40% of Americans Are Taking a Massive Retirement Risk

Saving for retirement is a long and thoughtful journey. It takes decades of consistent saving to see your nest egg grow to a healthy size, and it’s not something you can achieve overnight.

However, when it comes to retirement planning, a good chunk of the population is taking a huge gamble — literally.

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Roughly 40% of Americans think winning the lottery would be a good retirement plan, according to a survey from financial company Stash. The idea is even more popular among younger workers, with nearly 60% of millennials saying winning the lottery is a reasonable way to prepare for retirement.

You may dream of becoming an overnight millionaire, but the odds of winning that much money are shockingly abysmal — somewhere around 1 in 300 million for huge jackpots like the Mega Millions or Powerball, making it far more likely for you to be struck by lightning or give birth to quintuplets than to win the lottery.

So why do so many people think playing the lottery is the best way to prepare for retirement? Probably because for those who are struggling to save anything at all, even the terrible odds of winning seem better than the odds that they’ll be able to save enough on their own.

Preparing for an expensive future

It’s no secret that Americans are struggling to save. In fact, three-quarters of millennials in the survey admitted that they’re living paycheck to paycheck — which makes it more understandable why so many are banking on hitting the jackpot to fund their retirement.

Saving for retirement when you can barely pay rent may seem impossible. But if you put it off until later, it will be even harder to catch up. Because of compound interest, if you sock away even a few dollars now, that money will snowball over time and grow into significant savings. The longer you wait, the less time your money has to grow — meaning you’ll need to save more each month to see your savings grow as much as they would had you started saving earlier.

If you don’t save for retirement, your golden years may not be quite as comfortable as you’d hoped. You’ll likely end up depending on Social Security benefits to make ends meet, and considering the average monthly check amounts to roughly $1,300, you may have to pinch pennies to get by. Especially as you get older and will likely be spending more on healthcare costs in retirement, Social Security alone probably won’t cut it.

Even if you’re strapped for cash right now, if you’re creative with how you spend your money, you may be able to find a few areas where you can save more. And although you may not be able to save a lot right now, it’s better than saving nothing at all and hoping the lottery will solve all your problems.

Finding money in hidden places

The best way to figure out where you can save more money is to create a budget to first see where all your money is going. While it may seem like you have absolutely nothing to spare to put toward retirement, chances are you can cut back somewhere. Sometimes, you don’t even fully realize how much you’re spending each month until you see it written out in front of you.

Once you have an idea of how much you’re spending and what you’re spending on, see where you can cut back. Some expenses — such as your mortgage or rent, loan payments, etc. — may be fixed, but you may be able to cut back on variable costs like groceries, gas, and dining out.

Take an initial pass at your budget to see what can be cut right away. For example, maybe you find that you’re still paying for that subscription service you rarely use. Or perhaps you’re going out to lunch every day at work when you could start packing a lunch at least a few times each week.

Next, start chipping away at some of the essential costs. For example, while you need to buy groceries every month, you may be able to save some money by joining your store’s rewards program or clipping coupons. Or maybe you could open up a new credit card that offers cash back or other rewards, so you can still save money even while buying the essentials. You may only save a few dollars each trip to the store, but it adds up.

Also, if your employer offers matching 401(k) contributions, be sure to contribute at least enough to earn the full match — otherwise, that’s free money you’re leaving on the table. With matching contributions, you can potentially double your savings just by putting money in your 401(k), which can go a long way when you’re stretching every dollar.

If you’re in a more dire situation (i.e. you’re just a few short years away from retirement with next to nothing saved), you may need to make more significant cuts. While saving an extra $100 or $200 per month is better than nothing, it won’t be enough to build a nest egg that will last through retirement. In this case, in addition to making budget cuts and pinching pennies, you may choose to downsize your home to save several hundred dollars per month on mortgage payments, or you may move to a less expensive neighborhood to cut down on property taxes. This isn’t a decision to be made lightly, but if you’re seriously behind on your savings, you do have options.

For many people, saving for retirement is something you know you should be doing, yet it often feels like an impossible goal — so much so that winning the lottery seems more realistic than building up your savings on your own. But even if you don’t have much money to spare, it’s much wiser to put that extra cash toward your retirement fund instead of a lottery ticket.

