Tag Archives: Investing

10 Steps to a DIY Financial Plan | Charles Schwab

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  • Key Points
      • A financial plan isn’t only for the wealthy and it doesn’t have to cost a penny.
      No matter how much money you have, you can start with a DIY financial plan that will set you up for future success.
      With a good foundation in place, you can feel more confident about your finances and, when the time comes that you might need the help of a professional, you’ll be that much farther ahead.

    Did you know that 78 percent of people with a financial plan pay their bills on time and save each month vs. only 38 percent of people who don’t have a plan? That’s a pretty powerful statistic if you ask me. Or would it surprise you to learn that 68 percent of planners have an emergency fund while only 26 percent of non-planners are financially prepared to cover an unexpected cost?

    When I hear stats like these that were recently reported in a Schwab survey, it just reinforces my belief that everyone—no matter their financial situation—can benefit from a financial plan. So why aren’t more people planners? Usually it’s because either they don’t think they have enough money or they think a financial plan costs too much. But, as I’ve said many times, neither is the case.

    In fact, you can map out your own financial plan. That way, not only won’t it cost you a penny, but you stand to reap the long-term benefits. Here’s how to get started mapping out your financial future with a DIY plan.
    — Read on www.schwab.com/resource-center/insights/content/10-steps-to-diy-financial-plan

    Accumulating Wealth

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    The wealthy accumulate wealth by being frugal

    Frugality – a commitment to saving, spending less, and sticking to a budget – is a key factor in accumulating wealth, according to DataPoints’ founder, Dr. Sarah Stanley Fallaw.  Dr. Fallaw is also the co-authored “The Next Millionaire Next Door: Enduring Strategies for Building Wealth“.

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    In an University of Georgia’s financial planning performance lab research paper examining the topic of “what does it take to build wealth over time”, the key findings were that those who were successful at accumulating wealth frequently exhibited the following behaviors:

    • Spending less than they earned
    • Having a long-term outlook on their financial future
    • Maintaining sound financial records
    • Keeping up with financial markets
    • Saving regardless of income level

    Essentially, her research shows that anyone can accumulate wealth if they know the right steps to take. And, if individuals possess a certain set of characteristics, they may be more likely to become wealthy, according to Dr. Fallaw, who is also director of research for the Affluent Market Institute.

    In her research, she found that six behaviours, which she called “wealth factors,” are related to net worth potential, regardless of age or income:

    • Frugality, or a commitment to saving, spending less, and sticking to a budget
    • Confidence in financial management, investing, and household leadership
    • Responsibility, which involves accepting your role in financial outcomes and believing that luck plays little role
    • Planning, or setting goals for your financial future
    • Focus on seeing tasks through to their completion without being distracted
    • Social indifference, or not succumbing to social pressure to buy the latest thing

    In order to accumulate wealth, it is imperative for investors to understand that their underlying financial behavior and habits matter significantly. DataPoints research supports the notion that, “…individuals who successfully accumulate wealth often engage in basic and identifiable productive financial management behaviors.” And, they are often “socially indifferent” to the latest “must haves” and they resist the “lifestyle creep,” which is the tendency to spend more whenever they earn more.

    To properly build wealth, financial experts recommend saving 20% of your income and living off the remaining 80%. Many wealthy individuals, who religiously follow this principle, espoused the freedom that comes with spending and living below their means.

    Reference

    1. Grable, J. E., Kruger, M., & Fallaw, S. S. (2017). An Assessment of Wealth Accumulation Tasks and Behaviors. Journal of Financial Service Professionals, 71(1), 55-70.
    2. https://www.datapoints.com/2017/04/06/tasks-of-wealth-accumulators/
    3. https://apple.news/A4YIQ2ahsSKqzUG3rh1PmTQ

    3 mistakes to avoid during a market downturn | Vanguard

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    Following a decade-plus of generally rising markets, a meaningful downturn in stocks may finally be here. We don’t know how bad it will be or how long it will last.

