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The Wisdom of the Lazy Portfolio

Monique Tilford — Sat, 14 Nov 2009 00:02:52 +0000

Many fans of Your Money or Your Life are risk-averse and some have chosen not to have any involvement in the stock market at all. Indeed, the first edition of Your Money or Your Life advocated that readers invest the majority of their money in U.S. Treasury Bonds. But if you read the latest edition of Your Money or Your Life released in December 2008, you know that we included other investment options, including the stock market. In follow-up to the advice provided in the recent edition of Chapter 9 of Your Money or Your Life by Mark Zaifman, a fee-only financial planner in California www.spiritusfinancial.com, I wanted to direct your attention to a great blog post I found recently on the popular personal finance blog Get Rich Slowly www.getrichslowly.org.

The advice is simple but profound. For those willing to invest in the stock market but not willing to invest countless hours of limited life energy on learning the latest stock market tips, consider following a Lazy Portfolio approach. As author J.D. Roth says, ”Lazy portfolios are collections of index funds. Because these portfolios are balanced — they contain stocks and bonds — they mitigate risk while providing excellent returns. Best of all, they take very little time to maintain … over the long-term, (index funds) deliver better returns than most actively-managed mutual funds.”

The reason that I like this post “The Lazy Way to Investment Success” so much is because it reflects years of thinking from a variety of respected financial writers in one succinct article. Better yet, J.D. provides specific examples of tested investment options.

Get Rich Slowly

Monique Tilford — Wed, 30 Sep 2009 17:03:29 +0000

One of the few personal finance blogs I read on a regular basis is Get Rich Slowly by J.D. Roth. He had two great posts in the past few days that I wanted to share with you. The first one was about a new free online financial tool called Credit Report Card. The tool “breaks down your credit report into five simple-to-understand categories and gives you a letter grade for each one.” I tried the service and thought it useful. Read all about it here. The other post was by a new GRS staff writer who discussed the importance of doing the math when trying to determine what type of mortgage you should get on your house. If you happen to know anyone currently debating the merits of a 15 versus a 30-year mortgage, please forward this article to them. Happy reading!

New Ways to Save Using the Internet

Monique Tilford — Mon, 28 Sep 2009 20:46:27 +0000

When we updated Your Money or Your Life last year, we took out a lot of the hints and tips on how to save money in chapter 6. We knew that some of them had become outdated and that the Internet had emerged as a new and powerful cost-cutting tool. Today, I want to share with you three ways that I recently used the web to save money:

1. Significant reductions on magazine subscriptions: After you’ve completed the nine-step program and winnowed your magazine subscriptions down to only those you’ll take the time to read, I recommend that you visit the world wide web before you sign up for or renew your next subscription. Just type the name of your favorite magazines into your search engine and a variety of offers will invariably pop up. I wasn’t sure at first if these offers were legitimate but I haven’t had any problems with my renewals so far. Initially, I renewed my subscriptions through a variety of companies that were previously unknown to me, but I recently saw an offer from Amazon on a big-name magazine that could not be beat (even by the customer service rep at the magazine itself).

2. Great deals on non-prescription/health and beauty care items: I use a special sunscreen that I used to order through my local drugstore at full price. I recently typed the name of the product into my search engine and was delighted to find great deals on this item. I decided to order four and saved over 50%! The source I used was www.drugstore.com which has a wide variety of products and unbeatable deals for first-time buyers which includes free shipping and two-for-one offers.

3. “Free” coupons on EBay. Months ago, I stumbled upon a seller who was “giving away” coupons on EBay. (Apparently no one is allowed to charge money for coupons, but it is legitimate to charge for time spent collecting/sorting/clipping them). I quickly realized that this could be a great way to save money on the items I purchase most. Using the EBay search engine, I quickly found offers for organic milk, high-fiber bread, cage-free eggs and other items for which I had never found coupons in the past. Although you’re often required to buy 10-20 coupons at one time, I find that you can recoup your cost normally after redeeming just one of them (especially if your local grocery store offers double coupons).

Assuming you’ve already cut costs on all the big-ticket items in your life, the success of the Your Money or Your Life program relies on finding easy, satisfying and financially lucrative tips like these to reduce your daily expenses. Do you have any tips to share on how to use the Internet to save money? If so, let us know in the comments below.

Two articles worth reading

Monique Tilford — Fri, 25 Sep 2009 02:42:41 +0000

A woman who attended one of our workshops in NYC recently sent me an article on how a family shed $106,000 in debt. If you or someone you know is feeling overwhelmed by money issues, I encourage you to read this article and forward it further. It’s quite inspiring.

