Gold Is a Chameleon

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Is gold a commodity, an investment, or money?

The answer is…

Gold is a chameleon. It changes in response to the environment. At times, gold behaves like a commodity. The gold price tracks the ups and downs of commodity indices. At other times, gold is viewed as a safe haven investment. It competes with stocks and bonds for investor attention. And on occasion, gold assumes its role as the most stable long-term form of money the world has ever known.

A real chameleon changes color based on the background on which it rests. When sitting on a dark green leaf, the chameleon appears dark green to hide from predators. When the chameleon hops from the leaf to a tree trunk, it will change from green to brown to maintain its defenses.

Gold also changes its nature depending on the background.

Let’s first look at gold a commodity…

Gold does trade on commodity exchanges, and it tends to be included in commodity industries. The common understanding here is that gold is a commodity. But I don’t think that’s correct.

The reason is that because a commodity is a generic substance. It could be agricultural or a mineral or come from various sources, but it’s a substance that’s input into something else. Copper is a commodity, we use it for pipes. Lumber is a commodity, we use it for construction. Iron ore is a commodity, we use it for making steel.

Gold actually isn’t good for anything except money. People don’t dig up gold because they want to coat space helmets on astronauts or make ultra-thin wires. Gold is used for those purposes, but that’s a very small portion of its application.

So I don’t really think of gold as a commodity. But nevertheless we have to understand that it does sometimes trade like a commodity.

As far as being an investment, that’s probably gold’s most common usage.

People say, “I’m investing in gold,” or, “I’m putting part of my investment toward bullion gold.”

But I don’t really think of gold as an investment either. I understand that it’s priced in dollars, and its dollar value can go up. That will give you some return, but to me that’s more a function of the dollar than it is a function of gold.

In other words, if the dollar gets weaker, sure the dollar price of gold is going to go up. If the dollar gets stronger, then the dollar price of gold may go down.

So if you’re using the dollar as the measure of all things, then it looks like gold is going up or down. But I think of gold by weight. An ounce of gold is an ounce of gold. If I have an ounce of gold today, and I put it in a drawer, and I come back a year from now and take it out, I still have an ounce of gold. In other words it didn’t go up or down.

The dollar price may have changed, but to me that’s the function of the dollar, not a function of gold. So again, I don’t really think of it as an investment.

One of the criticisms of gold is that it has no yield. You hear it from Warren Buffet, you hear it from others, and that’s true. But gold is not supposed to have a yield because it’s money. Just reach into your wallet or your purse and pull out a dollar bill and hold it up in front of you, and ask yourself what’s the yield? There is no yield. The dollar bill doesn’t have any yield. It’s just a dollar bill, the way a gold coin is a gold coin.

If you want yield, you have to take some risks. You can put that dollar in the bank, and the bank might pay you a little bit of interest, but now it’s not money anymore. People think of their money in a bank deposit as money, but it really isn’t money. It’s an unsecured liability of an occasionally insolvent financial institution. The risk may be low, but there’s some risk, and that’s why you get a return.

Of course, you can take more risk in the stock market or the bonds market and get higher returns (or losses, as the stock market is currently proving). The point is, to get a return you have to take risk. Gold doesn’t have any risk. It’s just gold, and it doesn’t have any return. But again, it’s not supposed to.

Gold’s role as money is difficult for investors to grasp because gold hasn’t been used as money for decades. But gold in recent years has been behaving more like money than a commodity or investment. It is competing with central bank fiat money for asset allocations by global investors.

That’s a big deal because it shows that citizens around the world are starting to lose confidence in other forms of money such as dollars, yuan, yen, euros and sterling.

When you understand that gold is money, and competes with other forms of money in a jumble of cross-rates with no anchor, you’ll know why the monetary system is going wobbly.

It’s important to take off your dollar blinders to see that the dollar is just one form of money. And not necessarily the best for all investors in all circumstances. Gold is a strong competitor in the horse race among various forms of money.

Despite the recent price action, which is far more a function of the stock market rather than gold itself, this is great news for those with price exposure to gold. The price of gold in many currencies has been going up as confidence in those other currencies goes down. Confidence in currencies is dropping because investors are losing confidence in the central banks that print them.

For the first time since 2008, it looks like central banks are losing control of the global financial system. Gold does not have a central bank. Gold always inspires confidence because it is scarce, tested by time and has no cre‌dit risk.

Lost confidence in fiat money starts slowly then builds rapidly to a crescendo. The end result is panic buying of gold and a price super-spike.

We saw this behavior in the late 1970s. Gold moved from $35 per ounce in August 1971 to $800 per ounce in January 1980.

That’s a 2,200% gain in less than nine years.

We’re in the early stages of a similar super-spike that could take gold to $10,000 per ounce or higher. When that happens there will be one important difference between the new super-spike and what happened in 1980.

Back then, you could buy gold at $100, $200, or $500 per ounce and enjoy the ride. In the new super-spike, you may not be able to get any gold at all. You’ll be watching the price go up on TV, but unable to buy any for yourself.

Gold will be in such short supply that only the central banks, giant hedge funds and billionaires will be able to get their hands on any. The mint and your local dealer will be sold out. That physical scarcity will make the price super-spike even more extreme than in 1980.

The time to buy gold is now, before the price spikes and before supplies dry up. The current price decline gives you an ideal opportunity to buy gold at a bargain basement price. It won’t last long.

Regards,

Jim Rickards
for The Daily Reckoning

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Use Retail Therapy to Make a Small Fortune

This post Use Retail Therapy to Make a Small Fortune appeared first on Daily Reckoning.

Dear Rich Lifer,

You’ve heard the saying when it comes to trading stocks: buy low and sell high. The same strategy applies to making money buying items in stores.

This is called retail arbitrage, and it can make you a small fortune pretty quickly if you know how to do it right, and with Black Friday and the Holidays right around the corner, there has never been a better time to try it out.

E-commerce revenues are projected to grow to 4.88 trillion US dollars in 2021. If that number sounds high, consider that Amazon is already more valuable than all major brick-and-mortar retailers combined.

