Matt Bell's Blog, page 14

Profitable Ideas: Stealth Shopping, Endless Parenting, and More

Weekly list of curated personal finance articles from around the web.

The rise of stealth shopping: how Americans are hiding big purchases from their partners (Wall Street Journal). “My husband doesn’t need to see that I bought another pair of shoes.” Or does he?

The new age of endless parenting (MSN). How will they ever learn to fly if we don’t let go?

How to fight shrinkflation? Pay attention to unit prices at grocery stores (Planet Money). More than ever, it pays to read the shelf tags.

Extra mortgage payments: better monthly or yearly? (Marriage, Kids, and Money). Either approach works well, with one just slightly better than the other.

Leaving a legacy bigger than material possessions (Becoming Minimalist). We all know that, “No one is going to stand up at your funeral and say, ‘She had a really expensive couch and great shoes.’” But is that insight changing us?

What my all-star MLB pitcher dad taught me about Godly competition (The Gospel Coalition). A great story about shaping a child’s character.

Earning $300K but not feeling wealthy? You’re not alone (Fast Company). People’s definition of “wealthy” appears to be changing.

Inheritance isn’t automatic: the probate process can take almost two years and cost thousands of dollars (MarketWatch). Fortunately, there are some steps you can take to avoid this fate.

To weigh in on any of the above, just leave a comment below. And if you haven’t done so already, sign up for a free subscription to this blog.

Is There a Trustworthy Process Behind Your Investment Strategy?

Even during normal times, the stock market is unpredictable. But when the world goes crazy, the market sometimes goes crazy, too.

Just look at the first quarter of 2020, the early days of the global COVID-19 pandemic. The U.S. market fell 34% in just three weeks. Then, when everyone assumed it would be a terrible year to own stocks, the market roared back and ended the year up 16%.

It emphasized the futility of trying to predict the market, and the importance of having a trustworthy investing process. That’s one of the most important aspects of successful investing. Instead of relying on headlines, hot tips, or intuition to figure out what to invest in, find and follow a solid process that tells you what to invest in.

As I’ve mentioned before, such a process is marked by four elements:

It’s objective and rules-basedYou fully understand and agree with its designIt has a demonstrated track record of successIt’s emotionally acceptable to you

Here are three ways you could put such a process to work in your portfolio.

1 – Self-managed. I don’t recommend trying to beat the market on your own. For most people, it’s too difficult to come up with a truly objective, rules-based process. Or, just when you think you have come up with such a process, you’ll find it too difficult to stay with it.

But it’s pretty simple to use a rules-based process to meet the market—that is, earn the market’s overall return, while also building in a little downside protection. First, determine your optimal asset allocation. Then build your portfolio, using index funds to spread your dollars across stocks and bonds accordingly.

This could be done with just two or three funds — maybe 80% VTSAX and 20% VTIAX if your optimal asset allocation calls for 100% stocks. If it calls for the use of bonds, maybe VBTLX for the bond portion and then use the previous two funds split 80/20 across the stock portion (or their ETF equivalents).

An even easier approach would be to buy just one fund—a target-date mutual fund. Many fund companies offer such funds. The idea is to choose the one that has the year closest to the year you intend to retire as part of its name.

Planning to retire in 15 years? Use the Fidelity Freedom 2040 Fund, the Vanguard Target-Retirement 2040 Fund, or a similar fund from another company. It will come pre-built with the stock/bond allocation the fund company believes is best for someone with your investment time horizon, and it will automatically make that allocation increasingly conservative as you near retirement.

But keep in mind that funds from two different companies, Vanguard and Fidelity, for example, are likely to have a different stock/bond mix for funds with the same target date. So, choose a fund with the stock/bond mix that’s closest to your optimal asset allocation, even if its target date is a bit different than your intended retirement date.

The next two approaches rely on the help of an investment professional or a team of investment pros.

2 – Self-managed, with help. This approach involves subscribing to an investment newsletter. (Full disclosure: I work for Sound Mind Investing, which publishes such a newsletter). You maintain an investment account at the broker of your choice, such as Fidelity, Vanguard, or Schwab, and you make your own trades. Those are the self-managed parts.

Then you follow a strategy designed by the newsletter publisher and invest in the specific funds recommended by the newsletter. That’s the “help” part.

