Gen Y - Retire Rich!

Post #111 - PART 5: Life Lessons that will help your finances

Part 5: Life Lessons that will help your finances

Marry the ideal spouse
Forget about love and that soul mate stuff.  The reason you want to marry and have kids with a person is pheromones.  

Definition of pheromone: A chemical secreted externally by an organism to send information to members of the same species.

You probably don’t even know that chemicals are so important in the whole “You look hot, let’s have a baby” thing.  Chemicals, specifically pheromones, are actually the things with the most influence about who to procreate with.  Heck, those musky smells make it hard to get the condom on straight. 

You have to compete with the pheromones when you are considering a potential mate.  Don’t give in completely.  Try to inject a little financial logic into the decision.

Look for someone with these qualities:

• Makes decent money.
• Doesn’t spend money needlessly.  Let’s face it; if your spouse spends all the money, there won’t be any left over to invest.  You’ll be eating cat food by 70, and your spouse will leave you for another big earner.
• Is willing to live with the same investment risk level that you can live with.
• • If you’re conservative by nature, you don’t want to be married to someone who wants to invest in Congolese diamond mines.
  • If you are a reasonably aggressive investor, it will be difficult to be married to someone who wants to put all the money in the mattress.
• Wants to be a part of your investment success by participating in decisions about what your allocation percentages should be and helping you rebalance each year.  Or promises that you can do everything and he or she will never complain about the results.
• Is great in the sack.  This is an optional quality, vis-à-vis investment success, but hey, I thought I’d throw it in.

 Steer away from someone like this:

• A bonehead.  I don’t have to define this term; you know a bonehead when you see one.  Don’t marry them.  Your children will wind up being boneheads, and then you’ll be surrounded by boneheads.
• A person who spends four hours a day putting on makeup, especially if it’s a man!  Someone like this will not be paying a whole lot of attention to you or the kids.
• Someone who thinks that money must be spent before it gets old.
• Someone who has been on the cover of the National Enquirer.
• Someone who has more than three prison tattoos.
• Someone who has a medicine cabinet with more prescription bottles than band aids.  

 To sum things up, don’t look for great breasts, perfect abs, cute dimples or a dashing smile!  Your perfect spouse earns a decent living, knows how to save, and works for a company with a defined benefit pension plan.  Fight those pheromones.  Use your brain when you select a partner.

Post #109 - Target Date Funds Revisited

Post #109
Part 4:  Good Advice, Bad Advice, and News About Investment People (continued)

Target Date Funds Revisited – Good or Bad Advice?

Here’s an article to check out:

After Losses, Target-Date Funds Draw Scrutiny

In Posts 23 and 39 I talked about using the Vanguard Target Retirement 2050 Fund as a one fund answer if you are way too busy to even think about looking at your portfolio for ten minutes a year.  Was this a bad recommendation? 

No.

If not, then why is Vanguard mentioned in this article?

Vanguard is guilty of having 52% of the Target Retirement 2010 Fund portfolio in equities in 2008.  Consequently, they got pasted with a 21% loss as a result.  Other funds, offered by Wells Fargo and Deutsche Bank, had more bonds in their funds with the same target year.  Those funds suffered lower losses.  I guess the author of the article is implying that the Target 2010 funds should have had much lower levels of stocks in their portfolios, because retirees want safety.  The author mentions that those who buy target date funds are usually the investors who are the least informed.  In other words, the buyers thought they were buying something that was very safe, and found out that having 52% of your money in equities could lead to a big loss.

Vanguard doesn’t have excessive fees.  The annual expense ratio of the 2010 fund is .19%, which is minuscule.  So you can’t fault them there.

Vanguard has 11% of the fund portfolio in foreign stocks, which isn’t excessive.

Vanguard uses the Total Bond Market II fund and Treasury Inflation Protected Securities for the bond portion of the portfolio in the 2010 fund.  This is not a risky bond portfolio.

Just to put things into perspective, this fund has been around for less than 5 years.  It has a three year annualized loss of .4%, which ranks it in the top 24% of all funds in this category.  This means that 76% of the Target 2010 funds did worse.  But I agree that it is a big shock for some old guy who doesn’t know much about stocks to lose 21% a few years before he retires. 

