Clear Creek Financial Blog

Financial Advice for All Life's Creeks

How Much do I Need to be Able to Retire?

We have talked about many retirement planning issues. It is time to determine how much money do you need in order to be able to retire. Many factors influence the retirement decision; however, we have assembled a table that will highlight some parameters and provide some guidance.


Annual Income $70,000
Inflation 3.5%
Earnings Rate 12.0%
Life Expectancy 90
Years in Retirement 50 40 30 20
Total amount Needed Today $904,529 $883,107 $835,942 $732,095

The analysis assumes that at life expectancy (the last year of retirement), the balance in the savings account is 0. (You better hope you are not around.) Also, all assumptions need to materialize as expected (not likely). Finally, the analysis assumes that each withdrawal occurs at the beginning of the year (i.e. You need to eat during the first year of retirement).

You Just Received a Windfall – What Do You Do?

Putting together this article was really inspired by a friend of mine winning the lottery. There are scenarios that happen every day to a lot of people. They receive an inheritance, a big bonus at work, a raise or they win the lottery. There’s a lot of stress and anxiety that can accompany the joy of receiving a big chunk of money.

There’s a number of things that you need to do when you find out about the money. The first and most important thing that you should do is relax, take a deep breath and think about it for a bit. A year ago when I inherited some money from my father I went thru this. The amount that I got is a fraction of what my friend won in the lottery, but figuring out what to do is on everyone’s mind.

The first thing that you need to do is determine whether the amount that you are receiving is material. A material amount of money is really going to be different for everyone. Receiving a million dollars to Bill Gates or Warren Buffett doesn’t mean as much as it does to Joe the Plumber (for those of you that remember him). What you will end up doing with the money will be very different if the amount is a significant amount of money or just a ‘good’ amount of money. In all honesty, what I am going to recommend doing with the money really isn’t that different if it’s significant or not. The only real difference is the amount of risk that you take in step 3 below, not really in steps 1 and 2.

Step 1 is to look at your debt. There’s what we will call good debt and bad debt. Bad debt would be anything today that has an interest rate above 7%. At some point in the future what would be considered too high an interest rate might change but as of October 2016, let’s call it 7%. The first thing you should do is pay off as much of this bad debt as you can. In the short term it won’t be as satisfying as buying a new car, but from a personal financial perspective, this is the best thing that you can do. Having a mortgage and a car loan (depending on how much it is and how much you make) is perfectly fine and normal to have. With the low interest rates of today (sub 5% for car loans and sub 4% for home loans) playing with the banks money is a great use of your own money.

Step 2 has to do with your emergency fund. I agree with all of the financial advise that you need between 3 and 6 months worth of expenses readily available to cover any unforseen problems. My general opinion is more along the lines of 6 months rather than 3 months, so setting aside what you are comfortable with is your next step in easing your mind. If you’re unsure of what this amount might be and you want some rules of thumb, i would say that you should have 12 times your housing payments set aside. Again, every financial situation is different, but the cost of housing to most people is their largest expense that can take 1/2 of what an individual or family makes. The 12-times rationale takes this into consideration. Again, look at your situation and think about what you are comfortable with.

As much as I’m a finance guy, I also understand that there’s some basic human instincts that have to be considered here. Taking the above 2 steps might not make you feel good about receiving this windfall of money, so if you want to go buy yourself a present, by all means, go ahead. My only point right here is that you might feel good about things initially, but in the medium or long term, you might think otherwise.

Step 3 gets you to the ‘how do i invest‘ question. Here is where you have to stop and think about just how significant an amount of money this is to you. For arguments’ sake, I will say that if you receive in excess of $100,000 we will say that the amount is significant, anything less will be considered a ‘good’ amount. The reason that I will talk about these differently is because the more significant the amount of money, the less risk you should take with it. You should take less risk largely because you might not need to take as much risk to achieve your long term financial goals. When i was talking to Mr. Lottery, I had pointed out that if he had a portfolio of $1.5 million, he should expect to generate $30,000 a year alone in dividends — if they were to invest everything in an ETF that tracks the S&P; 500. This reflects the historic average of 2% per year return in dividends. [note – over the last 10 years, the actual return has been a little under 2.2%.] On top of this 2% per year is potentially another 5.2% in S&P; 500 returns excluding dividends for a total return of 7.2% per year (if you reinvest the dividends). This comes to $108,000 a year on that $1.5 million portfolio.

Let’s keep something in mind — your emergency fund that you set aside in step 2 above does NOT get invested. This stays in something like a money market fund, a CD or simply in a bank savings account.

With your decision for what to do when you invest, as a general rule of thumb, i typically recommend to people that they invest in ETFs (exchange traded funds) or Mutual Fund Index Funds with extremely low expense ratios. This allows you to keep as much money for yourself rather than giving it away to people that aren’t going to beat the market. For simplicity, I’ve found 3 ETFs that I find represent three different chunks of the US stock market – VB, VO and VOO. VB is the Vanguard Small-Cap ETF, VO is their Mid-Cap ETF and VOO is their Large-Cap ETF. If you know nothing about stocks or investing, I suggest you use these 3 funds and adjust your risk between them. If you truly know nothing — put 1/3 into each of them. If you’re young or can tolerate risk, put a little more into the small-cap fund and a little less in the large-cap fund. If you are inclined to invest in some bonds, which most financial advisors recommend, the iShares ETF AGG is an investment grade aggregate bond fund that can cover you on non-municipal bonds.