Investment newsletters charge a fee for a subscription. Some, such as Sound Mind Investing, are relatively inexpensive, charging just $120 to $200 per year.

3 – Advisor-managed. With this approach, an advisor will get to know you and your goals, develop an investment plan for you, and then manage your portfolio, choosing specific investments and executing the trades.

Advisors usually require that you have a certain amount of money for them to manage—often at least $100,000. Their fee is based on a percentage of the value of your portfolio—typically 1%.

So, if you have $100,000 being managed by the advisor, you would pay $1,000 per year for their management of your portfolio.

Whether you choose to subscribe to an investment newsletter or work with an investment advisor, be sure to choose one who shares your biblical worldview.

One of the benefits of choosing either of these last two approaches is that the investment professionals you’d be partnering with have access to more sophisticated investment approaches (i.e., value, momentum) designed to better meet your goals—whether that’s pursuing market-beating returns or gaining more downside protections.

That’s a valid reason to go with either approach, but what’s at least equally valuable is having someone to walk with you through the investing journey. The greatest risk to your success as an investor is getting in your own way. Reading articles in the newsletter you subscribe to or talking with your investment advisor can be a very helpful form of accountability, encouragement, education, and reassurance when the market goes a little crazy.

As the Bible says, “Plans succeed through good counsel.” – Proverbs 20:18

To navigate the stock market without making emotional decisions, it helps a lot to have a trustworthy investment process, and perhaps the help of a trustworthy investment professional.

What process are you using with your investments?

Profitable Ideas: Give and Live, The Paperwork Every College Kid Needs, and More

Weekly list of curated personal finance articles from around the web.

Having gratitude linked to lower risk of death independent of other factors, innovative study shows (Good News Network). The joy of giving has been well documented, but now it turns out that it’s good for our physical health as well.

HIPPA and FERPA releases (The College Financial Lady). Don’t send your child off to college without getting this paperwork done first.

Roth 401(k) vs. 401(k): which is right for you? (Kiplinger). It’s largely about trying to pay taxes when you’re in the lowest tax bracket, but that involves some guesswork.

Cost leading reason college student are stopping out (Gallup). No surprises here, but a good reminder for parents of young kids to start saving for college sooner than later.

ER admissions for self-harm have increased among 10- to 14-year-old girls (Institute for Family Studies). A wake-up call for parents to be in the game about setting boundaries for screen time and social media use. See also, A teacher did all he could to keep kids off phones. He’s quitting in frustration. (Wall Street Journal).

Nurturing gratitude in your child’s heart (Focus on the Family). A roadmap for raising kids who are thankful, not entitled.

Gambling enters the family zone (The Atlantic, via MSN). Gambling is quickly becoming normalized.

Shut up, suit up, show up (A Teachable Moment). “Driving a Cybertruck might look cool, but social media likes won’t fund your retirement.”

To weigh in on any of the above, just leave a comment below. And if you haven’t done so already, sign up for a free subscription to this blog.

Get To Know Your Inner Money Manager

At first glance, managing money seems pretty simple. In order to use a budget, you just need to gain some knowledge about how a budget works. In order to invest well, you just need to learn about different types of investments and how to buy them.

But it isn’t that simple, is it? Sometimes, even when we know exactly the right financial move to make, we don’t. Or, two people can take the same workshop, but one ends up having a much easier time putting the lessons into practice than the other.

Very often, what’s at work here is temperament. When you understand your God-given temperament, you see as never before why you tend to do what you do—financially and otherwise.

When couples fight about money, very often the disagreement isn’t really about what it seems to be about; it’s a clash of temperaments. Understand your temperament—and if you’re married, your spouse’s—and you will gain a huge advantage in managing money well.

Know Thyself

Temperament is “the prevailing quality of mind” that characterizes someone. Whether you’re extroverted or introverted is one aspect of temperament. Whether you like to keep your options open or prefer closure is another. Whether you prefer to think through decisions logically or go by gut feel is yet another. Together, these traits make up your temperament.

There are several temperament classification systems, but most have their roots in the one devised by Hippocrates, the father of modern medicine. He defined four main temperaments: choleric, sanguine, phlegmatic and melancholy.

Each temperament comes with a set of natural strengths and weaknesses. Living at the effect of your temperament can be frustrating at best and financially destructive at worst. You can’t change your temperament, but you can learn to manage it.

