Matt About Money https://mattaboutmoney.com Simple. Meaningful. Success. Fri, 27 Mar 2020 13:58:33 +0000 en-US hourly 1 9092505 Profitable Ideas: Your Check Will Soon be in the Mail, Not Too Late to Build an Emergency Fund, and More https://mattaboutmoney.com/2020/03/27/profitable-ideas-your-check-will-soon-be-in-the-mail-not-too-late-to-build-an-emergency-fund-and-more/ https://mattaboutmoney.com/2020/03/27/profitable-ideas-your-check-will-soon-be-in-the-mail-not-too-late-to-build-an-emergency-fund-and-more/#respond Fri, 27 Mar 2020 13:58:31 +0000 https://mattaboutmoney.com/?p=9274

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

Stimulus checks: How much money will you get, and when? (CBS Money Watch). Treasury Secretary Steve Mnuchin says the checks could arrive in about three weeks. But first the House of Representatives needs to give its stamp of approval.

Six smart ways to spend your stimulus check (Kiplinger). Windfalls are often squandered. Think ahead about how to best use the money.

How to build an emergency fund in the middle of an emergency (NY Times). It isn’t too late to build a savings reserve.

Are you prepared to hand over your finances to someone in an emergency? (USA Today). Use this crisis to see if you have your essential paperwork in order.

What do I do if I can’t afford my car payment? (Clark Howard). Lots of lenders are providing flexibility. 

I tried shopping for groceries online. Here’s what happened. (USA Today). Options for staying stocked up without going to into a grocery store.

Stop watching Netflix, and tackle these 8 tech projects instead (Fast Company). As long as you’re healthy, being stuck at home may give you time to get to some important projects that have been lingering on the back burner.

Building a career that matters (Cal Newport). Counterintuitive advice worth considering. 

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Don’t Waste a Crisis https://mattaboutmoney.com/2020/03/24/dont-waste-a-crisis/ https://mattaboutmoney.com/2020/03/24/dont-waste-a-crisis/#respond Tue, 24 Mar 2020 13:48:13 +0000 https://mattaboutmoney.com/?p=9245

Bob (not his real name) is deathly afraid of flying. Years ago, while onboard a plane that was about to leave its gate to taxi toward the runway, he had a panic attack and had to get off the plane. That day, something changed in him. He was so shaken by the experience that he felt compelled to start living his life differently. Interestingly, he decided that he wanted to begin volunteering somewhere. Somehow, that frightful experience made him want to make a greater contribution with his life. 

But then life got back to normal. As that seemingly life changing experience faded into ordinary life, he forgot all about his compelling vision to begin serving somewhere.

I think most of us can relate to that. We’ve probably all gone through something very scary that made us think in new ways and see changes we want to make. But as we got further from that experience, as life got back to normal, our commitment to change faded and everything stayed pretty much the same. 

Opportunity in adversity

I’ve been thinking about this in relation to the COVID-19 pandemic. If I had a nickel for every time I’ve heard it described as “unprecedented” or “once-in-a-lifetime,” well, I’d have a lot of nickels. But it’s true. None of us are likely to ever again experience a global crisis that grinds business to a halt, tanks the stock market, and puts us on lockdown.

A good question to be asking right now is what changes will we make as a result? What lessons can we learn from all of this? 

Once life gets back to normal, and I’m confident it will eventually get back to normal for most of us, will anything about us have changed? 

Think about your financial situation. Financially speaking, what has scared you the most about the pandemic? Are you worried about losing your job? Do you wish you had more money in savings? An investment plan to guide you through all the market turmoil? Less debt?

If you’re hurting right now, the last thing I want to do is pile on. It’s just that I feel very confident that we will get through this, and I hope that none of us will miss the opportunity to learn from it. 

Inspiration in Scripture

The apostle Paul gave us a vivid example of praying for deliverance from some type of suffering only to see God’s greater purpose for it.

