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Tuesday, May 28, 2013
About Economics: Tweeting Feds and More Reinhart-Rogoff
About Entrepreneurs: Marketing Tips for Micro Budgets
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Monday, May 27, 2013
Free Money Finance - on retiring, discounts
Real retirenent advice.Can you really go on retirement. In Australia and other European countries, they made the seniors more productive by making them retire later. In US, because of the current economic difficulties, and the situation where many retirement funds lost value or were wiped out due to bank failures, many retirees are forced to work again.Also when you retire and/or just sit on the rocking chair, you speed up your aging and early death.
Free Money Finance
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Posted: 22 May 2013 01:29 AM PDT
The following is a guest post from Gerrid Smith is CEO of the charity-focused coupon website, Save1. They provide coupons and deals from over 5,000 online stores! Each time a coupon is used, they provide a meal to a child in need.
There's no lack of how-to retirement articles online. You can learn about everything from travel to estate planning. It's great advice but is it practical? Instead of asking more experts, we wanted to ask some real people who made it to retirement with enough money to live comfortably and cross off a few of items on their bucket list. Here's what they said. Practice Retiring How do you really know how much you'll need to save for retirement? The answer is that you do not but there's a way to put some data behind your projections. Sydney Lagier, retired owner of the blog, Retirement a Full-Time Job, says that she and her husband tested their retirement budget the best way they knew how: They lived it before actually retiring. "My husband and I agreed to practice living on our planned budget before I retired. Of course, we could not. That practice run was a reality check that I'm glad I sorted out before I actually pulled the trigger on retirement." If it doesn't work, make changes. Those changes will give you an idea of your retirement lifestyle. Will one or both of you have to continue working part time? Can you cut expenses enough to be able to travel or lavish the grandchildren with gifts? Everything costs more than you think. Don't Fall for the Sales Pitch Every investment advisor has the magic fund that will set you up for the retirement of your dreams but as so many learned in 2008, those dreams can become a nightmare almost overnight. Boyd Lemon, author of Retirement: A Memoir and Guide, advises retirees to be wary of the products financial advisors try to sell to them. "Do not expect a higher return with low risk no matter what the investment adviser says. If the return is high relative to government bonds, it means that the risk of loss is correspondingly greater. You can count on that." If you're behind on your retirement savings, ratcheting up the risk in your portfolio isn't likely to make a large-scale difference especially if you're nearing retirement. Instead, contribute more. The IRS allows for catch-up contributions, which increases the maximum you can contribute to an IRA after the age of 50. Budget After Saving Bob Lowry, author of the retirement blog Satisfying Retirement, says, "A budget is the single most important tool to financial stability. There is no other way to understand where the money goes." Lowry advises people to think of saving as a payroll deduction that comes out of your paycheck before the money reaches your account. Then, design your budget around what is left over. Most employers allow you to split your check into multiple direct deposits with one going to a savings account, IRA or other vehicle and the other, into your checking account. He says, "make the decision early on to take your total income, commit to a percentage of savings (at least 10 percent), and then design a budget on what is left. Too many folks tend to build a budget and then make it work with available income and credit. (If they even budget at all). I followed this approach starting at age 28 and was able to retire at 52." Go after the Discounts Jim Probasco, a retired school administrator from Dayton, Ohio says that there are more senior discounts than retirees might think. Probasco says, "There are numerous websites that allow seniors to look for discounts in their community. Sites like seniordiscounts.com list discounts based on the zip code you enter. When I enter my zip code, it returns more than 7,000 results. Before we make travel plans, my wife and I check these sites for discounts at our destination. The terms of the discounts vary but most require you to be at least 50." "Some companies require that you register before receiving the discount. Some states also have discount cards that make you eligible for deals at participating businesses in your state. If your state has a department of aging, ask about discount programs available to you. These discounts can add up to substantial savings." Make Retirement an Adventure Everybody is concerned about saving enough money to live comfortably but Richard Pawlowski, author of the book, 2 Years in a Tent, proves that for those who are willing to forego the luxuries of a traditional lifestyle, retirement can cost very little. After he and his wife, Laura lost their home during the financial crisis, they traveled the country living in a tent. That might not be your idea of the ideal lifestyle but the traditional advice of saving at least 80 percent of your income is only true if you plan to live a similar lifestyle to the one you live now. If you're the adventurous type, retirement may cost a lot less. Pawlowski adds this advice: "No one has any guarantees in life. Millions of us may not get to retirement so why put it off until later? Live in the present and go travel in a tent. You'll save money, see our country, and get a totally new perceptive." Finally Whether your idea of the perfect retirement is traveling the world, living in a tent, or spending time with your grandchildren, the lack of a plan early in life will likely limit your options. However, living an unfulfilled life now in the hopes that later in life you can live in wealth probably isn't the perfect strategy either. As with any life decision, nobody can tell you what will make you happy. Dream big and take steps to realize those dreams. |
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Free Money Finance - a bankruptcy story and psyche problems affecting personal finance
This is an interesting story on the bad mix about child rearing, abuse, being gay, financial stability and business management.Be careful about your relationship and your finance and they could spell big trouble for you i the future.
