Investing – Matt About Money Simple. Meaningful. Success. Fri, 31 May 2019 17:28:09 +0000 en-US hourly 1 9092505 Profitable Ideas: How Your Phone Impacts Your Spending, Too Much Stuff, and More Fri, 07 Jun 2019 13:30:53 +0000

Weekly roundup of some of the best personal finance articles from around the web.

You spend 41% more at the supermarket if you keep checking your phone (MarketWatch). Distracted shopping costs more.

200 random things libraries will let you check out for free—from instant pots to skulls (Money). When was the last time you checked to see what your library offers?

Giving—or receiving—a down payment gift? Here are the tax consequences ( Some good rules to know, especially for first-time buyers. 

15 states with a ‘marriage penalty’ in their tax brackets (Kiplinger). There are lots of financial (and, of course, other) benefits to being married. But marriage can also cost more.

3 ways your office 401(k) gives you more money than you realize (Business Insider). A lot of people still long for the days of traditional pensions, but if you have access to a 401(k) plan, that’s probably a really good deal.

There is too much stuff (The Atlantic). It’s a first-world problem, to be sure, but “choice anxiety” is a thing. And it’s given rise to Instagram influencers, brand disrupters, and retail curators.

Here’s how much a US dollar is worth in every state (USA Today). The long-term benefits of living in a low cost-of-living state cannot be overstated.

Why spending less doesn’t reduce your quality of living (The Simple Dollar). It’s all about what you choose to spend less on and why.

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Profitable Ideas: Choosing Time Over Money, Turning $5,000 Into $33 Million, and More Fri, 31 May 2019 13:30:53 +0000

Weekly roundup of some of the best personal finance articles from around the web.

When it’s time to choose time over money (She Picks Up Pennies). The last section of this article says it all—doing the blocking and tackling of wise money management gives us options to build our lives around what matters most.

6 stats that show Americans are drowning in stuff they don’t need (Foundation for Economic Education). Not meant as a guilt trip, but as a reminder of how out of hand things can get if we’re not intentional.

Is a gap year better financially than going straight to college? (The Simple Dollar). Helpful thoughts about an idea that’s gaining traction in the U.S.

Reaching for the ‘Little House on the Prairie’ kind of life (No Sidebar). I think we can all relate to a desire for greater simplicity and meaning. It’s available, but it takes swimming against the stream of our culture.

How to turn $5,000 a year into a $33 million legacy (Getting Your Financial Ducks in a Row). Really compelling to see how far this whole compounding thing can go, impacting multiple generations.

10 DIYs for the most common insect and pest infestation (on the cheap) (The Frugal Gene). I love the springtime, but not all the bugs it brings. Here are some inexpensive remedies.

Almost 40% of Americans would struggle to cover a $400 emergency (Bloomberg). If you don’t have enough in savings, dialing back on your retirement contributions for a season could make a lot of sense.

Five great money saving tips people hate (ESI Money). Many people feel some tension between knowing the right thing to do and actually doing it. Here’s a closer look and some new ways to frame the decisions.

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3 Essential Questions About Investing Tue, 14 May 2019 13:30:14 +0000

Investing is arguably the most complicated and intimidating part of money management. And days like yesterday don’t make it seem any easier!

To invest successfully, it’s important to control what you can and let go of the rest. Consider your answers to the following questions, each one of which focuses on a key investing factor that’s well within your control.

Are you investing enough? One of the big trends within workplace retirement plans, such as 401(k) plans, is “auto-enrollment.” It used to be that participation in such plans was something you had to opt into. Now, in more and more companies, participation is the default; if don’t want to take part, you have to opt-out.

While that’s helped increase participation rates, one major watch-out has to do with your plan’s automatic contribution rate. In many cases, the percentage of salary is pretty low — like 3%. And a lot of employees, assuming their employer has their back, never really figure out if that’s enough (it isn’t) or increase their contribution amount.

To figure out how much you should be investing, use a free online calculator to run some numbers.

Is your asset allocation correct for your age and risk tolerance? Another major trend in workplace plans is the popularity of target-date funds. Many mutual fund companies now offer such funds.

You’ll recognize them because they have a date as part of their name, such as Fidelity’s Freedom 2040 Fund or Vanguard’s Target Retirement 2055 Fund. They’re usually offered in 5-year increments, such as a 2020 fund, a 2025 fund, etc. The date is the year closest to the year when you plan to retire.

There are two wonderful things about target-date funds. First, they handle asset allocation decisions for you, choosing the stock/bond mix the fund companies believe is best for someone planning to retire at that date. Second, as you get older, the target-date funds automatically adjust their holdings, making the portfolio more conservative.