Therefore, in order to keep me from becoming conceited, I was given a thorn in my flesh, a messenger of Satan, to torment me. Three times I pleaded with the Lord to take it away from me. But he said to me, “My grace is sufficient for you, for my power is made perfect in weakness.” Therefore I will boast all the more gladly about my weaknesses, so that Christ’s power may rest on me. That is why, for Christ’s sake, I delight in weaknesses, in insults, in hardships, in persecutions, in difficulties. For when I am weak, then I am strong.” – 2 Corinthians 12:7-10

I remember reading those verses as a new Christian when I was in my late 20s. Deep in debt and often discouraged at how long it was going to take to get out of debt, I had prayed many times for God’s intervention. But when I read those words it was as if a weight was lifted from my shoulders. I began to see a larger purpose for my debt. It was teaching me to depend on God and draw close to Him.

And then there are these familiar verses about life’s challenges:

Consider it pure joy, my brothers and sisters, whenever you face trials of many kinds, because you know that the testing of your faith produces perseverance. Let perseverance finish its work so that you may be mature and complete, not lacking anything. – James 1:2-4

Those words are not for anyone who has lost a loved one because of the pandemic. If that’s your situation, know that there are countless people, including my family, praying every night for healing, strength, and comfort for those most directly impacted by this crisis. 

But I think those words are for most of us who are facing other types of trials as a result of the pandemic right now. 

We can take heart that God has a purpose for us, a work He wants to do in us and through us. But what? That’s for you to discern. My encouragement is to try to do so before life begins to return to normal.

Take it to heart: “And we know that in all things God works for the good of those who love him, who have been called according to his purpose.” – Romans 8:28

Take action: Write down a couple of lessons you are learning through this crisis, things you want to change, financially or otherwise. And then tell someone about the changes you intend to make. Ask for their accountability as you go about making those changes.

Read more: The Opportunity of a Lifetime 

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Profitable Ideas: Making Your Money Back, Why We Won’t Talk About Money, and More https://mattaboutmoney.com/2020/03/20/profitable-ideas-making-your-money-back-why-we-wont-talk-about-money-and-more/ https://mattaboutmoney.com/2020/03/20/profitable-ideas-making-your-money-back-why-we-wont-talk-about-money-and-more/#respond Fri, 20 Mar 2020 13:43:03 +0000 https://mattaboutmoney.com/?p=9203

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

How long does it take to make your money back after a bear market? (A Wealth of Common Sense). Learning what we can from past downturns.

Seven ways to manage your anxiety during a market crash (A Teachable Moment). There’s still a lot you can control.

The ‘average’ year is rarer than you may think (The Evidence-Based Investor). Averages are made up of lots of ups and downs—a good point to remember while the market is way down.

4 easy things to do now to protect your finances from economic uncertainty (Fast Company). If you’ve been living a little too close to the financial edge, use this crisis as a motivator to make some changes.

Top 10 money lessons you must teach your kids (Value Walk). Lots of good ideas here.

US tax filing deadline moved to July 15, Mnuchin says (CNN). Just days ago, the filing deadline was still April 15; it was just the payment date that had been changed. But now even the filing date has been pushed back.

Why so many Americans don’t talk about money (The Atlantic). The dictionary’s definition of money — “a means of exchange” — couldn’t be more different from how people experience money.

Common enemies (Collaborative Fund). This one doesn’t have much to do with money, but it has some encouraging, helpful thoughts what’s happening in our world right now.

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Stronger Than Fear https://mattaboutmoney.com/2020/03/17/stronger-than-fear/ https://mattaboutmoney.com/2020/03/17/stronger-than-fear/#comments Tue, 17 Mar 2020 13:41:00 +0000 https://mattaboutmoney.com/?p=9177

I know what it is to be in need, and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want. I can do all this through him who gives me strength. – Philippians 4:12-13

But godliness with contentment is great gain.For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that. – 1 Timothy 6:6-8

As we navigate this coronavirus-induced new normal, it would be easy to give in to fear. The falling stock market has, no doubt, hit your retirement account, and maybe you’re not feeling so secure about your job. Sensationalist headlines and uninformed social media fear-mongering only make matters worse.  