Here’s a little insight into each temperament.

The choleric is the classic type A person – a hard-charging, time sensitive, get things done sort of person. If you think this article is a little long and wish I’d just bottom line it, you may be a choleric. On the positive side, once cholerics set a financial goal, nothing will get in their way. On the negative side, they may be in such a hurry to make things happen that they fail to talk about decisions with their spouse.

The sanguine is an outgoing, fun-loving people person who likes to be noticed. If you drive a flashy car, you may be a sanguine. On the positive side, sanguines tend to be very generous. On the negative side, planning is a foreign concept to them. Budget? Who has time for that? Sanguines would rather be out enjoying time with family or friends.

The phlegmatic is steady, reliable, and dependable. They tend to be very frugal, knowing how to really stretch a dollar. On the positive side, phlegmatics will consider all the pros and cons before making a financial decision. On the negative side, they may never get around to actually making the decision. Planning is a strong suit; follow through is a weakness.

The melancholy has some of the most natural money management abilities. If you enjoy using a budget, you may be a melancholy. Where melancholies can get into financial trouble is they can be perfectionists, insisting on having the best clothing or vacations, for example, which can lead to overspending in these areas.

Knowing your temperament and your spouse’s can help you leverage each other’s strengths and minimize each other’s weaknesses.

Going Further

Do you know your temperament?  If not, download the “Identify your temperament” worksheet from the resources page of my web site.

In my book, Money and Marriage: A Complete Guide for Engaged and Newly Married Couples, there’s an entire chapter devoted to temperaments – how to identify yours and your spouse’s, how to understand the financial ramifications, and how to put that knowledge to work in your relationship.

And in my most recent book, Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management, there’s a chapter devoted to bringing some of this temperament teaching to your kids.

How have you seen your temperament at work in your money management?

Profitable Ideas: Pursuing “Enoughness,” TikTok’s 15/3 Rule, and More

Weekly list of curated personal finance articles from around the web.

Why success doesn’t lead to satisfaction (Harvard Business Review). Are you operating with faulty measures of “enoughness”?

The invisible costs of homeownership (The Joint Account). The cost of a home goes well beyond the purchase price.

Parents, please turn off your phones (Institute for Family Studies). As Delaney Ruskin says in her wonderful documentary, Screenagers, “I saw this often: adults setting limits for their kids, but not wanting limits for themselves.” See also, Teaching your kids about money (Christian Stewardship Network). Part 2 of my conversation with Leo Sabo about how to raise our kids with biblical perspectives and practices around money.

You don’t need to spend a lot of money on vacation to make great memories (Becoming Minimalist). Time together and new experiences matter far more than how much we spend.

11 money habits financial experts wish more people would cultivate (Kiplinger). If you had to choose just one, what financial habit would you recommend?

We’re spending billions on this work-from-home indulgence (Wall Street Journal). Apparently, a lot of people are shopping their way through the workday.

12 years of minimalism: what it looks like for our family now (Tico and Tina). A good encouragement for all of us — linking our use of money with our most closely-held values.

Can TikTok’s 15/3 rule really improve your credit? (Due). Paying your bills on time is the important thing. Rules like this add needless complexity.

To weigh in on any of the above, just leave a comment below. And if you haven’t done so already, sign up for a free subscription to this blog.

Determining Your Financial Independence Day

As we prepare to celebrate our country’s Independence Day this week, why not take a few minutes to figure out your financial independence day? If you have any debt other than a reasonable mortgage, that’s the day when you will be completely out of that debt. If the only debt you have is a mortgage, that’s the day you’ll be completely out of all debt.

There are two key steps here. First, running some numbers on my Accelerated Debt Payoff Calculator. And second, working your plan.

Running the numbers

This step should only take about 30 minutes at the most. Enter the details of your debts, starting with your lowest balance debt. The calculator assumes that when your first debt is paid off, you will roll the full amount you were paying on that debt into your next lowest-balance debt.

Do you see the box below the 10th row, the one where it says, “Enter a monthly dollar amount you can add to your debt payoff plan”? This is where you can run some helpful what-if scenarios. Try entering $25 the first time through. The calculator assumes you’ll add that amount to your lowest balance debt (so be sure to do that!). Then try $50 or $75 or more.

