Money Management

The perfect investment: myth or reality? 

When it comes to investing, the phrase “perfect investment” is often used by Wall Street professionals — but what does it really mean? Many investors believe that the perfect investment exists and that if they find it, they will be able to make a fortune. However, this is not the case.

Vivian Tu, a professional Wall Street investor who goes by the handle YourRichBFF on YouTube, recently said that if there was such a thing as the perfect investment, she would already be a billionaire living in Bora Bora and not be making internet investment videos! While there is no perfect investment, Tu says that these three investments are good starting points for beginner investors who don’t know where to begin.

Target-date funds

The first type of investment is target-date retirement funds. A target-date retirement fund is an investment option that can be especially beneficial for those who don’t have time to actively monitor their investments. An investor chooses the fund based on their expected retirement year. For example, if you are in your mid-30s and want to retire around age 65, then the Vanguard Target Retirement 2055 Fund may be right for you. The “2055” refers to the year the fund will mature.

The investments are diversified within the fund, with assets shifted from stocks (higher risk/reward) to bonds (lower risk/reward) on the estimated retirement year entered. As the retiree nears their target date, the fund will become more conservative to reduce volatility, protect capital, and help ensure adequate resources will be available when it comes time to retire. All this makes a target-date retirement fund an attractive option for those who wish to save for their retirement, but may not have the time or desire to do so by manually constructing a portfolio.

Index funds

The second type of investment is an index fund. Index funds track and mirror indices such as the S&P 500 or NASDAQ Composite index. Investing in index funds can be a great way to build wealth over time. With low fees and reliable returns, they offer an attractive option for those looking to grow their retirement savings.

Unlike individual stocks or bonds, these funds do not require much effort on behalf of the investor, as they are passively managed by professionals. Index funds are a good choice for investors who want to invest in the market but don’t have the time or resources for active trading. Best of all, there are plenty of free trading apps that you can use to buy index funds.

Robo-advisors

Finally, another great option for beginner investors is a robo-advisor service like Betterment or Wealthfront. Robo-advisors are investment platforms and online tools that provide automated investing services. It uses algorithms, analytics, and automation to help investors manage their portfolios. Through the investment app or online platform, users can access and control their investments with ease.

Robo-advisors provide service 24/7, making them easier and more convenient for busy individuals who do not have the time or resources to actively monitor their investments. Users also benefit from features such as investment advice tailored to individual goals and risk tolerance, automatic rebalancing of portfolios, tax-loss harvesting, and portfolio diversification. This can help investors save valuable time while making informed investment decisions.

Although finding the “perfect” investment may be impossible, there are still plenty of good options out there for beginner investors. Target-date retirement funds, index funds, and robo-advisors all offer ways to diversify your portfolio. Diversifying helps you reduce your risk, optimize your returns, and meet your long-term financial goals!

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While some Ramsey tips make sense, others could potentially get you in trouble. 

After you buy a home, chances are good that you’ll be faced with the desire (or the need) to renovate some part of your property at some point during your time living in it. The problem is, paying for repairs and upgrades to your property can be a big expense on top of your mortgage loan.

Finance expert Dave Ramsey has four tips on how you can save money if you are renovating. But, while some of these tips could be smart, others could actually end up causing you big problems.

Here are Ramsey’s recommendations, along with some advice on whether you should listen to them all.

1. Do one project at a time

Ramey’s first suggestion is not to try to do too many things at once.

“When you look around at the outdated countertops, stained carpets or mismatched fixtures in your home, it might feel like you can never invite anyone over until it all gets done,” Ramsey said. “But instead of maxing out credit cards on a huge reno or sitting around feeling discontent, budget for any big purchases a little each month, or knock out smaller changes one at a time.”

Ramsey suggested this approach can give you time to identify sales and bargains that can reduce your overall renovating costs. It can also mean you have more time to come up with cash to cover each project.

While this advice can make sense, sometimes it isn’t practical — or could end up costing you more. For example, if you’re hoping to get new countertops installed throughout the entire house, it may be cheaper to have the granite company come out once to do them in the kitchens and bathrooms rather than having them out multiple times. So, that may mean renovating both the kitchen and powder room at the same time.

