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If you don’t know the difference between helping yourself and helping yourself to what others have, how about a job on Wall Street?

Going to the Dogs

“THERE IS A VERY fine line between ‘hobby’ and ‘mental illness’,” according to humorist Dave Barry.
Some years ago, we had a weekend place—a cabin on acreage—which we greatly enjoyed, even if it did come with challenges. One thing I especially enjoyed: taking the kids on nighttime walks to see how many critters we could spot. That led to an interest in flashlights, and I collected a bunch of them. That, in turn, led to a keen interest in pocketknives.

Read more »

Back to Normal

WE’VE ALL BEEN looking for signs that the financial world is returning to some semblance of normalcy. I recently read a CNBC article that gave me hope. The article said that worldwide dividend payouts were expected to reach $1.39 trillion in 2021, almost back to pre-pandemic levels.
The data came from a report by Janus Henderson, a U.K. money manager. Dividends in this year’s second quarter increased 26% from 2020’s second quarter and were only 6.8% below 2019’s second quarter.

Read more »

Short Stuff

Not Their Fault

“THE REALITY IS THAT most working Americans will continue to struggle to achieve retirement security because the ownership of financial assets is highly concentrated among the wealthiest,” wrote Dan Doonan, executive director of the National Institute on Retirement Security, for Forbes.com.

I read and re-read that statement, especially the word “because.” It seems Doonan has concluded that the great wealth held by the top 1% somehow inhibits the rest of us from saving and investing.

Read more »

Debt Despite Myself

I HATE DEBT. A very happy day was when we paid off the mortgage. I’d rather walk on broken glass than pay a penny of interest on my credit cards. But there have been a few exceptions to my usual rule, all involving car purchases.
The first was many years ago when I reached what I thought was an all-cash deal on a new car. The salesman surprised me when he offered the same price with 0% financing.

Read more »

More Than a Job

WHEN I WALK AROUND my neighborhood, I see beautiful and expensive automobiles parked on the street. When I look at the garages where these cars should be parked, they’re full of stuff. I just can’t understand why someone would spend thousands of dollars on a vehicle and let it be exposed to theft, vandalism and severe weather, while their garage is used as a storage unit.
Even though I can still fit both our cars in our garage,

Read more »

Final Countdown

AS I TYPE THIS, I’m less than a week from walking out the door of my workplace for the last time, bringing my second career to a close. I’m looking forward to the rest of my life.
We’ve been anticipating this day and we’re more than ready. My wife is already retired. My work for a large corporation is fine, but I’m not passionate about it. While there are some positive aspects to where we currently live,

Read more »

Dinner Is Served

HOW LUCKY I WAS to be the recipient of a dinner invitation to Ruth’s Chris. I love a sizzling ribeye, so I booked my seat at the event. Those nearing and in retirement have a good idea of what I’m referring to—the good old annuity sales presentation.
These dinners are put on by financial advisors looking to expand their business. The routine goes like this: Invite prospects, present for an hour on the benefits of owning insurance or an annuity,

Read more »

Be Prepared

I’M WRITING THIS a few days after Hurricane Ida ravaged parts of our country. We were lucky. Our home here on the South Jersey coast was spared from all but minor rainfall. Much of Pennsylvania and North Jersey saw enormous amounts of rain, flooding and tornadoes. In my 64 years living in this region, I don’t recall there ever being this much severe weather, especially the number of tornadoes.
Prior to the hurricane landing in Louisiana,

Read more »

Longer Reads

The Joy of Work

I’VE HAD SOME dreadful jobs in my life. I spent one summer putting metal plates under a huge press for eight hours a day. Once the plates were in the right position, I’d push some buttons that would cause the press to crash down and shape the metal into something useful.
The goal was to work fast because that meant more pay. Some of the workers disabled the safety features so they could produce more widgets and earn extra money.

Read more »

Income for Sale

“SHOULD YOU BUY an annuity from Social Security?” That’s the title of a paper released by Boston College’s Center for Retirement Research (CRR) in May 2012. It’s one of the best articles I’ve ever read about the Social Security claiming decision—and it’s had a big impact on my thinking.
Most of us know what an income annuity is: You hand over a sum of money and, in return, receive a check every month for the rest of your life or for a specified period of time.

Read more »

What’s Your History?

