Tag Archives: financial planning

The Personal Economics That Drive Services Like eBay & Airbnb

As a Product Manager at eBay in 2004, I had the opportunity to fly to New Orleans for my first eBay Live in June of that year. Over 10,000 eBay fans, mostly part-time sellers, gathered together to discuss, debate and learn about new features that the eBay platform offered them. I’ll never forget that experience, for while my official role was to teach eBay sellers about new features available on the platform, the truth is I learned more from them about their lives and reasons for selling on eBay. The biggest lesson I learned from speaking to hundreds of people who sold either part-time or full-time on eBay was a simple one. The relatively small amounts of additional income and […]

Too Much Liquidity Will Cost You Over the Long Run

When it comes to investing the general belief is liquidity is a good thing. But is liquidity always a positive?  The answer is no. Fifty years of personal investing experience and as many years observing other investors, particularly those managing their own investments, have led me to conclude that too much liquidity has, in fact, done individual investors more harm than good. Liquidity with a specific purpose  in mind is usually positive. For example, there is a clear benefit to having ready access to cash in an emergency fund to cover unexpected medical costs or your expenses between jobs. Other limited benefits of liquidity for the average investor might include keeping money for a down payment on a car or […]

Build the Emergency Fund That’s Right for You

One of the pillars of sound personal finance is the emergency fund.  An emergency fund is money set aside before everything else to cover unexpected expenses. This is the first step to building your financial future, even before you start investing. The challenge is it’s hard to predict when or if you’ll need money to cover your living expenses if you lose your job or experience unusual healthcare costs associated with a family member becoming seriously ill. Therefore it should not be surprising that the most common question we receive with regards to emergency funds is how large should they be?  For most people the answer is probably enough money to cover your living expenses for three to six months.  […]

Making the Case for Financial Planners

There are a number of value-added services that can improve your financial future.  In the past we have written about the benefits of engaging a tax advisor and an estate planner. In this post we make the case for financial planners. We believe financial planning can make a huge impact on people’s lives. That’s why we have dedicated a number of our blog posts to the topic.  However we are aware that many people could benefit from having an expert to drill down further on the covered concepts.  That’s where a financial planner can really help. In our experience there are five primary areas where a financial planner can add value: Cash Flow & Budgeting Asset & Debt Management Helping […]

The Advice You Need, Not The Advice You Want

Last week’s post, You Need Equity To Live In Silicon Valley, generated quite a bit of emotion from our readers. A number of people missed the point of the post, which explains the economics of living in Silicon Valley. We pointed out that it’s hard to make the numbers work if you don’t own equity in a business that could be worth something in the future. Unfortunately a number of people misinterpreted the article as a condemnation of Silicon Valley. Real estate is expensive in the Valley because so much wealth is created here. You can waste your time making a value judgment about whether it’s good or bad that the wealth we create, combined with a low inventory, drives […]

Couples Investing: How To Determine Risk Tolerance

A couple of weeks ago we wrote a post that discussed the importance of talking to your partner about money. Perhaps the single most difficult issue for couples to resolve is how much risk they should take with their investments. Managing your accounts separately is not a good solution. Whether accounts are titled separately or jointly, they are considered marital assets. Even 401(k)s, which almost all married couples manage separately, are marital assets. I don’t suggest you invest as if you expect to get divorced, but a healthy relationship depends on working jointly toward your financial goals. The conventional wisdom is you can best determine your joint risk tolerance through the pursuit of a consensus. If the two of you […]

Should You Get An MBA?

If you’re considering an MBA, you face two separate but related questions: Is the degree worth it? And, How will I pay? They are important questions because so many people, including many of our clients, consider going back to school when they want to change careers. But an MBA isn’t an automatic ticket to success, and it carries a high price. A full-time MBA at a top-ranked school costs between $96,000 and $127,000 in 2011, according to Businessweek. The costs at second-tier institutions (many of them big state schools) are $30,000-$40,000 less, but that’s still hefty. The price of school is only the beginning. The opportunity costs of forgoing two years of salary and career advancement are likely to be […]

The Case Against Maxing Out Your 401(k)

2012 IPOs: High Expectations, No Assurances

Most every personal finance blog I have ever read recommends maxing out your 401(k) contribution. They tell you to “just do it” – contribute as much as you can, as early as you can. I couldn’t disagree more. Forced savings I believe most bloggers (and many financial planners and low-quality investment advisors) recommend maximizing 401(k) contributions as a way to enforce a savings discipline. They believe that without automatic deductions, people won’t save at all. Our readership tends to be pretty disciplined and intelligent in their approach toward their finances, so I don’t think they need such a brute force recommendation. For our clients and readers, we emphasize transparency, rational decision-making and the use of mathematical tools. We recognize how […]

When A Roth 401(k) Trumps A Traditional 401(k)

The New Year’s Day tax deal (also known as the fiscal cliff legislation) made headlines in the retirement world because it included new rules to make it easier for employees to convert existing traditional 401(k) plans to Roth 401(k) plans. Over the past six years, an increasing number of companies have begun to roll out Roth 401(k) options for their employees. Many people now have the simple question: “When does it make sense to choose a Roth 401(k)?” Before we answer that question, you should understand the key difference between a Roth 401(k) and a traditional 401(k). With a Roth, you’ll pay taxes on the money you invest now, but no taxes when you withdraw the money at retirement. In […]

Financial Resolutions For Silicon Valley

At this time of year, you commonly see articles that offer long checklists of typical financial advice. If you’re looking for that, look elsewhere. We didn’t want to write one of those typical posts. It’s not that the advice is bad, it’s that those changes don’t matter much. You should maximize your IRA contribution, roll over your old 401(k), set goals and a budget for 2013, and donate to your favorite charitable organizations. These suggestions are worthwhile. Put them on your to-do list. Whether you do them now or in a few months […]