All posts by Jacob A Irwin
Creating and Implementing Your Investment Strategy – Part 4 – Determine Your Mix of International and Domestic Equity Investments
At a high level, the reason that you will want to add international investments to your equity portfolio is due to the fact that the price movements are not highly correlated with the returns of US equities. Because of this low correlation, it provides decreased risk and increased returns through the power of diversification.
Optimal Split –
A study published in the Journal of Investing in 1998 took an in-depth look at the performance and risk associated with different portfolios with varying asset allocation levels of international/domestic US equities.
The results of the study showed that the split that showed the optimal performance was an equity portfolio with 40% international and 60% US domestic. This allocation provided the highest returns with the lowest risk/price volatility. In other words, it had the highest Sharpe Ratio.
Finding The Split That Suits You Best –
While the 40% international allocation described above is the “optimal” split, as defined by academic research, it doesn’t necessarily mean that you should allocate 40% of your equity holdings to international investments.
Why is this you might be asking? The answer lies in the fact that an investment strategy is only as good as an individual’s ability to stick to it, even in the worst of times. The worst thing that could happen is that you determine several years from now that the 40% international equity allocation you decided upon is too much risk for you, and it causes you to sell off all of your holdings.
Therefore, in my opinion, the best approach is to use the 40% optimal split as the highest international allocation that anyone should employ in their investment strategy.
In other words, only the heartiest of souls that are very young (in their 20’s) should allocate 40% of their equity holdings to international investments.
For the rest of us, Burton Malkiel describes the following recommended allocations (based on age) in his famous book, A Random Walk Down Wall Street
. As you can see in the table below, even for people in their 20’s, Malkiel recommends that they only have 30% of their equity funds allocated to international instruments. I feel this level is very appropriate.
So, take a look at the table below to define at a high level of how your equity portfolio will be constructed.
In Part 5 of this series, I describe how you can determine the specific mutual funds that should make up the US domestic and international portions of your equity portfolio.
Keep on learning!
Jacob
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Creating and Implementing Your Investment Strategy – Part 3 – Determine Your Specific Mix of Fixed Income Investments
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______ % of my portfolio will be in fixed income investments and the remaining _____ % (1- fixed income %) will be in equity investments. The total should be 100%.
- For simplicity, throughout the rest of this post, we will assume that the asset split you choose is 30% fixed income and 70% equity.
So, you know that 30% of your investments should be placed in fixed-income vehicles. However, which ones should you choose to make up this 30%?
- Maturity
- No matter what the time horizon is for when your specific cash needs will occur, academic research has shown that short-term fixed income investment instruments have 1) less interest rate risk, and 2) higher returns.
- Because of these two factors, short-term (1-3 maturities) fixed income investments are considered superior to long-term ones.
- Fund Management
- As with equity investments, the fixed income security markets are extremely efficient, and therefore, active management is a loser’s game.
- Because of this, we will only want to seek out indexed/passively managed fixed income instruments for our investments.
- In my opinion, there are really four different options available to you as an individual investor for the fixed income portion of your portfolio:
- Cash / cash equivalents
- This category would include extremely liquid investment account types.
- Examples include money market accounts, savings accounts, and checking accounts.
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See following link to read my previous posting on these types of accounts – My Money Blog – Cash Equivalent Savings Accounts.
- Short-Term Indexed Bond Funds
- Offered by Vanguard and Fidelity. Vanguard fund I use is the Short-Term Bond Index, Ticker symbol – VBISX. Vanguard Bond Index Funds
- Feature low cost, passive management and expense ratios.
- Inflation Protected Bond Funds
- Also offered by Vanguard and Fidelity. Vanguard fund I use is the Inflation-Protected Securities fund, Ticker symbol – VIPSX.
- This type of investment instrument provides a hedge against changes in inflation.
- The interest rate associated with the bond fund changes with fluctuations in inflation.
- US Treasury Securities
- Can be used in place of Short Term Indexed Bond Funds. Personally, I prefer to use indexed bond funds due to the fact that they are offerred by Vanguard, and it therefore, keeps all of my investments in one place.
- Bought directly from the US government/treasury.
- Backed by the full faith and credit of the US goverment, and are therefore, very safe investments.