As I’ve mentioned, most financial advisors recommend certain asset allocations depending on your risk profile. This basically means that they recommend investing some in stocks (equities) and some in bonds. This helps you spread risk out. Many rules of thumb include 60-40 (60% equities and 40% stocks) is one of the most popular. If you’re younger and less averse to risk then maybe a 70-30 split is for you. This all depends on you and the only person that can really answer how things should be allocated is you. If you truly have no idea, then go with one of the two rules of thumb, 60% stock and 40% bond after age 45 and 70% stocks and 30% bonds if you’re younger is a good way to think about it.

So here’s what you do with your windfall (in a nutshell) — take 60% of the money and put 1/3 each into VB, VO and VOO, then take the remaining 40% and put it into AGG. I’ll get into some more complex asset allocation strategies in another piece soon, but for those that are getting started and dont have time to “think things through”, this is a fast and easy way to answer this question.

How to Invest in the Stock Market When You Don’t Have Money

Most people think the stock market is only for the wealthy. In fact, I felt the same way until recently. I thought I needed thousands of dollars to start investing. That’s what the movies tell us, right? Only people who have thousands of dollars lying around can reap the benefits of investing in stock.  

This myth holds many people back from making a responsible (and sometimes fun) financial decision. It’s understandable – why would you throw money into a black hole without knowing what will come out? Here’s the thing about that: You can make tiny, tiny investments if you want. Some stocks trade at just $5 a share. You won’t become a millionaire overnight with a small portfolio like that, but it’s a great way to start learning more about investing. Maybe, eventually, you’ll make larger investments, and then we can talk about becoming a millionaire.  

So, how do you invest in the stock market with limited discretionary funds? Here are a few tips. 

Work with What You Have 

The stock market will require you to save some money. Not necessarily thousands of dollars, but some. You don’t want to dip into emergency savings or cut your food budget in order to make a small investment. Keep your change for a few months and add it up. Cut a few subscription services out of your budget and see how much it comes to. You can invest on your own, with an app like Robinhood, with no minimum, but you’ll need to start somewhere.  

Ask Your Employer 

You know that 401(k) plan your employer helped set up? That’s the easiest way you can get into the stock market. It’s typically handled through the employer, and you can put investing on autopilot, but it’s a start. This is a great way to start investing with no money, and you can set up automatic payment transfers to ensure you’re contributing every month.  

Invest with an App 

Financial tech is making it easier to invest in the stock market without the help of a professional. These apps, known as micro investing apps, can help individuals invest small amounts of money in small stocks and index funds, growing wealth as passively or actively as you want. I’ve already mentioned Robinhood, but Stash Invest and Stockpile are similarly popular options.  

Don’t Give in to Excuses! 

Figuring out the stock market can be difficult, especially if you’re new to financial literacy. That said, this stuff is pretty easy once you get the hang of it. Start small and use it as a learning tool. Then, when you’re ready, make larger investments and see what happens! 

Quick Tips for Beginning Your Student Debt Payoff Journey

Close to 50 million Americans have some form of student loan debt, totaling close to $1.5 trillion at the end of 2018. For the first time in history, this debt is higher than credit card debt or auto loans. All of this is to say that if you have student debt, you’re far from alone – but that doesn’t mean you should ignore it. 

It can be easy to delay paying down debt. It might feel like you have so much to do that you’re unsure of where to go first. Confidence is key to any financial decision, and paying off debt is a huge, identity-shifting experience. That said, there are a few ways you can start the process, which will then turn into good habits. Eventually, you’ll achieve financial freedom.  

Start a Change Jar 

It sounds dumb, I know, but it’s a start. Set a jar out on your dresser and collect all your loose coins at the end of the day. That’ll eventually accumulate into something bigger, which you can then deposit at the bank. This is a great idea if you’re still in the grace period between graduation and debt repayment. Maintain this jar for those 6 months and use what you’ve collected to make your first loan payment. It’ll make the process seem easier and the payments themselves more attainable.  


Interest is one of the biggest challenges to paying off student debt, but the less you pay in interest, the more you can put toward the balance itself. Consider consolidating your debt to achieve a lower rate. This will also make it easier to balance multiple payments, as you’ll have only one bill to deal with each month.  

Re-Work Your Budget 

It might not be fun, but you should prioritize your student loans every month (after household expenses, of course). Spend some time calculating your budget. If you can stand to cut a few dollars from going out expenses, or maybe food, put that money toward loans instead. There is always a cheaper way to shop. 

Cancel Unused Subscriptions 

There’s no sense in having a membership or subscription if you don’t use it, especially if you could use that money to pay off debt. Go through your bank statements to see how many subscriptions you have, then total them up. If you only use Netflix to watch a movie once every month, it might be time to cancel.  

What Determines a Mortgage Interest Rate?

As a matter of fact, it is universally accepted that the higher a person’s credit score is, the lower the risk that person poses to a lender and therefore the lower rates of interest that person will receive with credit. On the flip side of the coin, the lower a person’s credit score, the higher risk they pose and the higher interest rates will be for credit applications. 

The same rings true for all credit applications, whether it is for a car, credit card or mortgage. While different countries and credit agencies employ different credit ratings and scales to determine a person’s credit score, they all have the above risk to reward ratio in common with lenders credit terms. 

