Top 5—Low-hanging fruit of financial management

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Most people want to increase their net worth.  The problem is that it’s not always easy.  Here is a look at the five “easiest ways” to increase your net worth, either by spending less, making more, or increasing your investments.

5.  Insurance: By definition, buying insurance is a money-losing proposition.  Insurance companies make money by relieving us of the financial risk of our lives.  And that’s fair. 

The problem is so often we make decisions on insurance at one stage of our lives and then “set it and forget it”.  After a few years, what was appropriate then might not be appropriate now.

A several years back Foxy and I got life insurance.  Based on our net worth and overall situation, it made sense.  Since then, our net worth has increased many fold, and if the EXTREMELY UNLIKELY event of our death happened, the survivors would be fine.  Is that worth $100 each month?

We picked the appropriate coverage on our car insurance four years ago.  Now our cars are four years older and worth substantially less.  Do we still need those levels of coverage today?  If the answer is “no” we could probably save another $30 per month.

4.  Revisit monthly expenses:  It’s easy to put your finances on auto-pilot as you make it through this crazy journey called life.  Yet, as fast as things are changing, especially technologically, it’s easy to have prices creep to too-high levels when you take your eye off the ball.

Our family has two cell phones (we refuse to cave in to getting our 10-year old a phone) and that costs about $60 per month.  Our internet is $35 per month. 

Yet, I can’t tell you how often I talk to families about their finances and expenses and when those items come up they’re paying two-, three-, four-times as much.  That’s not to say you should go without, but there are a lot of expenses where there are great alternatives at deep discounts from what you’re paying right now.

3.  Ask for a discount:  It’s amazing what we can get if we just ask.  I was working with a couple who had a pretty normal financial picture with pretty normal debts—car loans, mortgage on a second home, loan for a boat, student loans.

On a lark I suggested they call the various companies that held the loans and just ask if it was possible to get a lower rate.  Wouldn’t you know, they were told “yes” more often than “no”.  Sure, some places said no, but that happens.  The ones who said yes were able to offer better terms for the loans that amounted to hundreds of dollars in lower payments each month.  Who knew?

2. Balance transfer on credit cards:  Obviously having credit card debt is a bad thing and should be avoided at all costs.  If you do have credit card debt, eliminating that should be your top financial priority.

However, in the here and now, if you do have credit card debt that you’re working on paying off, getting a new credit card and transferring your balance could result in hundreds of dollars in savings on interest. 

Many cards offer 0% introductory rates for purchases or balance transfers.  Taking advantage of this could be a huge boost.  $10,000 of credit card debt at 20% rate is $170 for interest alone each month.  If you could take 20 minutes to apply for a new card with a teaser rate, that could save you a ton of money.

Of course, you still need to pay the debt off.  But doing so with an introductory rate can really help speed things along and save you a ton in the process.

1. Refinance your mortgage: Mortgages are often the largest expense that families have, yet it’s one of the easiest to impact.  Right now, mortgage rates are at historic lows. 

The Fox family just refinanced ours at 2.6%.  Many people could probably also get a lower rate, especially if you have a conforming mortgage (we don’t) or can swing a 15-year mortgage (we did 30).  Us going from 3.5% to 2.6% will save us about $500 per month for the next 30 years.  That adds up to some serious money.

Awesomely, the effort required to do this isn’t very much at all, especially compared to the upside.  With about 2-hours of internet searching, filling out forms, and talking to a few people, you can figure out if you can save money with a refinance.  If you can, then it’s probably 10 more hours of getting all the forms together and signing a bunch of stuff.  A dozen hours of work for an annuity worth hundreds of dollars a month is about as good as it gets.

Obviously there are the “meat-and-potatoes” way of increasing your savings.  Spend less.  But that requires a trade-off and sacrifice.  Here are some examples where hopefully that trade-off is the most painless.

Kids investing in stocks–Part 2

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Last week I told you how I try to instill strong financial habits in my two cubs.  Obviously this is a sensitive issue because, sadly in my opinion, openly discussing money, especially with the little ones, is a bit taboo in our society.

That said, I think, early and open discussions on money are important.  As you know, financial literacy rates in our country are abysmal.  I truly believe that “early intervention” is tremendously helpful here.