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8 ways to spring clean your finances

You’ve filed your taxes, and now it’s time to make good on your promise to “spring clean” your finances.

One key task is to throw away – or shred – old bank and credit card statements and aging tax returns that no longer give you joy. But there are other steps you can take to buff up your finances.

Starting by analyzing. Spring is the perfect time to ask a CPA or certified financial planner to review your tax return, especially last year’s net after-tax income sources, says Ian Weinberg, the CEO of Family Wealth Pension Management. 

“Determine, he says, “your top marginal tax rate under the new tax laws and rates and see if some of your income may be better off as tax-free, long-term capital gains, or qualified dividends versus ordinary income, or vice versa,” he says. “Many people will find that their income-producing investments may need to be changed accordingly.”

For instance, a lower tax bracket could call for more ordinary income such as IRA distributions, while a higher tax rate could call for more tax-free income and fewer IRA distributions.

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Also, if you received a refund on your tax return, contribute the proceeds into an IRA or Roth IRA. “Most tax software makes it easy to do and this is a great habit to do each year,” says James Gambaccini, a financial planner with Acorn Financial. “Another option would be to use the proceeds to fund a child’s 529.”

Consolidate, close financial accounts

Prepare a list of your financial accounts – IRAs, Roth IRAs, 401(k)s, taxable accounts and health savings accounts.

“The objective is to consolidate similar accounts, IRAs for example, to a minimum number of custodians,” says Barbara O’Neill, a professor at Rutgers, the state university of New Jersey.

Doing this, especially with your retirement accounts, can help you lower the fees you pay and make it easier when you have to take required minimum distributions or RMDs after age 70½ on your IRAs, says Jon Ulin, the managing principal of Ulin Co. Wealth Management. “A consolidated approach to investing will help to provide a more streamlined approach to your money management approach,” he says. 

O’Neill also recommends eliminating and replacing accounts that charge high fees, mutual funds with 12b-1 fees for example, and/or ones that do not offer high interest rates.

“Compare at least three competing account providers,” she says. According to the Securities and Exchange Commission, 12b-1 fees are paid by the mutual fund out of fund assets to cover distribution expenses and sometimes shareholder service expenses.

Check your debts

Get a handle on your debts, how much interest you’re paying, and when payments are due, says Sarah Carlson, the founder of Fulcrum Financial Group. Search for ways to reduce the interest rate you pay on loans, credit cards and the like; consolidate debt if it makes financial sense, put in place a system to avoid late payments.

Review automated payments

A growing number of people now have recurring payments that are automatically deducted from financial accounts. Review those payments, canceling those for products and services that are no longer used – such as gym memberships, says O’Neill. Apps such as Truebill and Trim App help you find and eliminate subscriptions.

Check your cable, cellphone bills

“Your cellphone is one service that escalates over the years and is never second-guessed,” says Jeffrey Edwards, president of Atlas Financial Planning. “That 12-month free trial that hooked you five years ago is now full price and then some,” he says. 

Document everything

Joshua Mungavin, a financial planner with Evensky Katz / Foldes Financial Wealth Management recommends documenting all your accounts, bills, and service provider contact information.

“You and your loved ones will be happy to have all important information together if there is an emergency or someone passes away,” he says.

“The Family Information Organizer: Your Planner for any Emergency, Disaster, or Loss of a Loved One” is a free eBook that you can use.

Check your insurance plans

Review your auto, life, home and umbrella insurance policies to make sure you’re getting the most competitive rates.

“If you have good students enrolled in your plan, be sure to ask about special rates for children with good grades,” says Dwyer. 

Be digital savvy

Cybersecurity is a critical area for your financial “spring cleaning,” says Aaron Clarke, a wealth adviser at Halpern Financial.

“If you have a password like ‘password123’ or your pet’s name, you need to increase your level of security, particularly for financial accounts and email,” he says. 

Consider boosting your login protection. “Especially for financial accounts, add an extra layer of security with multi-factor identification, or multiple passwords, codes and security questions,” he says.

And, if you have trouble remembering all your passwords for various services you use, consider using a password manager.

“We do not recommend any one brand in particular, but we do recommend selecting a product with multi-factor authentication for the most security,” he says.