To find out the level of interest and monthly repayments on a particular mortgage for a certain individual, firstly a credit report should be ordered from one of the main credit agencies such as Equifax or Experian. Once the credit score has been determined, research on the Internet will uncover the typical APR rates from various lenders to people with similar credit scores. These, while not exact, will give a good indication of expected rates and terms. 

Using the FICO scoring model as an example; if a person’s credit score is between the 490 to 580 region, mortgage interest rates are likely to be about four points higher than the best rates available. At the 581 to 620 level, rates will improve to about 2.20 points higher than the best mortgage rates. From 621 to 660 there will be about a 1.5 point difference and then between 661 to 700 only a difference of 0.5 points, this lowers to 0.25 points at 701 to 760. At the maximum ‘prime’ section of the credit scale of 761 and above, the interest rate on a mortgage will be the best that is available on the market. Please note that the above figures are all approximate and to be used as a guideline only. 

Understanding a Deed in Lieu of Foreclosure

Should a person find themselves in financial difficulty for whatever reason, whether it be through redundancy, illness or another factor and they cannot maintain their mortgage repayments, that person may consider a ‘deed I lieu of foreclosure’ should they be unable to either sell their property or work out a plan to resolve the situation. 

If a deed in lieu of foreclosure is arranged, it negatively affects the borrower’s credit score by as little as 50 points to as much as 250 points depending on the credit bureau that it is reported to. This is a major deduction of a person’s credit rating similar to that of bankruptcy and will have short and long term consequences on the credit available in the future. When a deed in lieu of foreclosure is reflected on a credit report for seven years. The impact of the deed in lieu does diminish over time, however credit applications within the first two years especially could be difficult to come by and offer high interest if they are agreed. Once the deed in lieu is seven years old, the entry can be requested for removal by the client by notifying the relevant credit bureaus. 

A new mortgage is an unlikely scenario for a person with the deed in lieu of foreclosure within the first two to three years of the entry being added to the person’s credit report. However the credit file can still be repaired by keeping existing or new credit products in good stead. For example by making payments on time and not meeting or exceeding credit limits. By doing this in the duration of the initial two or three years since the deed in lieu, the probability of obtaining a new mortgage at that time will be higher and more favourable interest rates and terms will likely be offered. 

A deed in lieu of foreclosure could mean the single biggest significant drop on a person’s credit score. Even premier credit scores of 850 may reduce to a level of 600 should this happen and though a score of 600 would attract Subprime lending, due to the deed in lieu entry on the credit history, this could prevent lending altogether, even with an average credit score. 

Tips on How to Fix My Credit

Credit problems seem to flourish lately. Debt can be the bi-product of credit card spending or from online personal loans that were not paid back on time. While the act of fixing a person’s credit completely may not be realistic, there are important steps that can be taken to certainly improve the credit history and therefore credit score.

Below is a guide to help achieve this. By following these steps, over time, a person’s credit score will be improved without fail. It is important to realize however, that credit scores are not updated daily by the credit bureaus and any changes made to a person’s credit history may take at least thirty days to be amended. Patience is the key to fixing credit scores.

  • Review the credit report and ensure that there are no irrelevant entries that are negatively affecting the credit score. These may be old loan agreements that have been paid, wrong data such as the amount of a credit limit or even somebody else’s data mixed up with another’s. The credit bureaus need to be made aware of these to remove them from the credit file. This may increase a credit score quickly and is a simple process;
  • Ensure that on credit agreements with a maximum expenditure limit such as a credit card that the balance remains below 30% of the total credit available. Credit bureaus use the balance to help determine credit worthiness;
  • Ensure payments are made on time and in full for all credit agreements. Even one or two late payments can have a big impact on a credit score;
  • The following have the most negative effect on credit scores, they are in order of importance and should one still be on file when it can be removed – request it to be removed immediately; bankruptcy, foreclosure, repossession, loan defaults, court judgements, collections, past overdue payments, late repayments, credit rejections, credit enquiries;
  • If an individual has little or no credit, applying for more credit products will help build a better credit history. Therefore credit ratings will improve if these accounts are kept in good standing;
  • Ensure repayments are made on time by setting up a direct bank payment from a bank account. If there are available funds in the bank account, late repayment defaults will be avoided altogether;
  • Use a credit card regularly. If little history is built up credit scores will not improve. The best idea is to use a credit card for a small purchase and then pay off the balance in full each month;
  • Do not apply for too many credit applications in a small period of time. Each application will be noted on the credit file and will act in a negative manner;
  • Avoid too many credit card balance transfers, these may save a person money, however they will negatively affect a credit score;
  • Ensure that the individual is registered to vote at a certain address;
  • If possible try not to change address or job frequently;

It is important to realize that credit cannot be repaired if a person’s finances are in a negative state. If bills and repayments re still being missed then credit scores will not improve no matter whatever other action is being taken. Repairing credit history takes a considerable amount of time, so patience is required.

How to Obtain a Credit Score without a Credit Card

Ironically to obtain a credit score from most leading credit bureaus such as Experian, Equifax or Trans Union online, a credit card is required to order the report.

There are alternatives however and it is possible to find out a credit score without a credit card.

Firstly free information can be found locally by using credit agencies such as These provide free credit reports, however an actual credit score is often not included with free credit report websites.

Secondly, a payment method other than a credit card can be used at all of the major credit bureaus such as a money order, check and in some instances debit card or direct bank account payments. This will entitle a borrower full information regarding their credit situation such as credit history and an exact credit score, however due to the method of payment, it can be a delayed process.