Amazon’s $1 trillion valuation is so big, it’s larger than Walmart, Target, Best Buy, Macy’s, Kohl’s, JCPenney, and Sears combined. What’s interesting though is nearly half of Amazon’s sales come from third-party sellers — independent sellers who offer a variety of new, used, refurbished, and collectible merchandise.

Most of these third-party sellers take advantage of Amazon’s ‘Fulfillment by Amazon’ program, called FBA for short.

How FBA Works

If you shop on Amazon, you’ve sometimes ordered a product that doesn’t arrive in Amazon’s traditional brown box. This is because a third-party seller has handled the fulfillment and shipping part of the sale.

Fulfillment by Amazon on the other hand, lets third-party sellers turn the fulfillment and shipping part over to Amazon. You send your products to Amazon, and they store your items until they sell.

When someone buys one of your items, Amazon ships it to the customer on your behalf. The whole process is explained in this short video.

How to Make Money With FBA

There are tons of things you can resell on Amazon for a profit, so you’re never going to be too limited figuring out what to sell. But my recommendation is start with toys.

It’s one of the most popular retail arbitrage categories because it’s so easy to get started. And some FBA sellers make good money doing it, think upwards of $10K per month during the holiday season when there’s even higher demand for popular toys.

The toy reselling strategy is simple: start by searching online for retailers selling toys at huge discounts, buy the toys, ship them to Amazon’s FBA warehouse, and if you choose toys with enough demand, you’ll see your inventory sell through in no time.

Popular toys generally resell very quickly, especially when they’re becoming scarce in regular stores. It’s not uncommon to resell all of your stock within a week of listing the items, sometimes even within hours.

If you want to resell toys through FBA, start by shopping clearance sections at retailers. Also remember that Amazon FBA accepts both new and used items, which is great if you have some mint-condition toys lying around that you wouldn’t mind getting rid of. Otherwise, look for popular or perennial toys that are likely to be hot sellers.

One other thing to be aware of is Amazon offers a 100% guarantee on products.

If something is damaged in shipping or the customer decides they don’t like it, you’re responsible for the return. Amazon also charges storage and order-fulfillment fees that you’ll need to keep in balance.

How to Boost Profits While Buying Inventory

To really ramp up profits, ask yourself how you’re going to buy items you plan to sell through FBA. The best way in my opinion is through reward cards and discount gift cards.

Before you buy items to sell on FBA, figure out which gift cards you need to buy for those items. For example, if you are going to buy toys from Kohl’s, you’d want to buy those toys with a Kohl’s gift card.

You should use your rewards credit card to buy the Kohl’s gift card from a discount gift card site like Gift Card Rescue or Gift Card Granny.

Then, when you make the purchase using the gift card, you’ll get even more rewards. Also search coupon sites like RetailMeNot to save on the Kohl’s purchase and make that discounted gift card stretch even further.

To recap: Earn rewards on your credit card, increase the value of your gift card by buying it at a discount and combining it with online coupons, and then, after you make your purchase, sell the purchased items through FBA at a profit.

Just be sure to pay off your credit card in full every month, or else you’ll get hit with interest that could cancel out all your hard work.

In Conclusion

There are a ton of resources available online to help you sell products through Amazon’s FBA program.

The more you learn about retail arbitrage and the FBA process, the better prepared you’ll be when you start using FBA to earn extra money yourself. But don’t spend too much time researching.

The best way to learn is simply by getting started. Either shop online or go to your local Walmart and dig through the clearance sections until you find a winner.

To a richer life,

Nilus Mattive

Nilus Mattive

The post Use Retail Therapy to Make a Small Fortune appeared first on Daily Reckoning.

Is Your Wallet Dragging You Down?

This post Is Your Wallet Dragging You Down? appeared first on Daily Reckoning.

In mid-2000, one of the most successful advertising campaigns running was Capital One’s “What’s In Your Wallet?”

Remember the commercials?

The first year the ads ran, Capital One total US accounts went from 29MM to over 40MM, and card consideration among consumers tripled!

This was the first time ever Capital One executed a sustained advertising campaign and they knocked it out of the park.

But if they were to launch the same campaign today, the ads might be a little different…

Instead of “What’s In Your Wallet?” they might be better off saying “What’s In Your Phone?”

We’re at a point now where you can safely leave your credit cards at home and pay for almost everything with your mobile device in store.

If you own a smartphone and have the right apps downloaded, you no longer need to carry around most of the things in your wallet.

Not convinced?

Another reason you should consider emptying your wallet is for your health. Up to 85% of Americans suffer from back pain at some point in their life. For many men, a common cause is sitting on your wallet.

If you’re ready to thin out your wallet, here’s what can go first.

  1. Credit Cards

There are several stores and restaurants that accept mobile payments instead of cash or credit cards.

All you have to do is download the mobile app and link one or more of your credit card accounts. You pay by tapping, this transmits a payment code via near-field communication (NFC) technology to the retail terminal.

The security measures are similar to using a chip card. Mobile wallets you can trust:

Apple Pay
Google Pay

Samsung Pay

  1. Checks

When was the last time you wrote a check?

There are easier and less cumbersome ways of transferring money to people now. Most mobile banking apps allow you to send money from your bank account to anyone simply by using their email address or username.

Using a money transfer app means no more carrying around checks in your wallet. These are some popular money transfer apps:

Venmo
Cash App
Dwolla
PayPal
Google Pay
Facebook Messenger

  1. Coupons

Unless you actually like cutting coupons, there’s an easier way to take advantage of all the savings.

Couponing apps and other cash back apps can replace all your paper coupons, freeing up a lot of wallet space.

Here a few coupon apps you should have on your phone:

Coupons.com
Ebates
Flipp
Ibotta
Checkout 51
Krazy Coupon Lady
RetailMeNot

  1. Loyalty Cards

Almost every store you go to now has its own customer loyalty card with perks and discounts. Carrying all these cards is not only annoying and bulky but unnecessary.

