Matt About Money Simple. Meaningful. Success. Fri, 15 Nov 2019 13:15:40 -0500 en-US hourly 1 9092505 Profitable Ideas: Secrets of Super Savers, What Science Says About How to Spend, and More Fri, 15 Nov 2019 14:30:00 +0000

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

The number one thing people with fat savings accounts scrimp on that you likely don’t (MarketWatch). Cancelling the daily latte will only get you so far. Here’s how to really free up some money to save.

So, your adult child moved back home. Here’s how to set limits — fast (Money). Got a boomerang kid? It’s good to establish some rules.

Why we bought a brand new car (JL Collins). Running this well-written post is proof that I can be (somewhat) reasonable when it comes to car-buying!

How to spend your money, according to science (Big Think). Eight ideas for spending smart.

You’ll be able to put more money into your 401(k) in 2020, but not your IRA (MarketWatch). New rules for the new year.

Using the “Eisenhower Box” to set spending priorities (The Simple Dollar). A simple quadrant system for making better decisions.

A graceful exit (Humble Dollar). Helpful guidance for thinking about what you’ll leave behind, and how.

Is it lifestyle inflation or do I need to adjust my budget? (She Picks Up Pennies). What happens when a well designed budget meets the real world. 

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Three Reasons Why Knowing Your Net Worth Matters Tue, 12 Nov 2019 12:42:15 +0000

Do you know your net worth? That’s how much is left after subtracting your debts from the total value of your cash and assets.

At first glance, figuring out your net worth may seem pointless. You’re probably not going to bump Warren Buffett or Bill Gates from their spots on any “World’s Wealthiest People” list anytime soon. And more importantly, from a biblical perspective, building wealth isn’t our primary financial objective.

Still, here are three reasons why monitoring your net worth can help you manage money better.

1 – Your net worth doesn’t lie

In our culture, it’s easy to convince ourselves, and others, that we’re doing better with money than we are. We can finance nice cars, pay for the latest fashions with plastic, and even “buy” a more expensive home than we can afford. But our net worth tells it like it is, and that can be a very helpful financial wake-up call.

In the personal finance classic, “The Millionaire Next Door,” authors Thomas Stanley and William Danko draw an important distinction between people who look wealthy but aren’t (they call them, “Big Hat, No Cattle”), and those who don’t look wealthy but are (where the title of their book came from).

There are many people in the first group—not so many in the second.

Ask yourself: Do I look wealthier than I am, or am I wealthier than I look?

2 – Your net worth shows whether you’re making progress

To be sure, there are other ways to define your life and determine whether you’re moving forward. Tallying your net worth each year, however, and monitoring the trend that develops, can be very helpful. If you’re going to build a nest egg large enough to support your family in your later years, you’ll want that trend to be moving in an upward direction.

Earning more each year and increasing your standard of living may make you look and feel like you’re getting ahead, but an increase in your net worth will show if you actually are.

3 – Your net worth helps you pinpoint financial issues

Each time you calculate your net worth (a natural time to do so is at the end of each year), don’t just retain the bottom line number. Keep the pieces and parts.

On the asset side, track the value of your home (Zillow will give you an estimate), your retirement savings, other savings, the value of your car(s), and other assets. Then look at changes within each line item.

With your household’s retirement accounts, don’t just record the balance. Also record how much you contributed each year and how much your investments earned. Of course, how much you contribute is much more under your control than the returns you earn. Still, the earnings side is important as well. If you see year after year of meager returns, it’s probably time to re-evaluate your investing process.

On the liabilities side, track how much you owe on your house and other debts, such as vehicle and student loans (Read Breaking the Cycle of Financing Vehicles). This annual exercise will provide a helpful reminder to perhaps put more focus on getting out of debt or make sure you’re on track to be mortgage-free at least by the time you retire.

How much net worth should you have?

“The Millionaire Next Door” has an interesting way of defining “wealthy.” Whereas many people think of someone who has a net worth of $1 million or more as wealthy, Stanley and Danko’s definition provides more of a level playing field for people across the spectrums of age and income: multiply your age times your annual pretax household income from all sources and then divide by 10. 

If you have that amount or more, you have a low-consumption, high-wealth-building lifestyle and you’re considered wealthy for someone of your age and income. If your net worth is much less than that, you’re probably consuming too much of your income and investing too little.

Take it to heart: “Be sure you know the condition of your flocks, give careful attention to your herds.” – Proverbs 27:23

Take action: Download and print the financial net worth form here, then figure out your net worth.