Lastly, there are many websites which give an estimate on a person’s credit score based upon a series of questions related to their current circumstances and credit history. The results may also include information relating to local credit searches in order for the user to see how their credit rates among similar citizens locally. The downside of such websites is that the score is nowhere near exact as it is a simple estimation from a small amount of data that is collected. While the credit scores from such websites are from less complex algorithms than those of the main credit agencies, the results can be useful if a very fast result is required. They are near as instant as gaining a credit score can possibly be and it is an easy method to obtain a credit score without the need of a credit card. The estimation given, however, may be anywhere within a hundred point radius, for example between 520 and 620.

Consumer Banking: New Products and Services

Traditional banking institutions are facing three major trends and market forces that have a catalyzed a bunch of new consumer banking products and services. First, they are realizing that their trading divisions are best focused on automated trading practices. Second, they’re realizing how important and profitable their consumer banking divisions have become. And third, banks are afraid that the consumer banking market is poachable through tech companies that are offering new kinds of consumer banking services—and Amazon especially which already has a strong foothold in many U.S. households.

Traditional Bank + Tech Company Partnerships

Rather than try to fight new tech companies on their own turf, many traditional banks are looking to partner with these tech companies. The result has been the introduction of entirely new types of personal banking services and a new level of convenience and security to traditional banking. These aren’t the only examples, but here is a selection of new products and services that have come out of these partnerships. 

HSBC + Amount: If you’re like a lot of today’s banking consumers, you want to be able to view multiple loan options to find the right balance of interest rates, repayment schedule, and loan terms. Then, consumers can go ahead and complete an online loan application. Amount is the tech company that powers HSBC’s ability to offer this kind of personal lending platform. Reportedly, loan amounts of up to $30k could be available as soon as the next day.

Rhinebeck + Zelle: Many new products and services are as simple as integrating platforms and features to deliver a great consumer experience. A lot of people who use personal online payment services like Paypal, Venmo, or Zelle wonder why their bank can’t offer this feature. Many banks now do—by partnering with the payments tech company. One recent example is the partnership between Rhinebeck and Zelle. Customers can make a Zelle payment on their phone through Rhinebeck’s mobile app. In fact, Zelle is automatically available on your phone when you download the mobile app.

Goldman Sachs + Apple: Looking to use your phone as a credit card? The Apple Card is a virtual credit card that combines the security of your iPhone and the ability to process credit card payments—including traditional cash back bonuses. It’s backed by Goldman Sachs, who is looking to promote Marcus its consumer banking brand. The early experience and information about Apple Card shows that even new consumer banking products have drawbacks. If you lose your iPhone, it can get really cumbersome to pay off your Apple Card balance.

Citigroup Checking with Credit Card Perks: Having already launched a fancy new digital banking platform, Citigroup is preparing to launch a new product that has long been on the wish list of people who wish they could have their cake and eat it, too. Credit card perks without the credit card. There has long been a gap between Citigroup’s general strength with its consumer banking and its lackluster credit card division. Recently, the bank has been taking an inside-out approach by further incentivizing its consumer banking products with credit-card-style perks. 

How to Choose Products and Services

So, in conclusion, financial institutions are getting creative in the products and services they offer consumers in the hopes that they will be able to develop a greater sense of customer loyalty. In few areas of the economy is the “lifetime value of the customer” so keenly understood as the consumer banking industry. In turn, we customers should look around at the products and services that are available to us at any given time—but also that our choice of bank is earning our loyalty in the broadest sense of the word.

What Is a Good Credit Score and Why Is It Important?

A good credit score is simply a rating applied to a potential borrower of credit that tries to define whether that person is low, medium or high risk with regard to offering credit. Credit scores vary from company to company, country to country. However, somebody with a good credit score will attract better interest rates and benefits upon application than somebody with a poor credit score. Additionally, the former will more likely succeed in a credit application than the latter.

Credit ratings are applied by credit bureaus and agencies such as Experian. By collecting data from a person’s credit history, an estimated rating is applied from judging how that person has behaved in maintaining previous credit accounts and from other personal data.

Maintaining a good credit score is becoming more important as time goes by. Traditionally the data was used by a prospective lender in order to help determine whether offering credit was a risky proposition, Nowadays, however entities such as insurance companies and even employers are looking at credit scores and credit history.

A few problems arise when trying to obtain a good credit score. Firstly, no credit agency fully reveals how the ratings are calculated and secondly, there are many difference credit scoring models throughout different areas of the world and even within the same countries and counties. Different creditors look for different factors and this makes improving a credit score difficult. Though it is not an exact science, there are many generally accepted methods to improve credit ratings overall. It is important to obtain a higher rating as possible in order to improve the chances of obtaining credit for the future, whether it be for a mobile phone contract or a mortgage.

As already mentioned above, formulas for a good credit score vary, however some basic criteria outlined below can be very beneficial to a good credit score:

  • Solid payment history
  • A mixture of credit types
  • A low level of recent credit applications
  • The percentage of available credit a person is currently using
  • The length of a person’s credit history

The first step of obtaining a good credit score is to find out the exact state of a person’s existing credit rating. This will give good insight into whether a future application may be accepted or if the same application will be declined, reducing the credit score even further.

With world society counting on credit more all the time, it is important to maintain a good credit score should it be needed in the future for any product or service. Furthermore’ with businesses such as utility companies and employers viewing people’s credit score, it can only be beneficial to gain a positive credit rating or even improve on an existing credit score.