Since most stores can look up your store loyalty account using your phone number, you really don’t need to carry the card around in your wallet.

But if you really want a way to store your loyalty cards that’s convenient so the cashier doesn’t have to look up your account every time, try one of these apps:

Stocard
Key Ring

  1. Contact Info

Another culprit of wallet bulk is business cards and small pieces of paper with important information written down — addresses, phone numbers, travel rewards program account numbers, etc.

You don’t need to carry stuff like this around and risk losing it or having it stolen.

You can store all this kind of information with access to it any time through a few digital apps:

Google Keep
Sec Notes
ABBYY Business Card Reader

  1. Insurance Cards

Car insurance, health, dental, and vision policy cards can all be stored on your smartphone. The best way to capture these cards is to take photos of each one, front and back.

You can organize these cards in a folder on your phone for easy lookup. And if you’re worried you won’t be able to read the numbers on the cards, don’t forget you can zoom in on the photos easily.

  1. Photos

Speaking of pictures, wallet-sized photos of your family are great but you’re limited to how many can fit comfortably in your wallet.

New phones have enough storage now to keep thousands of photos on hand. Don’t settle for only a few photos when you can store whole albums in your pocket.

Good cloud storage apps for photos are:

Google Photos
Prime Photos

  1. Receipts

If you travel a lot for business, you might find yourself storing paper receipts in your wallet to keep track of all your expenses.

Not only is this annoying to have to store a bunch of receipts in your wallet, the paper and ink typically rubs off making reading the receipts near impossible.

A better solution is to download a receipt organizer app. Here are few to check out:

Expensify
Shoeboxed

These are just a few things you can store on your smartphone to free up space in your wallet, saving you the hassle and back pain.

To a richer life,

Nilus Mattive

Nilus Mattive

The post Is Your Wallet Dragging You Down? appeared first on Daily Reckoning.

The Big 4 Retirement Worries and How to Beat Them

This post The Big 4 Retirement Worries and How to Beat Them appeared first on Daily Reckoning.

The #1 concern most Americans have when it comes to retirement is paying for health care.

According to a recent survey from Merrill Lynch and Age Wave, those age 65 and over ranked health as their greatest source of worry.

With rising health care costs and longer life expectancies, it’s no wonder covering medical expenses tops most retirees list of retirement worries.

Add to that an unpredictable future for our Social Security system, market corrections, and uncertain taxes, it’s reasonable to feel a bit on edge these days.

However, Americans do retire successfully. Studies tend to show current retirees being less concerned about these issues than those approaching retirement. They have the benefit of experience, I guess.

Although I can’t predict your future, a bit of insight and planning can still go a long way to help ease some of your retirement worries.

So today, I’m going to debunk four of the biggest worries nearly all retirees have on their mind.

Retirement Worry #1: Health Care

You see healthcare top many retirement lists and studies as a major concern because many health issues are age related.

While you can’t control your genetic makeup, you can make good choices when it comes to eating healthy and exercising regularly. In addition, I find simply giving people their options when it comes to healthcare coverage can ease a lot of the uncertainty.

Here are the basics…

Most people become eligible for Medicare when they turn 65. Medicare is made up of several parts.

Medicare Part A is hospital coverage. It’s generally free, with some exceptions.

Medicare Part B is medical insurance, and you pay a premium for coverage.

Medicare Part C, aka Medicare Advantage, is an optional replacement for traditional Medicare. You might pay more for an optional Part C plan.

Medicare Part D is your prescription drug coverage. Pard D costs will vary.

So unless your prior employer has your health insurance covered for life, you’ll most likely go onto Medicare.

Choosing the right plan depends on your health status, family history, and budget. It’s also not a bad idea to consider a Medicare Supplement plan, or a Medigap policy.

A major reason to consider a Medigap policy is if you plan on traveling.

Traditional Medicare doesn’t cover you when you travel outside the U.S. But, most Medigap policies do.

The last thing you should consider is long-term care insurance. The data isn’t pretty. Coverage is expensive and your alternative of no coverage can be worse.

The main things to consider here are whether or not your assets are needed for someone else to maintain a certain standard of living. And, whether or not you’re looking to leave a legacy.

Those are two major questions you need to ask before you consider long-term care insurance.

Retirement Worry #2: Outliving Your Money

The second biggest worry is fear of running out of money. With longer life expectancies and rising costs, the amount of money it takes to maintain a comfortable standard of living in retirement is significant.

Step one is to figure out how much you’ll need saved to retire comfortably. You can do this a number of ways but my suggestion would be to find a few different retirement calculators and run the numbers.

Once you have a few different sets of numbers, choose the worst case scenario and build your savings plan around that number.

The sooner you know how much you should have saved the better. Sometimes it can seem like a pension, Social Security and some modest savings will be enough. But that isn’t always the case.

Inflation and other uncontrollable factors can quickly eat away at your savings. It’s important to keep your spending to a minimum early in retirement, this way you give your money time to grow and you’ll have extra saved should you run into trouble later on.

Retirement Worry #3: Not Enough Cash Flow

This worry might seem similar to the second, but it comes from a different place. A lot retirees worry that their income won’t be enough to cover basic living expenses.

The fate of Social Security is up in the air. It likely won’t disappear but it could be significantly reduced, leaving a lot of retirees struggling to pay their bills.

The fix here is putting in place a solid drawdown strategy. The most common strategy is the 4% rule, where you withdraw 4% of your savings in the first year of retirement, and each year after that you take out the same dollar amount, plus an inflation adjustment.

For example, if you have $1,000,000 in retirement savings, the first year you would withdraw $40,000. Then, over the course of that year, inflation runs 3%. The next year, you’d withdraw $41,200.

There are a number of different drawdown strategies, the point being that having a sufficient cash flow is critical in retirement.

Retirement Worry #4: Debt

The last big worry is paying down debt. This worry probably wouldn’t have topped the list 20 years ago. But today retirees carry a lot more debt.

