Here are links to some interesting money articles from the week.
- 10 Tips For Dealing With Car Salesmen to Make Sure You Don’t Get Hosed by Jeremy @ Generation X Finance. Some very useful practical tips for dealing with car salesmen. I have something to add here. If you really want to avoid the psychological pressure from a car salesman, confront him online - seal your deal through emails and then just go and pick up your car. I will have more to write about this in future.
- Is Retiring by Age Forty This Simple? @ MBH @ Mighty Bargain Hunter. MBH analyzes the assumptions made by a “retire at 40″ article. He makes some valid points on certain assumptions that most personal finance bloggers make when they try to portray an overly positive financial picture to someone. Read the original article and tell us if you think you would be ready to retire early by following those steps - at 40 yrs?..may at 50 yrs?
- Ten Ways To Handle That Problem Property Next Door by SVB @ The Digerati Life. Sometimes that rundown house next door can reduce the value of your nice mansion. SVB gives tips on how to avoid getting trapped in such a situation.
- How Movie Theaters Make Money by Nickel @ Five Cent Nickel. I know how they make money - by selling popcorn and soft drinks at a premium.
Ok, now read Nickel’s article to find out how they really make money.
- Did I Misread Discover Miles Card’s Promotion? by Sun @ The Sun’s Financial Diary. Sun goes “Oops!” - admits to misreading a credit card offer and wishes he had those 12000 free miles. Blame it on sneaky marketing? Nopes… marketing is always sneaking (credit cards or not), the consumers have to make sure they don’t fall for it.
- Who Actually Reads the Terms & Conditions? by Ben @ Money Smart Life. This follows nicely with reference to Sun’s post above. You don’t need to read every word in the terms of conditions statement, but you should know what to read - Ben gives some pointers towards that.
- Donating Stocks to Charity by Jim @ Blueprint for Financial Prosperity. Jim discusses the monetary advantages of donating stocks to charity. Hmm… it’s better than donating cash.
- Umbrella Insurance by Matt @ Binary Dollar. A few words of wisdom about umbrella insurance.
- Top Athletes Make a Boatload of Money by FMF @ Free Money Finance. Tiger Woods makes $112 million a year and Roger Federer makes $31 million. Check out the post for other interesting numbers.
- I Am a Monkey by Lazy @ Lazy Man and Money. From the title it seems like Lazy made a transcendental connection with his ancestors; but it’s really about lending money on Prosper. He is replying to an allegation: “Prosper lenders are monkeys”.
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Personal Finance Network
This week my dad bought a car from an auction, they seem to be quite useful for getting cars cheap, But probably not so if going for a very specific type.
Regarding retiring by age 40. I think the author is a little optimistic for a couple of reasons:
1.Index fund performance. Sure, average performance over a long time may be over 10%, but most of us are only interested in 20 year performance during specific 20 years that apply to us. The return during specific two decades that apply is far from certain. Take market performance in, for example, 20 years preceding 1987 crash, and you’ll not get this return (if I am wrong with these particular 20 years, you can probably find other periods). If you are unlucky enough for a market crash to happen close to your desired retirement, you are out of luck. If you retire at 40 and then a few years later something bad happens with the stock market you might need to find a job after a few years break in employment (and in some fields outdated skills). Maybe I am a bit pessimistic because I lost some money in 87 crash soon after I started working (stock bought via company’s stock purchase plan). I got all of it back and more, but some of my investments still haven’t recovered from what happened when internet bubble burst.
2. Percentage of savings in funds one cannot access until certain age. If you want to retire at 40, you need to have enough of your savings outside of 401K, for example, to last 20 years. If you only save 20% that the article mentions, a simple math would show that most of the savings would indeed be in 401K: 15500 yearly limit is already over 15% for most people, especially young people. If you earn 100K a year, this only lives 5% for other investments, some of which may be Roth IRAs you don’t really want to touch even though you are allowed to withdraw the principal. So unless you earn significantly more than 100K a year, you need to save considerably more than 20% if you want to retire at 40.
You also have to consider the cost of medical care after you retire, inflation, and the longer life expectancy.
One other thing is that aside of medical care, the needs and wants of a 40-year old are higher: you still have your mortgage, or you may have kids to send to college. You also still have a lot more energy than a 70-year old: you may want to travel more, go to theaters, etc, or dress nicer, find some hobbies to occupy your time, take some classes in something you’ve always wanted to do. All of these things cost money. You may find even that you need more money then when you were working specifically because you need to occupy so much free time.
My other question is do you really want to retire at 40? OK, you may travel for the first few months, catch up on some things you’ve never had time for, do something you enjoy, but wouldn’t you get bored at some point? I am over 40 and I think I’d be bored sick if I retire now. When I was in my 20s I thought I’d want to retire early. Now I feel like I want to work while they keep me. Part of it is the fear of medical expensees, but I like my job. Maybe when I am over 50, I’d feel differently, but I am not sure. Granted working because you want to rather than because you have to is nice, but you also find that the more money you have the more you want. If a salary is high enough, it is very difficult to give it up.
Ibrahim: Yeah, most auctions will be similar - you will have great deals if you are only looking for something with 4 wheels that takes you from point A to point B. If you want a choice then you will want to check something other than auctions (or check numerous auctions till you find what you need).
Kitty: Thanks for the detailed reply. You have raised some good issues there - and I am thinking of making a post out of your reply…probably this week or next. Let’s see people have to say about this.