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

May 2006


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?

Banking Deal: Earn 1.30% APY on an FDIC-insured savings account at Synchrony Bank.

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.


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: [click to continue…]


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: [click to continue…]


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 with a little more savings.

I also need to resume saving 10% of my “day job” paycheck and earmark that amount for emergency savings. In fact, I should start doing the same for all other income I earn. So far, my “extra income” is all deposited into another “subaccount” at ING Direct. I rarely touch it, saving as much as possible to reinvest into the projects that generate the income. Perhaps I should start “paying myself” from this income.


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 →

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 […]

12 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, […]

4 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 […]

5 comments Read the full article →

Investing in Banks is Boring But Sexy

by Luke Landes

Fortune Magazine is happy about bank stocks, and it comes down to dividends. The dividends bank stocks pay to their shareholders beat the averages and increase every year, far above the rate of inflation. Presumably banks can offer this because they don’t necessarily need to reinvest earnings in much research and development, like a technology […]

3 comments Read the full article →

Flexo on Mulholland Drive, Overlooking the Valley

by Luke Landes

To satisfy curious minds, here is what I looked like last month while in California on vacation. Behind me is a view of the San Fernando Valley in Los Angeles, and the photograph is taken from a viewpoint along the famous Mulholland Drive.

6 comments Read the full article →
Page 1 of 3123