Nomadland Book: What Really Happens When You Don’t Save Enough For Retirement?

May 22, 2019 By Jonathan Ping 5 Comments
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I’m reading Nomadland: Surviving America in the Twenty-First Century by Jessica Bruder. Essentially, it’s the story what happens to a group of people when their plans for retirement fall apart. Here’s the book blurb:

From the beet fields of North Dakota to the campgrounds of California to Amazon’s CamperForce program in Texas, employers have discovered a new, low-cost labor pool, made up largely of transient older adults. These invisible casualties of the Great Recession have taken to the road by the tens of thousands in RVs and modified vans, forming a growing community of nomads.

You’ll probably retire earlier than you expect. Consider this EBRI chart showing the big difference between when workers expect they will retire (dark blue) and when people actually retired (light blue). One-third (34%) of all workers ended up “retired” by the time they reached 60, but the majority didn’t see it coming (which I assume means it was mostly involuntary).

Going through the book, here is a rough breakdown of the stages that the people went through:

Plan A: Ideal retirement. You have plenty of savings and income in retirement. I’m all set with a rock-solid pension, Social Security, and a big pile of investments.

Plan B: Make everything more modest. I don’t have as much as I’d hoped. Maybe I don’t need that beach condo? Maybe I’ll move into a smaller primary house. It’ll be easier to clean. I’ll just have to take less vacations. No problem.

Plan C: Work longer. Hmm, not still enough. That’s okay, I’ll just keep my job a little longer. I have lots of valuable work experience. I’m still healthy.

Plan D: Find any job. I’ve been laid off, and now I’ll have to find something that is full-time and offers benefits. The easiest targets are retail: Walmart, Home Depot, McDonald’s.

Plan E: REALLY cut expenses. My house is going into foreclosure. I have to sell all my other assets, including whatever life insurance policies, 401k plans, jewelry, and anything else of value that I have accumulated.

Plan F: Ask for assistance from extended family or friends. I can’t find any steady work that pays the bills (or may no longer be healthy enough to do so). I need to find cheaper living arrangements, immediately. I might crash with my children or other family/friend.

This corresponds well with this EBRI survey that I found afterward:

What happens if none of this works? That’s the common thread through many of the people profiled in this book. Not only did Plan A fail, but their backup plans also failed. Many had a late divorce. Many lost their high-paying jobs in their 50s, when they were planning to work until 70. Others had medical issues that racked up huge bills. They worked retail for a while, but it never added up to a decent full-time income. There just aren’t as many jobs for someone in their 60s and 70s. They lived with their children for while, but their kids are struggling as well.

One solution that some came up with in this book with is to change “homeless” to simply “houseless”. You buy a big van or small RV for well under $10,000 and you live in it. As long as you can find a place to park it, you’ve just cut your housing cost down drastically. People figure out to live on $500 a month. You can also now travel for temporary work – Amazon warehouse picker, campground manager, agricultural farm worker. As more and more people do this, they have formed communities and annual gatherings to support each other.

The book has me switching between two feelings: empathy for what brought them to this place, and curiosity about the mechanics of their day-to-day life as modern-day nomads. For now, one big takeaway is that people can and do fall through the cracks. The folks in this book are still taking action and working to survive and hopefully once again thrive.

Filed Under: Book Reviews, Frugal Living, Retirement
Last updated: May 23, 2019
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Charlie Munger: Financially Independent at Age 38 in 1962

May 12, 2019 By Jonathan Ping 4 Comments
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Despite the fresh packaging, we should remember that the “FIRE” concept (Financially Independent, Retire Early) is anything but a new concept. Even I can’t help being a little intrigued by the clickbait title “This Secret Trick Let This Couple Retire at 38”. Such an article could have been written about the 95-year-old Charlie Munger before he started investing alongside Warren Buffett:

The first 13 years I practiced law, my income [from practicing law] was $300,000 total. At the end of that 13 years, what did I have? A house. Two cars. And $300,000 of liquid assets. Everyone else’d have spent that slender income, not invested it shrewdly, and so forth.

I just think it was, to me, it was as natural as breathing, and of course I knew how compound interest worked! I knew when I saved $10 I was really saving $100 or $1,000 [because of the future growth of the $10], and it just took a little wait. And when I quit law practice it was because I wanted to work for myself instead of my clients, because I knew I could do better than they did.