Bigger mortgages, multiple credit cards — it’s a major issue that retirees face. It’s not that you can’t ever have debt in retirement, but you need to be able to manage it.

If you can, pay off your credit cards before you retire. You don’t want your retirement savings getting eaten up by high-interest payments.

In some cases, you’ll want to go into debt. Maybe you need to replace your vehicle and the interest payments are low enough that it makes sense to take out a car loan.

You might also downsize or buy a second vacation property with a mortgage. So long as you’re not relying on debt to fund your retirement and you have a plan in place to manage the debt you owe, you can overcome this worry.

The bottom line is that it’s natural to feel some anxiety about retirement. With the right plan is place and a grasp on what’s to come, you can mitigate most of your fears fairly easily.

To a richer life,

Nilus Mattive

Nilus Mattive

The post The Big 4 Retirement Worries and How to Beat Them appeared first on Daily Reckoning.

The Big 4 Retirement Worries and How to Beat Them

This post The Big 4 Retirement Worries and How to Beat Them appeared first on Daily Reckoning.

The #1 concern most Americans have when it comes to retirement is paying for health care.

According to a recent survey from Merrill Lynch and Age Wave, those age 65 and over ranked health as their greatest source of worry.

With rising health care costs and longer life expectancies, it’s no wonder covering medical expenses tops most retirees list of retirement worries.

Add to that an unpredictable future for our Social Security system, market corrections, and uncertain taxes, it’s reasonable to feel a bit on edge these days.

However, Americans do retire successfully. Studies tend to show current retirees being less concerned about these issues than those approaching retirement. They have the benefit of experience, I guess.

Although I can’t predict your future, a bit of insight and planning can still go a long way to help ease some of your retirement worries.

So today, I’m going to debunk four of the biggest worries nearly all retirees have on their mind.

Retirement Worry #1: Health Care

You see healthcare top many retirement lists and studies as a major concern because many health issues are age related.

While you can’t control your genetic makeup, you can make good choices when it comes to eating healthy and exercising regularly. In addition, I find simply giving people their options when it comes to healthcare coverage can ease a lot of the uncertainty.

Here are the basics…

Most people become eligible for Medicare when they turn 65. Medicare is made up of several parts.

Medicare Part A is hospital coverage. It’s generally free, with some exceptions.

Medicare Part B is medical insurance, and you pay a premium for coverage.

Medicare Part C, aka Medicare Advantage, is an optional replacement for traditional Medicare. You might pay more for an optional Part C plan.

Medicare Part D is your prescription drug coverage. Pard D costs will vary.

So unless your prior employer has your health insurance covered for life, you’ll most likely go onto Medicare.

Choosing the right plan depends on your health status, family history, and budget. It’s also not a bad idea to consider a Medicare Supplement plan, or a Medigap policy.

A major reason to consider a Medigap policy is if you plan on traveling.

Traditional Medicare doesn’t cover you when you travel outside the U.S. But, most Medigap policies do.

The last thing you should consider is long-term care insurance. The data isn’t pretty. Coverage is expensive and your alternative of no coverage can be worse.

The main things to consider here are whether or not your assets are needed for someone else to maintain a certain standard of living. And, whether or not you’re looking to leave a legacy.

Those are two major questions you need to ask before you consider long-term care insurance.

Retirement Worry #2: Outliving Your Money

The second biggest worry is fear of running out of money. With longer life expectancies and rising costs, the amount of money it takes to maintain a comfortable standard of living in retirement is significant.

Step one is to figure out how much you’ll need saved to retire comfortably. You can do this a number of ways but my suggestion would be to find a few different retirement calculators and run the numbers.

Once you have a few different sets of numbers, choose the worst case scenario and build your savings plan around that number.

The sooner you know how much you should have saved the better. Sometimes it can seem like a pension, Social Security and some modest savings will be enough. But that isn’t always the case.

Inflation and other uncontrollable factors can quickly eat away at your savings. It’s important to keep your spending to a minimum early in retirement, this way you give your money time to grow and you’ll have extra saved should you run into trouble later on.

Retirement Worry #3: Not Enough Cash Flow

This worry might seem similar to the second, but it comes from a different place. A lot retirees worry that their income won’t be enough to cover basic living expenses.

The fate of Social Security is up in the air. It likely won’t disappear but it could be significantly reduced, leaving a lot of retirees struggling to pay their bills.

The fix here is putting in place a solid drawdown strategy. The most common strategy is the 4% rule, where you withdraw 4% of your savings in the first year of retirement, and each year after that you take out the same dollar amount, plus an inflation adjustment.

For example, if you have $1,000,000 in retirement savings, the first year you would withdraw $40,000. Then, over the course of that year, inflation runs 3%. The next year, you’d withdraw $41,200.

There are a number of different drawdown strategies, the point being that having a sufficient cash flow is critical in retirement.

Retirement Worry #4: Debt

The last big worry is paying down debt. This worry probably wouldn’t have topped the list 20 years ago. But today retirees carry a lot more debt.

Bigger mortgages, multiple credit cards — it’s a major issue that retirees face. It’s not that you can’t ever have debt in retirement, but you need to be able to manage it.

If you can, pay off your credit cards before you retire. You don’t want your retirement savings getting eaten up by high-interest payments.

In some cases, you’ll want to go into debt. Maybe you need to replace your vehicle and the interest payments are low enough that it makes sense to take out a car loan.

You might also downsize or buy a second vacation property with a mortgage. So long as you’re not relying on debt to fund your retirement and you have a plan in place to manage the debt you owe, you can overcome this worry.

The bottom line is that it’s natural to feel some anxiety about retirement. With the right plan is place and a grasp on what’s to come, you can mitigate most of your fears fairly easily.

To a richer life,

Nilus Mattive

Nilus Mattive

The post The Big 4 Retirement Worries and How to Beat Them appeared first on Daily Reckoning.

Control Your Frivolous Spending in 6 Easy Steps

This post Control Your Frivolous Spending in 6 Easy Steps appeared first on Daily Reckoning.

One of the downsides to saving large sums of cash is it starts to burn a hole in your pocket.

When I was a kid, my grandparents would occasionally give me a $10 bill after I’d go visit for a week. I had zero tolerance for saving back then, so I would spend it on candy and comic books almost immediately.

Since then, I’ve built up a pretty good tolerance against spending cash. I’ve seen too many financial struggles and missed opportunities to not have a decent stockpile of cash in my bank account.

As of late though, my tolerance against spending is being tested. With a looming bear market, hoarding cash doesn’t feel like a bad investment.

The problem is this extra money starts tempting you. And, the last thing you want to do is waste your hard saved cash on something frivolous.

So, what should you do?

Here are 6 “easy” tips to help you control spending. I say easy because none of these require any extra discipline or extravagant measures. All you’ll need is a calculator, a pen and pad of paper.

The fastest way to boost your savings is by not spending what you have. If you want to accumulate more money, you need to learn some tricks to keep your spending urge at a minimum. Here are some tips I like:

Tip 1: Calculate How Much in Gross Income Is Needed to Buy

How much does it cost to buy a $90,000 Porsche 911 Carrera? It takes about $136,000 in gross income at a 30% effective tax rate. At a 25% effective tax rate, it requires $2,700 in gross income to purchase the newest $1,799 Macbook Pro.

Whatever you’re thinking about buying, multiply it by 1.5x to find out how much it really costs before tax. Suddenly, what you want to buy doesn’t seem as affordable.

Tip 2: Calculate How Many Hours of Work It Takes to Buy

If you work a salaried job, then you likely don’t pay much attention to your hourly rate.

However, understanding how much labor is required to afford something is sometimes the best strategy to give yourself some pause.

For example, to buy a $9,000 second-hand Rolex Submariner will take about 450 hours driving for Uber at $20/hour after operating costs. If you drive for 40 hours per week, that’s almost 11.5 weeks worth of work to purchase one watch.

Tip 3: Save 50% of Your After Tax Income Every Year

This might sound challenging, but I promise it’s not. As long as you’re maxing out your 401k and saving a certain percentage of your after tax income before you spend, you can afford to do whatever you want with your money after that.

But one idea I like is to max out your 401k and then save 100% of every other paycheck. Since most employers pay out twice a month, you can easily save at least 50% of your after tax income every year by following this plan.

It’ll be painful for the first 6 months, but after that you’ll adjust your living standards and it becomes easy.

Tip 4: Compare Yourself to Other People

If you make more than $35K a year, you’re in the top 1% of global income earners. Appreciate what you have compared to the billions of other people who weren’t lucky enough to be born in a developed country.

According to the UN world food program, some 795 million people in the world do not have enough food to lead a healthy active life. Simply comparing your circumstances to those less fortunate is sometimes enough to curb those impulse buys.

Alternatively, you can try motivating yourself by comparing your wealth and career success to other people your age who are doing better than you. Depending on your personality type, this can be really motivating and force you to keep boosting your savings in order to catch up.

Tip 5: Establish a Spending Goal

There’s a rule I like which states that whatever you want to buy, you should try to make at least 10x that amount first. For instance, if you want to buy a $30,000 car, try making $300,000 first. This is a tough rule to stick to but it forces you to achieve certain financial goals tied to big rewards.

What you’ll find is after spending all this time earning and saving enough to reach your big goal, you might lose the desire to actually buy what you originally thought you wanted.

Make your spending goals challenging so when you reach them it’s worth the pain to make the purchase.

Tip 6: Visualize the Opportunity Cost of Your Purchase

If the S&P 500 averages 7% a year for the next 10 years, you’ll have doubled any money you invest today in the index. Therefore, the $9,000 watch or $30,000 car you buy today might be worth $18,000 and $60,000 respectively in the future. Visualizing opportunity cost is one way to prevent spending, but it’s hard because it’s difficult seeing that far into the future. One easy way to see the future is by running your finances through a retirement calculator. You’ll quickly see whether you’re on track to retirement or not.

Boosting savings is not rocket science. Yes, it requires some discipline but if you follow these simple tips on how to curb your spending, you’ll build a high tolerance and see your bank account grow.

To a richer life,

Nilus Mattive

Nilus Mattive

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11 Habits You Need to Break Before You’re Broke

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I’m all for treating myself to some of life’s luxuries, but I won’t splurge to the point where it starts to hurt my finances.

Sadly, for a lot of Americans the latter is true.

In fact, the average US adult spends $1,497 a month on nonessential items, according to a recent survey conducted by OnePoll. That’s roughly $18,000 a year on things we can all do without.

The survey revealed that the average person spends about $20 per month on coffee, as well as $209 on dinners at restaurants and $189 going out for drinks with friends.

Survey respondents said they spend an average of $91 per month for cable, in addition to $23 for streaming movies and TV shows. Music streaming services averaged $22 a month, while other apps added $23.

Even the cost of health club and gym memberships was significant, averaging $73 a month, including classes.

One interesting finding was that Amerians make an average of five impulse buys per month – for a total of $109. But, the irony is the majority (58 percent) feel there are other important things they can’t afford…hmm.

The truth of the matter is we all have bad spending habits we need to work on. Today I’m going to walk you through 11 of the worst spending habits that drive financial experts wild.

The good news is that all of these can easily be fixed…

Bad Habit #1: Keeping All Your Money in One Account

I’m always surprised when I hear someone say they only have one bank account. Physically separating your money is the easiest way to set and stick to a budget.

Here’s what you should be doing: 1) Rename your checking account your spending/depositing account. Tie this account to your debit card. 2) Open a second checking account and designate this one to your bills.

Calculate your average bill tally from the 1st to the 15th, and from the 16th to the end of the month, and transfer that amount to your bills account every two weeks. This will stop you from overspending on your debit card because you’ll have already covered your bills.

This two-account setup will save you a lot of time and money by automating your budgeting.

Bad Habit #2: You’re always searching for deals

This might sound counter-intuitive, but searching for sales can sometimes set you further back. Out of the top ten reasons cited for overspending, two include sales: discounted items or “one-time only” flash sales that typically lead to more spending. The expression, I can’t afford not to buy it, couldn’t be more true.

Bad Habit #3: Not Saving “Found” Money

Did a rebate you sent in months ago finally come in? Did someone buy you a coffee unexpectedly?

“Found” money often gets wasted. Anytime you find unexpected money, transfer that money to your savings or bill accounts. You’ll be surprised how much this adds up with minimal effort on your part.

Bad Habit #4: Having Too Many Subscriptions

You sign up for a one-month free trial and before you know it, you’ve gone 6 months without realizing you’ve been paying this whole time. Too many people pay for monthly subscriptions they never use.

Review your credit card statements monthly and highlight any subscriptions you’re not using anymore. Cancel these as soon as possible or mark the next renewal date on your calendar so you know when to cancel.

Bad Habit #5: Keeping Up with the “Smiths”

It used to be you were trying to keep up with the Joneses. Except back then, it was just your next-door neighbor. Now, in an era of social media and 24/7 news cycles, everyone is your neighbor when you turn on your phone.

Don’t subscribe to this keeping-up temptation. What you see being portrayed online is not always a true portrayal of someone’s day-to-day. Set realistic expectations for how your life should look.

Bad Habit #6: Being Too Passive

How many items of clothing in your closet do you own that still have tags on them? Returning items. Calling your cable company to get a better rate. Negotiating a bank fee. These things all take time and a little bit of effort. But it’s time and effort well spent.

A twenty-minute phone call with your internet provider, could save you $15 a month. Multiply those savings by 12 and you’ve saved $180 a year from one phone call. It’s tempting to take the path of least resistance when it comes to your money, don’t do it.

Bad Habit #7: Paying fees

Fees are something I won’t tolerate. Bank fees, ATM fees, maintenance fees, they all add up and they’re all negotiable. If you look at your bank statements and notice you’re paying a significant amount in fees, you need to stop this immediately.

Write down all the fees you’re paying on a regular basis and choose at least three to slash. You might have to threaten to switch providers or change banks, whatever you need to do to get the fee waived.

Bad Habit #8: Not Automating Your Bills

Everyone should be doing this nowadays. If you’re still getting bills in the mail, there’s a good chance you’re forgetting to pay those bills some months or your payments are late.

Use your bills checking account to pay your bills without having to think about it.

You’ll save the hassle of having to remember and you won’t have to worry about paying late fees and other penalties.

Bad Habit #9: Wasting Food

The number-one money-waster is throwing away leftover food. According to a recent study, part of the reason for this phenomenon is that people are bad at reading food labels. Food date labels like “best before” and “sell by” are largely unregulated in the US.

84% of consumers discard food near the package date at least occasionally, says the study. Among date labels assessed, “best if used by” was most frequently perceived as communicating quality, and both “expires on” and “use by” as communicating safety.

Over one third of participants incorrectly thought that date labeling was federally regulated, and 26% were unsure.

Bad Habit #10: Thinking a Budget Means “No”

When you think of the word “budget” what comes to mind? For most people, they think a budget means they have to say “no” to everything. You can’t save for a vacation, if you’re saying yes to brunch with your friends. You can’t save for a new car, if you’re saying yes to new clothes every month.

That’s not necessarily true. A budget doesn’t mean no, it just means you need to start prioritizing your money.

Think of a budget as a pecking order for where your money goes. Whatever is left after the important nuggets get covered can go toward the less important “non-essential” wants.

Bad Habit #11: Ignoring Your Daily Habits

And just because you have a monthly budget, doesn’t mean you’re necessarily aware of all your day-to-day expenditures. If you want to quickly assess your weekly spending habits, run a 10-day budget.

Notice how many small things you didn’t realize you needed to budget for. You want to do this once a quarter for a few reasons.

First, it helps alleviate the paycheck effect, where you get paid and then spend your full paycheck two weeks later. Second, you’ll pay attention to daily fluctuations in your spending and be able to make adjustments as you go.

To a richer life,

Nilus Mattive

Nilus Mattive

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5 Simple Steps to Reduce Your Financial Strain

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Dear Rich Lifer,

Think about the last five years…

Can you recall an unexpected event that led to financial stain? Maybe a health crisis, layoff, leaky roof, or unexpected car repair.

You’re not alone. Approximately two-thirds of U.S. households experience an unexpected event that negatively impacts their financial wellbeing, according to Pew research.

So it’s no wonder the most common cause of money stress is the feeling that you’re just one financial shock away from disaster.

What’s even more depressing, reducing financial stress when you don’t make enough is nearly impossible.

“Even the kind of frugality that will theoretically bring you some relief will often require an investment of time or finances — and lacking money and time is exactly why you’re feeling overwhelmed,” says Emily Birken, author of End Financial Stress Now.

So what can you do if you’re stressed about money?

Birken recommends building some slack into your budget, which is possible at any income. Here is Birken’s five-step plan to help relieve some of your financial stress:

Step 1. Adjust Your Tax Withholding

The average tax refund in 2018 was $2,895, which works out to more than $200 per month. One way to increase your monthly net without having to earn more money is to adjust your withholding.

Birken recommends requesting a new W-4 from your Human Resources department and figuring out the right amount of allowances you should claim using the IRS calculator.

Just remember, the tradeoff here is come tax time you won’t be receiving a big pay day from Uncle Sam. But if it relieves some of your monthly financial worry, the adjustment could be worth it.

Step 2. Start A Surprise Fund

Different than an emergency fund, a surprise fund is slightly less robust and meant to help get you through small hiccups in your budget.

The easiest way to start building a modest surprise fund is to set up automatic savings with your bank.

Even if you sock away $5 a week, that’s $260 you can tap into should the need arise. If you up your weekly auto-save amount to $10 a week, that’s an extra $520 per year. You’ll be surprised how quickly your surprise fund grows and how you won’t notice the small amounts missing.