WE ALL LIVE IN the same economy, but we experience it differently. How we react to today’s economic developments is heavily influenced by our upbringing and world events at that time. This is a key insight from the first chapter of Morgan Housel’s wonderful book The Psychology of Money.
I can think of three things that have shaped my outlook—and lead me to a very different outlook from my children. First,

Read more »

On the Fringe

STEPPING INTO the HumbleDollar confessional, I admit to dabbling in a few high-fee, low-liquidity investments. It goes against much of what I stand for. But on occasion, I, too, reach for yield and the promise of returns uncorrelated with stocks. Before the chastising begins, please know that these speculative stakes total less than 3% of my portfolio. The rest is invested mainly in funds with expense ratios under 0.15%—and some have zero costs.

Read more »

Leaving on Bad Terms

I HAVE A RELATIVE—let’s call her Jane. Last year, in the early days of the pandemic, Jane had the foresight to buy shares in vaccine maker Moderna. With the benefit of hindsight, it was a smart decision.
But it wasn’t a difficult one, in Jane’s view. It was no secret that the company was working on a COVID-19 vaccine. It was also clear that vaccines would be in high demand. That made the investment case clear.

Read more »

Twenty Years Ago

ON SEPT. 11, 2001, I spent an hour and a half standing on a crowded subway train two blocks from the World Trade Center. During that time, both towers collapsed. No smoke came shooting down the subway tunnel. The earth didn’t noticeably shake. There were no deafening noises. Instead, we were just another subway car packed with disgruntled passengers, muttering about the perils of public transport.
It was only when the train backed up to Penn Station in midtown Manhattan that we learned what had happened that day.

Read more »

Voices

When is it okay to go into debt?

"Avoid auto loans, if possible. If you need to borrow to buy a new car, you may not need to buy a new car. It is a rapidly depreciating asset."
- Carl Book
Read more »

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

"Even though we are doing fine from a financial perspective, in many areas of life, we try to live frugally to set a good example... Target for clothes, much second-hand furniture (we buy nice used stuff from our affluent neighbors on Next Door), we just stopped using a landscaping service and now mow our own lawn, we got a rescue Covid puppy instead of a designer dog, we use a lot of You Tube videos so we can do-it-our-selves (dog training, dryer repair). I feel so proud when she exclaims how over-priced something is. Our neighborhood is too affluent for my comfort - my daughter has no idea of what normal is, but the schools are excellent and managed to stay open through most of Covid. I try to use the surrounding affluence as motivation. One of our cars just died and she wants a Tesla like her friend's family has. I tell her to study hard, work hard and save a lot and then she can buy herself a Tesla someday. My hope is that by then she'll have learned enough to buy a Toyota."
- Jackie
Read more »

What spending brings you greatest happiness?

"Paying for a couple of luxuries for my daughter: voice lessons - just for the joy of it and a math tutor, even though she does well in math - I want to make sure she remains not only competent, but also confident in math."
- Jackie
Read more »

Money Guide

Allocation Guide

YOUR MIX OF STOCKS, bonds, cash and alternative investments will be driven by your goals and individual circumstances. Still, it’s helpful to have some guidelines. Consider two approaches. First, there's the popular rule of thumb that says that, for retirement savings, you should take 100 and subtract your age. Whatever the result, that’s the percentage of your investment portfolio that you should put in stocks. For instance, the rule suggests a 30-year-old should have 70% in stocks. As rules of thumb go, it isn’t bad. But you might tweak it. Those in their 20s and 30s could probably have as much as 100% in stocks, though a 90% maximum might be more prudent. Why? By keeping a minimum 10% in bonds, you can notably reduce volatility without putting much of a dent in returns. Meanwhile, among retirees, stocks should probably be pegged at a minimum 30%. If you have less than that, you leave yourself vulnerable to long-run inflation. Indeed, with the right portfolio design, a 50% or 60% stock allocation may make more sense for retirees. What's the second approach? As a starting point, aim for 60% of your retirement nest egg in stocks, with your nest egg defined as its current value plus future savings. Those future savings represent cash that's yet to be invested and hence you can view them as part of your portfolio's conservative holdings, along with your bonds. No future savings? You should have a maximum 60% in stocks. Just entered the work world? Let's say you're age 25 with a $10,000 portfolio that's entirely in stocks. Risky? Suppose that, over the next 40 years, you expect to save $5,000 a year toward retirement, or $200,000 total. Result: If you combine your $10,000 current portfolio with your $200,000 in future savings, your $10,000 in stocks represents less than 5% of the $210,000 total. In fact, if you have a  strong stomach for market volatility, you could probably hold a 100% stock portfolio into your early 40s and still be below 60% stocks, once you figure in future savings. What about alternative investments? Here at HumbleDollar, we don’t think they’re a necessary part of a portfolio. But if you want a position in a mix of, say, gold stocks and real estate investment trusts, consider capping that position at 10% of your portfolio, no matter what your age. Finally, cash investments make sense for money you plan to spend in the near future, such as savings earmarked for a house down payment or spending money for the next five years of your retirement. But cash isn't a necessary part of a long-term investment portfolio. If you're inclined to hold cash for the long haul, consider instead a high-quality short-term bond fund or your 401(k) plan’s stable-value fund. Both should offer somewhat higher yields than a savings account or a money-market mutual fund. Settled on your portfolio’s target asset allocation? It’s time for the next step: deciding how you will diversify within these asset classes. Next: Step 3: Diversify Previous: Rebalance How Often? Articles: Count the Cash and Measure for Measure
Read more »

