THERE ARE FIVE KEY SCENARIOS where hackers could potentially wreak havoc with your financial life. Data thieves could:
Rack up charges on your credit cards.
Apply for a loan or credit card using your identity.
Steal money from your financial accounts.
File a false tax return claiming a refund.
Steal your medical information and then use it to, say, fraudulently fill prescriptions or submit medical expenses for insurance reimbursement.
How can you defend yourself?
DURING ITS BRIEF EXISTENCE, HumbleDollar has run a large number of articles devoted to kids and money. For instance, we published a series of five pieces by our bloggers devoted to what they learned about money when they were children: Growing Up (Part I), Growing Up (Part II), Growing Up (Part III), Growing Up (Part IV) and Growing Up (Part V). There were also three earlier pieces by Sam X Renick, two of which discussed what his father taught him: How to Keep All Your Earnings,
WHEN YOU SETTLE ON YOUR PORTFOLIO’S split between stocks and conservative investments, you should take a broad view of your finances—and factor in the many parts of your financial life that look suspiciously like bonds. If you think of a bond as something that kicks off a steady, predictable stream of income, that description doesn’t just fit the paycheck you might be collecting. It also describes a host of other assets, including certificates of deposit,
LOOKING TO GET MORE out of your money? You could dive into each of the money guide’s chapters and peruse the sections that seem most relevant to you. As you’ll discover, each chapter begins with a short introduction and a list of all sections in that chapter.
But here’s an alternative way into the money guide: Check out the key questions you need to consider. The articles below ran as a series of blogs—and each includes links to relevant pages in HumbleDollar’s money guide.
WE MAKE ALL KINDS OF FINANCIAL ERRORS, but three mistakes loom especially large: We use money in ways that hurt our own happiness, we derail our portfolio’s performance, and we spend too much and save too little.
Why do we make these mistakes? Here are five things we need to remember about ourselves:
We’ll never be satisfied
We’re social creatures
We are too focused on today
We hate losing
In many situations,
What are your five favorite financial websites? That question was put to HumbleDollar’s writers. Here’s what they came up with:
Adam M. Grossman
INVESTORS ARE OFTEN DESCRIBED as risk averse. But in truth, we aren’t risk averse, but rather loss averse. We tend to think less about our absolute level of wealth and more about changes in our wealth relative to some reference point—and we hate it when we fall below that value.
It’s been estimated that, for many of us, the pain we get from losses is at least twice as great as the pleasure we receive from gains.
WE TEND TO BE A SELF-CONFIDENT LOT, believing we’re above-average drivers, smarter than most and better looking. This isn’t necessarily a bad trait. Self-confident, optimistic individuals tend to be happier, more resilient and enjoy greater career success. But when our excessive confidence spills over into investing, it can hurt our portfolio’s performance.
As a group, investors will inevitably trail the market averages, once investment costs are figured in. Could you and I do better?
IN THE BATTLE BETWEEN our current self and our future self, it’s no contest: We overwhelmingly favor today. We spend excessively and take on too much debt, while giving scant thought to how we’ll service these debts or pay for distant goals like retirement and the children’s college education.
What explains this behavior? Once again, we can blame the instincts we inherited from our hunter-gatherer ancestors. They were focused on consuming today and didn’t need the self-control required to save for the future.
AMERICANS MAY CELEBRATE THE NOTION of rugged individualism. But in truth, we’re social creatures. Want a better life? The more robust our network of friends and family, the happier we’re likely to be.
This is one reason spending money on experiences tends to deliver more happiness than spending on possessions. When we go on vacation, attend a concert or go out to dinner, we typically do these things with others. An added bonus: The pleasure extends beyond the experience itself.
OUR LIVES ARE AN ENDLESS CYCLE of desire and dissatisfaction. We might have our eye on a promotion and the accompanying pay raise, or we might hanker after a new car. We muse about how much better our lives will be once we start collecting that larger paycheck and once we drive off the dealership lot in the new sedan.
But even if our wishes come true, they often prove to be a letdown.
EVEN IF YOU FOLLOW all the pointers in the previous section, there’s a good chance the funds you pick will turn out to be duds. Let’s say you bought the large-cap, mid-cap, small-cap and multi-cap stock funds that ranked in the top 25% of performers over the five years through September 2012. What percentage of these top performers remained in the top 25% over the subsequent five years—the period through September 2017? If the results were purely random,
AN INVESTMENT’S VOLATILITY is often assessed using two different yardsticks: standard deviation and beta. Standard deviation looks at how erratically an investment performs compared to its own history. For instance, it might measure how much a mutual fund’s monthly results stray from its average monthly performance over the past five years.
Meanwhile, beta measures how much an investment fluctuates relative to a market index. Suppose the benchmark used is the S&P 500. If an individual stock has a beta of 1,
YIELDS ON SAVINGS ACCOUNTS, money market deposit accounts and certificates of deposit are so modest that it’s tempting to opt for the convenience of the local bank, even if you know you could do better elsewhere. After all, is it really worth shopping around for an online savings account that pays perhaps 1.7%, rather than settling for 0.2% at the nearby bank you already use?
Let’s say you’ll keep $10,000 in the account. That extra 1.5 percentage points of interest would be worth $150 a year.
Are you a high school or college instructor? If you’re using our guide with students, here are six tips:
Consider teaching one of the 16 chapters each week. Because retirement is such a crucial topic, you might devote two weeks to it, focusing first on saving for retirement and then on generating retirement income.
The chapter on investment math was written with students in mind. Understanding compounding is central to understanding personal finance. You might introduce this notion in the first week.