Step 3. Negotiate Your Bills

Easy wins in creating some slack in your finances include negotiating your bills, suggests Birken. It’s considered easy money because you typically only have to do it once. And if you’re successful, expect to save yourself an extra $20-40 every month.

Even saving $20 per month on your cable bill works out to $240 a year. Think about all the recurring bills you have now that are negotiable.

“Internet, cable, cell phone, and auto insurance are service providers that are willing to adjust their pricing in order to keep customers,” says Birken. “It costs them far more to land a customer than it does to keep a current one happy.”

There are several ways to go about negotiating your bills, do some research on Google and you’ll find scripts and other tactics that can walk you through the process for specific providers.

Step 4. Cancel Unused Subscriptions

Subscriptions you set on auto-pay are easy to overlook. One easy thing you can do is set subscriptions so they don’t auto-renew. When you receive notification that your subscription is about to expire, that’ll give you a chance to gauge whether you need it or not.

For current subscriptions, look through your credit card and bank statements to determine which services you’re signed up for and decide whether you want to cancel or not.

Also identify services you’re doubling up on. Maybe one TV streaming platform is enough or you can drop the gym membership if you’re playing in a hockey league three nights a week.

Step 5. Check Your Bank Balance Daily

It’s easy to leave bills and bank statements unopened to avoid the pain of reality. If you’re serious about adding some slack to your budget, you need to check your bank balance on a regular basis.

I suggest setting a reminder on your cell phone to check once a day. Start extreme and get in the habit of checking daily so you’re more mindful of how much you’re spending and where your money goes every week.

The added benefit of daily checks is if you’re running low on funds, you can catch it before you get dinged on overdraft fees.

You’ll also see your spending habits and know if you have a particularly spendy month. If you’re spending a lot, you can make sure you slow down next month.

These are just a few of the ways you can lessen your financial worries without having to get a big raise or take on a new side hustle to up your income.

Be diligent about saving and keep a close eye on where your money goes and you’ll build enough slack to keep your mind at ease.

To a richer life,

Nilus Mattive

Nilus Mattive

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How to Avoid Shipwrecking Your Retirement

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Nilus MattiveDear Rich Lifer,

You’ve worked incredibly hard in order to save up to retire. The road to retirement can be a difficult one that requires both social and financial sacrifices in order to save enough for a comfortable retirement. This is why it’s crucial  to avoid as many financial  mistakes that  could compromise the security of your retirement plan as you can.

Not to fear! I’ll highlight some of the common mistakes people make with their retirement funds so that you can avoid these slip ups.

 

  1. Not Having a Plan

 

According to the Retirement Confidence Survey from the Employee Benefits Research Institute, 48% of workers haven’t calculated how much money they need to save for retirement. If you don’t have a plan, you are setting yourself up for failure. In fact, Fortune magazine published a study which showed that people with written plans end up with an average of five times the amount of money at retirement as compared to those with no written plansThere is no “one size fits all” when it comes to a financial plan, but experts suggest you aim to have enough saved up to in your retirement account and income from other sources to equal 80% of your income at the time you retire..

 

  1. Taking Social Security Too Early

 

Although you can start collecting Social Security Payments at age 62, your monthly checks are reduced if you start collecting benefits so soon. This could mean your benefits are reduced by almost 30%! To claim your full benefits you must sign up for Social Security at your full retirement age, which varies based on date of birth. So, for a worker eligible for a $1,000 monthly Social Security benefit at his full retirement age, claiming at age 62 reduces their monthly payment to $750 if his birth year is 1954 and if they were  born in 1957 it brings the amount down to $725.

Of course, there can be reasons to start collecting social security early, such as health concerns or an issue with your work status, but if you have the choice, make sure you think long and hard about when the right time is to start your collection.

 

  1. Cashing Out Before You Retire

 

It’s very tempting to dip into a sizable retirement fund, but as much as you tell yourself you will pay yourself back, once that money is gone it is usually gone for good. It is also important to remember that you have to pay income tax on any money you withdraw from an IRA. You also can face a 10% early withdrawal penalty if you withdraw money before the age 59 ½. If you absolutely must take out funds from your 401(k), there is a loophole you can use to take money out with no penalty. You can take penalty-free 401(k) withdrawals beginning at age 55, if you leave the job associated with that 401(k) account at age 55 or later.

 

  1. Spending Too Much Too Soon

 

When most people retire they are still living active and healthy lives. This will most likely result in wanting to spend money on activities such as trips, vacation homes, or boats. However, always make sure you are keeping track of your spending. If you live into your 90s you will still need resources in order to take care of yourself for your whole life.

 

  1. Playing the Stock Market

 

This one may seem a bit counterintuitive, but hear me out. Most people automate their 401(k) savings and investments while they are actively working so they can focus on other things. However, once retired some retirees think they are smart enough to take on Wall Street and take control of their own financial fate. My advice here may seem harsh, but unless you have experience with the market, or have someone who does know what they are doing, most likely you are not smart enough to beat Wall Street at it’s own game. Ultimately it may be  a much better idea to stick to a low-cost diversified ETF or mutual fund. Either way, if you decide to play the stock market, make sure it is with funds you are comfortable losing. Never invest money you can’t afford to lose.

 

  1. Failing to Account for Inflation

 

Right now the government states that inflation is barely 2%; however, there is no way to tell if, or when, higher inflation will occur. Inflation is often an issue for retirees because pensions may not be adjusted for inflation. Further, many jobs fail to offer a traditional pension plan. In fact, Only 17 percent of private industry employees were offered a traditional pension plan in 2018, according to Bureau of Labor Statistics data.

Social Security payments are adjusted for inflation annually; for example, recipients will get 2.8 percent bigger checks in 2019. However, this often only accounts for the increase in Medicare costs. So make sure you should keep a portion of your savings invested in assets that increase with inflation, such as real estate, stocks or rental properties.

