Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Proprietary System Shows Stock Market Rally Could Extend Higher - 23rd Jul 18
The Global Cannabis Market Is Set To Explode - 23rd Jul 18
The Death of the US Real Estate Dream - 22nd Jul 18
China is Now Officially at War With the US and Japan - 22nd Jul 18
You Buy the Fear in Gold - 22nd Jul 18
Trumponomics Stock Market 2018 - The Manchurian President (1/2) - 21st Jul 18
The Death of Japan's Real Estate Dream - 21st Jul 18
SMIGGLE Amazing Mega Shopping Haul, Pencil Cases, Smigglets and Giant Back Packs! - 21st Jul 18
Cayton Bay Beach Caravan Park Holiday - What's it Like? - 21st Jul 18
Gold Stocks Investment Wanes - 20th Jul 18
Diversifying Your Stock Investing Strategies is Smart Investing - 20th Jul 18
Custom Global Stock Market Indexes May Be Sounding Alarms - 20th Jul 18
S&P 500 Just 2% Below Record High, But There's More Stock Market Uncertainty - 19th Jul 18
Stock Market Technical Picture - 19th Jul 18
Gold Market Signal vs. Noise - 19th Jul 18
Don’t Get Too Bullish on Gold - 19th Jul 18
Bitcoin Price Rallies to Upper Channel – What Next? - 19th Jul 18
Trump Manchurian President Embarrasses Putin By Farcically Blowing his Russian Agent Cover - 19th Jul 18
The Fonzie–Ponzi Theory of Government Debt: An Update - 19th Jul 18
Will the Fed’s Interest Rate Tightening Trigger Another Financial Crisis? - 18th Jul 18
Stock Market Investor “Buy the Dip” Mentality is Still Strong, Which is Bullish for Stocks - 18th Jul 18
Stock Market Longer-Term Charts Show Incredible Potential - 18th Jul 18
A Better Yield Curve for Predicting the Stock Market is Bullish - 18th Jul 18
U.S. Stock Market Cycles Update - 18th Jul 18
Cayton Bay Hoseasons Caravan Park Holiday Summer 2018 Review - 18th Jul 18
What Did Crude Oil - Platinum Link Tell Us Last Week? - 17th Jul 18
Gold And The Elusive Chase For Profits - 17th Jul 18
Crude Oil May Not Find Support Above $60 This Time - 17th Jul 18
How Crazy It Is to Short Gold with RSI Close to 30 - 16th Jul 18
Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18
Stock Market Uptrend Continues, But... - 16th Jul 18
Emerging Markets Could Be Starting A Relief Rally - 16th Jul 18
(Only) a Near-term Stock Market Top? - 16th Jul 18
Trump Fee-Fi-Foe-Fum Declares European Union America's Enemy! - 16th Jul 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

5 Key Steps For A Comfortable Retirement From Former Wall Street Trader

Personal_Finance / Pensions & Retirement Apr 22, 2017 - 01:35 PM GMT

By: John_Mauldin

Personal_Finance

BY JARED DILLIAN : “Are you good with money?” You hear that question a lot. But, what does it mean?

It means:

  1. Paying your bills on time
  2. Being able to put something aside
  3. Maybe investing it
  4. Fully funding your retirement accounts
  5. Retiring comfortably

It doesn’t matter what you do for a living or how much you make. I know people who have never made more than a five-figure income and are millionaires (true story—more on this later).


Financial Literacy

The funny thing about being good with money is that it doesn't necessarily mean being smart. I know plenty of dumb people who are great with money. I know certifiable geniuses who always seem to be broke. I do think there is a correlation with intelligence, but I think it is rather weak. Maybe even negative at the upper reaches of IQ.

Is it nature or nurture? Probably neither. It doesn’t seem to be passed down through generations. Some people are just born with it. Others are self-taught.

There are regional differences, too—credit scores are materially worse in certain parts of the country (like the South). Which implies that there is a cultural element to it (which is super interesting).

Source: creditnet

People lament the tragic state of financial literacy in this country. It is indeed tragic. But imagine for a second that President Trump would put aside a billion dollars for financial education. Basic financial literacy, balancing a checkbook, paying taxes, that kind of stuff.

Do you think it would do anything?

