Book Review – The Quiet Millionaire

by David@MoneyNing.com · 3 comments

quiet millionaireThe Quiet Millionaire is a book that contains a wealth of information on personal finance topics. With forty plus years of professional experience as a personal and business financial advisor, Brett Wilder shares with us his expertise on how to accumulate and keep our wealth.

This book’s theme is tied very closely to the title of the book – The Quiet Millionaire. Instead of writing about how to be frugal or the secret to picking the right stock at the right time, this book focuses on how the average population can carefully plan and be a millionaire with time, patience and good probability.

One of the first Brett advices is to discover who the real you is and what you really want out of life, while making sure we plan for money to be our servant instead of being our master.

Next, he explains to us the seven major obstacles to Financial Success:
1. Undisciplined Spending
2. Materialistic Thinking
3. Burdensome Costly Debt
4. Taxes
5. Inflation
6. Poorly Structured Investment Portfolios
7. Unforeseen Life-Changing, Financially Devastating Events
This sets up the rest of the book where he tackles all sorts of topics such as cash flow, investing, taxes, and retirement.

Cash Flow
The key to having a positive cash flow involves knowing where our money is going. This includes creating a budget, in which personal finance software such as Quicken or Microsoft Money can help. Other tips include having a plan to determine cash flow requirements to fund future goals and objectives and paying ourselves first with automatic savings deductions.

Investing
Brett is a big advocate of low cost index funds. He believes in the long run, most people will end up leaving money on the table by trading individual stocks because many of us let our emotions get in the way. This is great advice for so many people because this totally takes the maintenance work required for stock picking out of the equation and just let the money work for us.

Taxes
In order to minimize taxes paid, we should actively plan for tax reductions. This means proactively perform intelligent tax reduction to maximize our after-tax dollars throughout the entire year.

Retirement
Once we retire, the primary focus should be to protect and preserve our wealth instead of trying to accumulate and grow it. One of the advices given is to establish a lifetime gift-giving program to reduce the value of his/her estate and transfer it to someone else over time without incurring taxes.

Target Audience
The book is for people who have a good income stream and would like the extra help to accumulate and keep their wealth through time. People looking for the secret to getting rich quickly are not going to find what they are looking for in this book.

Last Words
From the cover and title to the content, this book is about substance. There is nothing fancy in this book, just straight forward personal finance information that we can all benefit.

Do You Live Frugally Just To Buy Fancy Luxuries For Yourself?

by David@MoneyNing.com · 12 comments

I’m definitely someone that likes gadgets. So much so that my boss even called me “a hardware type guy”. Back in college, I had a very frugal lifestyle in some ways – eat home cook meals, seldom go out, buy very little clothing. However, I bought expensive gadgets like PDAs, MP3 players, and golf clubs.

I didn’t think much of it at the time because I just thought that was how everybody lived. I didn’t really taste expensive food, so home cook meals were great. It still didn’t help my financial bottom line though, because I ended up spending all my money on luxuries.

Looking back, it was something I wish I didn’t do because I either could have lived a richer lifestyle or saved even more money. Just imagine if I didn’t buy all those PDAs, and or computers and bought stocks in Microsoft (MSFT), I probably would not need to work anymore by now 🙂

My situation is very typical though. There were many of my friends that did something similar. I’m not sure if they thought about whether or not it was the right choice but they did it nonetheless. They saved and saved and saved until they had enough money to purchase the next gadget.

When I started working, things were a little different because:
a) I had more cash coming in every month.
b) My thirst to buy things died down.
c) Not that going into debt is any good, but my credit limit got higher as well so if I really wanted to buy something, I could also buy it without much thought.

I’m sure many people can relate to this. How many of you live a otherwise frugal life but spend a huge amount of your money on luxuries? Is this trade off worth it? If not, how do you avoid the spending temptation?

Compare Our 401k Balances With Others In America

by David@MoneyNing.com · 56 comments

US News has a very interesting article that shows various interesting statistics on account balances Americans hold in his/her 401k accounts. If you are one of those people that always wonder how your 401k nest egg compares to others in the country, this article is for you.

First, here’s the median account balance separated by salary ranges for people in the 20s.

Salary Range

Median Account Balance

$20,000-$40,000

$6,719

$40,000-$60,000

$16,393

$60,000-$80,000

$39,383

$80,000-$100,000

$56,194

More than $100,000

$57,794

I’m very surprised by this because I cannot believe the median account balance is so high. I know data are based on facts, but it’s hard for me to imagine that someone in their 20s earning $20,000 – $40,000 a year has ON AVERAGE $6,700 in their 401k.

Now, let’s look at the average 401k asset allocation for people in their 30s.

Type of Investment

Share of Account Balance

Equity funds

57.90%

Balanced funds

13.50%

Bond funds

7.40%

Money funds

3.20%

GICs*/stable value funds

5.20%

Company stock

9.60%

Other

2.20%

Unknown

1.00

This chart shows that most Americans are too conservative in their investments and savings. We all know that stocks provide the most returns in the long term, so I would suggest people in their 30s to put more than 67.5% of their assets in stocks (equity funds + company stock), especially for money in their 401k as the investment time horizon is long.

People in their 40s might have worked for 20-30 years with the same company. Let’s see what the 401k stats are for this group of people.

Job Tenure

Average Account Balance

0-2 years

$14,725

2-5 years

$29,010

5-10 years

$49,995

10-20 years

$89,882

20-30

$133,32

This is interesting because many people change jobs for higher pay. However, this chart shows people who worked at their latest job the shortest are also the ones that have smallest 401k nest egg. This is disappointing because it means that people are cashing out their 401k when they switch jobs, taking the 10% penalty. We should always try absolutely everything possible to keep our 401k growing, not shrinking.

Let’s compare the account balances for people in the 50s and 60s.

Salary Range

50s

Median Account Balance

60s

Median

Account

Balance

Percent

Decline

$20,000 – $40,000

$76,788

$64,147

16.46%

$40,000 – $60,000

$99,932

$97,588

2.35%

$60,000- $80,000

$163,935

$160,051

2.37%

$80,000 – $100,000

$243,382

$237,303

2.50%

More than $100,000

$367,413

$350,576

4.58

At 60 and above, we are allowed to withdraw our 401k without penalty. People in the low end of the income spectrum also decrease their 401k the most which is not surprise. It is intriguing that people with the most income at more than $100,000 (and the most money in their 401k balance) take out a bigger portion of their money (4.58%) compared with people with a smaller account balance. It is anyone’s guess why this happens but my guess would be that people with a big nest egg are thinking of diversification at retirement age and their financial advisor is helping them take out more money from their 401k into other types of investments.

There are a trillion ways to interpret any every set of data, so go check out the article and see how you compare. Report back with your thoughts.

I Could Use Someone Else’s Credit Card to Buy My Groceries

by David@MoneyNing.com · 65 comments

no ID credit cardMy fiancée and I talked about the fact that we can probably use each other’s credit cards to purchase things without getting caught. We realized that more times than not, we aren’t asked to show our IDs when we use our credit cards. We decided to brainstorm where we have bought something using our credit cards without showing our ID and came up with this list.

  • Anything online
  • Restaurants
  • Groceries via self checkout
  • Gas stations
  • Drug store
  • Convenient stores
  • Coffee
  • Tons of entertainment venues

* note that this list is based on my experience in the United States.

We concluded that we can live our lives with someone else’s credit card without ever showing our ID. Even without all the online stuff because we can virtually get anything over the internet nowadays, we can still get food, gas, coffee, and have fun with someone else’s credit card without fear. Now that I think about it, I can even get a 0% balance transfer credit card without ever showing my ID in the States!

Now, what about the places that asks you for ID?

  • Larger department stores
  • Groceries at the cashier
  • Beer stores
  • Bar (if you dare use a credit card)

Obviously there are some places that asks us for our IDs when we use our credit cards. Some of these places (like the bar) actually ask because they need to ID regardless but that’s not the point. I don’t understand why some stores check our IDs and some don’t. I can understand not asking if the amount is small, but what about places where the transaction is high?

Something else that is interesting is how each country handles credit card verification. I was born in Hong Kong, and people there always check the signature on the back of our cards against the one on the receipt. Everyone can argue that the signature can be forged, but it is at least better than not checking anything at all.

UK is taking a dramatic approach to this. They have gone to something called “chip and pin” where each credit card requires a pin similar to what we required for debit cards in the US. My friend actually went to UK recently and they won’t allow him to rent a car with his credit card because his credit card did not support the chip and pin technology. A nationwide change to combat this might be a little extreme but at least the country is telling their citizens that they will put in the effort to stop croaks.

How do you feel about this whole subject? Have you actually caught someone using someone else’s credit card? Have you accidentally used a card that’s not yours? Share with us your thoughts.

ATM Receipts – Wells Fargo vs Bank of America

by David@MoneyNing.com · 12 comments

My fiancée and I happened to withdraw money from our respective banks (Wells Fargo and Bank of America) recently and I want to show everyone the ATM receipts to see if they provide different information.

front of wells fargo atm receipt

As you can see above, they both provide the date and time of the transaction as well as the location. Furthermore, the last four digit of the account number is shown along with the amount withdrawn and available balance.

Personally, I like the Wells Fargo ATM receipt more because it is better organized. Looking at it carefully, we can also see that everything is better spaced out on the Wells Fargo version.

The back of the receipts are quite different however.

back of bank of america atm receipt

The Wells Fargo version uses the back to show some advertisements for their website as well as their 1-800 phone number (compared to Bank of America showing the number on the front without the website address). Again, Wells Fargo’s receipt is better because the bank is able to use the receipt more fully than its competitor.

Since Bank of America wastes the back of all their ATM receipts, I am going to suggest using…

money ning atm receipt

🙂

How One Couple Saved for Their Dream Home In 5 Short Years

by David@MoneyNing.com · 10 comments

saving for a houseIt can be done. One couple managed to save $98,000 in 5 years to buy their first house in New York. These two can-doers were by no means earning high salaries (a little over $100,000 combined by the end of the 5 years and much less at the beginning) all the while living in Manhattan, one of the most expensive cities in the world.

To save for the down payment on the $445,000 apartment, they quit smoking, stop meeting their friends for beers after work, stop buying new clothes, gadgets, and pretty much everything they didn’t absolutely need. The question they often asked themselves was “Do I want the house or an iPod? or Do I want a latte or the house?”

The beginning was especially tough because they weren’t used to skipping all the luxuries but they slowly got used to the habit of not consuming much more than the necessities. During the first year, they saved $8,000. In the next two years, they saved a combined $30,000 and $40,000 in the fourth year alone. Their savings was up to $98,000 by the fifth, allowing them to pursue their dream of owning a place they can call their own.

If they can do it, so can you. How many times have you thought about the difficulty of saving money and simply gave in to the spending temptations? With a can-do attitude, you can achieve financial freedom too.

Thank you NY Times, the article serves as an inspiration for all of us. It is also a wake up call for people who make $100,000 a year without being able to save a dime.

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