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Joe is a former financial advisor and media representative for American Express and Ameriprise. He was the “Money Man” at Detroit television WXYZ-TV, appearing twice weekly. He’s also appeared in Bride, Best Life, and Child magazines, the Los Angeles Times, Chicago Sun-Times, Detroit News and Baltimore Sun newspapers and numerous other media outlets.  Joe holds B.A Degrees from The Citadel and Michigan State University. 

How Successful People Accomplish More – Two Guys and Your Money 025

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Have shows come automatically to your iPod! Use the 2 Guys iTunes page here.

Listen to shows on your smartphone! Try the Stitcher app here.

 

 

You know those New Year’s Resolution thingies you wrote out a couple weeks ago?

Forgotten already?

We’re FINALLY here to help you keep those Resolutions AND create a more productive 2013. Time Management expert Laura Vanderkam joins us in the basement this week to discuss her books, including her two latest e-books: What the Most Successful People Do Before Breakfast and What the Most Successful People Do On The Weekend.

Enjoy!

 

SHOW NOTES:

 

<> Open

<2:35> H&R Block – Details on starting your own taxes and getting a 15% discount? Details here.

<3:30> Fiscal Cliff and New Year’s Resolutions

We discuss a few of Hank at MoneyQandA‘s How To Actually Keep Your New Year’s Resolutions This Time

<7:43> Better Time Management with Laura Vanderkam: Author of:

168 Hours: You Have More Time Than You Think

All the Money in the World: What the Happiest People Know About Getting and Spending

What the Most Successful People Do Before Breakfast (eBook)

What the Most Successful People Do On The Weekend (eBook)

 

Check out Laura’s blog: Laura Vanderkam.com

<39:37> PK’s Fractional Sense: New Years and Numbers (or How I Learned to Love Google)

<44:07> Let’s Give Something Away!

 

ENTER OUR GIVEAWAY HERE

 

Here’s our awesome prize:

Congrats also to our December winner, AV! You are taking home the book Mommy Millionaire by Kim Lavine

<49:43> Shortwave One-on-One with Barbara Friedberg – 2013 Predictions

<> Close: Movies –

OG – Coach Carter (rewatch, recommend)
Joe – Lincoln (recommend)

Saturday! Let’s Play Money….

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Ever wonder what goes on behind the scenes at major corporations when something goes haywire?

Corporate group think, of course!.

 

Happy Saturday!

 

Joe’s Top Movies of 2012

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Like movies? Want to save money? You’ve come to the right place!

If you’ve listened to the last segment of our 2 Guys & Your Money podcast, you’ll know that I watch a TON of films (37 last year, according to this list). Living in a small town in the middle of nowhere gives me limited entertainment options, so the one really big entertainment expense is an afternoon at the local Cinemark. In fact, if you’re ever in Texarkana on a Tuesday and at the earliest show time, you’ll usually find Cheryl & I there. Stop and say “hi.” You’ll know us: we’re usually the only people in the theater.

When a show doesn’t come to town or we get busy and miss things, we try to make it up by catching shows on Netflix (though this year my Netflix watching was mostly television shows).

I put together this list to save you money. While I’m not a critic or a pro, why not share info, right? I always cringe when a friend goes and sees a movie I knew stunk BEFORE they went. I wished I would have told them to save their cash.

That’s why I’m posting today.

 

Why watch films that stink?

 

While you might not agree with all of my picks, I think you’ll be able to tell from my comments whether you might like them or not. I’ve also tried to highlight films that are “Joe’s quirky picks” instead of “highly recommended.” Some of my top picks I wouldn’t recommend to everyone. Some of the bottom stuff is fine (although the bottom five here are absolute garbage).

Also….know those films that critics hate but you end up liking? Study the middle to bottom of the list here carefully. While there are some stinkers, others just didn’t rise to the level of other films, but are still ones that I’d watch. I’ve tried to make good recommendations in the comments on each flick.

So, here it is. The top films WE SAW in 2012 (not necessarily films made in 2012….AND I’m including films I’ve seen in 2013 that were nominated for an Oscar in 2012, so you can check out those as well).

 

Joe’s 2012 List of Films (all 37, from best to worst)

 

Numero Uno

Numero Uno

 

1) Silver Linings: Playbook – I love great characters. If I told you what this movie is about, you probably wouldn’t see it. However, the characters are so well developed that it’s impossible to leave the theater without liking this film. I was happy to see the Academy Awards agreed with my love for this film, by giving it a ton of nominations!