I don’t think it would.

I don’t think it prevents people from being bad with money, and the people who are good with it would probably have been good with it anyway. Doesn’t mean that teaching financial literacy isn’t a worthwhile goal, but you just have to be realistic about expectations.

So I think the reason most people read newsletters and articles like this is because they aspire to be “better with money.” (Of course, if you’re reading a newsletter like my weekly, The 10th Man (subscribe here for free), chances are you are already pretty advanced. We talk about some esoteric concepts, like trade policy and convexity and embedded short gamma.)

But today, I want to slow things down a little.

Step 1: Pay Your Bills on Time

I worked with a guy at Lehman who had a drawer full of unpaid cable bills. I struggle to see how that happens when you’re making multiple six figures. Seems a bit unmanageable to me.

A life hack I’ve discovered is that when I get a bill, I pay it immediately. I find that if I put it off for even a day, it gets buried in the pile of paper, and then I forget about it.

For sure, there is a time value of money, but when interest rates are super low, that argument doesn’t make any sense. What, are you going to cost yourself three cents a year? Just pay the bill when you get it.

Step 2: Put Something Aside

I don’t save as much as I used to, but I still save a lot. In the beginning, I had one motto:

Save until it hurts.

Most people spend and spend and then save what’s left over. Turn it around—save first and then spend what’s left over. You’d be surprised how creative you get about spending if you’ve already mailed the check to the mutual fund company (or the electronic equivalent).

This is easy to do nowadays with automatic withdrawals.

Most personal finance books say that you should save 5–10% of your income. I think you can be much more ambitious than that. 30% is a good target.

Just don’t do it at the expense of waiters and waitresses. Nothing worse than a bad tipper.

Step 3: Maybe Invest It

I say maybe, because investing isn’t for everyone. Most people are bad investors. Most people are better off with cash in a bank account or CD.

Present company excepted, of course!

But I stand by that statement. You can’t lose cash (as long as you are under the FDIC limit). Someday soon, we will have higher interest rates. There is this thing called interest on interest. You should read about it.

As for the people who want to invest, well, that is the point of The 10th Man. We all want to get better at it (including me).

Step 4: Fully Fund Your Retirement Accounts

This is just common sense. If the government is giving you a tax advantage to save and invest, you are a M-O-R-O-N for not taking advantage of it.

The only reason you would not take advantage of it is if you think there was some likelihood that the government would nationalize your savings—or force you to buy US government debt with it. The risk is not zero, but it is low.

Whether it’s a traditional IRA, Roth IRA, Sep IRA, 401(k), or other retirement account, max it out.

And if your employer matches your contribution and you still aren’t taking advantage of it, it is time to put on the dunce cap.

Step 5: Retire Comfortably

That’s the goal. The bigger question is: what do you want to do when you retire? Sit around and watch FOX News and get all paranoid? Chase a white ball around? Travel the world?

I actually haven’t gotten to Step 5 yet, because I don’t know what I want to do when I retire. A lot of people don’t like to work and are in a big hurry to stop. I like to work. So far, my retirement plans include buying a condo in Canada and having a private jet to take me back and forth (there is no other way to take all the cats).

People have been saying for years that Social Security won’t be around when I get older. Maybe, maybe not. I have an idea that it will still be around—it will just be funded through either higher taxes or more debt. But it won't be enough to live comfortably on.

What Will Your Retirement Look Like?

So, are you good with money? I hope so. Lots of people aren’t. They won't retire comfortably. They’ll retire—maybe not in poverty, but at some subsistence level that many people think will be undignified.

Is this anybody’s fault? Like, is there something we should be doing collectively?

I don’t think so. You can’t force people to make good financial decisions. You can’t even nudge them or educate them. Some people get it right, and some people don’t.

I made it a priority to learn about money when I was 22—and it became a passion. It can’t be a passion for everyone, but everyone should strive to be minimally competent. That should be the goal.

Get Thought-Provoking Contrarian Insights from Jared Dillian

Meet Jared Dillian, former Wall Street trader, fearless contrarian, and maybe the most original investment analyst and writer today. His weekly newsletter, The 10th Man, will not just make you a better investor—it’s also truly addictive. Get it free in your inbox every Thursday.

John Mauldin Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules