New Rule: All Purchases Subject to a 7-Day Mental Quarantine

New Rule: All Purchases Subject to a 7-Day Mental Quarantine

By: Carl Richards My wife and I are setting up a customs screening station in our driveway. No, we’re not starting an international airport. And it’s not for solicitors, strangers or gift-bearing guests. It’s for us and our stuff. From now on, before anything new comes into the house, resident buyers will need to answer a series of questions. How much did it cost? Are you replacing something you already own? Why do you think it’s amazing? And if it’s food, are you sure you’ll eat it? We’re doing this because stuff is taking over our home. And right now we’re in the process of getting rid of things we never use. We’re organizing, sorting and throwing things out from one end of the house to the other. And it feels. So. Good. You know what I’m talking about, right? That moment of sheer relief when that thing you no longer need or even really want finally leaves your home. Marie Kondo, the guru of clearing clutter, has built a global community around this catharsis. Her name has become a verb. But here’s the catch: Throwing stuff away is only half the battle. You have to stop stuff from coming into the house in the first place. Consider, for example, what customs might have said about the super precision gyroscope with gimbals(trust me, click the link) that I bought more than a year ago and used precisely once: Cost? $250. Is it replacing something? No. Why is it amazing? Because of the gimbals! But $250 for gimbals? Denied. Don’t get me wrong, the gyroscope is incredible. It works perfectly, so it’s...
The Top 10 Myths About 401(k) Plans

The Top 10 Myths About 401(k) Plans

By: Tim Maurer Like it or not — and thanks to the demise of the once-sacrosanct but now passé company pension — the 401(k) plan is the primary retirement savings vehicle today for vast numbers of American workers. While the 401(k) plan — whether traditional or Roth, SIMPLE or Safe Harbor — is a fact of life and regular pre-tax deductions toward a plan balance figure in many employees’ paychecks, a lot of people don’t quite understand the fund they’re paying into. In fact, there are a lot of misconceptions and myths that need clearing up. We turned to CNBC Digital Financial Advisor Council member, certified financial planner and author Tim Maurer, currently wealth advisor and director of personal finance for Buckinghamand the BAM Alliance, to help debunk 10 of the most common myths about 401(k) plans. Myth #1: 401(k) savings are eternally tax-free. Fact: “You — or your heirs — are going to be required to pay tax on 401(k) savings at some point, whether it’s now (in the form of Roth 401(k) contributions) or later (in the form of tax-deductible traditional 401(k) contributions),” said Maurer. “You didn’t think the IRS was going to be that generous, did you?” Myth #2: A 401(k) plan is always your best retirement savings option — corporate match or no corporate match — beating out individual retirement accounts and other savings vehicles. Fact: “There is no better investment than one that earns ‘free money,’ like in the case of a 401(k) company match,” said Maurer. “But beyond the matching contribution, there may be numerous reasons why a traditional or Roth IRA — or even...
Hope Deferred Makes the Heart Sick

Hope Deferred Makes the Heart Sick

By: Tim Maurer “Hope deferred makes the heart sick, but a longing fulfilled is a tree of life.” So reads a Solomonic proverb penned in the 10th century B.C. Consider with me, however, a contemporary application of this ancient wisdom, especially in the realm of personal finance. Hope Deferred “We’ve got to apologize, Tim,” said a financial planning client with whom I had a great relationship. “Whatever for?” I asked. “You know that new Lexus? The one that backs itself into a parallel parking spot?” “Yes, I’ve seen the commercials.” “We bought one,” the client said, with his head bowed in apparent shame. I’d never communicated that these folks—or anyone, for that matter, who has sufficient means—shouldn’t use said means to purchase a vehicle of their choosing. But the general impression the public has toward financial advisors and educators seems to be that we all think the best use of money is in storing it up and avoiding its deployment. Defer, defer, defer. It’s hard to argue that we in the money business don’t have a tendency to overstate the benefits of deferred gratification. Some (loudly) preach the outright virtue of financial asceticism early in life, pledging that present deprivation will surely result in future comfort, if not abundance. The cowed mentee may be afraid to ask the question begged: “But how long should I defer? And what if that future never comes?” As someone who spent several days inches from death after a serious car accident early in life, I know too well that tomorrow is not a promise. As someone who has walked beside a dear friend...
No, Really: Just Ignore Day-to-Day Stock Market Fluctuations

No, Really: Just Ignore Day-to-Day Stock Market Fluctuations

By: Carl Richards Early Friday morning, a friend texted me. Here’s what he said: “Will you come talk to my co-workers?! They are talking about stopping their 401(k) contributions because of what’s going on! Driving me nuts!” Still not quite awake, I replied, “What?” Within seconds, he replied, “Stock market fell 500 points this morning, Carl! It’s all the way down to 17,537!” My first thought: “Wow! The Dow is over 17,000.” And this is where things got a bit exciting for me as a financial professional. You see, about five years ago, I decided to totally ignore the stock market, especially breaking news about the stock market. I hadn’t stopped investing, but since investing is meant to be done over decades, I had this crazy idea that maybe I would really, truly act out that whole long-term thing. That meant thinking about five years, 10 years, even 20 years from now. But I most definitely wouldn’t be thinking about what happened in one week, let alone one day. So I made sure I had a diversified portfolio of investments. And then, I proceeded to do nothing. I also ignored the stock market news entirely, which has been surprisingly easy. But Friday morning, for really the first time in five years, it registered: The Dow had gone from just under 12,000 to over 17,000. That’s a gain of almost 50 percent over the last five years. Now that’s what I call amazing! Less amazing, however, is what the markets will do, or not do, over the next few days. So you choose: five days or five years. This commentary...
The Dual Roles of Money

The Dual Roles of Money

By: Carl Richards Money is an interesting actor that plays two roles in our lives. In the first, money equals money. It fits in a spreadsheet. It’s something to be calculated. In the other, money equals stories. It’s what we tell ourselves about our relationship with money. Let me share a story I’ve told myself. For six years, we have rented a home in Park City, Utah, and put off making any long-term real estate commitments. We knew we would get to it — eventually. Well, eventually arrived, and we looked at the spreadsheet. Even after entering conservative assumptions (guesses, really) about income, savings, housing prices, and the renting-versus-owning calculation in Utah, the numbers don’t lie. The spreadsheet shows that if we want to stay in the community we love, the best thing we can do is buy. That’s great news, right? But here’s the story I’ve told myself: The moment I, Carl Richards, buy a single-family home, this one action will cause a global financial meltdown. The housing market will crash. The financial markets will collapse. It’s a powerful story based on strong emotions around my experience losing a home in Las Vegas. I know I am not alone here in telling myself stories that are almost certainly not true. So what stories are you telling? Maybe you have told yourself a story that you don’t need to worry about the spreadsheet. If you just try a little harder or get a little luckier, things will be fine. You don’t need to bother with the actual dollars and cents. I think we know how that will turn out....
Page 1 of 3123