- Still have interest rate risk associated with them, however.
- Select the cash % allocation of your total portfolio, according to the first row of the table.
- Assume that you will allocate 5% of your total portfolio to inflation protected securities.
- Subtract the cash % and 5% inflation protected securities allocations from the overall fixed income allocation you calculated (in previous posts) to obtain the % of your portfolio that will be made up with a short term index bond fund.
For the 30% fixed income / 70% equity asset allocation example above (assuming the investor is below 60+ years old) –
- 5% of your overall portfolio would cash
- 5% would be inflation protected securities
- 20% (30%-5%-5%) would be index short term bond funds.
Note: The data is this table is taken from pgs. 350-351 of Malkiel’s famous book,
A Random Walk Down Wall Street. If you haven’t read it, click on the link to the left to pick up a cheap used copy from Amazon.com.
In Part 4 of this series, I take everyone through how to figure out your specific mix of index funds for the equity portion of your portfolio.
Keep on learning!
Jacob
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Creating and Implementing Your Investment Strategy – Part 2 – Determine Your Fixed Income Asset Allocation
In Part 1 of this series (see link below), I walked everyone through the first two steps in creating a personalized investment strategy.
- Determine the amount of cash liquidity you need for your emergency fund
- Forecast your future cash needs within 20 years in order to determine the minimum amount of fixed income Dollars you need to invest to meet your goals.
Creating and Implementing Your Investment Strategy – Part 1
In Part 2 of this series, we will walk through Steps 3-6 of the process in creating an investment strategy.
The end goal of this exercise is to make a final determination of the appropriate fixed income investment asset allocation.
Step 3 – Determine How Much Variability You Can Emotionally and Physically Tolerate
In investing, there are several certain, simple truths that you need to account for occurring at one time or another. One of these is the fact that your investments will decline and have very bad years from time to time.
The good news is that the “good times” in the market (when the stock market is increasing) usually persist eventually, enabling your investments to obtain a very good rate of return. However, in order to obtain these good rates of return, you must have the discipline to resist panicking and withdrawing your money from the market/equity exposure during declines.
In order to help you determine how much risk you are able to tolerate, we’ll need to analyze the table below (this table comes from Larry Swedroe’s book The Only Guide to a Winning Investment Strategy You’ll Ever Need
).
The table matches a worst case investment decline (loss) that can be possibly occur in a year, given a certain % fixed income asset allocation. I also included what the % decline would indicate in real Dollars if you were to have $100,000 in total assets invested.
Exercise:
Imagine in your head what you would do if you were to lose X Dollars in a year. Would you sell all your equity holdings? Would you buy more? Would you hold out until the market recovered?
Be honest with yourself. You are only hurting yourself if you answer incorrectly.
Once you have thought about it for a few minutes, record the minimum fixed income exposure level that you decided on, based on the maximum tolerable loss you can physically and emotionally tolerate within any given year.
Step 4 – Compare Your Results from Step 2 and Step 3
Next, take the minimum fixed equity % exposure level calculated in Step 2 (based on your forecasted future cash needs – don’t worry to include your emergency fund needs) and compare it with the exposure level you calculated in Step 3.
Take the higher, more conservative fixed income exposure/asset allocation level of the two that you calculated. Proceed to Step 5 below.
Step 5 – Determine How Much Risk You Need To Take On to Meet Your Investment Objectives
The final step in determining your overall equity and fixed income asset allocation percentages is to consider how much money you need/want to have later in life from investing. For me, this decision more specifically means how much money I will need to have to live the lifestyle I want during retirement.
To determine this, click on the link below to see my previous post on calculating how much money you need for retirement.
How Much Do You Need For Retirement?
In the retirement calculator in the post above, the place where determining how much risk you need take on relates to the “Assumed Annual Return” field.
By principle of efficient markets, the only way to increase this assumed annual return is to increase risk. And, the only way to increase risk is to increase your exposure to equity via your asset allocation percentages.
The table below gives approximate equity allocation % exposure levels corresponding to different rates of return required to meet your financial goals.
Using the retirement calculator above and the table below, record your target equity allocation %. To get the target fixed income % allocation, take 1- target equity allocation %.