Net worth analysis. According to his Wikipedia bio, the 95-year-old Munger graduated from law school in 1948. Let’s say he practiced law from 1949 to 1962. At the end of those 13 years, he states that he had $300,000 in liquid assets, a house, and two cars. The median value for a Los Angeles area house in 1962 was about $15,000. The median cost of a new car in 1962 was about $3,000. Adding this all up means his net worth in 1962 was about $321,000.

That was a significant amount of money in 1962. According this CPI inflation calculator, that is the equivalent of $2.7 million in 2019 dollars. In other words, the Munger household was financially independent when he was 38 years old.

Income analysis. He also states that in those 13 years as a lawyer, he made $300,000 total. For the sake of simplicity, let’s just say he earned the same income every year. That works out to $23,000 per year. This was a relatively high income – $193,000 per year in 2019 dollars. According to this source, the median family income in 1962 was $6,000 per year. That means he was earning about four times the median average household income.

Super-saver, super-investor, or a little of both? Maybe he shared this somewhere else, but I don’t know his saving rate or his investment return. He does boast of both not spending all that “slender” income and also about investing it “shrewdly”. We have his annual income and his final ending net worth, so you can set one and figure out the other using a compound return formula. I’m assuming everything is after-tax for simplicity again.

  • Let’s say he was a super-saver with a 50% saving rate. That means he saved $11,500 every year and invested it for 13 years. That would work out to an 10.5% annual compounded rate of return.
  • Let’s say he was a super-investor with a 20% annual compounded rate of return. That would work out to an annual savings of $5,500 per year, or a 24% savings rate.

I found that the annualized return of the S&P 500 index from January 1949 to January 1962 was about 18% when you include dividends (source). Thus, my guess is that he was somewhere between these two markers: 50% savings rate/10.5% annual investment return and 24% savings rate/20% annual investment return. These stats are definitely admirable and impressive, but also show that he didn’t hit the lottery or anything crazy.

Munger’s example reaffirms that if you have a relatively high income, save a high percentage of that income, AND invest that money into productive assets, your net worth will grow quite quickly.

A criticism of financial independence seekers is that it is pitched to “everyone” but only works for the rich. It is absolutely true that it is the easiest for high-income earners. How could it be any other way? At the same time, there are many households that earn high incomes that spend 95%+ of it every year. If these folks realize they have financial independence within their grasp, and then change their behavior to achieve it, I still view that as a positive thing. It’s always hard to spend less than the people you hang around with.

In our case, we both eventually earned six-figures, but not the entire time. When we earned a combined $60,000 a year, we lived on $30,000. When we earned a combined $100,000, we lived on $50,000 per year. When we earned $200,000, we lived on under $100,000. Would we have been able to maintain the 50% savings rate on a $60,000 income for 15 years? I’ll never know. I know it would have been much more difficult, and I’m glad we didn’t have to try. I’m also glad we started when we were young and without kids.

Managing expenses (frugality) alone will not get you there, but I still believe it is an important factor once you get your income to a certain level. I would argue that a household earning $100,000 and spending $50,000 per year is much better off in the long run than a household earning $150,000 and spending $125,000 or even $100,000 per year. Now, if someone is making minimum wage, it will be hard to have a lot left over to invest. Your efforts would be best focused on the income side of the equation.

Bottom line. Charlie Munger was born in 1924 and reached financial independence at age 38 from his earnings as a lawyer (before he became partners with Warren Buffet). While he is now best known as a billionaire investor, he took a familiar path to financial independence: solid 9-5 income, consistently high saving rate, and prudent investment of the difference. The same formula he started using in 1949 remains available 70 years later to someone starting in 2019.

Filed Under: Frugal Living, Inspirational, Investing, Retirement
Last updated: May 12, 2019
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Spending Diary: The Most Commonly Ignored Personal Finance Advice?

April 23, 2019 By Jonathan Ping 2 Comments
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

After finishing The Index Card: Why Personal Finance Doesn’t Have to Be Complicated by Helaine Olen and Harold Pollack, I found it to be a solid all-around personal finance book that joins others like If You Can by William Bernstein and The Richest Man in Babylon by George Clason in the category of “recommended books about money that are short and easily digestible”. All good ideas for gifts for recent graduates.

