Peace, Love & Spreadsheets

 In 2024 the stock market has hit a few all-time highs. It's up right now. If you're trying to get started with investing, you might ask yourself if this is your year, or if you should wait for a crash? They say history doesn't tell you what will happen in the future, but the stock market is a place where we have a lot of history and if you're going to invest, you might want to understand how it's worked for the last 100 years: As you can see, there were LOTS of points along the timeline where people invested at an all time high and it just kept going up, their shares were worth more the next month, year, day. There were a few points where the market went down. Look at late 2007, for example. The S&P 500 was at an all time high of $1540. The 2008 housing crisis happened and it dropped as low as $760. Did the people who invested at $1540 lose money? Only if they sold their shares. If they held, they'd now have those same shares worth $5000 today! Also notice ...

 High-yield savings accounts (HYSAs) are all the rage these days, with interest rates above 5%. They haven't always been this good! But I wanted to show some numbers about why an HYSA can't take the place of investing in an index fund that follows the market. If you KNOW you'll need some money in a year or two then sure, you don't have time to risk it in the market. The stock market goes up and down. About 75% of the time, it goes up, but we have no way of knowing what's going to happen in the next year. For example, let's compare a fabulous HYSA with a 5.5% interest rate to the 2008 stock market: It's sad. If you invested in 2008, the market would have crashed and your investments would be worth only $862. If you needed that money right at the end of 2008 and had to sell, you would only get $862 back even though you'd put away $1200 ($100 a month for 12 months) in cash. That's why we say if you need the money in a year - don't invest it. It'...

 "Automate everything!"  That's the typical advice from financial planners about budgeting, and I love it. Program your direct deposit to split off a bit into retirement and savings. Sign up for automatic billing so you don't miss utilities. All good. But if you're like most people, the bulk of your money in and out can't be automated. The cash envelope method is one way to get around this. I kind of did this when I was in my 20s... every week, I'd take out my budgeted cash for spending on groceries, lunches, coffees, and nights out with my friends. I was young and single and didn't have many complicated expenses so this worked for me. It was also a million years ago, because I am old. Years later two things changed: First, I had a family. I couldn't feed four of us on a few dollars a day, taking cash out for the week felt like a heavy pile of cash. It was never traceable, it was bulky to carry around, and the system depended on physically going to...

 I'm always on the lookout for simple steps that beginners can look at to get started, and ran across The Money Guys Financial Order of Operations (FOO). I like it a lot more than the baby steps, and it rhymes with the popular S&P 500 index fund VOO!  You can read all about it here but here are my thoughts. They start off with some ground rules... like a preface. First, their big goal is having you save 25% of your gross income, so if you like thinking long term you might figure up what that is now. Second, they state why they left out giving and charities... because that's not a step. It's part of everything. I agree! We shouldn't WAIT to make the world a better place, our help is needed now, so always find a way to give. But let's get into the steps.  1) Deductibles Covered Look at your insurance deductibles (health, home, car) and save up enough to cover your highest one - you're probably not going to blow out every deductible at once. 2) Save for retire...

 The idea of FIRE (Financially independent, retire early) started up in 2018. From what I can tell it was started by bloggers who worked a lot, saved money, lived very frugally with the goal to stop working. I've learned a lot from some of them... Mr. Money Mustache, The Frugalwoods, but I've also decided FIRE isn't for me. The frugal living ideas can't be beat. The Frugalwoods book is full of them, they really spend a lot of their lives making a game out of spending as LITTLE as possible. I love the ideas, and I think it's a responsible thing to do. When we consume less, we leave a smaller footprint on the world. We take less, waste less, we can give more. But that reasoning is a footnote in a lot of these stories, the main driver behind their decision is their hatred of their jobs and eagerness to GET OUT of the corporate life as soon as possible. It's the "work won't love you back" mantra. And that's where I look the other way. I think it is...

Used car or new car? Gas or hybrid? Everyone will tell you these are extremely personal decisions but I'm here to tell you a better answer: math! With the price of used cars being kind of nuts these days, you might decide it's worth it to get those extra miles to yourself and buy new. It all comes down to how much money you're going to spend per mile. If you spend $10K on a car and drive it for 100,000 miles, that's ten cents per mile. If you're considering a car that has an extra 15K miles on it, it'd better be $1500 cheaper. RIGHT? Enough explaining, easier to just math it out. Oh this all says "miles" but if you use all kilometer numbers, it'll work. Same idea it doesn't care. This does not include loan interest, insurance, electrity cost for hybrids. I can only do so much. First... how many miles will a car have on it when you get rid of it? What's the price of gas these days? Now compare up to 3 possible car...