Check your beneficiary designations

People die, get divorced, get remarried, have children. And when those and other life cycle events occur, people often forget to review their life insurance and retirement account beneficiary designations, says Scott Bishop, an executive vice president with STA Wealth Management. “If it has been a while since you have looked at them or don’t know what they say, it is a great tip to get organized.”

Robert Powell is the editor of TheStreet’s Retirement Daily www.retirement.thestreet.com and contributes regularly to USA TODAY. Got questions about money? Email Bob at rpowell@allthingsretirement.com.

 

How to use your internship income to buy every company in America

Misinformed college students who will keep their summer internship earnings in a savings account are missing out on thousands of dollars.

Too many people don’t realize a direct deposit paycheck into a bank account will return 0.01% annually and lose even more to inflation, whereas allowing a supercomputer to manage your money will return about 7% annually. Young people have become incorrectly risk-averse and lose out on compounding profits because of being overly sensitive to investing in a market that has far less risk than they realize.

Now is the best time in history for young people to avoid savings eaten away by inflation at banks and instead invest in safe stocks. For as little as $100, you can own a little of every big public company in America through index funds. These are diversified investment devices that track a larger financial market index (SP 500, Dow Jones 30, etc.).

Of course, having some cash on hand is necessary, but the bulk of your money should be stowed away to grow.

High schools oftentimes don’t teach about mutual funds or indexed exchange traded funds, but these world-changing investment devices are making it possible for students’ summer internships to pay them for the rest of their lives. All students need to do is trust the proven returns and dive into an investment that is better than fearfully hiding cash in your underwear drawer.

The first and most important aspect for new investors to grasp is that buying stocks is not as difficult as people play it out to be.

When investing pioneer Jack Bogle founded the Vanguard Group in 1975, investing changed forever. With the development of mutual funds and indexed ETFs, middle-class people could invest like billionaires. Institutions like Vanguard own stocks in effectively every publicly traded company in the world and utilize high-speed computers to manage investments and allow ordinary people to invest in these low-cost stocks.

Vanguard controls $5.1 trillion in assets, which means buying one of their offered index funds guarantees you own part of hundreds or even thousands of different companies. The world’s most famous investor, Warren Buffett, preaches diversity to reduce risk, and there is no better way to manage risk than by owning everything.

Investments can be bought and sold in a flash and converted from cash into stock or stock into cash within days, ensuring your investment can be liquified instantly.

Those who are proud of being risk-averse and only hold cash will lose about 2%-3% of their money each year to inflation. However, if you own the Vanguard SP 500 Index Fund (ticker symbol: VOO), you will earn 7% on average per year.

To put this number into perspective, imagine you and a fellow intern are working tirelessly throughout the summer and take home a nice $10,000  when you finish. You, who keeps $10,000 in cash, will be worth the equivalent of $9,700 the next year.

However, your clever partner who invests their money in a diversified investment will probably be worth $10,700. Additionally, that $700 will help the money grow quicker for years to come and may result in a junior year internship and a nice Mercedes to fill the garage of the Florida house you just bought to retire in.

Investing money for a more secure future is not something only old people, rich people and risky people should be inclined to do. In fact, income from college internships is the ideal opportunity to get started with a diversified portfolio that has the potential to double your investment five times in only 30 years.

Getting started is simple.The first step is managing to find income and thousands of talented students at this school are doing this the entire year.

Second, all it takes is signing up for an account at any insured investment bank or stock brokerage.

Third, transfer some or all of the money from a bank account into a brokerage account. Brokerage accounts at the best firms insure money up to $250,000. For young people, Robinhood and Charles Schwab offer the safest services with minimal fees.

Once your account is funded, the simple process of turning most of your cash into an appreciable asset is complete. After researching some basic information about some of Vanguard’s indexed ETFs, you can decide what investment is right for you.

Finally, once you have invested your money in a proper place, safe from the dangers of inflation (and your own erratic spending), your excitement will grow alongside your portfolio.

Fred is a freshman in Media.

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Why giving your grown kids money is a terrible idea

As a parent, you know full well that the check writing usually doesn’t stop when your kids reach adulthood. In fact, the financial demands of parenthood may seem never-ending.

But a new study sheds light on just how extensive that lingering financial support is, how damaging it can be to your finances, and the degree to which parents, out of love, are willing to sabotage their own security.

Merrill Lynch reports that 79% of parents with adult children between the ages of 18 and 35 provide financial support to their grown kids, spending an average of $6,600 a year per child.