They don’t shy away from what I think is the most commonly-ignored financial advice: TRACK YOUR SPENDING FOR THREE MONTHS. Even if you don’t track your budget closely after that, this initial spending diary can be eye-opening. Yes, it takes a bit of effort and can be rather uncomfortable psychologically. Here are some book highlights:

Track ALL of your spending…

For three months, keep track of everything you spend money on, no matter how small. That $1.50 bag of Cape Cod Waffle Cut Sea Salt potato chips? It counts, just as much as your four-figure mortgage or health insurance payment.

… for THREE MONTHS.

If you monitor only one month of spending, you won’t gain a full picture of where your money goes. Routine but sporadic expenses such as car repairs, doctor bills, and the emergency trip to the cat’s vet are more likely to occur over a several-month period.

Now, you can pick your “must keep or I’ll wither away” purchases and the things what won’t hurt as much to cut.

You need to determine what day-to-day spending is necessary and unavoidable, what is a luxury but helps you get through the day, and, finally, what is excess. Only then can you avoid falling prey to spending traps.

This allows you to make trade-offs: I’ll take advantage of the office coffee machine, but I’ll use the money I saved to travel to Italy next summer to attend my best friend’s wedding. I’ll drop my landline phone to pay for my gym membership or boost my child’s college savings.

Final tips. You can put everything on a single credit card or debit card, and then go through your purchases line-by-line. If you use cash, take a picture of your receipts and/or purchases on your phone. If you feel comfortable with it, link your account to Mint.com (or similar) and they will help you categorize things automatically. You’ll need to spend a few weeks teaching it (check in every few days), but it gets better over time.

If you can manage to track everything for three months to get an honest (if uncomfortable and scary!) view of your finances, you may find a big gap between what you think you spend vs. what you really spend. Where does your money go every month?

Filed Under: Book Reviews, Budgeting, Frugal Living
Last updated: April 25, 2019
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Blue Zones: Financial Lessons From the World’s Oldest People

April 18, 2019 By Jonathan Ping 4 Comments
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While learning about Okinawan centenarians, I also came across the idea of Blue Zones – places where a high concentration of people live past 90 without chronic illnesses. While the eating habits of Blue Zone residents have been mentioned a lot, Richard Eisenberg of NextAvenue wrote a three-part series focusing on the financial aspects of their longevity. Here is Part 1, Part 2, and Part 3.

Rather than focusing on the residents’ diets, he reports on how the oldest people in the Blue Zones make their money last and what Americans and America can learn from this.

Here are my notes:

The Nicoya Peninsula of Costa Rica

  • Close-knit family structure. Rely on immediate and extended family members. Nursing homes and assisted living facilities are rare.
  • Government-run public health care system with minimal out-of-pocket expenses.
  • Small government-run pension systems.
  • Low cost-of-living. Lower spending due to low consumerism. Rarely travel.
  • Rare to find elderly that own stocks or mutual funds.

Okinawa, Japan

  • They form a “moai”, which is a group of about 20 close-knit older friends who look out for each other both financially and emotionally. This acts as a replacement for assistance from blood relatives.
  • Government-run public health care system with minimal out-of-pocket expenses.
  • Low cost-of-living. Low consumerism. Low debt.

Sardinia, Italy

  • Close-knit family structure. Rely on immediate and extended family members. There are no long-term care facilities in Sardinia.
  • Government-run public health care system with minimal out-of-pocket expenses.
  • Low cost-of-living. Low spending due to self-reliant farming culture.

Ikaria, Greece

  • Close-knit family structure. Rely on immediate and extended family members. Nursing homes and assisted living facilities are rare.
  • Government-run public health care system, but no long-term care program.
  • Low cost-of-living. Low consumerism. Low spending due to self-reliant farming culture.

Loma Linda, California, USA

  • Technically, the Blue Zone consists of the members of the Seventh Day Adventist religious community.
  • Close-knit religious group that helps each other out.
  • Has a culture of self-discipline, planning, and preparation.
  • Tend to be wealthier with significant investments.
  • Tend to have frugal spending habits.

Commentary. One common thing that I notice about this list is that many are small, isolated communities, either by geography (islands), ethnicity, or religion. I feel that smaller groups more acutely appreciate the advantages of helping each other out. You can have long-term trust that you will raise your kids when they are young, and they will in turn watch over you when they are adults. When you get into larger cities, people seem to separate and start worrying mostly about themselves.

