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Forget the savvy investor with mediocre savings habits—and bet on the mediocre investor with great savings habits.

My Mentor

FOURTEEN YEARS AGO, my father-in-law was diagnosed with a blood cancer—multiple myeloma—and given five years to live. Ever since, he’s been battling it like a warrior. But he’s dying now, and he won’t be around much longer.
My father-in-law grew up without money to Depression-era parents. He earned his way into a prestigious college, and eventually received a PhD in chemical engineering. He had an impressive career as an engineer with a large chemical company in the Midwest.

Read more »

Coming Out Ahead

LAST WEEK’S NEWS that Social Security recipients will receive a 5.9% cost-of-living adjustment for 2022 might seem like a nonevent. After all, those larger monthly checks will be fully devoured by today’s higher prices.
Or maybe not.
September’s report for the Consumer Price Index (CPI) showed that inflation for medical care services—a big cost for retirees—was quite tame over the past 12 months, rising less than 1%. Seniors also spend significantly less on transportation,

Read more »

Short Stuff

Numbers Game

IT HAPPENED AGAIN. For the third time in two years, our credit card number was stolen. I learned this yesterday when I received the now-too-frequent question from Chase: “Do you recognize this gas station purchase for $1?” We live nowhere near the station in question, so I knew something was amiss.
I appreciate Chase’s diligence in identifying such transactions, and the fact that we won’t be held liable for any fraudulent charges. Still, I’ve grown weary of the whole process of cancelling credit cards,

Read more »

Gaining Perspective

ON MONDAY, OCT. 19, 1987, stocks plunged more than 20%. I was relatively new to investing—and the crash shocked me. I realize now that, when you’re starting out, no matter how much you study, the trait you’re most lacking is perspective.
When I began investing, I approached a successful investor and asked for tips to learn about the market. Part of his advice was to watch Wall Street Week with Louis Rukeyser on PBS.

Read more »

Getting Nudged

INFLUENCERS ARE people who use their popularity and social media presence to nudge our decision-making, especially our spending choices. They’re a powerful force in today’s marketing world, particularly with younger consumers looking for cues as to what’s hot.
In one survey, 60% of those ages 16 to 24 credited influencers with purchases they’d made in the past six months, more than any other age group. Combined with the bandwagon effect and FOMO, or fear of missing out,

Read more »

Rich Is Relative

THE OTHER DAY, I did something I probably shouldn’t have done. I checked Zillow to see the current estimated value for the condo I sold last year during the COVID-19 pandemic.
I knew real estate prices had gone up quite a bit since I sold in June 2020. But when I looked at Zillow’s price, I was still surprised to see my old home had risen 19% during that short period of time. It’s hard to imagine,

Read more »

A Worthy Choice?

A RECENT RULING from the Department of Labor appears to pave the way for more ESG (environmental, social and governance) mutual funds in 401(k) plans. Last week, Morningstar even launched an ESG-focused retirement plan service.
ESG assets are modest compared to other parts of the money management business, but they’re growing fast. Fund flows are substantial in the U.S. and gigantic in Europe. Investors are increasingly putting their money where their conscience is. But is that really a good thing when it comes to building our long-term wealth?

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Making It Automatic

ONE OF THE TOUGHEST financial challenges most people face—second only to accumulating enough for retirement—is deciding how to convert those funds into retirement income. Especially when the goal is to never run out of money.

I pride myself on being informed. This morning, I received my comeuppance. I was reviewing my 401(k) account, which is administered by Fidelity Investments. I had taken my required minimum distribution for 2021, but was exploring other ways I could withdraw money.

Read more »

Longer Reads

Keeping Score

WHAT’S YOUR CREDIT score? That’s hard to answer because none of us has just one. You likely have a dozen or more. So how did consumers come to think that one credit score—the FICO score—is the sole reflection of their ability to repay a loan?
Following decades of growing consumer spending, and associated data collection, the Fair Credit Reporting Act of 1970 required credit bureaus to open their files. The intent was to protect consumers from lenders who were relying on incorrect information.

