Money Magazine – September 2007

moneyAfter missing out on the August issue due to the move, I finally received my September issue of Money in the mail. The cover story, The Best Stuff At The Best Price, indicates one of those consumer-oriented Money articles that makes me roll my eyes, but the other articles on the front page hint at some potentially interesting stuff. Here are ten things that really stuck out at me from the issue.

People overinvest in their house. The average net worth of people aged 51-56, an age range that’s very likely to own their own home, went up 11.6% from 1992 to 2004. However, subtract their home from that and the net worth is actually down 3.3% over the period, ignoring inflation. What does that mean? People are counting on the value of their home more and more, which means that if housing prices level off for fifteen years like many are predicting, many people are going to have a huge chunk of their money in something that doesn’t grow in value at all. Ouch. A home is a great thing to have, but don’t put yourself in a place where it’s the only thing you have. (p. 21)

The biggest mistake job interviewees make is talking too much. I generally agree with this. The best interviews I’ve been involved with – as an interviewer – were the ones that turned into a conversation. One good tactic is to take full advantage of the part where the interviewer asks you if you have any questions – have at least a few lined up at this point so it seems like you actually are interested in the job. (p. 28)

Time with a financial planner can be a great gift for adult children. I agree wholeheartedly with this idea – an hour or two with a financial planner just as a twenty- or thirtysomething is starting to “get it” in terms of what they need to do with their money can be the best gift you can give. (p. 32)

When you are close to your goal, get out of stocks. This was a really useful article. Using the S&P 500 as a baseline, it made a very clear argument that when you get within a few years of your goal and the stock market isn’t fresh out of a monstrous downturn, you should pull your investments out of stocks. The article used retirement as the goal, but it’s true for any goal you might set – my wife and I have our dream house as an investment goal, for example. (p. 46)

Use a dangling carrot to get contracting work done well and quickly. For example, if you have someone fixing your kitchen and you agree in advance that it’ll be done on a certain date, let the contractor know that you’re having a big party shortly after the completion to show off the new work and might be willing to pass around the contractor’s card if the job is done well. The lure of lots of potential business is often enough to keep the contractor very focused on you. (p. 51)

With current mortgage rates and tighter lending, PMI is often a better choice than a piggyback loan if you don’t have 20% down. Here’s a really nice calculator so you can run the numbers yourself – most recent offers I’ve seen have a PMI of around 0.5%, a base loan between 6 and 7% and a second loan at around 8%. Running the math there shows you the PMI is cheaper, even with the potential reassessment cost. (p. 67)

Performance comes and goes, but costs roll on forever. – John Bogle My favorite quote from a list of twenty great ones. (p. 92)

The college admissions “game” is a waste of money. The article profiles people who have blown five figures on private SAT tutors and college admission preparers and such, then indirectly concludes that they’re a waste of money. Instead, they show a student who got into Harvard and didn’t spend a dime on the junk. What should you do to bolster a college application, then? Spend time on activities related to stuff that genuinely interests you. For me, in high school, I got fired up by the FFA and got heavily involved – my experiences there helped me a lot. (p. 103)

The best strategy for not beating yourself mentally while investing? Get a low cost index fund and forget about it. That’s the general idea behind a lengthy excerpt from the book Your Money and Your Brain. (p. 104)

Some stuff is worth paying extra for. I thoroughly agree with this sentiment in general, but the provided list of things actually worth paying extra for makes many big value judgements for people. For example, I don’t really feel the need to spend $200 on bedsheets. (p. 128)

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