Step 6 – Finalize Your Overall Asset Allocation Targets
Finally, compare the result from Step 5 (how much risk/equity you need) with the result from Step 4 (how much security/fixed income you need).
How do the levels compare?
As a general rule of thumb, you should take the highest fixed income asset allocation result that is obtained. This will help you have less stress in life. If, however, you find that your result from Step 5 tells you that you need to take much more risk in order to meet your goals, I would start analyzing ways to either 1) cut current spending and save more or 2) plan to live a simpler life style in the future.
To read Part 3 of this series, click on the link below.
Creating and Implementing Your Investment Strategy – Part 1 – The Liquidity Test
In a previous posting series (see 1st link below), I walked everyone through the steps in David Bach’s book Smart Couples Finish Rich
for how someone can create and implement a Purpose Focused Financial Plan.
As a final step to this series, I discussed the specific financial actions that a person can take to put this plan in to action (see 2nd link below):
- Creating a Purpose Focused Financial Plan Series
- Creating Your Purpose Focused Financial Plan – Part 4
In order to save money for longer term life dreams, David recommends using index mutual funds to accumulate wealth.
In the link below where I defined my asset allocation objectives/targets, I mentioned that I had defined the allocation levels based on several finance books that I have read. However, I did not go through the exact step-by-step details of how I arrived at the levels.
Since this is a very useful and interesting process, I wanted to dedicate a series to discussing how I (and you) can do some “self-searching” and arrive at a personalized investment strategy that you can then review with your financial advisor.
Step 1 – The Liquidity Test
The first thing to determine is whether or not you have enough cash or liquid fixed income investments on hand for what is called an “emergency fund.”
As described in the link below, you should keep enough cash on-hand for 6-9 months of expenses. These should be available for you to tap in to in the event that you lose your job or are injured (and cannot work).
Step 2 – Forecast Your Cash Needs for the Next 20 Years
After making sure that you have saved up enough money for your emergency fund (and made a mental note of the quantity), you must now plan for any expected cash needs for the next 20 years. The purpose of this exercise is to help to determine the minimum % of your assets need to be fixed income and which can be held in higher-return-producing equities instruments.
To get you started brainstorming, several cash need examples are listed below:
- Emergency Fund – most important thing
- House down-payment
- College tuition for you or your children
- Purchasing a car
- Engagement ring purchase
- Future vacations
- A high-end $6000 bicycle
- A motorcycle
Once you have thought about what cash needs will come your way in your life, click on the link below to access a template I put together for you to list a written and $ value description of your future cash needs.
Just download an Excel copy of the spreadsheet on to your desktop in order to be able to write your values in. Also, be sure to place the cash requirement in the appropriate year in which it will be used.
Google Docs – Forecast Your Future Cash Needs
After you type in your forecasted cash needs, the spreadsheet will then automatically calculate the total $ value that you need to invest in fixed income securities right now in order to meet your cash requirements/objectives. This quantity is displayed in the light purple cell, designated H3.
This total quantity is found by multiplying the cash needs by the appropriate (1- Maximum Equity Exposure Percentage) rate.
Once you have entered your forecasted cash needs and obtained the $ value from cell H3 that you need to have invested in fixed income investment instruments, you then need to perform the following steps.
- Enter the total amount you have available to invest in cell I3. The spreadsheet will automatically calculate the % of your assets that you should have invested in fixed income securities in cell J3.
- Next, perform a reality check.
- Compare the $ value that you should have invested in fixed income securities to the total amount of money you have available for investing.
- If the number is greater than the total amount you have available to invest, you may need to reduce your cash needs.
- Ask yourself – “how fancy of a house can you really afford?” – Maybe you cannot afford as high of a downpayment as you expected.
- Ask yourself – “do I have enough money to pay for my future child’s education?” If not, you should not feel bad about the fact that you need to secure your own financial future before setting aside money for their education.
- After making any adjustments needed to your forecasted cash requirements, make a record of your finalized % of your assets that should be allocated to fixed income instruments from cell J3.
- This value will be used going forward in the next post of this series to make a final determination of the % that you should allocated to fixed income instruments.
To read Part 2 of this series, click the link below.
