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Spend wildly, trade like crazy and realize gains quickly—and you free up the rest of us to save, index and skimp on taxes.

Spin the Wheel

I RECENTLY SPOKE with a colleague. I’d expected him to be retired by now. He told me that he’d planned to retire last spring, but his employer offered him a three-day-a-week part-time schedule with full benefits. He discussed it with his financial planner.
The planner told him that, if he retired, he had an 85% chance of meeting his retirement goals. By working part-time for two more years, his chances of meeting his goals went up to 95%.

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Paying the Price

I STARTED DOING the family grocery shopping when I was 12 years old. I also married a woman who doesn’t like to cook or grocery shop. That means I’ve been buying the groceries now for more than 50 years. Fortunately, I enjoy it most of the time, but only recently have I noticed some behavior that I wish I’d used more frequently in my early investing life.

I find it hard to buy anything unless it’s on sale.

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Short Stuff

Takes Courage

I DROVE BY the condominium I sold last year. It was bought by a young lady in her early 20s. I noticed a for-sale sign hanging near the front entrance of the building.
Out of curiosity, I looked up the unit for sale online. It had the same floor plan as the condo I’d sold, but was located on the first floor in the back of the building. The condo I owned was located on the top floor facing the street—a much better location.

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Starting Early

ONE WAY TO MAXIMIZE long-term family wealth is through a teenager’s summer or after-school job. How do these small paychecks add up to serious money? Probably the best investment we can make for our children and grandchildren: Stash their earnings in a Roth IRA.
A teenager’s Roth has three things going for it: little or zero taxes owed on the small bits of income earned, 70 or 80 years of investment compounding, and zero taxes owed when those gains are withdrawn.

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Driving Me Happy

MY CAR EMAILED ME to say its tire pressure was low. Perhaps it’s more accurate to say it this way: An email from Subaru was triggered by data uploaded from my 2020 Forester, all part of the automatic safety and maintenance technology built into the vehicle. The email confirmed the dashboard light indicating the same problem.
My frugal friends and I have had friendly debates about car buying. Is it better to buy a used car and avoid the instant depreciation when you drive off the dealer’s lot?

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Sentiment Sours

FINANCIAL MARKETS had a lot to digest in recent days: Retail analysts are keeping a close eye on holiday spending, economists got their latest dose of employment data—and traders are coming to grips with the current bout of volatility.
The VIX, the S&P 500 Volatility Index or “fear gauge,” surged above 30 on Friday. That was the highest end-of-week close since January. For perspective, the VIX climbed to 80 during 2020’s COVID-19 stock market crash.

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The Price Is Right

DOLLAR STORES ARE currently booming in popularity, but I’ve patronized them for many years. It never made sense to me to pay more for household goods elsewhere. Yes, the quality isn’t always great—but you can’t complain about the price.
I never buy food at Dollar General on my weekly visits. That’s partly because I go on to ALDI and Trader Joe’s immediately afterwards. I also wouldn’t want anything to spoil in the Florida heat.

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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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Longer Reads

Fill ’Er Up

I OWN JUST TWO individual stocks. One is Wells Fargo, which I’ve discussed before. The other is Total, recently renamed TotalEnergies, a major oil company headquartered in France.
I was initially attracted to Total by its generous dividend and enormous underperformance in 2020. Yes, great underperformance—not outperformance—often piques my interest. Of course, declining stock prices and generous dividend yields go hand in hand. As the price of oil stocks cratered in 2020, their dividend yields soared.

Read more »

Not So Efficient

THE STOCK MARKET’S recent wrenching price swings offer a valuable investment lesson. Let’s start by reviewing the facts:

On the day after Thanksgiving, the S&P 500 suffered its worst day in months and the Dow had its worst day in more than a year. The proximate cause: news about Omicron, a new coronavirus variant. Overnight, investors seemed to revive their playbook from the early 2020 recession. Airline stocks dropped precipitously. Oil plunged 13%. Meanwhile,

Read more »

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.

Read more »

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 »

Voices

When should you claim Social Security retirement benefits?