Of course, a bigger version of this is government-run health care, where everyone pitches in and agrees that nobody will become destitute due to a hospital bill. The American healthcare system is so complex and ingrained with powerful inertia that the idea of efficient, transparent, high-quality healthcare remains a huge puzzle waiting be (even partially) solved.

(I’m not saying we need the same system as Japan or Greece. But even billionaire capitalists Jeff Bezos, Warren Buffett, and Jamie Dimon realize that our bloated healthcare system is hurting our economy. Their new combined venture Haven has a goal of “simplified, high-quality and transparent health care at a reasonable cost.”)

On the smaller front, many familiar concepts still apply. Start saving early and plan ahead. Practice self-discipline in spending and lower your consumeristic appetites. If possible, move to a place where there is a lower cost-of-living. It’s so much easier to spend less when everyone around you spends a lot less! Get yourself involved in a close-knit community, whether based on blood, ethnicity, neighborhood, or religion.

Filed Under: Family, Frugal Living, Retirement
Last updated: April 19, 2019
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

How Often Should You Cook at Home on Weeknights?

April 16, 2019 By Jonathan Ping 4 Comments
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I subscribe to a NY Times e-mail newsletter called Five Weeknight Dishes, which sends – you guessed it – five weekly “fresh dinner ideas for busy people who want something great to eat”. However, one of the recent newsletters was titled How Often Should You Cook? and you might be surprised at the answer:

One question I’ve gotten a lot since I started writing this newsletter is how many nights I cook dinner during the workweek. The answer is not five.

I typically cook a meal from scratch on two weeknights, maybe three. You don’t need to do more than that! Pick at least one recipe that makes good leftovers, doubling or stretching them with eggs, vegetables, toast or grains if necessary. Or supplement with something else in the fridge or cabinet. Dinner can be a fun, crazy mishmash; photographers will not be showing up to document the meal.

As for the other nights: My partner cooks, or occasionally we order chicken parm or go out (luxuries of urban and suburban life), or eat our preferred brand of freezer pizza with a nice big salad.

There is no single “right” answer to this question, but I still found it reassuring. I used to try to cook close to 4-5 nights per week, but now it is also closer to 2-3 nights per week. Sometimes it feels good to eat something green (or otherwise colorful), fresh, and healthy. It always feels good to share a meal with family and friends. I get the same good, wholesome feeling when I eat something where I know exactly what went into my food. It feels like hitting the reset button, and I always find that it helps keep my weight down. Saving money is secondary, but still a welcome result.

Food delivery apps are making things so convenient now, but it’s usually not very good for my bank account nor my health.

Filed Under: Family, Frugal Living
Last updated: April 16, 2019
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Forced Retirement: The Time to Prepare is Now

March 13, 2019 By Jonathan Ping 4 Comments
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Here’s a random thing that happened after becoming financially independent. When I caught this opening scene of people getting fired from the movie “Up in the Air” on TV, I felt sympathy but I remember it used to give me stress and anxiety.

Ever since starting out with a negative net worth due to $30,000 in student loans, I’ve saved money every pay period because I worried about what would happen without a job. I wanted my financial life to be a robust fortress. It was a gradual process and not black-and-white, but one day I realized that I longer had to worry about a boss (or worse, a mercenary consultant that looked like George Clooney) firing me ever again.

Barron’s recently had an article So, You’re Retired but Don’t Have Enough Money to Be Retired. Now What? (possible paywall but it worked for me) which is really an excerpt from the book 55, Underemployed, and Faking Normal by Elizabeth White. Essentially, it is about people who had well-paying jobs for a long time, but hit hard times in their 50s and 60s:

I never thought it would happen to me. All my life—working at the World Bank, getting my M.B.A. at Harvard Business School, starting my own retail company—I thought of retirement as golfing in Florida (not that I really wanted to). Even after my business failed—taking most of my savings with it—I bounced back. I reinvented myself as a consultant and earned a six-figure salary. But in my 50s, the Great Recession hit, and the clients were slower and slower to call back. By age 60, it was crickets.

With nothing to speak of coming in, I was running through what was left of my savings. I started to notice friends in the same boat, trying to keep up appearances. A small group of us began to talk. All were 55 and older, well educated, with a history of career choice and good incomes. And then the bottom fell out. None of us expected to be here: in our 50s and 60s, scrimping and scraping or borrowing money from our adult children or 84-year-old mothers.