Homeowner’s Insurance
- Homeowner’s insurance should only be purchased to protect yourself against “financial catastrophes.” It should not be used for to recover from a small loss.
- An example of a catastrophic loss would be if a storm caused a tree to fall on your house.
- An example of a small loss would be if someone broke in to your house and stole only your TV you purchased for $1000.
- Take the highest deductible that you can afford.
- For the uninitiated, a “deductible” is the amount you have to pay out of pocket to your insurance company before your insurance policy will pay you out for the coverage you have.
- By taking the highest deductible you can afford, it ensures that you will only tap in to your insurance policy for catastrophes.
- Typically, the options available for deductibles quantities are $250, $500, $1000, $2500, and $5000. Choosing a higher deductible can save you huge money on your monthly insurance premium payments, as shown below.
- If you increase your deductible from $250 to…
- $500 – save up to 12%
- $1000 – save up to 24%
- $2500 – save up to 30%
- $5000 – save up to 37%
- The highest deductible that each person can afford varies (as you probably guessed). However, for my situation, I would go with a $2500 deductible, since I keep a good amount of funds available in my emergency fund savings account.
- Buy broad coverage insurance that covers all types of “perils,” or possible bad things that could happen to damage your home.
What does homeowner’s insurance consist of?
Provided that you purchased broad insurance (called HO-3 in technical circles) as mentioned above, your homeowner’s insurance policy will consist of three types of coverages – dwelling, personal property, and liability.
- Dwelling Coverage
- Dwelling coverage insures the cost of rebuilding the structure of your home, in the event that it were to be destroyed.
- In your insurance policy, you will want to make sure that you have a “guaranteed replacement cost” provision. This provision ensures that your insurance will pay to rebuild your house’s structure, even if it costs more than the Dollar value amount of the coverage you obtained.
- Condominium Dwelling Coverage
- Dwelling coverage for condominium’s works a little differently than with single-family homes.
- The condominium’s Home Owner’s Association (called HOA) will have a master policy that covers rebuilding the structure of the building in which your condo unit is located. If you are buying a condo, you will want to make sure that the dwelling coverage on the building in which your building is located is sufficient to rebuild the structure. For example, in reading through the HOA master policy for the condo I am moving in to this fall, I found out that the coverage for the 10 unit building in which my unit is located is only $750K. This seems a little bit low to me, meaning that I will want to look in to that issue going forward.
- However, the HOA master policy will not cover the replacement of the interior of your unit. For this purpose, the dwelling coverage portion of a homeowner’s insurance policy for condos will cover the following interior structures of your unit:
- Walls
- Wall coverings
- Carpeting
- Built-in cabinets
- Shower modules
- Sinks
- Personal Property Coverage
- Personal property coverage insures the “stuff,” or contents that you keep inside your home.
- As mentioned with dwelling coverage, you want to make sure that the personal property coverage contains a “replacement cost guarantee” to ensure that all of your items are replaced by your insurance (even if the price is higher than you thought), in the event of a loss.
- Personal property coverage is generally based on a percentage (usually 50-75%) of the dwelling coverage Dollar value. This is usually more than enough.
- Liability Coverage
- Liability coverage insures you in the event that someone is injured on your property (or by your pets) and sues you for damages.
- The general rule of thumb with this coverage is to obtain the larger Dollar value of either 1) 2X the amount of your dwelling coverage, or 2) $300,000.
Determining how much coverage you need
- Take a written and pictorial inventory of your property
A good place to start with in determining how much coverage you will need from your homeowner’s insurance policy is to take an inventory of all of the contents of your current apartment or home. Beside each item on the list, you will want to record the replacement value of the item (make sure to list what the item would cost to replace at today’s prices, not the price that you paid for it). Making this inventory will also help you if it ever comes time to file a claim to receive your insurance.
To get you started, the link below is a good resource from State Farm that shows the items contained in a typical house, along with their approximate replacement value. In addition, the Insurance Information Institute offers a great FREE pdf brochure available for download that will guide you through this inventory taking process.
Depending on the type of structure your home is, you will want to add replacement cost to 1) rebuild the actual house structure and 2) replace any permanent attachments, appliances (water heater, air handlers, wiring, etc), or improvements you have.