2. Save and pay cash for big projects

Ramsey also said it’s a good idea to save up for a big remodel rather than financing it — even if this takes a little more time.

Again, this is great advice in most situations. If you can save up to pay cash for upgrades, you avoid the hassle of applying for a loan and the interest charges that go along with it. But, it’s also not always practical.

If you have urgent upgrades you need, or if you can qualify for a low interest personal loan that you can pay over time that will enable you to make a change that makes your home significantly more livable, it may be worth borrowing to get the job done.

3. Try to DIY repairs when possible

Ramsey said that leveraging sweat equity can be a great way to cut your home repair costs.

“It’s pretty fantastic what you can learn to do on YouTube these days,” Ramsey said. “Contour your makeup until you look like a completely different person. Learn self-defense moves that rival Chuck Norris. And watch step-by-step guides to basic home repairs. That last one can come in quite handy when you need to fix a simple toilet leak but don’t want to pay an hourly rate for what might be a five-minute job.”

While Ramsey acknowledged that you should leave certain jobs to the pros, including those related to structural issues and electrical issues, the reality is that following this advice can backfire even outside of these specific situations, where a faulty repair could put your life at risk.

If you are not a handy person, trying to make changes to your home based on watching a YouTube video showing you how to do it could end up costing you a fortune. You could easily make a mistake that turns a minor five minute repair job into a major disaster. So, unless you are truly confident you can’t mess anything up, do not try to DIY.

4. Barter to get the job done

Finally, Ramsey suggested trying to barter to get some repairs taken care of when possible.

“For those assignments that need an expert, do you know someone who’d be interested in trading skills? You could offer to design their website, photograph their family, or help them file their taxes. Go old school and barter your expertise for theirs.”

This is also not necessarily advice worth following. Your time also has value, and if you’re a professional photographer or web designer, why not just find a client to offer these services to and then collect the money to pay your plumber or home repair professional? There’s very little reason to limit yourself to finding someone to barter with instead of just using your skills to make money you can use to pay for repairs.

Ultimately, as you can see, some of these tips make more sense than others — so consider carefully whether Ramsey’s advice on cutting home upgrade costs is worth listening to.

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Predict the same doom and gloom often enough and it will eventually come true. 

When it comes to the economy, the past two years have been dizzying. While there have been plenty of predictions of doom, gloom, and a severe recession, nothing has come to pass just yet. That’s not to say that the U.S. economy won’t hit bumps in the road as it continues to rebound from COVID-19. Still, glimmers of hope abound.

Positive signs

For example, home builders feel optimistic about the housing market in 2023. While prices are still too high, inflation has begun to cool, thanks primarily to the number of interest rate hikes initiated by the Federal Reserve. And in January, U.S. consumer spending surged by 1.8%. When adjusted for inflation, consumer spending was up 1.1%, the most significant increase in nearly two years.

Manufactured goods received a significant boost from the increase in spending. Among the big-dollar items Americans purchased were vehicles, household furnishings, and recreational equipment. We also bought more clothes and spent more on healthcare and recreation. Spending on services rose 1.3% as more of us hit bars and restaurants after the new year.

This surge in consumer spending is especially surprising because it comes amid so many predictions of doom and gloom. In fact, the report from the Commerce Department on Feb. 20 indicates that the economy is nowhere near a recession.

Mixed messages

Another mixed message we’ve recently dealt with has to do with the unemployment rate. One reason economists predict a recession in 2023 is because of expected job cuts. However, job growth in January was robust, and the unemployment rate was lower than it’s been since Nixon was in the White House.

Every dollar put back into the economy acts as a stimulus, keeping small businesses open and drawing more tax revenue into local governments. Those tax dollars build schools, repair roads, and make life more pleasant for area residents.

Better understanding of how it works

As we each did our best to get through the pandemic, we learned things along the way. For example, we now know that direct payments to our bank accounts were meant to accomplish two things: Help families struggling to pay bills and stimulate the economy.