Also, if you have any interest in examining the true value of a college education, I encourage you to check out this article which was posted recently on Get Rich Slowly. Since the costs of college have risen so much faster than inflation, it’s always useful to do the math and make sure you’re getting the maximum value possible out of this very expensive investment. One of the points guest blogger Jason Barr makes in the piece is that those who earn approximately $50,000/year (assuming a constant 4% rate of inflation and salary adjustments to keep up with that pace until retirement at age 65) can expect a lifetime earning potential of nearly six million dollars. That number blew me away. It made me think that it wouldn’t be a bad idea to mentally add another exercise to Step 1 in Your Money or Your Life: after getting your Social Security Statement which shows how much money you’ve made so far in your life, consider projecting out how much you’re making now and what level of income you believe you’ll be making in the future. If more Americans making $50,000/year could imagine that they’d earn $6 million by the time they retire, it might make them much more interested in saving as much of that bounty as possible (instead of always thinking of their salary as Never Enough.)

For those starting over

Monique Tilford — Wed, 23 Sep 2009 16:24:53 +0000

Last week we received the following email:

Just wondering if you might address the issue of those of us who have recently lost everything financially when our long-time industries took a dive, and are starting over? It’s clear as a bell what “enough” is now. If you have cautions or suggestions as we start over, we’d love to hear your advice. Your book is such an inspiration!

Vicki and I were both moved by this message. The idea of having someone lose all the money they’ve worked so hard to save is a trial we wish no one had to endure. But the bright tone of the email above suggested that this person was going to overcome the setback just fine. I reflected on what I would do in such a situation and recommended the following ideas:

1) First of all, I would not rush to any risky investments to try to make up for lost time. I have read several articles recently suggesting that this is one response people have taken after the stock market collapse and it is almost always a path to disaster;

2) If you’re anywhere near retirement age, I’d become very knowledgeable fast about how much you’re going to make in Social Security and when exactly you can claim that money;

3) I’d think hard about the things that make me deeply happy that cost very little money and then give those things to myself as often as possible while adjusting to this significant change in circumstances;

4) I’d keep careful track of my attitude and surround myself with others (even just one other person) who are also trying to amass savings to give me inspiration and good ideas;

5) I’d keep the mantra “Want What You Have” taped to my bathroom mirror or some other prominent place;

6) I’d get the highest-paying job I could which was still in alignment with my values;

7) I’d track every penny as recommended in Your Money or Your Life and read/sign up for the free blog posts at www.yourmoneyoryourlife.info.

What would you recommend? Please share your comments with us.

YMoYL: A Great Tool for The New Economy

Monique Tilford — Mon, 10 Aug 2009 02:34:15 +0000

The U.S. economy grew at an unprecedented pace over the past several decades until the recession hit last year. Many Americans made significant shifts in their lifestyles to accommodate the downturn and are waiting now for the economy to rally again. Yet the U.S. economy has permanently changed in ways that the average American may not realize. Just one generation ago, for example, credit card debt was uncommon and many workers could rely on a pension and full health benefits after retirement. Today, credit card debt averages $10,000 per household, private pensions are rare, Social Security is at risk, and seven out of ten workers have saved less than $10,000 for retirement. Millions of Americans now face a future of great economic insecurity, and experts lament that retirement itself is at risk. We have entered an era of The New Economy where the average worker no longer stays in the same job for decades, unions offer much less financial protection than before, and most workers are completely on their own in terms of providing for their financial future. I used to resent that things had changed so much. I wanted the safety and security that my dad had after working for the same company for 30 years and retiring with a full pension and great health benefits. Most recently, however, I’ve begun to conclude that a personal retirement portfolio that relies heavily on a corporate pension might not be so safe after all. We’ve all heard of corporations that experienced hostile take-overs where their retirement accounts were raided, or the Enrons of the world where management practiced shameless malfeasance, or a corporation (like some in the airline industry) that fell on hard times and simply couldn’t meet their retirement account commitments as promised. Although my heart still longs for a pension like my dad’s, my head has chosen to follow the Your Money or Your Life nine-step program as my retirement strategy.

The Art of Price Reduction Even at Major Chain Stores

Monique Tilford — Sat, 08 Aug 2009 13:18:20 +0000

When I first started to haggle years ago, I only did it at independently owned stores. One of my favorite stories included how I secured drastically reduced prices at hotels during a six-week trip out West after college. My technique? I would always show up around 9pm knowing it was unlikely that the hotel would be able to rent many more rooms at that late hour. I’d casually mention that I would be more than happy to camp out that night if I didn’t get the deal I wanted (which was true), but I can remember only once or twice actually rolling out my sleeping bag. My other favorite story is how I haggled down the price of a gorgeous, handmade beanpot lamp — and then once the storeowner and I got to a rockbottom price, I successfully knocked off another 4% because I was willing to pay cash. (As many of you know, storeowners always pay a surcharge for customers who use credit cards, so if you want to help out a local storeowner — or want to haggle for a cheaper price without a lot of drama — always offer to pay in cash).