State Farm – Personal Property Inventory
Insurance Information Institute – Home Inventory
After you have done this, you will also want to take pictures and/or a video of EVERYTHING in your house. This will provide even more evidence that all of the items are real, in the event of a disaster occurring.
Key point: Remember to store the inventory AWAY from your house, so that you do not lose it along with your other items in a disaster. For the written inventory, a good way to store the Excel file with the listing of all of your items is using Google Docs. It is a free online platform that allows you to securely store and share documents.
What is covered by your homeowner’s insurance policy?
If you have a broad coverage insurance policy, the following “perils” are typically covered:
- Losses caused by fires, lightning, tornadoes, weight of snow, wind storms, hail, explosions, smoke, vandalism, theft.
- Losses caused by a pipe bursting and spilling water all over your house
- Losses caused by a tree falling on your house during a storm (only if the tree was alive before falling).
For more information, the brochure (available for free pdf download) at the link below goes through numerous scenarios that are and are not covered by home insurance.
Insurance Information Institute – Am I Covered?
What is not covered by your homeowner’s insurance policy?
- Damage caused by floods or earthquakes
- Damage caused by water seepage from the ground
- Food spoilage
- Expensive jewelry, furs, or firearms
- Damage caused by birds, rodents, insects, or pets.
- Damage caused by business activities
Obtaining flood and earthquake insurance
Since flood and earthquake insurance is not included in the regular homeowner’s insurance policy, you will have to purchase it separately.
For earthquake insurance, it can be purchased directly from the insurance provide of your homeowner’s policy. Simply ask your agent to get coverage added on for that element.
On the other hand, flood/mudslide insurance must be purchased from the National Flood Insurance Program (government program). To find out more about flood insurance, please click on the link below to go to the program’s website.
National Flood Insurance Program Website
On the website, there is a very handy feature where you can type in your address and get an instant analysis of your risk potential for a flood occurring, along with estimates on what flood insurance would cost per year.
Give it a try for yourself! Even though the result for my condominium came up to be moderate-to-low risk, I believe that I will still purchase flood insurance to protect myself against catastrophic loss (and because it is very cheap).
The link below is a great resource from Net Quote that lists some way that you can save money on home insurance.
Net Quote – Ways to Save on Homeowner’s Insurance
Several of the methods to save money that stuck out the most to me are listed below:
- Asking for a multi-policy discount, in the event that you also have auto, life, or business insurance from the same insurance provider to which you are applying for home insurance.
- Install home security (burglar alarm) and home safety (fire extinguisher) devices.
- If you live in Canada, a good resource for information on home security is Home Security System in Canada.
- Stop smoking (reduces risk of fire burning down house).
Keep on learning!
Jacob
To receive updates on topics such as this one as soon as they are published, click on the link below to subscribe to My Money Blog:
Discover Your Future Social Security Benefits – Part 2
- Today, Social Security is the largest source of income for most elderly people. This is sad to hear.
- Social Security was NEVER intended to be a sole source of income for people, as it is being used today. The statement strongly encourages people to save their own funds to live off of and use Social Security as a supplement.
How are retirement benefits calculated?
- My Social Security statement lists that I have accumulated 19 credits at this time, and therefore, do not qualify to receive any retirement benefits yet.
Other Benefit Quantities Listed
- Currently, I do have enough credits (with 19) to qualify to receive disability income. If I were to become disabled right now, I would receive $1,485 per month in disability income.
- Additionally, I have accrued enough credits to qualify for a total of $3,315 per month of family survivor income, if I were to die right now.
- In order to get Medicare, you have to have accumulated at least 40 credits from earned income, and be 65 years old.
- Since I do not fall in to either of those categories, I am not eligible for this.
- In 2016, Social Security will begin paying more out in benefits than we collect in taxes.
- Just as a reminder, Social Security is paid as a part of your taxes from your paycheck.
- Without changes, by 2037 the Social Security Trust Fund will run out! Awesome!
- Additionally, in 2037, Social Security will only be able to pay out 76 cents of every Dollar of scheduled benefits.
What is the government doing to extend the life expectancy of Social Security?
To remedy the problem of Social Security running out, the government is, in short, raising the normal/full retirement age.
The table at the link below shows the different full retirement ages, according the year in which an individual was born.
