FREE NEWSLETTER

Want to reduce financial stress? All it might take is less debt, a few thousand in the bank and a regular savings program.

Mix and Match

MY PORTFOLIO HAS evolved over my 35 years as an investor, as I’ve learned more and as new funds have become available. A total stock market index fund? Sure, I’ll consolidate money in that. An emerging markets index fund? Yeah, a modest stake looks promising. How about a small-cap value index fund? The academic literature says that makes sense.
Today, I own a dozen different Vanguard Group mutual funds, each giving me exposure to a different part of the global financial markets.

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Inflation Bites

FINANCIAL PLANNERS often ask new clients about their first money memory. Mine was about an early encounter with inflation. It involved a favorite childhood snack named fuchka, a popular street food in Kolkata, where I grew up.
The snack is a ball-shaped flatbread, filled with spicy potato mash and topped with tamarind water. As you crunch its crispy shell, the magical flavors burst in your mouth and take your tastebuds on a rollercoaster ride.

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Short Stuff

Beyond Dollars

“RIFFING OFF” is a term used in music and particularly jazz. It describes when a musician picks up a musical line played by another musician and then runs with it, adding his or her own style or take.
I love riffing off my co-writers—and when they riff off me. I also do it sometimes with HumbleDollar articles and blog posts. I read a thoughtful piece and then, as the day goes on,

Read more »

Drive Buy

THOSE OF US WHO aspire to be shrewd investors try to buy when opportunities present themselves, while avoiding “crowded” trades.

I broke that last rule when I recently bought a second car. Yes, prices are skyrocketing as a result of supply-chain bottlenecks and strong consumer demand. But I had a good reason: My son’s entering the fulltime workforce—and he’s taking over use of my current car.

It was the worst time to put myself at the mercy of car dealers.

Read more »

Save ’Til It Hurts

I FREQUENTLY FIND myself criticized when I state my fiscally conservative views on saving and spending in retirement. One fellow recently said I had no compassion and I was scaring people.

If folks are frightened by my urging them to retire with the ability to replace most of their preretirement income, then perhaps they should be scared.

I’m also criticized because I have a pension, and so don’t rely on investments for my income.

Read more »

My Favorite Store

WHEN I MOVED to the U.S. for work, a friend graciously helped me settle in. He shared many useful tips, one of which was to become a Costco member. I’m glad I heeded my friend’s advice. I’ve saved thousands of dollars over the years and found the store’s service to be exceptional.
In recent years, my Costco shopping has expanded to include not just everyday purchases, but also luxury items, gas, tires, electronics and vacations.

Read more »

Quitting Retirement

DRIVING PART of the nation’s labor shortage is a wave of early retirements dubbed the “Great Resignation.” A red-hot housing market and booming stock market have made it financially easier for many to quit traditional nine-to-five employment, as has employers’ embrace of part-time, work-from-home positions. Add to that virus concerns and parents’ difficulty finding child care, and you’ve had a perfect storm for the labor market.
According to a recent article in The Wall Street Journal,

Read more »

November’s Hits

WHEN FOLKS WEREN’T consuming turkey last month, they were devouring HumbleDollar articles. Which ones? Here are November’s seven most popular articles:

Amassing wealth is hard—but staying wealthy can be even harder. Adam Grossman offers strategies that can help retirees and others hang on to the money they’ve accumulated.
“I feel like I’ve won the game and I want to take a victory lap,” says Mike Drak. “I have my freedom back. I’m happy to work part of the time—but only on my terms and only doing things I love.”

Read more »

Longer Reads

Brain Food

MY MOST MEMORABLE experiences are family vacations—and that includes the mishaps. Those become the stories we laugh about years later.
For instance, when our boys were young, we took an overnight train from Bangkok to northern Thailand. We found ourselves trapped for three days in Chiangmai by an unexpected torrential flood. Multiple times, we had to modify our plans for getting back to Bangkok. Finally, we got a flight on a small airplane. As we walked up to the plane,

Read more »

Fit to Retire

I WAS RECENTLY talking with a younger acquaintance about my decision to leave the workforce early. I’d left a demanding career to pursue my personal passions, while I was still young and healthy enough to do so.
My acquaintance is in his early 30s. He’s single and makes a boatload of money working in IT for a pharma company. He’s also a big proponent of the FIRE (financial independence-retire early) movement. He takes part in Reddit boards and reads every investment article he can get his hands on.