What is the Minimum Credit Score for a Mortgage?

A credit score alone is not the only information that a potential mortgage lender will look at to determine whether or not to process an application. History of outstanding debts and the fact of a person having steady and a long history of income are other major contributors.

However the credit score will likely be used to determine the level of risk of a borrower and therefore the rate of interest that may be borrowed at. The lowest rates of interest are offered to those with the best credit scores, while those with low credit scores receive the worst offers with high interest and higher monthly repayments for the same value of mortgage. In addition to this however, lenders will take the amount of a down payment or deposit into consideration. This can affect the level of interest on the mortgage in a similar fashion the credit score as outlined above.

Even though there is no real minimum credit score level that is required to obtain a mortgage, borrowers that are high risk propositions in the eyes of a lender with low credit scores, will be subject to increased up-front fees in order to be approved at all. The likelihood is high that a larger percentage down payment would be required for lower bracket credit score applicants in addition to high rates of interest. The result of Subprime lending can mean crippling repayments whereby the applicant is forced to decline their own application due to the high costs involved.

However, rates, fees, terms and conditions and other aspects of credit vary greatly from country to country, lender to lender. Generally speaking across the board, higher risk always means higher cost.

It is always worth finding up to date information on a credit file if thinking of applying for a mortgage in order to gauge a rough idea of what interest will be paid locally. In addition to this by checking errors on credit history, removing out of date entries may increase the overall credit score which could have a positive effect on the mortgage offers received.

How the Perfect Home Size Evolves as You Get Older

Some thirty years ago, the average home and household size allowed for 675 sq. ft. per person. Today, that number has crept up to just over 900 sq. ft person. There a lot of ink spilled nowadays between the competing philosophies of suburban McMansions and minimalist tiny-house living. What’s talked about less, even though it matters more for our everyday happiness, is how these preferences and tastes can evolve throughout a person’s lifetime.


Sizing a Home During Every Stage of Your Life

By understanding how your personal preferences may change as you get older, you’re more likely to be happy in your current place and be ready when you recognize it’s time to move.


  • If the dream of homeownership hits you at an early age, while you’re still trying to get established in your career, then you might be willing to look at smaller dwellings just because any place you can call home is a place you’re going to love. Plus, you can always upgrade later.


  • When you start and grow a family, a bigger-sized home becomes more of a priority, if not an absolute necessity to keep your sanity. Chances are, your only limits are how much you can affordable in a location known for having good schools.


  • As you age as your kids launch their own lives, it’s often time to downsize. You probably aren’t as willing to tolerate DIY home repairs, cheap linoleum floors, and other oddities that you didn’t mind as a young, first-time homeowner.


Make Real Estate a Personal and a Financial Investment

Liquidity and mobility is an issue with homeownership, especially when you take into account realtor commissions and the lost equity that comes with selling a home. This isn’t an option for everyone, but if you’re looking further down the river at your retirement portfolio, you might be interested in real estate investment. It may sound crazy now, but rather than sell your home as part of downsizing or upgrading, you might turn the home into a rental property.


And crazy as it sounds now, one day you might even find yourself looking to move back into this former home. Sprawling ranch homes can be great for families with school-age children in which the parents want some distance between the master bedroom and the kids’ rooms. They can also be great for seniors and elderly folk looking to stay in their own homes as long as possible. In the interim, you might spend a decade or two as a globe-trotting empty-nester with a luxury condo as your home base.


Don’t Fall for the Luxury Trap—It Could Cost You Thousands

If you have a smartphone (and who doesn’t at this point), you’ve probably visited a social media app. These platforms allow individuals to present curated versions of their lives; users post luxurious locations, gourmet meals, and daily latte pictures in order to portray a specific image of themselves. For those of us who aren’t paid for using these apps, either in the form of sponsored content or brand deals, these lifestyles might appear effortless and easily achievable. This couldn’t be farther from the truth.  


FOMO, or Fear of Missing Out, is real, and it’s a slippery slope when it comes to personal finances. Take, for example, Lissette Calveiro, a 26-year-old woman who felt pressured to keep up a glamorous social media presence after moving to New York City. She splurged frequently on brunches with friends and expensive clothes to take the perfect photos for her 12,000 Instagram followers. Meanwhile, her internship was unpaid, so she attempted to fund this lifestyle with nothing but a part-time retail job. As a result, she found herself nearly $10,000 in debt. Don’t be like Lissette. 


So, here’s how to indulge the luxury trap without completely falling for it. Moderation is key, so limit your luxuries to “once in a while,” or every few weeks. If you have to do it for social media content (it sounds dumb, but this is one of the biggest drivers of FOMO spending), take dozens of photos in different settings and under different lighting. You’ll get the content you need, and you’ll be able to spread it out over the course of several weeks. By consuming in moderation, you’ll also gain more appreciation for your moments of luxury—that $15 cocktail will feel more special if you can only buy it once each month.   


Another way to indulge luxury FOMO? Prioritize. While taking a 9-hour flight in business class might make for a fun story and a great Instagram post, spending thousands of dollars for a short, likely boring experience is not a smart decision. Instead, settle for a $6 latte or a Bloody Mary with brunch. While smaller expenses will add up over time, it makes more financial sense to get the $6 Sunday latte instead of the $1,000 business class flight. 