So, why the verses about contentment at the top of this post? Aren’t they the equivalent of painting a smiley face on a bad situation?

I’d like to think our faith has the power to help us experience contentment even in the face of tough circumstances. But how?

Giving thanks

Last week, I connected with some friends I’ve known for 30 years. We live in different parts of the country now, so we talked by Skype. After we finished our conversation, I was overwhelmed with a deep sense of gratitude. Reflecting on some memorable adventures we’ve had together over the years, and all that we’ve seen each other through — marriage, kids, job changes, the death of loved ones, and so many highs and lows in between — I thanked God for their friendships.

Yes, the day was filled with news about the virus spreading and the market falling. But I was filled with a deep sense of gratitude and contentment. It’s been my experience that the two are related. Gratitude fosters contentment, and contentment is an incredibly powerful antidote to fear.

Intentional prayer

Do you have some tangible concerns right now, financial or otherwise? Take them to God.

Give all your worries and cares to God, for he cares about you. – 12 Peter 5:7

Are there some decisions you feel you have to make right now? Ask God for help discerning whether you really do need to make a change, and if so, what or how?

If any of you lacks wisdom, you should ask God, who gives generously to all without finding fault, and it will be given to you. – James 1:5

And in the midst of those concerns or decisions, do something that may not feel natural. Give thanks.

Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus. – Philippians 4:6-7

Rejoice always, pray continually, give thanks in all circumstances; for this is God’s will for you in Christ Jesus. – 1 Thessalonians 5:16-18

Shortly after I became a Christian in my late 20s, someone taught me the ACTS “method” of prayer. To overcome our tendency to jump right into requests, ACTS saves the asking for last. You begin with adoration, then confession, then thanksgiving, and lastly, supplication. 

Adoration will remind you of who God is—that his strength and his goodness and his love are unmatched and eternal (Read The More Things Change, The More God Stays The Same). Confession is always good for the soul. I think of it as spiritual deep cleaning. As you move into a time of thanksgiving, don’t rush this part. Spend time thinking of relationships you’re grateful for, the many ways God has provided for you, the freedoms you enjoy. Then take your concerns to God.

Controlling what you can

Even when times are good, there are countless things that are beyond our control. And that probably feels especially true right now. But even in the midst of all that’s happening, there are some very important things we can control. We can control how much time we’re spending in God’s Word, in prayer, and in giving thanks. And in doing those things, we can find contentment in every situation, even this one. 

Take it to heart: “Let the peace of Christ rule in your hearts, since as members of one body you were called to peace. And be thankful.” – Colossians 3:15

Take action: Pause whatever you’re doing right now and pray, using ACTS as your guide.

Read more: Anchors in the Storm

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Profitable Ideas: When Investing Gets Uncomfortable, The One Guarantee in the Stock Market, and More https://mattaboutmoney.com/2020/03/13/profitable-ideas-when-investing-gets-uncomfortable-the-one-guarantee-in-the-stock-market-and-more/ https://mattaboutmoney.com/2020/03/13/profitable-ideas-when-investing-gets-uncomfortable-the-one-guarantee-in-the-stock-market-and-more/#respond Fri, 13 Mar 2020 14:23:53 +0000 https://mattaboutmoney.com/?p=9145

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

Everybody’s talking about it (The Irrelevant Investor). To invest, you have to get comfortable with being uncomfortable sometimes.

Here’s what happens when you panic and sell your 401(k) investments (USA Today). In short, nothing good.

Why you probably don’t want to mess with your target-date fund (Morningstar). Avoiding the temptation to act.

The one guarantee in the stock market (A Wealth of Common Sense). “To win in the stock market over the long haul you must be willing to lose over the short-term.”

The special kind of imposter syndrome that comes when you’re not broke anymore (NY Times). When you can afford it, but still have a hard time spending the money to buy it.

Breaking your bad spending habits (Living Well Spending Less). “Probably the greatest temptation each of us faces when we realize our spending is out of whack is to pretend like there’s no problem at all.”

How one woman eliminated stress from her life by simplifying her wardrobe (Forbes). Less time shopping, fewer decisions to make — what will you do with all that extra time, and money?