So I’m all for the regulators forcing the fund companies to disclose the exact composition of their target date portfolios before they sell them.  Personally, when I retire, I would prefer a fund that is 50/50 stocks to bonds, rather than 10/90.  But many people won’t, and they should know what they are buying.

Now, let’s get back to the fund I recommended, the Vanguard Target Date Fund 2050.  If you re-read posts 23 and 39, you will see that I don’t recommend it unless you are so strapped for time that you cannot devote a few minutes a year to maintaining a portfolio with more funds.  

For those of you who are in that position, it’s a much better choice than most of the other Target Date 2050 Funds.  Low fees (expense ratio of .19%) and reasonable asset allocation for young people (10% bonds, 72% US stocks and 18% foreign stocks).  It gets more conservative as you get older, so that within seven years of 2050, the fund’s asset allocation will resemble the Vanguard Target Retirement Income Fund. (66% bonds, 24% US stocks and 10% foreign stocks). 

How did this fund do in 2008?  It lost 34%.  That’s a big loss, but it’s not unexpected.  After all, 90% of the fund holdings are equities.

Let’s look at how the fund held up compared to its peer group.  The fund has been around for less than five years.  It has a three year annualized return of -2.58%.  This return is ranked in the top 1% of all funds in its category.   

So I’m good with my recommendation.

Post #108 - Write down your allocation strategy!

Post #108
Part 4:  Good Advice, Bad Advice, and News About Investment People (continued)

Make sure your asset allocation strategy is written down! – Good advice

The one person who is most likely to screw up your long term investments is……YOU!

Unfortunately, you (and me, and the rest of us weak humans) are not psychologically prepared for investing in the stock market.  Blame evolution.  Cavemen didn’t have to contend with the stock market.  They had simpler worries: large nasty animals, starvation and other cavemen who didn’t like them.  Mankind has not evolved to be good at stock market investing.  We have evolved to be good at running away from large nasty animals, buying groceries, and hiring lots of policemen to protect us from the bad cavemen.  Actually, I’m not sure about the buying groceries thing.  My son’s college fridge looked like a snack food concession at the ballpark.

These are the types of mistakes you might make without a written strategy:

1. You will want to follow the crowd.  If everyone is making tons of money investing in pork belly futures, you will want to buy some for yourself.  Following the crowd was good 1 million years ago when the crowd was running away from saber tooth tigers.  But it’s not good in the stock market.
2. You will be too afraid to take on enough risk to make reasonable returns.
3. You will be too bold, and take on too much risk in an effort to get rich quickly.
4. You will want to take money out of the stock market when prices fall.  Evolution has taught you to flee at the first sign of trouble.  That doesn’t work in the stock market which rewards long term investors with diversified portfolios and punishes those who make lots of changes as they always invest in yesterday’s winners. 
5. You will be tempted to put all your eggs into one basket.  For every one person who did this and made a fortune, there are 10,000 people who walked away with holes in their pockets.  Google Enron, MCI, and Tulip Bulb Mania for some prime examples.
6. You won’t want to rebalance your portfolio.  Rebalancing requires you to sell your winners and buy into the losers.  This goes against what you would consider to be rational thinking.
7. You will start to pay too much attention to your investments.  This is bad.  The more you look at your investments, the more changes you will make.  More changes mean more transaction costs.  More transaction costs mean lower returns. 

How do you prevent these mistakes with a written strategy?

• Each time you are tempted to do something that goes against the strategy, take the written strategy out of your file cabinet.
• Roll it up carefully.
• Hit yourself over the head with the rolled up strategy.
• Re-read the damn strategy.
• Remind yourself that you wrote it for a reason.  So you wouldn’t forget your long term goals and do something stupid.

If you find that just re-reading the strategy isn’t enough to fight the temptations all around you:

1. Sell your radio and TV on Ebay.
2. Stop surfing the net.
3. Cancel your newspaper subscriptions
4. Never talk to anyone about the stock market.
5. Don’t read those silly magazine articles about “The Five Best Ways To Invest New Money Today.” 
6. Switch your Home Page from InvestmentsToday.com to ILoveBunnies.com.  Don’t let the guys in the poker group know what the new Home Page is; they may not want to play with you. 
7. If someone starts talking about their investments at a party, stick your fingers in your ears and say “Blah, Blah, Blah” very loudly until they move away.  I did this at a wedding recently.  It worked so well I was asked to leave. 

