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Whether markets are efficient or inefficient, the result is always the same: After costs, most investors trail the market averages.

Get Me the Doctor

BEGINNING IN 1961—and for the 48 years that followed—I administered, designed, managed and negotiated health plans covering some 40,000 employees. In the late 1970s, cost became a growing issue. Over the years, we tried every trendy thing to control costs, from HMOs to wellness programs to shifting costs to employees. Nothing worked then and nothing seems to work today.
Before you jump to the most common conclusion, there was no insurance involved in any of the plans I managed.

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Off Target

ALBERT EINSTEIN reportedly once said, “Everything should be made as simple as possible, but not simpler,” or words to that effect.
When it comes to investing, I have always believed that the simplest approach is the best approach. But in recent years, a new type of investment has, I believe, crossed over into the “too simple” category.
This new type of investment: target-date mutual funds. If you aren’t familiar with them, target-date funds are mutual funds that typically buy other funds.

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All Better?

THE SAVINGS RATE has been revised by the federal government—and the new numbers offer a rosier take on America’s financial rectitude. But is the story believable?
Make no mistake: The old figures told a sorry tale. They suggested our savings habits fell apart after 1984 and with a vengeance after 1997. But suddenly, post-1984 doesn’t look so grim. Under the new methodology, the annual savings rate averaged 11.3% over the 35 years through 1984,

Read more »

Latest Blogs

Get Me the Doctor

BEGINNING IN 1961—and for the 48 years that followed—I administered, designed, managed and negotiated health plans covering some 40,000 employees. In the late 1970s, cost became a growing issue. Over the years, we tried every trendy thing to control costs, from HMOs to wellness programs to shifting costs to employees. Nothing worked then and nothing seems to work today.
Before you jump to the most common conclusion, there was no insurance involved in any of the plans I managed.

Read more »

Off Target

ALBERT EINSTEIN reportedly once said, “Everything should be made as simple as possible, but not simpler,” or words to that effect.
When it comes to investing, I have always believed that the simplest approach is the best approach. But in recent years, a new type of investment has, I believe, crossed over into the “too simple” category.
This new type of investment: target-date mutual funds. If you aren’t familiar with them, target-date funds are mutual funds that typically buy other funds.

Read more »

All Better?

THE SAVINGS RATE has been revised by the federal government—and the new numbers offer a rosier take on America’s financial rectitude. But is the story believable?
Make no mistake: The old figures told a sorry tale. They suggested our savings habits fell apart after 1984 and with a vengeance after 1997. But suddenly, post-1984 doesn’t look so grim. Under the new methodology, the annual savings rate averaged 11.3% over the 35 years through 1984,

Read more »

Blog archive

Numbers

WHILE 14% OF PARENTS said they would shoulder $75,000 or more in college debt for their kids, most were more cautious: 25% would take on $25,000 to $74,999, while the vast majority—61%—put the max at less than $25,000, found a T. Rowe Price survey.

Truths

NO. 90: HOME IMPROVEMENTS are money losers. Yes, homes typically climb in price over time. But the only sure source of appreciation is the land. The house itself deteriorates and requires hefty expenditures just to maintain its value. Indeed, if you fix up your home, you might recoup just 50% to 90% of the money spent—assuming you sell within a year.

Truths

NO. 90: HOME IMPROVEMENTS are money losers. Yes, homes typically climb in price over time. But the only sure source of appreciation is the land. The house itself deteriorates and requires hefty expenditures just to maintain its value. Indeed, if you fix up your home, you might recoup just 50% to 90% of the money spent—assuming you sell within a year.

Act

FREEZE YOUR CREDIT—something you can now do at no cost. This will prevent data thieves from taking out loans and credit cards using your identity. But it also means you’ll need to contact the three credit bureaus and unfreeze your credit temporarily whenever applying for credit. Sound like a hassle? As an alternative, consider setting up a fraud alert.

