money advice

3 Money Arguments That Can Hurt Your Relationships

Emily Guy Birken — Mon, 04 Nov 2019 08:00:07 +0000

Money has a funny way of sparking a number of disagreements, arguments, and even lifelong grudge-matches. No two people are going to see eye-to-eye on every aspect of money management, and since finances can be such a volatile topic, any money misalignment between two people can cause a great deal of friction.

Unfortunately, money arguments can often be much harder to navigate than your garden-variety disagreements.

Here are some of the most common money arguments you may have to deal with, and how you can nip them in the bud before they interfere with your relationships. (See also: 4 Money Fights Married Couples Have (And How to Avoid Them))

Friends with expensive tastes

We've all had the experience of not feeling like you can keep up with high-rolling friends. They might propose going out to eat at Cafe Riche where cocktails are $25 each and the entrees don't even have prices listed — while you were hoping to share a pitcher of beer and a plate of nachos at the local dive bar where no one blinks when you pay with sofa-cushion change.

It can feel awkward to ask your monocle-wearing friends if you can change the venue, but going to their preferred spot to pick at the cheapest side salad on the menu is a recipe for resentment. Especially if they suggest splitting the bill evenly at the end of the night.

You may worry that you're in for a fight no matter what you do, since pointing out the differences in your spending habits can end with hurt feelings. However, it is possible to get ahead of these potential arguments before they become a problem.

To start, you could simply state out loud that you're working with a tighter budget than you'd like, so you're hoping to have fun on the cheap. If that doesn't feel comfortable — not all friends are at the "sharing their financial reality" level of intimacy, after all — then consider suggesting fun activities that are free or cheap, and simply bowing out of the reservations at Chateau du Moolah.

Finally, if you do end up tagging along to some of the expensive restaurants, ask for separate checks when you order, rather than wait for the awkward moment at the end of the meal. (See also: 5 Friend Types That Can Hurt Your Finances)

Misaligned spending priorities

A surefire path to an argument between married or cohabitating couples is when one person spends money on something the other person thinks is unnecessary. Whether the money is going toward education, a new gadget, groceries, or clothes, one person may feel that the other is being completely irrational. The spender might feel like the saver is either a buzzkill or unsupportive, while the saver may think the spender is irresponsible and doesn't care about their future.

This kind of argument can be easily averted with separate fun money funds. Making sure each person has their own fun money can allow them to make purchases the other might see as unnecessary, without it becoming an issue.

It gets much thornier when larger spending priorities are misaligned. If you and your partner cannot agree on how much to spend on things like education, career needs, food, or the like, then having separate funds cannot solve the problem.

This is when it makes sense to talk about the basis of your spending priorities. If you feel strongly that you should pay for your child's education and your spouse disagrees, taking the time to talk about what those actions would mean for each of you can help you figure out what you're each trying to accomplish. Knowing the why behind your spending priorities can help you find common ground that will lead to a compromise. (See also: 4 Ways Couples Can Tackle Money Goals Together)

Loaning money

One of the most awkward money issues you can face is when a friend or family member asks to borrow money. You may find yourself feeling anything from shame at being unable or unwilling to help financially, to resentment for being asked in the first place. And if you do decide to loan money, you may find yourself silently judging every financial choice they make while you wait for repayment, and wondering when and how you can ask for the money back.

The best way to nip arguments about loans in the bud is to set clear expectations in advance.

To start, that means saying no if you're unable to extend the loan. If you're not in a position to lend money to your loved one — whether it's your financial situation or your emotional situation — then you need to tell them that you can't help them that way. Don't say you can't afford to loan them money, since that can be construed as an invitation for your would-be borrower to question every purchase you make. You can make it clear that you do care about their situation by asking if there are any non-financial ways you can help.

If you do decide to loan them money, treat it like a formal loan. Tell your borrower that you require a written contract with the repayment terms spelled out, including what will happen in case of a missed payment. There are free templates for promissory notes available online that can help you draw up the contract. Having this in place will make it clear to your borrower that you're treating the loan as a serious transaction. These boundaries will also ensure that you preserve the relationship.

If your loved one feels affronted by these terms, remember that you don't need to manage their reaction to your financial requirements. They are the potential borrower, which means you, as the lender, get to set the terms of the loan.

Don't let money get in the way of your relationships

In a perfect world, money would never come between you and your loved ones. But in the real world, money disagreements can cause a great deal of resentment and distress. However, setting firm boundaries and talking openly about your priorities can help you keep money arguments from turning extremely ugly.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Ask the Readers: Who Do You Go to For Money Advice?

Ashley Jacobs — Tue, 16 Jul 2019 08:30:06 +0000

If you want professional help with managing your money, a good financial advisor would be your best bet. But there may be other people in your life that you can turn to for general tips and guidance on budgeting, retirement, investments, and other money matters.

Who do you go to for money advice? What is your criteria for trusting (or ignoring) someone's advice? What is the best financial advice you've ever gotten from any source?

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This article is from Ashley Jacobs of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Deal With a Partner Who Is Too Controlling With Money

Ashley Eneriz — Wed, 28 Nov 2018 09:00:16 +0000

You share a home and a bed, but when it comes to your bank account, do you feel like your spouse is holding back? Living with a spouse who is too controlling over money can make you feel trapped rather than an equal partner in the marriage.