Special caveat: If the circumstances in your life change dramatically for better or worse, you may have to change your written strategy.  If you inherit $1,000,000 from Uncle Johnny you will need a new asset allocation strategy.  If your house burns down and you don’t have insurance, you will need a new asset allocation strategy. 

Post #107 - Fundamental Indexing

Post #107
Part 4:  Good Advice, Bad Advice, and News About Investment People (continued)
Fundamental Indexing

Here is a good explanation about fundamental investing written by William Bernstein:

Fundamental Indexing

 As you can see, Dr. Bernstein does not always write things that are comprehensible to us mortals.  I read it five times and I only understood the small words.  But the jist of his article is:

• Regular index fund managers decide on how much of stock XYZ to hold in the fund based on the stock’s market capitalization (how big the company is).  So the bigger companies have a bigger presence in the index fund.
• Mr. Arnott and friends believe that this is wrong.  They propose using things like aggregate earnings, sales, book value, dividends, and employees to decide how much of a company’s stock should be in the index.
• By using these other factors, the index kind of tilts toward value stocks.
• Dr. Bernstein’s conclusion is that there may be a slight improvement in performance, but it might be more expensive to manage an index fund like this.  The additional costs for managing the fund could outweigh any increased return.

 Mr. Arnott is marketing fundamental index funds to investors.  Apparently there is quite a wrestling match going on between the index fund establishment and the fundamental index fund crowd.  Read this article for some entertainment:

Talking Business - Passions Run High on Indexing - NYTimes.com

 Even stuffy old guys who spend their days talking about money can get crazy mad at each other.

 Picture Andre Perold (AKA Kimbo Slice  Kimbo Slice Fights ) going up against Robert Arnott (AKA Justice from the American Gladiators TV Show ) in a financial winner take all.  I’ll bet a whole lot of CPAs would put down big money to see that one!

 In any event, you should know that there is something called fundamental indexing in case you ever get to be a contestant on Jeopardy.  Is it better than normal indexing?  As Dr. Bernstein says, it depends!  For your purposes as an investor, stick to the regular index funds.  As noted in the Times article, regular indexing comes the closest to matching the returns of the market, and that’s our goal.

Post #106 - You Can’t Teach other People About Money

Post #106
Part 4:  Good Advice, Bad Advice, and News About Investment People (continued)
You Can’t Teach other People About Money

Here’s a very interesting post. Big idea: Why you can't teach money.  

This article basically says that someone like me can’t compete with the hundreds of thousands of people who make their living selling financial products to you.  Whereas you might read my blog a few times a month, these financial salespeople will be inviting you to seminars, showing up at your house to visit, and taking you out to dinner while they tell you all about the latest financial product you should buy from them.  They will drown out my excellent advice by sheer volume.  

Lauren Willis, the person interviewed in this article, says that studies show that even if you train people in how to handle their finances, they still don’t change their habits.  And many times they get an inflated opinion of their own abilities.  So they try to do things themselves and make bad decisions.   

Ms. Willis also said this: 

Stop trying to turn everyone into a financial planner. Instead, try to get everyone to understand that the people selling you financial products often don't have your best interests at heart.

   These comments seem to mesh nicely with what I have been trying to do in this blog.  

• I have said many times that you don’t want to listen to, or buy things from, financial planners, brokers, etc.
• I have given you a simple plan to follow for the rest of your life.  The only way you could mess up would be to not follow the plan.  
• I am not trying to turn you into a financial planner.  In fact, I don’t want you spending more than a few hours a year implementing the plan and rebalancing.  I don’t want you studying the market or reading the financial pages.  You don’t have to.  That’s the whole point of this blog.  Keep it simple and easy.
• I don’t think you will get an inflated ego if the plan works out well and you start to make lots of money.  But if you do, send me an email and I will promptly deflate your ego with an excellent riposte.
• You don’t need to be a genius to save 20% of your gross salary each year.  That takes strength of character that many geniuses don’t have.   And the only way you could screw this up would be not saving.