The estimated $500 billion parents fork over each year in total is double what Merrill Lynch estimates the same group is setting aside for retirement annually.

Do you think parents should give their adult children money?

Even more startling: Parents are making this tradeoff with eyes wide open. More than 7 in 10 of all parents surveyed—those with young as well as older kids—say they have consciously put the kids ahead of their own need to save for retirement.

Among parents of grown kids, 82% are prepared to continue down that path, reporting that they stand ready to sacrifice their own finances to help an adult child.

“Parents might say helping children stand up on their own two feet and go out into the wide world is a priority,” says Surya Kolluri, managing director at Merrill Lynch. But, he adds, it is important to “take a step back and consider what are all my financial priorities and how do I keep them in balance?”

What exactly parents are financing 

The Merrill Lynch survey of more than 2,500 parents, conducted in partnership with Age Wave, a research firm focused on the impact of an aging population, found that parents of kids age 18 to 35 help with a wide array of expenses. 

Those include food and groceries (60% of parents help), car payments (47%), the cell plan (54%), even footing at least some of the bill for vacations (44%).

Sometimes this means covering a portion of the expenses, other times it’s the whole bill. For example, a third of these parents pay their adult children’s entire cell phone tab; one out of five pay for vacations in full.

These outlays can come at a cost: The study reports that half of parents of adult kids say they are willing to raid their savings to help, more than one in four say they stand ready to raid their retirement accounts, and another quarter of say they will take on debt if needed.

How helping can hurt

Emotionally, this financial support makes all the sense in the world. The kids get older, yet they never stop being your kids. But this is a critical juncture where letting your head have a say in things can be vitally important. 

If you are getting a late start on saving for retirement, or you’ve run the numbers and would like to save more, the empty nest years are an unparalleled opportunity to catch up. That can be a lot harder, if not impossible, when you are still supporting your kids.

What’s more, putting your kids’ needs before your own increases the likelihood you’ll have to rely on them for financial support down the line. Another Merrill Lynch study found that nearly 70% of caregivers provide financial support for an elderly family member, spending an average of $7,000 a year.

Something else to think about: More parents are moving in with their kids, as the percentage of parents living in an adult child’s home has doubled since 1995 to 14%.

How to find a better balance

“We are going to be parents for life,” says Kolluri. But your role as a parent changes over time. “There is a life stage up until age 18, and then there is a life stage after age 18,” he adds. 

Recognizing that transition can help you to reevaluate your financial relationship with your grown child and set some boundaries on your support. Around half of the survey respondents with older kids say they wish they had done a better job of that.

Kolluri suggests you keep reminding yourself: “Those boundaries are going to help me, the parent, manage the rest of my life, which is saving for retirement, paying off my house, saving for my health.” 

When you have a heart-to-heart with your kids about money—and you should—here’s how to reset the financial expectations:

Establish needs vs. wants. Making sure your kid isn’t subsisting on a ramen-only diet is one thing, but helping to pay for vacations? Or pitching in so they can buy a nicer car, when that money could be used to pay down your mortgage or save more in your IRA or 401(k)?

Keep your support to the essentials, such as rent and groceries, not the extras like Uber rides and dinners out.

Make it formal. Rather than replenishing an empty bank account any time your son or daughter asks, agree upfront how much support you’ll provide every month, and transfer that money regularly. Only break that budget in the case of a true emergency.

Set an end date. Have a plan for when the financial support will stop, perhaps pegged to a milestone like when graduate school ends, or a year or two from now. 

Those great adults you’ve raised are bound to appreciate your need to find the right balance between supporting them today and nailing your own financial security.

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How ‘Bad With Money’ Helped Me Finally Figure Out My Finances

An impromptu trip to Paris isn’t something too many people can afford with ease; Gaby Dunn certainly couldn’t when she dropped $800 on a last-minute plane ticket to France in 2012. It wasn’t her wisest financial decision, but these days, the 30-year-old podcaster and author is making very different choices. It hasn’t been easy figuring out how to manage her money, and she chronicles this jagged road to financial literacy in her self-help-guide-meets-memoir, Bad With Money.

