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We can’t stop bad stuff from happening. But we can make sure everything’s okay financially.

Getting Used?

IN THE PAST, we’ve always bought certified preowned cars. We know new cars lose a big chunk of their value when you drive them off the lot, so we had our eye on a used car when we started our search earlier this year.
Our goal was a Mercedes Benz GLC 300 AWD 4MATIC. My husband enjoys the negotiating and drama that comes with buying a car, so he investigated choices, checked out prices at dealerships and was ready to start his usual two-to-three-month car hunt.

Read more »

Solomon on Money

THE MOST WIDELY read book of all time, the Bible, has a lot to say about money. According to biblical scholars, money and wealth are mentioned more than 2,000 times. Out of the roughly 40 parables Jesus told, nearly half speak of money.
Why does the Bible make such a big deal about money? The answer belongs in a Sunday sermon, not here. Still, I believe there’s a great deal to be learned from what the Bible says about money.

Read more »

Bet Your Life

INCOME ANNUITIES are a simple, cost-efficient way to generate guaranteed retirement income, and yet they account for just 5% of overall annuity sales. My contention: They can play a unique role in a portfolio—and deserve serious consideration by anyone planning for retirement.
Full disclosure: I’m co-founder of Saturday Insurance, an online company that offers income annuities and other insurance products directly to consumers. I also know that, when most people hear the word “annuity,” they cringe,

Read more »

Under Attack

THE FINANCIAL site MarketWatch has been running a series about the lives and budgets of Americans who retire abroad. My wife Jiab and I—who moved from Texas to Spain—were one of the first couples featured, along with a husband and wife who now live in Chile. Both articles made clear there were plusses and minuses to such a move—experiencing new things, but also being away from family—and that we weren’t advocating this for everyone.

Read more »

Out of Stock

A NEW FIRM called Life + Liberty Indexes has created what it calls the Freedom 100 index of emerging markets stocks. Unlike other indexes, which typically weight stocks by their market value, the Freedom 100 weights countries by measures of freedom. These include freedom of religion, freedom of the press and freedom of assembly, among others. In short, the Freedom 100 looks like it could have been created by the authors of our Declaration of Independence.

Read more »

A Penny Saved

CALL IT THE NEW conventional wisdom: Forget trying to spend less—and instead focus on earning more.
This change in thinking is no great surprise. We have endless opportunities to make an extra buck, thanks to all the “side hustles” available in our “gig economy.” Meanwhile, many folks bristle at the admonitions to spend less on lattes, happy hours and avocado toast. Let’s face it, will eliminating such expenses really put us on the fast track to financial freedom?

Read more »

Money Guide

Stock Picking

MANY INVESTORS maintain an enduring belief in good old-fashioned stock-picking. The hope: If they invest with a collection of skilled mutual fund managers who each have a laser-like focus on one part of the market, they can earn above-average returns. This approach has led to “style box” investing. Investors might buy a selection of U.S. stock funds that focus on large-capitalization, mid-cap and small-cap stocks. Within these three size ranges, they might purchase a top-rated growth fund, value fund and blended-style fund. That means they end up with nine different U.S. stock funds. Similarly, they might purchase a collection of mutual funds that give them exposure to foreign stocks and to the bond market. A recipe for success? It seems not. S&P Dow Jones Indices, a division of S&P Global, puts out a regularly updated study comparing actively managed funds to appropriate market indices. Over the 15 years through December 2018, the vast majority of funds in the nine U.S. style boxes underperformed their benchmark index. The failure rate ranged from 79% for large-cap value funds to an astonishing 98% for small-cap growth funds. Meanwhile, among international funds, the 15-year failure rate varied from 76% for international small-cap funds to 96% for emerging-market stock funds. The 15-year results for bond funds were somewhat more encouraging. But even the most-promising categories saw 63% of actively managed bond funds lag their benchmark index. The full report can be found at spindices.com. This market-lagging performance should be no great surprise. It isn’t easy to find market-beating stocks and bonds. Every trading day, investors pore over the market, hunting for bargains. If a stock is undervalued, it’s unlikely to stay that way for long. But while the search for winning stocks is often fruitless, it isn’t cheap. Many stock funds charge 1% or so in annual expenses and might incur another 0.5% in transaction costs, for a total of 1.5%. Sure enough, that’s the sort of shortfall you typically see each year when you compare funds to their benchmark index. Next: High Risk, High Returns? Previous: Fat Tails Blog: Fancy Your Chances?
Read more »