Manifesto

NO. 27: RISK and potential return are inextricably linked. If an investment holds out the prospect of high returns, we should presume it’s highly risky—even if we can’t figure out what the risk is.

Truths

NO. 118: OWNING both U.S. and foreign stocks will smooth out a portfolio’s long-run performance, as those two sectors take turns posting strong results. But when shares turn lower, global stock markets become highly correlated—and salvaging your portfolio’s short-run results will hinge on owning other asset classes, notably high-quality bonds.

Act

TAP HOME EQUITY to trim other debts. If you have high-interest auto loans or credit card debt, you might set up a home equity line of credit and then use it to pay off these higher-cost debts. That’ll reduce the interest you pay. You won’t, however, save on taxes. Thanks to 2017’s tax law, such home-equity borrowing is no longer tax-deductible.

Think

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.

Second Look

Retirement

Enough Already

“WHEN YOU’VE WON the game, stop playing with the money you really need.” That’s something my longtime friend and fellow author William Bernstein is fond of saying—and lately it’s been on my mind.
There’s been much handwringing over 2017’s stock market rally. Looked at objectively, it hasn’t been that startling. As of Sept. 29, the S&P 500 was up 14.2% for the year-to-date, with dividends reinvested—a good year, but nothing compared to the 25%-plus years we saw in 1991,

Read more »

Family Finance

Beat the Cheats

U.S. CREDIT CARD fraud topped $8 billion in 2015 and should surpass $12 billion next year. You can reduce your exposure to such incidents with a few simple steps. Why bother? Won’t the bank pick up the tab when unauthorized purchases show up on your account? Generally, yes, thanks to the Fair Credit Billing Act and the Electronic Fund Transfer Act. But there may be limitations on that protection, based on how quickly you notify your bank when you discover unauthorized charges.

Read more »

Investing

What Goes Down

IT MIGHT SEEM LIKE an obscure academic question: Do stocks truly follow a random walk or can we count on them reverting to the mean? Depending on which side we favor in this debate, it can make a huge difference to how we invest—and to our confidence as investors.
Like me, many HumbleDollar readers have most or all their investment dollars in index funds. A key reason we invest this way: It’s impossible to predict which stocks will shine because they follow a random walk.

Read more »

Lists

Third Rail

IF I’M EVER FEELING lonely, all I need to do is write about certain financial topics—and soon enough my inbox is brimming with emails, some vehemently disagreeing, others offering vigorous nods of assent.
A dozen of those topics are covered in HumbleDollar’s new chapter devoted to great debates—issues like whether money buys happiness, when to claim Social Security and whether individual bonds are superior to bond mutual funds. But those subjects aren’t the only ones that stir up readers.

Read more »
Home Call to Action

Mindset

No Money Down

AS SHARK TANK STAR Lori Greiner once said, “Entrepreneurs are the only people who will work 80 hours a week to avoid working 40 hours a week.”
Got the entrepreneurial itch? When I hear people say they have a great business idea, but don’t have the money to launch their business or quit their day job, my heart sinks. They’re missing the point: In today’s world, there are countless opportunities to start a business without any initial investment.

Read more »

Longer Reads

The Joy of Work

I’VE HAD SOME dreadful jobs in my life. I spent one summer putting metal plates under a huge press for eight hours a day. Once the plates were in the right position, I’d push some buttons that would cause the press to crash down and shape the metal into something useful.
The goal was to work fast because that meant more pay. Some of the workers disabled the safety features so they could produce more widgets and earn extra money.