In 2021 alone, stimulus checks and monthly tax credit payments lifted 19 million out of poverty, pushing the child poverty rate to a historic low. The answer as to whether direct payments stimulated the economy is more nuanced. Those with the least money in the bank at the beginning of the pandemic were the most likely to spend their checks, which did help stimulate the economy, while funds saved or used to pay debt did little to help.

While a recession did hit in the first half of 2020, it ended up being the shortest on record, at only two months. Some economists credit stimulus checks with preventing a second, more severe recession. Still, stimulus checks are credited with saving the economy from a much higher unemployment rate and a double-dip recession.

According to Reuters, some economists expect payback in February. While they may be right, recent consumer behavior indicates they may just be wrong.

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The quick answer? It will also depend on supply. 

Having a car is one of those things many people can’t compromise on. If you live in an area without public transportation, then chances are, you’ll need a vehicle to commute to work, run errands, and just plain function.

Meanwhile, if you’ve been in the market for a new car for quite some time, you’re no doubt aware that vehicles have been expensive to purchase the last few years. But will things change in 2023? Well, that depends on one key factor.

It’s all about supply

Chip shortages earlier in the pandemic, among other factors, brought vehicle production to a halt in 2020 and 2021. That’s led to a massive shortage of new cars — and a classic case of demand exceeding supply.

In case you didn’t take Economics 101, or you slept through it, any time you have a situation where the supply of a given good isn’t robust enough to meet buyers demand, its price tends to rise. That explains why so many recent car buyers have taken on tremendous auto loans in the past year — car prices have just been that high.

But things could change in the course of the next 12 months. First of all, those supply chain issues and chip shortages are apt to resolve eventually, and 2023 could be the year when the supply-demand gap is nicely bridged. Also, there are already signs that supply is catching up to demand — even though we’re not at the point where we can call cars “affordable” overall.

Edmunds data reveals that the average transaction price for new vehicles was $47,681 in November 2022 — a record high. However, that was the first month since July of 2021 where the average transaction price for new vehicles came in below the average MSRP (manufacturer’s suggested retail price). And this past November, the average MSRP dropped to $47,696.

Now, it’s worth noting that the aforementioned drop in price is concentrated across larger trucks, SUVs, and luxury vehicles. And again, the reason likely boils down to demand. There’s generally less demand for these types of vehicles than for smaller and lower-priced vehicles. But still, we can take this as a sign that supply may be picking up. And that could lead to lower car prices in 2023.

How to save money on a car purchase

A good 14.8 million new cars will be sold in 2023, according to an Edmunds projection. If you plan to buy a car this year, it’s important to set a budget. Take a look at your savings account balance to see how much you can afford to put down on a vehicle purchase, and then crunch the numbers to see what auto loan you can afford.

If money is tight, there are also steps you can take to save in the course of buying a car. First, shop around. Compare prices at different dealerships, and also, compare auto loan rates across different lenders.

Next, skip the bells and whistles — or at least make a list of priorities and avoid pumping money into features that aren’t so important to you, or that you’re unlikely to get a lot of use from. The people who sell cars tend to be very good at talking up those add-ons. But if you’re able to avoid the temptation to upgrade your vehicle, you might walk away with a car purchase that actually doesn’t break the bank.

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Everyone is entitled to an opinion. Some are more insightful than others. 

Dave Ramsey is concerned about the number of American men currently unemployed and unwilling to go back to the old 9 to 5. Ramsey’s sidekick for this taping of The Ramsey Show was Ken Coleman, a regular Ramsey contributor.

According to a report the men picked up at Fox News, 7 million able-bodied males between the ages of 25 and 40 could work but are not looking for employment.

Ramsey’s take

Ramsey primarily blames the women in their lives for what he refers to as the “wussification of America.” Ramsey said, “As a parent, you suck because your kids have no grit.” He then tells mothers to throw their 25-year-old out of their basements and teach them to work.

Ramsey goes on to say that these mothers are not only doing a disservice to their sons but also to their neighbors, America, and the mental health industry.

The financial guru wraps up by saying that the government, mothers, and live-in girlfriends are enabling unemployed men.