I think that Ms. Willis is very right when she says that sellers of financial products have so much money and advertising power that they are a difficult force to overcome.  As you accumulate more assets, you will get letters, phone calls, email, texts and microwave radiation from these people on a regular basis.  All of them will be offering “can’t miss” ideas.  They will present doctored evidence about how great their ideas did in the past.  They will tempt you more than a Suzy Q (I can’t resist  Susy Q’s, which are basically chemically altered chocolate cakes with artificial cream in the middle).  You will forget about my advice and succumb to these wily practitioners of the black arts.  Be strong.  Avoid the temptation.  Ms. Willis does not think that you can!  

If any of you readers would like to share a comment about stuff you are getting from stock brokers, go ahead.  Of course, brokers may not have discovered you guys yet.  You’re too young.  Generally, they target people with more assets.  But let me know what you are hearing from the financial community.  

By the way, did you know that the term OK originated with Martin Van Buren.  His nickname was Old Kinderhook (he was born in Kinderhook, NY).  When he was President, he would initial documents that he approved “OK” for Old Kinderhook.  And that’s where it comes from.  Nothing to do with this post, I just thought I would throw it in.

Post #105 - Trade in your Clunker and get a cash rebate – Bad Advice if you don’t really need a new car

Post #105
Part 4:  Good Advice, Bad Advice, and News About Investment People (continued)

Trade in your Clunker and get a cash rebate – Bad Advice if you don’t really need a new car

Here’s an interesting article about the Cash for Clunkers program that was recently terminated by the government.  

Cash for Clunkers' Impact on Economy and Environment Is Negligible  

The article basically tells you that the government’s stated reasons for this program will not actually happen.  

On the other hand, the program was a great deal for people with cars that were just about dead and had to be replaced anyway.  

I have a 13 year old Volvo with 130,000 miles.  It’s still good for another 130,000 miles, provided I take care of it and don’t use it as my primary vehicle for long trips.  It’s got lots of dents and chips, and it will probably need another timing chain, transmission and engine if I want to get those additional 130,000 miles.  Should I have traded in this clunker and buy a new car?  

Of course not!  Why would I spend money I don’t need to spend, just because the government will give me a rebate?  

What about replacing all the windows in your house?  You can get a rebate if the new windows are energy efficient.  If you were planning to replace the windows anyway, then go ahead and do it so you can get the rebate.  But if your windows are OK, and you really had no plans to replace them in the near future, don’t spend the money just because there’s a rebate.  

Here’s the thing.  Our government likes to complain that we don’t save enough.  But to get re-elected, the politicians need the economy to start humming.  It won’t hum unless people start spending money.  So they are dangling these lollipops in front of your eyes to get you to spend money you should be saving and investing.  

Which is more important to you?  Is it better to have no debt and be able to save 20% of your gross salary each year?  Or is it better to spend your money on new windows and a new car if you don’t need them?  You already know the answer to that.  

But it is more important to our politicians that you spend money now.  They will be gone by the time you reach retirement age.  They don’t really care if you have enough money at retirement, because it has no impact on their re-election bids.  

Let’s switch gears slightly.  

Do you think the American public is entering a long term phase of responsible saving?  Has the recent meltdown scared everyone enough so they will practice fiscal restraint for the rest of their lives?  

NO!  NO!!  NO!!!  The current restraint by American consumers is just a passing fad.Most people (the irresponsibles) will eventually continue to spend more than they earn.  The frugals (me and you) will continue to save our money.   The frugals are a small minority.   

What will happen to the economy?  Eventually, it will start humming again, since the irresponsibles will be spending.  This will improve the price of our equity holdings. And every once in a while (like last year) the economy will come to a jolting, shuddering near collapse because of some ridiculous excess or other.  When the economy jolts, the frugals will be hurt worse than the irresponsibles.  But it will be a temporary hurt.  In the long run, the irresponsibles’ overspending will actually allow the frugals to retire with a larger pile of cash.  That’s because the markets will be higher than they would be if everyone spent less.  

