Showing posts with label international stock market. Show all posts
Showing posts with label international stock market. Show all posts

Saturday, November 17, 2018

The Best Career Advice I’ve Ever Received

When I was first starting to get a good idea of the bad financial situation Sarah and I were in, I wrote an email to my professional mentor at the time. This person was a pretty well known person in our narrow field, with a high paying job and a lot of respect within the field and lots of professional options on the table before him. He was not my boss, though I had worked with him in the past and it was potentially possible that I could work for him again.

I simply asked my mentor what I could do to help build my career in a meaningful way, mostly in terms of money. He knew that Sarah and I had just brought our first child into the world, that we made decent but not great money, and that we were struggling with finances as many people in their twenties often do. I knew that he was not the kind of person to pull punches.

His response was wonderful, and I saved it for future reference. I just happened to be digging through that folder of ancient emails and came across it, and I wanted to share it with you, along with some commentary at the end. I did edit it a little to remove some references to other people and some of his rough language (he did have a pretty rough tongue, even in emails, if you knew him well).

* * *

Trent –

I’m assuming that you are interested in staying in data mining for many years. Here are some thoughts for building a career.

* Work on how to communicate and how to think through problems. Don’t worry about accumulating knowledge as it will naturally come to you over time in your career. You are good at writing but extend that to speaking. Work on problem solving – all kinds of problems. Don’t do easy [things] and when you have to get it out of the way ASAP or pass it off to someone. Hard [things] [teach] you way more than easy [things].

* Get used to asking lots of questions. Even if they’re dumb ones. Questions serve two purposes. One, it helps you build your knowledge in a practical way. Two, it helps to connect with the person you’re asking questions of. Ask for help when you need it, esp. when you can break it down into something simple for someone else to do like answering a specific question.

* Go to professional meetings. Pay attention in the sessions that are really relevant to you but for the rest of the meeting just get to know other people in data mining especially people a little bit further along than you. Talk to lots of people. Share your work and present in every avenue you can, but the value isn’t in the presentation itself but in the conversations after with people interested in what you’re doing.

* Dress like you care. Don’t have to wear a suit but don’t show up looking like you just rolled out of bed. Dress like [your boss] and you’ll be fine.

* If you go in and ask [your boss] for a raise, do everything you can to make it easy for him to make a case to [people higher in the pecking order]. Bosses usually want to pay their good subs as much as they can get away with but people higher up the pecking order want to pay the lower level people as little as they can. Give [your boss] tools to argue on your behalf. Figure that out by thinking about what [your boss’s boss] wants and supply [your boss] with that ammo.

* Get more education. It never hurts and [your boss] has funds for just that purpose.

* Help as many people as you can, be nice, and don’t backstab. I don’t just mean other data jockeys. Do the same thing for receptionists and janitors. Never, ever treat people [badly]. You help someone and they’re going to like you. Don’t give them any reason to think you’re going to backstab them later. Don’t worry about getting “paid back” because most of the “paying back” will happen when you’re not around when people speak highly of you. You’ll never directly see it but it will be a huge benefit.

* Point out good things about others all the time. Way better than saying bad things. Way better than bragging about yourself.

* Don’t brag about your achievements ever. Instead, dole out as much credit to others as you can without sounding weird. The only time you can “brag” is in a cover letter or resume or when you’re talking to your boss about a raise. If you brag outside of that, it will hurt you more than help.

* Learn as many names as you can and what they’re working on and if you can something about them that’s good.

* Get in the habit of talking to successful people you’re intimidated by. You practically ran away from [someone respected] at [a meeting]. People are people. [Respected guy] laughed it off but it wasn’t the best impression.

* Don’t pretend to be something you’re not. No one thinks bad of you if you’re into nerdy [things] as long as you don’t drag them into it. You play D&D right? Don’t be ashamed of it, as long as you don’t start talking to everyone about paladins and wizards and [other high fantasy things]. At the same time be cool with whatever other people like and if you’re even halfway interested dig in with them a little. Nothing better than finding someone who at least somewhat shares an interest with you.

Do that stuff and raises and promotions will come super easy.

* * *

For the next two years, I continued to work in that career path and I watched his advice start to pay off for me even as I became disenchanted with that career for other reasons.

The biggest change was that I stopped looking at meetings and conferences as an undesirable hassle and instead began to look at them as an opportunity.

If I was in a meeting or a conference session, I did everything I could to focus on what was being presented by taking notes and listening and asking questions during the Q&A session. My goal was to extract from their talk everything that was possibly relevant to what I was doing or what I might be doing in the future, along with the general summary of their talk.

When I was at conferences and not in a session and not sleeping, I was doing something with someone in my field, whether someone at my approximate level or someone who was further along in their career.

During the last several conferences I went to at that job (my boss was pretty big on sending people to conferences and encouraging them to present), I built a bunch of really good relationships. I fondly remember eating sushi with one of the absolute best people in my field and discovering that he also liked D&D. I built four different friendships that I still have to this day, two of which have told me that if I ever go back to that field, call them first.

My advice? Find ways to talk to people that are doing what you do in a positive way. How you do that is going to vary a lot depending on your specific job and specific career. It might simply be talking to your coworkers and having a laugh with them. It might be looking for a professional meetup in your area, or going to a professional conference. It might even be on social media. The point is to seek out ways to talk to people in your field in a positive way and share ideas and professional experiences and life experiences.

This was a struggle for me because I’m naturally introverted. I tend to clam up in situations where I don’t feel confident. I knew this was something I needed to work on, so I started learning how to hold meaningful conversations with people I didn’t know well. I found the book How to Win Friends and Influence People by Dale Carnegie invaluable for this. This because a skill set that I was able to pull over into my personal life as well and it’s helped me actually build a lot of personal friendships and connections in the community as an adult.

Another step I took was to try to eliminate any and all bragging from my professional conversations and extend as much credit to others as possible. I tried to avoid talking about myself and my achievements. Rather, I tried to focus on the achievements of the group as a whole if I was pressed to talk about it and dole out lots of credit whenever I could.

What I found to be really effective for this was to get into a habit of thinking about gratitude. Each day at work, I’d try to think of five people who did something that made my job easier to do or more effective or who gave me a key idea. Who was I writing software for? Who was I extracting data for? Who was actually employing me to do this? Who were the people who would bring key ideas to the table that I would implement?

What I found is that when I regularly showed gratitude at work and tried to think of things from that perspective, it was easy to come up with a healthy list of people to share credit with. I could share credit with people who offered good feedback on my work. I could share credit with the people who gave me great ideas. I could share credit with the people who were simply nice to me during the day, making it easier for me to work. I found that I was consistently giving credit to the people who showed up in my thoughts of gratitude.

This gratitude pattern actually migrated over to my personal life and has become something I do personally as well as professionally. I think of people I’m grateful for because they made my life better in some respect, and then I find myself naturally giving credit to people who show up regularly in my gratitude thoughts. Not only does this give them credit for being awesome people, it also keeps me from falling back on being self-focused and potentially arrogant.

Another valuable thing I learned was that you’re always better off tackling hard problems than easy ones. If you have a choice between a hard task – particularly one complex enough that you can’t quite visualize how to pull it off – and an easy task, choose the hard one.

First of all, you actually learn things from hard tasks, which makes you more effective in your job and your career path. Easy tasks rarely teach you anything and can often lead your skills to atrophy.

Hard tasks often give you a good reason to ask questions of others, which often leads to relationship building. I found that when I work on hard tasks, I find myself turning to notepads and whiteboards much more often, and that translates into asking questions and having conversations with others.

Hard tasks make it much easier to get into a flow state, where you’re so engaged with the task that you lose track of time, and I’ve found that being in a flow state is incredibly good for one’s mood for a long while afterwards.

Hard tasks are also effective resume builders and often provide the foundation for presentations and conversations. No one wants to hear about the easy tasks. They want to hear about the hard tasks.

I do this very thing with The Simple Dollar. It would be really easy for me to fire off endless piles of ordinary “list articles” where I just list 20 frugal tactics or 10 good crock pot recipes or 8 reasons why you should be financially independent. Those articles are easy. I don’t have to think about them. I don’t have to reflect when writing them. I barely have to research them.

Harder articles center around doing a lot of research, evaluating and reflecting on the interesting points, and writing something that’s actually meaningful. Those are much more difficult to write, but they’re the rewarding ones, and I try to do them as often as I can.

Almost always, a “hard” article that I invested a lot of thought into and mixed together research and my own personal experiences effectively results in a lot of great reader feedback, which is a sure sign that it hit home. The “easy” ones? They might be valued by some, but I don’t think they hit home in quite the same way.

This is true in any field. The hard work matters. The easy work is forgettable and doesn’t help you make a name for yourself. It doesn’t help you build skills or build a reputation. Choose the hard work.