"There is no one way for this. It all depends on your situation. Like your age and health. The need for the money due to job loss. This goes for spouses also. Everybody seems to talk about waiting till your 70, but for a lot of people that’s just not possible. So again there is no one size fits all. It’s what works for you and yours."
- Jeff
Read more »

Does it ever make sense to buy actively managed funds?

"Given current conditions, yes if you feel the need to have short-term bonds."
- Moesha
Read more »

What are the smartest financial moves you’ve ever made?

"Finally realizing that I'd never made a smart financial move, and then getting help."
- Moesha
Read more »

Money Guide

When to Claim?

AMONG EXPERTS on Social Security, there’s a strong consensus that most folks should delay benefits to get a larger monthly check—and yet almost half of retirees claim Social Security at 62, the earliest possible age.

Read more »

Manifesto

NO. 37: WANT to boost your happiness and that of others? Volunteer, give to charity and make gifts to loved ones. We’re often happier when we spend on others rather than on ourselves.

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

MENTALLY DIVIDE your portfolio into growth, safe and fun money. Growth money should be largely in stock funds. Expect a rough ride. Safe money should be in bonds and cash. Keep enough to give you a sense of security and cover upcoming portfolio withdrawals. Want to speculate? Set up a fun money account—but cap it at 3% of your portfolio.

Think

MORAL HAZARD. When we know someone else will pick up much or all of the financial tab, it’ll often change our behavior. For instance, those with health insurance are quicker to seek medical help, while those with long-term-care insurance are more inclined to enter nursing homes. The downside of this moral hazard: It means insurance costs more.

Second Look

Retirement

Family Resemblance

THERE’S LITTLE difference between the typical American family’s spending habits and that of our federal government—and many state governments as well. We run our government like many Americans run their financial lives, living above our means, seeking instant gratification, saving inadequately, showing little concern for the future, supporting our lifestyle with debt and denying the risks we face.
According to the Congressional Budget Office, all the major trust funds are headed for insolvency in the near future.

Read more »

Family Finance

Growing Up (IV)

THE SOUND AND SMELL of the Pickle will be forever burned into my memory. As a wannabe cool teenager, getting rides to school and soccer practice from my parents in their inherited 1976 green Dodge Aspen coupe with whitewall tires—a.k.a. the Pickle—was beyond embarrassing.
Sometimes, my parents would honk pulling away, just to add insult to injury. Needless to say, it took a bit of humble pie to finally understand the lessons my parents were teaching me,

Read more »

Investing

Calculated Courage

THE S&P 500 STOCKS are up roughly 100% since March 2020’s market low. I’m 100% clueless about how much longer this remarkable run will last. But I’m 100% confident that, when the next downturn comes, many investors will rush for the exit, fearful that their stock holdings will soon be worth little or nothing.
Which brings me to one of the most important investment concepts: intrinsic value.
No, intrinsic value isn’t a simple notion and,

Read more »

Lists

You—But Better

MUCH PERSONAL finance literature, including most of what I write, focuses on how to handle money—how much to save, which investments to buy, and so forth. But what if you have a more fundamental question: How do I earn more in the first place?
To help answer that question, I have five new summer reading recommendations. Each of these books offers strategies to help you increase your productivity—and your happiness—on the job. That, in turn,

Read more »
Home Call to Action

Mindset

Tell Us a Story

YOU MENTION to a colleague that longtime smokers shorten their life expectancy by an average of 10 years. Your colleague responds by talking about his grandmother who smoked a pack every day until she died at age 98. We all know that the statistic should trump the anecdote. But on the conversational scoreboard, it’s one point for both sides—and, three weeks later, you can’t help but recall the grandmother’s story.
The same thing happens with personal finance all the time.

Read more »

Longer Reads

Fill ’Er Up

I OWN JUST TWO individual stocks. One is Wells Fargo, which I’ve discussed before. The other is Total, recently renamed TotalEnergies, a major oil company headquartered in France.
I was initially attracted to Total by its generous dividend and enormous underperformance in 2020. Yes, great underperformance—not outperformance—often piques my interest. Of course, declining stock prices and generous dividend yields go hand in hand. As the price of oil stocks cratered in 2020, their dividend yields soared.

