sources of money for paying down, 43–47 Credit cards, 6, 17–35, 59, 133 APRs of. See Annual percentage rates author’s personal setup for, 28 automated bill paying through, 52, 130, 132, 137–38 automatic payment of accounts, 22–23, 39–40, 46, 47, 48, 132, 138 balance transfers and cash advances from, 32–33, 43–46 benefits of, 18, 29–31, 137, 139 cash-back, 20–21 closing accounts and, 32 disputing charges and, 30 e-mail notifications and, 138 emergencies and, 212 fees of, 19, 22, 23–25, 28, 40 increasing available credit on, 26–29, 37 keeping for long time, 26 missing payments on, 22, 23, 24 mistakes to avoid with, 32–35 new, getting, 19–21 number of, 21 paying only minimum payments on, 18, 38, 39 paying on time, 22–23 from retail stores, 33–34 reviewing bills for, 139 reward programs of, 21, 28, 29 secured, for people with no income, 20 tracking calls related to, 27 unsolicited offers for, 19–20, 109 Credit reports, 15, 16, 21, 48 Credit scores (FICO scores), 15, 16–17, 21, 48 managing credit cards and, 21, 22, 23, 24, 25, 28, 32, 33, 38 mortgages and, 16–17, 256–57 Credit unions, 57, 61 Credit utilization rate, 28–29, 32 Curve of Doing More Before Doing Less, 126–27
d Debit cards, 52, 53 discretionary spending and, 115–16 overdraft fees and, 50, 51, 110, 116 Debt: help for parents in, 223–24 paying off, 76, 82–83, 90, 220–21, 241 student loans and, 35–36, 220–21, 241 see also Credit card debt Direct deposit of paychecks, 58, 65, 129, 133, 136 Diversification, 166, 170, 172–75, 181 Dollarcost averaging, 197 Dow Jones Industrial Average, 168 e Earnings: increasing, 117–20 irregular, 139–41 unequal, living together and, 227–28 unexpected income and, 122–23 see also Raises; Salary 80/20 analysis, 109 85 Percent Solution, 8 Emergencies, raising money for, 211–12 Emergency fund, 216, 241, 253 Emigrant Direct, 51, 63 Envelope system, 115–17 Expense ratios, 156, 157, 176, 177, 178, 186, 187, 192 Experts. See Financial expertise f Federal Deposit Insurance Corporation (FDIC), 52 FICO scores. See Credit scores Fidelity, 187, 192
Financial advisers, 153–55 Financial expertise, 143–58 active vs. passive management and, 155–58 engineering a perfect stock-picking record and, 151 legendary investors and, 149 market-timing newsletters and, 145 personalfinance blogs and, 152 pundits’ and fund managers’ inability to predict market and, 2–3, 145–50, 165, 168 ratings of stocks and funds and, 148–52 529s, 217 Fixed costs, 104–6, 107, 130 Flexo, 44–45 401(k)s, 77–82, 176 amount to contribute to, 76, 77, 89 automatic contributions to, 79–80, 82, 129, 132, 136 common concerns about, 80–81 early withdrawal of money from, 80, 81, 85, 212 employer match and, 71, 76, 78, 79, 81, 82, 89 investing money in, 4, 81, 83, 185–86, 189, 198, 201, 209 paying credit card debt with, 46 setting up, 77, 82, 90 statistics on, 71, 72 switching jobs and, 80–81 tax-deferred growth of, 78, 80, 81, 210, 211, 221 Freelancing, 120, 139–41 Conscious Spending Plan and, 141 quarterly estimated tax payments and, 135 Friends, money issues with, 221 Frugality: cheapness vs., 94–96 prioritizing spending and, 97 Fund managers, poor performance of, 144–51, 155 Fun money, 107, 108, 130
g Get Rich Slowly, 152 Gifts, saving money for, 106–7 Girlfriends. See Boyfriends or girlfriends Global financial crisis of 2008, 3, 6 stock market declines and, 7, 70, 71–72, 178–79, 180–81, 189, 196, 202, 209 unraveling of credit and, 15, 19 Goldman Sachs, 146 Google Calendar, 134–35 Government bonds, 169, 191 Gym memberships, 100–101 h Hamm, Trent, 152, 240–41 Home, purchasing of, 250–59 determining if appropriate, 251–53, 255 as investment, 251, 253–54, 256 renting vs., 254 saving for down payment on, 108, 252, 257 tips for, 255–59 total cost of, 254, 255, 257–58 see also Mortgages Home equity line of credit (HELOC), 46 Homeowner’s insurance, 216, 259 HSBC Direct, 63 Hulbert, Mark, 179 i Impulse buying, 135 Income. See Earnings; Raises; Salary Index funds, 155, 156–57, 167, 177–80, 185, 186, 197, 201–2, 209, 211, 212, 258 buying into, 194–95, 198
choosing, 191–94, 198 constructing portfolio of, 188–95 expense ratios of, 157, 178, 192 rebalancing portfolio and, 180, 181, 189, 203–5, 206–7, 209 Swensen allocation model and, 189–91, 192, 195 Inflation, 7, 53, 70, 170, 240, 253, 256 Information glut, 4–5 ING Direct, 51, 62–63 Insurance: car, 18, 31, 248 homeowner’s, 216, 259 life, 216–17 Interest: on bank accounts, 51, 52, 53, 54, 59, 60, 61 on car loans, 248 on mortgages, tax deduction for, 256 on student loans, 220, 221 see also Annual percentage rates International equities, 157, 190, 203 Investing, 9, 11, 12, 69–90, 109, 143–215 active vs. passive management and, 155–58 in art, 182 asset allocation and, 166, 170–72, 175, 180–81, 183–85, 189–91, 202, 208– 9 automatic, 162–64, 202–3 concerns about risks of, 164 Conscious Spending Plan and, 106 determining your style of, 160–61, 198 diversification and, 166, 170, 172–75, 181 dollarcost averaging and, 197 five systematic steps for, 76–77 401(k)s and, 4, 81, 83, 185–86, 189, 198, 201, 209 high-interest savings accounts vs., 69–70 high-risk, high-potential-for-reward, 183 increasing monthly contribution and, 200–201
knowing when to sell and, 211–15 letting your parents manage your accounts and, 222–23 maintaining system of, 200–218 market downturns and, 163 myth of financial expertise and, 143–58 nonretirement accounts and, 77, 78, 79 paying off student loans vs., 220–21 Pyramid of Investing Options and, 167 in real estate, 182, 202, 251, 253–54, 256 rebalancing portfolio and, 180, 181, 189, 203–5, 206–7, 209 Roth IRAs and, 83, 186–95, 198, 209 for specific goal, 215 starting early and, 4–5 summary of advantages of, 81 tax concerns and, 205, 209, 210–11, 215 time to double money and, 187 underperformance and, 212–15 young people’s poor attitudes and behaviors and, 71–75 in your own career, 77 see also Bonds; Index funds; Lifecycle funds; Mutual funds; Stocks Investment brokerage accounts: automatic transfers to, 87, 88, 89, 90, 129, 132, 137, 187, 188, 195 choosing, 86–88 keeping track of, 88 IRAs, 81, 141, 209 see also Roth IRAs j Jenkins, Richard, 107 JLP at AllFinancialMatters, 152 Job offers: multiple, salary negotiations and, 235, 238, 239 negotiating, 236–37 l
Ladder of Personal Finance, 76–77 Late fees, of credit cards, 22, 23, 24 Leasing cars, 246 Leverage, 256 Lifecycle funds (target-date funds), 167, 180–85, 186, 189, 203, 205, 211 buying into, 188, 198 choosing, 187–88, 198 Life insurance, 216–17 Loads, of mutual funds, 156, 177 Lynch, Peter, 149 m Malkiel, Burton G., 150 Materialism, 74 Media, personal advice and, 5–6 Millionaires, behaviors of, 73–74 Money-market funds, 4, 170, 186 Moody’s, 150 Morningstar, 148–50, 152 Mortgages, 50, 216, 253, 255, 258 credit scores and, 16–17, 256–57 paying extra on, 77, 258 tax deductions and, 256 Mutual funds, 167, 176–77, 180 active vs. passive management and, 155–58, 177, 178 fees of, 155–56, 157, 163, 176, 177, 178, 179 managers’ inability to predict or beat market and, 144–51, 155, 177, 178 ratings of, 148–50 see also Index funds n Negotiating: with car dealers, 248–49 for job offers, 236–37
for salary in new job, 120, 234–44 Newsletters, market-timing, 147 “Next $100” concept, 128 Nickel (of www.fivecentnickel.com), 208–9 o O’Neal, Edward S., 158 Online banks, 51 checking accounts of, 62, 68 high-interest savings accounts of, 51–52, 53, 54, 59, 62–63, 65, 68, 69–70 Online shopping, 135 Overdrafts, 50–51, 65–67, 110, 116 p Parents, 222–24 managing their kids’ money, 222–23 in severe debt, helping, 223–24 Partners. See Boyfriends or girlfriends Paychecks: automatic 401(k) contributions and, 79–80, 82, 129, 132, 136 direct deposit of, 58, 65, 129, 133, 136 PBwiki, 88, 131 Philanthropy, 140, 217–18 Pyramid of Investing Options, 167 q Quicken, 134 r Raises: negotiating, 117–20 uses for, 122–23, 240–41 Rate-chasing, 34, 60 Real estate:
as investment, 182, 202, 251, 253–54, 256 see also Home, purchasing of Real estate funds (REITs), 190 Rebalancing portfolio, 180, 181, 189, 203–5, 206–7, 209 Rent, paying, 132–33 Renting vs. buying home, 202, 252, 254 Retail stores, credit cards from, 33–34 Retirement savings, 73, 107 see also 401(k)s; Roth IRAs Reward programs, of credit cards, 21, 28, 29 “Rich,” meaning of, 10, 219, 260 Risk tolerance, 196–97 Roth, J. D., 152, 196–97 Roth IRAs, 76, 81, 83–89 automatic contributions to, 87, 88, 89, 90, 129, 132, 137, 187, 188, 195 choosing discount-brokerage investment account for, 86–88 early withdrawal of money from, 84, 85, 212 investing money in, 83, 186–95, 198, 209 restrictions on, 84–85 setting up, 85–86, 88, 90 tax benefits of, 83–84, 210, 211, 221 Rule of 72, 187 s Salary: annual, computing from hourly rate, 119 negotiating, 120, 234–44 see also Earnings; Raises S&P 500, 168 Savings accounts, 53–54, 68, 85 automatic transfers to, 129, 132, 136–37 best options for, 62–63 FDIC insurance for, 52 finding perfect setup for, 56–57
interest on, 51, 53, 54, 59, 60, 61 online, 51–52, 53, 54, 59, 62–63, 65, 68, 69–70 raises and, 241 set up for specific goals, 113, 129 sifting through options for, 57–61 Savings goals, 112–13, 134 automatic transfers and, 129 Conscious Spending Plan and, 106–8, 200–201 down payment on home and, 108, 252, 257 freelancing and, 141 increasing amount of, 200–201 Jenkins’s 60 Percent Solution and, 107 large purchases and, 259–60 lifecycle and index fund minimums and, 183, 194–95 with partner, 227, 228–29 Schwab, 87, 187, 192 checking accounts of, 62, 68, 115–16 Schwartz, Barry, 4 Sector funds, 183 Selling investments, 211–15 Selling valuables, 212 SEP-IRAs, 141 Simon, W. Scott, 179 Simple Dollar, The, 152 60 Percent Solution, 107 Snowball method, 41–42 Solin, Daniel, 148, 158 Solo 401(k)s, 141 Spending, 2, 46–47, 91–124, 140 cheapness vs. frugality and, 94–96 of friends, judging, 99 planning and, 93–94, 103–24. See also Conscious Spending Plan raises and, 240–41 subscriptions vs. Á la Carte Method and, 100–101 talking to your partner about, 227, 228–29
tracking, 130, 137 on what you love, 9, 97–103 Stock market, 75, 253 annualized returns of, 70, 171 declines in (2008), 7, 70, 71–72, 178–79, 180–81, 189, 196, 202, 209 Stock options, 242 Stocks, 167, 168, 171, 180 asset allocation and, 166, 170–72, 174, 175, 180–81, 183–85, 190–91 categories of, 173 diversification and, 166, 170, 172–75, 181 picking, 165–66, 185, 189 ratings of, 148–50 underperforming, 212–15 see also Index funds; Mutual funds Student loans, 35–36, 241 investing vs. paying off, 220–21 Subscriptions, 100–101, 111, 130 Survivorship bias, 150 Swensen, David, 149, 189–91, 192, 195 t Target-date funds. See Lifecycle funds Taxes: 401(k)s and, 78, 186, 210, 211, 221 freelancing and, 135 investment decisions and, 205, 209, 210–11, 215 mortgage deduction and, 256 Roth IRAs and, 83–84, 210, 211, 221 stock trading and, 146, 178, 189 TIAA-CREF, 187 Trapani, Gina, 134–35 Treasury inflation-protected securities (TIPS), 191 Trip-cancellation insurance, 31 T. Rowe Price, 87, 184, 187, 192
u Unexpected expenses, 121, 122 v Vanguard, 87, 157, 171, 177–78, 184, 187, 188, 192, 194 Volatility, 165–66 w Wang, Jim, 112–13 Warranty extensions, 18, 31 Weddings, 37, 229–34 dealing with high cost of, 230–32 reducing costs of, 232–34 saving for, 107, 231 Wells Fargo, 53, 59, 65–67, 116
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Table of Contents Cover Page Title Page Dedication Copyright Page Introduction: Would You Rather be Sexy or Rich? CHAPTER 1 Optimize Your Credit Cards CHAPTER 2 Beat The Banks CHAPTER 3 Get Ready To Invest CHAPTER 4 Conscious Spending CHAPTER 5 Save While Sleeping CHAPTER 6 The Myth Of Financial Expertise CHAPTER 7 Investing Isn’t Only For Rich People CHAPTER 8 Easy Maintenance CHAPTER 9 A Rich Life Index