  1. Failing to Prepare for Medical Expenses

 

Many retirees have Medicare which covers most medical bills, alongside supplemental insurance. However, many forget that you must also be prepared to pay for deductibles, uncovered procedures and copays. These costs can add up over time. In addition, some health expenses, such as dental, eyeglasses, or hearing aids, are not covered by Medicare. Putting aside funds for health expenses that are likely to occur later in life will save you a lot of headache down the road for unexpected medical expenses..

Also remember, most people become  eligible for Medicare during the months around their 65th birthday. If you don’t sign up for Medicare during this initial enrollment period, you could be charged a late enrollment penalty for as long as you have Medicare.

 

  1. Not Spending Enough

 

This may seem odd, but it is possible to be too cautious when it comes to spending your retirement savings. Of course it’s great to leave your kids an inheritance, but there is no reason to scrimp and save if you have enough money in the bank. Don’t put yourself through  Unnecessary financial hardships that could be easily avoided by being realistic about your spending plan.

I hope that these tips will be helpful to you as you move forward with your retirement plan! I know it can seem like a daunting task, but with the right research, and planning, you can retire comfortably, and live out your golden years the way you always pictured them.

To a richer life,

Nilus Mattive

Nilus Mattive

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The 7 Money Lessons You Should Already Know

This post The 7 Money Lessons You Should Already Know appeared first on Daily Reckoning.

If wealthy people have the same 24 hours in a day, and work just as hard as others, how do they acquire such incredible wealth?

This was the question George Samuel Clason set out to answer in his timeless classic The Richest Man in Babylon. Since 1926, Clason’s book has sold more than 2 million copies and has been translated into 26 different languages.

Set in ancient Babylon, supposedly the wealthiest city in the history of the world, the book dispenses financial advice through a collection of short stories. The Babylonian financial gurus offer simple and common sense advice to managing your money — advice that’s still relevant today. 

What I like most about this book is the simplicity of the storytelling. Although the book is not religious, the format and diction comes across as “Biblical,” making Clason’s advice seem infallible and sticky in your mind. While none of the lessons are likely to be earth-shattering, they cover the fundamentals of basic wealth building everyone should know.

Going back to the original question: Can wealth creation be taught?

Clason says it can and I have to agree. In the book, Clason tells the story of Arkad, a merchant and the richest man in Babylon. The king of Babylon asks Arkad to share his wisdom with 100 students in an effort to increase the collective wealth of the population.

Most of the people in Babylon are broke, or as Clason calls it, having a “lean purse.” To cure a lean purse, Clason teaches these seven timeless lessons through the story of Arkad:

1st Cure: Start Thy Purse to Fattening.

The streams of income flowing into your life at any given moment can be large. But the balance in your bank account will only grow if you’re disciplined enough to divert portions of those income streams.

Throughout the book, the “enlightened” characters stress saving at least ten percent of your income every month, without fail. Do this by setting aside ten percent before all other expenses are considered.

“But when I began to take out from my purse but nine parts of the ten I put in,” Arkad said, “it began to fatten. So will thine.”

2nd Cure: Control Thy Expenditures.

The amount of money you make is important, but it’s secondary to the degree to which you learn to control your expenses. Clason calls lifestyle inflation one of life’s “unusual truths.”

He writes, That what each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary.” You must budget and plan your expenses earnestly. Demand value for the dollars you spend and, “…confuse not the necessary expenses with thy desires.”

3rd Cure: Make Thy Gold Multiply.

Your wealth should extend beyond your income. Make sure all saved monies are kept in the highest-yield interest-bearing accounts available. If you have experience and the know-how, invest a portion of your money in the stock market. Let time and compounding interest go to work for you.

“A man’s wealth is not in the coins he carries in his purse; it is the income he buildeth. That is what thou desireth: an income that continueth to come whether thou work or travel.”

4th Cure: Guard Thy Treasures from Loss.

Forget about the talking heads giving you their “hot tips.” If you’re going to take risks and invest your money, make sure you know how to guard and protect your assets.

Know your risk aversion and understand the risks in your portfolio. Your savings control your future – treat them like it.

“The first sound principle of investment is security for thy principal. The penalty of risk is probable loss. Study carefully, before parting with thy treasure, each assurance that it may be safely reclaimed. Be not misled by thine own desires to make wealth rapidly.”

5th Cure: Make of Thy Dwelling a Profitable Investment.

Clason’s argument is that it makes more sense to make payments that will eventually become equity rather than giving money to a landlord. We don’t need to get into the renting vs. owning debate today.

What’s important here is you should always be looking to build assets and equity with your money. If you don’t know how to invest in rental properties, learn the basics and scale as the equity you build starts paying dividends.

“Thus come many blessings to the man who owneth his own house. And greatly will it reduce his cost of living, making available more of his earnings for pleasures and the gratification of his desires.”

6th Cure: Insure a Future Income.

The future cannot be known, but you can take steps to assure a certain level of financial safety is met. Clason doesn’t really dive into this that much in the book but there are multiple ways you can safeguard your wealth.

Whether it’s a simple savings plan, outside insurance, or a combination of both, you should always be insuring the wellness of yourself and your loved ones later in life.

“No man can afford not to insure a treasure for his old age and the protection of his family, no matter how prosperous his business and investments may be.”

7th Cure: Increase Thy Ability to Earn.

The last “cure” to a lean purse is education. You should be a constant learner, always acquiring new skills, experiences and confidence.

These are the things that will attract more wealth as you become a more valuable asset to your company or business. Consider starting a second, part-time job, or freelancing your skills in your spare time to earn extra income.

“The more of wisdom we know, the more we may earn. The man who seeks to learn more of his craft shall be richly rewarded. Cultivate thy own powers, study and become wiser, become more skillful, and act as to respect thyself.”

At under 100 pages, The Richest Man in Babylon is a quick read. If want a how-to guide, this book is not it.

The advice might seem at times oversimplified, but it’s the same advice you read, rehashed in today’s bestsellers. The truth is the fundamentals to building wealth never change.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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