What is her advice for surviving forced retirement? Well, it sounds a lot like what you would read in an early retirement article.

The key question is not just how to tighten our belts. The real question is: Can we cut way back and still have good quality of life, still find ways to be connected to who and what we love? I believe that the short answer is yes.

A big first step in securing our futures is adopting a live-low-to-the-ground mind-set, which means that we have to drastically cut our expenses to fit our new income realities. But it also means figuring out what matters to you and what your priorities are and then cutting way back on everything else.

Once I get beyond the basics, it’s really about good health, family, and friends for me. I used to eat out a lot, and that’s something I still miss. But the women friends I rely on for sanity are all still here. It turns out we didn’t need fine dining and $12 glasses of Chardonnay to bond us.

You should happily spend money on your priorities, cut back on everything else, and realize that happiness is not about stuff. Sound familiar?

The key difference is that this is presented as a last-ditch solution after your hand has been forced. If you combine aggressively prioritized, lean spending with a solid six-figure career for a while, you have the basic recipe for financial independence. It may be much harder because of our various human tendencies, but it can be done.

We live in a culture that creates need where none existed before and defines quality of life as a metric of income. When you’re making money, all of that mindless consumption goes unchecked. When funds are tight you have to think about it. What do you really need to feel deeply grounded and content? You’ll discover that you actually need very little. It really does not cost much to be happy. I’m spending a tiny fraction of what I used to spend, and the world hasn’t ended.

What if you realized that at age 25 instead of 55?

Bottom line. Forced retirement may make you realize that you can live on a lot less money than you spend now. However, perhaps this book can help those who still have a solid job right now that they can also streamline their spending and thus be better prepared for whatever may happen in the future. I enjoyed the writing style in this excerpt and find it relatable.

Filed Under: Book Reviews, Budgeting, Frugal Living
Last updated: April 25, 2019
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Free Morningstar Premium Mutual Fund Reports via Public Library Card

March 6, 2019 By Jonathan Ping 16 Comments
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Updated 2019. Let’s say you are a DIY investor and doing some research on some mutual funds. You decide to learn more about the Vanguard Intermediate-Term Tax-Exempt Fund. You pull up the Morningstar quote pages (ticker VWITX and VWIUX) and find some useful numbers, plus an analyst report hidden to the public as a “premium” feature.

You see a 14-day free trial and after some more clicking around, you discover that a premium membership to Morningstar costs $199 a year or $24 a month.

mstar_premium2

Now, I’d like to read the rest of that analyst report, but I’m not sure if it is worth the fee. Well, you may already have access to those analyst reports through your payment of local and state taxes. Yup, the good ole’ public library!

Many public libraries have a subscription to what is called the Morningstar Investment Research Center database. Most offer instant, online access via your library card number and PIN. You should look under the “Databases” or “Resources” section. Some only have a limited amount of offsite licenses, so you’ll have to either ask for a password or you’ll have to read them in a branch. Here’s a screenshot of my free report accessed from the comfort of my home, with all the good stuff blurred out of course:

I was also able to access their analyst reports for stocks, mutual funds, and ETFs, as well as the premium version of tools like Portfolio X-Ray.

Now, if your local library system doesn’t provide this access, you can also look at state libraries, university libraries, or other libraries in the region for which you are eligible. Finally, there are some public libraries that offer library cards to non-residents for an annual fee. For example, the Charlotte-Mecklenburg Library in North Carolina offers library cards by mail for $45 a year (Seniors 62+, $35 a year).

Non-residents of Mecklenburg County can obtain a Charlotte Mecklenburg Library card for an annual fee of $45.00. This amount is approximately equal to the annual property tax a Mecklenburg County resident pays to support the Library. A non-resident library card entitles you to the full services of the Library at all locations.

According to their website, they also offer access to the Morningstar database. $45 a year is still significantly less than $199 a year, and there are other library benefits like access to Libby/Overdrive eBooks and RB Digital magazines. However, I would call them to confirm before you plunk down $45 as the services they offer can change at any time.

That is just one example. Here are some more libraries with non-resident borrowing privileges, although I haven’t checked again in 2019 as to whether they offer M* access.

Bottom line. If you want to access reports and information from the Morningstar Premium section, check your local and state libraries to see if you can access it for free with your library card. Some public libraries also offer library cards to non-residents for an annual fee. However, if you are signing up for a specific service like Morningstar, I would call them up first and confirm that they are still offering it for non-resident cardholders before you pay any fees.

Filed Under: Deals & Offers, Frugal Living, Investing
Last updated: March 6, 2019
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Personal Finance on a 3×5 Index Card: Classic and New Young Adult Version

March 5, 2019 By Jonathan Ping 9 Comments
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A few years back, Professor Harold Pollack quipped that everything you really need to know about money fits on a 3×5 index card. Folks asked him to prove it, and the resulting handwritten card went viral. Eventually, the idea became a book cowritten with Helaine Olen called The Index Card: Why Personal Finance Doesn’t Have to Be Complicated. Here is the original photo:

Via Abnormal Returns, I learned that Dr. Pollack recently created a new index card targeted at young adults under 30. Here again is a photo:

In case you can’t make out the handwriting, his tips are as follows:

  • Pay your credit card bill in full every month.
  • Keep a budget and spending diary. Pay cash up front whenever you can.
  • Don’t smoke. Mind your alcohol and dining spending, too.
  • Start saving early. Make it automatic, ideally through a 401(k).
  • If you have a job and no kids, aim to save 20% of pretax income.
  • Invest in low-fee total stock index funds, ideally in a 401(k).
  • Open a Roth IRA if you don’t have access to a 401(k).
  • Don’t buy individual stocks or try to time the markets.
  • Think federal first when borrowing for school. And don’t combine public and private loans if you consolidate.
  • A focused and rigorous major matters more than where you go to college.
  • Don’t push your friends to overspend. And beware the same peer pressures applied to you.

Sound, simple advice. But simple is not easy, and it can be hard to pull off everything on this list. I recommend using the card to help focus your efforts.

Filed Under: Frugal Living, Investing
Last updated: April 25, 2019
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Personal Finance: Recognizing Control and Using Your Time Efficiently

February 21, 2019 By Jonathan Ping 7 Comments
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Morgan Housel wrote a post called The Biggest Returns which really resonated with my outlook on investing and personal finance. The main idea was that you should consider the impact of your efforts in relation to the time and energy spent.

The idea that reducing your needs has the same impact as increasing your income – but the former is more certain and in your control than the latter, so it has a higher expected value – is as true for someone spending $15,000 a year as it is someone spending $15 million per year.

The hard part is becoming satisfied with spending less. […] For me it’s been realizing that what makes people happy is having options – doing what you want, with who you want, when you want, where you want. And options come from savings and assets, which are the opposite of spending.

Stock returns: Limited control. I decided on an asset allocation and invested my money in low-cost, low-turnover investments. Learning about investing and asset allocation initially was a good investment of time, but I still have limited control of the outcome. More importantly, this gave me the conviction and patience that it will work out in the long run. But I still might lose money in any given year, and I can’t just put in more effort and improve that return. I only check in on my portfolio quarterly.

Cash returns: Moderate control. About 1/3rd of my portfolio is in high-quality bonds, which in my definition includes cash and certificates of deposit. Here, I have some more control. For example, if I put money into a 5-year CD at 4% APY, I have high confidence it will do better than a 5-year Treasury bond at 2.50% yield. Sometimes there are such opportunities for the individual investor, sometimes there aren’t. Therefore, I track the best interest rates monthly.

Income: Moderate to significant control. Income is obviously important, and I while would rate it as more important than spending, that doesn’t mean spending in not also very important. There are plenty of people who earn $250k and spend $250k per year, while a $85k earner could spend $60k and save even more. But that same 250k earner has the ability to “see the light” and have their saving explode over the next few years. Unfortunately, there are no easy, foolproof ways to earn a high income. Of course, you should invest in yourself and improve your marketable skills and thus increase your human capital. Some people can move up the corporate ladder, others will do better with a more entrepreneurial route.

Personal spending: Significant control. Managing your spending is all about priorities, but there are two simple ways to attack your spending. First, you could start from the bottom and get rid of the more questionable “wants”: Expensive food habits (coffee, alcohol, snacks), monthly entertainment subscriptions, gambling, etc). Second, you could start from the top and pair down the big “needs”. I could have gotten a mortgage approval for a 3,500 sf house in my neighborhood. I live in a 2,000 sf house. I could pay cash for nearly any vehicle on the market. I bought a used minivan. I could have had fewer kids… Oops!