Read more: Rethinking the Net Worth Statement 

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Profitable Ideas: When Enough is Enough, Products That Last a Lifetime, and More Fri, 08 Nov 2019 14:30:47 +0000

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

The enough curve: Consider the ongoing costs of your purchases (My Money Blog). When buying more only brings more problems. 

It’s okay to be happy with a quiet life (Becoming Minimalist). Tagging off the last article… And when buying less brings you more of what you really want.

This is the most essential trait you need to land any job (Fast Company). It’s a trait you probably haven’t thought of.

Overcoming 7 hard things about hard money things (Advance Capital Management). How to win the battle between logic and emotion.

The spectrum of wealth (Collaborative Fund). A very insightful scale — where would you place yourself?

Don’t make things more complicated than necessary (The Simple Dollar). Financial decisions run the gamut — from super clear to super complex. For starters, make sure you get the clear ones right.

Your shoes are made of plastic. Here’s why (National Geographic). The problem? Plastic shoes are really hard to recycle. People who really love shoes may not like the solution.

10 brands with a free lifetime warranty (Clark Howard). Spending more for a product that lasts is often the most cost-effective decision.

Thinking about giving money to adult children? Think again (NY Times). It’s what the authors of “The Millionaire Next Door” called “economic outpatient care,” and it can do more harm than good.

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It Isn’t Just the Purchase Price, It’s the Ongoing Costs Tue, 05 Nov 2019 14:30:31 +0000

If you had $18,000 to spend on a used car, your options would include a 2017 Honda EX and a 2014 BMW 535i. Tell me honestly, which would you prefer?

Ah, but you know it’s a trick question. Sure, the BMW seems like it would be a lot more fun to drive. However, over time, it would end up costing a lot more as well. According to the Edmunds True Cost to Own calculator, after five years of ownership, the Honda would end up costing you $32,678 vs. $52,935 for the BMW. The main differences are in the cost of maintenance ($5,538 for the Honda vs. $11,185 for the BMW), repairs ($1,470 for the Honda vs. $8,757 for the BMW), and insurance ($4,789 for the Honda vs. $7,030 for the BMW).

Clearly, it isn’t just the purchase price that matters. It’s the ongoing costs as well. And that’s true for a lot of things we all buy, both big and small.

When buying a house, a larger house will be more expensive to heat, cool, insure, furnish, and maintain than a smaller house. And, less obviously, there’s The Pull of the Neighborhood to consider because our surroundings impact us more than we may realize. The types of cars our neighbors drive, the types of vacations they take, and so much more, influence our own decisions. Just because we can afford to live in a certain neighborhood does’t mean it would be wise to do so. 

When buying clothing, if we buy something that’s “dry-clean only,” that’ll be more expensive to own than something that can be machine washed. If one of our kids wants to go to college far from home, not only is the out-of-state tuition likely to be higher, but the ongoing costs of transportation will be higher as well. 

There was a good article on a related topic the other day on My Money Blog, in which the author showed a powerful “Enough Curve” graphic from the book, Your Money or Your Life. It points to the importance of knowing when enough is enough, because once you cross a line, the ongoing costs in time, money, and hassle, can mark a transition from owning stuff to your stuff owning you.

What are you planning to buy right now? Have you considered the ongoing costs?

Read more: The Ripple Effect of Our Financial Choices

Take it to heart: “Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much.” – Luke 16:10 

Know someone who has gotten engaged or married recently? The book, Money & Marriage, will help them get their relationship off to a great financial start. 

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Profitable Ideas: When Buying a New Car Makes Sense, How 3 Simple Changes Added Up to $5,000 of Savings, and More Fri, 01 Nov 2019 13:30:46 +0000

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

Should I buy a used or new car? (The Simple Dollar). The math doesn’t point toward buying a used car as much as before.

The obscure charges that utility companies add to your bill (ProPublica). Have you ever taken a close look at your utility bill? You may be surprised by what you’re paying for.

I stopped buying 3 things and saved $5,000 (Reader’s Digest). How some relatively simple changes really added up.

As investors try to be more ethical, some find no escape from businesses they detest (NPR). “Socially responsible” investing has become all the rage, but what’s really behind that label?

Where ESG fails (Institutional Investor). A good follow-up to the previous article.

Who actually feels satisfied about money? (The Atlantic). Living by comparison is dangerous to our happiness.