Read more »

Not So Efficient

THE STOCK MARKET’S recent wrenching price swings offer a valuable investment lesson. Let’s start by reviewing the facts:

On the day after Thanksgiving, the S&P 500 suffered its worst day in months and the Dow had its worst day in more than a year. The proximate cause: news about Omicron, a new coronavirus variant. Overnight, investors seemed to revive their playbook from the early 2020 recession. Airline stocks dropped precipitously. Oil plunged 13%. Meanwhile,

Read more »

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.

Read more »

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 »

Free Newsletter

Voices

If you inherited $5 million, how would you use the money?

"I'd take a good chunk of it and build an outdoor track for kids in our community to practice their running :)"
- Kyle Mcintosh
Read more »

Which aspect of the tax code do you hate the most?

"The convoluted and opaque parts that must be taken on faith that they are right. For example, in navigating TurboTax Premier I often find a confusing lack of explanations, and using it is supposed to make it easy."
- Arpe Gio
Read more »

Do we talk too little about our personal finances—or too much?

"I think it is key to discuss investing with your children. A lttle advice can make a world of difference in how they save and invest."
- Carl Book
Read more »
Home Call to Action

Manifesto

NO. 37: WANT to boost your happiness and that of others? Volunteer, give to charity and make gifts to loved ones. We’re often happier when we spend on others rather than on ourselves.

Act

MENTALLY DIVIDE your portfolio into growth, safe and fun money. Growth money should be largely in stock funds. Expect a rough ride. Safe money should be in bonds and cash. Keep enough to give you a sense of security and cover upcoming portfolio withdrawals. Want to speculate? Set up a fun money account—but cap it at 3% of your portfolio.

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

MORAL HAZARD. When we know someone else will pick up much or all of the financial tab, it’ll often change our behavior. For instance, those with health insurance are quicker to seek medical help, while those with long-term-care insurance are more inclined to enter nursing homes. The downside of this moral hazard: It means insurance costs more.

Money Guide

Start Here

When to Claim?

AMONG EXPERTS on Social Security, there’s a strong consensus that most folks should delay benefits to get a larger monthly check—and yet almost half of retirees claim Social Security at 62, the earliest possible age.

Read more »

Second Look

Retirement

Family Resemblance

THERE’S LITTLE difference between the typical American family’s spending habits and that of our federal government—and many state governments as well. We run our government like many Americans run their financial lives, living above our means, seeking instant gratification, saving inadequately, showing little concern for the future, supporting our lifestyle with debt and denying the risks we face.
According to the Congressional Budget Office, all the major trust funds are headed for insolvency in the near future.

Read more »

Family Finance

Growing Up (IV)

THE SOUND AND SMELL of the Pickle will be forever burned into my memory. As a wannabe cool teenager, getting rides to school and soccer practice from my parents in their inherited 1976 green Dodge Aspen coupe with whitewall tires—a.k.a. the Pickle—was beyond embarrassing.
Sometimes, my parents would honk pulling away, just to add insult to injury. Needless to say, it took a bit of humble pie to finally understand the lessons my parents were teaching me,

Read more »

Investing

Calculated Courage

THE S&P 500 STOCKS are up roughly 100% since March 2020’s market low. I’m 100% clueless about how much longer this remarkable run will last. But I’m 100% confident that, when the next downturn comes, many investors will rush for the exit, fearful that their stock holdings will soon be worth little or nothing.
Which brings me to one of the most important investment concepts: intrinsic value.
No, intrinsic value isn’t a simple notion and,

Read more »

Lists

You—But Better

MUCH PERSONAL finance literature, including most of what I write, focuses on how to handle money—how much to save, which investments to buy, and so forth. But what if you have a more fundamental question: How do I earn more in the first place?
To help answer that question, I have five new summer reading recommendations. Each of these books offers strategies to help you increase your productivity—and your happiness—on the job. That, in turn,

Read more »

Mindset

Tell Us a Story

YOU MENTION to a colleague that longtime smokers shorten their life expectancy by an average of 10 years. Your colleague responds by talking about his grandmother who smoked a pack every day until she died at age 98. We all know that the statistic should trump the anecdote. But on the conversational scoreboard, it’s one point for both sides—and, three weeks later, you can’t help but recall the grandmother’s story.
The same thing happens with personal finance all the time.

Read more »