WE MOVED FROM INDIA to the U.S. in 2014 when my husband got a job with a Silicon Valley tech company—and we found ourselves living in one of the world’s most expensive places.
On top of that, when our daughter was born, I left the workforce for a few years to look after her, which meant we had a period when we lived on just one paycheck. Still, within five years of arriving in the U.S.,
THRIFTY. FRUGAL. CHEAP. Pick the adjective you favor, and you could apply it to me.
I’ve spent almost my entire adult life being financially careful. I haven’t carried a credit card balance or overdrawn my checking account since my early 20s. I was an early convert to low-cost index funds. When I worked at The Wall Street Journal and at Citigroup, I brought my breakfast and a thermos of coffee to the office every day,
I NEVER REALLY LIKED the vehicles that I owned. They were an unimpressive lot, including a Volkswagen Beetle, Mercury Capri, Toyota SR5 pickup, Toyota Camry and Ford Fusion. I would like to say they got me where I needed to go, but that wasn’t always the case. All the cars, except for the Camry, were unreliable, which would sometimes make my life stressful and difficult. Of course, keeping those cars for many years didn’t help.
ONCE UPON A TIME, I thought it was a little unseemly to pay a lot of attention to costs. My father grew up in a farm family with little money. He was the first to attend college and, indeed, went on to law school from there. He did well in his profession and, when I was growing up, we lived a comfortable—though far from luxurious—life.
Maybe because he’d spent his youth worried about money,
IF YOU HAVE A SURPLUS in your household budget, what’s the best use for it? Does it make more sense to pay down debt or to invest those extra funds? With interest rates at such low levels, this is a question I’ve been hearing with increasing frequency.
Suppose your mortgage rate is 3.5%. If you pay down that debt, it’s like earning 3.5%. By contrast, if you invested in the stock market, your annual return would be uncertain.
EARLY RETIREMENT isn’t a common goal among my friends. When I talk about my semi-retirement, many assume I either made a quick buck in the stock market or benefitted from some sort of financial windfall. I counter this misconception by narrating the magic formula: Financial freedom is frugality, multiplied by simplicity, compounded by patience.
My response often seems mysterious until I explain the two basic math concepts behind it. We learn them in school,
MY WIFE AND I RECENTLY read The Ant and the Grasshopper, from Aesop’s Fables, to our youngest daughter. If you recall, the grasshopper mocks the ant for spending all his free time amassing food. But when winter comes, the starving grasshopper begs for assistance—and the ant refuses.
Lately, I’ve been struck by the irony of this parable. As we celebrate the role of physicians in keeping us all safe from a virus,
SAVING FOR THE FUTURE entails a pinch in the present. Every so often, it makes sense to reconsider how much we save—and whether it’s time to take a break from saving. As a recent early retiree, I was pondering this, even before the latest stock market disruption.
Unfortunately, none of us has a reliable crystal ball that tells us when to buy low or sell high. We also don’t have complete knowledge of our future self.
I RECENTLY READ about a trendy way to lose weight: intermittent fasting. Supposedly there are also health benefits. That got me thinking.
I’ve been roundly criticized for bashing the financial independence/retire early movement, otherwise known as FIRE, and for arguing that average Americans spend unnecessarily on all kinds of stuff, thus hampering their long-term financial security. My point of view hasn’t changed. But I’ve found room for compromise: Think of it as periodic financial fasting.
WHAT DOES IT TAKE to succeed financially? Pundits love to parse stock market returns, dig into the minutiae of Roth conversions and debate retirement withdrawal strategies. Yet, when asked what’s the most important financial virtue, almost all give the same answer: great savings habits.
That mundane reason certainly explains my financial success. Yes, I’ve benefited from owning index funds, holding a stock-heavy portfolio and buying enthusiastically during market declines. But all of that has been gravy.
HERE’S A SOBERING thought: Much—and perhaps most—of the money you’ll accumulate for retirement will reflect the raw dollars you sock away and not the investment returns you earn.
Consider a simple example. Let’s say retirement is 40 years away and your goal is to quit with $1 million. Let’s also assume you can earn an after-inflation “real” annual return of 4%, which is my best guess for the long-run return on a globally diversified,
THINK OF IT AS THE ultimate financial Rorschach inkblot test. When you hear about the pitifully inadequate retirement savings of so many Americans, what’s your immediate reaction?
a) This is the inevitable result of stagnant wages coupled with soaring medical, education and other costs; or
b) This is what happens in a financially illiterate society with scant self-discipline and constant temptations to spend.
For me, these differing views were brought into sharp relief by two recent articles on HumbleDollar.
I’VE READ A LOT of articles about why Americans aren’t saving enough for retirement. Most of the articles lay the blame on our spending habits and the debts we’re servicing.
For instance, some point the finger at the gourmet coffee we buy each morning. Suze Orman says, “You need to think about it as: You are peeing $1 million down the drain as you are drinking that coffee.”
Similarly, others point out we’re spending too much on unnecessary items like vacations,
FOR AS LONG AS I CAN recall, I’ve received unsolicited advice on what I should study in school, when I should get married, when I should pop out kid No. 1—and how I should spend my money. Regarding this last item, it seems there’s a lot of financial advice out there from people who enjoy a level of financial security I’ll likely never experience, unless I strike it lucky with the Powerball.
Many advice columnists just haven’t caught up with the soaring cost of living and student debt crisis that confront young people.
THE SAVINGS RATE has been revised by the federal government—and the new numbers offer a rosier take on America’s financial rectitude. But is the story believable?
Make no mistake: The old figures told a sorry tale. They suggested our savings habits fell apart after 1984 and with a vengeance after 1997. But suddenly, post-1984 doesn’t look so grim. Under the new methodology, the annual savings rate averaged 11.3% over the 35 years through 1984,