whether it’s saving for retirement or starting their dream business. But I believe we can reinvent ourselves at any age.
Last year, I listened to an NPR podcast that featured an interview with Bob Moore, founder of Bob’s Red Mill. You’re probably familiar with Bob’s Red Mill: Their products are now sold in most grocery store health-food sections.

Read more »

Rolling the Dice

IN JANUARY 1946, a man named Stanislaw Ulam found himself confined to a hospital bed, having suffered an encephalitis attack. A brilliant scientist and a veteran of the Manhattan Project, Ulam wasn’t the type to sit idly while he recuperated. Instead, after playing innumerable games of solitaire to pass the time, Ulam began to examine the statistical aspects of the game.
Among the questions he asked: How can you accurately estimate the probability of winning a game?

Read more »

45 Steps to Success

WHAT DOES a good financial life look like? Here’s a quixotic roadmap—comprised of 45 steps:

Stuff part of your babysitting or lawn mowing money in a Roth IRA. Suggest to your parents that they should encourage this sort of behavior—by subsidizing your contributions.
Get a credit card when you head off to college, charge $5 every month and always pay off the balance in full and on time. You’ll soon have an impressive credit score.

Read more »

Applying Pressure

TO BORROW from the movie Casablanca, we are all “shocked, shocked” at the college admissions scandal recently uncovered by the FBI. We are seemingly united in condemning the extremes that these wealthy—and sometimes famous—parents went to, as they sought college admission for their children. We’re talking fraudulent inclusion on sports teams, submitting fake standardized test scores and outright bribery.
But the idea of parents gaming the system for their child’s benefit is nothing new to those of us in high school education.

Read more »

Beefing Up Security

MANY OF US have little more than a weak, reused password standing between our financial assets and a remote attacker—one armed with powerful tools and a database of passwords from security breaches. This is a losing battle. It’s the most likely way for weak computer security to put our finances at risk.
Think this can’t happen to you? I’ll bet you have at least one password taken in a big security breach. A quick way to find out is entering your email address at Troy Hunt’s HaveIBeenPwned site.

Read more »

What I Value

A WAR IS RAGING. On one side of this conflict is the individual and, on the other, society and culture. To the victor goes your attention and your money.
I submit you’ll win through intentionality—and you’ll lose if you let society determine what’s of greatest value to you. I was on the losing side for many years.
As an undergraduate, I thought I wanted to be a lawyer. Why? Not because I had a deep passion for the law.

Read more »

Money Guide

Margin Loans

IF YOU HOLD your investments in a margin account at a brokerage firm, you can typically take out a margin loan equal to 50% of the account’s total value. This is the so-called initial margin requirement, and it effectively allows you to control investments worth twice as much as you could otherwise afford. A margin loan doesn’t have to be used to purchase additional investments. Some folks use margin loans to buy cars or pay the kids’ college bills, in part because the alternative may be to sell winning stocks and thus trigger capital gains taxes. Your interest costs, however, are only tax-deductible if the margin loan is used to buy taxable investments. Whatever your reason for borrowing, a margin loan has the potential to boost your returns if the market rises—and magnify your losses if it goes against you. Once you take out a margin loan, make sure your account continues to meet the margin maintenance requirements. Under FINRA rules, a margin loan must equal no more than 75% of your account’s total value. But brokerage firms can impose their own stricter rules, often insisting the loan be no more than 70% of the account’s value and sometimes less. Suppose you deposited $10,000 in a brokerage account and then borrowed another $10,000 to buy additional stocks, so you controlled $20,000 of shares. If your stocks fall 29%, to $14,200, your $10,000 loan would equal more than 70% of the account’s total value—and, depending on the brokerage firm’s rules, you could receive a margin call. At that juncture, you would need to reduce the loan as a percentage of the account’s total value by either adding securities or cash to the account or by selling holdings to repay part of the margin loan. Be warned: Your brokerage firm may not call you before selling securities to meet margin requirements, so it’s best to monitor the account carefully and take action before a margin call is a possibility. Next: Loans From 401(k)s Previous: Overdraft Fees Blog: Stocking Up
Read more »

Numbers

AMONG THOSE ages 23 to 38 who have had student loans, 73% have delayed one or more major financial milestones, found a Bankrate survey. This includes saving for emergencies (38%), buying a home (31%) and saving for retirement (25%).