It doesn't have to be this way. Here are some suggestions to remedy the issue and get your finances and marriage back on track. (See also: 8 Things I Learned About Money After Getting Married)

Get to the root cause

Have a heart-to-heart with your partner about their control issues. Many times, this controlling behavior has less to do with lack of trust and more to do with fear or anxiety. This fear could be coming from the way your partner was raised. Perhaps his or her family never had enough money or one parent squandered away savings on foolish spending.

Your partner might want to make sure they can provide for the family, and they don't realize it's hurting your relationship. It's important to know where these control issues are coming from first so you know how to proceed with the issue. (See also: How to Put Your Spouse on a Budget Without Ruining Your Marriage)

Balance the money load

Your partner's financial control issues could also stem from the stress of trying to balance the budget. Take some of the financial burden off their shoulders, such as paying bills or budgeting for everyday needs. Not only will this act increase the trust in your relationship, but it can also show your partner that you're a team, and they're are not alone in this responsibility. (See also: 3 Simple Ways to Split Bills With Your Spouse)

Talk about your feelings

You're stressed and feeling defensive about the way your partner is treating you, so it can be tempting to list off all the things they're doing wrong just to get it off your chest. But this tactic can lead to more fights. Give your partner the benefit of the doubt, even if you know they're intentionally in the wrong. Say things like, "I know you're not trying to appear controlling, but I feel like I'm being treated like a child rather than your partner when it comes to our finances."

Add a third party if needed

How does your partner respond? Are they genuinely apologetic, or do they take the stance of "My paycheck, my money." If they express the latter, then it's wise to seek out a marriage counselor, since this is an issue you'll need help addressing. You might even find a financial counselor who specializes in married or family finances who can help.

Understanding financial abuse

There's a difference between a spouse who is particular about how the budget is spent and one who controls every cent. Of course, if one spouse has a gambling or shopping addiction, then keeping the accounts safe and protected is understandable. But if you don't have access to any of your funds – i.e. your name is not on the bank account, or you have to beg for money when it comes to family spending, then this is considered financial abuse, and you should seek outside help. The National Network to End Domestic Violence and the National Domestic Abuse Hotline list additional forms of financial abuse to watch out for, as well as several resources for anyone who feels stuck in a partnership or marriage like this.

A healthy marriage should include equal access to funds and mutual respect for the family budget, and each other, despite who brings home the paycheck.

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This article is from Ashley Eneriz of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

10 Books to Read for a Better Money Mindset

Annie Mueller — Wed, 26 Jul 2017 08:30:19 +0000

It can be lonely living in a frugal world; maybe you're surrounded by big spenders, or mocked for being a penny pincher. Or maybe you struggle to see the long-term goals in the midst of short-term needs. Peruse this list of books for your next read, and build a stronger, proactive, and positive money mindset. (See also: 10 Beloved Books of Successful Millionaires)

1. A Conflict of Visions by Thomas Sowell

Read A Conflict of Visions for a big picture, to understand why people think about and react to money issues the way they do. A dense read, this isn't one you'll grab for the beach. Instead, grab your highlighter and tackle a chapter at a time. You'll learn a lot about money and why people have so many conflicts with it, which might, in the end, help you feel less conflicted.

2. The Power of Less by Leo Babauta

Successful blogger, author, and father of six, Leo Babauta knows a few things about handling money and a life of many responsibilities. His book, The Power of Less, will help you appreciate what less can bring you, in both business and in life. It's liberating to realize that pursuing more, whether personally or financially, won't necessarily lead to more life satisfaction or more success.

Babauta advises readers to take a quality over quantity approach, focusing on what's most important and treating the rest as a distraction. It's a lesson you can use in many areas of life (decluttering session, anyone?) but when applied to your money management, this approach can make it easier for you to focus on your best money moves and quit worrying about what everybody else is doing.

3. The Worldly Philosophers by Robert L. Heilbroner

In this classic, Heilbroner examines the history of economic thought by walking the reader through the "lives, times, and ideas of great economic thinkers." You'll learn not only about the economic philosophies developed by, say, John Stuart Mill or John Maynard Keynes, but also about the political upheavals and cultural issues that influenced and motivated them. If you're looking for a big-picture look at money and the economic systems that have been built around it, make The Worldly Philosophers your next read.

4. Thinking, Fast and Slow by Daniel Kahneman

In Thinking, Fast and Slow, Kahneman explores the inner workings of the mind. Specifically, he introduces the reader to fast thinking, which is quick and instinctive, and slow thinking, which is deliberate and more logical. These two thinking systems, Kahneman explains, can and do serve us well; however, if we don't understand their weaknesses, we can be misled by mental biases into decisions that don't serve us well. Read this book to solidify your commitment to making money decisions based on long-term goals rather than short-term desires.

5. Debt Is Slavery by Michael Mihalik

Mihalik's direct, powerful book on dealing with debt is a great one for bettering your money mindset, because that's his whole premise. In Debt Is Slavery, Mihalik argues that getting better at money happens when you get better at how you think about money, because, he says, "all action is born from thought."

There's no fluff here; Debt Is Slavery gets straight to the point in each chapter and provides practical steps for, first, changing the way you think about money and then changing what you do with it. If you're struggling to get out of debt and wondering if it's worth the trouble, read this book to renew your motivation and maybe even improve your debt-reduction strategies.