I’ve noticed recently, however, that it’s becoming easier to haggle even at major chain stores. A few weeks ago, for example, I was able to negotiate a cheaper price at Home Depot which surprised even me. I’m not the only one who has observed this change. Time magazine recently issued a story entitled: “Let’s Make a Deal” about how shoppers are haggling everywhere — even at big retail chains — and are coming out on top. (Time has been doing a lot of great stories like this recently, including a cover story on “The New Frugality” in case you missed it). Some of the techniques outlined include 1) print out better deals you can get elsewhere and show them to the salesperson; 2) if that doesn’t work, ask to speak to a manager. Another one is to let a store manager know is you find an out-of-date item at your grocery store. Most stores will give you one in-date version of that item as a thank you for notifying them of the problem. I just did this for the first time last week and felt extra good about it because it felt more like I was performing an act of public service instead of simply getting something for free. Not everyone is comfortable haggling, and you have to always remain conscious that your attempts to secure a cheaper price don’t eat up too much of your precious free time. But once you find your comfort level, haggling can be really rewarding. Have fun out there!

Frugality and the homeless

Monique Tilford — Tue, 04 Aug 2009 23:19:55 +0000

On my walk home tonight, a homeless man asked me for a handout. I asked if he was hungry and he said yes. But when I told him that I had homemade food at home that I’d be glad to bring to him, he politely declined. I’ve found that this is a common response. Yet many of us don’t want to give money to the homeless because we fear that it might be used for alcohol or drugs or something else unsavory. We feel conflicted, guilty … and often just hand over some bills. Yet is there a better response? I have struggled for years as to how to handle this situation and have come up with a solution that feels good to me: I offer food instead of money. I used to take the homeless person who wanted food to a local restaurant for take-out, but then I realized that was incongruent with my own values. I don’t take myself out to eat several times a week, so why would I want to buy that kind of expensive food (and generate that kind of waste) for someone else? I realized that I lived only two blocks from the city center and therefore could easily bring homecooked food to whomever needed it. (Whenever I travel though, I still revert to the take-out option). I recognize that the homeless have a legitimate need for money, and I know that offering food doesn’t address the conditions that make homelessness a continued reality in one of the richest nations in the world. But I feel good knowing that I’m doing my best to respond to a fellow citizen in need, but doing so within my means which maintains dignity for us both.

Fun hobbies can include grocery shopping

Monique Tilford — Mon, 03 Aug 2009 17:28:55 +0000

I just got back from a trip to my local grocery store where I saved 74% off my total bill. This is a new personal high for me and one that I thoroughly savored. Some people might be quick to dismiss such financial acrobatics but I really had a good time. My six-year-old was with me and she helped with the coupons and did all the bagging which made it fun for both of us. After 17 years of following the “Your Money or Your Life” program, I’ve observed that the activities I really enjoy doing often save me money too. I like cutting my family’s hair, gardening, refinishing furniture, cooking — and yes, even grocery shopping. I have added an element of fun to each of these household tasks by mentally calculating how much I’m saving. For example, I like to eat well but often think of how much money I’ve saved by preparing a meal at home instead of taking my family of four out to eat. This is why I can truthfully tell journalists that I never feel a sense of deprivation by choosing this lifestyle. Instead, I feel smart, self-reliant and free.

How Much is Enough: The Importance of Eliminating Food Waste

Monique Tilford — Fri, 19 Jun 2009 12:11:58 +0000

Did you know that we waste an estimated 27% of the food available for consumption in the U.S.? That works out to approximately one pound of food wasted every day for every American. I read these statistics in a New York Times article one year ago and was so stunned that they have stuck with me ever since. Food waste is so common in our country that we don’t always even notice it. But it became glaringly obvious to me after I had children. So I decided to do what I could as a mom and a citizen to eliminate food waste. First of all, I observed myself saying to my girls (Elli, 6 and Bella, 3) “We don’t waste in this house.” This means that I give them a straw when they eat breakfast cereal so that they can finish every drop of the organic milk; don’t cut off the crust from bread or peel an apple before they eat it; and only make one entree for dinner each night which they can choose to eat or not. We don’t fight about food. I think that’s because whenever I am fully confident in a decision that I make, my girls are much more likely to accept the “rules” without fuss. I try to be kind in the process. For example, each of my girls keeps a mental list of three things they don’t like to eat (Elli’s are chocolate, green peppers or mushrooms). But since my younger daughter’s favorite food is spaghetti with green peppers and mushrooms, I still make dinners with these ingredients which Elli then can pick out and set aside. This is kind of a tough topic to cover in a blog because there are so many nuances to the discussion. But I feel that by taking a stand on this issue, I have already undeniably expanded the variety of foods my children like to eat and hope over time that it will help them develop some compassion as well. I have lots of strategies I’ve developed on this topic that work for our family (including plenty of ideas for the creative use of leftovers, bruised fruit and the like) so if you want us to write more about these kinds of tips or have some ideas of your own to share, just leave a comment or email me here.