Ramsey, whose typical discourse covers issues like debt and investing, believes he knows where the problem started. It all began with Americans taking “pain away from kids,” removing struggles from their lives, and not allowing them to learn about the sting of rejection.

Self-medicating?

Ramsey and Coleman claim that men between the ages of 24 and 40 spend an average of 2,000 hours a year on their computer screens. Coleman calls it “self-medicating.”

According to Ramsey, unemployment causes mental health issues. And to a degree, he’s right. Can unemployment cause depression? Absolutely. Trying to get by without a job and money in the bank is one of the most stressful experiences an adult will face in their lifetime.

However, according to Harvard Business Review, after years of research, the medical community now accepts the relationship between workplace stress and illnesses like heart disease, hypertension, upper respiratory infections, peptic ulcers, reduced immunity, and migraines. And yes, they’ve also identified the connection between a miserable job situation and depression and suicidal tendencies.

What goes unsaid

What Ramsey and his friend failed to discuss is why these people are not anxious to get back out there. There was no mention of why their families — those who know these men and their struggles best — don’t appear to be pushing them out the door.

Here are three other potential reasons these folks are currently unemployed:

99.9% of all businesses in the U.S. are small businesses. Some of these men may see this as their opportunity to build something of their own.Ramsey spoke of how “unfair” it is to current business owners that these men will not accept their open job postings. He did not cover how unfair it is for business owners to treat their employees like a commodity, expecting them to give their all for a non-living wage. He didn’t mention how quick businesses are to lay employees off anytime profits dip.Coleman, who seemed to be in charge of the statistics for this particular episode, did not break down how many of the unemployed are men of color. To do so would demand a frank discussion about the financial fallout of COVID-19 on Black and Hispanic communities. It would also require acknowledging that racial inequity is alive and well — even in the workplace.

Coleman ended the show by saying, “Just no more government entitlements.”

Nothing in life is black and white, including the millions of Americans who continue to weigh their options. Hopefully, when these men do go back to work, it will be to interesting jobs that pay a living wage.

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You can take a passive role in making these happen. 

Chances are, you have different financial goals you’re looking to meet. Maybe you want to build an emergency fund and a solid nest egg for retirement. And saving and investing your money is a great way to get there.

Of course, the more thought and effort you have to put into your goals, the more daunting they might seem. But what if there were a way for you to take more of a hands-off approach to meeting your goals?

The good news is that there is. Here are three goals you can tackle by putting the process on autopilot.

1. Building an emergency fund

A recent Federal Reserve survey found that 32% of Americans could not cover a $400 emergency expense from savings. If that’s the boat you’re in, then building an emergency fund should really be a priority for you. And a good way to do so is to put the process on autopilot.

Rather than do your best to manually put aside money to save every month, arrange for an automatic transfer from your checking account to your savings account at the start of the month. That way, you won’t be tempted to spend money that should really be going into your savings.

2. Building a nest egg for retirement

Seniors who retire on Social Security alone often struggle financially. That’s why it’s so important to steadily fund a retirement savings plan. And you have two options in this regard.

If your employer offers a 401(k) plan at work, all you need to do is sign up. Just tell your employer how much money you want deducted from your paychecks, and they’ll do the rest.

If you don’t have access to a 401(k), you can save for retirement in an IRA account instead. And once again, you have the option to automate the process. Just set up an automatic transfer from your checking account so money lands in your IRA every month off the bat.

3. Building a solid investment portfolio

Maybe you want to invest your money outside of a retirement plan. If so, many brokerage accounts allow you to not only set up automatic transfers so you have funds to invest with, but also, automatic investments.

You might, for example, decide that you want to buy a certain number of shares of a given stock once a month. That’s something you can set up within your brokerage account so you don’t have to think about it. And if you own stocks that pay dividends (which usually happens on a quarterly basis), you can set yourself up to have those dividends reinvested automatically.

There’s no rule stating you have to actively spend time on your finances every month. Granted, it’s always a good idea to track your spending and keep tabs on your different goals. But if you want to build yourself an emergency fund, a retirement nest egg, and a thriving portfolio of investments, you can actually take a more passive role and still meet your goals.

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