Once you teach your cubs about earning and saving money, I think then the next thing is to teach them how to invest.


I am a super nerd when it comes to investing and personal finance (as you’ve probably figured out based on this blog).  So I am more than happy to dive in to deep topics like tax optimization and asset allocation.  But I can think of no quicker way to get the cubs’ eyes to glaze over and lose all interest.

For me, the hook to get them interested about investing is to sell it as a way to “get rich”.  Most cubs like the idea of being rich, so this fits nicely.  While keeping things age appropriate, I do tell them that our family’s net worth was a lot of hard work and savings, but then it grew several times that size because we invested it.  Putting it that way seemed to pique their interests.

As far as telling them what stocks are, I try to keep it as simple as possible.  A share of stock gives to a part of the company—if the company does well the stock goes up, and if it does poorly the stock goes down.  That’s it.  I don’t talk about bonds or dividends or anything else. 

Buying actual stocks

Once I got the cubs excited about stocks, I opened up two brokerage accounts with Vanguard.  First, all our family’s money is with Vanguard so that was the natural place to start.  Second, and this is important, Vanguard offers free stock trades.  As you’ll see in a second, frequent trades are important to keep the kids excited and engaged, so it’s nice that you don’t have to pay $15 each time you go in and out.

Since my cubs are minors, the account is actually in my name (to set it up for a kid is a monumental hassle).  Once they were opened, I funded each with $1000.  And we were ready to go.

I asked the cubs the simple question, “What stock would you like to buy?”  They wondered what their options were, and that’s where it became really cool—all sorts of companies have stocks.  We walked around the house looking at stuff we have that they like, and most of those were made by companies with stocks.

Mini Fox’s first investment was in Duke Energy since they’re our electric company, and ‘Lil Fox’s first was Edwards Lifesciences since I had done some consulting work there.  I bought $1000 worth of each stock and they were stockowners.

I tried to follow up by having them fill out a worksheet on each company so they could learn about it—the name, the headquarters location, what they make, how much revenue they get each year.  This worked at first, especially because we started in the summer, and they needed stuff to do, but I got lazy and they stopped doing it.  But I definitely think something like this is a good idea.

After a couple weeks I would ask them what the next stock they wanted was.  Obviously, in the real world I would never invest like this—individual stocks and very short time horizons.  But this really isn’t investing as much as it is education.

We’d go around the house again and pick another stock.  We’ve had Disney, DuPont (Mini Fox was obsessed with chemistry for a while), Vail (since Dad goes skiing every winter), and a bunch of others.  Right now Mini Fox is in Facebook because they own Oculus Quest 2 which he loves, and ‘Lil Fox is in Hasbro.

Celebrate the wins

A key to keep the kids engaged is to show them how they’re doing.  Obviously it’s more fun for them if the market is going up (dollar cost averaging is not a concept to teach right now 😊).  Fortunately, since we started this last summer, the stock market has been on a tear, up about 40%, so there have been a lot of wins.

Every few days I show the cubs what their stock is at.  Ironically, they don’t seem nearly as interested in how their stock is doing as much as “Did mine do better than my brother’s?”

Early on, ‘Lil Fox was rivaling Buffet.  He picked Valvoline (we got our oil changed there), Exxon (where we get gas), Toyota (I drive a 4Runner), and Pulte Homes (they built our house) all did tremendously well.  I’d call him a stock picking genius, and he had a lot of fun telling his friends that.

Mini Fox didn’t do as well (he invested in Tesla early but missed their huge run up) but made some good picks with Catepillar, Microsoft, and DuPont. 

As of today, ‘Lil Fox is up on his brother, but they’re pretty much in line with the market.  That said, it’s a few hundred dollars in profit, and that gets them really excited, and that’s kind of the whole point.

Who knows if this is a good approach or not, but I think it’s important that the cubs dip their toes in.  This is how we do it.  What do you do?

Teaching kids about money—Part 1

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Wow!!!  We’re going for the throat on this one.  Teaching kids about money is one of the hardest and most complex and most controversial and most personal of tasks facing parents and society at large.  But that’s never stopped us before.  Let’s take this topic on and see how many readers I can piss off.

