Like mutual funds, ETFs allow investors to spread risk over a series of investments, as opposed to one or two stocks or bonds. This lessens exposure to loss and provides peace of mind for investors who are weary of dramatic swings in the market.
Last week, we ran a story on living well on $40,000 a year, featuring a special education teacher who supports his family of four on that relatively modest salary. Fifty people commented on the article, many of whom argued that living on $40,000 a year was hardly an impressive feat.
“I could live like a king on $40,000 a year. Try living on $22,000 a year and see how that goes for you. And I have a family of three,” said Joyce of Maine.
Connie from Texas expressed a similar sentiment: “I would feel really rich if I made that kind of money… Why don’t you have an article on how to live on $17,000 or $20,000 a year?”
To do just that, we tracked down Joseph Fonseca, a writer currently living in Seattle who supports himself on $20,000 a year. Fonseca, 28, authored a first-person piece in the Washington Post over the weekend describing his “10 cities, 10 years” project, in which he moves every year and starts over in a new town. An aspiring novelist, he plans to eventually write a book about his quest. We spoke with him by phone to get more details about just how he makes ends meet.
“I think the biggest thing I have learned is if broke people are making fun of you and laughing at your ways, then you are doing something right. It was difficult to get mocked when Tracy was working and we chose to live off one salary while others were spending like there was no tomorrow. Many people told me to get off my wallet and spend money.
“Pride is sometimes a hard thing to swallow, but I knew that many of these people were not making smart financial decisions and these decisions would eventually come back and hurt them. I don’t know if it is unusual advice but, when making financial decisions, you have to do what is right for you and not be influenced by the many temptations that surround us.”
"Most people confuse investing with gambling. Gamblers try to “beat the house.” Investors want to be “the house."
— The Smarter Mutual Fund Investor: Are You Gambling or Investing?
That’s why the National Endowment for Financial Education suggests putting together all of your important documents, along with cash and credit cards, so you can easily grab them and go if you need to quickly leave your home. Banks and ATMs can shut down during emergencies, so it’s a good idea to have cash on hand in advance. The nonprofit also recommends keeping your insurance company’s contact information handy in case you need to call them on the go and get information about reimbursements and coverage.
Now is also a good time to check up on just what your homeowners insurance or rental insurance covers. According to the MetLife Auto & Home Insurance Literacy Survey, many homeowners don’t know just what their policy covers and sometimes end up paying for repairs that would have been covered by their policies.
2. Make saving “cool.” Kids’ clothing is the single most expensive item on back-to-school lists, reports the American Express Spending & Saving Tracker. In fact, 6 in 10 parents say they will purchase designer labels and name-brand clothing, including sneakers and jeans, in preparation for the school year. But Reynolds says that’s not necessary. Instead, she suggests browsing magazines with your child and jointly picking a trend to recreate at home. DIY projects include hair accessories, jewelry, and accessorizing socks or backpack patches. Visiting consignment stories is another affordable option.
Selling stocks in a falling market in favor of Treasurys, however, is a lot like leaving a building during an earthquake. You may feel safer, but you’ve likely put your finances in grave danger by liquidating stock positions at a time when equities are relatively cheap, and purchasing Treasurys that are relatively expensive. When it comes to buying just about anything other than stocks, we look for bargains. But when stocks go on sale, we head for the exit.
Buying a house may be affordable, but can you get the financing?
Here’s some extra motivation for parents still on the fence about trying to impart money lessons to their teens: It could save your own retirement funds later. That’s because parents today often help their adult children so much that they do damage to their own financial well-being.
2. Becoming victim to rapid lifestyle inflation. You’re a recent college grad, so that means you probably need a new car, new apartment, new sofa, and a new… Wait a minute. Not only do you not need all those things, you probably won’t appreciate them much, either. A little theory called the “hedonic treadmill” explains why. We adapt all too quickly to improvements in our lifestyle. That 60-inch television you drooled over at Best Buy will soon start blending in with the rest of your furniture, along with your top-of-the-line coffee maker and pillow-top mattress.
"Home buyers are thinking, ‘Maybe we don’t need that 7,000 square foot home like we thought we did in 2004 or 2005 when the market was approaching its top."
— Paul Bishop, VP of research at NAR — Why We’re Shunning the McMansion
"A few years ago, I discovered that I had over ten open credit card accounts at the age of twenty five. I had two Discover cards, three Citi cards, two MBNA cards (now Bank of America), and three American Express cards (one personal, one business, and one corporate). I had opened more than one credit card a year since eighteen, which is the earliest you can usually get a credit card on your own (minors can’t be bound to legally binding contracts on their own), and it was far too many."
Apply game theory: Presh Talwalkar, the blogger behind the game theory site Mind Your Decisions, suggests limiting the menu to a few reasonably priced items, collecting money in advance, and letting everyone know about these plans ahead of time. This strategy takes some a little work, but it’s a great way to make the group dining experience more enjoyable (and equitable). If you have a large enough group, the restaurant might even be willing to work with you to design a special prix fixe menu for your gathering.
Echoing other recent polls, the survey says there is strong public opposition to trimming Social Security. “Nearly 8 in 10 Americans (79 percent) indicate that leaders in Washington do not understand how hard it is to prepare for retirement.” Beyond maintaining and even strengthening Social Security benefit levels, people said, they want government to make it easier for employers to offer expanded retirement and pension programs.
7. File for flex dollars. If you haven’t finished your flex spending paperwork for 2010 for any outstanding healthcare expenses, you might have a few more days to do so, depending on your employer’s policy. Make sure you don’t leave any money in your 2010 account, because you’ll lose it. Don’t forget to read up on the latest flex spending rules: The IRS recently changed the rule regarding breast pumps, making them eligible for reimbursement through flex spending accounts, for example.