But here’s a key watch-out. Don’t blindly assume the allocation used by your target-date fund is appropriate. When the market fell by nearly 40% in 2008, many people who were invested in 2010 target-date funds—people just about to retire—lost a ton of money. Their target-date fund of choice turned out to be surprisingly aggressively invested.

Understand this: One company’s fund that’s designed for the same target retirement date as another may be designed very differently. For example, American Funds 2020 Target Retirement Fund has a 46% allocation to stocks whereas the Fidelity Freedom 2020 Fund has a 55% allocation to stocks. These funds will respond differently to the same market conditions.

To figure out how your investment portfolio should be allocated, take this simple quiz. Then, if you are using a target-date fund, find one that has a similar allocation (it might not be the one with the year closest to the year of your intended retirement as part of its name).

Are you ready for how rough the ride can get? It’s easy to make the mistake of hearing that the market went up by over 30% in a particular year, as it did in 2013, and assume it moved throughout the year in a nice smooth upward path. But it doesn’t usually work that way, and it definitely didn’t work that way then.

There were six significant downturns throughout 2013. Each time the market slipped, you can be sure some people feared the worst and bailed out, a move they certainly came to regret.

This points to the importance of using a process for selecting investments you understand, trust, and are committed to staying with in good times and bad. And it points to the importance of managing your expectations about how the market performs. While its long-term trajectory has been upward, the ride will certainly get rough from time to time.

How would you answer each of those three questions?

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Profitable Ideas: The Wants/Happiness Disconnect, Marketing Endgame, and More Fri, 03 May 2019 13:30:32 +0000

Weekly roundup of some of the best personal finance articles from around the web.

What we want doesn’t always make us happy (Bloomberg). Are you pursuing things, and spending money on things, that won’t make you happy?

Here’s how much more money you’d have for retirement if you saved $100 a month starting at age 25 instead of 35 (Business Insider). Time is “the simplest and most reliable tool we have for building wealth.”

The root cause of your money problems could be an actual money disorder (HuffPost). Many people have destructive financial beliefs and behaviors, but at a certain point those beliefs and behaviors cross a line.

Cash is king (Humble Dollar). In “the house of the wise” is an emergency fund (Proverbs 21:20).

Give to charity without giving up your tax deduction using a donor advised fund (Peter Lazaroff). The new tax code has complicated charitable giving. Here’s a workaround.

Keeping money secrets from each other: Financial infidelity on the rise (NPR). I’m a big believer in complete financial disclosure before marriage and ongoing financial transparency after marriage.

Audi, Google, Hertz, and the Avengers: Endgame brand tie-in marketing machine (Fast Company). How much marketing did you notice in the latest Avengers movie?

4 things you should never buy refurbished (and 4 things you should) ( Sometimes used products are a good deal, but not always.

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Profitable Ideas: The Financial Habits You Inherited, Becoming a 401(k) Millionaire, and More Fri, 26 Apr 2019 13:30:29 +0000

Weekly roundup of some of the best personal finance articles from around the web.

Want a good lesson in financial planning? Study how well your parents did or didn’t do (Pete the Planner). Identifying how your parents continue to influence your financial beliefs and behaviors is the first step toward deciding whether you want to retain those lessons.

Handling the financial irresponsibility of family members (The Simple Dollar). You can’t choose your family members, but you can choose how you respond to them.

Not being financially literate could cost you a bundle (CNBC). Just reading a financial blog on a regular basis (ahem) means you’re in the game. Lots of people aren’t.

How hard is it to become a 401(k) millionaire? (A Wealth of Common Sense). A good post that shows just how beneficial it is to get started with investing earlier than later.

How to protect your digital assets (Kiplinger). Your digital life has probably become more valuable than you realize.

What’s not covered by credit card rental car insurance (MarketWatch). It’s good to know what coverage you may need well before you find yourself standing at the rental counter.

3 easy ways to go zero waste and cut your trash by 80% (Going Zero Waste). This one isn’t directly about money, but it is about good stewardship.

Doing this one thing could save you $1,100 or more per year (Considerable). It’s good to develop a healthy dislike of recurring bills.

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Profitable Ideas: 10 Secrets of the Millionaires Next Door, A Question to Stop Asking Your Kids, and More Fri, 12 Apr 2019 13:30:45 +0000

Weekly roundup of some of the best personal finance articles from around the web.

10 secrets of the millionaires next door (Kiplinger). The great thing is how accessible/doable each “secret” is.

How much is your education worth? Depends how much you make (Bloomberg). Ten years from now, how people pay for college may look very different. The seeds are being sown.

Stop asking kids what they want to be when they grow up (NY Times). It’s such a common question. But there may be a downside.

Estate planning: 6 steps to ensure your family is financially ready for when you die (USA TODAY). This is the sort of thing many people plan to get to someday, one day. The problem is, some never get around to it.