Think

DIVERSIFICATION. While diversifying is important with bonds, it’s crucial with stocks—and involves investing in hundreds and perhaps thousands of companies from a host of market sectors and countries. If we don’t diversify, and instead focus our money on a handful of stocks or a single sector, there’s a danger we’ll take the risk of stock market investing—without getting the reward.

Home Call to Action

Free Newsletter

My Favorite Questions

YOU’RE UNLIKELY to get the right answers—unless you ask the right questions.
That’s especially true when it comes to managing money. We have answers thrust in our faces all the time, as marketers and salespeople exhort us to buy this mutual fund, that car, this stock, that home and this insurance policy.
But are these really what we want or need? It’s hard to know unless we ask the right questions. There’s ample evidence that many folks end up with financial products they don’t need and spend money in ways that bring little or no happiness.

Read More »
Jonathan Clements

About Jonathan

Jonathan Clements is the founder and editor of HumbleDollar. He spent almost two decades at The Wall Street Journal, where he was the personal finance columnist. His new book is now available: From Here to Financial Happiness.

Money Guide

Start Here

Credit Cards

CREDIT CARDS HAVE BECOME so integral to American life that some folks almost never pay cash and instead charge even the smallest expenses. That’s convenient, it can be safer than carrying cash and it could come with a monthly bonus, in the form of credit card rewards. Set against that is the well-known downside: If you aren’t careful, you will charge too much, won’t be able to pay off the balance in full and get walloped with finance charges. There is no legal maximum interest rate that a credit card can charge, though many card issuers appear to charge no more than 29.99%. Minimum payments are typically set so that your balance should shrink over time, assuming you aren’t adding more debt. That might mean the minimum payment is 1% of the balance plus that month’s interest and fees, which all told might come to around 2% or 3% of the card’s balance. How many people carry a balance? Reliable statistics are surprisingly hard to come by, but it seems a little over half of all Americans carry a credit card balance and the average debt per cardholder is around $5,000. Carrying a card balance, while sometimes unavoidable, isn’t smart. Today, a credit card might charge an interest rate of 12% to 20%—an exorbitant sum, especially when you consider that today’s savings accounts and short-term certificates of deposit pay 1% or less. Credit card debt is the classic example of bad debt: The interest rate charged is steep, the interest isn’t tax-deductible and the money was typically used to buy nothing of lasting value. Want to avoid charging so much that you end up with a bill you can’t pay in full? Try deducting your credit card charges from the balance in your check book. That way, when the bill arrives, you won’t be unpleasantly surprised—and you should have the money to pay off the entire sum owed. Next: Credit Card Rewards Previous: Jonathan's Story: Paying Off the Mortgage Blog: Getting Carded
Read more »

