FREE NEWSLETTER

A high credit score is America’s most prized financial status symbol—which is messed up, because it’s all about handling debt.

A Combustible Mix

THERE’S NO SUBJECT that gets me more worked up than market volatility—and especially the danger posed by high-frequency trading (HFT). Volatility has become part of the “new normal,” thanks to fundamental changes in how the market operates.
Remember the flash crash of 2010? I haven’t forgotten the unsettling events of May 6, 2010, when the Dow Jones Industrial Average dropped 600 points in just five minutes. For a few minutes, starting around 2:45 p.m.,

Read more »

Want $870,000?

SENTENCES THAT begin with “I can’t” drive me nuts—and I especially dislike the sentence, “I can’t save.”
“Pish-tosh,” I say.  Every household in America earning at least the median income can save for the future. If they try hard, many lower-income Americans could also save.
Of course, the amount saved will vary, but even small amounts can help over the long haul. If a household earning $40,000 a year can sock away enough to generate $300 or $400 in monthly retirement income to supplement whatever they get from Social Security,

Read more »

It Sure Adds Up

MY FINANCIAL advisor has been on a mission to reduce my investment costs. He’s been replacing my low-cost, broad-based index mutual funds with the exchange-traded fund (ETF) version. He believes this will improve my investment returns over the long run.
For instance, if you own Vanguard Total International Stock Index Fund—a mutual fund—you’re currently paying 0.11% in annual expenses. But Vanguard’s ETF alternative charges just 0.08%, equal to a savings of three cents a year for every $100 invested.

Read more »

Fatten That Policy

I WORKED in the investment department of three different insurance companies. But I never had any interest in buying a whole-life insurance policy. I knew term insurance was the best way to get the maximum death benefit for my premium dollars.
Instead, as a mutual fund manager, I was always more interested in investing in the stock market. (That said, I didn’t invest in the first mutual fund I managed. Why not? I didn’t want to pay the 7% “load”—the upfront sales commission.)
But my attitude toward whole-life insurance changed six years ago.

Read more »

High Times

READERS KNOW I love my baseball. There’s an old unwritten rule that, when a pitcher is working a perfect game, nobody talks to him. The position players leave the hurler alone since he needs to be “in the zone.” Fans grow more nervous as the game progresses and the ninth inning draws near. With each passing out, the prized perfect game comes closer into view.
I’m getting the same antsy feeling when it comes to highflying tech stocks.

Read more »

Just Say No

DOES WEALTH bring advantages? Yes—but it can also invite some unique challenges. Consider country music singer Kane Brown.
Shortly after moving into a new home, he went for a walk. He told his wife he’d be back in half an hour. But seven hours later, after getting lost, he ended up calling for help. What was unique about this episode is that, the entire time he was lost, Brown was on his own property.

Read more »

Money Guide

Adjusting Your Mix

IN YOUR 20s, 30s and 40s, you might have invested heavily in stocks because you had a paycheck to cover your living expenses and didn't need to worry about plunging financial markets. When you retire, you give up that paycheck—and that has big implications for your portfolio. Suddenly, you want not just growth from your investments, but also income. Later, when we talk about issues facing those age 65 and older, we’ll discuss how you might generate income from your savings while fending off the threat from both short-run market declines and long-run inflation. But to prepare your portfolio and make sure your impending retirement isn’t derailed by a stock market crash, you should probably scale back your investment risk over the last 10 or 15 years before you quit the workforce. An example: While you may have had 80% of your money in stocks in your early 40s, you might move toward a mix of perhaps 50% stocks and 50% conservative investments by the time you retire. The precise percentages will depend on a host of factors. For instance, if Social Security and any pension income will cover a large portion of your retirement living expenses, you might take more risk with your portfolio—a topic we also discuss in the investing chapter. On the other hand, if the bulk of your retirement income will come from savings or you have little stomach for market swings, you might be somewhat more conservative. Next: The 80% Rule Previous: On Track to Retire?
Read more »

Manifesto

NO. 27: RISK and potential return are inextricably linked. If an investment holds out the prospect of high returns, we should presume it’s highly risky—even if we can’t figure out what the risk is.

Truths

NO. 120: INFLATION is the friend of borrowers, but the enemy of savers. If you have money invested, you need to earn an after-tax return that outpaces the inflation rate—or your money will lose purchasing power. But if you’re a borrower, inflation is good news, because it allows you to repay the money you owe with depreciated dollars.

Act

TAP HOME EQUITY to trim other debts. If you have high-interest auto loans or credit card debt, you might set up a home equity line of credit and then use it to pay off these higher-cost debts. That’ll reduce the interest you pay. You won’t, however, save on taxes. Thanks to 2017’s tax law, such home-equity borrowing is no longer tax-deductible.