As a kid I remember home economics class.  This was in the early 1990s and the shadow of “this is really a class for girls” still loomed, although that was definitely changing.  Reflecting on it now, that was probably the most important class I ever took in school and I blew it off.  Skills like how to prepare a healthy meal, balance a checkbook, plan a large purchase, do a load of laundry—those are important.  Want to know what knowledge I haven’t really used a lot as an adult: trigonometry (and I’m a huge math nerd), the generals of the Civil War, how to diagram a sentence, which colors complement a blue background for an art project.

The point is, the most important life skills aren’t taught very well in school these days.  That’s a topic with a lot of deep water and could consume hundreds of blog posts.  But in the here and now, we reynards and vixens (did you know that’s what adult male and female foxes are called?) need to teach the cubs about money and managing their finances.

I will be the first to admit that I’m not perfect at this.  I am constantly learning and tweaking what I do, but here are a couple ways I try to pass these lessons on to ‘Lil Fox and Mini Fox.  If you think my approaches are good ones, feel free to steal them; if you think they suck, feel free to give me some pointers.


For cubs as old as ours are, the allowance is the central element of the cub economy.  I pay each cub one dollar per work day (weekends not included).  This is payment for all school related work which Foxy Lady and I purposely call their jobs (“You know how Dad and Mom have jobs that make money?  Well, school is your job.”).

Additionally, the allowance pays for chores that they need to do.  We’ve been working on expanding this list, but admittedly we aren’t great about that.  Some times it’s easier to do it ourselves than work with a 7- or 10-year-old to get it done.  That said, taking in the dumpsters after trash day, taking dishes to the sink, cleaning their rooms, and putting away their backpacks and shoes are their main chores.

Every Friday is payday and I give each cub $5 for the week of work.  I go to the bank every couple of months and withdraw $100, all in singles.  Each cub gets five one-dollar bills.  This was purposeful because I think getting a bunch of bills has a bigger impact than just getting a five-dollar-bill.  Maybe I’m right on this, or maybe I’m wrong.

Spending it

I feel I am probably over-paying for the allowance, but then I am pretty mean when it comes to what the cubs need to buy, so I figure that balances things out.

With their money they have to buy: Slurpees, any toys that are not birthday or Christmas gifts, gifts for their friends if they are invited to birthday parties, their season passes to Carowinds, and any video games.

It’s funny when we go out and I stop at a gas station to get a soda.  Mini Fox ALWAYS asks if he can get a Slurpee.  When I tell him he has to pay for it, he really thinks about it.  Sometimes he says “yes” and other times “no”.  That’s really the whole thing I want to accomplish.  If they can understand that if they want something it costs money, and that money comes from their hard work, then I think I’m winning. 

Also, we’ve had a lot of conversations at Wal-Mart about something they want to buy but they don’t have the money.  This leads to good conversations about them saving, and how long it would take (If it costs $22 and you have $8, how much more do you need?  If you get $5 each week, how long will it take?).  Also, the two of them can strategize about pooling their money, but then they have to share it and only pick something they both want.  That seems like parenting wins there.

Saving it

Obviously the other big concept is saving.  For us this is equal parts conceptual and physical.  Conceptually, we talk about those things above—if you want something you need to save to get it.

Physically, we talk about where the cash goes.  Remember, they are getting five one-dollar-bills each week, so it adds up.  I bought them little plastic storage units for screws and nails and things like that from Lowes.  They keep their money in those, and we call it their banks.  When we go out they need to carry their banks with them in case they want to buy something.

I also set up bank accounts for them.  Most banks allow something for kids which waives all the low balance fees.  That’s what we did at Bank of America.

For the bank, that’s a bit of a ritual where I take them and make sure they handle the transaction.  They have to take the cash out of their bank, count it, and give it to the teller.  When they’re done, they ask for a receipt with the balance on it.  It’s important to me that they physically handle everything so they understand it all.

Generally, they hate going to the bank because that means they “don’t have their money anymore for toys at Wal-Mart”.  That’s a bit of a miss and a concept we’re working on. 