Read more »

Income for Sale

“SHOULD YOU BUY an annuity from Social Security?” That’s the title of a paper released by Boston College’s Center for Retirement Research (CRR) in May 2012. It’s one of the best articles I’ve ever read about the Social Security claiming decision—and it’s had a big impact on my thinking.
Most of us know what an income annuity is: You hand over a sum of money and, in return, receive a check every month for the rest of your life or for a specified period of time.

Read more »

What’s Your History?

WE ALL LIVE IN the same economy, but we experience it differently. How we react to today’s economic developments is heavily influenced by our upbringing and world events at that time. This is a key insight from the first chapter of Morgan Housel’s wonderful book The Psychology of Money.
I can think of three things that have shaped my outlook—and lead me to a very different outlook from my children. First,

Read more »

On the Fringe

STEPPING INTO the HumbleDollar confessional, I admit to dabbling in a few high-fee, low-liquidity investments. It goes against much of what I stand for. But on occasion, I, too, reach for yield and the promise of returns uncorrelated with stocks. Before the chastising begins, please know that these speculative stakes total less than 3% of my portfolio. The rest is invested mainly in funds with expense ratios under 0.15%—and some have zero costs.

Read more »

Leaving on Bad Terms

I HAVE A RELATIVE—let’s call her Jane. Last year, in the early days of the pandemic, Jane had the foresight to buy shares in vaccine maker Moderna. With the benefit of hindsight, it was a smart decision.
But it wasn’t a difficult one, in Jane’s view. It was no secret that the company was working on a COVID-19 vaccine. It was also clear that vaccines would be in high demand. That made the investment case clear.

Read more »

Twenty Years Ago

ON SEPT. 11, 2001, I spent an hour and a half standing on a crowded subway train two blocks from the World Trade Center. During that time, both towers collapsed. No smoke came shooting down the subway tunnel. The earth didn’t noticeably shake. There were no deafening noises. Instead, we were just another subway car packed with disgruntled passengers, muttering about the perils of public transport.
It was only when the train backed up to Penn Station in midtown Manhattan that we learned what had happened that day.

Read more »

Free Newsletter

Voices

What’s your No. 1 goal for retirement?

"Work consistently on my health ... without it none of the other things (travel,golf,hobbies etc) are enjoyable"
- George Counihan
Read more »

What’s the best strategy for getting a good deal on a car?

"Used is the best way to go but that can take time and you do run some risks of issues even if you are mechanically inclined. I think if you must go new, the key is patience and narrow your choices down to a couple of models otherwise understanding what is a good value becomes hard to easily determine in your head. We just got what I consider a pretty good deal on a new Toyota CHR, I was against the idea but when my wife started talking about and using the word Lexus, I moved fast :) We by chance found a decent salesman told him what we wanted and he called us about 2 weeks ago when he had it. The price was less than some of the cars they had on the lot of the same model that were 2-3 years old. They took almost 22% off MSRP then added half back on fees. Not sure you can negotiate well on the fees or not. We showed up 30 minutes before closing and they had to curb the extra sales. If it was for me I might have tried to get better deal or waited till pandemic was over, which I guess is straight good advice but my wife felt she needed a car , she had enough of the 2008 mini van."
- rayanmiller6303
Read more »

How do you save money on travel costs?

"When we travel, we'll rarely pay for 3 meals per day. We do our best to stay places with a kitchen and/or leverage the breakfasts offered by the hotel."
- Kyle Mcintosh
Read more »
Home Call to Action

Manifesto

NO. 27: RISK and potential return are inextricably linked. If an investment holds out the prospect of high returns, we should presume it’s highly risky—even if we can’t figure out what the risk is.

Act

TAP HOME EQUITY to trim other debts. If you have high-interest auto loans or credit card debt, you might set up a home equity line of credit and then use it to pay off these higher-cost debts. That’ll reduce the interest you pay. You won’t, however, save on taxes. Thanks to 2017’s tax law, such home-equity borrowing is no longer tax-deductible.

Truths

NO. 118: OWNING both U.S. and foreign stocks will smooth out a portfolio’s long-run performance, as those two sectors take turns posting strong results. But when shares turn lower, global stock markets become highly correlated—and salvaging your portfolio’s short-run results will hinge on owning other asset classes, notably high-quality bonds.

Think

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.

