Some weeks, there’s just too much to write about. This is one of those weeks. [Notice that I've fixed the grievous typo; no need to tell me about it again!] Not only is my brain percolating with my own ideas for articles, but the internet is abuzz with interesting stories about personal finance. Pity the blogger with a ton of material!
Rather than waste time with a long intro, I’m going to jump right in. Here are some recent articles you folks have sent me, or that I’ve found through my own web surfing:
Earlier this week, I sang the praises of index funds. If you’re interested in index funds, but don’t know where to start, you may want to consider ETFs, or exchange-traded funds. Nearly all ETFs are index funds, but they’re traded like stocks. Confused? Kiplinger’s has an informative article on how to make ETFs work for you. This isn’t just a light-weight breezy piece; it contains solid info.
Elsewhere, that lovable curmudgeon Warren Buffett is at it again. He has a talent for making both liberals and conservatives angry. In this case, Buffett says that the rich should be paying higher taxes. “Taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further,” Buffett told ABC News. “But I think that people at the high end — people like myself — should be paying a lot more in taxes. We have it better than we’ve ever had it.”
Next, GRS reader Brendan Quinn sent me a link to presentation he recently gave to fellow students at Boston College. In his talk entitled Your Money: Buy Anything You Want, Guilt-Free, Brendan covers what he calls the three rules of personal finance:
- Spend less than you earn.
- Make the money you have work for you.
- Prepare for the unexpected.
I think it’s great to see college students taking the initiative to teach each other about financial literacy. Great work, Brendan!
Last week, The New York Times published a story about Nick Martin, who inherited $14 million ($10 million after taxes) in 1998. “But as so often happens to those lucky enough to realize the American dream of sudden riches,” writes Geraldine Fabrikant, “the money slipped through the Martins’ fingers faster than they ever imagined.” I used to mock folks who squandered sudden riches like this (and there are countless similar tales), but lately I’m more sympathetic. As Flexo at Consumerism Commentary wrote about this story, “It’s easy to be judgmental. The internet is a place where armchair quarterbacks feel comfortable. Very few people know what would happen if the same situation — an unexpected windfall — occurs to them.”
Finally, here are two recent articles from USA Today. Cindy Perman has a long (and controversial) piece about Americans dying with debt. Many boomers have little saved for retirement. But more than that, the article reports that “nearly 40% of retired Americans said they’ve accumulated credit-card debt in their twilight years — and aren’t worried about paying it off in their lifetime”. In happier news, here’s a short piece about a homeless Arizona man who returned a backpack containing $3300 cash and a laptop. Now, that is an awesome story.
There are plenty of other great stories in my stack, but this is already one of the biggest “Spare Change” round-ups I’ve ever posted. We’ll call this good for now.
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Wow, that was a ton of onfo jammed into one article!
First of all, Warren Buffett never ceases to amaze me. He just seems like such a great guy who still lives a simple life, even though he is worth over $45 billion. He verbally expresses that he should be paying more for taxes? Who says that? Crazy.
Also, the story about a homeless man returning large amounts of cash, that’s amazing.
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Most of my life-lessons have come the hard way. But today I am older and wiser, so instead I now learn from the errors others. But given the opportunity, I’d happily squander 10 million to teach myself one more lesson first hand.
Heartwarming story about the homeless fella in Arizona – thanks for sharing that.
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Barring all personal judgments about the man who blew his windfall…I think it breaks down to this:
Some people are frugal by nature. Probably most people that read this site I would imagine. You have a more level-headed relationship with money, and would not be led down this spiraling path of car after car, $170K horses, and antique furniture. At some point your frugality would kick you in the head and say “Wait a second, you don’t need this Stuff!”
Other people are frugal out of necessity. They spend what they earn, they cut back only because their checking account is in the double digits. Suddenly millions of dollars come their way, and their is no mental feedback loop as they jettison boatloads of cash.
I would be really interested in some kind of psychological study of windfall recipients and differentiating the traits of those who lose it and those who don’t.
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Typo police:
“This is one of those works.”
Should be: “This is one of those weeks.”
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Warren Buffett is free to give more of his money to the government. I’m not rich, but I don’t believe in soaking the rich. Let them spend it or invest it which is more productive, in my opinion, than giving it to the government.
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The guy that inherit $10M spent it like a drunken sailor. Too bad he didn’t know the basic of personal finance.
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@Samantha (#4)
Thanks. I caught it already. So embarrassing. This has been a terrible week for me and my spelling. Not sure what’s up with that. Maybe it’s time to have Kris start proof-reading every post, like she used to do in the olden days. Another set of eyes will often catch dumb stuff like that.
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The homeless guy- priceless!