Free Money Finance
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Posted: 23 May 2013 01:29 AM PDT
Here's our very first Reader Profile Update. Many of you asked for this type of post -- a progress report on where past Reader Profile readers are these days financially. I think you'll really enjoy this.
Today's post is from Mark, who gave us his reader profile over two year's ago. Here's his update: I wanted to tell my bankruptcy story because I think we can sometimes learn more from failure than from success. And I have to admit, I'm getting bored with reading personal profiles on FMF. I also wanted to talk about my bankruptcy because I think it really demonstrates that wealth building requires a certain amount of intellectual, emotional and psychological fortitude that a lot of people simply don't have. While it can be acquired, I think the posts on FMF demonstrate that people with certain personality types and personal backgrounds are much more likely to acquire and implement this knowledge than others. You'll notice the prevalence of engineer profiles on FMF...I don't think that's a coincidence. Most engineers are the INTJ Myers-Briggs personality type, and this personality type tends to be very good at saving and investing and preliminary case studies suggest INTJs are one of 3 personality types likely to retire early and be happy with the decision. See this link for details. http://www.retireearlyhomepage.com/mbti.html For the record, I am also INTJ. For those of you who don't know about the Myers-Briggs personality types, you can read about them here. And you can take the test here. My original profile appeared on this blog on 4/26/11 and I'm happy to report I continue to make progress saving & investing. I would say the seeds of my bankruptcy were sown when I moved more than 2000 miles away from home to go to college. The primary motivation for going to college out of state was that I knew I was gay and I wanted to do my own thing (on my parents' dime of course!) without them knowing about it. I also grew up in a cold winter climate and it was nice to move somewhere with warm weather! So, as you can see, I had some pretty unrealistic expectations / motivations / issues right from the start. Within 6 months, I met an older guy who seemed to have answers to a lot of the spiritual aspects of life that I was curious about and we ended up moving in together, motivated largely by the fact that he'd lost his job and was living with a kinda trashy roommate. (Red flag right there, I know). Toward the end of my first year of college, my parents had found out I was gay and about a month later they discovered I was living with a guy who was ~ 20 years older than me and they flipped out (This was the late '80s and his voice was on my answering machine....DUH...I know). Long story short, they were still kinda freaked out that I was gay, and when they found out I was living with some guy 20 years older than me it put them over the edge. Drama ensued and they cut me off financially. I got a job and went to school part time. He had just started his own business that had a lot of ups and downs that he didn't know how to deal with. I was freaked out because my income wasn't enough to support myself, let alone him and I was trying to get through school. After about 1.5 years he ended up getting in over his head with business and personal expenses he couldn't pay, we ended up putting his business in my name. I know. Horrible idea. I went along with his "It'll be different this time" line of thinking out of fear, I think. I didn't feel like I had any better options at the time. That may not have been true, but as the saying goes, perception is reality. By the time I was 21 years old, about three years after we met, we both ended up declaring bankruptcy, primarily because of overwhelming business and personal expenses we just couldn't pay. In general, there was a lot of tension because I was more of a saver and he was a spender. He would do stuff like go out to eat even though we didn't know where the rent money was going to come from. This would infuriate me, but for him this "coming from behind" way of operating was actually his comfort zone. We had VERY different ideas about what financial stability looked like. He grew up in a large family and basically had a hand to mouth existence. I grew up comfortably middle class with parents who are like most of the FMF profiles here. Lived below their means, paid cash for modest cars, paid the house off early. Saved inside and outside their 401ks (when they became more widely available in the early 1980s). I really had NO CLUE that most people didn't live the way my parents did. My mom used to say back in the 1980s "In any given neighborhood half the people can afford to live there and the other half can't". Unfortunately, as the 2008 financial crisis proved, she was right. (I think by 2008, it was more like 2/3 of the people couldn't afford their lifestyles, as Jean Chatzky's research for her 2008 book The Difference showed that 69% of Americans were either going further in debt or were living payday to payday). So my ex and I had completely different internal financial scripts that we went by....but our different scripts were only one small part of the problem. I came to realize in the next 20 years the reason for that. He had been sexually abused as a child by several older brothers (who, in turn, had also been molested....this is what the cycle of abuse often