Credit cards, bank bonuses, and other “found money”: Significant control. You won’t get rich solely from taking advantage of credit card sign-up bonuses, maximizing your cash back, or picking up $10-$100 here and there each week, but I estimate that it adds up to $3,000+ each year for our household. $3,000 is a 5% increase to a $60,000 income, or a free annual vacation. You should pick and choose what works for you; for example I refuse to drive around town (to buy gift cards, redeem coupons, buy and resell, etc). I prefer deals that can be done with just clicks.

This is also a good reminder that even though I might not write about them repeatedly, your biggest returns on effort might be: get a better job, relocate to a city with greater relative opportunity (income vs. cost-of-living), move into a smaller house, and buy a cheaper car (or find cheaper transportation). On a daily basis, the things that catch my eye (and thus what I write about) are actionable ideas where I have control of the outcome.

Filed Under: Frugal Living, Investing
Last updated: April 25, 2019
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Generation Wealth Documentary: What Are You Chasing? (Free on Amazon Prime)

February 5, 2019 By Jonathan Ping Leave a Comment
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

If you have Amazon Prime, I noticed that the documentary film Generation Wealth is now included as of February 1st, 2019. Here’s a short blurb and the trailer:

Lauren Greenfield examines materialism, celebrity culture, and social status and reflects on the desire to be wealthy at any cost. This visual history of the growing obsession with wealth uses first-person interviews in Los Angeles, Moscow, Dubai, China and around the world to bear witness to the global boom-and-bust economy, and to document its complicated consequences.

I haven’t finished it, but my biggest takeaway is that you shouldn’t be obsessed with certain things because even if you get what you think you want, you still won’t be happy or content!

  • If all you care about is money, you’ll never have enough money. The millionaire wants more. The billionaire also wants more. Someone else will always have a nicer house and a bigger yacht.
  • If all you care about is your looks, you’ll never be pretty enough. Your body can never be too skinny, your lips can never be too full. If someone gave you a $1 million of plastic surgery, you would probably end up just as unhappy as today.
  • If all you care about is social status, you will be striving forever. Why spend your life trying to impress people who don’t matter? The celebrities you want to be like? They aren’t all that happy either.

Obviously I think money is important, otherwise I wouldn’t be here. But money is a tool, not the goal. Can you use your energy in a useful and meaningful manner? Can you cover the basics – safe housing, clean food, and quality healthcare? Do you have loved ones with whom to share your time? None of the answers to these questions require a brand name. None require looking up to anyone on Facebook or Instagram. I try to remind myself of this regularly, whenever I feel the urge to “upgrade” something.

Watching this film made me feel exhausted more than anything else. These people are wasting so much of their life energy chasing something they’ll never reach.

Filed Under: Family, Frugal Living
Last updated: April 25, 2019
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Learning to Cook at Home: A Valuable Investment

January 30, 2019 By Jonathan Ping 13 Comments
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Cooking at home can save a lot of money as opposed to eating out all the time. We all know that, right? If not, here’s a big green chart to drill it in, taken from How Much Money Do You Save by Cooking at Home? by Wellio:

Here’s what that means on a monthly basis:

Being a good home cook should be viewed as a valuable skill – one that takes an investment of time and effort, but can pay dividends forever. You may not eat at a restaurant or do meal prep every day, but I know that some of you dual-income high-earners are dropping around $1,500 a month on food. That’s closing in on $20,000 a year. Your grandparents probably spent a fraction of that. Converting even a couple of those meals a week can multiply into real money. (Not to mention that home-cooked meals have helped with my weight loss and health goals. Eating out a lot seems to always correlate with weight gain for me.)

The problem is that if you haven’t developed the skill, it’s just too painful. You work hard and are exhausted at the end of the day, why tackle another difficult project? For me, if I have to make an extra stop at the grocery store, I’d rather just stop at the korean BBQ place and buy it ready-to-eat.

If you are just starting out, you can’t expect to be able to whip up a nutritious and tasty meal with the ingredients in your pantry in 30 minutes. You need to set yourself up for success. You need to divide and conquer. On the weekend, you should pick out one or two “easy” recipes that look appetizing to you and buy all of the ingredients that you need. Don’t wait to “pick it up on the way home”. Buy it on the weekend, and carve out 30 minutes of prep time on two weekdays. Remind yourself that it takes time to prepare a meal prep kit too, or even drive somewhere to get take-out. (Okay, Uber Eats and Grubhub are pretty darn convenient. But those delivery fees and tips add up fast!)