Archive

Life After Amazon

IN NOVEMBER 2015, I got a notice from Amazon advising me that its security had been breached by some clever hacker and that my password may have been compromised. I was locked out of my account and instructed to set a new password. In typical mindless fashion, I immediately set out to do just that. But then my inner contrarian stepped up and shouted some questions. I love this guy, even though most everyone around me thinks he’s a truculent moron. “How can this happen?” he asked indignantly. You mean to tell me that a retailer this big has failed to secure my data? This sets the convenience needle back a bit. I am not a fan of filling in required fields for any reason, plus now I have another password to manage. “Can you trust Amazon?” he bellowed. Hmmmm. Probably. I suppose the retailer’s employees have taken mitigating action and contacted me in my own interest. But they are responsible for an undetermined risk to my data and I find that inexcusable. Now for the big one: “What happens if you stop buying from Amazon?” he sneered. You’re joking, right? I mean, everyone uses Amazon for everything. You really have to use them. They make everything better through convenience. Even toothpaste, some would say. It’s now been more than 18 months since I last used my Amazon account. How has that affected my life? Read on at your own risk. 1. I am more thoughtful about my purchases. The whole Amazon business model is built around closing the gap between stimulus and response. Come to think of it, every modern financial convenience is intended to make it just a little easier to transfer the wealth of the proles to clever people in fancy offices. That’s not a moral judgment, it’s just reality: You see a shiny object (metaphor for something that psychologically appeals to your lizard brain), you do an internet search and—bam!—there it is on Amazon for a low, low price. Without Amazon, I am much more intentional about my purchases. 2. Therefore, I spend less. If the item I’m interested in requires just a little work on my part, I am more likely to make a better financial decision about the purchase. This is contrary to the entire economic system and could lead to the end of civilization. Cool. When we were a young, penurious couple, Donna and I took the advice of Larry Burkett, the founder of Christian Financial Concepts. We agreed that for any non-budgeted purchase we would get three prices and wait 30 days before pulling the trigger. Many times that spared us a poor purchase decision, as our knowledge grew and the reality of the outcome was given some soak time. I didn’t consider myself to be an undisciplined spender prior to Amazon, but the impact on my consumption-to-savings ratio has been measurable. 3. I have less stuff. Having lived in the same house for 23 years, I am a case study in accumulation. I came by this trait honestly, as my father was a product of the Depression and knew scarcity in a way I likely never will. But there is a cost in terms of tidiness. Combine that with hyper-consumption and life can seem a bit crowded. The mental health benefits of reduced clutter are well documented. Those minimalist freaks may be on to something. 4. I have more time. Once the endorphins of package opening have receded back to a lonely crevice of my formerly fecund brain, I still have to manage some object and the package in which it was delivered. The stuff I like to buy tends to need attention in terms of cleaning, sharpening, polishing, lubricating, painting, adjusting and improving, all involving further purchases from Amazon. Now, I spend less time trying to figure out how to store and manage items that I should never have bought in the first place. 5. I invest more. As an amateur investor, I’m always looking for new ways to generate passive income. This is a reliable path to financial freedom for the un-wealthy. If a day comes when I don’t love my job, I want the freedom to politely tell someone where to insert it. We are all some ratio of consumer-to-saver. Anything that improves the ratio increases the freedom factor. 6. I have more relationships with local merchants. Now that more of my buying is local, I meet more human resources related to my purchases. Having been a local merchant, I fully understand the value in these relationships from both sides of the counter. It makes for a more civil and better-connected community. This is abstract but highly relevant, now more than ever. 7. I use the library more. I read voraciously. It can be an expensive habit. Amazon does books like no one, and it’s very easy to have them delivered to my porch. Still, today, more library book selection is done from the comfort of home, downloading audio and e-books at little or no cost. I read some esoteric stuff, so occasionally I still need to purchase online. Just not from Amazon. 8. On balance, I pay more per individual item. I’m not tracking cost differential and so can’t quantify, but I assume this is true. Nonetheless, due to the overall reduced spending and other benefits listed here, I feel fine about this. You can’t expect good service from your local merchant if you chisel every last nickel out of every transaction. 9. I can be more generous. Generosity is important to me. I give more intentionally, and have created a separate financial account to allow me to respond to people in need on short notice through organizations that are financially accountable. Not only can I give more because I am spending less, but also I am more aware of how those gifts are helping the lives of people. Overall impact? On balance, abandoning Amazon has improved my quality of life. My decision won’t change the unfortunate consumption trends in our culture, but it will reduce clutter in my little world, while increasing my knowledge and resourcefulness. It will also increase the comfort margin if I need to leave the workforce for any unforeseen reason. Anything that helps me sleep better has great value these days. So, yes, there is life after Amazon. Try it risk-free for 30 days, with a money-back guarantee and free shipping. What have you got to lose? Editor’s note: HumbleDollar is an Amazon marketing affiliate. If you’re not swayed by the above article and remain hell-bent on ruining your life with online shopping, you can support this site by clicking through to Amazon using this link. When not paddling, biking or shooting, Phil Dawson provides technical services for a global auto manufacturer. He, his sweetheart Donna and their four extraordinary daughters live in and around Jarrettsville, Maryland. 
Read more »