Read more »

Invest Don’t Bet

MANY TIMES IN MY career, I’ve heard people say, “The stock market is just one big casino” or “Buying stocks is just like gambling.” Yes, there are similarities between investing and gambling. But when done properly, long-run investing shouldn’t resemble gambling in any real way.
Let’s start with the similarities. Day-traders—who buy individual stocks in an attempt to make a quick profit—are similar to gamblers at the roulette table. Both are hoping for a lucky play.

Read more »

Read Before Selling

LIKE A TIRESOME rerun of Friday the 13th, COVID-19 has returned in its newest form, the Omicron variant. Last Friday, financial markets were shaken by the news, especially the potential for greater transmissibility and the fear that current vaccines will prove impotent against the new COVID variant. Yesterday saw a partial market rebound. Still, traders are betting that share prices will remain volatile.
Much is unknown at this point, but many investors have taken a sell-now-and-ask-questions-later approach.

Read more »

When Fantasy Fails

I’M A LIFELONG football fan who’s played fantasy football for 20 years. What do I have to show for it? Zero league titles, a staunch ambivalence about fantasy football—and three investing maxims.
Every fantasy football season starts with the draft. Three intoxicating forces combine to make the draft a great time: predictions, customization and pride. I’ve come to realize that the draft accounts for about 90% of the appeal of the whole fantasy football concept.

Read more »

Money Talks

RON LIEBER, in his book The Opposite of Spoiled, describes a 2012 conversation between Chris Rock and Jon Stewart. In an interview on Stewart’s show, they got around to discussing the challenges both faced in raising children who could remain grounded amid wealthy surroundings.

Rock described how his own modest upbringing differed from the comfortable life his children enjoy. “My kids are rich,” he said. “I have nothing in common with them.”

Stewart agreed.

Read more »

Voices

What everyday purchase do you consider a bargain?

"Though I haven't had one in ages, a McDouble."
- Michael1
Read more »

What’s the best way to teach children about money?

"One of our "go-to" strategies was to install "Quicken" on our kids laptops before they left for college and setup automated downloads of checking account expenditures from their bank. Mint (free online tool also owned by Quicken) offers comparable functionality. Playing good defense (i.e. tracking their consumption habits and budgeting) is just as important as playing offense (Saving and investing) in the early years of a young adult's journey into the workforce. Plus, and having them open Roth IRAs, with a parent match of their $50/month contributions - but match only comes at the END of the full year."
- Newsboy
Read more »

Should you buy bond funds or individual bonds?

"HD recently posted about the use of iBonds from Treasury Direct. They should be looked at in terms of investing your cash that is not tax-deferred. My use of bond funds is to constantly ensure that in retirement I will have sufficient cash to withdraw funds to make my RMD. Having needed cash available via TD and iBonds that are held long enough is something I can deal with. I haven't had to mess with them since the kids are now grown and have families of their own. The HD article is worth reading. I hope it was HD :)"
- Thomas McGlinchey
Read more »

Money Guide

Breaking Even

WHEN SHOULD retirees claim Social Security? Let’s dispense with a few preliminaries. If you have young children, it may be worth claiming at age 62, so your kids can receive family benefits. Meanwhile, if you’re married and you were the main breadwinner, it’s probably worth delaying benefits to age 70 to get the larger monthly check. This is true even if you are in poor health. The reason: Your benefit may live on as a survivor benefit for your spouse. Instead, we’re keeping it simple. We will assume you are single and your full Social Security retirement age is 66. You’re trying to decide between a monthly benefit of $750 starting at 62, $1,000 at 66 or $1,320 at 70. Your plan is to take the money and invest it in high-quality bonds, and you want to know what the breakeven age is. In other words, if you take benefits later, at what age would the monthly checks you’ve collected be worth more than taking benefits at 62? Social Security benefits rise each year with inflation, so you need to figure that into the calculation. To make things easy, let’s think in terms of real (after-inflation) returns. For instance, if 10-year Treasury notes are yielding 2% and inflation is 2%, your real return is 0%. We will look at three scenarios in which high-quality bonds deliver after-inflation annual returns of 0%, 1% and 2%. Based on those three real returns, how long would you have to live to make delaying benefits worthwhile? If you delay from age 62 to 66 and you’re investing in bonds that deliver a 0% real return, you’ll be ahead shortly after you turn age 78—and the longer you live after that, the greater the advantage grows. Meanwhile, at a 1% real return, delaying benefits to 66 will put you ahead if you live to age 80, while a 2% real return will put you ahead by age 81. What if you delay benefits from age 62 to 70? You’re ahead at age 81 assuming a 0% real return, 82 assuming a 1% real return and 83 assuming a 2% real return. What if you plan to invest in stocks, not bonds? That could raise the breakeven age, because the potential return is higher. But the risk is also vastly greater, and that messes up the analysis. You shouldn’t make a straight comparison between a relatively sure bet (the government keeps paying Social Security) and something so uncertain (remember, stocks lost roughly half their value twice since 2000) without factoring in the difference in risk. Next: Spousal Benefits Previous: Early and Late Article: Worth the Wait
Read more »