Think

OPPORTUNITY COST. Whenever we make a financial choice, we give up something else, which may be a better use for the money. If we buy one item, we can’t spend the dollars on other items, either now or in the future. When we devote money to one goal, we have less for other goals. When we buy one investment, we’re effectively choosing not to buy other investments.

Second Look

Retirement

A Better Plan

TED BENNA, the inventor of the 401(k) retirement plan, famously once stated that the system he created should be “blown up.” Why? It isn’t the fundamental structure, which he still believes in. What he doesn’t like is the complexity and costs that characterize today’s typical 401(k).
The original 401(k)s, he likes to point out, had just two fund options. Today, it’s more like 20. Because of that, it’s all too easy for bad investments and high fees to sneak in.

Read more »

Family Finance

Chasing Points

I HAVE BOOKED eight one-way domestic flights this year, as well as multiple hotel nights—and I’ve done it all with the rewards points from my three Chase credit cards.
For those interested in earning rewards, you can’t go wrong with the dependable duo of Chase Sapphire Reserve and Chase Freedom Unlimited. Small business owners might also pick up Chase Ink Business Preferred.
The Chase Sapphire Reserve, the “premium” card of the trio, first made waves in August 2016 when it offered a 100,000-point signup bonus for those who spent $4,000 in the first three months.

Read more »

Investing

Risky Option

AS A KID, my most revered manmade invention was not a train or a record player, but rather the Swiss Army pocketknife. When I saw it for the first time at a friend’s home, I was fascinated that it could cut paper, open bottles, file nails and more. I marveled at the engineering beauty and wished I had one of my own.
Years later, I was in Switzerland for a short business trip and had some free time for souvenir shopping.

Read more »

Lists

More from Money

WANT TO MAKE your dollars work harder? Here are 11 of my favorite strategies. In each case, you can find additional information by clicking through to HumbleDollar’s online money guide.
1. Fund a Roth IRA—and let it double as your emergency fund. Ideally, you want to leave your Roth untouched, so you milk as much tax-free growth from the account as possible. But if you need to repair the car or replace the roof,

Read more »
Home Call to Action

Mindset

Getting Emotional

WHEN A FAMILY opts to purchase a Mercedes rather than a Subaru, the rest of us might think they’re being extravagant. But you likely won’t find many people saying, “How stupid is that? They could’ve got around town for half the price.” We accept that a car isn’t a strictly utilitarian purchase.
But we aren’t nearly so forgiving when it comes to “suboptimal” investment and personal finance decisions. Today’s contention: We shouldn’t be too quick to deride the money choices made by others—and,

Read more »

A Combustible Mix

THERE’S NO SUBJECT that gets me more worked up than market volatility—and especially the danger posed by high-frequency trading (HFT). Volatility has become part of the “new normal,” thanks to fundamental changes in how the market operates.
Remember the flash crash of 2010? I haven’t forgotten the unsettling events of May 6, 2010, when the Dow Jones Industrial Average dropped 600 points in just five minutes. For a few minutes, starting around 2:45 p.m.,

Read more »

Want $870,000?

SENTENCES THAT begin with “I can’t” drive me nuts—and I especially dislike the sentence, “I can’t save.”
“Pish-tosh,” I say.  Every household in America earning at least the median income can save for the future. If they try hard, many lower-income Americans could also save.
Of course, the amount saved will vary, but even small amounts can help over the long haul. If a household earning $40,000 a year can sock away enough to generate $300 or $400 in monthly retirement income to supplement whatever they get from Social Security,

Read more »

It Sure Adds Up

MY FINANCIAL advisor has been on a mission to reduce my investment costs. He’s been replacing my low-cost, broad-based index mutual funds with the exchange-traded fund (ETF) version. He believes this will improve my investment returns over the long run.
For instance, if you own Vanguard Total International Stock Index Fund—a mutual fund—you’re currently paying 0.11% in annual expenses. But Vanguard’s ETF alternative charges just 0.08%, equal to a savings of three cents a year for every $100 invested.

Read more »

Fatten That Policy

I WORKED in the investment department of three different insurance companies. But I never had any interest in buying a whole-life insurance policy. I knew term insurance was the best way to get the maximum death benefit for my premium dollars.
Instead, as a mutual fund manager, I was always more interested in investing in the stock market. (That said, I didn’t invest in the first mutual fund I managed. Why not? I didn’t want to pay the 7% “load”—the upfront sales commission.)
But my attitude toward whole-life insurance changed six years ago.

Read more »

High Times

READERS KNOW I love my baseball. There’s an old unwritten rule that, when a pitcher is working a perfect game, nobody talks to him. The position players leave the hurler alone since he needs to be “in the zone.” Fans grow more nervous as the game progresses and the ninth inning draws near. With each passing out, the prized perfect game comes closer into view.
I’m getting the same antsy feeling when it comes to highflying tech stocks.