A final strategy I wanted to focus on was to make it easy for the boss to make a case for you when you want a raise or promotion. In general – though not always – your boss knows your work and would genuinely like to pay you more or give you whatever other compensation you deserve. The problem is that the person your boss has to justify that to generally doesn’t know your work, at least not on an intimate level. That person up the food chain wants to maximize the “bang for the buck” in terms of getting the most value out of every dollar spent, and unless there’s a really good reason to do so, giving you a raise doesn’t help the bottom line.

First of all, ask yourself what you’re doing for the organization that’s beyond what any warm body could be providing. If you’re not doing anything that someone with a very basic resume off the street couldn’t quickly do, then you’re not going to warrant a raise. Ask yourself what you’re doing and what you’ve done that’s beyond what a minimally qualified person for your job would be doing.

Then, ask yourself what the company wants out of your position. What are you doing to add to the value of your company’s bottom line? More importantly, what are you doing that’s exceptional that’s adding to the value of your company’s bottom line? What are you doing that’s adding more to the bottom line than your coworkers or than someone fresh off the street could add?

Figure those things out. Condense those things down to a handful of very clear and direct bullet points, ideally with actual numbers as evidence. Make a single Powerpoint slide if you have to, one slide that makes the case that you are doing far more for the business than the guy fresh in off the street could ever provide.

Take those bullet points and deliver them to your boss as you’re making your case. Give him or her the ammunition he or she needs to take your case up the food chain and argue on behalf of a raise for you with the person actually cutting the checks. If your boss is cutting the checks, then deliver those bullet points to him as justification for that raise or promotion.

If you can’t do this, you’re not giving anyone an incentive to give you a raise. If you’re not providing anything that anyone off the street could provide, why should you be paid more than anyone off the street? The answer is you shouldn’t be. You’ve got to figure out what it is that you’re providing that’s more than the random person off the street.

If you don’t know what that might be, step back and look at what the owner of your company would want from a very high value person in your position, and do more of that. If you don’t know what that is, ask someone who does. Keep track of your own performance data – how much you’re here, how many tasks you complete, the impact of the most important tasks you do. Use those things to make the bullet points.

The easier you make it for your boss to argue on your behalf, the more likely it is that you’re going to get the raise or the promotion that you want. Keep that in mind every day.

In the end, it’s all about making yourself valuable. You do this by having more skills. You do this by completing the hard tasks. You do this by having tons of relationships. You do this by giving credit to others. You do this by exceeding expectations. If you don’t make yourself valuable, how can you expect others to treat you as though you’re valuable?

Good luck!

The post The Best Career Advice I’ve Ever Received appeared first on The Simple Dollar.

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Friday, November 16, 2018

Financial Success Is a Lifestyle Outcome, Not a Skill or a Fad

When I first started making financial changes in my life, I believed at first (and for a surprisingly long time after that) that the changes I was making to my life were largely short term changes. Sarah and I would “get ourselves on a good financial track” and we’d basically go back to the lifestyle we had before.

As I started making changes, however, I began to realize that a lot of the changes I was making to my life were strictly better than the way I was doing things before.

For example, we started buying a lot of store brands, and we learned that for the most part, they were basically identical to name brands in every way other than perhaps the aesthetic appeal of the packaging. We just switched to buying store brands for most things, and we probably buy an even higher percentage of our items in store brand form today.

Another example: we started trying to fill our weekends with new things by challenging ourselves to a “money free weekend”, where we’d try to go from Friday after work to Monday morning without spending any money. We actually grew to love these and actually did a lot of “money free weeks” where we wouldn’t spend any money from Friday after work until Monday morning ten days later. I wrote about money free weekends quite a bit when we were really diving deep into them, listing deeply fulfilling ways to spend a money free weekend and other similar pieces, eventually culminating in a giant list of 100+ things to do on a money free weekend.

I could list dozens of these changes – installing energy efficient light bulbs, making meals at home, shopping around more carefully when we made a significant purchase, etc. etc. – that all produced the same end result: a life that was at least roughly equal or notably better in non-financial terms and strictly better in financial terms than the life we were leading before.

These new routines that we were discovering weren’t the temporary changes we expected them to be. It became pretty evident pretty quickly that these changes should be permanent, as the upside that they produced in our life was quite clear.

So they became permanent. They became the backbone of a lifestyle that was just as enriching (if not more so) than our previous lifestyle, but the difference was that it was financially positive. Rather than seeing our net worth stay in place or go down year over year, it went up drastically each year.

We still go out to eat, but it’s a pretty rare thing to do so. We took our oldest son out for a birthday dinner recently and we realized that the last time we had eaten out before that was for another child’s birthday two months earlier (excepting a trip that we went on for a remote wedding). We just realized that eating at home was usually more convenient and pretty tasty and usually healthier, and the better we got at cooking, the easier it became. We can usually make dinner, serve it, eat together as a family, clear the table, and load the dishwasher before we would have even ordered at one of the nearest restaurants to our home. Plus, I’ve come to really value doing dinner-related tasks as a family, where we’re loading the dishwasher or prepping food together and just talking about life. This is a net improvement in our life, not just because of the money, though the money is a strict improvement.

We still stop at coffee shops, but we make 90% of our coffee at home. When we do go to a coffee shop, it feels like a genuine treat rather than just something we grab all the time, and that makes it seem a lot better. (It’s also probably healthier.) This is a net improvement in our life, not just because of the money, though the money is a strict improvement.

We both still like to read, but I’m more interested these days in curating my waiting list from the library and getting through a big pile of unread books I’ve picked up at used bookstores or received as gifts over the years. I haven’t been in a bookstore in several months aside from a quick stop where I was helping my dad find a specific book. I spend time reading, not seeking out new books to buy. This is a net improvement in my life, not just because of the money.

We have to have a real reason to spend money now. Incidental spontaneous spending of money feels wasteful because there are so many times when that incidental spending is just completely forgotten. If I want to be spontaneous, it’s usually far more memorable and meaningful if I’m spending time or energy. If I “splurge” on my own with money and it’s not something planned, it’s usually just completely forgotten before long, and that’s just an utter waste. Moving away from “splurging” or “being spontaneous” with money has been a net improvement in my life.

I’ve discovered many new hobbies over the last ten years or so. The biggest one has been hiking, which I have come to dearly love. There are few things that feel better to me, regardless of spending, than going deep in the woods somewhere and coming out on some beautiful vista or some unexpected clearing that is rarely touched by people and just enjoying the view and the quiet and the moment. It costs nothing, it’s deeply meaningful for me, and it’s something I’m going to keep doing as long as my legs can get me there. There are many other things like that, too: meditation and journaling immediately come to mind. They’re passions that fill my time and bring me deep personal value regardless of the fact that they cost essentially nothing to practice.

These changes – and many, many, others – are lifestyle changes. They are the default in how I live my life now. They aren’t temporary changes to get my head above water. They’re better ways of living – or at least comparable ways – that happen to be financially positive to boot.

For me, the decision of whether or not to try something is often influenced by finances, but whether it sticks around usually has nothing to do with finances. I filter the things I try by the expense of it and then stick with the things that seem strictly better or meaningful. I’ve learned over the years that there’s an infinite abundance of things to do and try and tweak if you use a “low cost” filter, something I simply didn’t see before. Now, our lifestyle choices often run through this filter first unless there’s something that truly doesn’t fit.

The end result of all of this is that our everyday life is perhaps more joyous and fulfilling than it ever has been, but it’s one where we’re spending drastically less than we earn rather than spending every dime (or more). Furthermore, being on a consistent financially positive track is a great reliever of background stress. I don’t feel the need to buy anything to “escape” from stress, and I haven’t for a long while.

The bonus? These changes have put Sarah and I on a track to retire relatively early, and that’s just the kicker. I genuinely believe that even if we were not on a track to retire early, we wouldn’t change anything significant about our current lifestyle. It’s fulfilling as it is. It gives us fertile ground for happiness. We don’t really need anything else, especially not anything we can buy.

It’s because financial success is a lifestyle outcome. It’s the result of living a lifestyle that makes financial success practically inevitable, and that means normal daily routines that minimize spending while maximizing opportunities for joyful and meaningful activity and connection with other people. Find those things that make you feel good (without making you feel bad later) and don’t involve spending money and fill your life with them. Discard the rest. You’ll find yourself with a very good life that inevitably marches you right toward financial success (provided you do something smart with your leftover money after each paycheck).

Good luck!

The post Financial Success Is a Lifestyle Outcome, Not a Skill or a Fad appeared first on The Simple Dollar.