How cognitive traps make it harder to let go of our stuff (Psychology Today). Why we hold on to what we don’t need.

How much time does the average American spend on personal finance? (The Ascent). Are you doing enough to keep your finances in order? 

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The Heart of Wise Money Management Tue, 29 Oct 2019 13:30:26 +0000

There’s a popular myth that managing money effectively is about knowledge and behavior. Figure out what to do and then do it. That’s it. Simple.

But there’s a crucial factor missing from that equation: The heart.

Above all else, guard your heart, for everything you do flows from it. – Proverbs 4:23

Marketers understand that principle. They know that making a sale is all about making an emotional connection between their products or services and our identity.  

Believing that if we just know the right things about money we’ll be able to do the right things leaves us unarmed in the battle for our hearts.

Writing God’s Word on your heart

To be sure, there is a lot to know about money. Which is better for our situation — a traditional IRA or a Roth? How much life insurance do we need?

But the longer I’ve managed money the more I’ve seen that cultivating the right attitudes of the heart is just as important as cultivating the right knowledge. And the best way to do that is to memorize Scripture.

Study this Book of Instruction continually. Meditate on it day and night so you will be sure to obey everything written in it. Only then will you prosper and succeed in all you do. – Joshua 1:8

To memorize scripture is to write God’s Word on our hearts. 

Doing so creates something of an internal gyroscope that keeps us on the right path when the winds of our culture threaten to push us off course.

Here are a handful of money-related verses that would be good to memorize.

Just as the rich rule the poor, the borrower is servant to the lender. – Proverbs 22:7

The Bible doesn’t say that having debt is a sin, but as one who once had $20,000 of credit card debt, I know firsthand that debt can be a form of bondage. That’s not the life Christ came to offer us. In a culture where it seems that debt is normal and inescapable, having Proverbs 22:7 written on our hearts can help us live in counter-cultural freedom.

The plans of the diligent lead to profit as surely as haste leads to poverty. – Proverbs 21:5

Especially since we’re managing money that belongs to God, doesn’t it make sense that we would use a plan? Many people who’ve never tried using a budget (or, as I prefer, a “cash flow plan”) think it’ll be restrictive, that it’s about obsessively spending less. But it isn’t. It’s about freedom and it leads to profit.

Be sensible and store up precious treasures—don’t waste them like a fool. – Proverbs 21:20 (CEV) 

Stuff happens. Expensive stuff. Having some savings in the bank reduces stress and prevents the need to take on debt when the unexpected happens. 

Once you have a reserve, it can be tempting to spend it. Just think of the vacation you could take, or the TV you could buy. Having Proverbs 21:20 written on your heart can help you maintain an emergency fund.

If you haven’t cultivated the habit of memorizing Scripture, I highly recommend it. It’s an essential part of wise money management with surprisingly powerful practical benefits.

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Profitable Ideas: Finishing Rich Isn’t About the Lattes, Finding Your Financial Focus, and More Fri, 25 Oct 2019 13:30:55 +0000

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

All you need to do to finish rich (The Irrelevant Investor). It isn’t about lattes. 

Can self-employed people ever actually retire? (MarketWatch). In short, yes, but it’ll take discipline and an awareness of the unique retirement accounts available to the self-employed.

How I paid off $100,000 of student loans in 3 years (Mr. Money Wizard). It wasn’t magic, but it’s inspiring nonetheless.

Only one in five Americans achieves this key financial goal for a comfortable retirement (USA Today). How to make the most of your retirement plan.

Even with the best advice, people can still mess up (Washington Post). Can you help the people around you if they don’t seem to want help?

Where you kid goes to college doesn’t matter as much as you think (CNN). What factors to look for when choosing a school.

It’s open enrollment. Are you making the most of your employee benefits? (Schwab). Some of the key decisions you’ll need to make, along with some helpful guidance.

To change your financial circumstances, choose focus (Becoming Minimalist). Finding the one thing would make the biggest difference in your financial life.

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An Essential Formula For a Financially Healthy Marriage Tue, 22 Oct 2019 13:30:01 +0000

Money is one of the prime sources of conflict in marriage. However, conflict avoidance isn’t the route to a happy marriage.

In fact, John Gottman, a psychologist who has devoted over two decades to studying what makes for a healthy marriage, believes that “fighting—when it airs grievances and complaints—can be one of the healthiest things a couple can do for their relationship.”  They key has to do with how you fight.