6. Material World: A Global Family Portrait by Peter Menzel, Charles C. Mann, and Paul Kennedy

It's easy to fall into a bubble, then forget you're in it. For a fascinating journey far outside your bubble, take a look at Material World by renowned photojournalist Peter Menzel. Each portrait — of an "average" family and all their worldly possessions — provides a point of vivid comparison: your standard of living next to that of people in many diverse areas of the world. Some will make you feel absolutely frugal, while others (most, perhaps?) will make you feel like you live at the height of excess.

7. The Intelligent Investor by Benjamin Graham and Jason Zweig

Warren Buffett (who is also a collaborator on the book), calls it "by far the best book on investing ever written." The Intelligent Investor was first published in 1949 and has since been updated for the current marketplace with commentary by Jason Zweig, personal finance columnist for The Wall Street Journal. If you want to solidify your understanding of investment options and move your mindset from a timid, maybe-investor to a knowledgeable practitioner of value investing, this is the book for you.

8. If You Can: How Millennials Can Get Rich Slowly by William Bernstein

Written specifically to help a younger generation gain better financial footing, If You Can is also available as a free downloadable booklet on the author's website. Bernstein recognizes that the theory of saving and investing money is fairly simple, but the practice of it is much more difficult. He outlines five hurdles that the reader must overcome in order to succeed financially. Read it to understand clearly what's tripping you up.

9. Your Money or Your Life by Vicki Robin

Robin's book is a practical manual on personal financial management. It's also a book that will help you connect the dots between your money, your choices, and your ability to live according to your own values and priorities. In Your Money or Your Life, you'll learn to equate time with money, and to make money decisions with the time-cost in mind. Suddenly, that $170 pair of shoes isn't so appealing when you calculate the price in hours of your life rather than dollars in your bank account. By shifting the way you think about money and value, you can see saving and investing as the reward it is, rather than as a self-imposed deprivation.

10. Nickel and Dimed by Barbara Ehrenreich

In Nickel and Dimed, Ehrenreich went undercover and exposed how difficult it is to get anywhere past financial survival while living on minimum wage. She opened up a big conversation on what it means to be rich and how disparate the lives of the poor, middle class, and wealthy can be: So disparate, in fact, that those in this financial segment may feel completely alienated from those in the other, unable to understand their motives, purposes, or needs.

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This article is from Annie Mueller of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Times Dad Was Right About Money

Emily Guy Birken — Thu, 01 Jun 2017 08:00:12 +0000

Despite what you may have thought as a teenager, it turns out your old man actually knew a thing or two — particularly when it came to money. True, Dad's wisdom might have sounded like corny jokes, dusty cliches, or weird logic at the time, but there was some great information in there among the eyeroll-inducing humor.

So at the risk of having him say "I told you so," let's take the time to recognize some of the ways Dad was right about money. Here are five of the money lessons he taught us well:

1. "If it sounds too good to be true, it probably is"

Your dad probably told you this to protect you from con artists, frauds, and crooks, as well as those friends of yours he never liked. When you were a kid, Dad probably wanted you to remember his advice when a friend told you that you could definitely get away with whatever scheme they were trying to talk you into. But it's important to keep this advice in mind when you are offered a "once-in-a-lifetime investment opportunity" as well.

It's easy to see dollar signs (or imagine a Ferris Bueller-like day of playing consequence-free hooky) when someone is presenting you with an offer that seems too good to be true. Reminding yourself that dear old Dad would probably tell you to back away slowly from such an offer can be enough to make you stop your impetuous rush toward untold fortune — or a whirlwind tour of Chicago in a stolen Ferrari.

2. "You don't need that"

When I was in elementary school in the 1980s, all the cool kids wore Jordache jeans, which my father very patiently explained to me that I didn't need. He clearly did not understand the importance of that horsehead label to one's standing in the social hierarchy on the playground.

When Dad told you that whatever item you believed was vital to your life and happiness was not something you needed, you were probably just as disappointed as I was. But as infuriating as it was to hear this, he was helping you learn the difference between wants and needs. To this day, I can hear Dad's voice in my head telling me I don't need whatever impulse purchase is trying to come home with me. I usually listen to him, too — unless it's a pair of awesome jeans.

3. "You've got Champagne taste on a beer budget"

Wanting something you cannot afford seems like a simple enough problem to solve when you're a teenager living at home — ask Mom or Dad to buy it for you. That request does not often end well for the teenager. Many an aspirational teenage consumer gets this sarcastic response from Dad regarding the relationship between their taste and their budget.

Coveting things you can't afford can destroy any budget, and your dad wanted you to understand that it's a short trip to bad finances if you try to indulge your high-end tastes. Dad was trying to teach you how to be realistic about your budget and stick to indulgences that you could realistically handle.

4. "Money doesn't grow on trees"

This is one of the greatest hits of dad sayings, and you probably heard it many times throughout your childhood. He'd dust this old chestnut off whenever you were blatantly wasteful, or whenever you asked for something that he wasn't willing to pay for. In some households, turning the thermostat up by a single degree would result in Dad materializing from nowhere to remind you that trees just don't produce currency.

At the time, this lesson just sounded like Dad being an old stick-in-the-mud. But he was actually trying to remind you that there is a cost to money. Someone (ahem, your parents) had to work for the money necessary to keep the house at a comfortable temperature, replace the toilet paper you used to TP your friend's house, and buy the guitar you so desperately wanted but you never actually practiced playing.

As an adult, it's much easier to understand that money isn't freely available when you realize you have to work in order to earn more. Suddenly, it makes sense why Dad turned into a financial botanist whenever you spent his money.