The quid pro quo (latin for “this is where the frugals get screwed”) is that when we are older, we will be forced to pay for the entitlements given to irresponsibles.  Politicians know that the irresponsibles outnumber the frugals by a whopping margin.  Future government policies (which are designed to get the politicians re-elected) will be geared to help the majority.   So your pile of cash will be taxed at higher rates than we have today.  

How does that grab you?  Because most people blew their money on big screen TV sets and boats, you will pay higher taxes in your old age.  They will get government support that you won’t qualify for, because you have more money than they do.  (I’m assuming that social security and Medicare benefits will be based on income when you retire).  

You can’t run from this responsibility.  If you try to sneak your funds into offshore accounts, you will be caught.  The US wants very badly to catch you.  In fact, we are embroiled in a fight with Switzerland to try to get the names and addresses of the people who have hidden their funds in illegal accounts sponsored by the United Bank of Switzerland.  Eventually we will have to invade Switzerland to get that list of names, but I guarantee the US will get those names.  And then heads will roll. 

If you move to Ireland, the government will make sure a large portion of your money remains in America.  Someone has to pay for the irresponsible ones in their old age.  

Yeah, it stinks.  But that doesn’t mean you should switch from the frugal tribe to the irresponsible tribe.  Yes, you will have to support the old irresponsibles to some degree, but they will not be living in luxury.   Your retirement years will be way more satisfying and easy if you stick with the frugals. 

Post #104 - Fixing the Garbage Disposer

Post #104

Part 4:  Good Advice, Bad Advice, and News About Investment People (continued)

Fixing the Garbage Disposer        

This is another case where I should have just “called a guy” right at the beginning.  

A while ago the garbage disposer sprang a small leak.  I called the manufacturer, who told me that all it needed was some plumber’s putty between the sink and the sink flange.  The phone rep guaranteed me that the job was so easy, even I could do it.  

My spouse was away for the day so I decided to surprise her and fix the leak myself.  I found the original directions, skipped over the section that said “Important safety instructions, read completely before starting” and went right to page 5.  They had a great picture of all the pieces and how they fit together.  First I had to disconnect the disposer from the sink trap.  No problem.  Next I had to turn the disposer so it disconnected from the mount ring.  It wouldn’t budge.  I got a hammer and gave it a tap.  Still wouldn’t budge.  I figured if I put a screw driver against the sink flange from the top of the sink and whacked it a few times, I might loosen it.  Instead I put a hole or two in the sink flange.  This didn’t look good.  I got back under the sink, stuck my head in the cabinet, and gave the mount ring a mighty whack.  Success!  Not only did the disposer come loose, it completely disconnected.  You can’t believe what a big hole a heavy disposer can put in the bottom of a kitchen cabinet when it falls from its mount.  It looked like a small cannon ball had hit the cabinet floor.  

At this point I needed a glass of water to clear my head.  I stood up and ran the tap for a few minutes to get a nice cold drink.  Then I noticed a large pool of water forming on the floor.  I looked into the cabinet.  Water was pouring out of the disconnected sink trap, right into the new hole I had made in the cabinet, and seeping out onto the floor.  That took a while to clean up!  

I did have the presence of mind to super glue the holes I had made in the sink flange before I cleaned the floor, so the glue would be dry when I reattached my disposer to the mount ring.  However, when I tried to reattach the disposer, it wouldn’t stay put.  Apparently, the fall had cracked the hopper projections, and they wouldn’t fit securely into the tightening ears.  By the way, these are technical terms.  I’m not making them up.  Although my waste disposer was equipped with the EZ Mount System, I think that the term was a misnomer.  I found it to be the Impossible Mount System.   

Finally, I realized that I had to buy a new disposer.  I drove to an appliance store that has a low sales tax.  In New Jersey, the size of the sales tax is inversely proportional to the chance of your being involved in a drive by shooting.  I went to a store with a negative sales tax.  This is an area where you need Kevlar lined clothing.   

When I got there, I noticed that the local parking lot was on fire.  I pulled the car onto the sidewalk right in front of the appliance place.  I waited until they lowered the drawbridge, and made my way onto the appliance floor.   