401(k) loans are not an investment (White Coat Investor). There’s far more downside than upside to borrowing from your retirement plan.

Your career is a multimillion-dollar investment, so manage it wisely (The Simple Dollar). When you think of all the money you’re likely to earn over the course of your career, you realize what an opportunity that represents. How well are you managing that opportunity?

How to budget for the hidden costs of home ownership (Gen Y Planning). The cost of maintenance and repairs is a shock to many new home owners. Here’s how to be prepared.

Be honest: Are you really saving enough for retirement? (Money Ning). You can’t control the stock market, but you can control how much you invest.

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Profitable Ideas: Investing Missteps, Shore Up Your ID Theft Protection, and More Fri, 05 Apr 2019 14:12:55 +0000

Weekly roundup of some of the best personal finance articles from around the web.

Investors doubled their stock market losses in 2018 by making this costly mistake. Here’s how to avoid it (Money). The dangers of letting your emotions get the best of you. Here’s a better approach.

I decided to pay off my mortgage by age 40, and I’m convinced it’s one of the best things I’ve ever done (Business Insider). Some people say it’s foolish to pay off a mortgage early if you have a low interest rate, but sometimes the best financial decisions require more than a spreadsheet.

Money matters (The Humble Dollar). Why money is such a poor way to gauge value.

Fights over estates can tear families apart (Independence Advisors). How you can make things go smoother for your heirs.

The problems with do-it-yourself online wills (Next Avenue). The cost savings may look appealing, but you may end up paying a higher price in the end.

How to work through financial conflicts in your marriage (Bible Money Matters). Good guidance for the financial disagreements many couples face.

Identity theft: Act now to protect yourself (Kiplinger). The problem is only getting worse. Here’s how to shore up your defense.

Using the bank your college recommended? Check for fees (CNBC). Students need to be careful. The bank recommended by their college may not be best.

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Cultivating the Lost Art of the Long View Tue, 19 Mar 2019 13:30:12 +0000

Waiting can be tough. We seem to be hardwired to resist it. And our culture does us no favors here. Whatever we’re interested in buying, there are ways — and we’re strongly encouraged — to have it now. Paying for it? That can wait until later.

But there are great rewards for those who learn to wait. 

Read The Master(’s) Principle

And motivation can be found by seeing the big picture. A good starting point is to quantify your financial potential.

Money plus time = a lot!

Consider this: If you’re 32 years old and your salary is $55,000, by the time you’re 70, it’s realistic that you could have earned over $3.8 million! That’s a ton of potential! 

Try this exercise yourself by plugging your current age, planned retirement age, current annual income, and assumed annual salary increase (I used a 3% in the example above) into this calculator.

By nature, we don’t tend to think long-term. For many of us, it’s difficult to imagine the future. But it can be very motivating to do so.

Keep yourself gainfully employed, earn a small raise each year, and you’ll generate a lot of income over your lifetime. The question is, what will you do with it?

The eighth wonder of the world

With the big picture in mind, now consider how the seemingly small steps you take today could be magnified over time. 

Think about investing, for example. I remember reading a column by one of my favorite financial journalists in which he talked about the day in his youth when someone introduced him to the power of compounding—what Einstein reportedly called “the eighth wonder of the world.” 

He had never heard of the concept before, but when he saw compounding in action, it was as if a light bulb switched on above his head. It motivated him to find the money to start investing.

In your first years investing, compounding may not seem like much of a big deal. But give it some time, and it will turn into a very big deal.

Let’s say you’re 20 years old, start investing $200 per month, do that for 50 years, and generate an average annual return of 7%. After 10 years, you will have invested $24,000. But because of the power of compounding, you will have earned about another $10,000. Nice, but not super impressive. At least not yet.

Now let’s run the example out 50 years. At that point you will have invested $120,000 — a great accomplishment unto itself. But because of the power of compounding, it will have turned into over $1 million. Now, that’s impressive.

But what if you can’t find $200 to invest every month at age 20? Besides, you figure, you’re young; you can afford to wait. Finally, at age 30, you start investing $200 per month, do that for 40 years, and get that same 7% average annual return.

You’ve only invested $24,000 less than if you had started at age 20. However, because you waited 10 years, you end up with about $500,000 less! That’s quite a penalty for waiting.

This same type of thinking can be applied to every aspect of your financial life. 

A lifetime of impact

Let’s go back to the earlier example of a 32-year-old making $55,000. If she did end up making $3.8 million by age 70, and if she cultivated the habit of giving away 10% of her income along the way, she will have given way $380,000. That could have a ton of impact!

Give away a portion of every dollar you earn, and you could play an important role in addressing some of the world’s great needs — sharing Christ, helping to alleviate hunger or poverty, and so much more. So much impact. So much joy.