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Wednesday, November 14, 2018

Challenge Yourself! Twelve Simple Frugal Challenges You Can Do This Week

I’m a big fan of using the thirty day challenge to try out a particular daily routine or behavioral change in my life. It’s a big part of how I view life as being something of an experiment, one in which you’re constantly adjusting and trying new things. The goal is to introduce incremental improvements to your daily life until it hums like a well-tuned engine as it pushes you forward toward your goals and dreams.

However, there are some adjustments and changes to your daily life that work really well as one-off challenges. Do them once or maybe twice and it becomes really obvious how useful those are, and those changes often just become the new norm for you immediately.

Here’s a list of twelve one-off challenges you can do yourself, just to see what the results are like. Give them a shot and see how they work out for you. If they don’t work for you… well, you didn’t lose much and you’ve learned something. If they do work out for you, you’ve found a new path for doing things in your life that’s more financially efficient than before.

Buy the store brand version of one or more (or all) items you normally buy the name brand version of. The next time you’re at the store, consciously buy some store brand versions (or discounted versions) of items you normally buy in name brand form. Take them home and use them instead of the name brand to see how they work for you. If you can’t tell a difference or if they work better than the name brand, just start buying the store brand from here on out. For me, I usually find that I can’t tell the difference.

Eat the cheapest dinner you possibly can. What is the least expensive dinner you can make that you’d actually like? Would you cook up some beans and rice, starting with dry beans and dry rice? Would you cook up a box of spaghetti and serve it with a bit of olive oil and garlic (enough for several meals at once)? Maybe you just scramble together three eggs, add a bit of salt and pepper, and serve it with a slice of toast? Try eating a super-cheap dinner tonight, as cheap as you can get. Maybe you can turn this into a weekly tradition.

Make a batch of homemade laundry soap. It will cost you a few bucks to do this, but you’ll have enough supplies to wash laundry for the next year. Just buy a box of borax, a box of washing soda, and a bag of soap flakes at the store (these are all available on Amazon if your store doesn’t have them). Grab a resealable plastic container, a measuring cup, and a measuring teaspoon. Add an equal amount of each of the three ingredients to the container using the measuring cup – aiming for a cup of each is good, or a little more depending on the container size. Shake it around thoroughly until it’s mixed (I shake it for about a minute). Then, drop the spoon in there and leave it by the washing machine. Whenever you’re washing a load of clothes, just use a single teaspoon of the mix – open the container, scoop out a teaspoon, and add it. Using just a cup of each powder will give you 48 loads – and you’ll have many, many cups of each if you buy a container of each at the store. My math has this recipe costing about $0.04 a load. This recipe seems to work like a champ. Just try it, and if it doesn’t work out for you and you go back to Tide after using this recipe for a while, it’s not a big loss.

Lower your thermostat by one degree. You could also do a very similar thing by raising it by one degree in the summer compared to what you normally set it at. Once you’ve made this one degree adjustment, live life as normal and see if you even notice it at all. For us, we found that gradually bumping the temperature by a single degree here and there over a period of weeks and months resulted in us really only noticing a major change after having adjusted things by several degrees. When the seasons change, we start that process anew, slowly bumping it downward throughout the winter and slowly bumping it upward throughout the summer until we hit the threshold of comfort for us. This minimizes energy bills. You can start this by just bumping things by a single degree.

Ride public transport to and from work. Rather than hopping in your car and driving to work, take public transport. Buy a ticket, ride the bus or the subway or the train, and then do the same again on your way home. Unless you’re very close to work, it’s probably going to be cheaper than the total cost of driving to and from work, and it gives you a chance to just sit there and read a book rather than having to focus on driving through busy traffic. A one time challenge is a great way to “test the waters” and see how it goes.

Go to a meetup, an event at the library, or something you find on the community calendar. Check out Meetup, your library’s website, and your community website, and just see what’s happening locally. Pick out one thing that looks like it might be interesting and go, with the intent of enjoying it and meeting people.

Use the appropriate amount of toothpaste. I like these little things, the strategies that are really minor and serve as only a slight incremental improvement that will save maybe a few bucks a year. Find enough of them, though, and it adds up to a surprising amount of money. This toothpaste thing is a great example. Toothpaste ads always show a giant stripe of toothpaste on the toothbrush, but the American Dental Association usually recommends using an amount that’s roughly the size of a pea – a small fraction of what toothpaste ads show. Try doing what the ADA recommends. You’ll find that your mouth gets clean with a lot less paste, and over time, that will add up to a lot of savings.

Write a meal plan for the next seven days, and make a grocery list from that plan. Just simply list what you intend to have for meals for the next seven days, focusing on simple stuff you make at home, and then make a grocery list based on that meal plan, taking into account what you already have in the cupboards. Use that list when you go to the grocery store. Just try this once, and you’ll find that you not only have a tight list of things to get at the store (meaning you’re not wandering and grabbing things at random), but you’ve also got something to focus on that helps keep you from getting distracted.

Pack a lunch for work. Rather than just going out for lunch or hitting a food truck or ordering some delivery, just pack a lunch for work the next day. Do it in the evening and stick it in the fridge so you can just grab it in the morning and it doesn’t add time to the day. Eat it when you’re ready for a lunch break. It’s way cheaper than almost any other lunch option you could have at work and probably tastier and healthier, too.

Clean out your closet. Tackle that catch-all closet in your house where you put stuff that you don’t want to deal with and then it just accumulates (mine is the closet in my home office). Just go through everything in there, figure out what’s actually worth keeping and what isn’t, and then sell the stuff you don’t want to keep on Craigslist or Amazon Marketplace or Facebook Marketplace. Turn that unwanted stuff into cash that you can use for something worthwhile. You might just find that this one-off task inspires you to tackle all of the other “catch-all” places in your home.

Negotiate a bill. Take one of your bills – your cell phone bill, your cable bill, your internet bill, whatever – and call the service provider. Go through each of the charges on your bill and ask to have any unwanted charges removed. See if there’s a lower cost package that meets your needs. Ask for a rate reduction. Ask for a “new customer” package. The worst they can do is say “no,” and you’ll find yourself where you started.

Visit the library. Just stop by your local library and see what they have there. Look for an interesting book you’ve always wanted to read. Look at their movie collection and their audiobook collection. Take a look at their bulletin board and their schedule of events. All of this stuff is free. Take home that interesting book. Snag a few movies. Make plans to check out some event going on there next week. It’s free entertainment. Even if you don’t find anything, you’ll at least know what they have on offer.

Simply choose a few of these challenges and try them out this week. If they don’t work out, there’s no major loss – you got to try something new and it didn’t cost much. If it does work out, you’ve discovered a new and better way of doing things. There’s almost no downside to giving yourself a challenge like this!

Good luck!

The post Challenge Yourself! Twelve Simple Frugal Challenges You Can Do This Week appeared first on The Simple Dollar.

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Tuesday, November 13, 2018

Is It Good to Have Multiple Credit Cards, or Will It Hurt My Credit Score?

Your credit score is an essential component of your overall financial health, so it’s important to make sure you don’t do anything that could damage it. If you always make your debt payments on time and keep your credit card balances low, your score will generally be in good shape.

Having multiple credit cards won’t necessarily hurt your credit score — and, in fact, it can sometimes help. But if you have more cards than you can handle or use them irresponsibly, your score could drop considerably.

How Having Multiple Credit Cards Can Impact Your Credit

To understand how carrying multiple credit cards can affect your credit score, it’s important to know how your score is determined. Your FICO score, for example, is broken down as follows:

  • Payment history: 35%
  • Amounts owed: 30%
  • Length of credit history: 15%
  • Credit mix: 10%
  • New credit: 10%

Now, let’s break down each of those in terms of how using multiple credit cards has the potential to hurt your credit score.

Payment History

Making on-time bill payments is the biggest factor in your credit score. In an ideal scenario, you’d never miss a payment on your credit cards. But it’s unlikely that all of your cards will have the same due date. And if you have more cards than you can manage, you can set yourself up to forget a payment.

But while that’s a danger, there are ways to prevent it from happening. By setting up automatic payments on all of your accounts, for instance, you can ensure that you’ll never miss one.

Even if you do, credit card issuers typically don’t report late payments to the credit bureaus until after you’ve been late for 30 days. So if you miss your due date but remember to pay the next day, it won’t show up on your credit report; the only consequences will be a late payment fee, interest, and possibly an increased penalty APR.

Amounts Owed

This factor is essentially based on your credit utilization, which is your credit card’s balance divided by its credit limit.

The lower your credit utilization ratio on each card and across all your cards, the better. So in this case, having multiple credit cards can actually help your score by increasing your overall credit limit and spreading out your balances across multiple cards.

For example, let’s say you have one credit card with a $3,000 balance and a $5,000 credit limit. Your utilization rate on the card is 60%, which would negatively impact your credit score.

If, however, you have three cards with a $1,000 balance and a $5,000 limit on each, your utilization drops to 20%, which is generally much better for your credit.