Dunn, who began her career as a journalist, worked at a variety of news outlets in her 20s while also maintaining a personal project on Tumblr called 100 Interviews. She went on to create a YouTube channel and podcast with her comedy partner, Allison Rankin, but despite her online success, Dunn still had a very big personal problem: student loan debt.

She was resolved to pay off her loans, and in the process of figuring out how to do so, she launched her own podcast in 2016: Bad With Money, which explores the emotional, social, and institutional factors that influence financial choices. In Jan. 2019, she released a book by the same name, and in it, talks about her money journey as a creative millennial living with bipolar II, who still has to pay taxes, save for retirement, make a will, and everything else.

‘Bad With Money’ by Gaby Dunn

$11

Amazon

Dunn introduces readers to the concept of “money scripts,” or the ways in which you’ve been taught to think about money by your family and community. In the book, financial psychologist Dr. Brad Klontz discusses how these scripts — like “money can solve all your problems and bring you happiness” or “you need to treat yourself when you are feeling sad” — can subconsciously affect how you make decisions.

This book made me realize that I had internalized so many scripts about writers and creative workers. I assumed that most people in my line of work earned so little money that they didn’t need to know about financial literacy, because all their money went straight to rent, food, and bills. This attitude wasn’t an informed perspective. I needed to recognize that I do benefit from understanding personal finance.

In the name of research, Dunn spoke about money with nearly every member of her family and many of her friends. What she found is that there are many different attitudes about saving and spending, even among people who spend much of their time together. Dunn self-educates throughout this journey: She learns what a stock is (she’s not ashamed to say she doesn’t understand them!) and researches how retirement accounts work.

Alberto E. Rodriguez/Getty Images Entertainment/Getty Images

I found it possible to look at my money scripts with a little more honesty and bravery because of Dunn’s disarming approach to talking about money. Readers won’t find complicated financial jargon in this book; she writes in-depth about what a credit score is, but she doesn’t pretend to know exactly which credit card is the best for every person.

After exploring the daunting personal finance world alongside another novice, I found myself with a set of action items that didn’t seem daunting: Set up a Roth IRA, save for unexpected medical expenses, and make freelance income goals. It’s not like I couldn’t do these things before, but my assumption that a just-barely-getting-by writer couldn’t or shouldn’t bother with financial literacy had been getting my way. This book is probably most useful for readers — like me — who haven’t spent much time thinking about financial literacy at all, and want someone to explain things to them from the beginning.

Dunn foregrounds experiences that other personal finance books may ignore; for example, she is bisexual, and she discusses the rise of the LGBTQ wedding industry in her chapters on how we spend money related to romantic love. She devotes an entire chapter to analyzing why systems are purposefully set up to be too complex and confusing for people to thrive financially, and why she sees some better paths forward through Democratic Socialist policies. “The structures we have collectively created and live in are not working for the vast majority of us, but we can also collectively build a different system,” she writes. She recognizes the benefits of understanding money through current political and social systems, but she pushes back, too. While she advocates understanding the medical insurance system, for instance, she also believes that basic medical care should be a right and not something that will send people into deep debt for the rest of their lives.

I found it incredibly satisfying to be privy to the nitty-gritty of Dunn’s financial path — from having to sell her possessions online to afford an unpaid internship in New York City, to becoming a successful writer and actress in Los Angeles. (By “successful,” I mean that she mentions the $50,000 payment she and Allison received for selling a TV show script, and she refers to her finances as much better than they were even just a few years ago.) She outlines her spending, breaks down what she spent in a random month in 2017 line-by-line, and acknowledges that she still experiences dry periods due to the lump-sum nature of much of her income. I enjoyed knowing that even people who publish books occasionally spend, as she did, $600 on Amazon. “Not every month is this bad,” she writes, “but man oh man!”

Near the end of her book, Dunn compares money to a character from the 1982 movie The Thing — the shapeshifting alien, a monster Kurt Russell struggled to defeat because it can look like anything and undermine his trust in his team. “Money is the alien,” she writes. “We are all Kurt Russell.” After reading the book, I have the tools to make healthy, useful money choices for me, but I don’t feel the need to make the same money choices as other people. Most of all, I feel encouraged to figure it out.

How This Graphic Designer Travels the World on $50K

A recent study found that 74 percent of Americans go into debt in order to travel. I’m not surprised; between the rising costs of airfare, eating out, and extracurricular adventure activities, it’s easy to go over budget.