Newsletter

Got to Believe

AS I’VE BUILT out HumbleDollar.com over the past few years, I’ve come to view the site not merely as a place where folks can learn about financial issues, but as a community that thinks about money in a unique way.
This shows up repeatedly in articles from guest contributors, with their focus on topics like spending thoughtfully, helping family, behavioral finance, indexing and achieving financial freedom. It’s a community where folks are trying to be rational about money,

Read More »

Archive

Retire to What?

AS I PREPARED to retire at the relatively young age of 55, it was important to me not to become isolated, not to lose touch with the world beyond my home. My husband continues to work, leaving me on my own for much of the day. I consider myself a social person. All my jobs have involved working with employees and customers, from my first job as a delicatessen cashier through to running my own landscape maintenance company with 25 employees and hundreds of accounts. My father retired at the same age. He moved to the Florida Keys, where he became socially isolated, spending much of his time alone.  He once told me that he hadn't spoken to anyone in days. And so, as I began a three-year transition into retirement, I wanted to ensure that I maintained touch with the outside world. Those transition years allowed me to ease into retirement and to build on my hobbies and interests. Prior to retirement, I had thought that, after so many years in the so-called rat race, I would yearn to move to the countryside to lead a more peaceful existence. But after some thought, it occurred to me that, much like my father in the Florida Keys, I would become socially isolated. I like where I live now, able to travel easily into Washington, DC, to visit friends or wander among the monuments and museums. For many years, I have regularly bicycled. In my home state of Maryland, there’s some of the best cycling in the country. Because of the demands of my job, there was never as much time as I wanted for riding. But on the weekends, I would seek out group rides. That enabled me not only to do a sport I enjoyed, but also to meet new people and develop friendships. Nowadays, in addition to group rides, I occasionally meet up in the early morning hours with fellow cyclists at local coffee shops. This gets me out of the house during the week and lets me stay in touch with those still in the work world. Volunteering within my community has also allowed me to meet neighbors and remain socially active. It’s gratifying to give back to the neighborhood where I have lived for more than 30 years. During the spring, summer and fall, I coordinate beautification activities within the neighborhood. This is also time that I can spend with my husband, who often joins me in these volunteer activities. Now, as I walk around the neighborhood, I am recognized by others and inevitably a conversation ensues. The winter months can be difficult. The cold weather makes one want to withdraw and hibernate until spring arrives. It is during these months that I travel. For the time being, much of my traveling is done solo. When I get to my destination, however, I am usually staying with family or joining friends who then travel with me. I remain involved in the company I built with my twin brother and recently sold. I help with various tasks during the year, and occasionally join employee and manager meetings. This lets me stay in touch with workers who have been part of my life for two decades. The various tasks keep my brain active, something that research suggests can fend off dementia and Alzheimer's. I am now 18 months into fulltime retirement. I sense that perhaps I went too far initially—and overscheduled myself. I plan on curtailing my cycling this year, after pedaling more than 11,000 miles last year. I discovered that my aging body didn't respond well to all those miles. In addition, last year, I helped at an immigrant advocacy organization. I spent many hours volunteering but have decided that, while I enjoyed the work, it was also too much. I can always go back if I find I have idle time that needs filling up. The last thing I want is to be sitting in the armchair every day, flipping through channels. Nicholas Clements is one of Jonathan’s older brothers. His previous blogs were Spending Time and Try This at Home.
Read more »

Manifesto

NO. 31: WE SHOULD plan for returns below the historical averages. Today’s rich stock valuations and modest bond yields don’t guarantee low returns—but it’s prudent to assume that’s what we’ll get.

Truths

NO. 67: MOST MUTUAL funds are sector bets. Funds often aim for style purity, sticking with just one stock- or bond-market niche. To gauge whether a fund is any good, compare it to others in the same category. But to build a diversified portfolio, buy just one or two funds from any given category—and diversify with funds from other categories.

Act

TAKE ADVANTAGE of your growing wealth. You might avoid interest charges by paying cash for your next car, rather than borrowing. You could minimize financial account fees by always keeping the required minimum. You might save on insurance premiums by raising deductibles and lengthening elimination periods, and perhaps even opting to self-insure.

Think

HAPPINESS RESEARCH. Using experiments and survey data, economists and psychologists have brought greater rigor to our understanding of what drives happiness. For instance, researchers have found that commuting and the birth of a child hurt happiness, a robust network of friends is a big plus, and the link between money and life satisfaction is surprisingly weak.

About Jonathan

Jonathan Clements

HumbleDollar is edited by Jonathan Clements, former personal finance columnist for The Wall Street Journal.

