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It’s better to sell in a panic when stocks are near all-time highs than wait until they’re 20% lower.

Stepping Back

AS YOU NO DOUBT noticed, the stock market took investors on a wild ride last week. On Wednesday, the Dow industrials dropped more than 800 points. On Thursday, the Dow lost another 546 points. Friday was better, up 287 points, but there was still plenty of stomach-churning volatility.
At times like this, I’m reminded of Warren Buffett’s motto: “You want to be greedy when others are fearful, and you want to be fearful when others are greedy.” While that certainly sounds logical,

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The Other Half

THIS WEBSITE is devoted to personal finance—and I try to keep it that way, avoiding partisan political pontificating. Still, as we’ve learned from the 2016 presidential election and its aftermath, the U.S. is a country divided between those prospering in today’s economy and those who feel shortchanged.
In reality, of course, it’s more of a spectrum than a sharp divide: Most folks neither live below the poverty level nor count themselves among the one-percenters.

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403 Beware

PUBLIC SCHOOL teachers’ biggest problem isn’t rowdy students. Instead, it’s their retirement plans that should be sent to the dean’s office.
After leaving my job as a foreign currency trader for an international bank, I became a middle school history teacher. My teaching career lasted more than 20 years. One of the worst things I encountered was the state of public school teachers’ non-ERISA 403(b) plans.
Having a front-row seat to the carnage was not pretty.

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Latest Blogs

Stepping Back

AS YOU NO DOUBT noticed, the stock market took investors on a wild ride last week. On Wednesday, the Dow industrials dropped more than 800 points. On Thursday, the Dow lost another 546 points. Friday was better, up 287 points, but there was still plenty of stomach-churning volatility.
At times like this, I’m reminded of Warren Buffett’s motto: “You want to be greedy when others are fearful, and you want to be fearful when others are greedy.” While that certainly sounds logical,

Read more »

The Other Half

THIS WEBSITE is devoted to personal finance—and I try to keep it that way, avoiding partisan political pontificating. Still, as we’ve learned from the 2016 presidential election and its aftermath, the U.S. is a country divided between those prospering in today’s economy and those who feel shortchanged.
In reality, of course, it’s more of a spectrum than a sharp divide: Most folks neither live below the poverty level nor count themselves among the one-percenters.

Read more »

403 Beware

PUBLIC SCHOOL teachers’ biggest problem isn’t rowdy students. Instead, it’s their retirement plans that should be sent to the dean’s office.
After leaving my job as a foreign currency trader for an international bank, I became a middle school history teacher. My teaching career lasted more than 20 years. One of the worst things I encountered was the state of public school teachers’ non-ERISA 403(b) plans.
Having a front-row seat to the carnage was not pretty.

Read more »

Blog archive

Numbers

RESIDENTS OF MASSACHUSETTS, New Hampshire and North Dakota are the most financially savvy, while Mississippi, Arkansas and West Virginia are the least, says WalletHub. The ranking considers factors like debt, credit scores, financial literacy and savings habits.

Truths

NO. 82: RETIREES NEED STOCKS to combat inflation. Even at a modest 2% inflation rate, the spending power of $1 is reduced to 61 cents after 25 years. Yes, owning stocks is risky. But if you have a cash cushion to cover five years of portfolio withdrawals, you should be able to ride out a bear market without selling stocks at fire-sale prices.

Truths

NO. 82: RETIREES NEED STOCKS to combat inflation. Even at a modest 2% inflation rate, the spending power of $1 is reduced to 61 cents after 25 years. Yes, owning stocks is risky. But if you have a cash cushion to cover five years of portfolio withdrawals, you should be able to ride out a bear market without selling stocks at fire-sale prices.

Act

VENTURE ABROAD. Foreign shares account for half of global stock market capitalization and are notably cheaper than U.S. shares. Indeed, thanks to weak results in recent years, including 2018, investors today have a chance to buy at relatively depressed prices. HumbleDollar’s advice: Allocate a third to half of your stock portfolio to foreign shares.

Think

PASCAL’S WAGER. The 17th century philosopher Blaise Pascal argued it was rational to believe in God. If you believe and God doesn’t exist, the price is modest: a life of less immorality. But if you don’t believe and God does exist, the price is far higher: an eternity in hell. The implication? We should focus less on the odds of something happening and more on the consequences—an important notion when managing money.