I also try to stress that banks keep their money safe.  This became real for Mini Fox who lost his bank with about $70 in it.  He was sloppy with it and not paying attention and lost it.  Yikes!!!

I have a feeling I know where it is, but I’m content to let him painfully stew on this one for a while.  Hopefully he’ll remember this feeling and see the value of protecting him money at a bank.

Dang.  This one is already at a thousand words.   Why don’t we split this into two posts and later in the week we’ll talk about how I have introduced stocks to the cubs.

See you then.

Top 5: Things to do with your finances when you’re just starting out

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Love must be in the air. The past couple weekends I’ve run into a few young couples who either just got married or are about to get married.

It got me to thinking about what are the most important things to do in the world of personal finance when you are just getting started.  For the soon-to-be newlyweds, here is my Top 5 list:

5. Figure out your debt situation: If you’re lucky, you won’t have a lot (or any) debt.  For most of us there is some out there, and that isn’t necessarily a bad thing.  List out every debt you have (student loan, mortgage, credit card, car payment, etc.), the balance, and the interest rate.

On a spreadsheet (see #4) rank them in order of interest rate.  As a general rule I use a cutoff of about 6%.  If your interest rate is above that pay those off right away, starting with the highest interest rate debt first.  If your interest rate is below that, that might be okay to keep that debt and just make the normal monthly payments.

If you have any debt (especially credit card debt) at any rate higher than 10%, that’s a “debt emergency”.  Really look at every purchase you make—if it’s not critical to your survival (food, shelter) then pass that up until your debt is paid off.  The only exception to this is #1—funding your 401k.

You can get creative with your debt by consolidating high interest rate cards onto a lower rate card or one that offers a low teaser rate.  That could save you a ton of money, and you should probably look into that, but ultimately, you’ll need to pay that sucker off.  So just hitting the grindstone of paying off your credit cards is a must.

4. Make a budget on a spreadsheet: Take a spreadsheet and put a quick budget together that includes your income, your expenses, and the difference between those two.  This can be simple at first (and it should be simple at first).  Over time, you’ll add more and more sheets to the spreadsheet for things like your mortgage, investments, kids’ education, and other things.

But at the beginning, you need to get a sense of where your money is going.  The budget will give you an aspirational view of this.  After your budget is done, you can track your spending with a website like  This two-step process lets you figure where you want to spend your money, and then also look at where you actually spend it.

Of course, this is an iterative process, and as you close a month and look at your expenses, you can see if you’re spending more than what you budgeted.  This isn’t a time to beat yourself up (being too hard on yourself is a sure way to stop looking at your finances closely, and that’s a REALLY bad thing), but a time to ask yourself why you spent more and if it was worth it.

As an aside, using a spreadsheet is a really good skill in general.  I was really good at spreadsheets and it’s hard to overstate the incredible impact it had on my career, as well as the incredible wealth those skills gave me and my family.  And really, my experience with spreadsheets started in college when I was creating a financial budget.

3. Educate yourself on investing: At a young age, educate yourself on investing.  Obviously, this blog is the universally acknowledged best place to learn about investing, but I have heard rumors there are others. is a great website that looks at personal spending and his early posts had a tremendous impact on my outlook.  A Random Walk Down Wall Street is a book on investing that really defined my investing strategy; I read that as a 19-year-old and still think about its insights today.

There are a lot of websites written by millennials about spending and personal finance that might resonate even more.  A few are:,, and  Most are about reducing spending and budgets and that sort of thing, but there are some on the nitty gritty of making investing choices.  You’ll want perspectives on both.

The whole point is that you need to know what you are doing here.  Spending 20 hours early in your life to figure out basics like asset allocation, tax avoidance, and fee minimization as well as a general attitude towards saving early can easily lead to hundreds of thousands or millions of dollars.  That comes to about $50,000 per hour—not bad.

2. Start an IRA with $1,000: This is as much about the experience gained as it is about actually investing your money.  Vanguard lets you start an IRA with $1,000 as the minimum amount.

You’ll navigate through their website, figure out how to make choices (like Roth or Traditional IRA—go traditional).  You’ll pick your investments, and then you’ll have something to look at every once in a while to see how it’s doing.