 

Lincoln

 

2) Lincoln – I didn’t see Daniel Day Lewis. I saw Abraham Lincoln. That’s an achievement. While there is little action in the movie, you’re on the edge of your seat for the whole 2+ hours. Excellent film, and for most, it’ll be their favorite of 2012, I’m sure.

 

argo

 

3) Argo – Intense, fun, and a true story I’d never heard all wrapped into one. Ben Affleck’s best work yet (and I loved The Town).

4) Zero Dark Thirty – If you saw Katherine Bigelow’s last film, The Hurt Locker, this is more of the same. Hated Hurt Locker? Don’t see Zero Dark Thirty.

5) Bernie – Jack Black is totally NOT Jack Black in this movie, and this is the best performance by Shirley MacLaine since Guarding Tess. It’s about northeast Texas. Want to see where I live? Watch this movie!

6) Ruby Sparks – What a clever little film. At first you’re pretty sure this is a knock off of the Will Farrell movie Stranger Than Fiction, then it morphs into something totally unique. A young man dreams up the perfect girl and writes about her…until she comes alive.

7) Skyfall – This film exceeded my expectations. Bond is definitely back with Daniel Craig. He’s 2-3 so far (two good films and one poor film).

8) Dial M for Murder (Netflix) – I love Hitchcock and FINALLY saw this one (Vertigo is one of my all time favorites). Excellent rental.

9) The Avengers – I really liked Captain America, Thor, and Ironman 1. Ironman 2 was dull. This was the best of all of them, in my book.

 

john-carter

 

10) John Carter – Every year I have a surprise in my top 10, and while Ruby Sparks might qualify, this is probably the film everyone’s heard of but nobody saw. John Carter was hailed as the biggest Disney flop (and one of the biggest flops, period) of all time. That’s a marketing problem, because this was a worthwhile film. Well made, acted, and a ton of fun, the fact that many audiences won’t see this movie makes me sad. (Some said it was a Star Wars rip off….this was a story dating to the earliest sci-fi days….if anything, Star Wars ripped this material!).

11) In Bruges (Netflix) – Hilarious dark comedy about two gangsters laying low in Brussels. They check in at a bed and breakfast while they wait for their boss to call. Laugh out loud funny in part, and incredibly violent and dark at the end.

12) The Hunger Games. Loved the books. The film is a worthy companion.

13) Frankenweenie – Tim Burton creates another animated masterpiece that’ll stand alongside Nightmare Before Christmas.

14) The Trip (Netflix) – Here’s the film that’s high on my list, but it’s slow, plodding, and really nothing happens. If you aren’t into strong characters and British humor, stay away.

15) Jack Reacher – Might be Tom Cruise’s best work in a long, long time….barring the last Mission Impossible, which I thought was clever.

16) Life of Pi – This film is a good “go to a coffee shop and talk about after” flick. I don’t know, though….it didn’t speak to me like it did others.

 

Pirates

17) The Pirates! Band of Misfits – One of the few animated films I laughed out loud all the way through. Hilarious work. Good family film.

18) Premium Rush – What a big surprise this was. I had no idea what this film was about…and it was a fun action ride featuring Joseph Gordon-Levitt, an actor who’s really coming into his own.

19) The Hobbit – I hoped this would be #1 before I saw it. Although it was my kind of movie, if you haven’t read the Hobbit, I can’t imagine how you wouldn’t be bored silly.

20) My Architect: A Son’s Journey (Netflix) – My favorite documentary of the year is written and narrated by the son of Louis I. Kahn (architect). He never knew his father much, and now tries to find the spirit of his dad by retracing his buildings and career. I love architecture, but it’s a poignant look into a man’s life from someone’s point-of-view who should have been closer to his dad.

I'm sure this would have been #1, had I thought to add it to the Netflix queue!

I’m sure this would have been #1, had I thought to add it to the Netflix queue!

21) One for the Money – I’m a Janet Evonovich fan, and this film, while not wonderful, was a great popcorn movie. It’s a Friday night and you don’t want to think? Here’s your choice.

22) Hope Springs – A film about an older couple having marital relations problems? I’d tell you to save your money if it weren’t Tommy Lee Jones, Meryl Streep (Golden Globe nomination) and Steve Carrell. It’s funny, sad, and keeps you interested.

