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Seeking Certainty

Ross Menke  |  February 4, 2019

SELF-EMPLOYED individuals, freelancers and commissioned workers all struggle with a key area of their finances: managing a variable income. When you don’t know how much you’ll make this month or this year, it’s tough to start saving. I know this all too well as a self-employed financial planner.
The uncertainty can leave you stuck, unsure which steps to take next. How can you risk putting money into long-term investments if you might need it to pay the bills a few months from now?

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B Is for Bias

Adam M. Grossman  |  February 3, 2019

IN THE WORLD of personal finance, researchers have long understood that behavioral biases negatively impact investors. Examples include recency bias, hindsight bias, confirmation bias and many others. These are all well documented. Recently, a group of researchers uncovered yet another investor bias: This one is called “alphabeticity bias.”
Alphabeticity, as you might guess, refers to the bias that can occur when choices are presented in alphabetical order. This bias, the researchers note, is found in a number of domains: In elections,

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Newsletter No. 42

Jonathan Clements  |  February 2, 2019

THERE ARE almost 139 million houses and apartments in the U.S. Based on the reader reaction I’ve received over the years, that’s probably also a pretty good estimate of how many people have strong opinions about the virtues of homeownership, or the lack thereof. It seems real estate discussions almost always deteriorate into debates driven by anecdotal evidence.
But what if we set aside the stories, and focus instead on statistics and commonsense? That’s what I try to do in HumbleDollar’s latest newsletter,

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January’s Hits

Jonathan Clements  |  February 1, 2019

LAST MONTH was the best ever for web traffic in HumbleDollar’s brief 25-month history. What were folks reading? These were January’s most widely read blog posts:

Still Learning
Subtraction Mode
Saint Jack
Never Retire
Nursing Dollars
Repeat for Emphasis
Price Still Slight

January also saw readers flock to our early January newsletter, as well as to a newsletter published in December.
Follow Jonathan on Twitter @ClementsMoney and on Facebook. Jonathan’s latest book: From Here to Financial Happiness.

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This Old House

Jiab Wasserman  |  January 31, 2019

HOW DID MY husband and I get where we are today—early retirement in Spain? One of the most critical decisions concerned our biggest expense: housing. As the one in charge of the family’s financial planning, I wish I could say I planned this outcome all along, but I didn’t. We were just lucky—though I like to think it was “lucky” in the sense that luck is when preparation meets opportunity.
When Jim and I got married in 2003—a second marriage for both of us—we needed a new place for our combined family of four,

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Off the Payroll

John Yeigh  |  January 30, 2019

WHEN OUR daughter landed a great job after her 2018 college graduation, we expected her to soon move off the family payroll. She immediately budgeted to take on all routine living expenses, including housing, food, car and utilities. We did volunteer to cover some smaller expenses, largely in situations where family plans are available, such as cellphones, Netflix, Amazon Prime and AAA. We also kept her on our employer-provided health insurance, which involved no added cost.

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I Can’t Do That

Dennis Friedman  |  January 29, 2019

THERE ARE TWO New Year’s resolutions I’d like to accomplish: I would like to gain weight and spend more money.
I’ve been trying to gain weight for such a long time that I’ve just about given up. I eat all day long until my stomach is about to explode. The next morning, I jump on the scale and my weight is back where I started the previous morning. Rachel looks at me amazed, as if I’m some kind of human garbage disposal.

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Spending Happily

Ross Menke  |  January 27, 2019

IN THE GRAND scheme of things, money is just a tool and net worth is just a number. We shouldn’t work solely to make more money. Instead, our goal should be to use that money to create as happy a life as we possibly can.
In their book Happy Money: The Science of Happier Spending, Elizabeth Dunn and Michael Norton explore this idea. How can we best use money to buy happiness?

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Price Still Slight

Jonathan Clements  |  January 26, 2019

DO THE CHEAPEST index funds always win? A year ago, I tackled that question—and the results for 2017 were mixed. Since then, the question has become even more intriguing. Last year, Fidelity Investments launched four index-mutual funds with zero annual expenses, while also slashing the expenses on its existing index funds.
Those zero-cost funds have only been around for a handful of months, so it’s a little early to gauge their performance. Ditto for the price cuts for other Fidelity index funds;

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Picture This

Ross Menke  |  January 25, 2019

HAVE YOU EVER considered what you want your retirement to look like? Not just generically, but in vivid detail? If you haven’t, I urge you to go through this exercise as you flesh out your financial goals.
Visualization is used mainly by athletes as they prepare for competition, so that they can get as close to the experience as possible before the competition starts. This was witnessed across the world when American skier Lindsey Vonn’s visualization routine was caught on camera before an Olympic race.

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Gaming the System

Jim Wasserman  |  January 24, 2019

I’M AN AVID player of video and computer games—along with 150 million other Americans. They’ve been a nice occasional escape from the pressures and obligations of the real world for more than 40 years and, now well into my 50s, I’m old enough to see them as merely that.
Youth, on the other hand, is more susceptible to having their behavior influenced, if not shaped, by interactive entertainment. There’s much debate as to whether such games promote dissociative behavior and even violence.

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Still Learning

Richard Quinn  |  January 23, 2019

FOR THE BETTER part of 40 years, I spent a great deal of time helping thousands of workers prepare for retirement. We ran seminars for workers and spouses on topics like retirement income, insurance, lifestyle, relocation and more. I think it’s fair to say that, if someone took advantage of the programs offered, they would have been well prepared financially and emotionally for retirement.
Sadly, relatively few workers utilized all that was available to them—this despite the support and urging of the unions that represented them.

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Not Worthless

Julian Block  |  January 22, 2019

THE INTERNAL Revenue Code doesn’t authorize much relief for investors when they suffer capital losses that exceed their gains. It allows taxpayers each year to offset the excess against as much as $3,000 of their ordinary income from sources like salaries, pensions and withdrawals from IRAs.
What about the unused losses? The law lets investors carry forward such losses and claim them in an identical way on their tax returns in subsequent years, until they’re used up.

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Humble Arithmetic

Adam M. Grossman  |  January 21, 2019

IN THE HISTORY of the investment industry, May 1, 1975, is a date to be celebrated. On that day, the industry took not one, but two, remarkable steps forward.
The first change was an action by the SEC to deregulate stockbrokers. For the first time in more than 100 years, brokers were given the freedom to set their own commission rates on stock trades. The result was a boon for individual investors. Today, instead of paying hundreds of dollars to trade a stock,

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Repeat for Emphasis

Adam M. Grossman  |  January 20, 2019

JAMES CLEAR, in his bestselling book Atomic Habits, offers this thought-provoking notion: Suppose a plane takes off from Los Angeles on its way to New York. But after taking off, the pilot turns the nose of the plane by an almost imperceptible 89 inches. Where will the plane end up? The answer: nowhere near New York. As it flies across the country, that 89-inch difference will take it hundreds of miles off course.

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