As a Modern Day Midas, you know that the U.S. is in the midst of a retirement crisis. Studies show 54% of all Americans have less than $25,000 saved for retirement, and only one third of American workers started saving twenty or more years before stopping work.
These numbers are frightening and frankly inexcusable. The good news, though, is that if you’re reading this blog, you have lots of time to avoid your own personal retirement crisis. And that’s actually, really, fantastic news considering how just how important the power of time is. So it’s time to get started.
These days, it seems like you can subscribe to just about anything. When I was a kid my favorite magazine subscription was Sports Illustrated for Kids (go ahead and laugh at me). I remember looking at the price on the cover in the grocery store – $3.99 – and looking at the subscription price – only $19.95 for 12 issues! What a deal.
You can extrapolate this logic to pretty much any purchasing decision (Why not super-size? It’s only 80 cents for another gallon of coke!) But it’s especially dangerous when you’re considering subscription services. If you’re like me, these days, you’re more likely to get a Netflix or Hulu subscription than SI for Kids, and lots of people do just that. I, in fact, have a Spotify Premium subscription, for which I pay the princely sum of $9.99/month.
A successful over-withholder
Tax season! Those two words probably bring tears of joy to your eyes…or maybe tears of boredom. For me it’s some of each.
Why tears of joy? Because, for the third year in a row, I am scoring a fat tax refund (I also get tears of boredom because filling out tax forms is about as fun as watching paint dry). That’s because I’ve over-withheld on my taxes all year. Each month, I’ve had more taxes taken out of my income than needed. But once I complete my tax return, I will get a check in the mail reimbursing me for the extra tax I paid.
Yes, The Modern Day Midas is back! After a lengthy hiatus, I have been inspired to continue writing about personal finance issues here on the blog. The source of my inspiration:
The other day, a friend sent me along this CNNMoney retirement calculator. He mentioned that his Mom was the source (which I very much approve of), and it had him thinking about how to fund his retirement. So, I started playing around on the calculator – and was surprised by some of the results. Lo and behold, reading the fine print of the calculator revealed four distinct issues that skewed the calculator’s output.
We recently discussed the trials and tribulations of the Real Housewives to illustrate a simple point: It doesn’t matter how rich you are, or how much money you’ve made. You can still go broke. Today, you’ll learn about a few of the most famous celebrities who blew through massive amounts of cash.
I hear lots of people say they don’t save money because they don’t “make enough.” The reality is you’ll never feel like you make enough, and if you make a ton of money, you can still spend it all, if you’re not careful.
That’s why I preach the importance of developing good money habits early in life. If you learn to save 15+% of your income when you make $12 an hour, you’ll definitely save even more when you make $120 an hour.
Some people never learn this lesson, though. Some people make millions and millions of dollars only to blow it on stupid things. And some stories of financial ruin actually make quite good yarns, even if there is an element of schadenfreude involved.
Allen Iverson, 2001 NBA MVP and 4-time scoring champion, earned over $154 million in his playing days from the NBA alone (that includes game time and practice). A.I. was known for his “independent” manner and occasional “bad” attitude.
David Bach, the author of “Smart Women Finish Rich” in the past decade coined a term called the “Latte Factor.” This term is also known as the “Latte Effect,” and the theory suggests that reducing small expenditures, and investing that money instead, will make you rich well into old age.
The poster child of the “Latte Effect” is, of course, that frothy, delicious cup of coffee we all enjoy. You might be disappointed to hear that I may be the poster child for how the Latte Effect affects the wallet. A quick glance at my Mint.com account shows that I spend an average of $41.98 at Dunkin’ Donuts each month. Yes, $41.98 every month!
If you currently invest money in the stock market, you probably want to get better at it.
Here’s a hint: be more like ladylike.
Empirical research shows that women achieve 1% better annual returns than men. That’s because women tend to be less confident in their stock picking abilities. Women are more aware of how difficult it is to spot market-beating opportunities.
For many people my age applying to graduate school, it’s decision time. You’ve received acceptances to one or more schools, and maybe even got into your dream school. If you applied to more than a couple schools, you’ve also probably gotten a scholarship offer somewhere. Now you have to decide what’s more important; a higher-ranked school for more money, or a lower-ranked school for less.
Well, what if I told you you could have your cake and eat it too? Graduate programs are more amenable than ever to tuition negotiation. This may seem like a foreign concept at first. Shouldn’t a prestigious university be above haggling over the price of admission? I’m here to tell you they’re not. In fact, tuition negotiation has become so normal that, if you’re not doing it, you’re financially far behind your future classmates. Average tuition paid is actually significantly lower than sticker price due to tuition discounting. If you’re paying sticker price, you’re actually paying tuition twice; once for you, and once for your classmates who pay less than the average.
If you’re like me, you’ve always wanted a cool car. Maybe you’ve had your eye on a BMW 7-series since you were old enough to drive, or you’ve always dreamed of your very own Mercedes E-class. I too have a dream car I want, but it is not the car I drive now. That’s because I discovered the 10% rule of car buying on Financial Samurai, another personal finance blog I follow. The 10% rule may seem a little stringent at first, but that’s probably because you are accustomed to the idea of financing a car.
Cars Are Not Investments
So why do we finance cars? A car is a depreciating asset, meaning that its value decreases over time. Cars depreciate really quickly; the average car loses 9% of its value right when you drive it off the lot, and another 10% just that first year. By the end of your fifth year of ownership, the average car is only worth 37% as much as you paid for it. Can you imagine your house losing 63% of its value in just five years?? Ultimately, cars are not investments, so you should not be paying interest to buy them.
Recently I wrote a post about the horrors of student loan debt. This kind of debt is very relevant for young people like myself. However, after I had gotten my thoughts out, I realized that my post was totally focused on the problem of student loans. I had neglected to explore the solutions of how you can deal with the debt. Solutions are what today’s post is all about.