dcsimg
As featured in The Wall Street Journal, Money Magazine, and more!

May 2006


$400,000.

Do you consider someone with a net worth of $400,000 rich? Well-off? Comfortable? Would you set a lifetime goal for yourself at $400,000?

Actually, a net worth of $400,000 sets you well above the median net worth in this country, and in the world, to say the least. But these statistics don’t matter… what matters is your immediate environment. In your immediate environment, could you give up working once you have $400,000 when you subtract your liabilities from your assets?

Dr. EvilI think many people will say “no” to this question, yet they’re willing to set a goal of $1,000,000 in the future — say, 30 years from now. $1,000,000 sounds much, much better than $400,000. With $1,000,000, one might be able to stop working and live off the income. At a 4% safe withdrawal rate, that’s $40,000 a year.

This is why some financial planners, some columnists, and even some bloggers are big on telling people what they can do now (how to invest) to increase the chances of ending up with $1,000,000 thirty years from now. It’s simple: invest $8,250 a year, invest in stocks, and pray for good markets at the end of the time period and a yearly average of an 8% increase.

The huge problem with this model is the fact that it completely ignores the effect of inflation. Assuming a 3% inflation rate over the next thirty years (it could be higher or lower, who knows, but this is a historical average), your $1,000,000 then will only be worth what about $400,000 is worth now.

By the time you’re a millionaire, a billion dollars may be what is needed for the “comfortable” life. With $1,000,000 in the bank, at the safe withdrawal rate of 4%, you’ll be living off the equivalent of today’s $16,000. (For that safe withdrawal rate — the amount you can withdraw while not depleting your funds over time — it’s assumed the money will be invested in the stock market, not sitting in a bank.)

Methinks you should strive for something well beyond $1,000,000 if your time horizon is 30 years.

{ 11 comments }

David Bach, the author of The Automatic Millionaire and The Automatic Millionaire Homeowner (the latter of which I reviewed earlier this year), also writes a column on Yahoo Finance. Recently he presented five tips for college graduates just beginning their path to financial security. This follows Part 1.

Here is the next tip Bach is providing for recent graduates: Read the full article →

{ 2 comments }

David Bach, the author of The Automatic Millionaire and The Automatic Millionaire Homeowner (the latter of which I reviewed earlier this year), also writes a column on Yahoo Finance. Recently he presented five tips for college graduates just beginning their path to financial security. (This ties in nicely with Friday’s thoughts about graduates aiming for the highest-paying first job possible.)

Here are the first two of Bach’s five tips for graduates: Read the full article →

{ 4 comments }

I’ve been developing a series about becoming your own boss, and this is part 5 in that series. The information is based on an article from MSN, but I’m pulling in information from other locations as well.

Step 5: Raise Money

Now that you have a solid business plan that outlines how much capital you need, it is time to find it. Here’s what our article suggests: Read the full article →

{ 0 comments }

Stay Connected With Consumerism Commentary

by Luke Landes

Most readers know that they can subscribe to the Consumerism Commentary RSS feed, bringing the full text of these entries to your reader, the way you like to see it. You can also subscribe to Consumerism Commentary to receive the latest posts through an email message once a day. Just enter your email address here:

0 comments Read the full article →

Six Steps to Being Your Own Boss, Part 4

by Luke Landes

I’ve been developing a series about becoming your own boss, and this is part 4 in that series. The information is based on an article from MSN, but I’m pulling in information from other locations as well. Step 4: Build a Bulletproof Business Plan A young entrepreneur should want People Who Matter to take his ... Continue reading this article…

0 comments Read the full article →

Don’t Get Ahead, Start Ahead

by Luke Landes

This is an interesting article from the New York Times. Research shows that your first job dictates how much your income will be your entire working career. The recent evidence shows quite clearly that in today’s economy starting at the bottom is a recipe for being underpaid for a long time to come. Graduates’ first ... Continue reading this article…

12 comments Read the full article →

Six Steps to Being Your Own Boss, Part 3

by Luke Landes

I’ve been developing a series about becoming your own boss, and this is part 3 in that series. The information is based on an article from MSN, but I’m pulling in information from other locations as well. Step 3: Fight Inexperience With Advice Step one was to gain experience. It will still be difficult for ... Continue reading this article…

0 comments Read the full article →

Six Steps to Being Your Own Boss, Part 2

by Luke Landes

Yesterday, I wrote about the first step to being your own boss, gaining experience. Working for oneself is a dream many people in this country have, and here is the second step for reaching that goal, according to MSN. Step 2: Build A Winning Team The article says that you should find people whose skills ... Continue reading this article…