When I read the article about the windfall it came to me that he always had money- just inherited more of it. He came off extremely resentful that he didn’t get as much as the brother who had always run the company. I found his explanations- even his “opps” to be quite self serving. I know people like this- never was taught the value of money- always waiting for the family to pay off. I saw the entire article as a guilt trip on his brother.
‘Poor me…”
Warren Buffet has always said he pays far too little in taxes. His revelation came the day he found out that he paid less in personal tax than his secretary! I like Warren!
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This is indeed one of those “works”
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Great articles! Warren Buffett has long been singing in praise of raising the tax rate on the highest earners, and always used as an example the fact that he pays less tax as a percent of his income than does his secretary!
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In the first paragraph, you said, “This is one of those works.” I believe you meant to say, “This is one of those WEEKS.”
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I actually know a guy I work with who’s goal in life is to die with as much debt as possible.
His retirement plan is to live it up all on credit and hopefully die owing more than is in his savings. He figures if he dies in debt then it was the bank financing his lifestyle not his own blood sweat and tears.
He buys a new car every 2 years, refinances his home a lot and always refinances to a new 30 year loan with the minimum amount of equity. He also loves the idea of reverse mortgages, but I doubt he would qualify.
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I probably wouldn’t feel rich with $10-mil if the people I saw every Christmas and Thanksgiving had $100-mil in the bank. Resisting the temptation to keep up with the Joneses is one thing, but resisting the temptation to keep up with your siblings is a whole other kettle of fish.
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That’s odd. When I checked getrichslowly.org this morning the grammatical mistake in the first paragraph was still there, and there were only two comments. But I read this article last night with at least 10 comments.
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Great info!!
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‘Dying with Debt’ …. what an eyeopener. Once you get into the level of debt that this article alludes to, it is extremely difficult to get out of it. Well, the credit companies know about this phenomenon and I’m sure that there’ll soon be restrictions of some sort on older borrowers whether it be credit limits or frozen accounts. They are, after all, using someone else’s money to pay for those vacations and that ‘someone’ wants their money back with interest. Why give it to a demographic that has no intentions of ever paying it back?
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I think the mentality of “so what?” has ruined us. “So what I have debt when I die?” “So what I walked away from my mortgages from homes I bought after a windfall?” Who does that “walking away” mentality really hurt? the credit card companies, the banks? I don’t think so. Oh, but wait, you don’t care who it hurts. Mostly it hurts your good name, the one you think dies with you obviously.
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what an awesome story about that man in Arizona!! if only we could all be so unselfish!
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I’m not sure what is “controversial” about the retirees with credit card debt article. It seems to me that this is a lot like people who decide to walk away from their mortgages. We do have mixed messages in our culture. We expect people to “take care of themselves” even though that may not always be possible (like with huge medical bills), and we don’t encourage people to save; the overwhelming message is still “he who dies with the most toys wins.”
But, like many such articles, the USA piece is pretty fuzzy about how many people/what percentage of the elder population? is involved and doesn’t make a very good distinction between those who are trapped in a disaster they didn’t choose (and that includes not just those who have medical bills they can’t pay, but those who were not voluntary retirees — the NYTimes had another article today about how many people face age discrimination as they look for jobs) and how many are choosing to go into debt they can’t/won’t repay.
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JD, have you heard of “cost per wear”? That superluscious $90 cashmere sweater, if you wear it 10 times in only $10/wear. With cashmere, tho, you’ll get more mileage. Plus, your wife won’t be able to keep her hands off you. That’s got to count for something, right?
With your weight currently in flux, just keep to classic basics until you hit your mark. Goodwill’s a good start (check out B’way and Grand stores for best men options). You don’t want to look like a slouch while you get buffer and slimmer!
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Regarding Warren Buffett: did he ask that all taxes on highest income earners be raised, or just salary/income taxes? Keep in mind that Mr. Buffett is making all of his money in capital gains, not salary, which are taxed at different rates right now.
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Thanks! That ETF link, and the articles that article pointed to, were exactly what I’ve been looking for.
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Er, J.D., it’s “Earlier this week I SANG the praises of index funds,” actually. You don’t need to print this comment–I just wanted to draw it to your attention.
As an aside, Lands End really is a good way to accumulate high-quality, long-lasting, classic and reasonably priced clothing. They are getting a bit snazzier every year for their women’s clothing, but their menswear has always been very tasteful and sharp. Good luck on that…I just moved to Boca Raton, FL to help our my mother-in-law following the death of my husband’s father. All my in-laws have been in either the clothing business or the furniture business for many generations, and the women immediately began throwing their beautiful and expensive castoffs at me because my Wal-Mart and thrift store stuff (even though it was all clean, tasteful and in good condition) just wasn’t cutting it! My brother-in-law is a chronic clothes-a-holic and gave my husband more than $3,000 worth of barely worn clothes of his, just so he could make room in his (own, walk-in) closet! Madness!