23) Conan O’Brien Can’t Stop (Netflix) – This documentary follows O’Brien as he’s prepping and performing his tour after losing the fight for the Tonight Show. It’s easy to see how versatile, obsessed, and attention-craving he is in this piece.

24) Trouble With The Curve – Another flawed script that’s saved because a) it’s a baseball movie and I’m a sucker for all of those; and b) Clint Eastwood, Amy Adams, and Justin Timberlake bring it home. I’ll say this: not into baseball? Pass.

25) Restrepo – Documentary following soldiers in Afghanistan. Want to see the plight of these soldiers? Watch this. If you saw The Hurt Locker, you know what you’re in for.

26) The Campaign – First, I laughed hard. I’m into politics. I think if you aren’t into politics, you might laugh, but you won’t get some of the more pointed political junkie humor. Blackhawk down! Ha!

27) Dark Shadows – A “small” film with little expectations. It’s Tim Burton being Tim Burton. If you liked Edward Scissorhands, this is more of the same.

 

Selma Hayek

 

28) Here Comes the Boom – Two parts of this film I really liked: 1) Selma 2) Hayek.

29) Mirror Mirror – First, let me tell you, there was nothing else on that week at our local theater. 2nd, this was a goofy, fun version of Snow White…far better (and less embarrassing) than the other version that appears further down this list.

30) The Bourne Legacy – Another good popcorn movie with holes the size of bowling balls in the plot. Be warned: they introduce a new bad guy with only 30 minutes to go in the film. Normally that’s death for a movie, but somehow this one overcomes it.

31) The Master – I know it’s listed WAY down my list, but three actors received Academy Award nominations….and I totally agree with that assessment. Phillip Seymour-Hoffman, Juaquin Phoenix, and Amy Adams just kill it in this story that tells the story of guy who sort-of-resembles the creators of Scientology (I’m told). If you love seeing actors save crappy material, go see this film. It’s clear that all three main characters are well executed. The story? Not so much.

32) The Dark Knight Rises – Bane was so, so, so boring as the main villain. If it weren’t for Anne Hathaway (Catwoman) the film would have been a total loss.

 

These last 5 films were a waste of time:

 

33) Atlas Shrugged (Part 1) (Netflix) – I love Ayn Rand and this book is one of my all-time favorites. The movie is a slow, convoluted mess.

34) Swingers (Netflix) – I think I missed it and am too old. I never saw this and heard it was a “cult classic.” After finally seeing Donnie Darko last year and absolutely lovin’ it, I was excited….but this flick didn’t do it for me.

Snow-White-And-The-Huntsman-Poster

35) Snow White and the Huntsman – I couldn’t stop laughing during the “serious” parts. If the film had two more stupid speeches about how “important” upcoming events were going to be, instead of just doing them, I would have walked out.

36) The Lorax – This movie sucked. They took one of my favorite Dr. Seuss stories, added “bad guys” and made it a misplaced message film. Pass.

37) Take Me Home Tonight (Netflix) – This escaped theaters in only a week. It looked like a fun throwback to the 80’s, so we popped some popcorn and turned it on. Halfway through we turned it off, because I would have been better off watching a porno with my kids than a film with sex, violence and drugs (and all presented as FUN!). Embarrassed to say that I even started watching that with my family….

What do you think? Some too low? Too high? Let’s fight out where I’m wrong with these in the comments below!

Expected Family Contribution: Digging For (and Finding!) Financial Aid

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As you’re waiting for that perfect college to give you the nod, “Expected Family Contribution,” or EFC, is a key term you need to understand BEFORE filling out the FAFSA form (…and you should be filling out the FAFSA form NOW).

Expected Family Contribution is the amount you’ll be expected to pay out of pocket toward your education. Here’s the simple formula:

Cost of college – your need = Expected Family Contribution

Sometimes it’s easier to understand what’s being asked by seeing the equation drawn out. Not to be completely obvious, but that equation makes three points clear:

– You can lower your bill by attending a less expensive institution
– You could attend a more expensive school and not pay a dime more if your need covers the difference between the cheaper school and more expensive school.
– You can lower your Expected Family Contribution by attending a less expensive school, increasing your need, or a combination of both.

Like I said, pretty obvious, huh?

If it was SO obvious, though, why do so many people overpay for college? Not my readers, though, right? We’re so lucky we hang out together!

 

EFC is about Income and Assets:

 

An overall note about assets: Assets are excluded for most people with adjusted gross income below $50,000.