The salesman sold me a new food waste disposer (the name had been upgraded since I purchased the last one) for $194.67.  He told me it was so simple to install I could do it myself.  I asked him to give me the name of a guy I could call.  

By the way, I still have a hole in the bottom of the cabinet.  I thought I could hide it with a big box of Brillo Soap Pads, but my spouse found it pretty quick.  She didn’t believe termites were responsible.

Post #103 - Good Advice for Fixing Your House

Post #103

Part 4:  Good Advice, Bad Advice, and News About Investment People (continued)

Good Advice for Fixing Your House

Fixing house problems costs a lot of money.  How do you get around that?  Buy a new house every five years!  No, I’m kidding.  The mortgage fees and moving costs would kill you.  Kidnap a general contractor and keep him in the basement.  That probably wouldn’t work either.  You might want to finish that basement sometime.  How would it look if there was a guy with a tool belt chained up in your rumpus room?  Become “handy” yourself.  No, that’s no good.  Being handy is a genetic thing.  You can’t learn it.  Only direct descendents of Mr. Black, Mr. Decker, Mr. Lowes, and Mr. Homer Depot have the necessary DNA.  See my previous few posts for proof.

The final option is to “call a guy”.

If you are not handy, you need to call a guy when something goes wrong.  Sorry ladies, there just aren’t that many females in the fix-it business.  Even though I still try to do things myself, most of the time I should have called a guy.  For instance, I should have called the “bug guy” when yellow jackets invaded our living room.  Those nasty, flying, stinging things made a hole in the ceiling and tried to sneak in one at a time.  I was crouching behind the sofa, with my spud gun, pasting them as they came through the hole.  I missed more than I hit, and had to jump out a window after a few minutes.  Luckily, we were able to close the living room door and contain the little pests.  I wound up spraying the room with stuff that was specifically labeled “not for indoor use”.  Then we had to live in a hotel for three days until the fumes left the house.  At least the yellow jackets were dead.  But I was scraping potatoes off the wall for weeks.

The last time the sink backed up, my wife got the big wrench, crawled under the kitchen counter, and banged on a pipe until it broke.  Then we called the plumber.  This was smart.  He fixed the pipes.  I told her I could have done the same thing, but she reminded me of the time that I flooded the upstairs bathroom while fixing a faucet in the tub.  We needed a bathyscaphe, a floor specialist, a tile man, and a world famous fly fisherman to get the house back in order.

The ceiling guy fixed our bedroom after I fell through the sheetrock while hopping around on the beams in the attic.  I was trying to reposition the TV antenna.  Imagine my wife’s surprise.  She was reading in bed, and suddenly I appeared in a cloud of plaster and dust.  We got cable after that.  Of course, we didn’t get “real cable”.  We are too frugal.  We just got the basic ten channels.

I still do my own window cleaning.  A “guy” charges too much and I really can do it myself, as long as I stay inside the house and reach out to do the outside of the windows.  In 1992 I had a nasty experience with a ladder.  I had just cleaned the second floor bathroom window and stepped back to admire my work.  That is always a mistake when you are on a ladder.  Luckily, nothing was broken, but I couldn’t ride a bicycle for a few months.

Luckily I don’t need a lawn guy.  The grass turned yellow about ten years ago and hasn’t show any sign that it needs cutting since then.  The town committee has sent me a few letters about the lawn, but I haven’t read them yet.  I don’t have a pool, so I don’t need a pool guy either.  That’s probably a good thing.  My neighbor’s pool guy installed nanny cams near the hot tub and sold the videos to an internet site called “Suburbanpoolplay.com”.

Anyway, if you own a house, you will most likely need to call a guy every few months.  Get your daughter to marry him to keep the cost down.

Post #102 - Don't do your own masonry

Post #102

Part 4:  Good Advice, Bad Advice, and News About Investment People (continued)

Don’t do your own masonry!

I had a few loose Belgian blocks at the end of my driveway.  It would have cost a small fortune to bring somebody in from Belgium to fix them.  I asked a few locals if they would do it.  They all laughed at me and quoted prices that were more in line with putting an addition on the house.