If your child’s failure to launch becomes a money problem for you (Next Avenue). The importance of avoiding “the enabling trap.” 

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Anchors in the Storm https://mattaboutmoney.com/2020/03/10/anchors-in-the-storm/ https://mattaboutmoney.com/2020/03/10/anchors-in-the-storm/#comments Tue, 10 Mar 2020 13:30:08 +0000 https://www.mattaboutmoney.com/?p=769

“The grass withers and the flowers fall, but the word of our God stands forever.” – Isaiah 40:7

With so much stock market turmoil and economic uncertainty swirling about, now more than ever we need the reassurance and guidance of God’s eternal Word. In order to cope with these challenging times, consider the counsel and timeless principles contained in the following passages of Scripture.

Go to God. If the ups and downs of the markets are wearing you out and causing you stress, turn to God for comfort.

Come to me, all you who are weary and burdened, and I will give you rest. Take my yoke upon you and learn from me, for I am gentle and humble in heart, and you will find rest for your souls. For my yoke is easy and my burden is light. – Matthew 11:28-30

You might think your concerns are too small to bring them to God.  They are not. The God of the universe invites you to bring them to Him.

Give all your worries and cares to God, for he cares about you. – 1 Peter 5:7

Go to others. This is not the best time to hang out with those who are checking their 401(k) balances every 30 minutes (then again, maybe you could help them). Look for friends who are riding out the madness of the markets with a sense of calm, and spend some time with them.

Two are better than one, because they have a good return for their labor: If either of them falls down, one can help the other up. But pity anyone who falls and has no one to help them up. – Ecclesiastes 4:9-10

Count on God’s promises. Are you worried about your retirement portfolio? Your kids’ college funds?

Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is not life more than food, and the body more than clothes? Look at the birds of the air; they do not sow or reap or store away in barns, and yet your heavenly Father feeds them. Are you not much more valuable than they? Can any one of you by worrying add a single hour to your life?

And why do you worry about clothes? See how the flowers of the field grow. They do not labor or spin. Yet I tell you that not even Solomon in all his splendor was dressed like one of these. If that is how God clothes the grass of the field, which is here today and tomorrow is thrown into the fire, will he not much more clothe you—you of little faith? So do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ For the pagans run after all these things, and your heavenly Father knows that you need them. But seek first his kingdom and his righteousness, and all these things will be given to you as well. Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own. – Matthew 6:25-34

In other words, God knows your needs and he promises to provide for you.

Take Action. God’s Word is not just for contemplation. It is designed to spur us to action.

Do not merely listen to the word, and so deceive yourselves. Do what it says. Anyone who listens to the word but does not do what it says is like someone who looks at his face in a mirror and, after looking at himself, goes away and immediately forgets what he looks like. But whoever looks intently into the perfect law that gives freedom, and continues in it—not forgetting what they have heard, but doing it—they will be blessed in what they do. – James 1:22-25

Want to be blessed in your financial life? Do what God’s Word says to do. Here are some of the best biblically directed money moves you can make:

Develop a plan. The Bible does not say that the hopes and wishes of the dreamers lead to profit. It says…

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

If you’re not currently managing your day-to-day spending with a plan, you’ll find a simple guide to getting started here.

Give generously. Times of economic uncertainty often lead people to cut back. You might think now’s the time to ease back on your generosity. It isn’t. The Bible teaches us that we will always have enough to give generously.

Now he who supplies seed to the sower and bread for food will also supply and increase your store of seed and will enlarge the harvest of your righteousness. You will be enriched in every way so that you can be generous on every occasion, and through us your generosity will result in thanksgiving to God. – 2 Corinthians 9:10-11

Save consistently. Among the many biblical principles highlighted by a tough economy is the importance of having some money in reserve.

The wise store up choice food and olive oil, but fools gulp theirs down. – Proverbs 21:20

Build an emergency fund totaling one month’s worth of essential living expenses in a bank or credit union savings account or a money market mutual fund, pay off consumer debt, and then build your emergency fund up to six month’s worth of living expenses.