Read more »

Fighting IRMAA

I TURNED AGE 64 over the Labor Day weekend. One of my goals for my 65th orbit of the sun is to really dig into Medicare.
Luckily, I have a few friends and relatives who have blazed the trail before me. I’ve also studied Medicare as part of some financial planning courses I took a few years ago. Still, one topic I’ve never researched in detail is Medicare’s income-related monthly adjustment amount, otherwise known as IRMAA.

Read more »

Teaching the Teacher

I RECENTLY STARTED reading Think Again, the new book by Adam Grant. Subtitled The Power of Knowing What You Don’t Know, Grant’s book got me thinking about all the ways that, over the years, conversations with clients have led me to look at things through different lenses. Below are eight such topics:

1. There’s one important financial question that stumps most everyone—for good reason. In building a financial plan,

Read more »

An F in Retirement

IT’S EMBARRASSING to admit in a public forum that I failed at retirement. But I’m doing so—because I think people can learn from me, and thereby avoid making the same mistakes.
I spent my entire 38-year career in the banking industry. Naturally, I learned a lot about money and investing. I helped thousands of clients save for their own retirement. On top of that, my wife is an investment advisor.
But despite all that knowledge and expertise—and having enough money to retire comfortably—I still managed to find my way into retirement hell.

Read more »

Medicare and Me

AND SO IT BEGINS again—trying to figure out the mess that is Medicare.
A 132-page book from the Department of Health & Human Services arrived in the mail recently. “Medicare & You 2022” is four pages longer than the 2021 edition I received earlier this year, when I was turning age 65. I could barely bring myself to pore through the pages of that one, as I endeavored to understand the myriad choices facing me as I hit that magic milestone.

Read more »

My Total Portfolio

TIME AND AGAIN, we’re reminded to fully understand a question—particularly when the question is complex—before acting or deciding not to act.
“Johnny pushed me” may have been the whole story, but not likely. Why did Johnny push David? What was the context? How are the two boys connected? What’s their history? Was it a big push? Did it do harm?
Ideally, we want to know the whole situation before we decide what to say or do.

Read more »

Voices

How much emergency money should you hold?

"I don't hold very much cash. If I need cash, I can use a margin loan on my portfolio. My broker has a low rate and I can repay it at my discretion. This allows me to keep my funds invested."
- Carl Book
Read more »

Are top private colleges worth the cost?

"Most of the brilliant decisions made on behalf of the US Government's taxpayers are the product of young minds nurtured at the finest Ivy League universities, primarily Harvard."
- Chazooo
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 »

Money Guide

Simplicity

WHEN FACED WITH AN array of possible solutions, we should lean toward the simplest—an insight dubbed Ockham’s (or Occam's) Razor after its originator, the English 14th century Franciscan friar William of Ockham. But this principle is regularly ignored by investors, who are drawn to complicated investments and investment strategies, with their veneer of sophistication. Think about the popularity of hedge funds, day trading, equity-indexed annuities and market timing. Unfortunately, such strategies and products mostly serve to transfer wealth from investors’ pockets to Wall Street’s coffers. The reason: high investment costs. How can we avoid participating in this great wealth transfer? We should listen to William of Ockham—and keep our finances simple. That means avoiding the complexity and cost that come with trying to pick individual stocks and bonds or trying to figure out which way financial markets are headed next. Taken to its logical conclusion, this leads us to the simplest of all strategies: buying and holding the entire market through market-tracking index funds. We can do that either by purchasing perhaps three total market index funds—one each for U.S. stocks, U.S. bonds and foreign stocks—or by buying a target-date fund that holds these total market funds. This simplicity brings with it an important added benefit: rock-bottom investment costs. A preference for the simplest solution should extend beyond our portfolio. We should favor term insurance over the complexity of cash-value life insurance. We should prefer to own cars rather than deal with the fine print of a lease. We should favor straightforward fixed-rate or adjustable-rate mortgages over more complicated varieties. We should think twice before owning more real estate than just our principal residence. We should only use complicated trust arrangements if they’re absolutely necessary. Next: Control Previous: Humility
Read more »

Manifesto

NO. 29: WHAT MATTERS to long-term stock investors is the market’s dividend yield and growth in earnings per share. Everything else is noise that can bully and seduce us into foolishness.

Truths

NO. 29: BROKERAGE commissions aren’t your only trading cost. When you buy and sell individual stocks and bonds, or a fund manager does so on your behalf, you lose money to the bid-ask spread—the gap between the lower price at which you can currently sell and the higher price at which you can buy. Wall Street’s market makers pocket the difference.

Act

CONSIDER A HEALTH plan that qualifies as a high-deductible plan. Not only should the premiums be low, but also you’ll get the chance to fund a health savings account—arguably the most tax-advantaged savings plan on offer. A high-deductible plan could mean large out-of-pocket medical expenses, so that should figure into the size of your emergency fund.

Think

COGNITIVE DISSONANCE. Suppose you sold stocks in March 2020, only to see the market soar. The result is mental discomfort, because your realization that “I made a huge mistake” conflicts with your belief that “I’m a smart investor.” To ease this cognitive dissonance, you might cook up a justification for selling—or even revise your memory of what you did.

Second Look

Retirement

Saving Ourselves

FRANKLIN ROOSEVELT said on Aug. 14, 1935, that the new Social Security program would provide “some measure of protection to the average citizen… against poverty-ridden old age.”
Nancy Altman, president of Social Security Works and chair of the Strengthen Social Security coalition, opined this year that “after a lifetime of work Americans should have enough guaranteed Social Security to maintain their standard of living.”
Make no mistake: There’s a vast gap between Roosevelt’s notion of protecting against poverty and Altman’s goal of guaranteeing one’s standard of living.

Read more »

Family Finance

Works If You Can’t

BE HONEST: WHEN was the last time you thought about disability insurance? As co-founder of a website that sells insurance, it’s a topic I think about every day, but I realize most folks have other things on their mind. Yet becoming disabled is one of the biggest financial risks that working people face.
Disability can result from accidents or sickness and can impact people of all ages. According to the Social Security Administration, a 20-year-old entering the workforce has a one-in-four chance of becoming disabled for a year or more before retirement.

Read more »

Investing

Spring Cleaning

AS THE STOCK MARKET repeatedly hit new highs in recent years, my net worth reached levels I hadn’t expected. But instead of feeling good about it, I was getting annoyed. Most of my retirement dollars had been invested over the past decade at high stock market valuations. I could use a good bear market so that, in my few remaining years in the workforce, I bought stocks cheap.
I also worried that a prolonged downturn at the worst possible time might derail my early retirement plans.

Read more »

Lists

Six Tips

WORRIED ABOUT inflation? You might be drawn to inflation-indexed Treasury bonds—officially known as Treasury Inflation-Protected Securities, or TIPS. These bonds protect you from unexpected inflation, plus there’s no risk of default.
Those features make TIPS attractive to investors who are concerned about rising consumer prices, and especially the impact of inflation on the bond portion of their portfolio. Intrigued? Before you invest, here are six factors to consider:
1. Hedging vs. speculating. TIPS can be used to hedge against inflation or to speculate on it.

Read more »
Home Call to Action

Mindset

Small Pleasures

TODAY, I SING the praises of spending—on the little things in life.
We fiercely resist the suggestion that money doesn’t buy happiness. Commentators will often trot out the quote—which has been attributed to all kinds of folks—that, “I’ve been poor and I’ve been rich. Rich is better!”
I think that’s true. But it isn’t proportionally true. If you went from earning $100,000 a year to earning $200,000, or your portfolio grew from $500,000 to $1 million,

Read more »

Longer Reads

Keeping Score

WHAT’S YOUR CREDIT score? That’s hard to answer because none of us has just one. You likely have a dozen or more. So how did consumers come to think that one credit score—the FICO score—is the sole reflection of their ability to repay a loan?
Following decades of growing consumer spending, and associated data collection, the Fair Credit Reporting Act of 1970 required credit bureaus to open their files. The intent was to protect consumers from lenders who were relying on incorrect information.