Fixing your payments

The calculator also assumes you’ll do something else that’s incredibly helpful—that you’ll fix your payments. You see, if you go no further into debt on a particular credit card and make the minimum payments that are required each month, your required minimum payment will decline each month.

That isn’t kindness on the part of the credit card company; it’s math. Your minimum required payment is based on your balance, and if your balance is declining a little each month, that means your minimum payment will decline a little as well.

It declines by such a small amount that most people don’t even notice. They get hooked into this declining payment amount and that’s what keeps them in debt for just about forever. Fixing your payments on the amount you paid this month will dramatically speed up the process of getting out of debt. So, add whatever you can to the smallest balance debt and be sure to fix your payments on all the rest.

Run enough scenarios to figure it out—a realistic plan to get you to your financial independence day. Set a goal for the extra amount you’ll come up with to accelerate the payoff of all your debts. Stretch yourself, but also make it doable. Then see what the calculator says about how long that’ll take you to finish your plan and figure out from there what that date will be—the month and year of your financial independence.

Working your plan

Of course, this is the hard part. Hopefully, running some numbers to see how much more quickly you’ll be out of debt will serve as a motivator. Then, and I know this is easier said than done, you just have to see the process of getting out of debt as something of a machine. Get it up and running. Get the flywheel turning.

Hit the numbers each month — that fixed minimum plus something extra toward the lowest balance debt, and fixed payments on all the rest. When one debt is wiped out, roll the full amount into the next lowest balance debt, and keep going. Get some accountability. Get some small wins. Eventually, you’ll feel it. Momentum!

Then one day you’ll make your last payment and that will be one sweet day. Believe me. Having worked this process for about four and a half years to wipe out $20,000 of debt, I know what it feels like to hit that number each month, month after month. And I know what it feels like to make that final payment.

Your city may not shoot off fireworks in your honor, but my guess is that your annual financial independence day celebration will be one that you enjoy for many years to come.

What questions do you have about getting out of debt?

Profitable Ideas: Quiet Compounding, Cheap Protection for Your Car, and More

Weekly list of curated personal finance articles from around the web.

Quiet compounding (Collaborative Fund). “It’s a wonder to see.” 

No more piggy banks (The Contessa Counts). Great ideas for helping your kids manage their own spending.

Envy is not an asset class (A Teachable Moment). “Liberating yourself from the addiction of comparison should be the centerpiece of your financial plan.”

Visualized: How long can each generation survive without income? (Visual Capitalist). If your income ended tomorrow, how long could you pay your essential expenses?

Early career conversations young workers need to have (Fast Company). Send this to the recent college grad in your life.

The $10 item that can prevent your car from being stolen (Clark Howard). Today’s car thieves have gone high tech. Here’s how to protect yourself.

Are you dreamscrolling? Three ways to avoid overspending (Reuters). It’s not all bad. Here’s how to keep it that way.

Teaching your kids about money (Christian Stewardship Network). What if a parent doesn’t feel qualified to teach their kids about money? We tackle that topic and more in this conversation.

To weigh in on any of the above, just leave a comment below. And if you haven’t done so already, sign up for a free subscription to this blog.

‘Much Obliged’

Writer Fulton Oursler had vivid memories of an old woman named Anna who helped care for him as a child. When she sat down to eat she would say, “Much obliged, dear Lord, for my vittles.”

Oursler wondered why she thanked God since she would get the food regardless of whether she gave thanks or not.

“It makes everything taste better to be thankful,” Anna said. “You know, it’s a game an old preacher taught me to play. It’s about looking for things to be thankful for. Like one day I was walking to the store to buy a loaf of bread. I look in all the windows. There are so many pretty clothes.”

“But Anna, you can’t afford to buy any of them!” he interjected.

“Oh, I know, but I can play dolls with them. I can imagine your mom and sister all dressed up in them and I’m thankful. Much obliged, dear Lord, for playing in an old lady’s mind.”

Many years later, when Anna was dying, Oursler remembered standing by her bedside. Deep in pain, her old hands were knotted together in a desperate clutch. “Poor old woman,” he thought. “What had she to be thankful for now?” Just then, she opened her eyes and looked at him and said, “Much obliged, dear Lord, for such fine friends.”