SSA.gov – Ages At Which You Are Eligible To Receive Social Security
If you are like me, and was born after 1960, the full retirement age is now 67 (even though you can begin receiving Social Security benefits at a discounted/reduced rate at age 62, no mater when you were born).
How should this be used in personal finance planning (for retirement, etc)?
My Current Asset Allocation and Net Worth Growth – June 2010
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Achieved my short term target net worth for this year
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Contributed the maximum contribution level of $5000 allowed for my Roth IRA for the year 2010 (and 2009 as well)
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Eliminated all significant holdings in individual stocks from my portfolios
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Have accumulated ~80% of the cash towards my down payment target for a condo purchase this fall.
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Am under contract with a condo to purchase this fall and am on track to close end of July, 2010.
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Cash – As I have mentioned several times, I expected that this would be high due to accumulating funds for a down payment. No action can be taken.
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TIPS Bonds – Since I have no extra cash right now (due to cash accumulation above), I cannot purchase this mutual fund due to the fact that you have to have $3000 to purchase it with Vanguard. It is not available as an ETF with Vanguard either (I wish it was).
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Domestic Large Cap – Unfortunately, this is being held in my 401k account, and therefore, has a greatly reduced selection of index funds from which to choose.
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Because of this, the only options available to me are to exchange funds from this mutual fund to 1) an international equity fund, 2) a small cap index fund, or 3) a bond fund.
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Because I have 33% of my net worth currently held in fixed income instruments (and the stock market currently is going down anyways), I want to work towards decreasing my exposure to bond funds slightly.
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In order to do this, I performed the following actions in my 401k account – 1) Changed my future investment selections to 100% of funds going towards purchasing the Small Cap index fund, 2) Exchanged $1500 from the bond fund to the small cap index fund, and 3) Exchanged $3000 from the S&P500 index fund to the small cap index fund.
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Domestic Large Cap Value – Since this is held in a taxable account, I cannot sell my holdings to exchange money to this mutual fund. I will have to wait until new funds can be added to increase the allocation %. However, I did add a large cap value ETF to my taxable Vanguard account that I can begin funding whenever I get additional money coming in. This is good news.
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In addition, since my Emerging Markets exposure is currently 7% (4% lower than the target 11%), I exchanged $1000 in my Roth IRA from International index mutual fund to the Emerging Markets index mutual fund.
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Since I am looking at buying a condo/townhouse in the summer/fall time frame, I will be trying to build up cash reserves in my high yield savings account for the down payment and closing costs. I have already accumulated approximately 80% of the cash I am targeting for my down payment.
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Obtain condo insurance – including flood, earthquake, dwelling, personal property, title, and liability insurance.
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Find an attorney to help in the closing/settlement process of buying my condo.
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Include my condo equity and debt in my net worth calculations.
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Sign up for a biweekly home loan payment plan
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Set up accounts for making home ownership automatic – automatic deductions for loan repayments, real estate taxes, maintenance reserve funds, insurance, etc.
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Increase my Small Cap Value allocation target to 14% (from 13%), and decrease my Small Cap allocation target to 8% (from 9%).
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I also just realized that the short term bond fund that I have been using for about a year with (Vanguard Short-Term Investment-Grade Fund – MUTF: VFSTX) Vanguard is in fact AN ACTIVELY MANAGED FUND. This is a big error on my part for not realizing this!
- Vanguard Short-Term Bond Index Fund (MUTF: VBISX) – To remedy the situation, I sold my holdings of the actively managed fund and moved them all to this indexed short-term bond fund also offered by Vanguard! Never let your guard down!
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Wish List (since most of my extra cash this month is being used to save for down payment, I will not have as much extra to play around with as normal – so these may or may not happen)
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Purchase an inflation adjusted bond mutual fund (TIPS)
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Begin contributing to the large-cap value funds in my taxable Vanguard mutual fund account.
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At some point, purchase the Vanguard Total Stock Mkt Idx (MUTF:VTSMX) to replace S&P 500 index fund. This gives better, broader diversification to the US stock market.
Jacob
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Paying Off Credit Card Debt Through Smarter Ways
- You should use online comparison services to save on your utility bills – electricity & gas and insurance products – home, life, and cheap car insurance for women.
