EverythingYouNeedto KnowAboutPersonal Financein833Words

[Pages:1]? 2015 Dow Jones & Company. All rights reserved.

THE WEEKLY GUIDE TO MANAGING YOUR MONEY

Sunday

Smart money moves aren't more complicated than you think. They're simpler.

Cut through all the jargon and pontificating and technical stuff, and everything you really need to know about personal finance fits into less than 1,000 words--no more than three to four minutes.

Ignore economic and financial forecasts. Their purpose is to keep forecasters employed. Most professional economists were blindsided in 2008 by the biggest financial collapse in 70 years--and by the stock market's recovery.

Ignore "expert" stock picks. The stocks that Wall Street experts like most generally fare no better than those they like least--or stocks picked at random.

Keep it simple. Complicated financial strategies and investments are mostly designed to enrich managers and salesmen. A simple, diversified portfolio of low-cost index funds, rebalanced yearly, will do just fine--if not better.

Buy individual stocks only as a gamble. Never buy fashionable investments.

Put most of your longterm portfolio into equities. While equities are volatile, they generally produce the best long-term returns--typically about 4% to 5% a year above inflation. But remember to hang on when they plummet.

Invest globally, not just in the U.S. Foreign stock markets, in the aggregate, are no riskier than U.S. markets and offer terrific diversification.

Buy Treasurys, too: In addition to stocks, own some long-term Treasury bonds and some Treasury inflation-protected securities. These are likely to hold their value, or

Everything You Need to Know About Personal Finance in 833 Words

By Brett Arends

even go up, when stocks crash.

Never buy a lottery ticket. The lottery runs a profit, which means the players run a loss. And a study once found that the people who won ended up no happier than those who lost.

Know thyself. Don't pursue complex financial or tax strategies if you're not a details person. Cut up your credit cards if you're a shopaholic. Invest more conservatively if you're apt to panic in a crisis.

Buy high-deductible home and car insurance. It'll

save you money. Insurance is necessary, but is generally expensive.

Protect yourself from disaster. Have disability insurance, either through work or directly. Buy term life insurance to cover dependents if you fall under a bus.

Save early, save often. Time and patience are the investor's best friends. Invest a dollar for 10 years at 4% and you'll have $1.50. Invest it for 40 years and you'll have nearly $5.

Use those free shelters. Contribute as much as possible to your company's 401(k)

plan or equivalent (such as 403(b) or 457), and at least enough to get the company match. If you can, contribute to individual retirement accounts for yourself, and a nonworking spouse, as well.

Make the most of what you have. Don't pin too much hope on the next pay raise or stock windfall. The more we have, the more we want. Psychologists call this the "hedonic treadmill." The only way to have enough is to master the art of being satisfied.

Plan for a long life. A third of your adult life could come after you're 65. Try to

James Bennett

pay off your mortgage, and save at least 10 times your annual salary, by the time you retire. Delay taking Social Security for as long as you can up to the age of 70, to maximize each monthly check.

Don't buy a vacation home as an investment. The carrying costs will absorb most of the price appreciation each year.

Pay off credit cards. Don't carry a balance from month to month unless you are planning to default and file for bankruptcy. Card interest rates are extremely high--partially to account for

the borrowers who will default. Make paying off that debt your overriding priority.

Cut the waste. There's fat in every middle-class budget. Most cellular bills are too high. Most cable bills are too high. Most people waste too much money on their cars. Few habits bust the budget more than eating out regularly.

Beware of buying your employer's stock. Your job there is probably financial exposure enough.

Tune out advertising. If you consider it all to be a pack of cynical lies designed to steal your money, that's about right.

Don't spend money showing off. Designer brands and "luxury" labels are created to overcharge the desperately insecure. They'll mark you out as nouveau riche. Old-money families keep it down low.

Protect your nest egg. Don't drain your retirement savings to pay for your child's college education. Likewise, don't empty your 401(k) or IRAs to start a business. You will be taxed and penalized on the withdrawals even if you lose the money. And so long as the money remains in those shelters, it's protected from creditors.

Teach your children about money. Teach them early and often. No one else will, and they will have to make their own way.

Value your money. Work out how much you take home, after-tax, for each hour you work. And remember that number--especially when you shop.

Share. Finally, if you think giving to charities and good causes is the lowest-priority item in your entire budget each year, re-examine the budget.

The Bottom Line

Change in the three leading U.S. stock indexes since the debut of WSJ Sunday, 9/13/99-2/6/15.

75%

Nasdaq

50

s 64%

25

DJIA

0

s 62%

?25

S&P 500

?50

s 52%

?75 1999 '01 '03 '05 '07 '09 '11 '13 '15

Source: WSJ Market Data Group

The Wall Street Journal

NEED TO KNOW (2030 EDITION)

While we're looking back over the 15-year life of the Sunday WSJ, we thought we'd also look forward 15 years, to items you might have read in a 2030 Need To Know column.

1 Crisis: The number of elderly homeless is projected to jump 10% by 2035 as more seniors have mortgage debt and face rising health-care costs. Developers of low-income senior housing smell a bonanza. "Demand is off the charts," says one executive. --VD

2 Bullish: As the S&P 500 Index neared 9000, a majority of analysts surveyed by The Wall Street Journal dismissed fears that the eight-year-old bull market is due for a correction. Some 84% agreed with the statement "this rally is different from previous rallies." --CG

3 Still at It: The leading edge of Generation X turns 65 this year, but a new survey finds 94% plan to continue working. The top

reason: a competitive job market with five-figure signing bonuses in a health-care industry struggling to serve the 10 million Americans who are older than 85. --AC

4 Bookless: UCLA is the latest university to announce it's abandoning printed undergraduate textbooks in favor of tablets and e-books. State university systems in Colorado, Texas and Florida have also banned printed textbooks. --DCJ

5 Reunited: Federal regulators are expected to clear the merger of Verizon and AT&T, in effect restoring the communications behemoth broken up in 1984. The new "Back-Door Bell," as critics call it, will have 278 million subscribers, 98% of them wireless. --CG

The Numbers

The price growth for four representative stocks over the life of

The Wall Street Journal Sunday

C

RSH/RSHC

264%

4,200%

84%

99.7%

BRKA

BRKA

Berkshire Hathaway 9/10/99: $61,800 2/6/15: $224,880

Apple $2.77 $118.93

Citigroup $303.42 $49.14

Radio Shack $51.13 $0.13

Lawrence Rout, Senior Editor Larry.Rout@

Christopher Gay, News Editor Chris.Gay@

David Crook, Editor David.Crook@

Mark Tyner, Art Director Mark.Tyner@

Lorri Wagner Business Partnerships (609) 520-4235 Lorri.Wagner@

Paul Carlucci Jr. Director of Sales (212) 597-5636 Paul.Carlucci@

CORPORATE HEADQUARTERS 1211 Avenue of the Americas New York, NY 10036

FOR A SPECIAL JOURNAL SUBSCRIPTION OFFER, CALL 1-888-295-2747

ALL OF THIS WEEK'S EDITION IS AVAILABLE ON OUR FREE WEBSITE: Sunday

Thanks for Sharing Your Sundays With Us

This is the 805th--and last-- issue of The Wall Street Journal Sunday.

It's with the deepest sadness that I write that.

I conceived of WSJ Sunday in 1998. With the help of hundreds of colleagues at The Wall Street Journal, Dow Jones & Co. and our partner newspapers around the country, we launched on Sept. 12, 1999. Hundreds, if not thousands, of dedicated people have sustained it over the years.

We're going out with our heads high. We were born the largest personal-finance publication in the U.S., and we still are. We premiered in 10 part-

ner papers reaching 4.5 million subscribers. We peaked in 2005 at 84 newspapers in nearly 11 million homes. Today's edition runs in 67 papers going to 6.2 million households.

But even today's rather large number masks a sobering reality: Each of those partners reaches fewer people than it used to, and advertisers are abandoning broad, middle-market media.

Our unique business arrangement with our partners-- shared revenues and shared expenses--has kept us going over the years. But now, though we exit still in the black, it's no

longer enough. In our first issue, we prom-

ised "the most timely and helpful news and commentary anywhere about managing your money." I hope we've delivered.

More importantly, I hope we've lived up to our fundamentally democratic belief that you--a regular person of modest means and no professional financial background--can take control of your money and build a comfortable future. I hope that we have helped you make your life better, more secure, more free.

As we prepared today's edition, I kept in mind something one of my journalism heroes,

the late advice columnist Ann Landers, once said: "I would rather have my column on a thousand refrigerator doors than win a Pulitzer.'' I'm with you, Eppie.

Even in the age of email and Facebook, there's still a lot to be said for those yellowed clips sharing bites of ancient wisdom whenever you're in the kitchen.

We won't be here for you next week. So get out your scissors.

And thanks for having us in your homes these past 15 years. We'll miss you.

--David Crook Editor

david.crook@

JONATHAN CLEMENTS

How to Live a Happier Financial Life

It all comes down to this.

I wrote for the first edition of The Wall Street Journal Sunday. It seems fitting I should help bring down the curtain. Parting thoughts? With my final 750 words, here are five notions that--I believe--are indispensable to a happier financial life.

Biggest time waster: Commuting

I don't look back at my career with many regrets--except commuting. NJ Transit, the commuter rail system that runs trains into New York City, stole countless hours that I would love to have back.

I have come to view the classic trade-off--accepting a long commute as the price of a big house in the 'burbs--as a pact with the devil. Indeed, research suggests commuting is terrible for happiness. One example: A study in Sweden found that a long commute increases the risk that a couple will separate by 40%.

Best investment attribute: Humility

Wall Street wants you to believe you can beat the market, because market-beating efforts are a big moneymaker--for financial firms. But it hasn't worked out so well for investors.

Yes, Warren Buffett has beaten the market over a life-

time of investing. But there aren't many others.

The math of investing is brutal. Before costs, we collectively earn the market's return. After costs, investors--as a group--must inevitably lag behind.

Trading stocks may offer an adrenaline rush and buying actively managed funds can allow us to dream of riches, just like lottery tickets. But managing money should be about making money, not entertainment. If you want to notch decent returns, put your ego aside and put your money in broadly diversified index funds with rock-bottom annual expenses.

spending, be in better shape if you lose your job, and need less income to sustain your standard of living once retired.

Most important, low fixed costs make it easier to save a hefty sum every month--and that, more than anything, will drive your financial success. I've met thousands of ordinary Americans who have amassed seven-figure portfolios. The vast majority share one attribute: They're great savers.

Best way to spend money: Experiences

I believe money can buy happiness, but you have to spend with care. My advice:

I've met thousands of ordinary Americans with seven-figure portfolios. The vast majority share one attribute: They're great savers.

Key to financial success:

Cheap housing

A third of the money spent by the typical household goes toward housing. Add car payments and other transportation costs, and you're at more than half. My advice: Try to keep those two costs well below 50% of your income, especially in your early adult years.

The less you spend each month on housing, cars, utilities and other fixed costs, the less financial stress you'll suffer. You'll also have more money for discretionary "fun"

Use your spare cash for experiences, not possessions. Pay for the family vacation. Go to a concert. Head out to dinner with friends. This will strike many as counterintuitive. Possessions seem appealing, because they have lasting value, while experiences leave us with nothing tangible.

But this is also the reason experiences can bring more happiness: We have not only the event itself, but also the anticipation before and the fond memories after--and those memories aren't soiled by the messy reality of some

object that gets dirty, breaks down and is eventually discarded.

Top financial goal: Not working for money

Unless you have enough saved for retirement, you need an income. But if possible, never work just for a paycheck. I believe the keys to a fulfilling life are spending our days doing what we're passionate about and our evenings with friends and family.

Problem is, the career that makes us happy in our 20s may not be satisfying in our 40s--and the new career we want to pursue may not be as lucrative. What to do?

Avoid the acquisition treadmill of bigger homes and better cars, and instead save like crazy in your 20s and 30s. Do that, and you could buy yourself the freedom to spend the rest of your life on your terms, rather than one dictated by car leases, credit-card bills and mortgage payments.

Many readers of this column have become my regular correspondents--and I hope that'll continue. From now on, I will be writing for Saturday's Wall Street Journal, while also updating my book, the Jonathan Clements Money Guide, every year.

Keep tabs on me via , my Facebook page (Jonathan Clements Money Guide) and Twitter (@ClementsMoney). Email: ClementsMoney@.

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download