Read more »

Fighting IRMAA

I TURNED AGE 64 over the Labor Day weekend. One of my goals for my 65th orbit of the sun is to really dig into Medicare.
Luckily, I have a few friends and relatives who have blazed the trail before me. I’ve also studied Medicare as part of some financial planning courses I took a few years ago. Still, one topic I’ve never researched in detail is Medicare’s income-related monthly adjustment amount, otherwise known as IRMAA.

Read more »

Teaching the Teacher

I RECENTLY STARTED reading Think Again, the new book by Adam Grant. Subtitled The Power of Knowing What You Don’t Know, Grant’s book got me thinking about all the ways that, over the years, conversations with clients have led me to look at things through different lenses. Below are eight such topics:

1. There’s one important financial question that stumps most everyone—for good reason. In building a financial plan,

Read more »

An F in Retirement

IT’S EMBARRASSING to admit in a public forum that I failed at retirement. But I’m doing so—because I think people can learn from me, and thereby avoid making the same mistakes.
I spent my entire 38-year career in the banking industry. Naturally, I learned a lot about money and investing. I helped thousands of clients save for their own retirement. On top of that, my wife is an investment advisor.
But despite all that knowledge and expertise—and having enough money to retire comfortably—I still managed to find my way into retirement hell.

Read more »

Medicare and Me

AND SO IT BEGINS again—trying to figure out the mess that is Medicare.
A 132-page book from the Department of Health & Human Services arrived in the mail recently. “Medicare & You 2022” is four pages longer than the 2021 edition I received earlier this year, when I was turning age 65. I could barely bring myself to pore through the pages of that one, as I endeavored to understand the myriad choices facing me as I hit that magic milestone.

Read more »

My Total Portfolio

TIME AND AGAIN, we’re reminded to fully understand a question—particularly when the question is complex—before acting or deciding not to act.
“Johnny pushed me” may have been the whole story, but not likely. Why did Johnny push David? What was the context? How are the two boys connected? What’s their history? Was it a big push? Did it do harm?
Ideally, we want to know the whole situation before we decide what to say or do.

Read more »

Free Newsletter

Voices

What’s the best strategy for collecting and using credit card rewards?

"I try to keep it simple with 2 cards: An Amazon visa that gives me 5% back on Amazon purchases (which for me is a lot of money on an annual basis) and a Citicard that gives me 2% on everything else. I prefer cash back to "points" because I can use it for anything with no effort. But I am considering a United card that will give me 70,000 bonus miles in anticipation of a big vacation in the next year."
- Jackie
Read more »

How much emergency money should you hold?

"I don't hold very much cash. If I need cash, I can use a margin loan on my portfolio. My broker has a low rate and I can repay it at my discretion. This allows me to keep my funds invested."
- Carl Book
Read more »

How often do you check your portfolio and the markets?

"Don't need to check the markets, my iPhone does that for me in real time. But seriously looking at it? When my stock Funds report dividends and at tax time to verify whether any realignment is warranted or necessary. But since I subscribe to John Bogle's investment philosophy hardly ever. I don't depend on my investments for income as I have a generous pension plan that generates the income and provides for additional investments, hobbies, and gifts mainly to family."
- Arpe Gio
Read more »
Home Call to Action

Manifesto

NO. 29: WHAT MATTERS to long-term stock investors is the market’s dividend yield and growth in earnings per share. Everything else is noise that can bully and seduce us into foolishness.

Act

CONSIDER A HEALTH plan that qualifies as a high-deductible plan. Not only should the premiums be low, but also you’ll get the chance to fund a health savings account—arguably the most tax-advantaged savings plan on offer. A high-deductible plan could mean large out-of-pocket medical expenses, so that should figure into the size of your emergency fund.

Truths

NO. 29: BROKERAGE commissions aren’t your only trading cost. When you buy and sell individual stocks and bonds, or a fund manager does so on your behalf, you lose money to the bid-ask spread—the gap between the lower price at which you can currently sell and the higher price at which you can buy. Wall Street’s market makers pocket the difference.

Think

COGNITIVE DISSONANCE. Suppose you sold stocks in March 2020, only to see the market soar. The result is mental discomfort, because your realization that “I made a huge mistake” conflicts with your belief that “I’m a smart investor.” To ease this cognitive dissonance, you might cook up a justification for selling—or even revise your memory of what you did.