I'm reading "Financial Feminist" by Tori Dunlap and might have a few entries on this really interesting book, but she said something that shocked me so I wanted to run the numbers.  In her chapter on "The Financial Game Plan", she says our FIRST goal must be to have a 3-6 month emergency fund. "Even if you're hundreds of thousands of dollars in debt, do not move on to the next step until you have your emergency fund." The scream I scramed! I've said before that I'm more of a percentage budgeter... and in this book, she does get to that, starting with the 50/30/20 needs/wants/savings budget as a starter. But my shock about the idea of having a 3-6 month emergency fund before high interest debt drove me straight to my spreadsheets. Let's say you take home $60K a year, and for the last two years you've spent 110% more than what you make... earn $5000 a month, spend $5500, wracking up debt on a credit card with 20% interest. For simplic...

Posts about index funds aren't usually Instagram viral material, but it happened in 2023! It was about the Hypatia Women CEO fund - an index of companies lead by women - and it caught my attention for pretending to be a new idea. Don't get me wrong, it's a good idea. I do support diversity and I do think women can lead companies that grow our money! But WCEO is far from being the first... there are lots of versions of these funds and there are questions to look into before we invest in them. Disclaimer for this post: I always say I'm not an advisor giving advice, but on this one I'm REALLY not, I have not found the magic questions for index funds. But I will tell you what I look at and what I'm in. I've invested in several of these, but I'm not turning over my whole portfolio. Another disclaimer... a lot of these funds haven't been around for 5 years so I'm listing 3 year growth. This is a terrible time to list 3 year growth because 3 years ago, ...

A while back I made a savings calculator to answer the simple question... what would it take to retire in (X) years? But if you're like me, online calculators are fun once. Spreadsheets are fun FOREVER! Here's how to make your own spreadsheet to tell you the answers.  Both Excel and Google Sheets have a PMT function that calculates payments on a loan - or in your case, a fund that will set you up for a future of withdrawals without actually going down. Full disclosure: talk to your own advisor. I have not retired, don't plan to retire in 10 years, I just like math.  The payment (PMT) function needs to know... 1) Rate - what interest are you getting on your investments? I've read a whole range on what values you should use for this, from 4% to 10% or more. I used 5% in this example. 2) Number of payments - this is years x months since you're saving monthly. You can swap out every 12 for 26 if you get paid every other week and like to think of savings as per paycheck...

 Many years ago, I read a counterintuitive idea in Thomas Stanley books (Millionaire Next Door and its various offshoots) about generosity leading to higher net worth. Stanley's popular books did research on millionaires - Americans who we think of as "rich" - and laid out the trends in their research. They figured the millionaires would be big spenders who enjoyed luxury brands and expensive lifestyles, but they found the opposite in many case. For many of the rich people interviewed, they achieved their wealth through their frugal mentality and business savvy, not necessarily their income.  One idea I read changed me, and it's been many years so I want to write about it. They found that giving money away can actually lead to a higher net worth. This seems to go against our basic 2nd grade subtraction skills - if you give away money won't you have LESS of it? But here's what they found. Take two families. They earn similar incomes. One reports donating less t...

I like to read. My public library had quite the wait list for JL Collins' "The Simple Path To Wealth" but I jumped in it years ago because the book was so vehemently recommended in financial groups I'm in. If you also like to read, pick it up. It's calm, reassuring, and the advice is very popular. But while you're waiting on your library hold, here were my takeaways. 1) Spend less than you make. This book doesn't dwell for chapters and chapters on the IDEA that you should budget and plan to invest. It just states the obvious, then moves on to the next instruction, which is my favorite thing about it. It is not for people who are soaked in debt and can't resist the mall... it assumes that you are past that. 2) Invest in low cost whole market index funds. These haven't always been available. If you wanted to invest in the 70s or 80s, you probably had to pay someone who was good at stock picking, or learn to pick stocks yourself, and hope the compan...

All over the financial world you'll find fans, and anti-fans, of Dave Ramsey. I'd put myself in the second category. First, because I've read his books and they're REALLY heavy on not-spending, like "man I get it, move on to the meat of budgeting". But he keeps judging people for shopping at the mall for another 200 pages. I'm already not shopping at the mall. Then his website is ALL about buying more stuff. More books, programs, seminars, conferences. He's definitely making himself wealthy.  I'd dramatically change his baby steps. I don't get why people are such big fans of this method. In fact when I talk to people, they all seem to be fans of the first step, and that's it! So why give the whole philosophy so much credit? To re-cap, here are the baby steps: Save $1000 emergency fund Pay off all debt (except the mortgage), smallest debts first Save 3-6 months of expenses in a fully funded emergency fund Invest 15% in retirement Save for yo...