    We do know that some investors will make costly mistakes before prices rise again. Here are 3 common errors worth avoiding.
    — Read on investornews.vanguard/3-mistakes-to-avoid-during-a-market-downturn/

    10 Money Lessons He Wished Heard — or Listened to — When Younger | MarketWatch

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    Updated: February 23, 2020

    Jonathan Clements, author of “From Here to Financial Happiness” and “How to Think About Money,” and editor of HumbleDollar.com., is the former personal-finance columnist for The Wall Street Journal. He has devoted his entire adult life to learning about money.

    That might sound like cruel-and-unusual punishment, but he has mostly enjoyed it. For more than three decades, he has spent his days perusing the business pages, reading finance books, scanning academic studies and talking to countless folks about their finances.

    Yet, despite this intense financial education, it took him a decade or more to learn many of life’s most important money lessons and, indeed, some key insights have only come to him in recent years.

    Here are 10 things he wished he’d been told in his 20s—or told more loudly, so he actually listened:

    — Read on www.marketwatch.com/story/10-money-lessons-i-wish-id-listened-to-when-i-was-younger-2020-02-12

    1. A small home is the key to a big portfolio. Financially, it turned out to be one of the smartest things he had ever done, because it allowed him to save great gobs of money. That’s clear to him in retrospect. But he wished he’d known it was a smart move at the time, because he wouldn’t have wasted so many hours wondering whether he should have bought a larger place.

    2. Debts are negative bonds. From his first month as a homeowner, he sent in extra money with his mortgage payment, so he could pay off the loan more quickly. But it was only later that he came to view his mortgage as a negative bond—one that was costing him dearly. Indeed, paying off debt almost always garners a higher after-tax return than you can earn by investing in high-quality bonds.

    3. Watching the market and your portfolio doesn’t improve performance. This has been another huge time waster. It’s a bad habit he belatedly trying to break.

    4. Thirty years from now, you’ll wish you’d invested more in stocks. Yes, over five or even 10 years, there’s some chance you’ll lose money in the stock market. But over 30 years? It’s highly likely you’ll notch handsome gains, especially if you’re broadly diversified and regularly adding new money to your portfolio in good times and bad.

    5. Nobody knows squat about short-term investment performance. One of the downsides of following the financial news is that you hear all kinds of smart, articulate experts offering eloquent predictions of plummeting share prices and skyrocketing interest rates that—needless to say—turn out to be hopelessly, pathetically wrong. In his early days as an investor, this was, alas, the sort of garbage that would give him pause.

    6. Put retirement first. Buying a house or sending your kids to college shouldn’t be your top goal. Instead, retirement should be. It’s so expensive to retire that, if you don’t save at least a modest sum in your 20s, the math quickly becomes awfully tough—and you’ll need a huge savings rate to amass the nest egg you need.

    7. You’ll end up treasuring almost nothing you buy. Over the years, he had had fleeting desires for all kinds of material goods. Most of the stuff he purchased has since been thrown away. This is an area where millennials seem far wiser than us baby boomers. They’re much more focused on experiences than possessions—a wise use of money, says happiness research.

    8. Work is so much more enjoyable when you work for yourself. These days, he earn just a fraction of what he made during my six years on Wall Street, but he is having so much more fun. No meetings to attend. No employee reviews. No worries about getting to the office on time or leaving too early. he is working harder today than he ever have. But it doesn’t feel like work—because it’s his choice and it’s work he is passionate about.

    9. Will our future self approve? As we make decisions today, he think this is a hugely powerful question to ask—and yet it’s only in recent years that he had learned to ask it.

    When we opt not to save today, we’re expecting our future self to make up the shortfall. When we take on debt, we’re expecting our future self to repay the money borrowed. When we buy things today of lasting value, we’re expecting our future self to like what we purchase.

    Pondering our future self doesn’t just improve financial decisions. It can also help us to make smarter choices about eating, drinking, exercising and more.

    10. Relax, things will work out. As he watch his son, daughter and son-in-law wrestle with early adult life, he glimpse some of the anxiety that he suffered in my 20s and 30s.