5. "The best things in life are free"

If your dad was anything like mine, he might have told you this when you asked him for money. While his attempt at being funny was probably not well received, the actual message also made you roll your eyes — since there are plenty of awesome things in life that you have to pay for.

This is a lesson that needs to marinate for a while before it resonates. Teenage you may have just seen this cliché as a cover for your dad not wanting to give you money to go out with your friends. However, adulthood often brings the realization that the things that really do make life sweet — like sunsets, belly laughs, kisses, and naps — are not things you can buy. Dad was right when he told you that you don't need to spend money to enjoy the best of life, even if he was a little too schmaltzy in how he told you.

Appreciating Dad's words of wisdom

Many of the things your dad told you about money might have sounded hokey when he first said them, but it doesn't make them any less true. Let your dad know how much you have learned from him, and how much you appreciate his wisdom, if not his sense of humor.

This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Money Strategies for the Sandwich Generation

Ashley Eneriz — Mon, 13 Feb 2017 11:00:07 +0000

Generation X is commonly called the sandwich generation for two reasons. First, they are sandwiched between the Millennials and the Baby Boomers, both groups that seem to hog media coverage — and marketing budgets. More importantly, many Gen Xers face the modern problem of caring for their elderly parents while still also caring for their own children. (See also: 6 Ways the Sandwich Generation Can Get Ahead)

Being in the sandwich generation can be stressful and financially draining. Here are five strategies to stay financially afloat if you're caring for others.

1. Talk Openly About Finances

Whether your elderly parents live with you or not, it is important to know where they stand financially. For families that didn't grow up talking about money, this might feel awkward. However, it is important for you to be prepared to assume financial responsibility if anything were to happen.

Of course, it is best to have this talk with a certified financial planner and estate attorney, as well. There are a lot of financial matters to discuss.

Who has power of attorney?
Where will the funds for your parents' care come from?
Should your parents be receiving veterans' benefits or Medicaid assistance?
Do your parents have any investments, and are they making the best rate of return on them?
Do your parents have long-term care insurance or enough retirement savings to cover care costs?

2. Utilize Special Savings Accounts

Money will be tight when you are caring for your parents and children at the same time, but don't neglect saving accounts. Contribute as much as you can to your retirement account and even look into a 529 plan for future college costs.

Many employers offer flexible spending accounts (FSAs), which allow you to contribute up to $2,500 into a health account and dependent care account. If both you and your spouse are employed, then you might both be eligible to contribute $2,500, for a combined $5,000. This money can be used for your own medical costs, your kids' medical costs and care needs, and your elderly parents' medical and care needs, if they are declared as your dependents.

An elderly parent can be financially taxing, but don't let that cause you to avoid saving for your retirement or your child's college. You don't want to be stuck in a financial black hole once your elderly loved one is gone.

3. Get Tax Benefits

If you do declare a parent as a dependent, make sure you get all of the possible tax benefits. Talk with a tax specialist about getting special deductions for medical home improvements, medical expenses, and care expenses.

4. Prioritize the Budget

Take a look at your budget and see what can be cut or put on hold. You might have to move to a more affordable area or forgo family vacations for a few years. Being in the sandwich generation will take sacrifice, but if you can survive this time without incurring debt, then you will stay financially afloat.

If you need extra money, try to sell unwanted or unneeded items. Every little bit helps. If either your child or parent is capable of earning some money with a part-time position, this can help too. A teenager can get a job and take over their cellphone or car payments, and your parent can help contribute to the grocery budget. Even if this only adds up to an extra $100 a month, it can still create a little bit of breathing room.

5. Ask Other Family Members for Help

An aging parent shouldn't fall on the shoulders of just one person. Siblings and other able family members should help financially and physically. Have a serious talk with your other siblings and family members about contributing. If they cannot contribute financially, then they should be able to watch or care for an elderly parent at least a few hours a month to give you a break.

Don't try to balance the weight of aging parents and children alone. Start by talking with a financial adviser, who can help put your finances in order and point you to free resources. It can also help to seek advice from peers who have gone through or are going through the same situation.

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This article is from Ashley Eneriz of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Best Money Tips: Pieces of Money Advice That Are Always True

Amy Lu — Fri, 23 Sep 2016 09:30:17 +0000

Welcome to Wise Bread's Best Money Tips Roundup! Today we found articles on pieces of money advice that are always true, things you need to stop expecting from other people, and money-saving hobbies that will prep your budget for the holidays.

7 Best Money Management Tips From John Oliver

Emily Guy Birken — Mon, 08 Aug 2016 10:30:07 +0000

I don't often admit to it, but I have a little crush on comedian and Last Week Tonight host, John Oliver. I mean, what's not to like? There's his adorable British accent, his hilarious takes on the modern world, his dimples, his sound money advice…

No, really. John Oliver is actually a pretty solid source for financial tips. Over the past few years, he has cemented his place in my heart by using his comedic platform to educate his audience on everything from credit scores to debt management and retirement savings

If you haven't had a chance to watch all of John Oliver's money-related episodes, here are my favorite financial funnyman's seven best money management tips:

1. Before Taking a Payday Loan, Be Absolutely Sure There Are NO Other Options

As seen on: Last Week Tonight: Predatory Lending

Wise Bread readers are likely very well aware of the predatory nature of payday loans. Taking a short-term loan can kick off a terrible cycle of debt with annual interest rates as high as 700%. But, as John Oliver points out in his rant, a Pew survey found that "a majority of borrowers say payday loans take advantage of them, [but] a majority also say they provide relief."