Manifesto

NO. 60: WE SHOULDN’T necessarily be investment contrarians, but we should be leery of crowds. When “everybody” is buying, that’s a warning sign—and we should resist joining the stampede.

Truths

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.

Act

CONSIDER A ROTH conversion. Is your taxable income for the current year less than normal, so you’ll end up in a lower income tax bracket? To take advantage, you might convert part of your traditional IRA to a Roth IRA, where the money will grow tax-free thereafter. One warning: Make sure you have the necessary cash set aside to pay the resulting tax bill.

Think

FAT TAILS. We imagine investment returns will look like the standard humped-back normal distribution curve, with annual results mostly clustering around the average, while extremely good and bad years are relatively rare. But in reality, great and terrible years occur with surprising frequency, causing the performance distribution curve to have “fat tails.”

Second Look

Retirement

Try Not to Slip

THE FLU SEASON was approaching, so I decided to schedule an appointment with my medical provider for a flu shot. The next morning, I received an email from my prescription drug plan informing me that it was processing a payment for $30.80.
My immediate thought: “How could my medical provider charge me for a flu shot that I haven’t yet received? And why aren’t they billing Medicare?” Medicare provides a free flu shot to every enrollee.

Read more »

Family Finance

We’re Stuffed

THERE’S A RETAIL chain called The Container Store. As the name implies, it sells all types of containers, storage units and custom closets to help people organize their stuff, much of which they likely don’t need.
Let’s say you want a separate plastic box for each pair of shoes. You can have it. Did you know men own an average 12 pairs of shoes and women an average 27 pairs? Amazingly, 85% of women own shoes they purchased but have never worn.

Read more »

Investing

Before the Fall

THE SUDDEN BULL move of 1991 enraged me. Mr. Market waved the red flag and I charged. Forget balanced, S&P 500 and large-cap value funds. I was gonna get me one of them aggressive funds that goes up 99% in a year.
I greedily and resentfully scanned the list of 1991’s 10 top-performing mutual funds. Why didn’t I own any of them? Oppenheimer Global Biotech was up 121%. Vanguard Windsor II, which I owned around that time,

Read more »

Lists

What It Takes

SAVE 30% OF INCOME? No way.
That’s been my reaction whenever I’ve read about people saving 30% or more. I look back and think about making monthly mortgage payments, raising four children, paying for college and trying to save something to supplement my pension. For my wife and me, a 30% savings rate simply wasn’t possible. Nevertheless, people do it.
To find out more, I asked folks on a Facebook retirement planning group, “How do you save 30%?” The responses boiled down to nine key factors.

Read more »
Home Call to Action

Mindset

Step by Step

ONE OF MY FAVORITE movies of recent years was Hidden Figures. There’s a pivotal scene where the hero, Katherine Johnson, realizes they need to use an ancient numerical technique known as Euler’s Method to solve the trajectory equations for John Glenn’s mission. This involves breaking a complex problem into very small pieces, solving each part, and then summing them to get the solution.
Over my engineering career, I used various numerical integration techniques to solve complicated problems.