Child Money – The FAFSA treats dependent student money as MORE IMPORTANT than parent money in the EFC equation.

Rational? While parents may have other priorities, the child has one: graduate.

Therefore: 20% of dependent and independent student assets count against them when calculating EFC. Little Jimmy’s got $10 in his savings? That’s $2 less financial aid school will give him.

The EFC calculation includes an “asset protection allowance” for parents and independent students with children before ANY money counts against their EFC calculation. How much is the allowance? While the amount varies depending on age and marital status, the average family receives a $45,000 allowance. After that, only 12% of assets are used toward the family EFC calculation.

So, to summarize:

– Parents and Independent Students with Children receive an asset protection allowance of around $45,000
– 20% of dependent student assets are used for the EFC calculation
– 12% of parent assets are used
– 7% of independent students with children assets

Got it? Awesome.

What’s the rational for these numbers? Parents and students with children have to make ends meet at home first, and then can focus some of their money on college. Students in college should spend a higher percentage of assets on education.

I hope you’re starting to see that WHERE you save is an important factor when deciding how to save for college. Clearly, keeping money in a parent’s hands vs. saving in junior’s name can be a good idea in many circumstances.

Big Point: It’s illegal for parents (or anyone other than the child) to remove money from junior’s name to avoid horrible EFC consequences (or for another other reason). However, junior can purchase items beyond food, clothing and shelter with his own money. You can also choose to save more money (or an equal amount) into the parent’s name for college.

Also notice – 529 plans….they’re in a parent’s name.

…and that money in life insurance policies? It doesn’t count against you at all. As far as EFC calculations go, it doesn’t exist.

Want more on the best places to save for college? Check out: College Savings Simplified, The Best Places to Save for Education

 

Income

 

Expected Family Contribution

Forget full time work for dependent students. It weighs heavily against EFC!

Yeah, I know, you want junior to have a job in college. Guess what? Every dollar junior earns (after a small allowance) counts more severely against his need than income a parent earns. Once again, there’s good rationale for this: junior should be focused on graduating, so if he works, then he should pay every dollar he makes toward school.

As with assets, there is an income protection formula:

– Dependent students receive an income protection amount of $6,000. After that, between 22 and 47% of the amount junior earns is used for EFC calculations. (It’s a sliding scale with percentages rising as the income level rises.
– Independent students with children and parents receive a much more generous allowance. For parents, the number ranges from $16,000 to $55,000 depending on the number of dependents in school and overall family size.

As you can see, parent income counts against need, but once again, parents only have a smaller percentage of their income that counts against EFC.

Rationale? Parents have many priorities besides a dependent student’s education, while dependent students need to save. The EFC allows for a small part time job to learn skills, but punishes students who work full time. Work on graduation!

Good news for me: during the EFC calculation, because I’ll have two in college at the same time, my total parent contribution is divided by two.

Retirement

How do retirement accounts factor into EFC? Money saved into retirement accounts DOES COUNT against EFC. Rationale? You should expect to sacrifice for a short time to help junior through college. If you’re the one headed to school, graduation quickly is your number one priority.

 

Strategies

 

If you’re reading this with young children (or just a glimmer in your eye), realize these calculations can change. However, I’ve been teaching clients about EFC since my children were born, and things are roughly the same as they were then. So:

– Save money into the parent name instead of a child’s name.
– Save aggressively into 401k plans BEFORE college years start because you may have to lower your contributions during college years.
– If you’re fairly certain you’ll be a financial aid candidate, cash value life insurance may be an option (although I generally shy away from these products)
– Forget about junior working full time during college. You’ll just elongate the process for him and you.
– Use Junior’s money to buy assets he’ll use during college and for expenses that don’t include food, clothing and shelter. If you’d like, use the money YOU save by NOT covering these non-essentials into a plan in the parent’s name.

Fun, huh? Financial aid programs actually make a ton of sense to me AND it becomes much clearer HOW to save when you know the keys to the FAFSA and EFC.

What parts of financial aid are most confusing to you? Leave them in the comment section and we’ll try and tackle those next.

This is only one piece of an overall college financial plan. Check out: 5 Steps to a Successful College Financial Plan.

Photos: College student w laptop: Ed Yourdon;

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Average Joe’s Friday Read-a-Long

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….in which our intrepid hero, Average Joe, takes you through some of his favorite reads. This post is published whenever the hell Joe gets around to it. Today’s your lucky day.