In the middle of writing this post, I checked my email (yes, while writing about taking the long view, I got impatient and fidgeted away to something else!) and there I saw an update from a missionary we support. The impact she’s having is amazing. More people are hearing the Gospel, more are coming to faith. And we get to play some small role in that. Incredible.

Saving for something special

My wife and I will celebrate 20 years of marriage this year. Four years ago, we started dreaming of what we might do to celebrate. And we began saving. 

Today, the airline tickets are reserved, the hotel is booked, and money for restaurants and other entertainment is in the bank.

Is there a special trip you’d like to take? How much of your kids’ future college costs would you like to cover? What else would you like to accomplish in the future? 

Thinking big is the starting point. Let those goals motivate you to add them to your monthly cash flow plan and start chipping away. A little bit of money set aside on a regular basis for a long time can really add up.

It works both ways

Of course, debt can have a compounding effect as well—a negative effect. Let’s say you have a $6,000 balance on a credit card that charges you 18% interest, and you carry that debt from month to month, making just the minimum required payments each month. It could take you more than 17 years to pay it off, and cost you $5,700 in interest!

So turn it into a win by chipping away at the goal of becoming debt-free. If you could put $300 toward your debt every month, you’d be debt-free in just two years. Run some what-if scenarios to see how much faster you could get out of debt. What if you could put an extra $20 toward your debts each month, or an extra $50?

How to make it happen

Making any of this work requires margin, that wonderful cushion between your income and expenses. 

Read One of the Sweetest Concepts in All of Money Management

It requires not spending too much on a house, not having a car payment, and being proactive and intentional about day-to-day spending. Some people reading this may see it as impossible. But it is possible.

I once had $20,0000 of credit card debt that I thought would never go away. It took time and it took patience. It wasn’t much fun along the way, but today I’m glad that it took four and a half years to pay it all off because it took that much time to change my way of thinking and to cultivate better habits.

Read How I Found Financial Freedom

Take the long view. Get a sense of your financial potential and start chipping away at whatever it is that motivates you, whether that’s getting out of debt or going on a special trip. Along the way, pray for patience. In our have-it-today culture, it will take some commitment to live differently.

What if?

Wouldn’t it be a shame to look back on your life and wonder, “What happened to all the money I made?” By the same token, wouldn’t it be satisfying to look back and know you made the most of what was entrusted to you?

Getting a feel for your financial potential can be very motivating. Be sure to take the next step, though, and turn that potential into a plan.

Profitable Ideas: Happy People Earn More, the Boring Path to Success, and More Fri, 15 Mar 2019 13:30:24 +0000

Weekly roundup of some of the best personal finance articles from around the web.

Why happy people earn more money (Entrepreneur). You may think greater wealth leads to happiness, but maybe it’s the other way around.

Exploring the growing trend of taking a gap year before college (Christianity Today). The benefits of waiting another year before starting college.

Just save more money (The Irrelevant Investor). It’s one of the most important factors for investing success and it’s well within your control.

Why is it so hard for couples to talk about money — and their debt? (Buzz Feed). Especially when you try to work out the whole money thing within the context of a relationship, it becomes so much more than an objective means of exchange.

Compounding boredom is simple, but not easy (A Teachable Moment). Success goes to those who take the right steps, day in and day out.

Average Americans can’t afford to buy green (Bloomberg). It isn’t easy, or inexpensive, bein’ green.

Seriously, stop throwing away your old clothes (Fast Company). Far better to swap, sell, or stitch your old duds.

It isn’t the kids. It’s the cost of raising them (The Atlantic). The joy of parenting — it’s complicated.

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Profitable Ideas: Breaking the Fast Fashion Habit, Making the Most of Your 401(k), and More Fri, 01 Mar 2019 14:30:56 +0000

7 ways to break the fast fashion habit — and save the planet (World Economic Forum). It isn’t good for your wallet or the environment.

Americans could save $700 million by checking one thing before buying a home (MarketWatch). You probably looked at lots of homes before choosing one to buy. You should shop around for a mortgage, too.

Here’s what to do if you can’t pay taxes by April 15 (CNBC). Even if you can’t pay the full amount, you have to file your return.

Workism is making Americans miserable (The Atlantic). Are you looking to your work for more than it can deliver?

Money and marriage: Four tips for successful ‘matrimoney’ (The Simple Dollar). So much of it comes down to communication.

Password managers have a security flaw. But you should still use one. (Washington Post). How carefully are you managing your passwords?

This common 401(k) oversight could cost you big time in retirement (Money). You may have been automatically enrolled, but you still need to take some action.

Most millennial homeowners have buyer’s remorse, a new survey shows (CNBC). A lot of it comes down to a failure to anticipate all the maintenance and repair expenses.

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