Length of Credit History

This factor considers how long you’ve been using credit as well as the average age of your accounts. The more new credit card accounts you open, the lower that average will be.

But while that sounds bad, remember that your length of credit history only makes up 15% of your credit score. And since the average age of your accounts isn’t the only component of your history, the impact may not be very noticeable.

Credit Mix

Lenders typically like to see that you can manage various types of credit. And credit scoring models perceive installment debt — such as a mortgage, student loan, or auto loan — as less risky than revolving credit card balances.

Having more than one credit card account may help improve your credit mix. But according to FICO, this factor isn’t crucial in calculating your score unless there’s very little other information in your credit profile.

New Credit

Every time you apply for a credit card, or any other credit account for that matter, that’s considered new credit, and the lender may run a hard credit check.

According to FICO, each new hard inquiry can knock up to five points off your credit score, but many scores won’t be affected at all. Even if your score does drop slightly, it’s not a permanent drop.

Where this factor could make a difference is if you apply for multiple credit cards in a short period of time. Not only could multiple inquiries have a compounding effect on your credit score, but it could also be a red flag for lenders.

So as long as you space out your credit card applications and use credit responsibly in general, you likely won’t see a compounding effect on your credit score.

How Many Credit Cards Is Too Many?

So is it good to have multiple credit cards? Well, we can safely say it’s not bad. Using more than one credit card for your everyday spending has its benefits: For instance, using cards with different rewards programs can help you maximize how much you earn.

What’s more, some credit cards offer benefits that other cards don’t, and having more than one in your wallet can ensure that you can take advantage of all the benefits you want.

There’s no universal answer to the question of how many credit cards is too many, because everyone is different. If you have good organizational skills and can easily stay on top of your card management, you’ll likely know when one more is too much.

But if the idea of keeping track of more than one or two cards gives you anxiety, it may be better to restrict how many you keep in your wallet. And if you struggle to contain your spending, having no credit cards at all may be the best strategy for you.

If you want help with managing multiple credit cards, here are a few tips:

  • Use budgeting software that allows you to see transactions and balances in one place.
  • Keep a list of your monthly due dates and when annual fees are due, if applicable.
  • Consider waiting until you have an established credit history before you apply for multiple cards.
  • Be honest with yourself about your capacity for card management.
  • Get rewards credit cards that align well with your lifestyle — whether you spend more on travel and dining or groceries and gas — so you can maximize the value you get out of them.

The Bottom Line

Getting multiple credit cards won’t hurt your credit score if you use them responsibly. But the more cards you have to keep track of, the more likely you may be to forget about a payment – so there can be consequences if you have trouble staying organized or with overspending.

As you consider whether it’s a good idea for you, think about why you want to have multiple cards and what your strategy is for managing them responsibly. Because if you do it right, you can take advantage of all the benefits your cards have to offer with very few drawbacks.

Learn more about your credit: 

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Feeling Rich and Feeling Poor

One question that I left out of the mailbag yesterday is this one, from Dana:

I find myself oscillating back and forth between frugality and spending recklessly. After a lot of reflection, I think the reason is that when I buckle down with frugality, I begin to feel “poor” after a while. I feel like I’ve intentionally cut myself off of what life has to offer. It leads to a spiral of negative thought, and then eventually I give up and splurge, and for a little while I feel “rich” like life is full of possibilities. Then, after a while, I start to see my life as a train wreck with no future, so I resolve to buckle down again. I have been in this oscillation more or less for two decades. I see frugality as a means to get to a healthy retirement, but when I’m actually doing it, I actively start to feel badly about myself and my daily life. When I spend without restraint, I feel better about myself and my daily life but then I realize that I’m never going to retire and my credit cards are creeping up and that feels awful, too. I’m hoping you’ll have some insight here.

There’s a lot to unpack here, so let’s dig in.

Feeling “Poor” and Feeling “Rich”

The first thing I wanted to touch on was the idea of feeling “poor” versus the idea of feeling “rich.”

Dana described feeling “poor” as “cutting myself off from what life has to offer.” On the other hand, Dana described feeling “rich” as the sense that “life is full of possibilities.”

For Dana, the difference between the two seemed to be how freely she was able to spend money on short term wants. Allowing herself to spend money as she wished on short term desires conveyed a sense of freedom and possibility to her, whereas putting tight restrictions on those short term spending desires transformed over time into a sense of being restricted and “un-free.”

To her, this felt like the difference between “rich” and “poor.” To her, a “rich” person is able to spend money on short term things without concern, whereas a “poor” person really isn’t able to. That sense of freedom translated to her psyche, leaving her feeling happier when she felt “rich” and sadder when she felt “poor.”

Rich, Poor, and Personal Options

If we stop and look at things from that angle, it’s pretty clear that Dana’s sense of “rich” and “poor” comes from the number of personal options she sees available to herself in a given moment, with “rich” representing an abundance of options and “poor” representing few options. In a way, that does represent some of the dichotomy between wealth and poverty, but I think that, in the situation where a person is choosing to place financial restrictions on themselves, it’s not a clear picture.

Remember, one of the main goals of voluntary frugality and voluntary simplicity is to not choose low value short term options so that you can gain access to higher value long term options. A person might choose to be “poor” in terms of short term options in their life so that they can be “rich” in terms of long term options.

Think of someone working two jobs to get out of a bad financial hole. That person is definitely choosing to restrict their day to day options in the hope of having more options later on in life.

Frugality is often used in the same way. You’re cutting off a lot of incidental spending and making price-sensitive choices when you do spend so that you can have more options later on in your life and in other areas of your life.

It’s a restriction that makes Dana feel “poor,” but I think that the restriction is an illusion.

Frugality and Purchasing Freedom

It’s worth noting here that I’m mostly talking about voluntary simplicity. I’m not talking about a situation where a family is pushed up near the poverty line and many frugal strategies become a requirement rather than an option. In those situations, you can feel as though you don’t have a choice.

However, that’s not the situation Dana is describing, nor is it the situation that a lot of Americans find themselves in. For many Americans, frugality is a choice, one that you make when you want to reduce the amount of money leaving your pocket this week or this month or this year.

Frugality simply means investing thought in order to figure out what option is going to give you the most value in exchange for your dollar.

If you look exclusively at the short term, it is really hard to perceive that spending less is going to be the best option. You’re often spending less to receive a somewhat lower quality item (though that depends on the situation) and, if there’s not something else you’re going to spend your money on in the short term, it can feel like a loss. If you are forcing yourself to repeatedly make choices like that, it can definitely feel constricting.

Frugality makes more and more sense the further out you stretch your time consideration, because then you’re starting to think abut choices in the future, beyond the next few days.

The thing is, human beings aren’t particularly good at this. Most of the time – in fact, almost all of the time – we’re thinking in the short term. We’re thinking about getting through the day or getting through the week.

It takes conscious effort to look seriously at things beyond the immediate future. You have to train yourself to start considering the long-term consequences of your daily choices and use them as a pro-and-con with those immediate choices.

Let me give you a clear example of what I mean.

Let’s say I’m standing at the store and I’m trying to decide which box of breakfast cereal to buy. I can either buy a box of Cheerios or a box of store brand oat circles. They’re basically the same, but Cheerios is a brand that I trust. Buying the store brand, however, saves me about a dollar.

Now, I have the financial freedom to choose either one in the short term. That’s not a question, and I don’t believe it’s a question for Dana, either.

The question actually is “Would I rather have that $1 used to get a box of Cheerios rather than a box of ‘toasted oat circles’ or would I rather have that $1 available for something else down the road and put those ‘toasted oat circles’ in my cart?”

That “something else” can potentially be a lot of things. It might be money put aside for retirement. It might be money put aside for next year’s family vacation. It might be used to pay off a debt. It might be money you can use to buy something fun this weekend.

The thing is, most momentary frugal choices feel like small potatoes. It’s just a dollar, right? Who cares? It’s often not worth active consideration – they’ll just grab the Cheerios, feel good, and keep going.

The thing is, we make those choices all the time. Obviously, a grocery store is rich with those choices, but we are making those kinds of decisions almost every time we spend money.

For me, the choice to spend less now as a default (meaning unless there’s a compelling reason not to do so) feels empowering. I don’t actually need a specific goal for the future. I just know that there’s probably going to be a better use for that dollar in the future than the difference in quality – if there is any – between Cheerios and “toasted oat circles.” I don’t even need to know what that future use for that dollar is. I just know that, through my own reflection, there are a ton of things in the future that are going to be uses for that dollar that I’m going to appreciate, and holding onto that dollar for now is a good choice.

In other words, I generally feel “rich” when I am frugal in the moment, because I’m considering the wide range of possibilities available in my future. When I go through the grocery store, make a bunch of little frugal choices, and think to myself, “Wow, I really didn’t spend much on these ten bags of groceries” at the checkout, I feel great because I’m thinking about how much I didn’t spend and how that money will be able to be used on other things that are important to me in the long term.