looks like). He had mentioned this to me when we were together that he had some memories of this, but I had absolutely no idea of any of the implications. My ex recently went to a very good psychologist and recovered a lot more memories. It turns out the abuse was much more extensive than he initially remembered and that there was both physical and sexual abuse. It turns out that people who experience this kind of childhood trauma often repress their memories as a defense mechanism. One of the big traits my ex had as a result of the childhood abuse was he had a hard time with ANY kind of stability...As soon as things start going on a comfortable "cruising" altitude, someone or something would come along to crash the plane. This type of thing is very common with those who were sexually abused as children. Stability is actually very uncomfortable for them. They can't handle it, so they sabotage themselves so that they're always coming from behind. Always putting in lots of effort and making great strides, but never getting anywhere. People who suffer childhood sexual abuse often attract abusive people in their lives (Employers, "friends", and acquaintances take advantage of them financially and otherwise). They tend to have a HUGE issue with feeling they don't deserve anything. Sometimes they try to cover this up by overcompensating and being super positive on the surface...but underneath it all, they feel they are bad people and are unworthy of anything. They put themselves in positions to be taken advantage of over and over again. My ex had started his own business as the result of being in an abusive employment situation. (Yet another red flag that I didn't see at the time). I lived through this for 6 years without really understanding the abuse aspect of it at all even though the signs were there. For example, when we first met, he told me he had 2 ex wives who had been killed by ex boyfriends...2 more red flags to add to the collection. (Of course, the whole gay and being married thing is a whole other weird dynamic...but suffice it to say it's still much more common than many folks want to admit). Prior to meeting me, he had also been in a few abusive relationships with other men. It wasn't until recently that I fully understood why my ex got into those self destructive financial and relationship dynamics. He would be fine...and then BOOM, he'd be depressed for no reason and his business would start falling apart. I would get angry and upset, which would only add fuel to the fire. It was all very bewildering and frustrating. Now, here was my end of it:
I am absolutely convinced that until we can learn to heal people and ourselves from the emotional traumas that are much more common than is currently recognized, we can't help them financially. The hard part is that I'm not sure modern psychology/psychiatry really knows how to heal people--at least not fully. We must understand that the human race has progressed much faster technologically than it has emotionally. Fortunately, most of us don't have severe abuse in our childhoods, so the emotional blocks (and we all have them in varying degrees) can be more easily overcome. But it's absolutely essential that people take the time to understand the underlying motivations for their behavior. Those motivations are not always evident on the surface level, as I think my piece has clearly demonstrated. |
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Free Money Finance - Reader story on finance - they earn much
Free Money Finance
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Posted: 06 May 2013 05:05 AM PDT
The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going. Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit. Next in the series is FMF reader SB. She answered my questions (in red below) as follows: Please tell us a bit about yourself. I am 33 year-old married woman. My husband is also 33. We live in the San Francisco area; we don't have any kids yet but are expecting our first early this fall (very exciting!!). We also have a dog. We are fortunate to both work in high-demand, well-compensated sectors; I work as a business consultant for a well-known consulting firm and my husband is the director of a local non-profit. Collectively we earn approximately $290,000 in base salary and $20,000-$25,000 in bonus annually. This is a HUGE jump up from our salaries of just a few years ago. We both plan to continue working full-time, but in the long-term I am looking to transition into a career that is not quite as intense. While financial security is very important, I've been fortunate to get to a point at which having more work / life balance is a bigger priority. I easily work 60-80+ hours a week and don't want to look back on my life (particularly with kids) thinking I spent too much time working. My husband and I both attended private liberal arts colleges; I attended a top full-time MBA program and he did not attend graduate school. We were very fortunate to have a mix of parent support, scholarships, and loans for undergrad and graduated with $26,000 in loans (those are now paid off). I graduated business school nearly 3 years ago with $165,000 in loans (ouch!) although that is now fortunately significantly lower. Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.). Income In addition to our salary, we also have a rental condo from when we lived in DC. We could sell it but it's in an up and coming area that we believe will continue to appreciate in the coming years, and we have no trouble renting it for significantly above our mortgage. We rent it for $2,700 and pay $1,500 in mortgage + insurance + condo fees. We don't have any plans to sell anytime soon. Expenses Our monthly expenses, including savings and debt reduction, are as following:
Assets
Our major issues are to plan for the baby and save up enough for a down payment on a house in the bay area. Child care costs will be the most significant, at least $2K a month. I am fortunate to have a really generous paid leave and so we won't have to begin child care until March next year … but still, we need to start planning for it. Then there is everything else that comes along…medical bills, baby "stuff," etc. We are not really big "stuff" people, but I know it's easy for that to change when a baby comes along. We want to open up a 529 plan and will likely contribute $500 a month. We also will purchase life insurance, I expect around $1 million each, and create wills. The other issue is saving up enough for a down payment on a house in the bay area. I know choosing to live here may not be a popular decision in this community, but we have family and large social networks of friends and colleagues here, and we both really love just about everything in the bay area – the weather, the outdoor activities, the diversity, the incredible food and cultural options, etc. – and want to plant our roots here. We recognize the significant costs that come with that. I believe we can afford to live here long term, but a big factor in that will be getting a mortgage at a low interest rate, and so I want to take advantage of those low interest rates within the next 12-18 months. The only issue is the down payment. We'd like to put at least 10% down, which means at least $90K including closing costs. This is where I sometimes wonder if I should have been saving money more aggressively vs. paying down my student loans. What do you all think? With real estate prices rising here (we are looking at a few communities and many houses are going for 10-20% above asking price, w/ cash offers) I'm starting to get worried. I also really want to take advantage of the current low interest rates. What are your plans for the future (retire early, build your career, etc.)? Longer-term I'd like to transition into work that affords me more work / life balance. I am fortunate in that my experience as a business consultant would make it easy for me to transition into a marketing, strategy, or business development role working for a client. This is a common path for ex-consultants and I have many former colleagues who report that they are happier, still as challenged professionally, and have much more time for family / life after they've transitioned into a corporate role. Making this transition does likely mean a reduction in my long-term earning potential, as consulting partners can easily make 5x or more my current salary, but at a certain income level, quality of life is just so much more important, and I would have a pretty grueling 5-7 years ahead of me, including pretty intense travel, to get to partner (plus a continued strenuous schedule upon becoming partner). I see the lifestyle of the partners I work with and I just don't want to raise kids that way. We don't really see ourselves retiring early, but I could imagine that one or both of us work part-time at different stages in the future. What's your best piece(s) of financial advice and/or your general philosophy on personal finances? For those in this community who are earlier in their careers, I would say don't be afraid to take on debt when it is a thoughtful long-term investment in your career. Be thoughtful about it, of course! But if it makes sense, don't let the short-term debt scare you off from something that will greatly increase your long-term earning potential. My income is 2x more than it was prior to business school, and the job I have today – with raises of 10-15% a year, and really good job / career security – is one that requires an MBA from a top school. It was a significant investment for me, of two full years of my time and that monster debt, but one that changed the trajectory of my career for the next 30+ years. Even with all the debt payments I'm making today, I still have more financial "wiggle room" than I did prior to business school. My other observation is that life is a journey, and that setting aside money for fun and dreams along the way is important. Most Americans don't save nearly enough for retirement, and so they don't need to hear that message, but I think it's possible to go too far in the other direction too – beating oneself up for the morning latte, or the vacation, or whatever it is. I think it's important to know what you need for retirement and for short-term savings, and to make sure you are saving enough to get there. Once you are, great! Then don't beat yourself up if you do end up spending what's left over. Every budget should have buckets for saving / debt reduction, needs, AND wants – even if that wants bucket is pretty small. I've learned a lot from this community and look forward to hearing feedback from the readers. Should I put more money into savings rather than focusing so much attention on my student loans? Am I misguided in thinking we need to save a down payment within the next 12-18 months? What would you do differently if you were me? |
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