The Global Challenges of Corona Virus.

The challenges posed by the raging corona virus across the global community is stretching far beyond the scope of healthcare. It's beginning to take its toll on the socioeconomic lives of people especially in the United States.

Just like the unfortunate aftermath of the 9-1-1 tragedy, several companies are now closing down and laying off their staff. Just yesterday, a company in Pennsylvania laid off a whopping 700 staff members. Yet, among the multiplying effects of this sad reality is the inability of those being laid off to pay their bills and even feed their families. Mortgage payments, rents, utilities and grocery-shopping are now becoming a herculean task for many families. The situation is really critical.

Today, Delmarva (electric company) announced that it has suspended all service disconnections and waiving late payment fees for those who can not afford to pay. This is a step in the right direction and we can only hope that other utility companies will take a cue from Delmarva while praying for them all to remain in service. God bless America.

One of the highest-paid Persons that is Living Frugally.

Calling Doctor Frugal: Near the top of the Rockstar Finance Net Worth Tracker sits the Physician on FIRE (I'm calling him PoF from here on out). PoF is an anesthesiologist who makes a healthy income. According to one of his recent posts, the average pay for his specialty is $350,000. Based on where PoF lives, his pay probably exceeds $400,000 (about four times more than the average American household). Despite the big income, he's not a big spender. The PoF family went through $62,000 in 2016, less than $63,784 that the average American family plowed through in 2013. 

Lifestyles of the rich and frugal: On a recent vacation, I visited the PoF and his family and was eager to see how they lived. Any time the conversation turned to money or I noticed something related to dollar signs, I made a mental note. Here are some of my favorite observations: 

Home: PoF lives in a modest space in a 1950s subdivision. The house is tastefully decorated with mid-century modern furnishings, right down to the dishes and silverware. All of it could have been purchased at expensive antique stores or through auctions. However, the PoF family bought it here and there, piecemeal from thrift stores, Craigslist and garage sales. There is a custom ceiling in a screened-in room at the PoF house. When I asked PoF about it, he said:

"I found the old wood flooring on Craigslist and thought it would make a neat ceiling. I stuffed it into my car and nailed it up myself."  

While PoF's home is 3600 square feet (equally divided between above ground and basement), it cost less than PoF makes in a year. And PoF's vacation home set him back just $15,400. 

Grocery shopping (PoF's wife speaking here): "We shop at Aldi. They have the best fruits and vegetables."  

Aldi is a discount grocery chain in the United States. No Whole Foods here!

Vehicles: PoF's wife drives a modest minivan and he sports an HHR with over 100,000 miles on the odometer.

Bicycles: PoF has a load of bicycles in his garage. While they are nice bikes, they aren't made out of carbon fiber or exotic metals. He bought most of them used:

"I picked up my road bike and these two mountain bikes on Craigslist."

Going out to eat (or not): The PoF and I sampled beers at local microbreweries, but we never went out to eat. A couple of our outings overlapped lunch and we simply packed sandwiches. And when PoF and his family do go out to eat, they don't visit high-end steakhouses. Before I departed, I asked PoF for advice about a town that we were stopping at:  

"Yeah, we've stopped off at the Arby's there for lunch a couple of times…"

Vacations: I asked PoF his opinion on signing up for a hotel credit card. I'm going to New York and this card would get me two free nights in a super swanky hotel that would set me back $1,600 otherwise. I told PoF that I'm not really comfortable staying in fancy places like that and he said this:

"I don't like it either. I can open my own doors and carry my own bags."

The PoF family isn't cheap. Cheap is serving guests Spaghettis, using generic toilet paper (just don't do it) and tipping poorly. I ate very well at the PoF household and the toilet paper was plush, just how I like it. PoF tipped generously on our microbrew expeditions.



Deprivation or optimization: I get into arguments with extravagant people frequently:

"Why don't you just treat yourself?"

"Just buy it!"

And my personal favorite (is the sarcasm coming through?): "I could never live your life of deprivation."  

The PoF family isn't deprived in any way. They've been to Iceland and recently went on a cruise. PoF's children have loads of Lego ($$$$$). PoF's beer making operation is sophisticated and his refrigerator contained many fancy brews.

They spend money on what matters to them and save when it doesn't: Cars don't make them happy, so the HHR is all they need. Neither does a big home or designer clothes. The PoF family has realized that stuff doesn't bring happiness. Money isn't an issue when you have a net worth north of $3,000,000, but that isn't the only cost of stuff. Managing stuff requires your time. Accumulate enough stuff and it owns you. PoF and his family have optimized their lives for what is important to them. They live minimally and with intention. They optimize their spending and more importantly, optimize their time. 

Be like Dr. Frugal: It's easy to be frugal when you have no money. Frugality by choice is much more interesting. People like PoF have life figured out. He knows what matters and if it costs money, he spends it. However, figuring out what matters is the true hard part, and it looks like PoF has succeeded. You may not be able to earn like the PoF family, but you can certainly live like them. I recommend that you do!

Courtesy: Budgets Are Sexy.

Five Potentially Devastating Mistakes Pre-Retirees and Retirees Make.



Failing to save enough is an obvious, and all-too-common, disaster in the making, but here are five much trickier danger zones to steer clear of. 

The road to and through retirement is filled with potholes. Some are small, and you may be able to drive right over them, but some can be devastatingly deep. They could send you on a financial tailspin with little chance of recovery. 

Here are five mistakes that could hinder your retirement plans:

1. Focusing on the wrong thing: Retirees spend a lot of time worrying about how much things will cost as they age — health care, long-term care, etc. My advice to retirees is to switch their mental energy to the other side of the ledger — their incomes. If you have enough income, and you’re managing it well, you’ll be prepared to handle those expenses as they come at you.

2. Misunderstanding risk: No one knows for sure which way the market will go. We use different measures to aim to figure it out, but at the end of the day, it’s impossible to predict. So, it’s up to retirees to control the amount of risk they are experiencing. For many people, it’s tough to get past the idea that risk equals reward. In the second half of one’s financial life, however, you cannot afford the same kind of risk you tolerated when you were saving money for retirement.

3. Not knowing what you pay: Many people go forward with their financial adviser’s investment strategies without understanding all the possible costs in both hidden and disclosed fees. When you add up the cost of paying your adviser, along with the trading and product costs for your investments, the fees could be upward of 3%. That means you have to get a 3% return just to break even. Don’t just nod and agree with the plan the adviser sets before you — ask questions and check costs.  

4. Leaving your IRA or equivalent to your surviving spouse without considering alternatives: Most people leave their IRA to their spouse without even thinking about how the surviving spouse’s tax status will change — from how the surviving spouse may file (single vs. married filing jointly) to how much taxable income they now have. We encourage married couples to work with their tax preparer or CPA to draw up a mock return that would reflect any possible changes to tax liability if a spouse would pass away. It’s easier to plan for this significant life event than to have to react at that moment. Other choices for bequeathing an IRA would include younger individuals (although they would be required to take required minimum distributions, the percentages to withdraw would be quite small) and a see-through trust.

5. Accepting low returns: The stock market isn't the only place to get a decent return these days. There are many different investment vehicles designed to create lasting income in retirement, which should be the No. 1 focus of retirees. One of those vehicles is a fixed indexed annuity. By taking a portion of their money and putting it on deposit with an insurance company, retirees are able to take advantage of the upside of the market without taking on any of the downside risk. There are also options for creating assistance with potential long-term care costs — something many retirees fail to protect themselves against due to high premiums.  

How can you avoid these potential problems in your retirement journey? I always encourage a person to find an adviser who specializes in the second half of an individual’s financial life and to be sure and ask how the adviser is managing their funds. Receiving good financial advice is one of the most important things you can do for your future self. 

Courtesy: By Roger Ford, RFC, Investment Adviser | Conservative Financial Solutions