Money Guide

Contents

Simplicity

WHEN FACED WITH AN array of possible solutions, we should lean toward the simplest—an insight dubbed Ockham’s (or Occam's) Razor after its originator, the English 14th century Franciscan friar William of Ockham. But this principle is regularly ignored by investors, who are drawn to complicated investments and investment strategies, with their veneer of sophistication. Think about the popularity of hedge funds, day trading, equity-indexed annuities and market timing. Unfortunately, such strategies and products mostly serve to transfer wealth from investors’ pockets to Wall Street’s coffers. The reason: high investment costs. How can we avoid participating in this great wealth transfer? We should listen to William of Ockham—and keep our finances simple. That means avoiding the complexity and cost that come with trying to pick individual stocks and bonds or trying to figure out which way financial markets are headed next. Taken to its logical conclusion, this leads us to the simplest of all strategies: buying and holding the entire market through market-tracking index funds. We can do that either by purchasing perhaps three total market index funds—one each for U.S. stocks, U.S. bonds and foreign stocks—or by buying a target-date fund that holds these total market funds. This simplicity brings with it an important added benefit: rock-bottom investment costs. A preference for the simplest solution should extend beyond our portfolio. We should favor term insurance over the complexity of cash-value life insurance. We should prefer to own cars rather than deal with the fine print of a lease. We should favor straightforward fixed-rate or adjustable-rate mortgages over more complicated varieties. We should think twice before owning more real estate than just our principal residence. We should only use complicated trust arrangements if they’re absolutely necessary. Next: Control Previous: Humility
Read more »

Second Look

Retirement

Saving Ourselves

FRANKLIN ROOSEVELT said on Aug. 14, 1935, that the new Social Security program would provide “some measure of protection to the average citizen… against poverty-ridden old age.”
Nancy Altman, president of Social Security Works and chair of the Strengthen Social Security coalition, opined this year that “after a lifetime of work Americans should have enough guaranteed Social Security to maintain their standard of living.”
Make no mistake: There’s a vast gap between Roosevelt’s notion of protecting against poverty and Altman’s goal of guaranteeing one’s standard of living.

Read more »

Family Finance

Works If You Can’t

BE HONEST: WHEN was the last time you thought about disability insurance? As co-founder of a website that sells insurance, it’s a topic I think about every day, but I realize most folks have other things on their mind. Yet becoming disabled is one of the biggest financial risks that working people face.
Disability can result from accidents or sickness and can impact people of all ages. According to the Social Security Administration, a 20-year-old entering the workforce has a one-in-four chance of becoming disabled for a year or more before retirement.

Read more »

Investing

Spring Cleaning

AS THE STOCK MARKET repeatedly hit new highs in recent years, my net worth reached levels I hadn’t expected. But instead of feeling good about it, I was getting annoyed. Most of my retirement dollars had been invested over the past decade at high stock market valuations. I could use a good bear market so that, in my few remaining years in the workforce, I bought stocks cheap.
I also worried that a prolonged downturn at the worst possible time might derail my early retirement plans.

Read more »

Lists

Six Tips

WORRIED ABOUT inflation? You might be drawn to inflation-indexed Treasury bonds—officially known as Treasury Inflation-Protected Securities, or TIPS. These bonds protect you from unexpected inflation, plus there’s no risk of default.
Those features make TIPS attractive to investors who are concerned about rising consumer prices, and especially the impact of inflation on the bond portion of their portfolio. Intrigued? Before you invest, here are six factors to consider:
1. Hedging vs. speculating. TIPS can be used to hedge against inflation or to speculate on it.

Read more »

Mindset

Small Pleasures

TODAY, I SING the praises of spending—on the little things in life.
We fiercely resist the suggestion that money doesn’t buy happiness. Commentators will often trot out the quote—which has been attributed to all kinds of folks—that, “I’ve been poor and I’ve been rich. Rich is better!”
I think that’s true. But it isn’t proportionally true. If you went from earning $100,000 a year to earning $200,000, or your portfolio grew from $500,000 to $1 million,

Read more »