So many people are just at a total loss when it comes to setting up accounts for their investments.  That becomes a real problem once you hit 30 or 40 and you’re starting to get behind the 8-ball; you know you need to do something but are kind of clueless on where to start.  Doing it now lets you get your toes wet in this world and makes the next accounts you need to set up (529, 401k, brokerage, etc.) all the less daunting.

1. Get the company match on your 401k: #2 was more for experience than for investment.  Here is where you should start walking down the path for investments.  At a minimum, contribute the match and take the free money.

This is so important for a couple reasons.  First, you’re getting that free money.  Second, you’re making your first “asset allocation” decision.  When it comes time to pick which fund to invest in, unless you have very unique circumstances for an early-20s person, I would definitely go with a 100% equity index fund.

Third, your 401k is a really powerful tool.  If you had no other investing tool, you could still grow a 401k to well over a $1 million during your working career.  That is enough to fully fund your retirement.

BONUS—Stay poor:  Too many young adults make a huge mistake of trying to mimic the lifestyle their parents provided, once they (the young adults) get out of school.  That first paycheck of $2,000 is going to seem like a ton of money (and it is).  It’s really tempting to decide to buy a new car or go on a kickin’ vacation or upgrade the furniture.  Resist the urge.

Your parents took 25 or more years of working (with pay increases and investment returns) to provide the house and cars and vacations you enjoyed your senior year of high school.  It’s not realistic to think you can have stuff at that level of niceness so early.

A car is a really good example.  In general, automobiles are horrible investments.  To the degree you have a car that can get you from point A to point B, keep it.  A new car will be nice and cool and make your friends gawk, but it’s a horrible use of money.  A couple hundred dollars a month for a car, plus insurance, and maybe $50 for a gym membership, $50 for cable, and $80 for four dinners at a restaurant—those numbers add up.  Those alone could fund your savings in the early years.

Your early 20s are a time when it’s still okay not to have the best and nicest of everything.  If you can embrace that, even when you do have the money, and put that extra money to work in investments you’ll build a very strong financial foundation that will afford you many more opportunities are you reach your 30s and 40s (remember, I did that and I retired at 36).

Refinancing a mortgage

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Sometimes it’s easy to think the way to amass wealth is with grand slams or 80-year touchdown passes (or what ever analogy you want to use for that big move).  In financial terms it’s getting a $500k job or picking the next stock that will double in a month.  But I think the opposite.  Those big wins are rare and people can waste a lot of time and effort and money chasing them.

Rather, the best way to amass wealth is the little wins (the single hit or the 4-yard run up the middle).  In personal finance those “little wins” are things like we talk about here a lot: lowering your costs, saving small amounts every paycheck, making sure you get the 401k match.

Recently, the Fox family got another small win which will add up to something very large.  We are in the process of refinancing our mortgage.  It’ll save us a little bit each month but that will add up to an enormous amount when it’s all said and done.

Two years ago, the Fox family moved to Charlotte.  We bought a wonderful home, and like most people, used a mortgage to pay for it.  Also, as with most people, our monthly mortgage payment is our single largest expense.

Over the past two decades, interest rates have been at all-time lows, and that means that mortgage rates have similarly been at all-time lows.  When I first purchased a home in 2006 my mortgage interest rate was 6% and everyone was talking about how incredibly low rates were.  Fast forward 15 years and rates have been cut in half (or even lower).

To the point, we are in the process of refinancing as we speak, at this very moment.

When to refinance

The decision to refinance really comes down to a decision of taking on a little pain now (in terms of closing costs and other fees associated with the new loan) for a lot of benefit later (in terms of lower interest rates).

For us we had the following stats for our current mortgage:

Mortgage amount$800,000
Interest rate3.65%
Monthly payment$3,781

The simple math tells you that we’re paying about $30,000 a year in interest, or about $2,400 each month.  That seems like a really big number.  Even decreasing that a little bit could really move the needle.

Doing some back-of-the-envelope math, knowing rates were around 3%ish, I could save about $5,000 a year or about $400 a month.  Definitely that seemed worth it, at least to start the process.