The point is that there will be times when people need money in a hurry and feel that their choices are limited. However, most borrowers have more choices than they think they do. Prospective payday loan customers could always borrow from a family member or friend, pawn or sell an item, or even sell blood or plasma. In other words, it's a better idea to do almost anything else to generate some quick cash than visit a payday loan store. (Although some of the ideas suggested by Sarah Silverman, the official spokesperson for doing anything else, are clearly meant to be tongue-in-cheek.)

Many payday loan borrowers end up turning to these anything else options in order to get out of the cycle of payday loan debt, so it would be better to just start there.

2. Start Saving for Retirement Now — And Build a Time Machine and Start Saving 10 Years Ago If Possible

As seen on: Last Week Tonight: Retirement Plans

We all need to be saving more money for retirement, and the earlier you start, the more time compound interest has to work its magic. According to a 2014 study from the Center for Retirement Research at Boston College, a 25-year-old would only need to set aside 15% of her income each year to adequately replace her income as of retirement at age 62 — but if she started at age 35 she would need to save 24%, and 44% if she waited until age 45.

While I have no issue with encouraging people to save more (really — save more!), I do have a quibble with the slight whiff of shame clinging to the build-a-time-machine portion of this advice. We can't change our past financial behavior, but we can feel bad about it and let it affect our present behavior — which too many people tend to do. There's no point in offering coulda-shoulda-woulda advice when time machine technology is still a couple of thousand decades away from reality.

However, the basis of this advice is more than sound. Don't waste your money on Elf School in Reykjavik. Put it in your retirement account where it can do you some real good.

3. Check Your Credit Report Every Year

As seen on: Last Week Tonight: Credit Reports

Your credit history can affect everything from whether you qualify to make large purchases, to your ability to land a job or rent an apartment. Unfortunately, credit reports are not always accurate, even if you have been a boy scout when it comes to your responsible credit usage.

As John Oliver reports, the credit reporting bureaus make major mistakes in one out of every 20 credit histories. That may be a 95% accuracy rate, but it does leave 10 million consumers to deal with critical mistakes on their credit reports.

The only thing we can do to fight mistakes (and identity theft, which Last Week Tonight did not even get into) is to regularly check our credit reports. We are legally allowed free access to a credit report from each of the major reporting agencies — TransUnion, Experian, and Equifax — once per year. You can access that information at annualcreditreport.com.

If you're particularly organized, you can keep an eye on your credit on a rolling basis by checking one of the three agencies every four months.

4. Invest in Low Cost Index Funds

As seen on: Last Week Tonight: Retirement Plans

Seeing this particular piece of advice had me standing up and cheering in front of my laptop. The financial industry likes to tout the superiority of actively managed funds since there is an individual making decisions for your investments — which has got to be better than doing nothing.

Except the active managers who are tinkering with investments have a couple of big detractions. First, they are human, which means they are subject to emotional reactions to market volatility. It is very hard to stick to a plan when ego, panic, or greed is driving the train. According to research by Nobel laureate William Sharpe, you would have to be correct about timing the market (that is consistently buying low and selling high) 82% of the time in order to match the returns you will get with a buy-and-hold strategy. To put that in perspective, Warren Buffett aims for accurate market timing about 2/3 of the time.

In addition to the difficulty of market timing, an actively managed fund will have higher transaction costs because of all the active buying and selling (each of which generates a fee) going on. Even if you have the world's most accurate active manager, a great deal of your returns will be eaten up by your transaction costs.

Low cost index funds, on other hand, keep their costs low by having fewer managers to pay, and they tend to outperform actively managed funds because they are simply set to mimic a certain index. The majority of consumers will not beat low cost index funds for satisfactory retirement investment growth.

5. If You Have a Financial Adviser, Ask if They're a Fiduciary

As seen on: Last Week Tonight: Retirement Plans

A financial adviser is a fiduciary if he or she is legally required to put your economic interests ahead of their own. This is an important distinction because the terms financial adviser, financial planner, financial analyst, financial consultant, wealth manager, and investment consultant are unregulated — which means someone introducing himself by any of these titles might not have the expertise to back it up.

But even if your financial adviser does have the credentials necessary to help you manage your money, she might be paid via commission, which could mean she recommends products to you that help her bottom line more than your retirement.

Since a fiduciary is legally obligated to put your interests above their own, you are more likely to get objective advice from them.

While John Oliver recommends running the other direction if you find that your financial adviser is not a fiduciary, that may not be necessary as long as you understand how your adviser is paid and you are willing to commit to due diligence in double-checking your adviser's recommendations.

6. Gradually Shift From Stocks to Bonds As You Get Older

As seen on Last Week Tonight: Retirement Plans

This advice is part of target-date retirement planning. The thinking behind it is that you need to be invested in riskier (and therefore higher-earning) investments like stocks when you are young, because you have the time to ride out the volatility and reap the returns. But as you age, you need to be sure your principal is protected, which means gradually shifting more of your investments into bonds, which are more stable but have lower returns.

This is pretty good general advice, and I love the show's take on when to remind yourself to shift more to bonds — whenever a new James Bond actor is chosen. (I'm team Gillian Anderson!)