Spend wisely. Be proactive in managing your day-to-day spending, looking for the most effective use of money in each spending category. As one of my mentors likes to say, every financial decision is a spiritual decision because it all belongs to God.

So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches? And if you have not been trustworthy with someone else’s property, who will give you property of your own? – Luke 16:11-12

A cash flow plan is the essential tool for managing money well.

Avoid consumer debt. Those who do not carry a balance on their credit cards from month to month and do not finance vehicles live with an unusual amount of financial freedom.

The rich rule over the poor, and the borrower is slave to the lender. – Proverbs 22:7

If you have such debt, use today’s financial upheaval as motivation to get out from under it.

Diversify. A common mistake investors make is to build portfolios that are too concentrated. Now more than ever—with stocks falling and bonds gaining—we can see the wisdom of diversification.

But divide your investments among many places, for you do not know what risks might lie ahead. – Ecclesiastes 11:2

Be patient. When times get tough it’s tempting to bail out of the market. But as was pointed out earlier, the Bible warns against making hurried decisions.

Steady plodding brings prosperity; hasty speculation brings poverty. – Proverbs 21:5 (TLB)

Use wise counselors. The Bible teaches us the importance of using trusted advisers.

Plans fail for lack of counsel, but with many advisers they succeed. – Proverbs 15:22

If you aren’t reading the content produced by Sound Mind Investing on a regular basis, now would be a good time to start.

These are just a handful of the many money related principles found throughout God’s Word. People who practice such principles will be the ones best able to weather even the worst financial storms.

Therefore everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock. The rain came down, the streams rose, and the winds blew and beat against that house; yet it did not fall, because it had its foundation on the rock. But everyone who hears these words of mine and does not put them into practice is like a foolish man who built his house on sand. The rain came down, the streams rose, and the winds blew and beat against that house, and it fell with a great crash. – Matthew 7:24-27

Take it to heart: “So do not fear, for I am with you; do not be dismayed, for I am your God. I will strengthen you and help you; I will uphold you with my righteous right hand.” – Isaiah 41:10

Take action: Which of the verses mentioned above resonated with you the most? What action steps do you feel prompted to take as a result?

Read more: Keeping a Steady Hand on the Wheel Under Changing Financial Conditions

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Profitable Ideas: This is Your Brain on Market Volatility, Blessed Are The Recyclers, and More https://mattaboutmoney.com/2020/03/06/profitable-ideas-this-is-your-brain-on-market-volatility-blessed-are-the-recyclers-and-more/ https://mattaboutmoney.com/2020/03/06/profitable-ideas-this-is-your-brain-on-market-volatility-blessed-are-the-recyclers-and-more/#respond Fri, 06 Mar 2020 14:30:00 +0000 https://mattaboutmoney.com/?p=9044

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

Don’t lose it (Humble Dollar). What happens to your brain when the markets go crazy.

Blessed are the cobblers, recyclers, and thrift-store shoppers (Christianity Today). How should our faith guide us in a throw-away culture.

You can afford that item you want — but should you buy it? (CNBC). “The more energy you put into understanding what you’d like your money to do, the better idea you’ll have if something is a good choice for you.”

GoodRX save money on meds—it also shares data with Google, Facebook, and others (Consumer Reports). When a good deal comes at a surprising cost. 

The best places to sell your cell phone (Clark Howard). Got an old phone or two sitting around in a junk drawer?

Dollar cost averaging vs. lump sum: The definitive guide (Of Dollars and Data). This article looks at the question from a pure dollars and cents perspective, but there’s also an emotional side

How to avoid the temptation to keep up with the neighbors (The Simple Dollar). Six strategies for living your life, not your neighbors’ lives. 

Car buying new or used: Use data to see which is better (Kiplinger). Some helpful tools for comparing all the costs.