If you have social media FOMO and want to live a life of luxury, don’t compromise your financial security for a shot at Instagram fame. Instead, indulge smartly and in moderation—you’ll enjoy your purchases more and save money in the meantime.

A Step-by-Step Guide to Building Your Savings

Thinking about building your savings can seem overwhelming—especially if you’ve just paid your monthly bills. Taking more money out of your paycheck, even if it’s just to put into a savings account, can feel impossible. While there’s no magic solution to increasing your savings, there are several steps you can take to make the process easier (and a bit less painful). Here are my top tips for putting more money away. 


Make a Realistic Budget 

Budget-building is daunting and repetitive, but building your savings and staying consistent will require a clear plan. Try out a few budgeting apps to see what works, or opt for a standard Excel spreadsheet. Track your bills, necessities, and frivolous spending, then establish how much money you want to save every month. Start small and be realistic—even if that means saving just $50 each month.  


Try the Change Jar Method 

It sounds crazy, but the change jar method can actually help save money in the long term. At the end of every day, deposit loose change in a receptacle and watch your savings fill up. To ensure you save with this method, use cash for as much spending as possible. At the end of the day, you’ll always have something to put in the jar. 


Cut Costs Around Your Home 

Much of our income goes toward monthly living expenses. It’s not something to be ashamed of—its simply a fact of life. However, these recurring monthly expenses can add up, and cutting one or more of your services can lead to great savings. Review your monthly expenses and see where you can trim cost. Cut your cable bill and opt for a subscription service instead. Downgrade your Internet if you don’t use it that much. Enroll in energy-saving programs from your electricity provider. 


Set Up Automatic Transfer 

Out of sight, out of mind. Ask your bank how to set up an automatic transfer to your savings account. Allocate a certain percentage of each paycheck to be automatically placed into savings. This is an easy and low-stress way to build your savings account.  

Take the Buy Nothing New Challenge and See What Happens

People around the world are trying to gain control of their financial lives and spending habits. As a result, more individuals are turning to the “Buy Nothing New Challenge” as a way to curb spending and remain mindful. The originator of this idea, The Happy Philosopher, first experimented with the idea of not buying any clothe for a year. The Internet personality quickly discovered that this wasn’t challenging enough. The idea then expanded to include everything—not just clothes. If this sounds like a fun or challenging idea, try your hand at it and see what happens. 


For those interesting in adopting this lifestyle, there are a few exceptions and disclaimers that define what it actually means to buy “nothing.” “Stuff” is difficult to define, but most loosely describe it as permanent, durable goods that are not necessary to life. Anything consumable or related to hygiene or household products (think: cleaners) doesn’t count, but many challenge-accepters have gone the extra mile and switched to DIY cleaning and hygiene materials. Emphasis is also placed on maintaining and repairing what an individual already owns, but select circumstances provide grounds for exception (replacing a laundry machine damaged beyond repair, for example). 


Additionally, experiences don’t count. This includes everything from flight tickets to hotel stays. Virtual stuff is also okay, but gifts should tend toward ”experience” rather than physical objects (concert tickets, event access). Borrowing and renting is also allowed, and care should be taken not to harm or withhold necessities from animals during the process. Home improvement is a gray area, but if a repair or item is necessary, it is okay.  


So, there you have it. The rules of the game. While most people undertaking the Buy Nothing New Challenge attempt to do a full year, start with a week and see how you feel. Then, take the challenge month by month. After a few weeks of practicing this lifestyle, you might be surprised by how much money you’ve been able to put away. 

College Financing: Tips for Students

If you’re a high school upperclassman or recently-graduated, congratulations! You’ve hit one of the first large, professional milestones in your life, and you have something to celebrate. If you’re independently researching college financial options and strategies, I’m proud of you—you’re already more proactive than most of your peers. While it’s easy to get caught up in the swells of end-of-high-school graduation and taking the first steps into adulthood, realizing the impact of your education on your financial wellbeing will bring you crashing back to shore. That might sound scary, but don’t worry—you’re not alone in this journey, and the friends, adults, and professionals in your life will be able to provide guidance, empathy, and essential advice. However, it’s my turn to give my two-cents. So here it is.


As a teenager or young adult, conceptualizing money can be very, very challenging. I know I was immune to the stress of college financing in the early years of my education; seeing “Cost of Tuition: $55,000” never registered as “an expense bigger than most adult’s annual salaries.” Compounded over four years, the cost of an education never truly felt like “a quarter of a million dollars.” But, unfortunately, this is exactly what it costs to get an education in the United States. If you attend a standard four-year college or university, your education will likely cost six figures—and as someone whose high school job paychecks are never more than $200 each pay period, that figure might not truly register.


The fact of the matter is: that number is real, and it is never going to go away. Sure, you’ll chip away at it with merit and aid-based scholarships, grants, and loans. You might not even have to start paying until well after you graduate. I didn’t realize how much I owed until I got my first job; I had to call my federal loan provider and apply for income-based repayment. Most of us, though well into adulthood, are still paying off our undergraduate education. I’m not trying to scare you; I’m trying to instill a sense of responsibility and financial wherewithal.


That said, there are ways to bring your college costs down while in school. If your college does not require on-campus housing after the first couple of years, consider moving off-campus. This is a great way to save money, as Room & Board/Meal Plan expenses are often very, very high. Sign up for Work-Study jobs if you’re eligible or find an on- or off-campus job to offset your book and food expenses. Opt for digital texts rather than $300 textbooks and ask your professors if they have any paid research positions available. If you can, see if you can complete degree requirements in 3 or 3.5 years instead of four. Research private scholarships both before and while in school to bring loan costs down early.