The only nuance I would like to add to this piece of advice is to remind investors that retirement does not mark the end of your investing days — and you should not be entirely invested in bonds by then. Theoretically, you still have 25 to 40 years ahead of you as of the day you retire, and you will still need to be partially invested in aggressive assets like stocks in order to make sure your money keeps growing.

7. Keep Your Fees, Like Your Milk, Under 1%

As seen on Last Week Tonight: Retirement Plans

Except for the fact that skim milk is a watery horror I would not wish on my worst enemy's morning Wheaties, this is probably my favorite of John Oliver's money tips.

Fees on your investments work a lot like interest — in that they compound quickly. Last Week Tonight showed a clip from the 2013 PBS documentary The Retirement Gamble, which illustrated how compounding interest would eat up 2/3 of your investment growth over 50 years, assuming a 7% annual return and a 2% annual fee.

The only way to combat such termite-like destruction of your investment growth is to keep your fees low — under 1%. And the lower you can get your fees under 1%, the better you are. As John Oliver's segment points out, "Even 1/10 of 1% can really [bleep] you."

Money With a Side of Funny

The majority of financial information is not exactly fun to read through. That's why it's so important for a satirist and comedian to take on these vitally important issues and make them entertaining. I'm thankful that John Oliver has decided to make money one of the issues he illuminates for his audience.

Are you a regular watcher of Last Week Tonight? What valuable advice have you gleaned?

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

10 Money Lessons I Learned From Dad

Paul Michael — Thu, 16 Jun 2016 10:00:09 +0000

It's Father's Day soon. In honor of all the dads out there, I thought it would be great to look back on some of the marvelous advice my dad gave me over the years. I'm sure a lot of the advice on the list is familiar to you, as the generation before mine passed down much of the same knowledge to all of us. Still, it's always advice worth following, and has saved me thousands of dollars over the years. Here are 10 tips from my dad, that I now pass on to you. (See also: 3 Smart Ways to Save on Father's Day)

1. Don't Throw Good Money After Bad

When my dad first told me this one, I was too young to really understand it. Honestly, even in my midteens I wasn't exactly sure what he was getting at. Then, when I became an adult with an income, and the means to make my own purchases, I got it. First, it was buying a cheap used computer that I had to pour a bunch of money into to make usable. And even when it had the best specs, it was still not as good as a new one, which would have been faster and cheaper.

From projects that suck money and time and have no profitable outcome, to investments that keep tanking despite a constant injection of cash, I always remember what my dad told me: Don't throw good money after bad.

2. Do a Job You Love, and You'll Never Work a Day in Your Life

Oh, how right he was on that one. I know it's not really my dad's quote, but it didn't stop me taking it to heart. From as long as I can remember, I have loved drawing, painting, writing, and creating. I did everything I could to follow a career path that utilized those skills, and today I am a creative director in advertising and entertainment — and I also get to write articles like this one.

Sometimes, I feel a bit guilty about getting paid to do something day in, day out, that I really enjoy. And that is the best way to make money; when you aren't even trying. So if you are not yet out of school, follow your dreams and find a job that you will enjoy, if you can. If not, find a way to make money in your spare time by doing something you love — whether it's fixing cars, painting murals, or singing. When you love it, the money is not hard work. It's not work at all.

3. Buy Cheap, Buy Twice

As someone who loves a deal, I did not take this advice word for word. I don't believe in paying full price for anything, and that could be considered "cheap." But I like to buy quality items at a lower price. What my dad was saying was that if you buy a cheap tool or a bargain bucket t-shirt, you cannot expect either to last. It's far better to pay $30 for something that will last you a few years, than $10 for something that will last only six months. If you're digging around in the dollar store bins for screwdrivers, you can guarantee you'll be back for a replacement much sooner than if you had picked up a quality item from a hardware store.

4. Don't Buy Champagne on a Beer Budget

"Wait Dad, we never have Champagne." "Exactly," was his response to me. I grew up in a working class home in the northeast of England. We rarely ate out, and when we did, it was cheap. I remember coloring in pictures every month at the same cafe because "kids eat free if they color a picture." My parents never splurged, except at Christmas (which was a case of going overboard to make up for the rest of the year, I think). We bought food once a week, on Friday, and if we wanted something before then, we had to wait.

I learned this lesson well. I don't have massive loans or a ton of credit card debt, I have a modest car, a small home, and I live well within my salary every month. This is probably the most important lesson I ever learned, and it has stood me in good stead.

5. You're Never Too Young to Save

Whether it's for retirement, a savings account, or just something on which to spend your allowance, saving was drummed into me from an early age. "Pay yourself first" was another way my dad put it.

I had a savings account at the local bank when I was 10 (the Natwest piggy banks were awesome). At 22, I started saving for my retirement. Even though it was just a little each month, the power of compound interest is working its magic on that some 20 years later. Some people say you should live for today, because you'll be too old to enjoy it later on. I certainly don't think you should save everything and live a Scrooge-like existence, but plan ahead, and start saving as soon as you can, with whatever you can. You are going to need it.

6. There's Nothing Wrong With Second-Hand

Many of my friends growing up had new clothes, new bikes, new toys, and new backpacks every few months. I did not. I did get new things, but I made them last. However, I was taught early on that there was no stigma or shame in buying used items. It is a lifestyle choice I continue to practice, and it saves me a lot of money. Used cars are way cheaper than new ones. I will go to Craigslist for appliances, electronic items, tools, and, well, anything else that I need. I will search for "factory refurbished" or used before new. The only exceptions I have on used items are footwear, underwear, and safety items (think infant car seats).

