The one thing rich parents do for their kids that makes all the difference is that “they can buy their children pricey homes in nice neighborhoods with good school districts,” said Emily Badger on The Washington Post. “Wealthy parents are famously pouring more and more into their children, widening the gap in who has access to piano lessons and math tutors and French language camp. The biggest investment the rich can make in their kids, though — one with equally profound consequences for the poor — has less to do with enrichment than real estate.” Ann Owens, a sociologist at the University of Southern California, explained: “Forty to fifty years of social-science research tells us what an important context neighborhoods are, so buying a neighborhood is probably one of the most important things you can do for your kid. There’s mixed evidence on whether buying all this other stuff matters, too. But buying a neighborhood basically provides huge advantages.” (washingtonpost.com)
Here are 7 Quick Ways to Save Over $100,000
You probably have heard of the latte factor. That little innocent morning latte could cost you tens of thousands of dollars over the course of your working life. If you have trouble saving money for emergency fund, to pay off debt or to invest for retirement, there are some quick ways to save by making small changes to your spending habits. Assuming you plan to retire after 40 more years and that your savings will grow by 7.8% annually, here are 7 quick ways to save over $100,000 during your working life:
- Eating out too much: $207,598
- Taking cabs often: $235,963
- Smoking: $579,957
- Buying coffee every day: $79,085
- Paying for a gym you don’t use: $131,808
- Streaming commercial-free music: $32,919
- Ordering the wine: $151,579
(cnn.com)
Here Are America’s Top 3 Grocery Stores
According to a report from Market Force Information, Wegmans tops the list as shoppers’ favorite grocery store. Publix Super Markets and Trader Joe’s came in second and third place. The three best grocery chains in the U.S. are all privately-owned companies. The survey was done online with more than 10,000 respondents in February 2016. Trader Joe’s ranked first for cashier courtesy while Wegmans and Publix ranked highest in cleanliness, product selection and specialty department service. Wal-Mart which is the largest grocer in the U.S., ranked last out of the 15 grocers on the list. (cnn.com)
Average Worker Needs 1 Million Years to Earn the Wealth of Bill Gates
According to Forbes real-time net worth, the fortune of Bill Gates is worth $76.2 billion as of 5/10/16. People on average hourly wages in the US would need to work for one million years to earn the wealth of Bill Gates, according to financial website THISISMONEY. While the gulf between the world’s wealthiest and the rest of us is widening, the time it would it would take for average earners to earn the wealth of their country’s billionaire is even worse. In Mexico, people in the country would need to work for over 3.8 million years to generate the wealth of billionaire Carlos Slim Helu. In Brazil, it would take a worker there over five million years to earn as much as the fortune of Brazilian billionaire Jorge Paulo Lemann.
Could Gambling be the Secret to Saving When Rates Are So Low?
Jay L. Zagorsky, The Ohio State University
Many interest rates in the U.S. are close to zero and even negative in some parts of the world, like Japan. Not unexpectedly, U.S. savings rates are also quite low as individuals ask themselves: “Why save a lot of money at a bank if I get no return?” This situation has many commentators wringing their hands because low savings rates are a problem for many reasons. Individuals who don’t save face spending their golden years of retirement in poverty, instead of plenty. In addition, people with no savings face financial problems and potential ruin when unexpected large expenses occur and cannot help out their children with large bills like college or a down payment on a first home. In the absence of a rapid increase in interest rates, which appears unlikely, is there anything we can do to change this problem and get people to save more? As odd as it may sound, gambling could be part of the answer. [Read more…]
Should You Follow the 4% Retirement Rule?
The 4% rule derived from a 1994 study by William Bengen in which he found that 4% was the highest rate that held up over a period of at least 30 years. Here’s how the rule works: You start by withdrawing 4% of your nest egg and then adjust the withdrawal amount to keep pace with inflation. So should you follow the 4% rule? Walter Updegrave on CNN Money recommend to start out with a reasonable withdrawal rate between 3% to 4% to support you 30 or more years in retirement. “You can go with a higher rate or a lower one. Just remember that the lower your initial rate, the less income you’ll have to meet your spending needs and the more likely you could end up with a big retirement account balance late in life. Conversely, starting with a higher rate will provide a more comfortable lifestyle, but could subject you to a greater risk of outliving your savings. Once you’ve decided on a withdrawal rate, you should be ready to boost or cut back your withdrawals based both on your spending needs and how much your nest egg’s value is rising or falling.” (cnn.com)
Wealthy Families Are Trying to Invest Like Warren Buffett by Making Private Equity Deals Themselves
Rich people are just making private equity deals themselves rather than bothering to go through private equity funds. Bloomberg reported: “Wealthy families are embracing their inner Warren Buffett, albeit on a smaller scale. They used to hand most of their assets to managers to invest. Now, following the likes of Buffett, Michael Dell and Bill Gates, many are acting like private equity firms, buying large stakes in companies or acquiring them outright. Families can exert tighter control over their money, give the kids something to do and cut their deal fees.” In investing, fee does matter. By directly buying a stake in a company, families can avoid paying fees to private equity firms, which typically charge a 2 percent annual management fee while keeping 20 percent of profits. “After a decade of direct investing we found that we actually saved millions, which were reinvested in companies and assets — huge, huge savings,” said Chad Hagan, whose family built its wealth in private health-care and financial businesses. (bloomberg.com)
School Calls Police on Girl Using 2 Dollar Bill to Buy Some Chicken Nuggets at Lunch
A Houston eighth-grader, Danesiah Neal, was detained and threatened with a felony when she tried to buy some chicken nuggets with a 2 Dollar Bill for school lunch at Christa McAuliffe Middle School. This is just insane! The school officials confiscated the bill and said it was fake. “I went to the lunch line, and they said my $2 bill was fake,” Danesiah told a local ABC News. “They gave it to the police. Then they sent me to the police office. A police officer said I could be in big trouble.” The school officials contacted Danesiah’s grandmother, Sharon Joseph, who gave the bill to the student to ask for confirmation. Then an investigation into the $2 bill led Fort Bend police to the bank to examine. After the bank determined that the bill is real, the issue finally got resolved. What a nightmare for a little girl to be threaten with a felony forgery, which can carry up to a 10-year prison sentence and remains on a student’s criminal record for life, ABC said. (washingtontimes.com)
Warren Buffett: I Could End the Deficit in Five Minutes
Large debts are not good for individuals nor countries. Individuals can take care of their personal finance to fix the debt problem. What’s about country’s deficit? Warren Buffett says he could fix the U.S. deficit problem very quickly. He told CNBC: “I could end the deficit in five minutes. You just pass a law that says that any time there’s a deficit of more than three percent of GDP, all sitting members of Congress are ineligible for re-election.” (cnbc.com)
New Rules Will Make It Harder to Get a Mortgage If You Carry a Credit Card Balance
Starting June 25 Fannie Mae introduces new rules to make it harder to get a mortgage if you carry a credit card balance. Basically, the new guidelines use trended credit data as a rating system to evaluate borrower’s ability to manage revolving credit card accounts. “A borrower who uses revolving accounts conservatively (low revolving credit utilization and/or regular payoff of revolving balance) will be considered a lower risk. A borrower whose revolving credit utilization is high and/or who only makes the minimum monthly payment each month will be considered higher risk as it indicates the borrower may have trouble making payments in the future.” Kristin Wong on Lifehacker points out that “if you pay your balances in full every month, you’re probably good. If you have a revolving balance, you’re considered a risk, and depending on how much debt you’re revolving, it could prevent you from getting a loan.” (lifehacker.com)
Why Equity Crowdfunding Could Be Dangerous for Investors and Entrepreneurs
