Trying to beat the market is a game for the rich. Only they can afford the inevitable disappointing results.
WHEN I STARTED working fulltime in 1980, there were very few retirement savings vehicles available to the average worker. I remember setting up my IRA and contributing the $2,000 annual maximum—at the time the only retirement account I could fund.
Today, by contrast, there’s a slew of retirement choices on offer. Where should those new to the workforce focus their dollars? If you have access to a 401(k) or similar retirement plan with an employer matching contribution,
WE ARE ALL victims of continually rising costs. Here’s the oft-repeated drill: The service provider sends the yearly renewal bill by mail or email, or the new annual cost is simply posted to our credit card account or deducted from our bank account.
Assuming we even notice the charge, the head-scratching starts. What the heck was the cost last year anyway? The new fee may have increased just 3% or 5%, which doesn’t seem like a lot.
A DOZEN YEARS ago, on my first day of business school, the professor stood at the board and illustrated a concept called “present value.” Truth be told, over my remaining time in school, I don’t think I learned anything more important than I learned in that first hour. It is, in my view, the single most useful tool in all of personal finance. Below, I’ll walk you through the concept and then illustrate some ways it can help you make better financial decisions.
I OFTEN FEEL like the Grinch, who “puzzled and puzzled ‘till his puzzler was sore.” One question I’ve puzzled over endlessly: If what I do barely matters in the greater scheme of things, why in the world do I keep doing it?
Here are four related thoughts that often crop up in my writing:
One of life’s great pleasures is working hard at something we care deeply about.
While striving toward our goals can bring great satisfaction,
MY HUSBAND is the consumer every company should fear. In my last post, I detailed his multi-month research that preceded our recent car purchase. This time, he decided to investigate auto insurance.
The Gecko’s promise to save 15% had hit a nerve. A savings of 15% on a $2,500 annual insurance bill for two cars would be worth the effort. But, of course, being the thorough person that he is, my husband had to check out every other insurance company on the planet.
PREPARING for retirement is like running a marathon. It requires dedication, discipline and endurance.
But there’s also a crucial difference.
When you cross the finish line in a marathon, you know the race is over. But when you quit the workforce, it’s much harder to figure out whether you’ve successfully reached retirement. Why? A happy and prosperous retirement is about money, but it’s also about so much more than money. Here are 15 signs that a wonderful retirement likely lies ahead:
You don’t need an online calculator to tell you that you have enough money,
WHO DO WE TIP? A CreditCards.com survey found that 77% say they always tip their server at a sit-down restaurant. We’re less likely to tip hairdressers (63%), food delivery folks (63%), taxi drivers (49%) and hotel housekeepers (27%).
NO. 42: WE SHOULD never take investment advice from brokers and insurance agents—because they have an incentive to sell high-commission products and get us to trade excessively.
NO. 93: PAYING down a mortgage is often the best bond we can buy. We earn a return equal to the mortgage’s interest rate, which will typically be above the yield on high-quality bonds. True, if we pay down a mortgage, we’ll have less mortgage interest to deduct—but that deduction is now less valuable, thanks to 2017’s tax law.
TRY THE BACKDOOR. Is your income too high to fund a Roth IRA? Consider making nondeductible contributions to a traditional IRA and then converting it to a Roth. This can allow you to get money into a Roth at little or no tax cost—provided your nondeductible IRA is your only IRA. If not, the so-called backdoor Roth could trigger a big tax bill.
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.
WHEN I STARTED working fulltime in 1980, there were very few retirement savings vehicles available to the average worker. I remember setting up my IRA and contributing the $2,000 annual maximum—at the time the only retirement account I could fund.
Today, by contrast, there’s a slew of retirement choices on offer. Where should those new to the workforce focus their dollars? If you have access to a 401(k) or similar retirement plan with an employer matching contribution,
WE ARE ALL victims of continually rising costs. Here’s the oft-repeated drill: The service provider sends the yearly renewal bill by mail or email, or the new annual cost is simply posted to our credit card account or deducted from our bank account.
Assuming we even notice the charge, the head-scratching starts. What the heck was the cost last year anyway? The new fee may have increased just 3% or 5%, which doesn’t seem like a lot.
A DOZEN YEARS ago, on my first day of business school, the professor stood at the board and illustrated a concept called “present value.” Truth be told, over my remaining time in school, I don’t think I learned anything more important than I learned in that first hour. It is, in my view, the single most useful tool in all of personal finance. Below, I’ll walk you through the concept and then illustrate some ways it can help you make better financial decisions.
I OFTEN FEEL like the Grinch, who “puzzled and puzzled ‘till his puzzler was sore.” One question I’ve puzzled over endlessly: If what I do barely matters in the greater scheme of things, why in the world do I keep doing it?
Here are four related thoughts that often crop up in my writing:
One of life’s great pleasures is working hard at something we care deeply about.
While striving toward our goals can bring great satisfaction,
MY HUSBAND is the consumer every company should fear. In my last post, I detailed his multi-month research that preceded our recent car purchase. This time, he decided to investigate auto insurance.
The Gecko’s promise to save 15% had hit a nerve. A savings of 15% on a $2,500 annual insurance bill for two cars would be worth the effort. But, of course, being the thorough person that he is, my husband had to check out every other insurance company on the planet.
PREPARING for retirement is like running a marathon. It requires dedication, discipline and endurance.
But there’s also a crucial difference.
When you cross the finish line in a marathon, you know the race is over. But when you quit the workforce, it’s much harder to figure out whether you’ve successfully reached retirement. Why? A happy and prosperous retirement is about money, but it’s also about so much more than money. Here are 15 signs that a wonderful retirement likely lies ahead:
You don’t need an online calculator to tell you that you have enough money,
WHO DO WE TIP? A CreditCards.com survey found that 77% say they always tip their server at a sit-down restaurant. We’re less likely to tip hairdressers (63%), food delivery folks (63%), taxi drivers (49%) and hotel housekeepers (27%).
NO. 42: WE SHOULD never take investment advice from brokers and insurance agents—because they have an incentive to sell high-commission products and get us to trade excessively.
TRY THE BACKDOOR. Is your income too high to fund a Roth IRA? Consider making nondeductible contributions to a traditional IRA and then converting it to a Roth. This can allow you to get money into a Roth at little or no tax cost—provided your nondeductible IRA is your only IRA. If not, the so-called backdoor Roth could trigger a big tax bill.
NO. 93: PAYING down a mortgage is often the best bond we can buy. We earn a return equal to the mortgage’s interest rate, which will typically be above the yield on high-quality bonds. True, if we pay down a mortgage, we’ll have less mortgage interest to deduct—but that deduction is now less valuable, thanks to 2017’s tax law.
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.