Read more »

Longer Reads

Brain Food

MY MOST MEMORABLE experiences are family vacations—and that includes the mishaps. Those become the stories we laugh about years later.
For instance, when our boys were young, we took an overnight train from Bangkok to northern Thailand. We found ourselves trapped for three days in Chiangmai by an unexpected torrential flood. Multiple times, we had to modify our plans for getting back to Bangkok. Finally, we got a flight on a small airplane. As we walked up to the plane,

Read more »

Fit to Retire

I WAS RECENTLY talking with a younger acquaintance about my decision to leave the workforce early. I’d left a demanding career to pursue my personal passions, while I was still young and healthy enough to do so.
My acquaintance is in his early 30s. He’s single and makes a boatload of money working in IT for a pharma company. He’s also a big proponent of the FIRE (financial independence-retire early) movement. He takes part in Reddit boards and reads every investment article he can get his hands on.

Read more »

Invest Don’t Bet

MANY TIMES IN MY career, I’ve heard people say, “The stock market is just one big casino” or “Buying stocks is just like gambling.” Yes, there are similarities between investing and gambling. But when done properly, long-run investing shouldn’t resemble gambling in any real way.
Let’s start with the similarities. Day-traders—who buy individual stocks in an attempt to make a quick profit—are similar to gamblers at the roulette table. Both are hoping for a lucky play.

Read more »

Read Before Selling

LIKE A TIRESOME rerun of Friday the 13th, COVID-19 has returned in its newest form, the Omicron variant. Last Friday, financial markets were shaken by the news, especially the potential for greater transmissibility and the fear that current vaccines will prove impotent against the new COVID variant. Yesterday saw a partial market rebound. Still, traders are betting that share prices will remain volatile.
Much is unknown at this point, but many investors have taken a sell-now-and-ask-questions-later approach.

Read more »

When Fantasy Fails

I’M A LIFELONG football fan who’s played fantasy football for 20 years. What do I have to show for it? Zero league titles, a staunch ambivalence about fantasy football—and three investing maxims.
Every fantasy football season starts with the draft. Three intoxicating forces combine to make the draft a great time: predictions, customization and pride. I’ve come to realize that the draft accounts for about 90% of the appeal of the whole fantasy football concept.

Read more »

Money Talks

RON LIEBER, in his book The Opposite of Spoiled, describes a 2012 conversation between Chris Rock and Jon Stewart. In an interview on Stewart’s show, they got around to discussing the challenges both faced in raising children who could remain grounded amid wealthy surroundings.

Rock described how his own modest upbringing differed from the comfortable life his children enjoy. “My kids are rich,” he said. “I have nothing in common with them.”

Stewart agreed.

Read more »

Free Newsletter

Voices

What would you happily buy even if it were twice the price?

"First off, it'd be so hard for me to keep buying anything if it were twice the price. I'm awful when it comes to anchoring to an initial price! A quality used car might fit the list. I have purchased pre-owned vehicles off Craigslist a few times, and all have been good experiences. My target buy price is about $5k. If I could have high confidence the 'new car' would last me 10+ years with safety and minimal non-routine maintenance, I might do it. Of course, I want to pay the market price and no higher :) Another good one is the cost of an additional AAA membership when there is an existing family plan. It's very affordable with good benefits."
- Mike Zaccardi
Read more »

How much financial help should parents give their children?

"I wanted to give my kids a good start in life so I made the pricey decision to pay for their education and had to put a mortgage on my house to do it. I still view it as one of my better investments."
- Mike Drak
Read more »

What’s the best way to gauge an investor’s risk tolerance?

"Look at their account history... proof is in the pudding!"
- Scrooge_McDuck88
Read more »
Home Call to Action

Manifesto

NO. 60: WE SHOULDN’T necessarily be investment contrarians, but we should be leery of crowds. When “everybody” is buying, that’s a warning sign—and we should resist joining the stampede.

Act

CONSIDER A ROTH conversion. Is your taxable income for the current year less than normal, so you’ll end up in a lower income tax bracket? To take advantage, you might convert part of your traditional IRA to a Roth IRA, where the money will grow tax-free thereafter. One warning: Make sure you have the necessary cash set aside to pay the resulting tax bill.

Truths

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.

Think

FAT TAILS. We imagine investment returns will look like the standard humped-back normal distribution curve, with annual results mostly clustering around the average, while extremely good and bad years are relatively rare. But in reality, great and terrible years occur with surprising frequency, causing the performance distribution curve to have “fat tails.”