Home Call to Action

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A Good Life

IS THIS A MOMENT of cultural change? I see glimpses of a new way of thinking. The New York Times recently ran articles on both the cult of thrift and the financial independence/retire early—or FIRE—movement. Words like mindfulness, purpose and meaning have gained new currency. U.S. household debt is growing, but it’s still barely higher than a decade ago. The national savings rate even shows signs of improving.
Maybe this is yet another reverberation from the Great Recession.

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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 latest book: From Here to Financial Happiness.

Money Guide

Start Here

Fixed vs. Adjustable

MOST FOLKS INSTINCTIVELY OPT for a fixed-rate mortgage, where your principal-and-interest payment stays the same every month. But in all likelihood, an adjustable-rate mortgage, or ARM, will be cheaper. ARMs are priced off short-term interest rates, while fixed-rate mortgages are priced off intermediate-term rates—and short-term rates are generally lower than intermediate-term rates. Moreover, when interest rates drop, homeowners with ARMs will likely see their monthly payment fall when their rate next resets. By contrast, for holders of fixed-rate mortgages to benefit from lower rates, they need to go through the hassle and cost of refinancing. Of course, with an ARM, there’s also a risk that the interest rate will increase at the next adjustment date. ARMs often have both periodic and lifetime caps that limit how much the rate can increase. Let’s say an ARM has a two-percentage-point periodic cap, a six-point lifetime cap and a one-year adjustment period. Every year, the rate you’re charged could climb two percentage points, though it can never climb more than six points above your initial rate. Not sure you want to take that much risk? Instead of a pure ARM, many homebuyers take out a 3/1, 5/1, 7/1 or 10/1 hybrid ARM. With these loans, your rate is fixed for the first three, five, seven or 10 years, and then the rate adjusts every year thereafter. At that point, the rate could climb sharply. But there’s also a good chance you might move or refinance within the first five or six years, so you may never feel the bite from the mortgage’s adjustable rate. As you ponder what mortgage to get, give some thought to your job situation. If you have a secure job with a steady paycheck, you might take the risk of an ARM and, fingers crossed, get rewarded with a lower average rate over the course of the mortgage. But if your income fluctuates, you should probably look for predictability in the rest of your financial life, including favoring fixed-rate mortgages. Next: Conforming vs. Nonconforming Previous: Mortgages
Read more »

Archive

Zeroing In

BY THE TIME WE REACH our late 20s, we’ve made a set of fairly inflexible choices that dictate our ability to spend and save. Our career arc and earnings potential are established. Our debt from undergraduate and graduate programs has been accumulated. The number of dependents we’ll support is getting clearer. Changing any of these decisions is either impossible or mighty tough. But there’s a second tier of financial choices that are in constant flux—and where we have the greatest flexibility to influence our spending and saving. Remember, spending and saving are a zero-sum game, so it’s all about tradeoffs: If I spend X, I can’t save Y. If I purchase Q, I won’t be able to afford R. If I prioritize M, I need to forgo N. My wife and I discuss these tradeoffs as we make spending decisions. For us, it means that, even though we hate cleaning the house (and who doesn’t?), we aren’t ready to spend $150 a month for a cleaning service. Instead, we’d rather allocate these dollars to a larger grocery budget, knowing that we often choose to shop at Whole Foods and specialty stores. More recently, we started regularly donating to our favorite charities. This has meant reducing our monthly entertainment spending to offset the contributions. Want to make these sorts of tradeoffs? Consider the potential value-add of any expense. Sometimes, it’s negligible or negotiable. I am happy to forgo an expensive gym membership and, instead, use a budget-priced, no-frills gym. It just doesn’t greatly impact my overall experience. On the other hand, Sarah and I still buy paper copies of every book we read. While we’d save money with e-books and even more with a library card, we love owning books. The $50 a month we spend on books feels like it’s worth the joy it brings. In other words, budgeting doesn’t always mean choosing the most frugal option. But it does mean recognizing that, with every spending choice, we give up the opportunity to use the dollars for something else. Zach Blattner’s previous blogs include Money Pit and Unexpected but Predictable. Zach is a former teacher and school leader who now teaches teachers across the Philly/Camden region as a faculty member at Relay GSE. He is a self-taught finance nerd who dispenses advice to his wife, friends, family and anyone else willing to listen.
Read more »

