Let’s Make A Deal

I went to a (early!) retirement party for a friend and former colleague of mine this week.  Yay Phil!  It was so fun to catch up with my old work buddies who were there.

Knowing that Mr. Ms. Liz and I are fairly knowledgeable about things financial, one former colleague confessed that he spends about $4,000 a year going out to lunch.

If you read last week’s post, you know that if you LOVE going out to lunch and it completely enhances your world,  you should go out to lunch and enjoy every minute and every morsel.  (So long as you don’t have consumer debt like credit cards and you are saving at least 15% of your income for your retirement).

But he was making this confession because going out to lunch doesn’t completely enhance his world, it just makes life a bit more convenient.

He thinks $4,000 a year is too much money.  Yep, it would be too much money for me too. Continue reading “Let’s Make A Deal”

Save To Retire Early Even If You Won’t

I listened to a good bit of the James Comey hearing last week.  I don’t follow politics closely but Mr. Ms. Liz does so it was on the TV while I was working.

I kept wondering–does he have F U money?

We haven’t talked about F U money before because I find it to be a bit vulgar and I know some of my readers are sensitive to such things.  But I haven’t found a better way to express this concept.

Jim Collins, one of my personal finance heroes, coined the term.  If you haven’t read his stock series yet, do it right after you finish this insightful post :).

Does James Comey have enough money to move on to something else without worrying about how he will keep his family afloat during the interim?  He’s 56, could he retire? Continue reading “Save To Retire Early Even If You Won’t”

The Easy Way To Fund Your Dreams

What do you dream of?

Traveling? Buying a home? Staying home with your kids? Taking time off? Sending your kid to college? Retiring someday or even early? Buying a camper and heading for the open road?

Don’t know what your dream is?  Read this and figure it out!

Unfortunately, few dreams are free.  If you want to pursue your dream, you’ll probably need to save some money.

It may seem really hard to eek out savings from each paycheck.

But I promise it will only get easier!

As long as you’re not spending more than you make, you don’t even have to reduce your spending.  IF you’re spending more than you make, sorry, but you have to get yourself on track.  Cut, cut, cut and earn, earn, earn until you’re not living beyond your means.

You just need to commit to keep your spending where it is. Continue reading “The Easy Way To Fund Your Dreams”

Little Decisions Help You Reach Your Dreams

It is hard to set money aside for your future.  Damn hard.

Especially when you are surrounded by people who spend money like it never runs out.

I hated being the one saying I couldn’t do something because I didn’t have the money.  Really I had the money but I didn’t have the budget.  So then I started saying those things weren’t in my budget.

But it got easier–people got used to us being more frugal and adjusted to it or they sort of slipped out of our lives. Continue reading “Little Decisions Help You Reach Your Dreams”

What Could You Do With A Million Dollars?

On the Stacking Benjamins Podcast I was listening to today, Joe was talking about the responses he received when he asked his Twitter followers what they would do with a million dollars.

He got some interesting responses.  Some were altruistic–donating the money or helping family members.  Some were realistic–like paying off debt.  And some were funny–like calculating the time it would take to count the money at the bank–in twenties.

It got me thinking.  What could each of us do with a million dollars?

I’m overly rational so I got out the calculator.  $1,000,000 invested should provide $40,000 of retirement income forever.  With Social Security providing 40% of our needs (as it does for the average recipient), we should have a stream of income of about $67,000 in retirement.  I could live a pretty nice life on $67,000.

That $1,000,000 invested in rental real estate should provide even more income.  According to Paula at affordanything.com, we shouldn’t invest in a property unless it will rent for 12% of the purchase costs per year, 6% of that goes to costs and that leaves 6% return for us.  Our retiree now has an annual stream of income of $100,000 including Social Security.

Now we’re talkin’!  With that income, we could do some really cool altruistic stuff too! Continue reading “What Could You Do With A Million Dollars?”

Fees Matter . . . A Lot

Do you know how much you are paying in mutual fund fees?  You should, because fees matter . . . a lot.

When you hear people talking about mutual fund fees, they are usually talking about the expense ratio.  This is the percentage charged against the earnings of your fund each year.  These fees pay the operating costs of running the fund and, usually, return a bit of profit to the company running the fund.

My focus in this article is going to be on this expense ratio. Continue reading “Fees Matter . . . A Lot”

Autopilot can be great . . . unless it isn’t

We are truly fortunate that we can set many of our financial transactions up to happen automatically.

Most of us have 401k contributions come out of our paycheck before we even see it.  You can’t spend what you can’t see.

My utility bills go on a credit card automatically which–you guessed it, gets automatically paid in full each month from my checking account.

When I was working, I had an amount automatically sent from my checking accounting to my investment account each month.

Now that I’m retired, my investment account sends money to my checking account–automatically.  It feels like I’m getting a paycheck–even if it is just from myself!

These automatic transactions are great when they help us achieve our financial goals–forced savings and simplification of routine bill paying are fantastic.

But automatic transactions can also derail us from reaching our financial goals. Continue reading “Autopilot can be great . . . unless it isn’t”

It’s Not Always Smart To Do The “Smart” Thing

It is typically recommended that we purchase insurance for catastrophic, infrequent events and we self insure for everything else.

So we should insure our lives and our ability to work if people depend on our income with life and disability insurance, our home because its loss would be difficult to recover from with homeowner’s insurance, our cars because the damage we can do to others is enormous with auto insurance, and our other assets if they are significant with an umbrella policy.

But we should not insure things that are relatively easy to replace or dollar amounts that are small relative to our net worth.

Using that rule, it would not make sense to insure my wedding ring.  While it is valuable to me, it isn’t valuable compared to our overall net worth.  It was when we got engaged but it isn’t now.  For $35 to $50 in premium each year, we’ve had the peace of mind that comes from not worrying about replacing my ring.  We’ve paid that premium for 28 years.  We filed a claim once and may be filing another claim Monday. Continue reading “It’s Not Always Smart To Do The “Smart” Thing”

If You Can Only Do One Thing

Life is busy, I get it.  The last thing you need is one more thing on your to do list.

Mastering your finances seems really time consuming and complicated.  I tried to simplify it as much as I could for you but it ended up being 12 steps to a kick a$$ life.  And those 12 steps didn’t include some really important things that help us move through the steps more quickly like figuring out your why and tracking your net worth.  And it didn’t include things like making a will and getting life insurance which are critical if anyone depends on your income or in-home work.

If I had to pick one thing to have everyone do (after getting life insurance*) it would be to calculate your net worth.  Your net worth is like a business’s balance sheet.  What you own minus what you owe.  Calculating my net worth kept my eye on the prize and was my secret weapon to achieving early retirement.  Once you start tracking it, your mind automatically thinks differently about earning and spending decisions–you want your net worth to go up each month.

Net Worth = What I Own – What I Owe Continue reading “If You Can Only Do One Thing”

Turn A Treat Back Into A Treat

When something is scarce, we value it more.

Our water was shut off the other day so a leak could be fixed in front of our desert home.  Fortunately, Mr. Ms. Liz saw the plumbers coming and filled a bucket with water.  I can wash my hands in about 4 ounces of water when water is scarce.  When water isn’t scarce, it takes at least four times that much.

I love sweets–chocolate, sour sugary, chewy caramel–all of them.  My Mom was a dental hygienist and didn’t want sugar on our teeth so there were no sweets in my home; even the table sugar was hidden.  This turned me into a great sweet sleuth (with only one cavity) but also made me enjoy every morsel of any sweet.  Each year, my brother and I were given the Russell Stover four pack chocolates in our Christmas stockings.  I remember stretching those four chocolates out over the day, paying close attention to each bite and each flavor.  Last night I ate four blueberry/dark chocolate squares almost without a thought. Continue reading “Turn A Treat Back Into A Treat”