I filled out a loan application on line and got bombarded by a ton of people offering mortgages.  After sorting through all the messages and picking the one or two that seemed best, I went through a process that all-in took about 10 hours of work plus sending a bunch of emails.

Ultimately, we got a 3% rate for closing costs of about $6,000.  This is taking candy from a baby.  It’s hard to imagine finding a better deal.  I’ll be charged $6,000 today (and I won’t even really pay it because it will be rolled into my new mortgage), for the ability to save $5,000 this year and every year after.  Easy money.

Going with a shorter mortgage?

We will be refinancing with another 30-year mortgage.  We could have gone with a 15-year mortgage and that would have knocked our rate down to about 2.88%.  Certainly, a lower rate is good, about $80 per month in savings.  However, it requires a larger monthly payment.  We could afford it, but I definitely think we can do better by investing that money.

In fact, that’s the same playbook I used to get my car for free.

So we went with a 30 year mortgage.

Going with an ARM?

The other option we had was to do an adjustable rate mortgage.  The way these work is they give you a really low rate for five years (hence a 5-year ARM), but after that the rate can adjust, almost always up.

We have used these in the past, both in Los Angeles and Greensboro, and it turned out both times that was the right decision.  ARMs make sense if you think interest rates will stay low, or you think you’ll move before the ARM is up.  For us, in the past, we moved before the ARM was up, so taking the lower rate worked.

Now, we are pretty well settled in our home so we don’t plan on moving until Mini Fox graduates high school (10 years away).  Also, it seems very unlikely that rates will stay this low.  Most people, me included, expect rates to go up.  For all those reasons, we didn’t do an ARM.

That left a traditional 30-year fixed mortgage, and that’s what we went with.

To pay points or not?

The final decision was whether we should take the normal rate or “pay points” to get a lower rate.  What this means is we could take the 3% rate and pay the normal closing costs ($6,000).  Or we could pay extra closing costs (about $7,000 extra, making the total closing costs $13,000) and get a rate all the way down to 2.65%.

This may seem more complex but it’s still a fairly straight-forward calculation.  Just doing the regular refinance would reduce our monthly costs about $400 per month, so we’d “pay off” our closing costs in a bit over a year.  No brainer.

By paying the extra points, we lowered our rate an additional 0.38% or about $150 each month.  Of course that cost us $7,000, so it would take us about 46 months to “pay off” the extra points for the lower rate.

Four years may seem like a long time, but then you remember that it’s a 30-year mortgage, and it doesn’t seem that long.  Even if we sell in 10 years, we’re still well ahead of the game.

That’s our story.  We’re going with a 30-year mortgage with closing costs of about $13,000 but that will lower our monthly payment about $600.  Like I said, taking candy from a baby.

And if you really want to nerd out, if I assume that I can invest that $600 each month in the stock market at historic averages, after the 30 year mortgage is done, I’ll have a tidy $730,000!!!  That’s almost as much as the mortgage itself.  Not bad.

How much should you be saving for your kids’ college?

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Saving for college is a major issue when it comes to personal finance.  When I talk to people, it’s nearly universal that people say their financial goals are to “have enough to retire comfortably” and to “pay for their kids’ college so they don’t come out with loans.”

If that is your goal, that begs the question: How much should you be saving each month?

Obviously this is a very complicated question.  This is not a one-size-fits-all situation since there are so many details that make can make things vary substantially.  Probably the biggest one is how much the total cost of attendance will be for your kid’s particular institution.  That said, we can look at some broad averages.

The type of school

As you know, I actively question the value that colleges deliver in this day and age.  When I look at the costs of attendance, that just reinforces the idea that colleges are WAY OVERPRICED.  That said, let’s assume we have two broad choices for college:

In-state:  Parents will get a huge break if their kids go to a public in-state school.  The “top” state school in each state tends to cost about $25k for total attendance.  Certainly there’s a range—UCLA is about $34,000 while University of Massachusetts is about $19,000.  However, don’t think those lower costs are charity.  Your tax dollars are subsidizing those lower costs.

The cost of University of North Carolina-Chapel Hill, in our home state, is about $24,000.  Also, that’s a number that easy to work with since it’s divisible by 12, so let’s go with that.  We’ll assume that in-state expenses at a good school are about $24,000.