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Investor Live Fire Testing https://mattaboutmoney.com/2020/03/03/investor-live-fire-testing/ https://mattaboutmoney.com/2020/03/03/investor-live-fire-testing/#comments Tue, 03 Mar 2020 14:30:00 +0000 https://mattaboutmoney.com/?p=9002

I remember reading an article by a long-haul cargo plane pilot who described his job as hour upon hour of boredom interspersed with moments of sheer terror. That’s a pretty good description of the stock market. There are long periods when not much happens. And then there are times like right now. Huge declines last week. A big upward move to start this week. And who knows what comes next?

But there’s a big difference between a jetliner in crisis and a market in crisis. For pilots, such moments require quick decisions and immediate action. For investors, the best response is to do… nothing. Nothing? That’s right, nothing. 

And that can be extraordinarily difficult. But a sure sign that you are investing well is that when the market goes crazy you are willing and able to stay with your investment strategy. At times like these, it’s all about your perspective and your practices.

Perspective

A healthy biblical perspective on investing is about trusting that God is in control, and that he knows your needs and has promised to provide for you. It’s about saying, “Okay, Lord, I’ve done all that I know to do to manage your resources well. It’s painful to see investment losses, but I know that you are in charge and my trust is in you. Please give me wisdom and peace.”

It’s also about patience. The Bible says, “Steady plodding brings prosperity; hasty speculation brings poverty” (Proverbs 21:5). Biblical investing is slow and steady. Doing the right thing a little at a time over a long period of time. Keeping a steady hand on the wheel when things get rough.  

And just as the Bible teaches us to be patient, so does market history. Of all the daily market moves since 1926, about half were positive. In other words, on a day-to-day basis, you have about a 50 percent chance of making money in the market. However, the longer you stretch that time frame, the greater your chances of making money. Some 62% of one-month periods have been positive, 79% of the one-year periods, 94% of 10-year periods, and 100% of 20-year periods.

The investing journey is filled with lots of ups and downs, but time is on your side.

Knowing some market history is an important part of a good steward’s perspective on investing.

Practices

Navigating crazy times in the market is also much easier if you’ve made it your practice to follow a trustworthy investment strategy. Remember, a trustworthy investment strategy is marked by:

Objectivity. Especially at times of market stress, when your emotions are screaming, you need an objective, rules-based strategy. This is not the time to let your emotions sway your decisions.

Demonstrated effectiveness. Knowing how the strategy you’re following has fared during past market disruptions can help manage your expectations. If you know that the strategy you’re using has a track record of delivering the returns you need, even though it has had its share of ups and downs, can help you stay with it. 

Emotional acceptability. That means the returns your strategy has delivered have come at a level of volatility you can live with. When you know the strategy you’re using tends to be about 25% less volatile than the market, that can help you handle a 6% decline, especially when the market falls by 8%. That tells you your strategy is performing as it should.

Ease of understanding. You should be able to describe to a middle school student how your strategy works. If your strategy is something of a black box to you, a mystery, that can cause anxiety at times of market stress. By the same token, being clear about how it works can help give you peace.

The true test

Whether you’re a pilot or an investor, the true test of your abilities comes during an emergency. If you have money in the market right now, how well have you dealt with all of the recent volatility? What does your response say about your perspective about investing and your investment practices?

Take it to heart: “Whoever gathers money little by little makes it grow.” – Proverbs 13:11

Take action: If recent market events have made you realize you don’t have a trustworthy investment strategy, check out Sound Mind Investing

Read more: Three Ways to Deal With a Volatile Stock Market

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Profitable Ideas: Looking for a Stock Market Bottom, How Delivery Apps Eat Your Budget, and More https://mattaboutmoney.com/2020/02/28/profitable-ideas-looking-for-a-stock-market-bottom-how-delivery-apps-eat-your-budget-and-more/ Fri, 28 Feb 2020 14:30:00 +0000 https://mattaboutmoney.com/?p=8950

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

How does the stock market bottom? (The Irrelevant Investor). “The most important thing for investors that are worried, and that probably includes all of us, is to keep in mind that this too shall pass.” I also have to say that times like this tell us whether we’re using an investment strategy we truly trust.

The easy path to retirement (The Simple Dollar). Despite this week’s market activity, there are some aspects of investing you can control. Put your focus there.