After May 16 equity crowdfunding will no longer be reserved for the ultra-wealthy. Thanks to the new Securities and Exchange Commission passage, anyone can participate in equity crowdfunding instead of accredited investors with a net worth of more than $1 million or annual income of more than $200,000. However, equity crowdfunding could be dangerous for investors and entrepreneurs. Tanya Prive writes on Fortune: “Many people simply don’t understand how startup investing works. Venture investments are highly illiquid — when you make an investment in a startup, you don’t have the option to pull your cash out on demand. In fact, you typically make the investment and then wait anywhere between three to 10 years before there is a liquidity event, which can come in the form of a merger, acquisition, initial public offering or secondary market transaction. It’s important that new startup investors understand this asset class characteristic and are able to stick it out for the long-run.” With the mandated investment limit on equity crowdfunding, investors are left vulnerable to non-diversified portfolios. It’s best for individual investors to put their money in index mutual funds. (fortune.com)
Parents are Pressured to Make Sure Their Kids Succeed
For middle class earning between $40,000 and $100,000, 44 percent could not come up with $400 in an emergency. 27 percent of those making more than $100,000 also could not. This is not poverty. So what is it? Rebecca Rosen on The Atlantic argues the financial insecurity “that has no name” derived from the costs associated with raising children, especially housing and education. Not surprisingly housing and education the biggest sources of debt. American middle class households are falling into circles of financial hell as they are pressured to make sure their kids succeed. Rosen pointed out that “housing and education appear to be two distinct categories of spending, but for many families they are one and the same: For the most part, where a family lives determines where their kids go to school, and, as a result, where schools are better, houses are more costly. This is both cause and effect: Where houses are expensive, the tax base is bigger and schools have better resources, and where schools are better, there is more demand for housing.” (theatlantic.com)
NYC Most Expensive Apartment Costs a Jaw-Dropping $250 Million
NYC’s most expensive apartment will be a $250M condo at 220 Central Park South as reported by Tanay Warekar on Curbed. “What’s been touted for months as New York City’s most expensive condo is finally here. Vornado Realty Trust has revealed plans for a four-floor apartment at 220 Central Park South, and it will cost a jaw-dropping $250 million, The Real Deal reports. If it sells for the asking price, it will handily surpass the record set by the $100.5 million sale of a penthouse at One57 last year. The gigantic apartment will be located on floors 50-53 of the Robert A.M Stern-designed building. To create the mammoth offering, Vornado combined a 11,000 square-foot duplex on the 50th and 51st floors along with three apartments on the floors above.”
Class Divide is the Strongest Predictor of Air Rage
Class warfare has turned into a political struggle between the 1% and the 99%. Now there’s more evidence that air rage is largely based on seat class, according to a study by Katy DeCelles who teaches organizational behaviour at the University of Toronto. “Something like that makes you very aware of the fact that you are not being treated as special as someone else.” The paper concludes that inequality between seat classes is the largest single contributor to air rage. The effect intensifies, DeCelles suggests, when the travellers file past the high rollers during boarding. Airborne inequality also makes the rich behave worse. “It’s a very strong effect,” said DeCelles. Base on the database involved more than one million flights, DeCelles and her co-author compared flights that had separate first and economy classes with those that didn’t. The strongest predictor of air rage, by far, was class divide. (ctvnews.ca)
9 Signs You Aren’t Saving Enough Money
Kathleen Elkins writes on Business Insider: “Earning a lot of money doesn’t necessarily make you rich. At the end of the day, no matter what your paycheck reads, you still have to save and invest your money if you want to accumulate wealth.” Here are 9 signs you aren’t saving enough money:
- You can barely pay your bills each month
- You tell yourself you’ll save more when you start making more
- You haven’t started saving for retirement
- You don’t set aside money for big, upcoming purchases
- You haven’t started investing
- You don’t have an emergency fund
- You spend over 40% of your income on housing
- You don’t track your expenses
- You can’t pay more than the minimum on your credit card balance
Elkins also shows tips on how to improve for each of the shortcoming in the article. (businessinsider.com)
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