Money Guide

Start Here

Credit Cards

CREDIT CARDS HAVE BECOME so integral to American life that some folks almost never pay cash and instead charge even the smallest expenses. That’s convenient, it can be safer than carrying cash and it could come with a monthly bonus, in the form of credit card rewards. Set against that is the well-known downside: If you aren’t careful, you will charge too much, won’t be able to pay off the balance in full and get walloped with finance charges. There is no legal maximum interest rate that a credit card can charge, though many card issuers appear to charge no more than 29.99%. Minimum payments are typically set so that your balance should shrink over time, assuming you aren’t adding more debt. That might mean the minimum payment is 1% of the balance plus that month’s interest and fees, which all told might come to around 2% or 3% of the card’s balance. How many people carry a balance? Reliable statistics are surprisingly hard to come by, but it seems a little over half of all Americans carry a credit card balance and the average debt per cardholder is around $5,000. Carrying a card balance, while sometimes unavoidable, isn’t smart. Today, a credit card might charge an interest rate of 12% to 20%—an exorbitant sum, especially when you consider that today’s savings accounts and short-term certificates of deposit pay 1% or less. Credit card debt is the classic example of bad debt: The interest rate charged is steep, the interest isn’t tax-deductible and the money was typically used to buy nothing of lasting value. Want to avoid charging so much that you end up with a bill you can’t pay in full? Try deducting your credit card charges from the balance in your check book. That way, when the bill arrives, you won’t be unpleasantly surprised—and you should have the money to pay off the entire sum owed. Next: Credit Card Rewards Previous: Jonathan's Story: Paying Off the Mortgage Blog: Getting Carded
Read more »
Home Call to Action
Jonathan Clements

About Jonathan

Jonathan Clements is the founder and editor of HumbleDollar. He spent almost two decades at The Wall Street Journal, where he was the personal finance columnist. His new book is now available: From Here to Financial Happiness.

Free Newsletter

My Favorite Questions

YOU’RE UNLIKELY to get the right answers—unless you ask the right questions.
That’s especially true when it comes to managing money. We have answers thrust in our faces all the time, as marketers and salespeople exhort us to buy this mutual fund, that car, this stock, that home and this insurance policy.
But are these really what we want or need? It’s hard to know unless we ask the right questions. There’s ample evidence that many folks end up with financial products they don’t need and spend money in ways that bring little or no happiness.

Read More »