- You can switch to unbranded accessories, clothing, and food.
- Shop at discounted stores to save on your grocery bill. Invariably, they can offer heavy discounts like “Buy 1 get 1 free,” and so on.
- Bring a welcome change in your lifestyle. You can even consider walking or boarding a bus to your workplace instead of driving down by your car.
- In order to increase liquidity, you can even consider rent out your shop or home. This is in fact an excellent way to increase your liquidity.
- Every individual has unwanted items. So why not sell them out an online auction site? You would be amazed to know that some of the items you considered as trash could fetch sizeable amount of money when sold.
- You could even become a freelancer and start offering services online. In the quest you could make regular clients who could provide you business for an ongoing basis. Complimenting your salary with freelance work could solve your debt related concerns on the go.
- Bankers and other debt consolidators could also be contacted in order to provide cheaper cost of capital. Or they may provide a customized arrangement to ease off the debt. If debtor defaults to make a payment their credit rating may take some beating. Henceforth, availing a loan or liability would become difficult or may be impossible.
Veronica
Keep on learning!
Jacob
To receive updates on topics such as this one as soon as they are published, click on the link below to subscribe to My Money Blog:
Beer – Bottled vs. Canned, Wine – Corks vs. Screw Tops
In a previous post (see link below), I discussed the topic of how the cost of wine can add up to a significant sum over the years. Furthermore, I discussed that if you are smart in choosing low-priced wine, it can result in large savings over the years.
As a continuation to discussing the various financial impacts that our choice of ethanol containing beverages present, I wanted to investigate two topics that I occasionally ponder when drinking wine or beer.
Question 1 – Does bottling beer or canning beer make the drink taste better?
Until recently, I believed that all high-quality, more expensive beer was packaged in to bottles (and that only cheap beer was canned).
However, when I bought a case of Royal Weisse wheat beer from Sly Fox Brewery in Royersford, PA (it is a microbrewery that brews their own high-quality beer) about a month ago, the case consisted of 24 aluminum cans of beer instead of 24 glass bottles.
This is when I began to think that maybe, there is actually an advantage to canning beer vs. bottling it.
After doing a little research online, I found the following link, which I felt was helpful to identify the following plus’s and minus’s of bottling vs. canned beer.
Drinkfocus.com – Comparison of Different Presentations of Beer
Bottled Beer
- Has a shelf life of about 3 months.
- Have undergone rapid heat treatment of pasteurization.
- Light can penetrate bottle and cause oxidation of the beer if stored for long period of time.
Canned Beer
- Although not affected by exposure to sunlight, canned beer can still be spoiled by heat exposure.
- Canned beer can pick up a bad taste from the aluminum particles of the can in which it is stored.
- Is filtered and then heat treated by pasteurization after it is canned.
Bottom Line
- For me, the bottom line is that canning is better for beer that has to travel long distances to reach you (aka beer from national companies – Bud Light, Heineken, etc) due to it being resistant to oxidation by sunlight and bottling is better for beer that is purchased from local breweries.
Question 2 – Does a cork or screw top bottle make wine taste better?
As most people know, many less expensive wines these days are steering away from the use of corks to cap the bottles and are employing metal screw-top caps instead.
It is a common preconceived notion that these screw caps do not retain the flavor of the wine as effectively as the corks do. However, is there any proof to whether one capping method or the other preserves flavor better?
After searching for several minutes on Google, I came across the website below.
Lovetoknow.com – Wine Bottle Closures
As you can see from the article, screw top wine closures have the following benefits over traditional corks.
- Create an air-tight seal so as to not allow oxidation to occur in the wine bottle.
- Eliminate the occurrence of wine getting spoiled by bad corks.
- Easier to open. No corkscrew needed.
- Works with all types of wine.
- For me, the bottom line here is that screw top caps are the superior form of wine bottle closure for wines that are destined to be consumed in less than 2 years (short term).
Keep on learning!
Jacob
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Top 10 Highest Net Worth People and What We Can Learn From Them
Tonight’s article is another solid guest post from Alban. In his first post on My Money Blog, Alban did a great job explaining to us about five financial products that the majority of people should have. This posting gained a very high-ranking on the personal finance article website, Pfbuzz.com as well. Please see the links below for more information.