Happy Friday, read-a-long peeps. It’s been quite a few weeks since this groundhog popped his head out of the hole and said “I’m not sick anymore!” but now’s that time.

Of course, that means I was sick over the entire holiday and only recovered in time to get my ass back to work.

But, with work like this, who needs a holiday anyway, right? You with me?

 

Here’s what I’m talking about:

 

Hey workout lovers, Todd Mayfield at Fearless Men wrote about barefoot running. I’m sticking with shoes for now, but he makes a great case for those five toed shoes.

Savvy Scot and femmefrugality have cool posts on technology. Savvy Scott focuses on emerging energy-saving tech while femmefrugality tackles items that will be cheaper in 2013. Both fun reads if you’re hoping for new toys or lower costs on those toys.

There’s something about making letters that can be personal. As bloggers, we do it by stringing together words in ways that reflect our personality. At Letter Cult, they focus on how people actually draw the letters. This post is full of fascinating examples.

Holly at ClubThrifty writes the funniest/creepiest post of the week, with her near-porno debut at a classic motel.

My internet friend Jefferson at SeeDebtRun outs himself and his weight struggle in Epic Failure. The question I ask is this: what is the right way to lose weight? Go it alone? Do it with a team of help? Read weight loss blogs?

It’s not a blog, but the New York Times ran a fascinating article about how Disney is expanding their technological advantage over other companies….and mining data at the same time.

Hank at Money Q & A lists several ways to keep your New Year’s Resolutions. Generally, New Year’s tips posts won’t make a “must read” list, but Hanks are really good, especially the last one: Don’t Make Any.

…and finally, I love peeing in public as much as the next guy, but TB at Blue Collar Workman (who sees all the good stuff in a day’s work), meets a woman with her pants down….literally in a post last week.

 

As always, too many great blog posts by too many good authors to mention….but this should get you started this weekend!

 

Congrats Are In Order

 

Congratulations to our friend American Debt Project on her recent engagement.

Way to go, Len Penzo on being mentioned on the Dave Ramsey Show! Dave reviewed Len’s Billionaire piece with his listeners and discussed how everything is in perspective. Of course, you can hear Len weekly on the WAY-more-popular Two Guys and Your Money podcast, but I think the little Ramsey thing is a great 2nd place….

Sicorra at Tackling Our Debt reports that her blog planning tools have been downloaded over 1,000 times. Wow! If you haven’t checked them out, what are you waiting for…a link? I just gave it to you!

AND last but not least, our friend Dr. Dean Burke from the Millionaire Nurse Blog finished first in his election for Georgia State Senator, and is headed to a run off early next month. While I’m sure that keeps him away from our podcast a little longer, America can use more great people like Dr. Dean. Congrats on the well-deserved victory!

 

We’re Very Popular and Humble, Too

 

In the last few days we’ve been mentioned quite a few places, and I need the thank my mentioning peeps:

Jason at FrugalHabits, who just might be the friendliest guy on the internet, gave our pieces Stock Market Punishment – 1st Lesson of 2013 and 5 Saving Tips You Wish Someone Had Told You Earlier a nod.

PK, from DQYDJ.NET included our podcast (including his own, awesome contributions) in his DQYDJ Weekender last week.

Todd & John, our friends at Fearless Men, chose Stock Market Punishment – 1st Lesson of 2013 for their as part of their best reads of the week.

Kathleen from FrugalPortland used our savings account strategy in her post Two New Savings Hacks for 2013.

Steve Stewart of MoneyPlanSoS fame mentioned our podcast on his DaveRamseyFan website in his post: Dave Reads: What’s It Like to Be a Billionaire, By Len Penzo.

Speaking of podcast, Lance at Money, Life and More also mentioned the show and his appearance in his Personal Finance Round Up, Mentions, and Carnivals #37.

 

Contests! We’ve Got Your Contests Right Here!

 

Our $100 contest ends soon. You should get in on the fun while it’s still open.

We’ll have a $1,000 contest coming this weekend (look for it Sunday here).

I received your emails about Diary posts. Keep them coming! I’m reading them all and hopefully will be able to respond to some this weekend. New Diary posts hopefully coming next week….

 

Adorable Cat Photo: DidByGraham

Want More Money For College? What the $%#! Are FAFSA and EFC?

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Bill & Caitlin want to put their children through college, but like many people, they had other priorities. With three younger children, it’s been a difficult road to save for their oldest. Now Jennifer is a senior in high school, and they were in my office with the same look a football team has when they’re down by five points and have 50 yards to go with only 8 seconds left in the game.  Time for some drastic action.

Luckily, Bill & Caitlin had some room to work with to make their chances of aid better than they’d expected. We also made it easier for them to pay for college by making some changes to their overall financial plan.

But first, there were some crucial terms Bill & Caitlin didn’t understand that we had to define. Their whole college aid strategy would be predicated on knowing the rules of the game, and off these rules were wrapped up the terms “FAFSA” and “EFC.”

 

The FAFSA

 

The Free Application for Federal Student Aid is more than the name implies. Although this is the government’s financial aid program to apply for the Pell Grant, it also opens up nearly all need-based aid programs you’ll ask for in traditional college programs. Sure, Bill & Caitlin had heard of the FAFSA form before, but they were about to make a critical mistake: they weren’t going to fill it out because the chances of them receiving federal government aid was highly unlikely.

That would be a huge mistake.

Don’t avoid the FAFSA in your search for college funding options. Here’s a good way to think about financial aid programs (although schools and states wouldn’t present the information this way): schools will not give you financial aid until you bleed the state. The state won’t give you financial aid until you bleed the feds. For this reason, EVERYONE works through the FAFSA form. While most people will be denied a Pell Grant, this is also the form to apply for subsidized and unsubsidized student loans, and unsubsidized student loans programs are open to nearly everyone. It’s also the way to apply for almost every need-based aid through states and schools.

Key point: Fill out the FAFSA form, even if you think you won’t receive any aid. When? Start now.

 

EFC

 

This is another “biggie.” Expected Family Contribution (or EFC), is the amount the government says you should be expected to pay out of pocket for school before aid programs kick in. Bill and Caitlin were making some huge mistakes in their money management that was actually costing them EFC dollars.

Your need will be based on the difference between the cost of the college and the amount of your EFC.

            Cost of school minus EFC = need

Based on your need, your school’s financial aid officers will create an aid package.

It’s important to remember that the acronym is eFc (expected FAMILY contribution, not ePc (expected PARENT contribution). Schools will look at the income and assets of the student as well as parents. They’ll also examine how many other family members there are and the number that are also attending college.

 

Schools may not have the same EFC calculation. There are two. You should ask which your favorite institutions use:

–          Federal EFC calculation. This is the most used number and is determined using the FAFSA.

–          Institution EFC calculation. This calculation is used by individual schools to determine their own EFC. While they may rely on the FAFSA as well, individual schools may have additional criteria they consider when determining aid packages.

 

Takeaway Information

 

So, Bill & Caitlin had a ton to consider, but a few points were obvious already:

–          Understanding the basics of the FAFSA before filling it out would help them calculate ways to better reflect their true EFC.

–          Ask schools what EFC calculation each uses and find out any institutional discrepancies from the national EFC calculation BEFORE applying for financial aid.

Stock Market Punishment: The First Lesson of 2013

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The podcast team is giving the interns a well-deserved week off, so lucky reader….YOU get a FREE extra blog post from Average Joe. I know. Pinch yourself. It’s real. Almost like our awesome rare Saturday post this week.

Look at what the media did to you again.

The sky is falling! Fiscal cliff! Doom! Stock market will be in shambles! Hide your children!

Big ratings for the financial channels, huh?

If you listened and moved your money out of the market, it destroyed your chances for a great return in 2013.

MAYBE you’ll recover if you jumped out before the big two-day run up in stocks. The chances, though, are against you: historically, if you miss the 10 best days in the stock market, you lose about 5.18%, or nearly half your return for the year. If you paid trading fees to avoid the “fiscal cliff disaster,” this only exacerbated your problem.

Here’s what the panicked investor missed in the S&P 500 last week:

December 31: 1.7%

January 2: 2.5%

January 3: –.03%

January 4: .05%

In short, if you missed two days last week you lost out on 4.2%. Those types of returns don’t come around often.

By the way, don’t go in the comments and tell me that “all you lost was a little time….” go back and read the stats above first. You lost a ton.

 

let’s calculate the cost of listening to the media on this one

 

Suppose you’re 25 years old and you have managed to save $10,000 into your 401k plan. You lost out on $420. Sounds like no big deal, right?

Let’s use the rule of 72 to determine just how much you really lost:

The rule of 72 says that if you divide the interest rate you think you’ll achieve into 72, you’ll come up with the approximate number of years it’ll take your money to double. Cool, huh?

Assuming that you wanted this money for retirement (401k, right? That’s not your “mad money” account….I hope), we’ll use age 70 for your withdrawal. We’ll also use a realistic return assumption of 8%.

8% / 72 = 9 years for your money to double.

So, that $420 you lost wasn’t really $420, was it?

It would have doubled when you were 34, 43, 52, 61, 70.

Your “little” $420 wasn’t $420. By 32 it was $820. At 41 it was $1,640. By age 50 you’d lost $3,280. At 59 the gap was $6,560. When you went for the money at 69 you had $13,200 less.

 

it gets worse

 

If you’re 30 and gambled $50,000 that the market would tank, it’s uglier. Let’s also use 9% rather than 8%, since people looking long term historically have used 10% as their assumption (which I believe is too high, BTW).

Check out what more money and a “little” one percent difference do to your loss:

Rule of 72 = 8 years for money to double.

Funds double at 38, 46, 54, 62, 70

$2,100 lost during two day run-up in market.

= 4,200 loss at 38, 8,400 loss at 46, 16,800 at 54, 33,600 at 62 and

…$67,200 at age 70.

On our “What Did We Learn in 2012” podcast, expert after expert told you the same thing: don’t listen to national media finance porn and don’t chase short term results.

If you did, I’m going to play Dr. Phil now: How’s that workin’ out for ya?

 

Photo: Joe Shlabotnik

5 Savings Tips You Wish Someone Had Told You Earlier

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There are many ways to obtain a little extra cash when it is most needed, from log book loans and second mortgages to working freelance, to much more unlikely scenarios, such as winning the lottery! It’s always better to try and save cash than hope for the lottery windfall. Here’s five of the most useful ways to ensure there is money there when you most need some:

 

Budget! It’s surprising how many people let budgeting pass them by, even if they are mentally sold on the idea. Once you’ve overcome the remarkably large hurdle of actually sitting down with pen and paper, the basic concept is simple: track what you earn and make sure your expenses don’t outpace your earnings. The very first time you carry out this exercise, you’ll be surprised at how many “little expenses” add up. Often, you’re surprised by some of the numbers. Your energy bills might be higher than you’d expected, or gasoline for the car is more than you’d thought. Once you create a plan to bring those demands under control, you’re well on the way to making tangible savings.

Put savings first. Too many people think they can’t save because “there’s not enough money left over at the end of the month”. This is putting the cart before the horse. Spending nearly ALWAYS expands to eat away whatever amount is in your bank account, so it’s vital to decide how much you wish to save before beginning to spend, spend, spend. Typically, it’s a good idea to set aside a minimum of 5-10% every month for savings, either consciously, or by directing your bank to automatically siphon off the sum into a separate savings account. Once that is done, then you can apply the remainder of your income to your budget!

Cut your energy bills. A major household expenditure is gas and electricity. Fortunately, with many different providers out there, it’s reasonably simple to go online and change suppliers – after first using price comparison sites to find out whose offering the cheapest tariffs. Be sure to repeat the exercise every few months to take advantage of market competition.

Pay down your debts. Debts are the single biggest drag on personal finance, and eliminating them is a massive step on the road to saving. When resolving to pay off debts, start with those commanding the largest interest rates – and remember: these are not necessarily the largest debts. Credit cards generally come with relatively hefty interest rates, so they are an excellent place to start, but all personal circumstances are different, so list your debts and their attached interest rates from highest to lowest, to see where the axe should fall first. Some people start with the lowest balance and work from there (Dave Ramsey’s “snowball” method). This has been proven to help people psychologically pay down debt, but may cost you more in interest over time.

Watch how you shop. Make an “audit” of your next trip to buy groceries by studying the till receipt. Strike off the ready meals and processed foods and resolve instead to get your fruit and veg at the market. The ingredients are much cheaper there, and with the help of easy and quick online recipes you’ll soon be eating more healthily – and saving a remarkable amount every month into the bargain!

 

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Saturday! Let’s Play Money

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Tired of all the New Year’s lists? So am I (not that there weren’t good ones….I’m just over it now).

So, I bring you the MOST AWESOME New Year’s List of all.

Cheers.

j.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Photo: Jimmiehomeschoolmom

5 Simple Steps to Kick 2013 Into High Gear

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Happy 2013, everyone!