But what if you could trade your talents for travel around the world without shelling out your savings? That’s part of the strategy Abbey Ley, 33, employs to visit international destinations like Switzerland, Bali, and Australia. A freelance graphic designer, illustrator, and animator, she makes around $50,000 per year, a good chunk of which goes toward taxes, retirement, student loans, and business expenses. A few years ago, Ley started using her talents to afford travel while staying within her strict budget. Here’s what we all can learn from her process. 

Outside: How do you manage your freelance income and your savings?
Ley: I keep an active text document on my computer where I track my monthly bills and review it every few days. I have most of my monthly bills on auto-pay, so I never have to worry about late fees. For larger payments, like my student loans, I mark the withdrawal date in my calendar so I make sure to have enough funds in my account. In that same doc, I keep track of active clients and the amounts of projects affiliated with each one (when the deadline is and when I expect to be paid). To project monthly income, I total those up, but it often fluctuates; sometimes clients will put projects on hold or I’ll receive payments later than expected. Since my income is so inconsistent, I keep an emergency fund in savings, where I accrue 2.2 percent interest as long as my balance is at least $2,000. This is the fund I typically draw from for my travel adventures.

How did you get started on your current career path?
Early on in my career, a few years after moving to New York City, I worked as the art director for Wanderlust, a series of yoga, wellness, and music festivals. The events take place at different mountain resorts across North America, and traveling was an incredible perk of the job for most of the staff. My job designing, though, didn’t require me to work on-site at the events, so I had to get creative to make a case for my travel expenses to be covered. I took on the role of organizing teams of photographers at each event, took lots of photos myself, and helped run our social-media accounts. I didn’t get paid extra for doing this work, but getting to travel made it worth it. These experiences solidified my love for travel, and I realized that working on the go with a laptop thrilled me much more than sitting in an office. A few years later, I saw a listing to intern abroad in Switzerland for three months as a designer, and I jumped at the opportunity. The pay was low, but I saw value in having flights and housing paid for. The hours were full-time, but I took on freelance projects alongside the job in order to fund adventure-filled weekend trips all around Europe.

(Abbey Ley)

What money-saving tricks or tips did you use on your recent trip to Bali and Australia?
I originally planned the two-week trip to Bali because my friend owned a meditation and yoga-retreat center in Bali, and she let me stay there for free in return for branding and graphic-design help. I traveled in late January and February, which is the off-season, so flights were much cheaper than they would be in the summer. I also stayed with a friend in Brisbane, Australia, so that took care of lodging expenses. When I wasn’t hosted, I booked lodging via Airbnb. Homestays in Bali are very affordable in comparison to the U.S., so I was able to stay in a few beautiful places for about $30 per night. Food is also pretty cheap (and delicious) in the country. 

Australia is more expensive, so while staying with my friend in Brisbane, I shopped at the farmers’ market and grocery store and utilized his kitchen to cook meals instead of going out all the time. When I left Brisbane to explore Melbourne and Sydney on my own, I booked my own room in shared Airbnbs (and made some great new friends). I also stayed outside the central business district in areas that were less expensive. One money-saving idea that I decided to do a bit last-minute was to take an overnight train from Melbourne to Sydney, which saved me a night of lodging. Even though I didn’t book a sleeper car, I was still able to get some decent shut-eye.

What tips would you offer someone who wants to figure out how to use their talents to trade for travel?
There are so many careers that can be done remotely and so many opportunities to travel for work. You probably have a skill or two that is worth value to someone else, if you think about it. Figure out what you’d most like to do, and research to find out all you can about it and the location you want to travel to. Reach out to people who are doing or have done what you want to do, and ask them questions. For women, there’s a Facebook group called Girls Love Travel that has been a great resource for me.

Save up in preparation for your trip, especially if you are trading your services or volunteering in exchange for travel. When agreeing to trade or volunteer your time, be realistic about the duration of time you can commit to. If you’re able to take on paid work while trading or volunteering, that will help. If not, look for opportunities that provide something of value to you (travel, housing, or meals).

Is there anything we can do from home to prepare for a long trip?
I always cancel subscriptions I don’t use or can live without. Trim is a great mobile app to help with this. Before I go on vacation, I try to double down on the number of meals I make at home. (I always save a surprising amount of money not going to restaurants.) I try to do this on the road, too.  