Archive

The $121,500 Room

I HAVE A WIFE, two children, two dogs, and the need for three bedrooms and two bathrooms. In March 2015, I purchased a four bedroom, 3½ bath, 3,000-square-foot house in a nice neighborhood with quality public schools. The fourth bedroom was largely unnecessary but, like many people, we occasionally get visitors and feel it’s nice to have an extra bedroom for them, instead of spending money on a hotel room. This is the story of how that fourth bedroom cost me more than $121,500, far more than it would have cost to get hotel rooms for our occasional visitors. The Guestroom. The guestroom and its accompanying full bathroom are approximately 600 square feet. We bought the house for $140 per square foot, meaning that this extra room and bathroom cost me $84,000. Where I live, you can get a decent hotel room for $100 a night. In other words, I could have purchased 840 nights in a hotel room. I don’t think we’ll ever have 840 overnight guests, unless we stay in this house for a very, very, very long time. In addition, we have a very comfortable, queen-size Lazy Boy sleeper couch that could have substituted for the guestroom. Running total: $84,000 The HVAC Incident. “The way they installed this, I don’t even think I can fix it.” That is not what I wanted my HVAC (heating, ventilation and air conditioning) repairman to say, but that is what he said. The guestroom did not have its own HVAC zone and, because it is above the garage and the insulation is not what it could be, the guestroom is always too hot or too cold. If you are going to have a guestroom, it needs to be comfortable, right? Some $5,000 later, the guestroom had its own wall-mounted HVAC unit and zone. Running total: $89,000 The Exchange Student. Because we have an $89,000 extra room with a bathroom and its own HVAC, we hosted a Spanish exchange student during the past school year. Hosting an exchange student was a great experience for both my family and me, expanding our horizons and hopefully forging a lasting relationship with someone for us to visit in Spain. The student, though skinny as a rail at 5’8” and 110 pounds, ate way more than I would have expected. I have no idea how much it cost me. Running total: $89,000, plus whatever it cost me to feed a skinny but hungry 16-year-old boy for a school year. Despite the fact that he was of driving age, he was not allowed to drive in the U.S. This, of course, led to… The Manny Van. As of August 2016, I had a wife, two kids, two dogs and an exchange student. It was going to be tough to get around and do the traveling we like to do in our Toyota Prius and Ford Fusion Hybrid. Having a 12-, 15- and 16-year-old in the backseat, while technically feasible, was not going to be fun for anything other than the shortest of trips. Plus, we like to bring the dogs. Enter the $32,500, 2015 Toyota Sienna minivan, which I like to call the “manny van” when I’m driving. It enabled me to haul all living beings I was responsible for in the manliest of vans. Running total: $121,500, plus whatever it cost me to feed a skinny but hungry 16-year-old boy for a school year. The Moral of the Story. One of the classic financial mistakes that people make (including me, apparently) is spending too much money, including buying too expensive a car and too large a house. Sometimes, something as simple as wanting a guestroom can lead to unintended and expensive consequences. If we didn’t have a guestroom, I would probably have an extra $121,500, a school year’s worth of food—and I wouldn’t be driving a “manny van.” Joel M. Schofer, MD, MBA, is a Commander with the U.S. Navy’s Medical Corps. He blogs about personal finance at MilitaryMillions.com and can be reached at Still-In@MilitaryMillions.com. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Department of the Navy, Department of Defense or the United States Government.
Read more »

Numbers

NEBRASKA, Iowa, Missouri, South Dakota and Florida are the best states to retire, says Bankrate. The ranking is based on five criteria, with the biggest weight given to affordability.

Home Call to Action

Manifesto

NO. 20: FRUGALITY isn’t just the key to financial success. It’s also no great sacrifice, because spending often brings only fleeting happiness—and sometimes even pangs of regret.

Truths

NO. 44: GOOD COMPANIES are often bad stocks. Why? Investors bid up the value of widely admired, fast-growing companies—and the companies often end up disappointing investors. Meanwhile, investors shun troubled, slower-growing companies, so even so-so corporate performance can result in strong market returns.

Act

CHECK YOUR portfolio percentages. In 2019, stocks have outpaced bonds, U.S. growth companies are ahead of bargain-priced value shares, real estate stocks have sparkled and foreign stock markets have fallen behind. All this may have pushed your portfolio away from your target asset allocation—and it could be time to rebalance.

Think

HYPERBOLIC DISCOUNT. Suppose we’re choosing between a smaller reward today and a larger reward at some future date. To get us to wait, the later reward typically has to be far larger, perhaps giving us a 100% return for delaying just a few days or weeks. Such hyperbolic discounting highlights how we favor today and shortchange our future selves.

Getting Used?

IN THE PAST, we’ve always bought certified preowned cars. We know new cars lose a big chunk of their value when you drive them off the lot, so we had our eye on a used car when we started our search earlier this year.
Our goal was a Mercedes Benz GLC 300 AWD 4MATIC. My husband enjoys the negotiating and drama that comes with buying a car, so he investigated choices, checked out prices at dealerships and was ready to start his usual two-to-three-month car hunt.

Read more »

Solomon on Money

THE MOST WIDELY read book of all time, the Bible, has a lot to say about money. According to biblical scholars, money and wealth are mentioned more than 2,000 times. Out of the roughly 40 parables Jesus told, nearly half speak of money.
Why does the Bible make such a big deal about money? The answer belongs in a Sunday sermon, not here. Still, I believe there’s a great deal to be learned from what the Bible says about money.

Read more »

Bet Your Life

INCOME ANNUITIES are a simple, cost-efficient way to generate guaranteed retirement income, and yet they account for just 5% of overall annuity sales. My contention: They can play a unique role in a portfolio—and deserve serious consideration by anyone planning for retirement.
Full disclosure: I’m co-founder of Saturday Insurance, an online company that offers income annuities and other insurance products directly to consumers. I also know that, when most people hear the word “annuity,” they cringe,

Read more »

Under Attack

THE FINANCIAL site MarketWatch has been running a series about the lives and budgets of Americans who retire abroad. My wife Jiab and I—who moved from Texas to Spain—were one of the first couples featured, along with a husband and wife who now live in Chile. Both articles made clear there were plusses and minuses to such a move—experiencing new things, but also being away from family—and that we weren’t advocating this for everyone.

Read more »

Out of Stock

A NEW FIRM called Life + Liberty Indexes has created what it calls the Freedom 100 index of emerging markets stocks. Unlike other indexes, which typically weight stocks by their market value, the Freedom 100 weights countries by measures of freedom. These include freedom of religion, freedom of the press and freedom of assembly, among others. In short, the Freedom 100 looks like it could have been created by the authors of our Declaration of Independence.

Read more »

A Penny Saved

CALL IT THE NEW conventional wisdom: Forget trying to spend less—and instead focus on earning more.
This change in thinking is no great surprise. We have endless opportunities to make an extra buck, thanks to all the “side hustles” available in our “gig economy.” Meanwhile, many folks bristle at the admonitions to spend less on lattes, happy hours and avocado toast. Let’s face it, will eliminating such expenses really put us on the fast track to financial freedom?

Read more »

Free Newsletter

Numbers

NEBRASKA, Iowa, Missouri, South Dakota and Florida are the best states to retire, says Bankrate. The ranking is based on five criteria, with the biggest weight given to affordability.

Manifesto

NO. 20: FRUGALITY isn’t just the key to financial success. It’s also no great sacrifice, because spending often brings only fleeting happiness—and sometimes even pangs of regret.

Home Call to Action

Act

CHECK YOUR portfolio percentages. In 2019, stocks have outpaced bonds, U.S. growth companies are ahead of bargain-priced value shares, real estate stocks have sparkled and foreign stock markets have fallen behind. All this may have pushed your portfolio away from your target asset allocation—and it could be time to rebalance.

Truths

NO. 44: GOOD COMPANIES are often bad stocks. Why? Investors bid up the value of widely admired, fast-growing companies—and the companies often end up disappointing investors. Meanwhile, investors shun troubled, slower-growing companies, so even so-so corporate performance can result in strong market returns.

Think

HYPERBOLIC DISCOUNT. Suppose we’re choosing between a smaller reward today and a larger reward at some future date. To get us to wait, the later reward typically has to be far larger, perhaps giving us a 100% return for delaying just a few days or weeks. Such hyperbolic discounting highlights how we favor today and shortchange our future selves.