It’s time to take yourself a little more seriously and step up your game. My cousin, a year younger than me, had major heart surgery a couple weeks ago and nearly lost his life on the operating table. Not to be all melodramatic, but it was another close-to-home reminder that time is a finite beast. If you’re going to leave your mark on the world (or just on your little private Idaho), 2013 is the time to make changes.

Here’s the gameplan we’d use when practicing financial planning with clients back in “the day” and it’s also what I’m using this year to shift up a gear:

1)   Write out clear, actionable goals. I like Maria at The Money Principle’s post about themes. Start with an idea generally of what you want to do, then drill down toward specific tasks.

My 2013 theme is about tying up loose ends and focusing harder on core tasks. I haven’t yet crystalized completely the theme (it should be more succinct than what I have so far), but that’s not bad news. I’ve been thinking about it constantly, and this action gets the right thoughts in my little noggin’.

My main goals are simple: I have the first draft of a book written, and I’ve let it sit for about 9 months. Why? I have no idea. Other priorities. But now’s the time to finish that project. I’ve run marathons now for two years. I’d like to run one faster than ever. I’d also like to try an ultramarathon. I need to focus on cooking healthier food at home and have a more regimented plan. On the website side, we’ve talked about creating some products. These need to be launched in 2013.

2)   Direct deposit to your savings account. Everyone direct deposits money into their checking account…and immediately drains it. Reconfigure your system so that you direct deposit to savings. Manually move money to live on over to your checking account.

While this seems like a little step, it’s a huge change. Now you’re saving automatically and having to think every time you spend money. You’re a conscious consumer, rather than an auto-spender.

3)   Protect your downside. I know this for a fact: bad stuff that you don’t expect will happen in 2013. I don’t know where it’ll come from, so the best course of action is to look for Achilles Heels and apply duct tape. Do you have an emergency fund? Is your insurance up-to-par? Is the budget tight?

I need to adjust Cheryl’s life insurance (adjusted mine in 2012). Our will is now six months from being out-of-date (my children will be 18 years old…how the hell can that be? They were just babies yesterday….). I also have to begin “landing the plane” with my kid’s investment funds, so they’re ready when and if I need them for college expenses.

It’s also time for me to get home and auto quotes again. For some, checking out Insure 4 a Day may be a good idea. They offer a variety of cheap short term car insurance options dependent on your requirements.

4)   Focus on energy, not time. I agree with Jim Loehr and Tony Schwartz in their book The Power of Full Engagement on this one: the key to optimum performance is to manage your ability to crank stuff out. As workers, we’re like tennis players: we compete year-round. It stands to reason that we can’t be great every moment of every day. We should gear up for those times when there are “big tournaments” in our life and focus on those days.

I’m working on a model day that better uses my energy and shelters that time I need for key tasks. I generally experience great creativity in the morning and low energy around 3 pm, so I’m reconfiguring my day to take advantage of that morning time and guard against the afternoon letdown. I’m also focusing more on my diet to avoid those crashes (just as soon as I finish these chocolates….).

5)   Create surround sound. The best way to stay motivated is to surround yourself with people, books and podcasts that keep your mind on those activities that’ll help you achieve your dreams. Schedule meetings with your planning partners, spouse, and close mentors. Don’t just say “I’ll talk to people more often about my plans.” That doesn’t happen, does it? Set a time in your calendar and stick to it.

We created the podcast for this reason. I enjoy casual talk about subjects I’m interested in, not hard core discussions. I couldn’t find many chatty money podcasts (Planet Money is probably the closest I’ve found), so we created one. If you’ve listened to our show you know: it’s more about equating money with fun and less about deep drilling.

Biographies work well for me, too, to create surround sound. I don’t know why, but I particularly love books about chefs. Maybe it’s because they have to be in-the-moment so much. I loved Kitchen Confidential by Anthony Bordain (don’t read this book if you don’t like foul language and discussions about illegal activities). Currently I’m polishing off Restaurant Man by Joe Bastianich. Both of these are great looks into the world of business, written passionately by someone who knows their craft inside-out.

This list could be 100 points long, but if you practice those five above as you walk into 2013, you’re going to move faster, with more energy, and with fewer distractions.

ON that note, how about $100 Amazon money or cash to start your year off right! That’ll buy a bunch of groceries, books or mp3 players…..

Photo: TheBusyBrain

 

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