7. Find a Way to Afford It

I grew up around the haves, and have-nots. I would say for the most part, I was in the latter category, but only because the haves were those who had everything they ever wanted. However, if I wanted something really badly, my dad would tell me, "Figure out a way to make it happen."

If my allowance wasn't enough for the book or DVD I wanted, I'd do odd jobs or get a paper route. I would sell things I owned to get something else (I still regret selling my entire Transformers toy collection to get a CD player… oh, if I had foresight). But today, the same is true. I'll work extra hours. I'll hustle freelance gigs. I will find ways to make it work, rather than the usual "slap it on the credit card" routine so many people follow.

8. Don't Shop on an Empty Stomach

Have you ever done this? It's a nightmare. Everything you see, in every aisle, looks fantastic. You may have a shopping list (in fact, my mum insisted on one) but it goes out the window when you shop hungry. You throw all sorts of food into the cart, and before you know it, you're checking out with way more than you need. Sometimes, you buy so much it goes off. Or you blow your budget for the week, and realize half the stuff in your cart is junk. So, before I do my shopping, I grab a bite. Even if it's just a granola bar, it can really stop those hunger pangs from taking over, and turning you into the "eyes bigger than your belly" monster.

9. Knowledge Is Money (and Power)

The more you know, the better the deal you can get. My dad taught me that from an early age, and to this day I am a research freak. Of course, he didn't grow up with the Internet, so he had to work a lot harder to find bargains and hustle great deals. So before I buy anything, I do my homework. I comparison shop. I ask friends and family. I talk to insiders, or visit forums. For me, buying something without knowing as much about it, and the buying process, as possible is just throwing money away. And knowledge is also power in this context. If you're armed with it, you can negotiate from a position of strength. Know you stuff, it will serve you well.

10. Learn How to Fix (and Make) Things

From as long as I can remember, I was helping my dad out with DIY projects. We didn't have a lot of money growing up, but he certainly knew how to stretch it out. Buying materials to build something was way cheaper than buying it ready-made. Coffee tables, lamps, desks, computer cases, fire surrounds, you name it, he built it. He was really good at it, too.

Over the years, he must have saved so many thousands of pounds (as I say, I grew up in England) by making his own things, or fixing things instead of paying for repairs. I try to follow in his footsteps, although sadly, I didn't get his knack for woodworking. But I will look up ways to repair things that are broken, or follow online videos for things like replacing brake pads or cabin filters. Whenever anything is in need of a repair, my dad is in the back of my head saying "Hey son… you can fix that, go on, give it a go."

Happy Father's Day, Dad. I love you, and wish I could see you more. You're my hero.

This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Voices to Tune Out When Managing Your Finances

Tara Struyk — Tue, 07 Oct 2014 13:00:03 +0000

Having trouble managing your money?

Be careful where you turn for advice. Most of us are inclined to take at least some advice seriously, but who should you trust? And just as importantly, who shouldn't you trust? (See also: Investment Advice You Never Want to Hear From a Financial Advisor)

Here are a few people's voices you should tune out rather than turn up.

1. Your Family

I'm sure your family members are terrific people, but you have to be very careful about taking their financial advice. Why? Well, family members can be pretty compelling. We trust them. We love them. Most of them have our best interest in mind. And that can make us take their advice a little too seriously.

Maybe your mom thinks you should be buying a house (even though she doesn't know about the credit card debt you racked up in college). Maybe grandpa thinks you should be investing in bonds (even though he doesn't know your investment risk profile, or goals, or strategy). Maybe your cousin thinks you should live in the moment and spend your life savings on travel (because that's what he's doing).

These tidbits of advice aren't all junk. The problem is that no one can give you high-quality, accurate financial advice without knowing just about everything about your personal finances. Plus, just because certain investments or strategies or life choices worked for others doesn't mean they'll work for you. Don't let the love and respect that you have for the people in your family dictate how heavily you weigh their advice.

2. The Buy-It-Now Pundit

The media is filled with opinionated stock pundits. You know, the guys who write investment columns, or pen subscription newsletters for investors, or dole out advice on TV. Many of these famous analysts are famous for a reason; at some time or another, they've had great track records. In other word, most of these guys know their stuff, and their opinions are a great way to learn more about the market, what sorts of factors affect individual stocks, and what clues to look for when it comes to buying and selling investments.

However, when one of these experts tells you to buy, it's time to tune them out. Buying a stock isn't the only piece of the puzzle. If you have no good reason other than a stranger's advice to buy it, how are going to know when it's time to sell? This is why you should never, ever buy or sell a stock based on what someone says unless that person is your own personal, trusted financial advisor. Even then, it's best to do your own research. Just remember who will pay the price if the stock turns out to be a loser.

3. The Misery-Loves-Company Friend

Everyone has a friend who tells them how they should be spending their money. Maybe yours says you should should really take more vacations. Or get a bigger TV. Or buy a boat. This friend is not really concerned for your financial well-being... and yet, this person can often be quite compelling. Perhaps you envy the things they have. Or maybe this person's brash personality just makes it hard to admit that you can't afford to roll that way. More than likely, this person just wants you to corroborate his or her poor financial decisions. So, don't let them get to you — or convince you that the lifestyle you've chosen — isn't good enough. (See also: The 5 Worst Pieces of Financial Advice Your Friends Give You)

4. The Guy Who Works at the Bank

This can be hard for many people to understand, but just because someone works at a bank doesn't mean they're money experts. In fact, many of the people working at your local branch have pretty limited training in financial management. What that means is that while they're qualified to sell investments, they may not have all the tools required to help you determine which ones are truly right for you. If you know your stuff, do your research beforehand so that you can go in knowing what you want. If you aren't up to that, find a skilled, certified financial advisor who can help you.

