Consumerism Archives — Beating Broke

Are We Too Confident in the Stock Market?

August 22, 2018 By Shane Ede 4 Comments

Experts are fond of telling us all about the historic returns of the stock market. But, does our belief in that make us overconfident in the stock market?

You’ll have a hard time finding someone who won’t tell you that the market performs quite admirably over time. It may have it’s ups and downs, but it performs at a rate that touches on double digits for longer periods of time. And, it’s hard to argue with the facts. Take the market for any given 10 or so year period and you aren’t likely to find too many periods where it hasn’t returned a pretty nice rate. Especially when you compare it to the rates of savings accounts and CDs over the same period.

But, there’s shady side to all of that. Our confidence in the ability of the stock market to return those kinds of numbers can sometimes cause us to over-invest our portfolios. Every time the stock market drops significantly (or crashes altogether) we hear stories about the person who was near retirement and now has to work for another 10 years because he/she lost it all in the stock market drop. Invariably, you hear one of the reporters utter something about whether the stock market is as safe as we all make it out to be.

And the truth is, no. It’s nowhere near as safe as some would make it out to be. In fact, it’s down-right risky. And the less diversification you have, the riskier it becomes. Hold all your money, or a significant portion of your portfolio, in one stock and you’re just as likely to suffer a tragic loss than you are to retire rich. Ignore the more conservative professionals who suggest that you should move more and more of your money away from stocks and into something like bonds as you age, and you have a much higher chance of suffering a tragic loss.

Our confidence isn’t entirely misplaced, however. The facts remain that the market does return a healthy rate over time. And as long as you can weather a few down trends, you’re likely to come out on top if you just hold on for the ride. The overconfidence comes when you keep your money in too high of a percentage of stocks as you near retirement age. By the time you are 10-15 years from retirement (about age 50-55) you should have moved at least 50% of your portfolio away from stocks and into bonds. Your investment adviser should be able to help you with that, or you should sign up with a stock advisor service (like the Motley Fool Stock Advisor, or Betterment). When you’re 5 or so years from retirement, you should be closer to 90% in bonds and other safer investments. Yes, these investments are less likely to have high returns, but they also are almost guaranteed to return something. And, as the old saying goes, something is better than nothing.

The bottom line is this. Be aware of the risk of the stock market and that you should begin playing it safer as you near retirement age and you should be ok. Don’t get overconfident in the history of the stock market and it’s giant returns. Most importantly, find an investment adviser that you can trust and, at the very least, get their advice on your portfolio and it’s allocations, and you should find yourself hitting retirement with most of the money you expected to be there.

Image Credit: Charging Bull by kdinuraj, on Flickr

This post originally appeared on Beating Broke on 10/25/2010, and has been refreshed.

5 Reasons Why You Should Declutter Your Home Once a Year

March 2, 2016 By MelissaB 3 Comments

When we moved from Chicago to Tucson 18 months ago, packing was a nightmare. We hadn’t had a good decluttering session in nearly 3.5 years, since our last move, which was local. We spent weeks, yes, literally weeks, giving away and selling junk that we just didn’t use anymore before we could even start packing our possessions.

When we moved to Tucson, I vowed to keep on top of the clutter and the household messes. However, when we prepared to go on vacation recently and knew that our tidy neighbors would be coming in and out of our house for two weeks to cat sit, we realized we had a problem. The clutter, and the messes, had returned since the move.

I spent several weeks decluttering again. Several bags of items went to the local kids’ resale shop; several boxes went in the garage earmarked for a garage sale later this year, and a lot of crap just got tossed in the garbage.

Now that we’re decluttered once again, I can’t believe how much better I feel. From here on out, we’re decluttering once a year. Here’s why:

Make Additional Money

I made nearly $100 at the kids’ resale shop. I opted for store credit to get 30% more money. I’ll use that over the next few months to get my kids clothes and birthday presents. (Yep, the store sells NEW toys at a fraction of retail.)

I also made another $150 selling items on eBay.

We haven’t had our garage sale yet, but based on what we have to sell, I think we’ll easily make at least another $100.

Sure, these amounts aren’t going to even buy us a month’s worth of groceries, but we now have several hundred more dollars than we had a few short weeks ago, AND our house is much tidier.

5 reasons to declutter your house — Original IMG credit: Dafne Cholet on Flickr.

Save Money

There were several items like my son’s arm shield for archery, our headphones for the computer, to name a few, that we were planning to replace because we couldn’t find them. Surprise, surprise, once we decluttered and cleaned up, we found these and many more things. We saved ourselves from buying duplicates. These small savings add up!

Kids Outgrow Things

Kids grow. . .A LOT! Pants that fit last winter may be two inches too short this winter. Games that they loved to play with last summer may be too babyish this summer. Why keep all these relics of previous phases of childhood? Clear them out so you have more room.

More Satisfaction With Being At Home

My youngest two children and I had a particularly painful decluttering session when we tackled all the papers, toys, and little pieces that were littering the floor in front of their toy area. But how much better we all felt when we could see clean, empty floor in front of the toy shelves. In fact, my children started playing immediately in that space and had a great time.

I notice now that the master bedroom is cleaner, I feel lighter and happier when I walk into the suddenly much more open space.

It’s Easier To Maintain Your Home

We hope to stay in our home for many years, but the reality is that my husband may not have a job here in another year or two. Until he secures a permanent position, we feel like our home is ours temporarily, so it’s important to keep up a maintenance and cleaning routine in case we have to put it on the market some time. Having a clutter free home makes this much easier.

What benefits do you get from a less cluttered home?

Are Good Deals Putting You in Debt?

October 28, 2015 By MelissaB 2 Comments

We all love a good deal, right? There’s nothing better than paying $2.40 for a pair of kids’ shorts that retail for $16 or paying $0.25 for Christmas wrapping paper at an after Christmas sale when it would cost you $2 or more to buy it new.

After all, buying things on clearance is what savvy shoppers do, right? This is an excellent strategy for being frugal with your money, right?

Well, yes. . .and no. Are those good deals putting you in debt? Ask yourself these questions and decide if you really need that good deal.

Do You Buy More Than You Need?

When something is on clearance 80% off, it’s tempting to buy alot. . .more than you need. After all, why buy one sweater at $5.00 on clearance when you could buy 8 for the cost of what just one would cost retail? Besides, you’re not paying any more than it would cost to buy a $40 sweater brand new, and you’re getting 8. What a deal!

But do you NEED 8 sweaters? Will some of them languish in the back of your closet, with the tags still on, until you decide to purge your closet and give them away or try to sell them at a garage sale?

Can You Afford It?

Sometimes, you need to pass up good deals. If you can’t afford the deal and put it on credit card, are you really saving money? By the time you figure in the interest you’ll pay, that clearance sweater may end up costing you nearly as much as it would cost retail, or, if you pay only the minimum payment on your cards, even more!

Some people have gone in debt in pursuit of good deals. Kristine Rogers, who was featured in Money magazine, explains that she went in debt buying children’s clothes on clearance: “Gymboree held a clearance sale in which every item was priced at $7.99. ‘I grabbed clothes my daughter didn’t need. I bought four of the same coat in different colors.’ By the end of the day, Rogers’ compulsion had cost her $800.” Rogers developed a full blown shopping addiction in the pursuit of sales and ended up with $50,000 in credit card debt! Sure, she got good deals, but in the end, after interest, she likely paid much more than she would have if she’d bought the items at retail.

Are You Tying Up Current Cash Flow?

Assuming you don’t go into debt to buy good deals, you may still be tying up your cash flow. If you spend $40 on 8 sweaters that you buy in May but won’t wear until November, you’re tying up cash flow. If you don’t wear some of those sweaters at all, you’ve wasted money despite the good deal.

Be More with Less explains, “If you buy wrapping paper on December 26^th and stock up on sale items year round, you are spending more than you would if you just bought what you needed. Don’t be fooled by the cashier that tells you, ‘you just saved $22.00’ when you just spent $300.”

What do you think? Is it worthwhile to pursue good deals, or can it be a slippery slope to overspending and debt?

Do you buy items on clearance? Do you always use all of the items, or do you accidentally buy too much?