More Positives Than Negatives

As he writes in his book, Why Marriages Succeed or Fail, one of Gottman’s most important findings can be boiled down to a simple formula: “You must have at least five times as many positive as negative moments together if your marriage is to be stable.”

So, the next time your spouse does something financially that bothers you, try opening up the conversation with some positives.

If he shows up with a new iPad that you didn’t discuss buying, tell him how much you appreciate how hard he works and how much you want him to have things he enjoys, AND (a better transition word than “but”) you would feel much better about the family’s finances if you had a plan for such purchases.

For example, you could each have certain budgeted amounts you could spend as you’d like to each month – amounts that are part of a bigger plan that ensures you’ll still be able to meet all of the family’s expenses and accomplish other goals. He can have his iPad, but it might require that he save his allocations for a few months before making the purchase.

Beyond Money and Marriage

Of course, Gottman’s formula doesn’t just apply to how we manage money in marriage. It applies to all aspects of our relationship with our spouse, and even our relationships with others such as friends and co-workers.

As you think about your most important relationships, how well are you following the five-positives-to-one-negative formula?

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Profitable Ideas: Reaching Maximum Frugality, Five Things to Never Buy New, and More Fri, 18 Oct 2019 13:30:12 +0000

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

When frugality bottoms out (The Simple Dollar). What to do when you’ve maximized savings in all areas.

How to teach your kids about money and help them be financially responsible adults (Money). Solid advice, especially for younger kids—and especially “Let them learn by doing.”

Buying less is better than buying green — for the planet and your happiness ( After all, if you’re buying environmentally friendly stuff, you’re still buying.

The asymptote of joy and woe (The Aleph Blog). A fancy way of saying, “You need some money in reserve!”

If personal finance feels like punishment, you’re doing it wrong (She Picks Up Pennies). There’s a difference between spending wisely and living a life of deprivation.

Five things you never need to buy new (CNBC). What types of things do you refuse to buy new?

Is customer loyalty costing you money? (The Evidence-Based Investor). If it’s been a while since you’ve shopped your insurance, you might be spending too much.

Dragging out a college degree is a drag on finances (Real $martica). If you have college-bound kids, the more you can prep them for what they really want to study (and what they really want to do for a living), the better. I know, easier said than done, but still..

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The Ripple Effect of Our Financial Choices Tue, 15 Oct 2019 13:30:49 +0000

Who are your financial role models? Which of your relatives, friends, neighbors, or co-workers motivate you to make smart money moves?

For me, it isn’t the wealthy people I know who live in big homes or drive fancy cars. It isn’t the people who are always the first to own the latest gadgets. It’s the people I know who happily live well within their means.

Actions Speak Louder Than Words

When I was new to church and trying to figure out the whole money thing, I attended some workshops about biblical money management. The teacher was great. He really knew his stuff. But how he lived his life marked me even more than the content of his workshops.

By his appearance, I assumed he was either middle class or maybe upper middle class. I happened to see him in the parking lot once and his car gave off the same impression.

Months later, I discovered that he made a lot of money. I mean a lot of money. A long time after that, I found out why he lives so modestly. He believes his gift for making money is primarily for the purpose of making a difference in the world. He gives away over half of his income every year.

I haven’t been in touch with him for many years and yet his example continues to influence me.

What’s Permissible May Not Be Constructive

The Bible teaches us to look not just to our own interests, but also to the interests of others and also to set a good example for others.  Have you ever thought about the way your financial decisions influence others?

I’m not saying we’re responsible for the decisions other people make or that we should feel guilty about buying nice things. But I am saying that people notice how we use money, and it would be good for us to consider what impact our financial choices have on others.

Are there any ways that our financial decisions may be influencing others to make bad financial decisions? Are the types of products or brands we buy creating distance between others and us?

The Bible says that even though something may be permissible, it may not be constructive.

I once heard a preacher say he thought it was a sin for a person to drive a BMW. I don’t agree with that as a blanket statement (and I don’t even drive a BMW!). However, certain purchases could foster the sin of pride. Other purchases could be unwise if they make us seem unapproachable.

It’s really difficult to draw clear lines, saying this is too large a house or that is too prestigious a car. However, I think it’s wise for us to consider the potential impact on others of the financial decisions we make. Our use of money has a greater impact on others that we probably realize.

Who are some of your positive financial role models and how have their choices influenced you? Have you ever thought about how your financial decisions may be impacting others? Has it ever made you not buy something you were thinking about buying?

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