    When you’re starting out, there’s so much uncertainty — what sort of career you’ll have, how financial markets will perform, what misfortunes will befall you. And there will be misfortunes. he’d had my fair share.

    But if you regularly take the right steps—work hard, save part of every paycheck, resist the siren song of get-rich-quick schemes—good things should happen. It isn’t guaranteed. But it’s highly likely. So, for goodness’ sake, fret less about the distant future, and focus more on doing the right things each and every day.

    You can follow Jonathan Clements on Twitter @ClementsMoney and on Facebook at Jonathan Clements Money Guide.

    Uncertain Financial Markets

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    “Don’t gamble. Take all your savings and buy some good stock and hold it till it goes up; then sell it. If it don’t go up, don’t buy it.” Will Rogers

    Since the financial crisis of 2008-2009, the U.S. stock market has been on a long-term uptrend. In the crisis’ aftermath, a nearly 11-year bull rally emerged from its ruins becoming the longest-ever uptrend in Wall Street history.

    And, the American economy is equally robust as consumer spending remains strong and as the unemployment rate (3.5%) remains at the lowest in 50 years. Despite low employment, Federal Fund interest rates still sit near historical lows and the 10-year Treasury yields only 1.8%.

    Financial Crisis

    Bringing back painful financial memories for investors, the financial crisis of 2008-2009 wreaked havoc on the stock market. During the crisis, the S&P 500 index (SPX) lost 38.5% of its value in 2008, making it the worst year since the nadir of the Great Recession in 1931.

    Today, many economists and financial industry pundits conclude that global economies will face an increasingly uncertain and potentially volatile future. Those future concerns range a gambit of political, geopolitical, economic and socio-political issues.

    The uncertainties and concerns include the upcoming U.S. presidential elections, potential turmoil in the Middle East, growing fear regarding cross border spread of the Novel Corona virus, and the growth concerns regarding the economies of the rest of the world economies.

    Investing in an Uncertain Environment

    “Never under estimate the man who over estimates himself…he may not be wrong all the time.” Charlie Munger

    When it comes to investing in an uncertain environment, it is difficult to know what actions to take. But, nobody knows with certainty what is going to happen next in the markets or can predict the direction with certainty of the global economy. Despite the many self proclaimed stock picking experts who promote their ability to forecast the markets and abilities to select the next Amazon-like stock, it important to always remember that no one knows what will happen in or can accurately forecast the future.

    Recently, Charlie Munger, Vice Chairman of Berkshire Hathaway, shared his thoughts about investing in general and regarding Elon Musk and Tesla, specifically. He commented that Elon is “peculiar and he may overestimate himself, but he may not be wrong all the time…”.

    Additionally, Munger commented that he “…would never buy it [Tesla stock], and [he] would never sell it short.” Prudent investors would be wise to heed Munger’s advice and be concerned not only about potential rewards but, more importantly, also concerned about potential risks investing in hot, high flying stocks.

    In Munger’s view, there exist too much “wretched excess” in the market and investors are taking on too much unnecessary risk. He worries that that there are dark clouds looming on the horizon. And, he believes markets and investors are ill-prepared to weather the coming market “trouble”.

    References:

    1. https://www.marketwatch.com/story/wretched-excess-means-theres-lots-of-troubles-coming-warns-berkshire-hathaways-charlie-munger-2020-02-12

    Dividends Income Strategy

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    “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” John Rockefeller, founder of the Standard Oil Company

    For retirees, dividends are a source for cash flow and a great form of income security in their post work years. For smart investors, dividend investments represent one of the closest things they can find to guaranteed income and possible capital appreciation.

    John D. Rockefeller, founder of the Standard Oil Company and the world’s first billionaire, was a vocal advocate of dividends. He once commented that, “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”

    Dividend investing provides a steady income stream from the distributions of a company’s earnings to its shareholders. It works well for investors looking for long-term growth and for individuals preparing for or living in retirements who have a lower risk tolerance.

    Dividend stocks are companies that pay shareholders a portion of earnings, or dividend, on a regular basis. These payments are funded by profits that a company generates but doesn’t need to retain to reinvest in the business. Dividend stocks are a major factor in the total return of the stock market. About 3,000 U.S. stocks pay a dividend at any given time.

    Divdend income investor.

    Dividend paying stocks are major sources of consistent income for investors. They can create income and wealth when returns from the equity market are highly volatile or at risk. Essentially, dividend–paying stocks have become an attractive alternative to bonds for investors looking for a reliable stream of investment income.

    Companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by providing payouts or sizable yields on a regular basis. If you’re looking to build wealth or generate income, dividend stocks are pretty hard to beat.

    Dividend-focused stocks do not offer much price appreciation in strong bull markets. However, they do offer a steady stream of income along with the potential of capital gains. These are the major sources of consistent income for investors to create wealth when returns from the equity market are at risk.

    Companies that pay out dividends generally act as a hedge against economic uncertainty or downturns. They tend to provide downside protection by offering payouts or sizable yields on a regular basis.

    Dividend stocks offer solid returns in an era of ultralow bond yields and also hold the promise of price appreciation. The S&P 500 index’s yield was recently around 1.9%, about even with that of the 10-year U.S. Treasury note.

    Dividends also offer a number of advantages beyond income, one being that qualified dividend income is taxed as a capital gain and at a lower rate than ordinary income receives. The top federal capital-gains tax rate is 23.8%. Payouts can also help buffer volatility in tumultuous markets, providing returns even during a market decline.

    Dividend stocks can reduce the amount of volatility or beta in a portfolio. Essentially, dividend investing is boring, and lacks the thrill of a small cap tech stock with exponential revenue growth and avoids the volatility of small caps.

    Dividend Payout Date

    Getting a regular income from the companies investors own are a testament to their discipline, the health of their business, and their confidence in its future. Companies will announce when their dividend will be paid, the amount of the dividend, and the ex-dividend date. Investors must own the stock by the ex-dividend date to receive the dividend.

    The ex-dividend date is extremely important to investors: Investors must own the stock by that date to receive the dividend. Investors who purchase the stock after the ex-dividend date will not be eligible to receive the dividend. Investors who sell the stock after the ex-dividend date are still entitled to receive the dividend, because they owned the shares as of the ex-dividend date.

    Dividend Payout Ratio

    Dividends are typically paid from company earnings, but not all dividends are created equally. If a company pays more in dividends than it earned, then the dividend might become unsustainable. Comparing dividend payments to a company’s net profit after tax is a simple way of reality-checking whether a dividend is sustainable.

    Unless there are extenuating circumstances, from the perspective of an investor who hopes to own the company for many years, a dividend payout ratio of above 100% is definitely a concern.

    Another important check is to see if the free cash flow generated is sufficient to pay the dividend, which suggests dividends will be well covered by cash generated by the business and affordable from a cash perspective.

    Still, if the company repeatedly paid a dividend greater than its profits and cash flow, investors should be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

    High Dividend Yield

    A high dividend yield strategy does have several drawbacks. Those disadvantages include vulnerability to rising interest rates and the potential exposure to financially challenged companies that may have trouble maintaining and growing dividends. Since the stock prices of firms with stable cash flows tend to be more sensitive to fluctuations in interest rates than those with more-volatile cash flow streams.

    With lower interest rates and the stock market trading at near all-time highs, the high dividend paying stocks and ETFs could be excellent picks at present. Dividend ETFs provide investors with a diversified portfolio of dividend-paying stocks that allows you to invest and collect income without having to do nearly the amount of research you’d need before buying a large number of the individual components.

    Another source of income are preferred stocks. Preferred stocks are known for offering higher dividends than their common stock counterparts. In fact, they can be viewed as a safe haven in case of a market pullback as the S&P 500 is up nearly 24% so far this year.

    Stocks with a history of above-average dividend yields typically can be a sign of companies with deteriorating business fundamentals. While that can be the case in certain situations, there are many companies with strong underlying fundamentals that are some of America’s largest and most stable companies.

    Bottom line, don’t fall for a high dividend yield in a vacuum. It may not paint an accurate picture of the stock’s potential. Instead, look at the company’s fundamentals and determine how dividend payouts change over time. That may indicate a company’s financially stability. Also, it may illustrate long-term dividend potential.

    Dividend-Growth Strategies

    An investor should not buy dividend stocks just for the sake of dividends to generate income…they should also be seeking capital appreciation to keep up with inflation and mitigate the risk of the long term loss of buying power of the dollar, as well. The most successful dividend investors seek dividend paying stocks that have the potential to grow their dividend each year.

    Dividend payers with a history of dividend growth over a prolonged stretch (10 years’ worth of dividend hikes) tend to be highly profitable, financially healthy businesses. While dividend growers prioritize delivering cash to their shareholders, they’re balancing that against investing in their own businesses. Such firms have often held up better than the broad market, as well as the universe of high-yielding stocks, in periods of economic and market weakness.

    During the market downturn from early October 2007 through early March 2009, dividend appreciation stocks, such as Dividend Aristocrats, held up better as a category versus the broad market and versus high dividend yield benchmark.

    Dividend-growth strategies also look appealing from the standpoint of inflation protection, in that income-focused investors receive a little “raise” when a company increases its dividend. Dividend-growth stocks will tend to hold up better in a period of rising bond yields than high-yielding stocks. That’s because dividend-growth stocks’ yields are more modest to begin with, so they’re less vulnerable to being swapped out when higher-yielding bonds come online.

    The dependability of dividends is a big reason to consider dividends when buying stocks. Not every stock pay a dividend, but a steady, dependable dividend stream can provide a nice boost to a portfolio’s return.

    Sources:

    1. https://finance.yahoo.com/news/dividends-capital-gains-differ-195903726.html
    2. https://www.fidelity.com/learning-center/investment-products/stocks/all-about-dividends/why-dividends-matter

    Passive Investing

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    The ‘father of passive investing’, Burton Malkiel, Princeton University professor emeritus of economics and author of the famous investing book, “A Random Walk Down Wall Street“, believes that most investors should invest passively. This idea is embodied by exchange-traded funds that track major stock market indexes, such as the S&P 500, and passive mutual funds.

    Malkiel’s theory is that investors are better off buying a broad universe of stocks, index funds, and minimizing fees rather than paying an active manager who may not beat the market. Index funds, also known as passive funds, are structured to invest in the same securities that make up a given index, and seek to match the performance of the index they track, whether positive or negative. As the name implies, no manager or management team actively picks stocks or makes buy and sell decisions.

    In contrast, active funds attempt to beat whichever index serves as the fund’s benchmark, although — and this is important — there is no guarantee they will do so. Active managers conduct research, closely monitor market trends and employ a variety of trading strategies to achieve return. But this active involvement comes at a price. Actively-managed funds typically have significantly higher fees and expenses.

    A 2016 study by S&P Dow Jones Indices showed that about 90 percent of active stock managers failed to beat their index benchmark targets over the previous one-year, five-year and 10-year periods; fees explain a significant part of that under performance.

    Vanguard’s John ‘Jack’ Bogle – Stay the Course

    Many industry leaders, including Vanguard’s John ‘Jack’ Bogle, who pioneered index funds, were influenced by Malkiel’s theory on passive investing.

    John ‘Jack’ Bogle

    Jack Bogle, who founded the pioneering investment firm Vanguard in 1975, is widely regarded as the father of index investing. Index investing is a strategy that functions best when investors sit on their hands for decades. This strategy is far removed from the thrill and excitement of trying to beat the market by picking individual stocks — but one that research says works.

    Over the decades, Jack Bogle’s philosophy has acquired a plethora of devout investors whom follow his teachings. His followers, known as the Bogleheads, embrace long-term commitments to broad, boring investments. Bogleheads choose investments that are low-cost index mutual funds and exchange-traded funds (ETFs).

    These low-cost index mutual funds and ETFs are designed to mimic their respective benchmark stock or bond markets, not beat them. Bogleheads’ core belief— stay the course — is so essential to their investment strategy. Bogleheads’ key tips for beginners are:

    Early investing is better than perfect investing

    Don’t get overwhelmed with your options and let decision paralysis keep you from investing sooner. The magic of compound interest is where your money grows that much faster because you keep earning interest on your interest. To illustrate the strategy, a person who starts investing small amounts in their early 20s will be better off than someone who starts later and invests larger amounts later to catch up.

    Stay in the market; Don’t try to time the market

    For Bogleheads, the best way to invest is through passively-managed index funds like those pioneered by Vanguard. That way, while your investment will rise and fall with the market, you’re not a victim to any particular company’s misfortune.

    Investing in passively-managed funds is a core Boglehead tenet — and research shows the strategy is a sound one. The majority of actively-managed funds have underperformed the stock market for nearly a decade, according to an annual S&P Dow Jones Indices report. In other words, trying to pick winners doesn’t work; simply riding out the market’s ups and downs does.

    Don’t peek; Set it and forget it

    It is advised that investors check their investments a few times a year—but they shouldn’t react to market volatility or short-term corrections. The key to passive investing is to “set it and forget it”— that is, once you know what you’re investing in, leave it alone, let the market do its thing and be patient.

    Over the past decade, passive investment has been closing the gap on active management. Yet, the ‘father of passive investing’ believes there are still too many investors who are not taking advantage of passive investing. Malkiel believes strongly that “…[passive investing] works. It’s the best thing for individual investors to do for the core of their portfolio.”

    Keep it simple

    In a nutshell, the best approach is a simple, low cost, diversified portfolio of index funds that matches the market return. Don’t try to beat the market—ignore hot tips and check your returns infrequently.

    References:

      https://www.cnbc.com/2020/01/02/burton-malkiel-says-his-passive-investing-idea-was-called-garbage.html
      https://money.com/theres-a-super-secret-conference-dedicated-to-investing-legend-jack-bogle-heres-what-its-like-on-the-inside/
      https://us.spindices.com/documents/spiva/spiva-us-year-end-2016.pdf

    U.S. Markets Overreacting

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    Updated:  Monday, 2/3/2020 at 8:25 am

    We never want to downplay the threat posed by the Novel Coronavirus in China and globally. The highly contagious coronavirus is a pneumonia-causing illness that infects an individual’s respiratory tract. It is now responsible for a reported 360 deaths in China as of Monday morning and 17,000 infections, according to Chinese officials and official figures from the World Health Organization. Furthermore, it can be confidently assumed that the Chinese Communist government has drastically under reported the magnitude of the spread and the total number of its citizens effected by the virus.

    Consequently, the U.S.represents a relative virgin population for the Novel Coronavirus. Americans have little to no immunity to this strain of virus from previous spreads or vaccination.  Thus it does pose a potential temporary risk and impact to the U.S. economy.

    Subsequently, the World Health Organization has declared the fast-spreading coronavirus a global health emergency — a rare designation that should help to contain the spread and outbreak.

    On Friday, the Federal government decided to quarantine Americans arriving on U.S. soil from Wuhan and the Guangdong province in southern China. Additionally, the U.S. initiated measures to screen passengers arriving from all other regions of China. Those found without symptoms are released and asked to self isolate themselves for the fourteen days, the prescribed incubation period for the Coronavirus.

    U.S. Influenza Season

    However, most Americans are not aware that the CDC estimates that there has been 25 million cases of seasonal influenza in the U.S., 250K hospitalizations and 20,000 deaths reported. This is not abnormal for influenza season in the U.S. Moreover, influenza has been assessed as widespread in Puerto Rico and in 49 states.

    Image if the media chose to report these statistics like the quantity of seasonal influenza cases, hospitalizations and deaths in the U.S. every hour and had quasi-infectious disease experts on-air to pontificate about the potential severity and potential deaths. Additionally, image if they had their reporters stoke fear by wearing a nurse’s mask to cover their respiratory system and displaying concern in their voices while reporting live from a mall in Chicago.

    More than likely, the market would have been impacted by the over reporting of news.

    Conclusion

    Bottom line, the market has been  freaking out over the coronavirus outbreak, which doesn’t pose a threat to any long-term investor, as long as they remain calm and disciplined.  The media’s coverage and reporting of the coronavirus might be best described as over-dramatic. The effect has been the market sell off and market volatility. Additionally, the media appears to be now over hyping the preventive measure U.S. officials have taken to prevent the spread of the highly contagious virus on U.S. soil.

    Friday’s U.S. stock market two percent sell off was definitely an overreaction to the over-reporting and over-hyping by the U.S. entertainment media.

    References:

    1. https://www.cdc.gov/flu/weekly/index.htm#ILIActivityMap

    10 Rules for Financial Success – Barron’s

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    “Wealth isn’t about how much money you make – wealth is about how much money you save and invest.”

    The true measure of financial success isn’t how much money you make—it’s how much you keep. That’s a function of how well you’re able to save money, protect it, and invest it over the long term.

    Sadly, most Americans are lousy at this.

    Even after a decade of steady economic expansion and record-breaking stock markets, almost two-thirds of earners would be hard-pressed to cover an unexpected $1,000 expense—a medical bill, car repair, or busted furnace—and more than 75% don’t save enough or invest skillfully enough to meet modest long-term retirement goals, according to Bankrate.com.

    Even wealthy families aren’t getting it right: 70% lose wealth by their second generation, and 90% by their third. “Shirtsleeves to shirtsleeves in three generations,” as a saying often attributed to Andrew Carnegie goes.

    What’s at the root of these bleak data? Stagnant salaries amid rising costs of health care, education, housing, and other big-ticket necessities have put a major strain on folks of all ages. But advisors point to a deeper issue: an almost universal lack of financial literacy.

    “This is a much bigger problem than most people are aware of,” says Spuds Powell, managing director at Kayne Anderson Rudnick Wealth Management in Los Angeles. “I’m constantly amazed at how common it is for clients, even sophisticated ones, to be lacking in financial literacy.”

    The ten rules for financial success are:

    1. Set goals
    2. Know what you’ve got and know what you need
    3. Save systematically
    4. Invest in your retirement plan
    5. Invest for growth
    6. Avoid bad debt
    7. Don’t overpay for anything
    8. Protect yourself
    9. Keep it simple
    10. Seek unbiased advice

    — Read on www.barrons.com/articles/10-rules-for-financial-success-51558742435

    Personal Finance: 4 Ways to Save Money and Improve Your Money Management Skills | Brian Tracy

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    “Believe you’re the person you must become…”

    Virtually every single person in America who is financially independent started off with nothing. But they acquired good personal finance habits, learned how to save money, and improve their money management skills, eventually becoming some of the most successful people in their communities. And anything that anyone else has done, you can probably do as well.

    Save Money By Using A Long Time Perspective

    To save money and become financially independent you must begin living on less than you earn even if you are deeply in debt. One of the most important guarantors of your personal finance success is called “Long time perspective.”

    Take the long view.

    Develop a long term attitude toward yourself and your financial future and begin thinking in terms of where you want to be in five and ten years. This long-time perspective will have an inordinate impact on your personal finance habits and money management skills in the present, and will help you save money over the years.

    The starting point of financial independence is described in George Klasson’s book, The Richest Man in Babylon, as “Pay yourself first.” He says that, “A part of all you earn is yours to keep.” If you just save 10% of your gross earnings every single paycheck over the course of your working lifetime, you will become financially independent and gain personal finance success. In fact, if you saved $100 per month from the time you started work at age 20 until the time you retired at age 65, and this $100 per month earned 10% per annum return, compounded, you would be worth more than $1,100,000 when you retired, in addition to social security pensions and everything else. Major take-away from The Richest Man in Babylon are – pay yourself first, live within your means, invest your money wisely, and prepare for the future.

    — Read on www.briantracy.com/blog/financial-success/personal-finance-money-management-tips-save-money/