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.

{ 10 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 }

I still have cash at ING Direct, so maybe the strategy of staying on the bottom of the top works. The interest rate they offer is 4.25% APY as of this morning. While this is miles above the national average, they’re still at the bottom of the online savings list.

{ 0 comments }

In addition to filing for bankruptcy, a hedge fund is suing its own investors to recover the profits that were paid out. Should investors who thought they were investing in a legitimate operation be forced to give back what those funds paid out if the payments were based on fraudulent numbers? Who is to blame?

If you are new to hedge hunds, here is an introduction I compiled last year.

{ 2 comments }

After Graduation: Choices, Plans and Risks, Part 1

by Luke Landes

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 ... Continue reading this article…

8 comments Read the full article →

Increasing My Savings, An Experiment, and Extra Income

by Luke Landes

I initiated a new recurring bank account transfer from my Wachovia checking account (my basic operating account) to my ING Direct savings account. As I can’t schedule a daily recurring transfer of $5, I added a weekly $35 transfer. Hopefully this will force me to tighten up my spending a little bit and provide me ... Continue reading this article…

2 comments Read the full article →

Rent Checks Are Getting Larger

by Luke Landes

Here’s a piece of bad news for myself and all other renters out there. While I continue my search for an apartment to move into on July 1, the National Association of Realtors is forecasting a 5.3 percent increase in rents this year. Here are some details from CNN Money: In addition to making home purchases ... Continue reading this article…

0 comments Read the full article →

Six Steps to Being Your Own Boss, Part 5

by Luke Landes

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 ... Continue reading this article…

0 comments Read the full article →

I Will Host The Next Carnival of Investing

by Luke Landes

The Carnival of Investing, fresh from being masterfully hosted by Journey to Financial Freedom, will be here next Monday. If you are a blogger and are interested in participating, please submit your entry here before Sunday evening. Speaking of investing, these days I’m a fan of ShareBuilder despite my account taking a nosedive lately. Check ... Continue reading this article…

0 comments Read the full article →

Looking for Apartments, Update 3

by Luke Landes

We didn’t get to look at apartments this weekend. We had one visit scheduled for Sunday, but I received a call Saturday night from the owner saying the rental unit — the top two floors of a two-family house — has been taken. The listing looked very promising; it included a washer and dryer which ... Continue reading this article…

0 comments Read the full article →

When IPOs Attack

by Luke Landes

The voice-over-IP telephony company, Vonage, did something interesting for its initial public offering (IPO) last week. They offered long-time customers a chance to get in on the IPO. As you can see below, customers who went in on the deal may not have received the best investment.

0 comments Read the full article →

The Carnival is Up!

by Luke Landes

Happy Memorial Day, for all readers in the United States. The 50th edition of the Carnival of Personal Finance has been posted at My Open Wallet! Thanks to Madame X for a very colorful display. Here are some of my favorites: * Advantages of Being 26 at A Penny Saved… * Never Settle at the ... Continue reading this article…

0 comments Read the full article →

What Are Those Question Mark Icons?

by Luke Landes

If you read the comments left by readers here on Consumerism Commentary, you may have noticed a question mark icon (pictured at left) that appears next to some visitors’ comments or personalized icons that appear alongside mine or those of a few other people. These icons are Gravatars. Simply sign up for an account on ... Continue reading this article…

0 comments Read the full article →

Several Banks Increase Their Savings Rates

by Luke Landes

In the last few weeks, several banks increased the interest offered on their savings accounts. On Friday, I updated the chart. Feel free to let me know if you hear of any updates before I get to them. There were increases to CitiBank, GMAC, Emigrant Direct, and Capital One. More details are here.

0 comments Read the full article →

Blame It On Japan

by Luke Landes

Remember when everyone was freaking out about the huge sell-off in the stock market in the last couple of weeks or so? Well, it’s the Bank of Japan’s fault.

0 comments Read the full article →

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 →

Weekly Blog Roundup

by Luke Landes

I hope you’re having a great weekend! The weather here has been quite hot and muggy. Here’s what was happening around the pfblogosphere this week, including the MoneyBlogNetwork members: * Mighty Bargain Hunter has some thoughts about raising the minimum wage. * Five Cent Nickel has some advice for declaring a home office tax deduction. ... Continue reading this article…

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 →

Worst. Drivers. Ever.

by Luke Landes

Here are some nice thoughts for the holiday weekend. Those of us in the northeast are the worst drivers in the country. Ranked last, based on results from a standardized driving multiple choice test, are Rhode Island, Washington, D.C., Massachusetts, New Jersey and New York. Where are the best drivers?

8 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 →
Page 1 of 512345