Money Guide

Start Here

Breaking Even

WHEN SHOULD retirees claim Social Security? Let’s dispense with a few preliminaries. If you have young children, it may be worth claiming at age 62, so your kids can receive family benefits. Meanwhile, if you’re married and you were the main breadwinner, it’s probably worth delaying benefits to age 70 to get the larger monthly check. This is true even if you are in poor health. The reason: Your benefit may live on as a survivor benefit for your spouse. Instead, we’re keeping it simple. We will assume you are single and your full Social Security retirement age is 66. You’re trying to decide between a monthly benefit of $750 starting at 62, $1,000 at 66 or $1,320 at 70. Your plan is to take the money and invest it in high-quality bonds, and you want to know what the breakeven age is. In other words, if you take benefits later, at what age would the monthly checks you’ve collected be worth more than taking benefits at 62? Social Security benefits rise each year with inflation, so you need to figure that into the calculation. To make things easy, let’s think in terms of real (after-inflation) returns. For instance, if 10-year Treasury notes are yielding 2% and inflation is 2%, your real return is 0%. We will look at three scenarios in which high-quality bonds deliver after-inflation annual returns of 0%, 1% and 2%. Based on those three real returns, how long would you have to live to make delaying benefits worthwhile? If you delay from age 62 to 66 and you’re investing in bonds that deliver a 0% real return, you’ll be ahead shortly after you turn age 78—and the longer you live after that, the greater the advantage grows. Meanwhile, at a 1% real return, delaying benefits to 66 will put you ahead if you live to age 80, while a 2% real return will put you ahead by age 81. What if you delay benefits from age 62 to 70? You’re ahead at age 81 assuming a 0% real return, 82 assuming a 1% real return and 83 assuming a 2% real return. What if you plan to invest in stocks, not bonds? That could raise the breakeven age, because the potential return is higher. But the risk is also vastly greater, and that messes up the analysis. You shouldn’t make a straight comparison between a relatively sure bet (the government keeps paying Social Security) and something so uncertain (remember, stocks lost roughly half their value twice since 2000) without factoring in the difference in risk. Next: Spousal Benefits Previous: Early and Late Article: Worth the Wait
Read more »

Second Look

Retirement

Try Not to Slip

THE FLU SEASON was approaching, so I decided to schedule an appointment with my medical provider for a flu shot. The next morning, I received an email from my prescription drug plan informing me that it was processing a payment for $30.80.
My immediate thought: “How could my medical provider charge me for a flu shot that I haven’t yet received? And why aren’t they billing Medicare?” Medicare provides a free flu shot to every enrollee.

Read more »

Family Finance

We’re Stuffed

THERE’S A RETAIL chain called The Container Store. As the name implies, it sells all types of containers, storage units and custom closets to help people organize their stuff, much of which they likely don’t need.
Let’s say you want a separate plastic box for each pair of shoes. You can have it. Did you know men own an average 12 pairs of shoes and women an average 27 pairs? Amazingly, 85% of women own shoes they purchased but have never worn.

Read more »

Investing

Before the Fall

THE SUDDEN BULL move of 1991 enraged me. Mr. Market waved the red flag and I charged. Forget balanced, S&P 500 and large-cap value funds. I was gonna get me one of them aggressive funds that goes up 99% in a year.
I greedily and resentfully scanned the list of 1991’s 10 top-performing mutual funds. Why didn’t I own any of them? Oppenheimer Global Biotech was up 121%. Vanguard Windsor II, which I owned around that time,

Read more »

Lists

What It Takes

SAVE 30% OF INCOME? No way.
That’s been my reaction whenever I’ve read about people saving 30% or more. I look back and think about making monthly mortgage payments, raising four children, paying for college and trying to save something to supplement my pension. For my wife and me, a 30% savings rate simply wasn’t possible. Nevertheless, people do it.
To find out more, I asked folks on a Facebook retirement planning group, “How do you save 30%?” The responses boiled down to nine key factors.

Read more »

Mindset

Step by Step

ONE OF MY FAVORITE movies of recent years was Hidden Figures. There’s a pivotal scene where the hero, Katherine Johnson, realizes they need to use an ancient numerical technique known as Euler’s Method to solve the trajectory equations for John Glenn’s mission. This involves breaking a complex problem into very small pieces, solving each part, and then summing them to get the solution.
Over my engineering career, I used various numerical integration techniques to solve complicated problems.

Read more »