Finally, I rent out my Brooklyn apartment on Airbnb while I’m gone, even if it’s just for a couple weeks. For my Bali and Australia trips, I hired a friend who lived in my building to check on the place between guests. It took a good amount of communication and maintenance, but we figured it out in the end, and in addition to the extra income, I liked helping facilitate other people’s travel.

Steven Merrill, Financial Planning: Why can’t I keep up with the market?

Question: I have been investing for years, but I never seem to do as well as my friends. I own high quality mutual funds, but I don’t even earn as much as the mutual fund company says I should earn. Do you have any idea why my portfolio always seems to lag? This is getting frustrating.

Answer: Without knowing your portfolio history, it is impossible for me to explain exactly why your portfolio might be underperforming. However, there are several things you need to consider when you think about your investment performance.

First, keep in mind that measuring and reporting investment performance can be tricky. If you want a thorough discussion of the issues involved, check out the “Global Investment Performance Standards,” or GIPS. This 447-page document is the gold standard for investment performance reporting. It is published by the CFA Institute and is used by all reputable investment advisors as the basis for reporting performance. GIPS is available to the public at www.GIPSstandards.org.

You should also keep in mind that comparing your investment returns with your friends’ returns is a foolish exercise. Your situation is different from their situation in ways that you cannot possibly understand without digging into the intimate details of their financial lives. Investments that are appropriate for them may not be appropriate for you and vice versa. Focus instead on making sure that your investments match your circumstances and that your portfolio is properly constructed.

Consider also that your friends are probably not giving you the full picture. I’m not saying that your friends are lying, but they may not know what they are talking about. Remember what I was saying about the complexity of investment measurement and reporting? In any case, do yourself a favor and tune out the external noise and focus on your situation.

When it comes to your own investments, there are a number of reasons why you might underperform—even if you own a well-managed mutual fund. These reasons include the effect of loads or commissions, the timing of your investments or withdrawals, and what you choose to do with dividends. An example will help illustrate what I mean.

Let’s suppose you invest $1,000 in a particular mutual fund at the beginning of the year. At the end of the year your mutual fund company reports that your fund was up 10 percent. Without any extenuating circumstances, you would expect your investment account to now be worth $1,100.

However, suppose you paid a 3 percent load to buy the fund. In that case, you really only invested $970, and your investment would have grown to be only $1,067. You did earn 10 percent, but on a lower invested amount. Over time, the effect of that load will diminish, but if you pay a load on every addition you make to the fund, your performance will always lag. The Securities and Exchange Commission has tried to help investors better understand the effect of loads on portfolio performance by requiring fund companies to report load-adjusted returns in their prospectuses, but many people gloss right over those disclosures.

Mutual fund companies also report performance assuming you made a single lump-sum investment at the beginning of the year and held the investment for the entire year. To the extent you make multiple investments over the course of the year, or take withdrawals during the course of the year, your actual performance will differ from the fund’s reported performance. If the market is going up, your performance will lag the market.

Finally, published fund performance numbers assume you immediately reinvest dividend and interest payments back into the mutual fund. If you withdraw dividends or interest payments or invest them in something else, your actual performance will not match the fund’s reported performance.

Steven C. Merrell is an investment adviser and partner at Monterey Private Wealth Inc., in Monterey. Send questions concerning investing, taxes, retirement or estate planning to Steve Merrell, 2340 Garden Road Suite 202, Monterey 93940 or steve@montereypw.com.

Ridgewood Savings Bank: Does Your Bank Offer These 5 Big Perks? – WABC

NEW YORK — There are few banking tools you depend on more than your checking account. That’s why, no matter how you like to spend and manage your money, you need an account that makes it easy and rewarding.

Unfortunately, not every checking account can deliver. If you’re thinking about upgrading yours, here are five valuable benefits you should expect from your bank:

1. Easy Ways to Manage Your Money
A busy schedule shouldn’t keep you from staying on top of your finances. The right bank will offer state-of-the-art digital banking tools that let you manage your money when and where you want. At Ridgewood Savings Bank, our highly rated Mobile Banking app brings the bank to you: Deposit checks with your smartphone, pay bills, schedule recurring transfers, get eStatements, use the Money Management (MX) budgeting tool, pay friends and family using Popmoney – you can even bank with your SmartWatch.