This is summarized in my Cooking at Home Flowchart:

dinnerflow2

Once you have some “go-to” weekday meals, you can schedule them and rotate as desired. Once you get a lot of recipes into memory, then you can start to improvise. I’m sorry, but newbies can’t go straight into thinking of recipes as Salt, Fat, Acid, Heat. Maybe if you were the culinary equivalent of Beethoven. I’ve made hundreds of sheet-pan dinners (I like Melissa Clark recipes) and one-pot meals and I still get stuck if I don’t have things thought out ahead of time. If you learn to prep, then that one weekend grocery stop can equal 5 weeknight meals.

Wellio is a food prep company that offers to help you out with recipes and shopping lists. I haven’t used them, but I like that they are trying to attack the pain points in home cooking. I’ve mentioned them previously in Which Meals Offers The Most Nutrition Per Dollar?

Filed Under: Budgeting, Frugal Living
Last updated: April 25, 2019
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Dependent Care FSA: Save on Daycare, Preschool, Summer Camps, After-School, and Elder Care

December 4, 2018 By Jonathan Ping 11 Comments
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

One of the newer work perks that we took advantage of this year was the Dependent Care Flexible Spending Account (DCFSA). This is separate from the Health Care Flexible Spending Account (HCFSA) and the Health Savings Account (HSA). However, they do work in a similar way in that you can pay for eligible expenses with pre-tax money and thus save money by being exempt from income taxes on that amount. For example, we were able to pay for $5,000 in preschool expenses using your DCFSA in 2018. At a a 30% marginal total tax rate (see below), that was a $1,500 savings.

Eligible expenses for children (under age 13)
The overall idea is to cover childcare while you are working:

  • Nannies, Au pairs, and babysitters
  • Daycare and Nurseries
  • Preschool
  • Before and After School Care Programs. (Non employer-sponsored.)
  • Summer Day Camps

Eligible expenses for adults
The overall idea is to cover care for an adult dependent (spouse, relative) who is physically or mentally incapable of caring for themselves and lives in your home for more than half the year:

  • Adult or Senior day care center
  • In-home custodial caregiver (Non-medical, like eating and bathing assistance)
  • Transportation to/from eligible care (by your care provider)

You should keep detailed supporting documentation and itemized receipts for your HR department and potentially the IRS.

Maximum contribution amounts
The annual contribution limits for 2018 and 2019 are below. (They are not adjusted automatically for inflation.) Note that you can’t exceed your earned income.

  • $5,000 per year if you are married and file a joint tax return or if you file as single or head of household. (If MFJ, one person can get $5,000 when the other does not participate at all.)
  • $2,500 per year if you are married and file a separate tax return. (If MFS, both of you can get $2,500 individually.)

Similar to the Healthcare FSA, these funds must be claimed during the year deducted (plus any grace period) or you will lose the funds. “Use it or lose it”.

Total tax benefit
When you are able to pay with pre-tax money, you are avoiding taxes on:

  • Federal income tax
  • State income tax
  • FICA (Social Security tax)
  • Medicare tax

For 2018, the Social Security tax rate is 6.2% on the first $128,400 wages paid. The Medicare tax rate is 1.45% on the first $200,000 and 2.35% above $200,000. For us in the 22% federal marginal tax rate, that’s a total of 22 + 6.2 + 1.45 = 29.65%. So we’re nearly at a 30% savings even ignoring state income taxes. A 30% total tax savings on $5,000 in childcare expenses is $1,500. This is definitely worth enrolling and submitting a few receipts, even if our claim submission system is a bit slow and clunky.

This is also separate from the Child and Dependent Care Tax Credit. You are not allowed to “double-dip” and claim the same specific expense for both this DCFSA and the tax credit. But if you have enough total expenses, you can get both.

Bottom line. If you pay for childcare or care for a disabled adult dependent, you should check if your employer now offers a Dependent Care Flexible Spending Account (DCFSA). The times to check are when you get a new job, have a new child, change marital status, your spouse loses benefits, or during Open Enrollment. If you pay for full-time care, it is quite likely you can max this out and save some serious money. Just be sure to file those claims on time!

Filed Under: Frugal Living, Taxes
Last updated: December 5, 2018
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

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