Read more »

Just Say No

DOES WEALTH bring advantages? Yes—but it can also invite some unique challenges. Consider country music singer Kane Brown.
Shortly after moving into a new home, he went for a walk. He told his wife he’d be back in half an hour. But seven hours later, after getting lost, he ended up calling for help. What was unique about this episode is that, the entire time he was lost, Brown was on his own property.

Read more »

Free Newsletter

Home Call to Action

Manifesto

NO. 27: RISK and potential return are inextricably linked. If an investment holds out the prospect of high returns, we should presume it’s highly risky—even if we can’t figure out what the risk is.

Act

TAP HOME EQUITY to trim other debts. If you have high-interest auto loans or credit card debt, you might set up a home equity line of credit and then use it to pay off these higher-cost debts. That’ll reduce the interest you pay. You won’t, however, save on taxes. Thanks to 2017’s tax law, such home-equity borrowing is no longer tax-deductible.

Truths

NO. 120: INFLATION is the friend of borrowers, but the enemy of savers. If you have money invested, you need to earn an after-tax return that outpaces the inflation rate—or your money will lose purchasing power. But if you’re a borrower, inflation is good news, because it allows you to repay the money you owe with depreciated dollars.

Think

OPPORTUNITY COST. Whenever we make a financial choice, we give up something else, which may be a better use for the money. If we buy one item, we can’t spend the dollars on other items, either now or in the future. When we devote money to one goal, we have less for other goals. When we buy one investment, we’re effectively choosing not to buy other investments.

Money Guide

Start Here

Adjusting Your Mix

IN YOUR 20s, 30s and 40s, you might have invested heavily in stocks because you had a paycheck to cover your living expenses and didn't need to worry about plunging financial markets. When you retire, you give up that paycheck—and that has big implications for your portfolio. Suddenly, you want not just growth from your investments, but also income. Later, when we talk about issues facing those age 65 and older, we’ll discuss how you might generate income from your savings while fending off the threat from both short-run market declines and long-run inflation. But to prepare your portfolio and make sure your impending retirement isn’t derailed by a stock market crash, you should probably scale back your investment risk over the last 10 or 15 years before you quit the workforce. An example: While you may have had 80% of your money in stocks in your early 40s, you might move toward a mix of perhaps 50% stocks and 50% conservative investments by the time you retire. The precise percentages will depend on a host of factors. For instance, if Social Security and any pension income will cover a large portion of your retirement living expenses, you might take more risk with your portfolio—a topic we also discuss in the investing chapter. On the other hand, if the bulk of your retirement income will come from savings or you have little stomach for market swings, you might be somewhat more conservative. Next: The 80% Rule Previous: On Track to Retire?
Read more »

Second Look

Retirement

A Better Plan

TED BENNA, the inventor of the 401(k) retirement plan, famously once stated that the system he created should be “blown up.” Why? It isn’t the fundamental structure, which he still believes in. What he doesn’t like is the complexity and costs that characterize today’s typical 401(k).
The original 401(k)s, he likes to point out, had just two fund options. Today, it’s more like 20. Because of that, it’s all too easy for bad investments and high fees to sneak in.

Read more »

Family Finance

Chasing Points

I HAVE BOOKED eight one-way domestic flights this year, as well as multiple hotel nights—and I’ve done it all with the rewards points from my three Chase credit cards.
For those interested in earning rewards, you can’t go wrong with the dependable duo of Chase Sapphire Reserve and Chase Freedom Unlimited. Small business owners might also pick up Chase Ink Business Preferred.
The Chase Sapphire Reserve, the “premium” card of the trio, first made waves in August 2016 when it offered a 100,000-point signup bonus for those who spent $4,000 in the first three months.

Read more »

Investing

Risky Option

AS A KID, my most revered manmade invention was not a train or a record player, but rather the Swiss Army pocketknife. When I saw it for the first time at a friend’s home, I was fascinated that it could cut paper, open bottles, file nails and more. I marveled at the engineering beauty and wished I had one of my own.
Years later, I was in Switzerland for a short business trip and had some free time for souvenir shopping.

Read more »

Lists

More from Money

WANT TO MAKE your dollars work harder? Here are 11 of my favorite strategies. In each case, you can find additional information by clicking through to HumbleDollar’s online money guide.
1. Fund a Roth IRA—and let it double as your emergency fund. Ideally, you want to leave your Roth untouched, so you milk as much tax-free growth from the account as possible. But if you need to repair the car or replace the roof,

Read more »

Mindset

Getting Emotional

WHEN A FAMILY opts to purchase a Mercedes rather than a Subaru, the rest of us might think they’re being extravagant. But you likely won’t find many people saying, “How stupid is that? They could’ve got around town for half the price.” We accept that a car isn’t a strictly utilitarian purchase.
But we aren’t nearly so forgiving when it comes to “suboptimal” investment and personal finance decisions. Today’s contention: We shouldn’t be too quick to deride the money choices made by others—and,

Read more »