This simple list could save you if your credit cards are ever stolen (Clark Howard). Good advice, especially if you have a trip coming up.

Environmentalism, frugality, and minimalism: The triumvirate that’ll save you money and simplify your life (Frugal Woods). All three are in vogue, but have you combined them?

Up to 91% more expensive: How delivery apps eat up your budget (NY Times). The quest for convenience comes at a cost.

Busyness is laziness (Becoming Minimalist). This idea offended me at first (Like most people, I’m busy!), but the author makes some challenging and helpful points.

You’re miserable at work. Here’s what to do short of quitting (MarketWatch). Don’t suffer in silence. One of these steps is bound to help.

When minimizing was the only option (No Sidebar). One family’s honest story of navigating a tough season of unemployment and health issues. 

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To Invest Well, Ask The Right Question https://mattaboutmoney.com/2020/02/25/to-invest-well-ask-the-right-question/ Tue, 25 Feb 2020 14:30:00 +0000 https://mattaboutmoney.com/?p=8923

Have you ever invested in a stock or mutual fund because it was recommended by a friend or relative? Or maybe you read about it on a financial web site or blog. 

Think about the investment choices you’ve made in your workplace plan. Why did you make those choices? One recent study found that when workplace retirement plans list the mutual funds that are available in alphabetical order, those at the top of the list tend to get chosen most often.

When the market gets a little crazy, like this week, have you ever sold an investment out of fear? Or, when the market is growing, have you ever made an investment that’s riskier that what you would normally choose?

One of the problems with these types of investment decisions is there’s no process behind them. Do those investments really make sense for you, given your age and risk tolerance? And how will you know if or when you should sell, or what you should buy next?

While you won’t find this advice stated explicitly in the Bible, I believe a good stewardship approach to investing is focused on the investment process rather than the investment picks. In other words, don’t be too quick to ask, “What should I invest in?” Instead, ask, “What investment strategy should I use?” And the strategy you choose should be marked by four criteria:

1) Objectivity. Steer clear of any strategy that depends on someone’s predictions or opinions about where the market is headed or what sectors are likely to perform best. Instead, opt for a strategy that’s guided by objective, mechanical rules. When things get a little crazy in the markets, you don’t want human emotion involved in your investing. You want a trustworthy, rules-based process.

2) Demonstrated effectiveness. While a strategy’s historical performance doesn’t guarantee its future performance, it should have been around long enough to see how it has performed under various market conditions. And it should have a proven track record of delivering the level of returns you need to achieve your goals. (Last week’s article, Two Steps Toward a Biblical Approach to Investing, recommended a calculator that can help you clarify your investment goals.) That doesn’t necessarily mean going with a strategy that has the highest possible returns. It means finding one designed to deliver the level of return you need, and, as the next point describes, at a level of volatility you can live with. 

3) Emotional acceptability. This means two things. First, you’re willing to do whatever it takes to follow the strategy (some require more work than others). And second, you’re comfortable with the volatility that can be expected from the strategy. Where I work by day, Sound Mind Investing, our Dynamic Asset Allocation strategy has a “relative risk” score of 0.62. That means it has been 38% less volatile than the U.S. stock market. On the other hand, our Sector Rotation strategy has a relative risk score of 1.9. It’s a high-risk, high potential reward strategy that has been 90% more volatile than the market overall.

Again, the ideal is to choose a strategy that has a demonstrated track record of delivering the level of returns you need in order to meet your goals and has an expected volatility level that enables you to sleep at night. 

4) Ease of understanding. How well could you explain what’s in your investment portfolio and why? Could you explain all of that to a middle school student? If you’re married, both of you should be able to give at least a general explanation. That way, no matter how your portfolio performs, you’re in it together.

Think about your investment approach. How well does it meet the criteria above?

Take it to heart: “The plans of the diligent lead to profit as surely as haste leads to poverty.” – Proverbs 21:5

Take action: Try explaining how you’re now investing to someone, preferably a young person. See how easily you can do that.

Read more: Three Ways to Deal With a Volatile Stock Market

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