One mean comment my sister-in-law made when we gave a dinner party last night was when her husband complimented us on the white wine we served. It was Wal-Mart’s own, $2.97 bottles of plonk, but we like it and it fits our budget. The sister-in-law, at the table, leaned over to her husband and whispered “don’t say that…they got it at Wal-Mart and it costs $2 a bottle!” I said to her, “oh, you know our secret!” She replied, “yes, I use that stuff for cooking!” Ouch! (Mind you, this sister-in-law spent $42,000 (!) on a LIQUOR CABINET for her living room, so our worlds are pretty far apart!)
Anyway, keep up the wonderful blog…I’m so grateful for people like you and your readers who have helped me so much over the years. I am proud to say that as of yesterday, we are now debt-free except for the house! Yahoo!
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Austin-Martin? Mink coat? Boo hoo. Yeah, I’m judgmental.
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So glad to see that Warren Buffett is not afraid to tell it like it is! His honesty among those with his financial status is simply refreshing! Thank you, Mr. Buffett!
Americans dying in debt is very sad, but true. I am relieved to see that students like Brendan Quinn are teaching the younger generations not only how to manage their money, but also that it’s OK to talk about finances. I recently asked my own father about his finances after first stating it was up to him if it was up for discussion. I was happy to hear he was very willing to talk about the subject and that he’s made some recent improvements in that department. I felt so much better after our talk and I think he did, too!
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I feel your pain, so much content: so little time. Thanks for sharing these great bits with us.
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If Mr. Buffet wants him and other people like him to contribute more in taxes, why doesn’t he just make out a check to the IRS and tell them to put it in the General Fund? I am sure they’d take it! And then Mr. Buffet can talk other “rich” folks into writing those voluntary checks!
I wouldn’t squander a dime of an inheritance…but, I’ll never get one. Mom and died broke, with no debt, either one of them, but still broke.
As for the guy who squandered his $10 million, I surely hope the government doesn’t think they had the rights to it – as a justification for the ultimate death tax. If is a person’s right to squander it, if they so desire! I am sure the government would have spent it faster than the guy who squandered it!!!
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I am not shocked by the story of 14M/10M being lost as it happens more often than we hear about but DAMN.
More though I am always shocked by the fact that as a culture most people are never happy. You have 10M cash. Can do anything you want, but you still can’t do everything you want.
When do people learn. The cars, horses, vacation/clothing sure none of those are out of the reach of someone with that net worth. But multiple homes (including one worth half your net worth), cars, horses, writing a book which I sure was self financed, risky investment advice why so careless.
It wasn’t like your income is 14M a year you got lucky and that doesn’t happen everyday. I wish them the best of luck in their new life and hope they have learned a few lessons along the way.
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“One of those works”? ; )
Great info. Thanks!
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Maybe it’s the inner cynic in me, but I think the guy who blew through $14 Million should be made to wear a dunce cap for the rest of his life. Horses, cars, fancy houses are mentioned wistfully, but nowhere do you hear of how he set aside money for his kids’ college educations.
10 to 1 odds says that he didn’t. Kind of reminds me of that one skit on Chappelle’s Show where black people get financial reparations for slavery. Ignoring all conversations of race, it was pretty funny (yet kinda sad) to see Dave Chappelle’s character “Tron” motion to a stroller and proclaim proudly to a reporter that he “bought this baby, straight cash!” with his newfound wealth.
As for the guy who returned the money in AZ: nothing but respect for his actions. Although to even the conversation, he’s homeless largely on account of his 3 prior DUI’s. Also, $3000 and a laptop in a backpack pretty much sounds like a drug deal gone sour.
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Re: Comment #8 by Janette
Warren Buffett pays taxes at a lower marginal tax rate than his secretary, not less taxes in total. If the former were the case, I think there’d be some serious furniture moving up in here!
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Great articles. Thanks for sharing.
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…one of those works.
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Oops, there were only two comments showing when I tried to submit that last one, and then when it went through there were 33! It’s been more than covered but no ‘edit’ button shows up on the previous comment on my iPhone, so I needed to make this second comment to excuse myself.
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JD, thanks for having such a helpful, impartial website. I’m learning a lot here. Bess
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Dying with debt used to be one of my worst fears, now that I’m out of debt, I try to save as much as I can. Its actually the stories of seniors with debt that motivated me to get out of debt and save.
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LOL! According to the this afternoon’s gnus, thanks to our elected representatives’ irredeemable partisanship it looks like we’ll all be paying higher taxes.
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I agree with Warren Buffet and I am amazed that he voiced his opinions. I believe also that we as Americans should build distribution systems creatively and create and sell or trade products and services. Some will succeed and some will fail but all in all the economy would improve if enough of us try.
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