2 comments Read the full article →

Strong Hurricane Season Approaching

by Luke Landes

The National Oceanic & Atmospheric Administration (NOAA) is predicting a very active hurricane season (June 1 through November 30) this year. The organization is encouraging people living in the affected areas to begin preparations. For the 2006 north Atlantic hurricane season, NOAA is predicting 13 to 16 named storms, with eight to 10 becoming hurricanes, ... Continue reading this article…

4 comments Read the full article →

Six Steps to Being Your Own Boss, Part 1

by Luke Landes

Many people dream about not having to answer to someone else’s rules, not having to rely on someone else for income, and not getting the hated response to any question, “You should just be happy to have a job.” The dreamer who wishes for an existence free from these shackles wants to be his or ... Continue reading this article…

0 comments Read the full article →

Money Stats for Twentysomethings

by Luke Landes

A feature on MSN Money looks at finances of people in their twenties. The feature includes statistics such as median net worth, median income, percentage owning homes, etc. with which you can compare yourself if you happen to be in this particular demographic. At age 29, I was doing well compared to these averages, but ... Continue reading this article…

5 comments Read the full article →

Baby On The Way? Get Ready To Be Shocked!

by Luke Landes

Yesterday I wrote about the expenses of raising a teenager, but the fun doesn’t start at age thirteen. Let’s flash back to birth. Sources for the previous post determined the cost of raising a teen to be $190,980, but here’s an article that says the cost of raising a baby to age seventeen is $250,000. ... Continue reading this article…

0 comments Read the full article →

How To Succeed: Be A Jerk

by Luke Landes

Jeffery Pfeffer, a Stanford professor (say that out loud), often invited his friend Keith Ferrazzi to speak to his MBA students. Here’s a little about the frequent guest, who is now an independent consultant: Ferrazzi earned his MBA at Harvard in 1992 and quickly became a star at Deloitte Consulting. Starwood Hotels hired him as ... Continue reading this article…

6 comments Read the full article →

The Cost of Raising a Teenager

by Luke Landes

USA Today’s reporter, Kathy Chu, talked to some typical parents to get a feel for how much they spend indulging their children. Here’s a statistic from the U.S. Department of Agriculture of all places, quoted in the article: Last year, a middle-income family spent an average of $190,980 to feed, house, clothe and entertain a ... Continue reading this article…

8 comments Read the full article →

Tax Bill Passed By House And Senate

by Luke Landes

On Thursday, the Senate passed a new bill, already passed by the House, that extends reduced tax rates, changes the nature of the Alternative Minimum Tax (AMT), eliminates an extension to higher-education tuition deduction, and eliminates a special deduction for teachers who pay for supplies out of their own pockets. The rich — those with ... Continue reading this article…

4 comments Read the full article →

Ten Websites I Couldn’t Live Without

by Luke Landes

I’ll admit there’s a little bit of hyperbole in the title of this post. I’m sure I’d survive without the internet, but I’d be unwilling. Unwilling to go on living. If I had to choose, here are the ten websites I’d want to have with me on a desert/deserted island, in no particular order. CNN. ... Continue reading this article…

6 comments Read the full article →

Ten Tips For Cutting Car Expenses

by Luke Landes

Car costs got you down? The inimitable Suze Orman offers ten tips for keeping car insurance costs down in a world where gas prices continue to climb. Here’s the short version: * Boost your deductible. Keep cash on hand for emergencies, or call it partially self-insuring. This will keep your monthly payments down and you ... Continue reading this article…

0 comments Read the full article →

Americans Are NOT In Bad Shape With Credit, Sort Of

by Luke Landes

I like Liz Pulliam Weston’s latest article, The Truth About Credit Card Debt because she cites some statistics that fly in the face of conventional thought regarding credit behavior of Americans. We’ve all heard this before: Americans are in an unparalleled level of revolving credit card debt. The average American household carries more than $9,000 ... Continue reading this article…

0 comments Read the full article →

Looking for Apartments, Update 1

by Luke Landes

As I mentioned on Friday, my girlfriend and I are looking for an apartment somewhat halfway between where we both work (Queens and central New Jersey). The island of Manhattan tends to cause problems drawing straight lines on a map, so we’re looking in two places:

8 comments Read the full article →
Page 1 of 212