Money Guide

Contents

Allocation Guide

YOUR MIX OF STOCKS, bonds, cash and alternative investments will be driven by your goals and individual circumstances. Still, it’s helpful to have some guidelines. Consider two approaches. First, there's the popular rule of thumb that says that, for retirement savings, you should take 100 and subtract your age. Whatever the result, that’s the percentage of your investment portfolio that you should put in stocks. For instance, the rule suggests a 30-year-old should have 70% in stocks. As rules of thumb go, it isn’t bad. But you might tweak it. Those in their 20s and 30s could probably have as much as 100% in stocks, though a 90% maximum might be more prudent. Why? By keeping a minimum 10% in bonds, you can notably reduce volatility without putting much of a dent in returns. Meanwhile, among retirees, stocks should probably be pegged at a minimum 30%. If you have less than that, you leave yourself vulnerable to long-run inflation. Indeed, with the right portfolio design, a 50% or 60% stock allocation may make more sense for retirees. What's the second approach? As a starting point, aim for 60% of your retirement nest egg in stocks, with your nest egg defined as its current value plus future savings. Those future savings represent cash that's yet to be invested and hence you can view them as part of your portfolio's conservative holdings, along with your bonds. No future savings? You should have a maximum 60% in stocks. Just entered the work world? Let's say you're age 25 with a $10,000 portfolio that's entirely in stocks. Risky? Suppose that, over the next 40 years, you expect to save $5,000 a year toward retirement, or $200,000 total. Result: If you combine your $10,000 current portfolio with your $200,000 in future savings, your $10,000 in stocks represents less than 5% of the $210,000 total. In fact, if you have a  strong stomach for market volatility, you could probably hold a 100% stock portfolio into your early 40s and still be below 60% stocks, once you figure in future savings. What about alternative investments? Here at HumbleDollar, we don’t think they’re a necessary part of a portfolio. But if you want a position in a mix of, say, gold stocks and real estate investment trusts, consider capping that position at 10% of your portfolio, no matter what your age. Finally, cash investments make sense for money you plan to spend in the near future, such as savings earmarked for a house down payment or spending money for the next five years of your retirement. But cash isn't a necessary part of a long-term investment portfolio. If you're inclined to hold cash for the long haul, consider instead a high-quality short-term bond fund or your 401(k) plan’s stable-value fund. Both should offer somewhat higher yields than a savings account or a money-market mutual fund. Settled on your portfolio’s target asset allocation? It’s time for the next step: deciding how you will diversify within these asset classes. Next: Step 3: Diversify Previous: Rebalance How Often? Articles: Count the Cash and Measure for Measure
Read more »

Second Look

Retirement

Enough Already

“WHEN YOU’VE WON the game, stop playing with the money you really need.” That’s something my longtime friend and fellow author William Bernstein is fond of saying—and lately it’s been on my mind.
There’s been much handwringing over 2017’s stock market rally. Looked at objectively, it hasn’t been that startling. As of Sept. 29, the S&P 500 was up 14.2% for the year-to-date, with dividends reinvested—a good year, but nothing compared to the 25%-plus years we saw in 1991,

Read more »

Family Finance

Beat the Cheats

U.S. CREDIT CARD fraud topped $8 billion in 2015 and should surpass $12 billion next year. You can reduce your exposure to such incidents with a few simple steps. Why bother? Won’t the bank pick up the tab when unauthorized purchases show up on your account? Generally, yes, thanks to the Fair Credit Billing Act and the Electronic Fund Transfer Act. But there may be limitations on that protection, based on how quickly you notify your bank when you discover unauthorized charges.

Read more »

Investing

What Goes Down

IT MIGHT SEEM LIKE an obscure academic question: Do stocks truly follow a random walk or can we count on them reverting to the mean? Depending on which side we favor in this debate, it can make a huge difference to how we invest—and to our confidence as investors.
Like me, many HumbleDollar readers have most or all their investment dollars in index funds. A key reason we invest this way: It’s impossible to predict which stocks will shine because they follow a random walk.

Read more »

Lists

Third Rail

IF I’M EVER FEELING lonely, all I need to do is write about certain financial topics—and soon enough my inbox is brimming with emails, some vehemently disagreeing, others offering vigorous nods of assent.
A dozen of those topics are covered in HumbleDollar’s new chapter devoted to great debates—issues like whether money buys happiness, when to claim Social Security and whether individual bonds are superior to bond mutual funds. But those subjects aren’t the only ones that stir up readers.

Read more »

Mindset

No Money Down

AS SHARK TANK STAR Lori Greiner once said, “Entrepreneurs are the only people who will work 80 hours a week to avoid working 40 hours a week.”
Got the entrepreneurial itch? When I hear people say they have a great business idea, but don’t have the money to launch their business or quit their day job, my heart sinks. They’re missing the point: In today’s world, there are countless opportunities to start a business without any initial investment.

Read more »