So I said, “Hey it can’t be that hard.”

This from a guy who almost rolled himself off the roof while painting a board.

Anyway, I went down to the nearest Home Depot and bought a 40 pound bag of cement.  This is a lot of cement for two Belgian blocks, but I thought I could save it for when more blocks got loose.

I went online and got instructions of how to re-do the Belgian blocks.  Seemed pretty easy.  Of course, brain surgery seems pretty easy when you watch it on TV.

I dug a hole, took out the blocks and prepared a small batch of concrete.  Poured the concrete into the hole and stuck in the blocks.  They were about six inches lower than the rest of the blocks.

The damn hole was too big.

I should have waited until the concrete hardened, put some dirt on top to make the hole smaller, and gone from there.  But guys don’t like to wait.  I was ready for action.  I decided to mix another small batch of concrete and just throw it in the hole.

Anyway, I wound up mixing multiple additional batches of concrete.  Each time I put the blocks in, they were still too low.  And they became more and more submerged as my concrete solution in the hole got higher and higher.  I finally threw some old lumber into the hole so the Belgian blocks could rest on something solid.  The lumber was high enough so that the Belgian blocks were finally even with the rest of the line.  Why didn’t I do that earlier?  I guess because I’m not Belgian.

Once the blocks were on the lumber, they were sitting above my pool of concrete.  I needed more concrete in the hole.  The entire 40 pound bag of cement went into that hole.  When the concrete hardened, no amount of TNT was going to move these two blocks.

Now I had to clean off the blocks.  They had sunk into the concrete so many times that they looked like gray amorphous blobs.  There was no indication that they once had been rectangular in shape.

The internet tells you that you can wait until the end of the job to clean the blocks.  This is a lie.  The concrete on the blocks had already hardened.  No amount of scrubbing or chipping could make a dent.

So now I have nice Belgian blocking outlining my driveway.  And at the end of the line there are two quartz like monstrosities that remind you vaguely of Superman’s Fortress of Solitude.

Post #101 - How much you save is critical

Post #101

Part 4:  Good Advice, Bad Advice, and News About Investment People (continued)

How much you save is critical

You can have the best asset allocation plan in the world and the perfect mix of equities/bonds.  But if you’re only adding ten dollars a month to the pot, you will not be financially secure when you retire.  So, concentrate on your career and save lots of money.  These are commandments 1 and 2 in the blog.

I recommend you save and invest 20% of your gross salary every year.  People have told me that’s not doable.  All I can do is shrug my shoulders in a Gallic sort of way.  “Eef you do not vant to do eet, zen you will leev laak a church moose ven you get old.”  How’s that for a French accent?

I’ve given you lots of ideas in this blog about saving more/spending less.  There are plenty of articles on the internet that you can read.  All the ideas are out there for you to use.

Very few people are willing to defer their gratification.  So most of those who read about how important it is to save money do not learn the lessons.  Hopefully, you readers are different.

 Do a couple of future value projections!  Pretend you save $2000 per month and get a 6% annual return on investment over forty years. 

 How do you do a future value projection?   

• Go find a computer that has the Microsoft Excel program.

• Turn on the computer and start the Excel program. 
• In any cell on the Excel screen, type = fv(6%/12,480,-2000)
• Hit the Enter key on your keyboard to tell Excel to calculate the result of the formula.
• Hint, the number is $3,982,981.47

 Do the same formula for saving 1,000 per month.  The number is $1,991,490.73

Look at how much more money you will have if you can save $2000 per month instead of $1000 per month.

Now, look at saving $1000 per month and getting 8% return each year.  The formula to type into Excel is =fv(8%/12,480,-1000)

The result is $3,491,007.83

The facts tell us:

If you save $2000 per month for 40 years and get an average annual return of 6%, you will wind up with almost $4 Million.

If you save $1000 per month for 40 years and get an average annual return of 8%, you will wind up with $3.5 Million.

As you can see, investing an extra $1000 per month is much better than getting an additional 2% return each year, by half a million dollars.

And you have total control over how much you wave, whereas you have no control over whether you get a 6% return or an 8% return.

So go out there and save money.  Do it today!