My Money Blog – 5 Financial Products Most People Need
Alban’s Post Featured on Pfbuzz.com
Please visit Aban’s website at the following link to read more of his articles! – Home Loan Finder. To become a guest poster on My Money Blog, simply email me at the address in the Contact Me section.
Top 10 Highest Net Worth People and What We Can Learn From Them
It’s not difficult to have an expensive shiny car, a big expensive house or a shiny, big, expensive TV because it is easier than ever to charge your purchases to credit and get into debt to live the lifestyle of the rich and famous. However, many of the rich and famous you are trying to emulate are not truly rich either as they too have gone into debt to maintain the lifestyle which is expected of them. Instead you should be striving for the lifestyles of those with high net worth, so find out more about what it means to be truly wealthy and which famous faces make it into the top 10 high net worth people.
Net Worth is True Wealth
Calculating your net worth can be done using a simple sum, where you deduct your liabilities such as your credit card debts, personal loans, mortgage or student loans, from the value of your assets including your house, car and other investments. After deducting your liabilities from your assets you see what you are truly worth if you were to liquidate those assets today.
Unfortunately many people have a negative net worth, that is, they have more liabilities than they do assets and while these people may appear wealthy because they have the big cars, houses and TVs, if they do not have the assets and investments to back it up they simply have possessions, not true wealth. When you hear or see on the TV or in magazines that a certain celebrity is worth a certain number of millions or billions, this is the calculation of their net worth so while they may live in a mansion which is worth $10 million, they may have a mortgage on that house and personal or credit card debt so they are not really worth the full $10 million of their assets.
The 10 Highest Net Worth People
In the case of the following 10 people, their worth is calculated on the value of their assets, less the liabilities it has cost them to obtain those assets and maintain their lifestyles. The 10 highest net worth people are currently:
1) Warren Buffett
Warren Buffett has an estimated net worth of $62 billion which secures him a place at number one in this list. Buffett is the chairman and CEO of the conglomerate holding company Berkshire Hathaway which operates in insurance, jewelry, retail, manufacturing and utilities to name just a few of their subsidiary companies.
2) Bill Gates
We all know who Bill Gates is and thanks to millions of us around the world continuing to invest in computers so we can continually curse at them, Bill Gates is estimated to be worth $58 billion.
3) Sheldon Adelson
Las Vegas Sands is the world’s premier casino-based company and as the shareholder, Adelson is worth $26 billion.
4) Larry Ellison
The multinational operations of the Oracle Corporation have helped the founder Larry Ellison accumulate a net worth of $25 billion. Oracle is a computer technology corporation which develops and markets enterprise software products such as database management systems allowing Ellison to organise his way to the fourth highest net worth listing.
5) The Waltons
The Wal-Mart stores can add something else to their already comprehensive list of products and services, as founders of the chain are enjoying a net worth of $19.2 billion each.
6) Sergey Brin
Where do you go when you have a question? Google. And it is that unanimous answer which has secured the co-founder of Google worth of $18.6 billion.
7) Larry Page
Unlike the co-founder in the number 10 spot of this list, as a co-founder of Google Larry Page is equally worth $18.6 billion.
8) Charles and David Koch
Charles and David are the co-founder and executive president respectively of Koch Industries which works in manufacturing, trading and investments. Both are worth $17 billion.
9) Michael Dell
With computers and technology taking a strong spot in this net worth list, the chairman and CEO of Dell Inc is worth a respectable $16.4 billion.
10) Paul Allen
Paul Allen is an entrepreneur and the much less wealthy co-founder of Microsoft worth just $16 billion. Perhaps he didn’t get the 50-50 split that the Google guys were able to negotiate, or perhaps his mortgage is just a lot bigger than Bill’s.
You will notice from this list that every person has worked hard to build their own net worth, rather than basing it on family fortunes, or getting caught up in debt. While you may not be able to accumulate a net worth in the billions, you can still be aware of what you are worth to put your debts and possessions in perspective.
Thanks for reading.
Alban is a personal finance writer. He offers tips to maximise net worth through investment and helps people to compare investment home loans.
Keep on learning!
Jacob