According to the Reverend Dr. John Westerhoff, who tells Anna’s story in a booklet called “Grateful and Generous Hearts,” we can all learn much from Anna, who viewed life as a gift. “Taking nothing for granted, demanding nothing as her due, she recognized that we come into this world with nothing, we go out with nothing, and in between we are given all we have.”

While the busyness and responsibilities of our lives can easily obstruct our view, none of us has to look very far to find a reason to be thankful. Living with an attitude of thankfulness is honoring to God, good for the soul, and infectious.

What are you thankful for? Try making a list of 10 things—the first 10 that come to mind. Then give Anna’s prayer a try: “Much obliged, dear Lord. Much Obliged.”

Be cheerful no matter what; pray all the time; thank God no matter what happens. This is the way God wants you who belong to Christ Jesus to live. – 1 Thessalonians 5:18 (MSG)

Profitable Ideas: The Financial Habits You Inherited, Stealing Graceland, and More

Weekly list of curated personal finance articles from around the web.

The money habits I learned from my parents—for better or worse (Wall Street Journal). “You may want to invest and spend wisely, but these unconscious, ingrained tendencies can create financial problems down the road.”

How to visit colleges (The College Financial Lady). If you’re checking out some schools this summer, do so with a plan. Be sure to click on the “Big Six” link in this article.

How to find focus in a world full of distractions (Becoming Minimalist). I especially like the eighth suggestion, which deals with the number one distraction most of us face.

When life forces your hand (A Wealth of Common Sense). On the importance of not taking the future for granted.

How to be enough (Vox). One of our consumer culture’s primary messages is, “You are not enough.” Gratitude is a very effective antidote.

Why I skipped college to be an HVAC tech (Wall Street Journal). College isn’t for everyone.

Scammers tried to steal Graceland. Here’s how to make sure they don’t get your home (CNN). You can’t make this stuff up! But there are ways you can protect yourself.

Your family will love you even more if you simplify your estate (MarketWatch). If ever filling out paperwork was an act of love, this is it: Make sure you have a will or trust, as well as related documents. See also, It may be time to review your estate-planning documents. 

To weigh in on any of the above, just leave a comment below. And if you haven’t done so already, sign up for a free subscription to this blog.

Best Financial Advice

Over the years, I’ve asked readers to share some of the best financial advice they’ve ever received. Here are some of their answers.

Bob said that during a pre-marriage class he and his then fiancé attended, the teacher suggested using pay raises to build an initial savings account. In Bob’s words, “I can remember how taken aback I was when I did the math and realized what a significant savings base we could establish in just three years. All it would take was establishing and maintaining a reasonable budget, committing to staying within it for three years, and banking 3 years of modest raises.”

Bob says following that advice helped his wife and him develop the habits of living beneath their means and saving money. They have raised five children on one income (he’s a teacher) and have never had debt for anything except a mortgage.

Bob said the savings advice stemmed from a simple question the teacher asked: “What do you do with your raises?” Without some forethought, expenses usually increase to absorb all new income.

Mary Ellen pointed to these simple words of wisdom from her parents: “Don’t spend money you don’t have. Credit cards are fine as long as you pay them off in full as soon as the bill arrives.” Following that advice has enabled her to pay cash for each car she has owned and to even pay off her mortgage early.

For Chris, the advice to maintain an emergency fund and to have no debt except a mortgage has enabled his family to weather several months of unemployment without touching their retirement or college savings.

And Brittany pointed to her father’s encouragement to always give away at least 10 percent of her income. Doing so, she says, has been a constant reminder of God’s provision.

As for the best financial advice I’ve ever received, I’d have to mention the recommendation of a pastor who counseled my wife, Jude, and I before we got married. He urged us to build our lifestyle primarily on one income while we both worked.

He explained that if we were blessed with kids one day and if we wanted to have one of us step out of the paid workforce to stay home with the kids, it would be much easier if we had not built a lifestyle that depended on two incomes.

That’s exactly what we did. We gave based on both incomes, but we bought a condo we could afford on just my income and based most of our other living expenses on that income. We saved most of the rest of Jude’s income, and it also enabled us to take some memorable trips.

Four years after we got married, we had the first of our three children. We had agreed early in our relationship that we both wanted Jude to be home full-time if and when we had kids, and when that time came, it was not a financial stretch to make that happen.

What about you? What’s the best financial advice you’ve ever received?