Home Call to Action

Never Too Late

FOLKS OFTEN feel that, because they’re a certain age, their time has passed and it’s too late for them to pursue new goals, whether it’s saving for retirement or starting their dream business. But I believe we can reinvent ourselves at any age.
Last year, I listened to an NPR podcast that featured an interview with Bob Moore, founder of Bob’s Red Mill. You’re probably familiar with Bob’s Red Mill: Their products are now sold in most grocery store health-food sections.

Read more »

Rolling the Dice

IN JANUARY 1946, a man named Stanislaw Ulam found himself confined to a hospital bed, having suffered an encephalitis attack. A brilliant scientist and a veteran of the Manhattan Project, Ulam wasn’t the type to sit idly while he recuperated. Instead, after playing innumerable games of solitaire to pass the time, Ulam began to examine the statistical aspects of the game.
Among the questions he asked: How can you accurately estimate the probability of winning a game?

Read more »

45 Steps to Success

WHAT DOES a good financial life look like? Here’s a quixotic roadmap—comprised of 45 steps:

Stuff part of your babysitting or lawn mowing money in a Roth IRA. Suggest to your parents that they should encourage this sort of behavior—by subsidizing your contributions.
Get a credit card when you head off to college, charge $5 every month and always pay off the balance in full and on time. You’ll soon have an impressive credit score.

Read more »

Applying Pressure

TO BORROW from the movie Casablanca, we are all “shocked, shocked” at the college admissions scandal recently uncovered by the FBI. We are seemingly united in condemning the extremes that these wealthy—and sometimes famous—parents went to, as they sought college admission for their children. We’re talking fraudulent inclusion on sports teams, submitting fake standardized test scores and outright bribery.
But the idea of parents gaming the system for their child’s benefit is nothing new to those of us in high school education.

Read more »

Beefing Up Security

MANY OF US have little more than a weak, reused password standing between our financial assets and a remote attacker—one armed with powerful tools and a database of passwords from security breaches. This is a losing battle. It’s the most likely way for weak computer security to put our finances at risk.
Think this can’t happen to you? I’ll bet you have at least one password taken in a big security breach. A quick way to find out is entering your email address at Troy Hunt’s HaveIBeenPwned site.

Read more »

What I Value

A WAR IS RAGING. On one side of this conflict is the individual and, on the other, society and culture. To the victor goes your attention and your money.
I submit you’ll win through intentionality—and you’ll lose if you let society determine what’s of greatest value to you. I was on the losing side for many years.
As an undergraduate, I thought I wanted to be a lawyer. Why? Not because I had a deep passion for the law.

Read more »

Numbers

AMONG THOSE ages 23 to 38 who have had student loans, 73% have delayed one or more major financial milestones, found a Bankrate survey. This includes saving for emergencies (38%), buying a home (31%) and saving for retirement (25%).

Manifesto

NO. 31: WE SHOULD plan for returns below the historical averages. Today’s rich stock valuations and modest bond yields don’t guarantee low returns—but it’s prudent to assume that’s what we’ll get.

Act

TAKE ADVANTAGE of your growing wealth. You might avoid interest charges by paying cash for your next car, rather than borrowing. You could minimize financial account fees by always keeping the required minimum. You might save on insurance premiums by raising deductibles and lengthening elimination periods, and perhaps even opting to self-insure.

Truths

NO. 67: MOST MUTUAL funds are sector bets. Funds often aim for style purity, sticking with just one stock- or bond-market niche. To gauge whether a fund is any good, compare it to others in the same category. But to build a diversified portfolio, buy just one or two funds from any given category—and diversify with funds from other categories.

Think

HAPPINESS RESEARCH. Using experiments and survey data, economists and psychologists have brought greater rigor to our understanding of what drives happiness. For instance, researchers have found that commuting and the birth of a child hurt happiness, a robust network of friends is a big plus, and the link between money and life satisfaction is surprisingly weak.

Home Call to Action

Free Newsletter

Got to Believe

AS I’VE BUILT out HumbleDollar.com over the past few years, I’ve come to view the site not merely as a place where folks can learn about financial issues, but as a community that thinks about money in a unique way.
This shows up repeatedly in articles from guest contributors, with their focus on topics like spending thoughtfully, helping family, behavioral finance, indexing and achieving financial freedom. It’s a community where folks are trying to be rational about money,

Read More »

