MY NEW BOOK is now on sale—and my latest newsletter was just published. The newsletter, which is free and appears bimonthly, includes nine ways to think differently about money, plus five key insights from happiness research.
Those articles are drawn from ideas in my new book, How to Think About Money. Folks who have read it say it’s the best thing I have ever written (though that may reflect their dim view of my earlier writing).
WE’RE SPENDING the final two weeks before Labor Day on Cape Cod, staying with my in-laws. Everywhere we turn, there’s another delightful home with a wonderful water view. “Wouldn’t it be great to live there?” my wife and I muse, as we imagine how much happier we’d be if we lived in this place of apparently permanent vacation.
We are, of course, completely delusional.
Being in a beautiful spot can be a great joy for a week or two.
STOCK INVESTORS this year are fretting over Brexit, tighter monetary policy and lackluster economic growth. But every year, there’s another compelling reason to bail out of the stock market. Think about the past half-century: We’ve had wars, political crises, financial crises, double-digit inflation, a double-dip recession, terrorist attacks and more. And yet, if you had stashed $10,000 in a global stock portfolio at year-end 1969 and sat tight through all the subsequent turmoil, you would have more than $450,000 today.
TEN YEARS AGO, the real estate market peaked. Today, prices remain 2.1% below their mid-2006 high—though they’re also 34.8% above their 2012 low, as measured by the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index.
As property prices have recovered, homes have become less affordable. The impact, however, has been softened somewhat by modestly rising incomes and slightly lower mortgage rates, according to data from the National Association of Realtors. The upshot: If you have the U.S.
1. That new toy you desperately want? Wait a week, and you’ll be desperate for something else.
2. Folks who appear rich often aren’t.
3. Just because you aren’t paying doesn’t mean it’s free.
4. Mom and Dad might earn lots of money. But financial obligations probably devour 90 cents out of every dollar.
5. If you were paying the electricity bill, you wouldn’t leave the lights on.
6. Those lottery tickets that get folks so excited?
HOW LONG WILL you live? A recent study from Boston College’s Center for Retirement Research noted that, “A healthy 65-year old man in an employer pension plan has a 25% chance of dying by age 78, or of living to age 91 or beyond.”
Think about the dilemma this creates if you’re retiring at age 65. Even if you are in the middle 50% of the male population—neither among the 25% who die early in retirement nor among the 25% who live well into their 90s—your retirement could last just 13 years or it could be double that,
WHEN I WAS in my 20s, with two young children to provide for, I had neither an emergency fund nor nearly enough life insurance. I knew both were important—but I simply didn’t have the money to spare.
Make no mistake: Launching a financial life is daunting. Most twentysomethings have modest incomes, and yet they’re supposed to save for retirement, buy a car, build up an emergency reserve and put aside money for a house down payment,
RECENTLY, I JOINED Creative Planning in Leawood, Kansas, as Director of Financial Education. This involves sitting on the firm’s investment committee, giving occasional speeches and writing a quarterly letter for clients. Want to read my first letter? Click here.
I was a guest last month on the PBS show Consuelo Mack WealthTrack. Check out the online video. On the show, I discuss my new book, How to Think About Money,
WHAT DOES IT TAKE to succeed financially? Here’s my list of the 10 most important choices you’ll ever make:
1. How much you borrow for college. Planning to become a journalist or a social worker? The lower your likely lifetime earnings, the less sense it makes to take on a heap of education loans.
2. What career you pursue. Obviously, the more you earn, the easier things should be financially—though this advantage is often frittered away through excessive spending.
THE CLEMENTS household has been in turmoil since May. After weeks of shoehorning our life’s possessions into endless cardboard boxes, we moved home and then, three days later, headed off for 10 days of vacation. My wife and I aren’t quite sure how we settled on this crazy schedule (though we’re pretty sure the other spouse is responsible). But we’re painfully aware of the result: It’s been months since we’ve had anything that felt like an ordinary day.
WHAT EXPLAINS America’s miserably low savings rate? There’s no shortage of suspects. You could finger our lack of self-control, as well as our tendency to favor today’s spending and shortchange tomorrow’s goals. You can cite seven decades of post-war prosperity, which has made Americans confident they can weather financial storms, despite skimpy savings and hefty debts. You could blame rising aspirations amid increasing income inequality, which have left low-income families spending ever more as they seek to keep up with the Joneses.
I PROMISE to behave better tomorrow. What happens when tomorrow becomes today? All bets are off.
Our broken promises might involve money, such as committing to spend less, save more and pay down debt. Or they might involve some other aspect of our life, such as committing to eat healthier, exercise more and drink less.
All this highlights our irrationality. We may not be experts in nutrition, physical education and money management. But we have a pretty good idea of how we ought to behave.
WALL STREET’S inhabitants have many unpleasant qualities: greed, arrogance, disdain for customers, inflated self-importance, a sense of entitlement. But all this is made worse by another unappealing trait: They’re so damn prickly.
The degree of prickliness is closely correlated with the outrageousness of the fees they charge. I saw this again and again during my decades as a financial journalist. I can’t recall an index-fund manager ever throwing a king-size snit, and it was rare that I got a nasty letter or email from a fee-only financial planner.
INVESTORS ARE HUMANS, TOO. In the rest of our life, we readily acknowledge that emotions play a huge role. But when handling money, we insist we’re entirely rational. Really? Here are 10 headscratchers that suggest otherwise:
Why do we concede that the car sitting out in the rain is a depreciating asset, and yet we’re convinced that the house sitting in the rain is a great investment?
Why do people, who are so optimistic about everything else,
IF YOUR GOAL is lower investment costs, the financial world has never been friendlier. Let’s say you want to buy the broad U.S. stock market. You can choose between a Schwab exchange-traded index fund that charges 0.03% of assets per year, an iShares ETF that levies 0.03% or a Vanguard mutual fund that costs 0.05%.
Those expense ratios are truly astonishing: If you had $100,000 to invest in the broad U.S. market, your annual fund expenses would be just $30 or $50.