Money Guide

Start Here

Stock Picking

MANY INVESTORS maintain an enduring belief in good old-fashioned stock-picking. The hope: If they invest with a collection of skilled mutual fund managers who each have a laser-like focus on one part of the market, they can earn above-average returns. This approach has led to “style box” investing. Investors might buy a selection of U.S. stock funds that focus on large-capitalization, mid-cap and small-cap stocks. Within these three size ranges, they might purchase a top-rated growth fund, value fund and blended-style fund. That means they end up with nine different U.S. stock funds. Similarly, they might purchase a collection of mutual funds that give them exposure to foreign stocks and to the bond market. A recipe for success? It seems not. S&P Dow Jones Indices, a division of S&P Global, puts out a regularly updated study comparing actively managed funds to appropriate market indices. Over the 15 years through December 2018, the vast majority of funds in the nine U.S. style boxes underperformed their benchmark index. The failure rate ranged from 79% for large-cap value funds to an astonishing 98% for small-cap growth funds. Meanwhile, among international funds, the 15-year failure rate varied from 76% for international small-cap funds to 96% for emerging-market stock funds. The 15-year results for bond funds were somewhat more encouraging. But even the most-promising categories saw 63% of actively managed bond funds lag their benchmark index. The full report can be found at spindices.com. This market-lagging performance should be no great surprise. It isn’t easy to find market-beating stocks and bonds. Every trading day, investors pore over the market, hunting for bargains. If a stock is undervalued, it’s unlikely to stay that way for long. But while the search for winning stocks is often fruitless, it isn’t cheap. Many stock funds charge 1% or so in annual expenses and might incur another 0.5% in transaction costs, for a total of 1.5%. Sure enough, that’s the sort of shortfall you typically see each year when you compare funds to their benchmark index. Next: High Risk, High Returns? Previous: Fat Tails Blog: Fancy Your Chances?
Read more »

Archive

The $121,500 Room

I HAVE A WIFE, two children, two dogs, and the need for three bedrooms and two bathrooms. In March 2015, I purchased a four bedroom, 3½ bath, 3,000-square-foot house in a nice neighborhood with quality public schools. The fourth bedroom was largely unnecessary but, like many people, we occasionally get visitors and feel it’s nice to have an extra bedroom for them, instead of spending money on a hotel room. This is the story of how that fourth bedroom cost me more than $121,500, far more than it would have cost to get hotel rooms for our occasional visitors. The Guestroom. The guestroom and its accompanying full bathroom are approximately 600 square feet. We bought the house for $140 per square foot, meaning that this extra room and bathroom cost me $84,000. Where I live, you can get a decent hotel room for $100 a night. In other words, I could have purchased 840 nights in a hotel room. I don’t think we’ll ever have 840 overnight guests, unless we stay in this house for a very, very, very long time. In addition, we have a very comfortable, queen-size Lazy Boy sleeper couch that could have substituted for the guestroom. Running total: $84,000 The HVAC Incident. “The way they installed this, I don’t even think I can fix it.” That is not what I wanted my HVAC (heating, ventilation and air conditioning) repairman to say, but that is what he said. The guestroom did not have its own HVAC zone and, because it is above the garage and the insulation is not what it could be, the guestroom is always too hot or too cold. If you are going to have a guestroom, it needs to be comfortable, right? Some $5,000 later, the guestroom had its own wall-mounted HVAC unit and zone. Running total: $89,000 The Exchange Student. Because we have an $89,000 extra room with a bathroom and its own HVAC, we hosted a Spanish exchange student during the past school year. Hosting an exchange student was a great experience for both my family and me, expanding our horizons and hopefully forging a lasting relationship with someone for us to visit in Spain. The student, though skinny as a rail at 5’8” and 110 pounds, ate way more than I would have expected. I have no idea how much it cost me. Running total: $89,000, plus whatever it cost me to feed a skinny but hungry 16-year-old boy for a school year. Despite the fact that he was of driving age, he was not allowed to drive in the U.S. This, of course, led to… The Manny Van. As of August 2016, I had a wife, two kids, two dogs and an exchange student. It was going to be tough to get around and do the traveling we like to do in our Toyota Prius and Ford Fusion Hybrid. Having a 12-, 15- and 16-year-old in the backseat, while technically feasible, was not going to be fun for anything other than the shortest of trips. Plus, we like to bring the dogs. Enter the $32,500, 2015 Toyota Sienna minivan, which I like to call the “manny van” when I’m driving. It enabled me to haul all living beings I was responsible for in the manliest of vans. Running total: $121,500, plus whatever it cost me to feed a skinny but hungry 16-year-old boy for a school year. The Moral of the Story. One of the classic financial mistakes that people make (including me, apparently) is spending too much money, including buying too expensive a car and too large a house. Sometimes, something as simple as wanting a guestroom can lead to unintended and expensive consequences. If we didn’t have a guestroom, I would probably have an extra $121,500, a school year’s worth of food—and I wouldn’t be driving a “manny van.” Joel M. Schofer, MD, MBA, is a Commander with the U.S. Navy’s Medical Corps. He blogs about personal finance at MilitaryMillions.com and can be reached at Still-In@MilitaryMillions.com. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Department of the Navy, Department of Defense or the United States Government.
Read more »