All of that said, remember: It is your job to be a student. This is what you’re paying for, and you should take full advantage of this unique position. Pick up a job, but don’t sign up for so much paid work that your studies suffer. If your school recommends on-campus housing to facilitate community, don’t be afraid to live in a dorm all four years. Your college experience is unique to you, and you should live the way you feel most comfortable. When it doubt, ask your financial aid office and friends for financing advice. Many financing options are based on individual institutions, and your college might have a game-changing strategy for you to pursue.

College Financing: Tips for Parents

For parents, college is a simultaneously exciting and daunting enterprise. On one side of the creek, you’ve instilled within your child a sense of adventure and a love of education—good job! On the other, you may have just signed you, your graduate, and the family up for decades of loan payments and debt mitigation. That sounds terrifying to most people, but don’t fret. Parents before you have figured out how to finance this massive undertaking, and parents after you will have an even more difficult time coming up with tuition payments. Though it’s easy to get lost in the stream when it comes to financing college, there are strategies you can adopt to tackle the situation one wave at a time.

If your college student is several years away from entering school, you’re in the best place to tackle the financial mountain head-on. The best way to pay for your child’s education is to pay for it directly—as much as possible. One of my favorite strategies is to save through a 529 Plan, which you can start as soon as your child is born. This is a tax-advantaged saving plan designed specifically for college costs. Sponsored by states, state agencies, and education institutions, the money you invest will grow, tax-free, and can be withdrawn for educational purposes without paying taxes.


If you’ve saved your financing strategizing for the last minute, you can still take steps to ensure your child’s financial wellbeing. Every college student (or their parent) must complete the Free Application for Federal Student Aid (FAFSA); the Department of Education utilizes the reported data to assess the amount of federal loan support your student needs. The Stafford Loan is the most common type of federal student loan, and it can be subsidized or unsubsidized. These have low, fixed interest rates, repayment starts six months after graduation, and credit history is not a factor. In most cases, your child will be eligible for a Stafford Loan to cover some or all tuition costs. However, the Stafford Loan will be in your child’s name; technically, this will be their financial burden.


However, the federal government also has something called a Parent PLUS Loan, which allows parents to help finance their child’s education. PLUS Loan holders can borrow an amount equal to the cost of tuition, but securing this type of loan is more difficult than the Stafford. Additionally, Parent PLUS Loans come with a fixed interest rate of 7.00% (very high), and repayment begins as soon as the loan is fully distributed. If you are not awarded a PLUS Loan through your FAFSA application, reach out to the college’s financial aid office and ask how you can request a PLUS Loan.


If you are uncomfortable taking out loans for your student’s education, you have other options. Many parents tap into their retirement plans. If you choose this option, check to see if you will incur early withdrawal penalties or what the taxes on the withdrawal might be. However, think very seriously about this decision; there are loans available for college, but there are no loans for retirement.


Ultimately, your child should take the wheel as much as possible when planning for college. While I understand that you want to help as much as possible, this is a difficult game to navigate: you want to secure your own financial wellbeing while ensuring your child’s ability to repay student debt. I recommend sitting down with your college student to talk about what debt is, what it means, and how they can begin to finance their educational investment (we have a guide, if it helps). If all else fails, talk to the school’s financial aid office—they frequently steer parents in the right direction.



A Few Key Money Spots People Miss

When you think about how to save money, spend it wisely, or invest it wisely, those are the big levers to financial success and freedom. However, people often miss some crucial moments to save or make sure they are in good shape, and they are very common moments that I want to mention.

#1 Accounting – Spend

Hire an accountant. Yes, it will cost more than Turbo Tax, but an accountant is someone who can ensure that you aren’t going to get a penalty or audited. If you do, you have someone contracted on your behalf to make sure everything goes smoothly. In addition, you could be wasting money in various ways or not aware of new changes to the tax law that you could benefit from. If you own a small company they can recommend excellent payroll software companies or proper expense reports or general documentation that is helpful or your day to day and makes general account much easier and smoother without needing a full time accountant.

#2 High Points Credit Card

Get one. Go to the Points Guy and research what you need for your lifestyle. No need for travel points if you are a homebody. Then put everything on here. Now listen. If you aren’t good with day-to-day expenses you need to be careful here, but in general if you aren’t using a points card you are giving away money. Then put everything on here. Figure out how to put every little expense here. Especially, recurring home expenses like gas, electric, internet.

#3 Your Mortgage

This is typically a one-time expense or a once every so often expense so make sure you understand every detail, every expense, and compare compare compare mortgage rates. You might look at a $100 fee on a $500,000 loan and think it’s nothing, but if you are mortgaging that amount that $100 could end up being $300 over the life of the loan. Agora can help find the cheapest origination fees. Nerdwallet can find the best rates. I know I know, you are tired from looking at houses and home inspections and negotiating and earnest money and closing costs…but pay attention. The process is set up to be very easy to add more and more dollars to the process, so dig in and fight or put it on the seller.