5. Yourself

When it comes to how to manage your money, there are probably a few competing voices in your head. There's only one you should listen to, and it probably isn't the loudest one. You know that sick, sinking feeling you get when you pull out your credit card for the umpteenth time? That's your gut talking. That's the voice that pipes up when you're doing something stupid. Something you'll regret later. It may not speak loudly, but that's the voice you should be listening to. As for the voice that tells you to buy more, do more, and worry later? It can be pretty compelling voice, but it's also the one you should learn to tune right out.

Who Are You Listening To?

While taking someone's advice at face value may seem like an easy bet to make, virtually no one knows as much about your personal financial situation as you do. This means that very few people are qualified to give you sound advice about it. Remember this the next time someone else offers their opinion. You don't have to ignore it or toss it aside. What you can do, however, is assess it, compare it to your financial situation, and determine whether it's really a good fit for you. In most cases, it won't be. After all, the world is full of opinions. Good financial advice is much harder to come by.

Where do you get money advice? Please share some advice on advice in comments!

This article is from Tara Struyk of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Ask the Readers: What Money Advice Would You Give a College Student?

Ashley Jacobs — Tue, 19 Aug 2014 15:00:03 +0000

Editor's Note: Congratulations to Linda, Diane, and Steve for winning this week's contest!

College students hear a lot of life advice from pretty much everyone around them, but tips on financial matters may not be at the top of their minds. Still, it's important for young people to know how to manage their money now — and in the future.

What money advice would you give a college student? Did someone give you this advice when you were that age, or did you have to learn from experience? Have you shared your tip with any college students you know?

Tell us what money advice you would give to a college student and we'll enter you in a drawing to win a $20 Amazon Gift Card!

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money advice

3 Money Arguments That Can Hurt Your Relationships

Friends with expensive tastes

Misaligned spending priorities

Loaning money

Don't let money get in the way of your relationships

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Ask the Readers: Who Do You Go to For Money Advice?

Win 1 of 3 $20 Amazon Gift Cards

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How to Deal With a Partner Who Is Too Controlling With Money

Get to the root cause

Balance the money load

Talk about your feelings

Add a third party if needed

Understanding financial abuse

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10 Books to Read for a Better Money Mindset

1. A Conflict of Visions by Thomas Sowell

2. The Power of Less by Leo Babauta

3. The Worldly Philosophers by Robert L. Heilbroner

4. Thinking, Fast and Slow by Daniel Kahneman

5. Debt Is Slavery by Michael Mihalik

6. Material World: A Global Family Portrait by Peter Menzel, Charles C. Mann, and Paul Kennedy

7. The Intelligent Investor by Benjamin Graham and Jason Zweig

8. If You Can: How Millennials Can Get Rich Slowly by William Bernstein

9. Your Money or Your Life by Vicki Robin

10. Nickel and Dimed by Barbara Ehrenreich

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5 Times Dad Was Right About Money

1. "If it sounds too good to be true, it probably is"

2. "You don't need that"

3. "You've got Champagne taste on a beer budget"

4. "Money doesn't grow on trees"

5. "The best things in life are free"

Appreciating Dad's words of wisdom

5 Money Strategies for the Sandwich Generation

1. Talk Openly About Finances

2. Utilize Special Savings Accounts

3. Get Tax Benefits

4. Prioritize the Budget

5. Ask Other Family Members for Help

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Best Money Tips: Pieces of Money Advice That Are Always True

Top 5 Articles

Other Essential Reading

7 Best Money Management Tips From John Oliver

1. Before Taking a Payday Loan, Be Absolutely Sure There Are NO Other Options

2. Start Saving for Retirement Now — And Build a Time Machine and Start Saving 10 Years Ago If Possible

3. Check Your Credit Report Every Year

4. Invest in Low Cost Index Funds

5. If You Have a Financial Adviser, Ask if They're a Fiduciary

6. Gradually Shift From Stocks to Bonds As You Get Older

7. Keep Your Fees, Like Your Milk, Under 1%

Money With a Side of Funny

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10 Money Lessons I Learned From Dad

1. Don't Throw Good Money After Bad

2. Do a Job You Love, and You'll Never Work a Day in Your Life

3. Buy Cheap, Buy Twice

4. Don't Buy Champagne on a Beer Budget

5. You're Never Too Young to Save

6. There's Nothing Wrong With Second-Hand

7. Find a Way to Afford It

8. Don't Shop on an Empty Stomach

9. Knowledge Is Money (and Power)

10. Learn How to Fix (and Make) Things

5 Voices to Tune Out When Managing Your Finances

1. Your Family

2. The Buy-It-Now Pundit

3. The Misery-Loves-Company Friend

4. The Guy Who Works at the Bank

5. Yourself

Who Are You Listening To?

Ask the Readers: What Money Advice Would You Give a College Student?

Win 1 of 3 $20 Amazon Gift Cards

Mandatory Entry:

For Extra Entries:

Giveaway Rules: