This just in. Executives now take home about one third of total U.S. wages. The figure is probably higher when you factor in stock options and other forms of non-wage compensation.
From the WSJ.
Best,
James
p.s. For the record, this trend bothers me. But, I just haven’t put my finger on exactly what about it is causing the consternation.
Hi All,
Okay, so following our recent theme of writing more about asset allocation, here are some thoughts about what kind of assets you want when you are building wealth.
1) Your portfolio should have a broad mix of assets. For example, you want different sorts of investments in your portfolio: bonds, stocks, real estate, commodities, cash, etc. etc. This is basic, everyone knows about diversification. That way if one of these investments tank, your overall wealth won’t take a devastating hit.
2) Okay, so that’s fine. Once you’ve decided on this the question is what are the characteristics of assets that should be held in your portfolio.
A) You want them to make money. That is, your assets should have long term healthy return. The end goal is to build your wealth.
B) High volatility. This is controversial, but if the overall fluctuation in price of your portfolio is steady, high volatility in an individual asset is okay. This allows you to implement buy low and sell high strategies and means that rebalancing has additional beneficial effects.
C) Negative correlation. Correlation is the degree of relatedness between two types of investments. Its important that your assets are not correlated with one another. For example, stocks and gold tend to be negatively correlated. This means, if your gold declines, then your stocks may increase.
Why is this important? For money. If your assets are negatively correlated your return tends to increase. At a minimum you’ll avoid being caught up in situations like last years big stock market losses.
3) Remember: A diversified portfolio should be diversified at two levels: between asset categories and within asset categories. So in addition to allocating your investments among stocks, bonds, cash equivalents and other investment types you’ll also need to spread out your investments within each asset type. So get gold and silver, large and small cap stocks and high yield CDs and savings bonds.
Best,
James
Hi All,
Sometimes I come across something fun and controversial that’s worth pointing out. Well Stephen Levitt – of Freakonomics fame – has a great posting on why some California medical marijuana dispensaries are advocating that local governments tax them. Its not really about personal finance, but its a quick fun read.
Levitt writes…
“The real answer, I suspect, is that he is generating $19 million a year in revenues selling in a market (medical marijuana) that is barely legal. And DeAngelo probably suspects that taxation will increase the likelihood that his business remains legal, for two reasons.
The first reason is that taxing a good implicitly says that the government acknowledges the legitimacy of the activity; we tax legitimate goods, and we fine and imprison those who sell illegitimate goods. Second, while experts suggest that marijuana itself is not very addictive, new sources of tax revenue surely are addictive! So once the revenues start coming, government won’t want to turn off the spigot.“
The rest of the posting is here.
Best,
James
The question has been asked out there before to finance gurus, as to whether or not one should help to pay of their sweetie’s debt before marriage. While there are obviously lots of different opinions on this question, we DINKs have our own two cents to add to the commentary.
Overall we see that before you get married your finances are still not entirely joint. At the same time, many couples live together before marriage, and thus end up sharing finances more than they would have in years past.
For the most part we would both agree that it is not outright best to have one partner pay off the others debt without some caveats. First, there is no obligation to do so. If you aren’t really certain in your own mind that things will work out, you are likely better to put it towards your own savings. Secondly, if you do choose to assist this should be in moderation.
In our case I actually had a bit of credit card debt to start out with. The short story is that I managed to pay off $13k in credit card in nine months flat while only making $35k. While I did scrimp to pay this off, James also assisted. First, when we split up our rent and household expenses, we did so where it was a few hundred dollars in my favor so this could go towards credit card debt. Secondly, when James sold his first apartment, he was kind enough to send $3k of that my way. In this case I had already been paying off for several months and had worked hard to get the place ready for showing, but it was still generous.
For us, we had already known each other for a dozen years at this point, so we were more committed to the process than your average couple just dating before marriage.
Whatever works for you, that is fine. Just be careful. You can get burned by committing too much financially before you are obligated to do so, and it could have big implications on your wealth in the future.
Readers: If anyone has stories around this subject one way or another we’d be happy to hear.
Cheers,
Miel
“Many persons think that by hoarding money they are gaining safety for themselves. If money is your only hope for independence, you will never have it. The only real security that a man can have in this world is a reserve of knowledge, experience, and ability. Without these qualities, money is practically useless. The security even of money depends on knowledge, experience, and ability. If productive ideas are displaced by destructive ideas, economic life suffers.“
Henry Ford
Well, okay…not really.
But if you are in that unfortunate situation you’ve got to pay it off. Seriously.
Here are some things to consider:
1) Drastically reduce your expenses. You can probably live on $30,000 a year, so start cutting back. Any amount you make more than $30,000 put towards your cards. Live as frugal as possible. Learn what frugal living is and what it entails.
2) Do some things to get extra money. You’ll have to put in some serious effort to pay off the debt so you’ll probably be looking for some extra bucks. Saving money isn’t enough at this point, so either look for a second job or get creative with how you can bring in money.
3) If you’ve missed a bunch of payments, consider negotiating with your creditors. If your creditors think you are a deadbeat and aren’t going to pay, you have some negotiating leverage with them. Consider offering 50 cents on the dollar – they might go for it.
4) Avoid the debt consolidation people. Most of them are a big rip off. You probably just need to start paying off your debt, but if you take the consolidation loans it will stay on your credit report for five to seven years.
5) On an optimistic note, things probably go quicker than you thought. When a motivated person chooses to address their debt, it tends to go fast.
Best,
James
Hi All,
The internet is full of information about credit scores. Some of it better than others.
One good source for personal finance tips is Kiplinger. For todays posting, here is a clip from their money basics series. At 3 minutes 54 seconds, its brief and has sound information about what raises or lowers your credit score. We agree with most of these.
For those of you who can’t access the video, the main points are:
A) There aren’t any shortcuts.
B) Factors that lower your score include:
1) Late payments
2) Having too much credit
3) Opening many new accounts
4) Closing older lines of credit
C) Factors that improve your score are:
1) Making payments on time
2) Using only 25-50% of your accounts
D) Scores can be improved quickly. After your behavior changes, you should see improvement in 6 to 12 months.
Here is the kiplinger video:
Enjoy!
James
Seems like a lot of celebrities are having financial problems these days.
Actor Stephen Baldwin has filed for bankruptcy.
Rapper Foxy Brown owes the IRS nearly a million bucks.
Toni Braxton owes California $79,000 in back taxes, the state has a lien on her property.
Case in point: just because someone is famous or talented, they aren’t necessarily good with money.
Best,
James
Apologies for for East Coast readers! Print this offer for a free pastry, with the purchase of drink, is good only until 10:30am today. Keep in mind that the offer only lasts while the pastries do, so it is better to go early. Hopefully some of our West Coast readers can make it on time.
Enjoy!
Miel
The moment you commit and quit holding back, all sorts of unforeseen incidents, meetings and material assistance will rise up to help you. The simple act of commitment is a powerful magnet for help.
– Napoleon Hill
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