Archive

Life After Amazon

IN NOVEMBER 2015, I got a notice from Amazon advising me that its security had been breached by some clever hacker and that my password may have been compromised. I was locked out of my account and instructed to set a new password. In typical mindless fashion, I immediately set out to do just that. But then my inner contrarian stepped up and shouted some questions. I love this guy, even though most everyone around me thinks he’s a truculent moron. “How can this happen?” he asked indignantly. You mean to tell me that a retailer this big has failed to secure my data? This sets the convenience needle back a bit. I am not a fan of filling in required fields for any reason, plus now I have another password to manage. “Can you trust Amazon?” he bellowed. Hmmmm. Probably. I suppose the retailer’s employees have taken mitigating action and contacted me in my own interest. But they are responsible for an undetermined risk to my data and I find that inexcusable. Now for the big one: “What happens if you stop buying from Amazon?” he sneered. You’re joking, right? I mean, everyone uses Amazon for everything. You really have to use them. They make everything better through convenience. Even toothpaste, some would say. It’s now been more than 18 months since I last used my Amazon account. How has that affected my life? Read on at your own risk. 1. I am more thoughtful about my purchases. The whole Amazon business model is built around closing the gap between stimulus and response. Come to think of it, every modern financial convenience is intended to make it just a little easier to transfer the wealth of the proles to clever people in fancy offices. That’s not a moral judgment, it’s just reality: You see a shiny object (metaphor for something that psychologically appeals to your lizard brain), you do an internet search and—bam!—there it is on Amazon for a low, low price. Without Amazon, I am much more intentional about my purchases. 2. Therefore, I spend less. If the item I’m interested in requires just a little work on my part, I am more likely to make a better financial decision about the purchase. This is contrary to the entire economic system and could lead to the end of civilization. Cool. When we were a young, penurious couple, Donna and I took the advice of Larry Burkett, the founder of Christian Financial Concepts. We agreed that for any non-budgeted purchase we would get three prices and wait 30 days before pulling the trigger. Many times that spared us a poor purchase decision, as our knowledge grew and the reality of the outcome was given some soak time. I didn’t consider myself to be an undisciplined spender prior to Amazon, but the impact on my consumption-to-savings ratio has been measurable. 3. I have less stuff. Having lived in the same house for 23 years, I am a case study in accumulation. I came by this trait honestly, as my father was a product of the Depression and knew scarcity in a way I likely never will. But there is a cost in terms of tidiness. Combine that with hyper-consumption and life can seem a bit crowded. The mental health benefits of reduced clutter are well documented. Those minimalist freaks may be on to something. 4. I have more time. Once the endorphins of package opening have receded back to a lonely crevice of my formerly fecund brain, I still have to manage some object and the package in which it was delivered. The stuff I like to buy tends to need attention in terms of cleaning, sharpening, polishing, lubricating, painting, adjusting and improving, all involving further purchases from Amazon. Now, I spend less time trying to figure out how to store and manage items that I should never have bought in the first place. 5. I invest more. As an amateur investor, I’m always looking for new ways to generate passive income. This is a reliable path to financial freedom for the un-wealthy. If a day comes when I don’t love my job, I want the freedom to politely tell someone where to insert it. We are all some ratio of consumer-to-saver. Anything that improves the ratio increases the freedom factor. 6. I have more relationships with local merchants. Now that more of my buying is local, I meet more human resources related to my purchases. Having been a local merchant, I fully understand the value in these relationships from both sides of the counter. It makes for a more civil and better-connected community. This is abstract but highly relevant, now more than ever. 7. I use the library more. I read voraciously. It can be an expensive habit. Amazon does books like no one, and it’s very easy to have them delivered to my porch. Still, today, more library book selection is done from the comfort of home, downloading audio and e-books at little or no cost. I read some esoteric stuff, so occasionally I still need to purchase online. Just not from Amazon. 8. On balance, I pay more per individual item. I’m not tracking cost differential and so can’t quantify, but I assume this is true. Nonetheless, due to the overall reduced spending and other benefits listed here, I feel fine about this. You can’t expect good service from your local merchant if you chisel every last nickel out of every transaction. 9. I can be more generous. Generosity is important to me. I give more intentionally, and have created a separate financial account to allow me to respond to people in need on short notice through organizations that are financially accountable. Not only can I give more because I am spending less, but also I am more aware of how those gifts are helping the lives of people. Overall impact? On balance, abandoning Amazon has improved my quality of life. My decision won’t change the unfortunate consumption trends in our culture, but it will reduce clutter in my little world, while increasing my knowledge and resourcefulness. It will also increase the comfort margin if I need to leave the workforce for any unforeseen reason. Anything that helps me sleep better has great value these days. So, yes, there is life after Amazon. Try it risk-free for 30 days, with a money-back guarantee and free shipping. What have you got to lose? Editor’s note: HumbleDollar is an Amazon marketing affiliate. If you’re not swayed by the above article and remain hell-bent on ruining your life with online shopping, you can support this site by clicking through to Amazon using this link. When not paddling, biking or shooting, Phil Dawson provides technical services for a global auto manufacturer. He, his sweetheart Donna and their four extraordinary daughters live in and around Jarrettsville, Maryland. 
Read more »