• The Economic Bogeyman

    The economy is in the doldrums. We’re in a “lost decade.” The latest jobs report is terrible. The investment you have will never see the same returns again. You need to invest in gold to have your savings survive. No, wait, silver. No, wait, natural gas. There’s always an economic bogeyman out there. There’s always …

  • Looking at Frugality as an Investment

    As we’ve discussed before, an average American family with two children – a seven year old and a ten year old – spends $1,252 a month on food according to the USDA’s liberal food plan. If that family adopted just a few frugal practices and were able to switch their food spending to the USDA’s …

  • Applying Warren Buffett’s 7% Figure to Your Retirement

    A few weeks ago, I discussed a Bloomberg article about Warren Buffett’s projections for the stock market over the long term. Here’s a refresher on what Buffett said: “The economy, as measured by gross domestic product, can be expected to grow at an annual rate of about 3 percent over the long term, and inflation …

  • Is Every Purchase Merely an Investment?

    I’m going to use a long example of a car purchase to start off this post. Bear with me through it. Let’s say, for calculation’s sake, that a car has a life span of 200,000 miles before the maintenance issues catch up with it. For the last 40,000 miles of that drive, the reliability of …

  • Where Does 7% Come From When It Comes to Long-Term Stock Returns?

    Whenever I talk about investing in stocks, I usually suggest that you can earn a 7% annual return on average. That percentage is based on a few assumptions. First, I’m assuming that you’re investing for longer than ten years. That’s because in a given year, the stock market is very volatile. Some years see an …

  • Is This Everything You Need To Know About Financial Planning?

    Here’s an interesting article I discovered over at the Vanguard site about the basics of retirement planning. In it, the article quotes a section of Scott Adams’ 2002 book Dilbert and the Way of the Weasel: Everything you need to know about financial planning Make a will. Pay off your credit cards. Get term life …

  • Could Cyprus Happen Here? What Can We Do?

    Several readers have sent me rather concerned emails over the past week over the banking situation in Cyprus, where the government, facing a deep financial emergency, essentially took money from every bank account in the country, anywhere from 6.7% to 9.9% depending on the size of your balance. Here’s a detailed description of what happened …

  • The Investment Trinity

    Every investment you make requires you to balance three different factors. The first factor is risk. How likely is it that you’re going to get the return you expect over the next year, or the next five years? Generally, lower risk is better. The second factor is liquidity. How easy is it for you to …

  • How Does Inflation Affect a Mortgage?

    Karen writes in: My brother has argued with me that I shouldn’t make any extra payments on our mortgage because we’re losing money over the long term by making early payments. He says that with inflation at 3% and our money able to earn 1% at minimum in a savings account and more if we …

  • My Plan for Handling a Big Windfall

    Kelly writes in: What would you do if you won the lottery? Since I don’t play the lottery, I’ll answer this question under the assumption that instead I’m just receiving a very big inheritance from my unknown Uncle Rockefeller and Aunt Vanderbilt. The first step I’d take is to make absolutely sure all taxes on …

  • Does a “Savings Club” Account Work?

    Carol writes in: My local bank offers an interesting account each year. It starts on the first Saturday in January and the deal is that if you deposit the same amount each week for 49 weeks, they will make the 50th deposit for you and give you the money at the end of the year …

  • More Than 25 Percent of Americans Are Making a Huge Financial Mistake

    What mistake? According to the Arizona Star, more than 25% of Americans are raiding their 401(k)s to stay afloat. The only way this even looks like a good idea at all is if you’re looking only at the very, very short term. If you look beyond that, making this move is pretty clearly worse than …

  • Why I Never Use Stock Market Predictions to Invest My Money

    Let’s say, hypothetically, that I figured out some ingenious way to predict the stock market so well that I would always significantly beat the annual returns of the S&P 500. Every year, year in and year out, I could get a 30% to 50% return in the stock market. Assuming I’m not so altruistic as …

  • Financing to Make Money

    Connie writes in: My husband and I are in great financial shape thanks to living well below our means for many years. We are in our mid 40s and have $300,000 in the bank along with no personal debts. We’ve been thinking about buying an apartment building in our area. There’s a person who may …

  • An Example of Dividend Stock Investing

    Several people have written to me recently asking me how exactly investing in dividend-paying stocks actually works. I thought I’d walk through this in a step-by-step fashion so that people can see how it actually works. First, a few caveats. Dividend stock investing is something I do with only a small part of our investments. …

  • Investments, Taxes, and Worry

    Johnny writes in: The one thing that has kept me from diving into investing is fear of taxes. Every time I read about taxes and investments, it seems really, really complicated and I’m worried I’m going to be stuck with a big tax bill at the end of a given year even if I think …

  • Stomaching the Roller Coaster

    Jane writes in: I think you’re giving bad advice to people when you tell them not to put everything in stocks or real estate when making a long-term investment. Over a long period like ten years or more, you simply can’t beat the returns there. Long-term investing relies on several assumptions, two of which hinge …

  • Building an Investing Future

    John writes in: You’ve mentioned before how a person might slowly build up income-earning investments to provide an income stream for them. How would that actually work? Let’s say I can squeeze out $100 a month for this. What would I do? Okay, let’s do this. First of all, you need to have selected something …

  • Five Red Flags for Bad Financial Advice

    Every once in a while, I’ll find myself in an airport or somewhere else where a personal finance or investment program is on television. I’ll watch it for a bit and usually find myself frustrated because, every time I watch, I see a bunch of red flags that indicate that I should take what’s being …