Years ago I worked with a woman who didn’t believe that saving money now matters. She had fabulous clothes. Designer furniture. Treated herself to dinner out most nights. And told me “I have time to save for retirement. It’s stupid not to enjoy life now when I still can. Who knows what the future brings?”

Odds are she is not alone in that thinking — and doing. But the thing she didn’t fully understand is that the longer you wait, the less chance your money has to grow faster than inflation. And the less chance you give yourself for having enough money later on — when you’ll really need it.

Why people put off saving money

Even though there is a good reason why saving money now matters, I get that there are also reasons why people feel it’s ok to wait to save. And then wait some more. Let’s look at some of what might color their thinking at the time:

• “I’m still young. I have plenty of time.”
• “I’m not making enough now to matter. I can contribute more when I earn more.”
• “Life is short. If I save, there’s no guarantee I’ll ever get to spend it.”
• “Why bother? I’ll never be able to retire anyway. I expect to work until I drop.”

Why saving money now DOES matter

So now we get to the math part. And the part where we pose the big “what if”: [Read more…]

First let’s be clear. The stock market really IS unreliable. At least at any given moment. And for some people that alone is enough reason to stay far away from investing in stocks. Or anything other than tucking it away in their good ole bank account. Or mattress.

But there’s also a downside to just looking at the downside. Over time, at least historically, the market has done better than savings accounts. And because of inflation the interests rates that banks pay have historically been a lot lower than the inflation rate. And so, year after year, the real-world buying power of your money gets eaten away.

Let me explain what all that means

When we say that the stock market is unreliable at a given time, it doesn’t mean that you are for sure losing money. You only lose money if you sell your stock when the price is lower – no matter how unsettling daily fluctuations can be. [Read more…]

I’m writing this for everyone who has ever lived in a noisy apartment — and couldn’t afford to move. Or for whatever wishful-thinking strategy kept waiting for it to magically stop. But it doesn’t. And even a day feels like an eternity.

If you’ve never had the … uh … pleasure you cannot imagine how, after a while, even little noises can begin to feel like someone dancing on your head in cleats.

Types of noisy apartment sources

Our world is filled with unwanted noise, all seemingly hell-bent on driving you stark raving mad. Some come from outside your building — most of those out of your control. And some come from right inside from neighbors or hallway passers-by or building machinery that “conveniently” was turned off the very day you looked at your new apartment before signing. [Read more…]

A friend of mine wrote to ask me why the value of his stock mutual fund is higher than the simple difference between what he paid for it a few weeks ago and the current price that he sees listed now. So I said the difference is the dividend.

He wrote back “I am so confused!” And I get that. The financial markets are confusing even to people who say they are experts. After all, if it were really all that easy everyone would be worth billions.

Especially when you’re new to investing as he is — and even for many of us who have been around for a while — things like this can feel confusing. So I created this simple explanation for my friend, and it helped him understand. Hope it helps you…

What is a stock mutual fund?

In simplest terms, a company’s stocks are investments for the people who buy them, and a way to help provide operating funds for the company that issues them. They allow you to own a small portion (shares) of the company — and in some cases they even offer dividends on your shares.

A stock mutual fund is a fund that aggregates a large number of stocks, managing the portfolio on an ongoing basis to maximize your fund’s earnings and value. The reason they hold so many stocks is to benefit from diversification, a form of risk management.

Why do these funds pay dividends?

They are passing on the earnings from individual stocks. Not all stocks pay dividends, but for some companies it’s a way to help make themselves more attractive to potential investors, helping keep the company stock in demand and (hopefully) helping to keep the stock value up higher than it might be otherwise, even in rough markets.

How does this affect my mutual fund?

[Read more…]