Money Guide

Start Here

Margin Loans

IF YOU HOLD your investments in a margin account at a brokerage firm, you can typically take out a margin loan equal to 50% of the account’s total value. This is the so-called initial margin requirement, and it effectively allows you to control investments worth twice as much as you could otherwise afford. A margin loan doesn’t have to be used to purchase additional investments. Some folks use margin loans to buy cars or pay the kids’ college bills, in part because the alternative may be to sell winning stocks and thus trigger capital gains taxes. Your interest costs, however, are only tax-deductible if the margin loan is used to buy taxable investments. Whatever your reason for borrowing, a margin loan has the potential to boost your returns if the market rises—and magnify your losses if it goes against you. Once you take out a margin loan, make sure your account continues to meet the margin maintenance requirements. Under FINRA rules, a margin loan must equal no more than 75% of your account’s total value. But brokerage firms can impose their own stricter rules, often insisting the loan be no more than 70% of the account’s value and sometimes less. Suppose you deposited $10,000 in a brokerage account and then borrowed another $10,000 to buy additional stocks, so you controlled $20,000 of shares. If your stocks fall 29%, to $14,200, your $10,000 loan would equal more than 70% of the account’s total value—and, depending on the brokerage firm’s rules, you could receive a margin call. At that juncture, you would need to reduce the loan as a percentage of the account’s total value by either adding securities or cash to the account or by selling holdings to repay part of the margin loan. Be warned: Your brokerage firm may not call you before selling securities to meet margin requirements, so it’s best to monitor the account carefully and take action before a margin call is a possibility. Next: Loans From 401(k)s Previous: Overdraft Fees Blog: Stocking Up
Read more »

Archive

Retire to What?

AS I PREPARED to retire at the relatively young age of 55, it was important to me not to become isolated, not to lose touch with the world beyond my home. My husband continues to work, leaving me on my own for much of the day. I consider myself a social person. All my jobs have involved working with employees and customers, from my first job as a delicatessen cashier through to running my own landscape maintenance company with 25 employees and hundreds of accounts. My father retired at the same age. He moved to the Florida Keys, where he became socially isolated, spending much of his time alone.  He once told me that he hadn't spoken to anyone in days. And so, as I began a three-year transition into retirement, I wanted to ensure that I maintained touch with the outside world. Those transition years allowed me to ease into retirement and to build on my hobbies and interests. Prior to retirement, I had thought that, after so many years in the so-called rat race, I would yearn to move to the countryside to lead a more peaceful existence. But after some thought, it occurred to me that, much like my father in the Florida Keys, I would become socially isolated. I like where I live now, able to travel easily into Washington, DC, to visit friends or wander among the monuments and museums. For many years, I have regularly bicycled. In my home state of Maryland, there’s some of the best cycling in the country. Because of the demands of my job, there was never as much time as I wanted for riding. But on the weekends, I would seek out group rides. That enabled me not only to do a sport I enjoyed, but also to meet new people and develop friendships. Nowadays, in addition to group rides, I occasionally meet up in the early morning hours with fellow cyclists at local coffee shops. This gets me out of the house during the week and lets me stay in touch with those still in the work world. Volunteering within my community has also allowed me to meet neighbors and remain socially active. It’s gratifying to give back to the neighborhood where I have lived for more than 30 years. During the spring, summer and fall, I coordinate beautification activities within the neighborhood. This is also time that I can spend with my husband, who often joins me in these volunteer activities. Now, as I walk around the neighborhood, I am recognized by others and inevitably a conversation ensues. The winter months can be difficult. The cold weather makes one want to withdraw and hibernate until spring arrives. It is during these months that I travel. For the time being, much of my traveling is done solo. When I get to my destination, however, I am usually staying with family or joining friends who then travel with me. I remain involved in the company I built with my twin brother and recently sold. I help with various tasks during the year, and occasionally join employee and manager meetings. This lets me stay in touch with workers who have been part of my life for two decades. The various tasks keep my brain active, something that research suggests can fend off dementia and Alzheimer's. I am now 18 months into fulltime retirement. I sense that perhaps I went too far initially—and overscheduled myself. I plan on curtailing my cycling this year, after pedaling more than 11,000 miles last year. I discovered that my aging body didn't respond well to all those miles. In addition, last year, I helped at an immigrant advocacy organization. I spent many hours volunteering but have decided that, while I enjoyed the work, it was also too much. I can always go back if I find I have idle time that needs filling up. The last thing I want is to be sitting in the armchair every day, flipping through channels. Nicholas Clements is one of Jonathan’s older brothers. His previous blogs were Spending Time and Try This at Home.
Read more »
Jonathan Clements

About Jonathan

HumbleDollar is edited by Jonathan Clements, former personal finance columnist for The Wall Street Journal.