In other words, being frugal makes me feel rich.

At the same time, spending money on impulsive stuff often leaves me feeling poor. Often, because it was an impulsive buy, it wasn’t something that I deeply wanted. It was just something that I talked myself into buying right at the crest of my desire for that item or experience, when that wave came on quickly and will fade just as quickly. An hour later or a day later, that purchase will either be regretted or forgotten (at which point it’ll be regretted when I review my credit card statement). It is that feeling of regret, knowing I used the money on something unimportant when there are many more important things in my life, that leaves me feeling poor.

There’s another important aspect to my sense of “rich” and “poor”: time use.

Time Use and Feeling Rich

The single thing that makes me feel the most “rich” in my life is a big block of uninterrupted time to pursue something I’m doing solely for my own enjoyment and enrichment.

A whole afternoon to curl up with a book feels rich to me. A game night with old friends where we play some long strategic game and laugh and think and converse and strategize with each other feels rich to me. A day spent hiking in the woods feels rich to me. An afternoon making a batch of homebrew feels rich to me.

The idea that I could have a lot more of that in my life is intoxicating, and it’s a huge motivation for me to aim to retire early.

When I feel “poor” is when I’m so strapped for time that I can’t make time for those things that really matter to me. In fact, it is often in those “poor” moments (in terms of time) that I make my most foolish spending decisions, because I want to feel “rich” and I want to feel like my life has choices and possibilities, and when my time is tightly restricted, I don’t feel that way.

So, for me, time management is actually a form of frugality. It’s a way to make myself feel “rich.” Often, I tightly schedule my time during the week while dangling a big block of time or two during the weekend to enjoy some hobby or personal growth project, and that intense feeling of “richness” that I get during those blocks of time on the weekend really make me feel that I have a “rich” life. That sense of a “rich” life carries forth to frugal choices throughout the week and an adherence to some pretty overstuffed days in terms of things I’m trying to get done.

One thing I’d strongly suggest to anyone who feels “poor” is to massage your schedule and your responsibilities so that you have some blocks of time to do things that you personally care deeply about. Give yourself a chunk of time each weekend to read or to work in the garden or to spend time in the wood shop or whatever it is that makes you feel joyous and happy and alive and in the flow. Block that time off and make it sacrosanct. If you’re wired anything like me, it will make you feel richer.

“Poor” Choices Aren’t Always Poor

I might be wrong here, but I think another aspect of what Dana is talking about is that she feels “poor” when she’s always choosing low end brands, which have a lower perception of product quality than higher end brands. It feels like you’re always going “cheap” and that “cheapness” is degrading your quality of life by a thousand small cuts.

My solution to this has been twofold.

First, I usually buy store brands, but occasionally I buy a name brand (usually with a coupon) and try to assess if it’s genuinely better at its job than the store brand. The vast majority of the time, I can’t detect a difference. When I can tell a difference, it’s not always in favor of the name brand. Even when the name brand is better, it’s not usually worth the price difference. When I come upon situations where the name brand really is significantly better, I buy that name brand. This used to be the case with trash bags until the store brand drastically improved in quality (I actually think the store brand I use is the same as Glad with a different color draw string).

Second, I read Consumer Reports and often follow their “best buy” recommendations. The above strategy works for nonperishable foods and household supplies; Consumer Reports usually guides me for bigger purchases. Very often, I buy their “best buy” item when I need an item of a particular type, particularly if I can find it on sale. Those items tend to offer incredible “bang for the buck.”

When I know I’m buying a good product, then I don’t feel “poor” for having bought it, even when the price I’m paying is a lot lower than the “premium” version.

The catch here, of course, is that this requires some time and thought. Often, when we’re making purchases, we haven’t done all of that homework. We’re relying on other cues, like our familiarity with the name brand, the marketing on the label, and even the price (because the more expensive one must be better, right?). In that situation, if we choose the inexpensive version, it can feel like we’re choosing low quality to save a buck, and that can end up feeling like death by a thousand cuts.

There’s an overriding theme in all of this. Can you pick it out?

The Power of Introspection and Thinking

In almost all of these cases, that sense of feeling “poor” because you’re buying the cheap product is overcome by thinking about it carefully outside of the moment.

You can think about what your big goals are and what you’re working for.

You can think about how relatively unimportant this little purchase is in the big scheme of things.

You can think about your time use and whether you’re just wanting to buy out of a desire to feel “rich” because you’re strapped for time.

You can investigate whether a particular purchase or product is actually one that returns a lot of value to you for the money.

All of those factors center around thought and research and introspection outside of the moment when you’re making that purchase. If you’ve done those things and reflected on them, you start to internally realize that frugality actually means giving up something trivial for something more valuable. It’s only when you don’t do that thinking that you can feel that frugality is doing the opposite.

Frugality should never be about sacrificing something genuinely valuable to you. If you’re doing that, you are making “poor” choices.

Rather, a big part of frugality is figuring out which things are actually of genuine value to you. Trust me, choosing store brand oat circles over Cheerios is not an issue where I’m losing genuine value in my life. Where I lose genuine value is when I can’t spend a few hours reading or when I’m not able to retire until I’m old and infirm or that I can’t afford to buy something that I’ve decided is genuinely meaningful in my life.

In the end, if a sense of freedom of choice is what makes you feel “rich,” step back and look at your choices more carefully outside the heat of the moment. Which choices really bring more value into your life? When you’re sure about a particular choice, start doing it in the more meaningful way.

My belief is that if everyone did this, a lot of people would be far more frugal, and a lot of people would be buying store brand oat circles rather than Cheerios. That’s because for most people, the source of genuinely feeling “rich” in life doesn’t come from our minor spending decisions. Those minor decisions just feel more important in the moment and are often nudged to feel that way by good marketing. Step back and realize that the kind of products you buy at the store, for the most part, don’t really matter in terms of living a truly “rich” life or a “poor” one, then make your choices accordingly.

Good luck!

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Cancer Patients Can Now Defer Student Loans Without Accruing Interest

During the height of my three-year battle with breast cancer, a diagnosis that required one dozen surgical procedures, eight months of chemotherapy, and eight weeks of radiation treatment five days a week, I was scraping to get by on disability payments and whatever odd jobs I completed when my energy allowed.

Needless to say, I wasn’t saving a dime for retirement during those three years (which is worth a discussion of its own), and I wasn’t paying off any of the bills I had accumulated prior to the diagnosis. Chief among those debts that I shelved were my graduate school student loans amounting to about $27,000.

In order to survive and still put food on the table for myself and my son (full disclosure: I am a single mom), and keep a roof over our head, I opted to defer my student loans for the duration of my treatment due to economic hardship. It was a decision that set me back tremendously — because while I wasn’t obligated to make monthly payments during those years, I was still racking up thousands of dollars in interest on the loans.

While I had little choice about the path I took, it seemed to me at the time that there should be a better option for people in my situation.

The good news is that there now is a better choice. As I was scrolling through the news recently, I came across a press release from Congressman Ed Perlmutter’s office that stopped me in my tracks.

The headline of the press release was “Cancer Patients Now Able to Defer Student Loans While Receiving Active Treatment.” It went on to note that such patients can defer their loans without accruing interest, including a six-month grace period after completing treatment.

It was as if someone had read my mind, and likely the minds of thousands of other cancer patients who have experienced the exact same challenge I did.

According to the release, the legislation was developed to provide desperately-needed financial peace of mind to patients battling cancer. And it has already been signed into law. (I had to reread that part of the press release at least three times to convince myself this was indeed real and I hadn’t misread or misunderstood something.)

Known as the Deferment for Active Cancer Treatment Act and introduced by Reps. Ileana Ros-Lehtinen (R-FL) and Perlmutter (D-CO), the legislation was signed into law in late September. Here’s what you need to know.

The Key Details

It has long been the case that individuals are allowed to defer student loan payment for various qualifying reasons such as going back to school, joining the armed services, or looking for a job, but cancer treatment has never been among the reasons one could qualify for deferment.

The new legislation enables individuals who are diagnosed with cancer to defer payments on federal student loans while actively receiving lifesaving treatment without interest accruing during the deferment period.

It also provides a six-month grace period after cancer treatment has finished, giving patients some much needed time to get back on their feet. (On behalf of cancer survivors everywhere – thank you for understanding that it takes time to get reestablished.)

Unfortunately, there isn’t much more information available about the new measure at this time. The specifics of the bill have not yet been posted online. Perlmutter’s director of communications, Ashley Verville, told me in an email that additional details are still being finalized.

“We are still working to try and figure out exactly how the program will work and the financial impact,” she said, adding however that individuals can start taking advantage of the program immediately and should contact their loan servicer.

Discussions about introducing the bill began a while back, when Ros-Lehtinen, who plays on a softball team coached by Perlmutter, approached him about introducing the measure. Perlmutter immediately signed on.

“It is a common sense, bipartisan solution to address the rising number of student loan defaults amongst borrowers by empowering patients to continue repayment after they are back to full health,” said Perlmutter via email. “I appreciate the work of my colleague Rep. Ros-Lehtinen on this legislation and her work to provide this much-needed assistance to cancer patients throughout our nation.”

Who Stands to Benefit

Nearly 70,000 young adults are diagnosed with cancer each year, according to the the Ulman Cancer Fund for Young Adults. What’s more, according to the same organization, a cancer diagnosis between the ages of 15 and 39 is nearly eight times more common than such a diagnosis during the first 15 years of life. Today cancer is the leading disease killer among 20- to 39-year-olds.

But to be clear, it’s not just those 39 and under who have both student loan debt and cancer — countless others will benefit, too. I was diagnosed at age 42. While 36% of millennials carry student loans, according to a recent survey by AARP, so do 19% of Gen Xers, with an average balance of $39,000.

Kate Yglesias Houghton, outgoing president and CEO of Critical Mass: The Young Adult Cancer Alliance, acknowledges as much.

“Every American no matter their age deserves the same opportunity to survive and thrive after a cancer diagnosis,” she said. “Thanks to the leadership of Representatives Ros-Lehtinen and Perlmutter we have finally broken through and are working with policymakers to remove the unique barriers – like student loans – faced by young adults after a cancer diagnosis.”

While the new bill may have been adopted too late to help me, I can’t help but be relieved for those who follow behind me, who are still fighting cancer, or who are yet to be diagnosed. A cancer diagnosis is devastating enough, there’s no need to unnecessarily compound the stress with skyrocketing debt. This new program alleviates at least one part of the battle.

More by Mia Taylor:

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Questions About Checking Luggage, Funeral Expenses, Altruism, Roth IRAs, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. What is wealth?
2. Logistics of multiple savings goals
3. Cost of unexpected funeral
4. Changing goals
5. Shipping items verus checking luggage
6. “Get what you pay for”?
7. Retire early for altruism?
8. Can’t reduce debt
9. Emptied out 401(k)…
10. “Mega backdoor Roth”
11. Summer things on sale
12. Holiday gifts without reciprocation

My youngest son is quite skilled at chess and carries around a pocket chess set with him. While he’s not a chess prodigy by any means, he’s quite skilled at the game and can give me a run for my money – and I played chess fairly seriously for years.

It’s been fun watching him inch through the stages of it, from learning the rules to learning the joy of playing to learning the joys of making a really good move to now being on the precipice of wanting to study great games and learn opening sequences.

My son and I are having great conversations, we’re thinking a lot, and it’s a completely free activity (aside from the cost of a simple chess set). It’s wonderful!

On with the questions and comments!

Q1: What is wealth?

What is wealth?

Money is a tool. It is not – nor can it ever be more than a tool. It’s great to have some. You can probably survive with less. But nice to have more. If you’re driving a car, it’s great to have a spare tire in the trunk. The spare tire is not good for much else. Oh, it can become a rope swing or someone’s version of a lawn ornament, but it’s best use is as a tire when you need one. It’s a tool. If you think it’s really anything but a tool, you are imbuing it with lots more traits than it can possibly have. It’s a tool. Money can’t make you happy. What that particular tool can buy you might make you happy for a while, but the money is a tool. If it buys you a healthy diet and good healthcare, you are using that tool really well. If you use it to buy only beer, soda, and candy – well, you’ll probably be gone before the money is. Lots of tools outlast their owners. No amount of money can give us physical or mental health. Using the tool of money properly can give us a great sense of security that will bolster both our mental and physical health and create the general sense of well being that most people would define as ‘wealth’.
– Jaden

This comment comes from a very long time reader who has written in many times over the years, and I felt it was such a great description of what wealth is that I wanted to share it with you all.

Money is a tool that enables you to live the life you want. If you want a life that’s filled with convenience store purchases but lacks a stable retirement, then spend your money on convenience store purchases and don’t put money away for retirement. It’s that simple.

The challenge we all face is overcoming the short term things we’re tempted to use our money for in order to adequately fund the long term things. Can we overcome the temptation for a treat right now to adequately fund our retirement forty years from now? It’s fairly obvious from a detached perspective which one is better, but in the moment, it’s not nearly as clear.

Q2: Logistics of multiple savings goals

I have a problem with putting all savings in one savings account, and then planning to budget some of that for car, vacation, a mortgage etc. it’s difficult to keep longer, medium and short term savings and non monthly expense reserves in just one pot. This also also interesting in terms of new innovative banking accounts that let you create virtual sub spaces for the savings accounts. Haven’t read much quality debate around that. What do you think?
– Jerry

There are a number of online banks who do exactly this, like Capital One 360, for example.

I think that it’s a good tool for helping people organize their finances. When you log on to online banking with a bank that has a service like that, you can clearly see the different places where your money is.

Still, it’s honestly not much different than maintaining a spreadsheet where you track the amounts put aside for different goals.

Basically, a spreadsheet like that would have a top line containing the full balance of your savings account. Under that, you’d have lines that describe each of your savings goals and the “balance” of each one. At the bottom, you have a remaining total, which consists of a formula that takes the total balance and subtracts from that the amount in each of your savings goals. So, it would look something like =B1-B2-B3-B4, if cell B1 had your total balance, and B2 through B4 had the balance of each of your goals. You could update your actual savings account balance regularly and then adjust the amount saved for each goal manually until the remnant is $0.

Q3: Cost of unexpected funeral

I’ve come across a situation that I am stuck with and I think you might be able to help. I have a grandchild who became a ward of the state last fall. We are unable to care for him. After bouncing through some foster homes, he eventually committed suicide. We are his only involved relatives, so we helped make the final arrangements, knowing no one else would. The funeral home was awesome. They gave us a bottom dollar price. Half of that came in from generous friends and co-workers. Now we are looking at the last half. It’s really not all that much, but we are struggling as well. We are approaching retirement age and have no real nest egg built up. I’ve looked all over for public assistance (then I was told that paperwork had to be filled out before the funeral took place – and it was never brought to our attention!). This child was in the care of DHS. Should they not be responsible for the cost? Any ideas?
– Jane

DHS might seem like they would be morally responsible for the cost, but they may not be legally responsible. You could contact a lawyer, as this might be a case that a lawyer who focuses on issues like this might look at pro bono.

Still, the first thing I’d do is contact the funeral home again and ask whether they’re aware of any additional programs that you might be eligible for, just to make sure. They might yet know of something you can use to help pay it off in a situation like this.

I don’t know of a magic solution that will fix this. If neither of the two solutions above help, just talk to the funeral home about a payment plan with tiny monthly payments. That’s about all you can really do.

Q4: Changing goals

Ten years ago, I was single in my mid 20s working at a really high stress job that paid super well. I was banking everything I could and elsewhere and living in my car, using work facilities for everything (there was a gym, a laundry, and a cafeteria). My goal was to fund a great startup idea out of pocket.

Now I am married with a kid and another on the way. I quit the stressful job and now work as IT director for a school district which is busy but not nearly as high stress. The money I saved up turned into a house. I wouldn’t do that startup idea if my life depended on it though I’d sell my business plan if someone wanted to buy it. Saving for retirement in a typical 403(b) and probably won’t retire until I’m 60 or 65.

Moral of the story? Things change. Don’t lock yourself into some grand financial plan for the future because who knows what your life will look like a decade from now. Save money for retirement but keep some of it flexible, too.
– James

Fifteen years ago, I lived in a tiny little apartment and had debt totaling multiple years of my salary which I thought I’d never pay off. I’ve been debt free for most of a decade now.

I didn’t have any kids. My wife and I weren’t sure we wanted any kids any time soon. Our oldest (of three) just celebrated his thirteenth birthday.

Ten years ago, I worked in a research lab in a position I thought I’d probably work in for the rest of my life. Now I’m a freelance writer.

Things change. The better your financial foundation is – no debts, solid resume, decent job – the easier it is to transition right along with those changes.

Q5: Shipping items verus checking luggage

I’m about to fly with my family to visit extended family for six days for Thanksgiving and “Christmas.” A friend told me it’s cheaper to ship a box with clothes and other travel items in it than to check a bag at the airport and less hectic too. Checking prices seems comparable. Is it worth it to ship a box instead of checking luggage?
– Alex

In terms of headache, I’d far rather ship a big box of clothes and other items than try to check luggage at the airport. It’s not even a question. Just putting everything in a box at my convenience, dropping it at UPS at my convenience, and having it already at the destination and in my room when I arrive? Compare that to trying to get luggage through an airport with kids in tow, checking a bag rather than using express check-in, and then waiting at the luggage carousel (this time with tired kids) for the bags to (hopefully) appear.

For me, if the costs are close at all, I ship the clothes and other items in a single box. I do it a week or so in advance of the trip so that I can use the low-cost options for shipping and I have enough time to verify that it arrived safely.

It sounds like you’ve already done the price comparison and the price is similar. If that’s the case, load up a box tonight and ship it soon. That’s my advice to a parent with kids.

Q6: “Get what you pay for”?

How accurate do you think the old maxim of “get what you pay for” is accurate?
– Alice

I think it’s partially true and partially false.

In general, the best version of a particular item will not be the cheapest version and that, in general, if you pay more you will usually get a better items. The best version will probably be one of the more expensive versions, though not always. At the same time, the most expensive option is not always the singular best option.

What matters more than anything is research and finding out which is truly the best item and, perhaps more important, which is the best “bang for the buck” item. If you can get an item that’s 90% as good as the very best item at 50% of the price, that’s probably a wiser purchase than the best item at full price.

As I mentioned last week, I have some amazing socks that cost about as much as ten pairs of cheap socks at the store. Are they worth ten times as much? That’s debatable. However, if I find those expensive socks on sale, they’re definitely worth it for me because I won’t be replacing socks very often.

At the same time, for a lot of household goods, we buy store brand versions. They do the job perfectly well and fulfill exactly what we need from the item.

The moral here? Do your homework and be patient for sales.

Q7: Retire early for altruism?

Do you have any thoughts on this article about Vicki Robin? She’s one of the authors of Your Money or Your Life and she seems to think that the reason to retire early is to be charitable and altruistic. Thoughts? https://amp.businessinsider.com/purpose-of-early-retirement-giving-back-altruistic-behavior-2018-11
– Kevin

I think that anything you do in life has a lot more value if you have a purpose behind it. What’s your purpose in going to work? The more clearly you understand that purpose, the more tolerable work will probably be.

The same thing is true if you retire early. How are you going to fill your days? If those days have a purpose and you’re doing something that’s meaningful for you, retirement is going to have far more value and you’re going to find far more happiness there.

Is altruism or charitable work the answer for everyone? Probably not, but I think it’s a good answer for a lot of people, enough so that people should investigate it.

More than that, I think that if you’re considering retirement at any age, you should start thinking seriously about what your purpose and meaning in life is and what you can do most effectively with your newfound abundance of time to achieve that purpose. What are you going to do to use that time and not just let it pass by you?

Q8: Can’t reduce debt

I do not make enough money to reduce my debt even if everything goes perfect. My pay is eaten by rent and utilities and minimal groceries at the store. I managed to get out of payday loan cycle by selling most of my possessions but can’t get further ahead no matter what I do.
– David

First thing: put some loans in forbearance. If you’re struggling this hard, contact some of your lenders and discuss forbearance with them, starting with any student loans. This basically means putting those debts on pause for a while as you take care of other ones. You’re likely eligible for this because I’m almost sure you’re making a relatively low income.

Second thing: if you can, move back in with your parents for a while. Yes, this might seem like a step backwards, but it gets the cost of rent off your back for a while. You can give your parents what you were paying for utilities and then channel the rent money into paying off debts rapidly.

Third thing: if at all possible, seek out a temporary second job, especially during the holiday season. Use that income to maybe knock a debt out of the way, freeing up some breathing room.

Doing what you’re doing now isn’t going to work. You’re going to have to try some new approaches.

Q9: Emptied out 401(k)…

Three years ago before I knew what I was really doing I emptied out my 401(k) to pay off all of my loans. While I am debt free now, I’m now 37 with almost nothing saved for retirement and I really regret it. Don’t empty out your 401(k) even if it seems like it would help!
– Jeffrey

I do agree with this sentiment. Emptying out a 401(k) should be a last resort move. If you need to get rid of debt quickly, just cut the contributions for now. Don’t empty out the account.

Still, you shouldn’t feel that much regret. Right now, you have zero debt. You should, in theory, have the capacity to dump a lot into your 401(k) by making large contributions going forward. You have a lot of financial flexibility right now.

Yes, your net worth would likely have been much higher had you not touched anything, but that’s water under the bridge. You’re 37. You’re debt free. You have a decent job. You have a lot of options. Don’t dwell on the downside.

Q10: “Mega backdoor Roth”

I’ve seen some mentions of a “mega backdoor Roth” on other sites but it was barely explained with tons of jargon. You are good at explaining things simply. How does a mega backdoor Roth work?
– Daniel

A “mega backdoor Roth” refers to a strategy where you’re basically able to move money from a 401(k) into a Roth IRA using a multi-step process.

When you contribute money to a 401(k) through your workplace, this is usually a pre-tax contribution. It’s taken out of your paycheck before taxes are calculated.

However, you’re also legally able to make after-tax contributions to a 401(k), provided your plan allows it (about half of 401(k) plans do). If you can do so, you can make additional contributions to your 401(k) using after-tax money – money from your paycheck after taxes are calculated and taken out. These contributions won’t help your tax returns this year, but they will get more money into your retirement savings.

What’s the benefit? First of all, it gets around the contribution cap for a 401(k), if you’re bumping up against that. You can only contribute about $18,000 in pre-tax money to a 401(k), but you can contribute much more if those additional contributions are after-tax.

The “mega backdoor Roth” also comes into play here, because the IRS allows you to roll over those after-tax 401(k) contributions straight into a Roth IRA if your plan allows you to do so (this is called an in-service distribution) or you’re changing employers. This allows you to bypass the annual $5500 contribution limits on a Roth IRA. The big advantage of doing this is that, if the money is in the Roth IRA, you won’t have to pay taxes on the gains on that after-tax money, but if it stays in the 401(k), you will.

While this is a nice trick, it’s not quite as effective as simply contributing straight to a Roth IRA directly or contributing to a 401(k) pre-tax. It’s only useful if you’re wanting to contribute many tens of thousands to retirement, and those people are often over the income limit for Roth IRA contributions.

It’s a strategy useful for extreme savers and high income earners who want to hedge their bets regarding taxes in retirement. For the vast majority of people, it’s a novelty, but not directly useful.

Q11: Summer things on sale

This is a great time of year to watch your local hardware store for summer nonperishable but consumable supplies like wood chips and charcoal and bags of soil. They’re often trying to get rid of the stuff and mark it down like crazy to make room for things like bags of ice melt and show shovels. If you garden or have a big yard or a charcoal grill look at the clearance section of your hardware store right now.
– David

This is some great advice, though that clearance season blew through northern Iowa a few weeks ago. That’s because we need the ice melt awfully early around here.

I did manage to buy some organic fertilizer on clearance a few weeks ago. It was spread immediately on our garden as we were winterizing it and another couple of bags were put into storage for the winter.

Still, if you live in most of the country and are a homeowner, it might be a great time to take a peek at the clearance section at your local hardware stores, especially if you have some good dry storage space.

Q12: Holiday gifts without reciprocation

In June, my youngest brother lost his job. He sent everyone in the family an email this past week saying that he couldn’t afford to buy anyone holiday gifts and requested that no one buy him any gifts. I still want to give him a gift. I don’t feel that the holidays are about what you receive, but what you give. But then I feel like I’m violating his request. Thoughts?
– Angela

If you feel like giving him a gift, give him a gift. Flat out tell him that it’s because you love him and it is part of a great holiday for you that you get to see him open a few gifts and that him not giving gifts is completely fine given his current situation. Give him a hug and tell him that you love him, no matter what, and that having him here with everyone at the holidays is the real reason you came, and opening a few presents together like when you were kids is something really important to you.

His request for people to not give him gifts is likely so that he doesn’t have to feel guilty about receiving something when he doesn’t have anything to give. He may still feel guilty about your gift even with the above explanation.

A good compromise might be to get him something relatively small, or make something for him so that he doesn’t feel that you went out and spent money on him.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

The post Questions About Checking Luggage, Funeral Expenses, Altruism, Roth IRAs, and More! appeared first on The Simple Dollar.

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Monday, November 12, 2018

Why I Trust Vanguard With My Investments

Whether I’m opening an IRA, brokerage account, or 529 savings account, or I’m simply choosing investments within a 401(k) or other investment account, I have thus far exclusively chosen Vanguard for my personal investments and I almost always recommend that my clients use them as well.

To be sure, I’d be perfectly comfortable using accounts and funds offered by plenty of other companies. Providers like Betterment, Schwab, Fidelity, iShares, TD Ameritrade, and others can all be good choices.

Some of those other providers even offer funds that cost less than what Vanguard offers, which is hugely important given that cost is the best predictor of future returns.

Still, Vanguard is almost always my first choice, and the main reason why comes down to trust.

Why I Trust Vanguard

Two of the first actions ever taken by Vanguard illustrate perfectly why they have earned my trust.

John Bogle founded Vanguard in 1975 with a unique ownership structure. Rather than being publicly owned, or being owned by a small group of partners, the company was owned by its mutual funds, which in turn were owned by the people purchasing shares in those mutual funds. That ownership structure was purposefully chosen so that business profits could be passed on to regular investors in the form of lower fees, rather than going to third-party shareholders.

The next year, in 1976, Vanguard launched the First Index Investment Trust, which was the first index fund ever made available to regular investors. This fund eventually became the Vanguard 500 fund, which is now one of the biggest and least expensive mutual funds in the world.

Those two events set a precedent that has been followed throughout the years. They signaled a commitment to minimizing fees, a commitment to index investing, and a commitment to maximizing the benefits for the everyday investor.

And that, really, is why I trust Vanguard over every other investment provider. Because they’ve followed through on that commitment year after year, I trust them to do the right thing.

Those other investment providers? Again, many of them can be used well, and in some cases can be used to minimize fees even further. But I don’t have the same trust in any of them that I do in Vanguard.

Let’s take Fidelity as an example. They recently introduced the industry’s first ever zero-fee, zero-expense ratio mutual funds, which is a big deal and is not something that Vanguard offers. They also offer many other index funds that are competitive with Vanguard in both price and quality.

But they also offer high-priced, actively managed mutual funds. They also charge you $50 to close an IRA, something that costs nothing at Vanguard. And they offer two types of target-date retirement funds, some of which are index-based and low cost, and some of which are not index-based and cost much more.

With Vanguard, I trust that there’s no bait and switch. With some of those other providers, I know that at least part of the reason they’re offering these low-cost funds is to get you in the door with the hope that they can eventually sell you something more expensive.

Given that investing is a long-term endeavor, that trust matters to me. While nothing is ever certain, I’m confident that Vanguard will continue to put my interests first.

The Downsides to Vanguard

Despite all the positives, there are some downsides to Vanguard that are worth mentioning.

The biggest is the fact that Vanguard mutual funds have relatively high minimum investment requirements. Their target date retirement funds all require $1,000 to get started, and almost every other mutual fund requires at least a $3,000 initial investment, though their ETFs do not have a minimum investment requirement.

In contrast, many other investment providers either don’t have a minimum investment or have a much lower bar to clear. Fidelity, for example, offers many funds with no minimum investment requirement, and Betterment also allows you to get started without any minimum balance.

If you’re just starting out and don’t have much to invest, you may be better off using another investment provider, at least for a while.

The other downside is simply the fact that you can, in some cases, find lower cost investments elsewhere. The difference is usually very small, but it can be a little more significant if you’re investing smaller amounts of money.

Fidelity’s new zero-cost mutual funds are a good example, though not the only one. Their Total Market Index Fund is free, compared to 0.14% per year for Vanguard’s Total Stock Market Index Fund (VTSMX) on investments up to $9,999 and 0.04% per year once your balance reaches $10,000.

On a $5,000 investment, that 0.14% difference means that you would pay an extra $7 per year to use Vanguard’s fund. That’s certainly not going to make or break your investment return, but it’s still something to be aware of.

It All Comes Back to Trust

None of this is to say that Vanguard is always the right choice or that you personally should always invest your money with Vanguard. There are many factors that go into choosing an investment provider and it’s impossible for me to tell you what the right choice is for your personal situation.

But when it comes to my personal investments, and typically those of my clients as well, Vanguard is the company I trust more than any other. They were founded with the mission of serving everyday investors and they have stuck by that mission ever since.

And when it comes to my family’s financial future, that trust means the world to me.

Matt Becker, CFP® is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families.

More by Matt Becker

The post Why I Trust Vanguard With My Investments appeared first on The Simple Dollar.

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Sunday, November 11, 2018

Walmart vs. Whole Foods: Which Is Cheaper for Organic Food?

Organic foods don’t have to be a luxury, but they aren’t always cheaper in stores that typically offer a discount.

It’s been roughly four years since Walmart began pushing organic food at its U.S. stores. The discount store has attempted to lure more customers by increasing its organic offerings and taking a more upmarket approach to food in general.

In short, it wanted its grocery department to be a less-expensive Whole Foods.

What it didn’t expect was Whole Foods becoming an organic Walmart. Last year, Amazon bought Whole Foods for more than $13 billion and vowed that lower prices would follow. They did, for Amazon Prime members, but consumer advocates say they’ve seen little downward pressure on Whole Foods prices.

But before you make your uncle’s lame “Whole Paycheck” joke about the store’s pricing, just consider what a supposed “discount” chain like Walmart charges for organic goods. While consumer advocates put more than 100 items in their Whole Foods basket and compare prices by year, we picked 12 staples and browsed the aisles at both Whole Foods and Walmart. If you think you’re always getting a better deal at Walmart, you may want to check our receipt.

PEANUT BUTTER

This is one of the biggest problems we’ve encountered with Walmart’s organic section: Not a lot of cheaper store-brand items compared to Whole Foods’ vast 365 Everyday Value offerings. In this case, a jar of Adams costs roughly 27 cents an ounce compared to 25 for Whole Foods’ cheapest organic offering.

SHARP CHEDDAR CHEESE

This is one of those categories that made Whole Foods popular in the first place: Snacky, high-end foods you want more often than you need. In this case, however, Walmart comes out 10 cents less per ounce than its Whole Foods competitor. If you’ve got cravings, Walmart may be the better choice for protecting your budget.

BABY CARROTS

That said, if your munching impulses skew healthier, Whole Foods’ store-brand snack-sized carrots come in more than 28 cents per pound cheaper than Walmart’s.

EGGS

  • Walmart: Marketside Organic Large Brown Eggs, $3.97 for 12
  • Whole Foods: 365 Everyday Value Organic Large Brown Eggs, $3.99 for 12

This is what we saw more often than not: Whole Foods and Walmart offering near-equivalent pricing on the same products. Two cents isn’t a whole lot of savings, especially when you’re trying to argue that your competitor is out to steal your whole paycheck.

ICE CREAM

Humboldt is Walmart’s most value-priced organic ice cream, and it’s still nearly three cents per ounce more expensive than the Whole Foods version. In fact, a recent Walmart sale had to roll back the price of Humboldt pints to $2.48 just to reach parity with Whole Foods.

COFFEE

Without question, Walmart’s 41 cents per ounce is a better deal than Whole Foods’ 46. That said, this is Walmart’s lone organic offering, with Whole Foods fielding an entire line of house-brand coffees. In fact, the ground versions of Whole Foods’ coffees cost between 35 and 40 cents per ounce, or less than Walmart’s one Seattle’s Best variety.

MILK

It’s a difference of less than a cent per ounce between the two, but it still works in Whole Foods’ favor. Considering that milk is still nominally a staple, even with dairy consumption decreasing overall, those fractional cents can add up from week to week.

EXTRA VIRGIN OLIVE OIL

Those two sizes represent the largest and cheapest each store offered, and Walmart’s 23 cents per ounce still worked out to more than Amazon’s 21 cents an ounce. If you substituted this for butter a long time ago, buying it in the closest thing Walmart has to bulk isn’t saving you any money over buying it at a fraction of the size at Whole Foods.

BABY SPINACH

When it comes to triple-washed salad spinach, the price difference is pretty much a wash, too. Although Whole Foods comes in far cheaper at the 5-ounce size ($1.99 compared to $3.46 at Walmart).

SEEDED BREAD

That Walmart loaf is the only organic loaf it offers under its house brand. Whole Foods, meanwhile, offers several other options that all come in roughly 20 cents less per loaf than their Walmart counterpart.

SPAGHETTI

This is one of the cheapest items – organic or otherwise — you’ll find in any grocer, so it’s no surprise that Whole Foods and Walmart come in at about the exact same price. Yes, Walmart offers a bit more per package, but both are about 7 cents per ounce, so there’s no real “deal” to be found here.

PASTA SAUCE

Again, Whole Foods is marginally less expensive here. Sure, it’s by less than a tenth of a cent per ounce, but that’s still a significant margin for an upscale, niche food store going up against a ubiquitous discount giant.

The Verdict

After that little shopping trip, we aren’t sure if “Whole Paycheck” is the hoax it appears to be or if Walmart’s organic groceries are just far pricier than its reputation suggests. However, it’s clear that after Walmart’s foray into organic and Amazon’s Whole Foods shopping spree, the value of shopping Walmart over Whole Foods is more about perception than it is about price.

More by Jason Notte:

The post Walmart vs. Whole Foods: Which Is Cheaper for Organic Food? appeared first on The Simple Dollar.

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