#4 Pay Your Mortgage Off Early

Look. This doesn’t have to be suffocating. You don’t need to pay it off in half the time. However, if you make just one extra payment per year, you will shorten your loan by 7 years. So if your payment is $2400 just make it $2600 and don’t think about it again. If you have more, pay more. Depending on the loan type and length and the like, you typically will pay about 3x the amount of the loan if you take it to term. So your $500k house will cost you $1.5 million–just in the financing, not the home improvements–over the life of the loan. Certainly, you want to get as much money into the market as you can, but you will have more money to put into it later if you aren’t paying 3x. You don’t need a special loan to do this, just add more principle to the payment each month.

#5 Pay Your Car Off Early

Same as with mortgage. Take the longest payment plan that doesn’t increase your rate, get the smallest payment they require, then pay it off fast. Car rates are typically about 2x what mortgage rates are, so you won’t pay 3x over it’s life, because their lives are shorter, but you want to pay the least interest possible. The reason for the smallest payment, is so that around Christmas or when you want to take a vacation, you can back off for a month without taking a penalty.

#6 Remember You Don’t Have Enough

This philosophy came from my high school buddy’s dad. I’m not sure if he knew what he was talking about or was just being cynical, but he usually had some wise advice, and he said this to us once and it stuck. You don’t have enough. This works at any age. It’s really hard to truly convince yourself that you have enough. Certainly some people actually do, but even they think they don’t. If you are comfortable and feel like you do, you don’t. Or at least convince yourself that you don’t. This will keep you looking at each expense and lifestyle choice through the lens of long term security. It will keep you straight and narrow.

Why You Keep Cash in Investment Accounts

I hear this quite a bit. People see investors who talk openly about their strategies and hidden in their discussion is how much cash they keep on hand. It’s usually a throwaway comment, which is probably why people think they are really missing something as it comes off like something that everyone knows. Here are the two things you are likely thinking, and then here is what they actually mean.

#1. It’s not cash as is hundreds in a brief case.

This is not actually cash, like you would use to buy beers at the ballgame. What people mean when they say we keep 5% in cash is not physical bills, but anything that is not invested. This will become more clear in a second. But short answer: not actual cash.

#2. Why have that money digitally and not invest it?

This one I get a lot. You already have it in an account. It’s like you got all the way to the goal line and took a knee. Why keep 10% in cash in your brokerage account? How about putting that into a money market and at least making a few lousy fractions of a point on it?

Here’s why. Let’s say you have $200k in your brokerage account and 10% in cash or $20k in cash (funds not invested). First, again, this is how people mean this when you hear it. Here’s the reason and in a second I’ll explain why the % in cash also changes.

If you hold 10% in a market that has been soaring, we know from studying the trends that on average every 13 months the market will take a 10% hit. Such as today on Dec 30, 2017, we haven’t seen a significant drop was Feb 2016 so we are long overdue on the averages. This is typically thought of as a correction line in retrospect, but always thought of as the end of the world as it’s happening. The market is just settling, and then at some point it returns.

Now. During these times–and also other times when companies or bonds or funds you like are being undervalued–when you have cash on hand, you can invest in things when there is a price reduction. If you don’t have cash on hand, then you miss out on some good deals. And crucially, here is the point: it takes time to get cash of any size into an into an account, at minimum 3-5 days from the time you execute the transfer. However, if you aren’t on top of it immediately, this adds time. If it happens over a weekend or a holiday, this adds time.

So cash keeps you lose and ready to pounce when something happens.

Fluctuating Cash Amounts

Depending on your age and your investing type and the market, you might hold 5% and you might hold 20%. Right now, for example, I’m looking to add a percent each month waiting on the drop to get in. After the drop and the big invest, given my age and risk profile, I might only hold 1-2% for a while until the market stabilizes. By that point, I might be leveraged enough, I might not be. I might have extra cash, who knows? The point is that you need to use cash to your market advantage.

Retirement: A Calm Stream with No Stillwater

Deciding when to retire is never easy. You need to have a firm grasp on what your current living expenses are and what your future living expenses may look like. Even then, it’s an exercise that based in the fundamental uncertainty that is life and mortality. Sure, there are certain kinds of data you can use to make informed plans. A family history and honest look at your lifestyle habits can create a personal life expectancy, but you just never know. As my mother used to say, you could get hit by a bus tomorrow. And life expectancy is still just an over/under for when your retirement resources need to last.


Choosing a number and having specific goals can be a great motivational tool, but it’s got to be based on the complete picture including both financial resources and personal priorities. A million dollars is frequently thrown about as a kind of benchmark, but it’s largely a moving target and the number itself can be misleading. For more context, check out these twin online sources….the first one from 2015 makes the argument that a million dollars is no longer enough for retirement, while this one from 1017 makes the argument that it’s still possible to retire happily with less than a million dollars. It really just depends.


Ideally, you’ll be financially secure enough to fully enjoy your retirement while still doing away with the idea that you have an expiration date. A calm stream that never stops moving, that’s a creek that can be maneuvered in old age.


More Thoughts on Retirement

Choosing to retire is never purely a financial decision. Some people are seemingly constitutionally incompatible with retirement. They go out of their minds with restlessness. A lot of us only realize how important feeling useful has become to us until we retire. You may have a plan to fill your time, but that doesn’t mean you’re going to find endless leisure as rewarding as you first imagine.


It’s one thing if you have kids to which you can leave a healthy inheritance, but I’ve always thought retirement plans are even trickier for childless couples. How do you ensure you have enough to stay comfortable in old age, while still leaving it all out on the field? Do you have a cause you’ve always believed in so much that you’ll be happy to leave the bulk of your legacy?


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