2. Cool Rewards
Does your bank provide you with a debit card rewards program that shows you they are grateful for your business? If not, look for a bank that will. Ridgewood has two FREE rewards programs: With the first, uChoose Rewards, you can earn rewards points automatically when you make purchases with you debit card, check your points balance online, easily redeem points online and access a vast selection of rewards, including cash back, travel, sporting events, concert tickets, gift cards and more. With the second rewards program, Purchase Rewards, you can turn everyday purchases into cash by activating exclusive cash back offers at select retailers.

3. Tons of Surcharge-Free ATMs
You shouldn’t have to pay to get your own money, but here in New York and across the country, out-of-network ATM fees are higher than ever. Choose a bank with a large ATM network so you can avoid ATM fees without going out of your way – even when you’re away from home. As part of the Allpoint network, Ridgewood offers our customers surcharge-free access at more than 55,000 ATMs around the world – far more than you’ll find at even the largest national banks.

4. Instant-Issue Debit Cards that Are Convenient and Secure
Other banks make you wait days to receive your new card in the mail. But when you open your checking account at a Ridgewood branch, you’ll have your free Ridgewood Debit Mastercard before you walk out the door. Plus, add your Ridgewood Debit Mastercard to your Mobile Wallet and use Google Pay, Apple Pay or Samsung Pay to make payments with your phone. And if there’s ever a suspicious transaction, find out fast with real-time Debit Card Fraud Text Alerts.

5. Built-in Identity Theft Protection Services
Did you know that tens of millions of Americans are impacted by an identity crime, such as identity theft or data breaches, each year? That’s two new victims every second. The risk of identity crime is growing, which is why it’s important to choose a bank that offers the resources to help you fight it. Ridgewood partners with EZShield to provide all our checking customers with ID restoration services with a Certified Resolution Specialist, available 24/7 from U.S.-based experts. Ridgewood Premier Checking customers receive EZShield ID Protection Plus, which provides dark web monitoring and credit monitoring, free.

Upgrade Your Checking Account – and Your Bank
Whether you want easy ways to manage your money, a competitive rate or exclusive benefits, Ridgewood Savings Bank has the checking account for you, along with lots of great features you won’t find at most banks. Learn more, compare accounts and open yours today.

Terms and conditions apply. Products, services and benefits subject to change without notice. Message rates may apply. EZShield is a third-party company and is not affiliated with Ridgewood Savings Bank.

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An Echo Press Editorial: Easy ways to save money

As part of Financial Capability Month, the Minnesota Department of Commerce is reminding Minnesotans about basic low-cost measures people can take to reduce energy use, cut utility bills and put more money in their pocket. Here are a few ideas:

• Use a programmable thermostat to reduce your heating and cooling costs.

• Turn off computers and monitors when not in use.

• Plug home electronics, such as TVs and DVD players, into power strips and turn the strips off when equipment is not in use.

• Turn off lights and fans when nobody is in the room.

• Close your fireplace damper when not in use.

• Take short showers and use low-flow showerheads.

• Turn your hot water heater down to 120 degrees F.

• Wash only full loads of dishes and clothes, and air dry both when possible.

• Replace incandescent lights with much more efficient lighting, such as light-emitting diodes (LEDs).

• Look for the Energy Star label when purchasing new appliances, lighting, and electronics.

• Have a home energy assessment to identify ways to make your home more energy efficient (weather-strip doors and windows, seal air leaks, add insulation, and more).

• Go to work via carpool, use public transportation, or telecommute.

The commerce department points out that simple behavior changes such as turning off lights, air drying clothes outdoors and setting your hot water heater at 120 degrees don’t cost you anything. But applied together, they can shrink your utility bills and grow your bank account over time.

Here’s an example: Replace an old energy-hog refrigerator with a new high-efficiency model. The new refrigerator will likely pay for itself in seven or eight years via energy savings, and you will enjoy additional energy savings for the life of your appliance.

Likewise, a properly installed and operated programmable thermostat will pay for itself in as little as one year with energy savings, according to the commerce department.

For more energy-saving tips, check out the Minnesota Department of Commerce Home Energy Guide (.pdf) or the U.S. Department of Energy’s Energy Saver Guide(pdf).