Money Guide

Start Here

Fixed vs. Adjustable

MOST FOLKS INSTINCTIVELY OPT for a fixed-rate mortgage, where your principal-and-interest payment stays the same every month. But in all likelihood, an adjustable-rate mortgage, or ARM, will be cheaper. ARMs are priced off short-term interest rates, while fixed-rate mortgages are priced off intermediate-term rates—and short-term rates are generally lower than intermediate-term rates. Moreover, when interest rates drop, homeowners with ARMs will likely see their monthly payment fall when their rate next resets. By contrast, for holders of fixed-rate mortgages to benefit from lower rates, they need to go through the hassle and cost of refinancing. Of course, with an ARM, there’s also a risk that the interest rate will increase at the next adjustment date. ARMs often have both periodic and lifetime caps that limit how much the rate can increase. Let’s say an ARM has a two-percentage-point periodic cap, a six-point lifetime cap and a one-year adjustment period. Every year, the rate you’re charged could climb two percentage points, though it can never climb more than six points above your initial rate. Not sure you want to take that much risk? Instead of a pure ARM, many homebuyers take out a 3/1, 5/1, 7/1 or 10/1 hybrid ARM. With these loans, your rate is fixed for the first three, five, seven or 10 years, and then the rate adjusts every year thereafter. At that point, the rate could climb sharply. But there’s also a good chance you might move or refinance within the first five or six years, so you may never feel the bite from the mortgage’s adjustable rate. As you ponder what mortgage to get, give some thought to your job situation. If you have a secure job with a steady paycheck, you might take the risk of an ARM and, fingers crossed, get rewarded with a lower average rate over the course of the mortgage. But if your income fluctuates, you should probably look for predictability in the rest of your financial life, including favoring fixed-rate mortgages. Next: Conforming vs. Nonconforming Previous: Mortgages
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 latest book: From Here to Financial Happiness.

Free Newsletter

A Good Life

IS THIS A MOMENT of cultural change? I see glimpses of a new way of thinking. The New York Times recently ran articles on both the cult of thrift and the financial independence/retire early—or FIRE—movement. Words like mindfulness, purpose and meaning have gained new currency. U.S. household debt is growing, but it’s still barely higher than a decade ago. The national savings rate even shows signs of improving.
Maybe this is yet another reverberation from the Great Recession.

Read More »

Archive

Zeroing In

BY THE TIME WE REACH our late 20s, we’ve made a set of fairly inflexible choices that dictate our ability to spend and save. Our career arc and earnings potential are established. Our debt from undergraduate and graduate programs has been accumulated. The number of dependents we’ll support is getting clearer. Changing any of these decisions is either impossible or mighty tough. But there’s a second tier of financial choices that are in constant flux—and where we have the greatest flexibility to influence our spending and saving. Remember, spending and saving are a zero-sum game, so it’s all about tradeoffs: If I spend X, I can’t save Y. If I purchase Q, I won’t be able to afford R. If I prioritize M, I need to forgo N. My wife and I discuss these tradeoffs as we make spending decisions. For us, it means that, even though we hate cleaning the house (and who doesn’t?), we aren’t ready to spend $150 a month for a cleaning service. Instead, we’d rather allocate these dollars to a larger grocery budget, knowing that we often choose to shop at Whole Foods and specialty stores. More recently, we started regularly donating to our favorite charities. This has meant reducing our monthly entertainment spending to offset the contributions. Want to make these sorts of tradeoffs? Consider the potential value-add of any expense. Sometimes, it’s negligible or negotiable. I am happy to forgo an expensive gym membership and, instead, use a budget-priced, no-frills gym. It just doesn’t greatly impact my overall experience. On the other hand, Sarah and I still buy paper copies of every book we read. While we’d save money with e-books and even more with a library card, we love owning books. The $50 a month we spend on books feels like it’s worth the joy it brings. In other words, budgeting doesn’t always mean choosing the most frugal option. But it does mean recognizing that, with every spending choice, we give up the opportunity to use the dollars for something else. Zach Blattner’s previous blogs include Money Pit and Unexpected but Predictable. Zach is a former teacher and school leader who now teaches teachers across the Philly/Camden region as a faculty member at Relay GSE. He is a self-taught finance nerd who dispenses advice to his wife, friends, family and anyone else willing to listen.
Read more »