Private/out-of-state:  If you don’t take advantage of that in-state subsidy, costs get higher very quickly.  Private schools can range from about $25,000 to as high as $70,000.  Since most of the schools that you think of when you think of private colleges—Harvard, Duke, Notre Dame, etc.—are in that $70,000 range, let’s use that as our number.

How much to save

Maybe time got away from you and you are getting a really late start.  Your child is entering college this year.  The math here is pretty easy.  Each month you’ll have to come up with 1/12 of the annual cost of college.  For a public school, that’s $2000 per month and for a private school that’s about $5800 per month.

Those are big numbers, but the good news is if you plan for it and are able to save sooner, those monthly contributions become a lot more manageable.

If we look at the other extreme, we can calculate what would happen if you started saving when the child was born.  This is a bit more complicated because there are two powerful factors at play. 

First, tuition costs for college are always rising (I’ll spare you my rant, but suffice it to say it’s ridiculous).  Let’s assume that on average college costs increase about 3% each year.  That means that $24,000 annual cost for a state school this year will be compounded 18 years by the time your child enters college.  That’s a big deal, increasing the cost from $24,000 to about $43,000.  Ouch!!!

Time doesn’t help us there, but it does help us in the way you probably expected.  Second, the money we save each year can be invested.  If we assume a 6% return, that becomes really powerful, as we all know.

The calculations aren’t easy and I do them on a spreadsheet.  At the end of the day, you’d need to save and invest $350 each month to pay for a child’s 4 year public college education.  If you go private, that number increases to a bit over $1000 each month.

Of course, real life probably puts most of us in the middle between those two extremes—starting when the kid is born and starting when the kid starts college.  This makes sense.  When the kid is born there are a lot of expenses and other things going on, so it’s not always easy to start right away.

Here is a table that shows how much you’d need to start saving each month based on the year you start.

Kid’s age you start saving Public Private
0 $351 $1,024
5 $460 $1,343
10 $650 $1,896
15 $1,070 $3,119
18 $2,000 $5,833

I don’t know if that chart fills you with optimism or pessimism.  Obviously the sooner you start the less you have to save.  I was a bit surprised by how much just a few extra years helps.  If you started saving when your kid is 15, you have to save about half of what you’d need to if you started when they enrolled.  That just shows that it’s never too late to start.

On the other side, if it takes you a few years to get everything lined up, and you don’t start saving until the child is 5 years old, you don’t have to come up with a lot more than if you started when the kid was born.  So that means you shouldn’t beat yourself up too much if you had to wait a bit.

Either way, if you decide that college is right for you child and that you want to help them pay for it, I hope this helps put those financial requirements into perspective.

How we came out ahead on health insurance

Readers who’ve been following the blog for a while know that in early 2018 the Fox family had to go out on our own to get private health insurance.  I did a three-part post on it here and here and here.  It was a big change from always having had private insurance through our employers.  But we did it.

Here’s how everything looks a year later.  If you don’t want to read the whole thing here’s the punchline: We had our sickest year in the past 5 years, but we still came out ahead about $16k.

What we got

When we were looking at our different options, there were two broad choices that we had to make.  We could go with a full-blown Obamacare plan that provided comprehensive coverage for everything, similar to what we had when we got insurance through our job.

Or we could go with a much more stripped down plan that offered a high deductible, but put a cap on our expenses if some type of medical catastrophe happened.

All four of us had always been relatively healthy, and since the Obamacare plan cost about $2200 per month while the stripped-down version cost $600 per month, it seemed like a no-brainer.  We went with the stripped down version.

For a cost of $600 per month we got access to the health insurer’s negotiated rates.  Plus, there was a cap of $25,000.  If something horrible happened we wouldn’t be bankrupted.  And on we went.

Just like all things, the first purchase we made probably wasn’t the best.  At the beginning of 2019 we weren’t rushed like we were the first time.  I was able to shop around look at a lot of different options.  We found a similar stripped-down plan, but this one only cost $450 per month and had a cap of $3000—better coverage at a lower price.  We switched to that, and that’s what we have now.

How we used it

Of course, once we got on a stripped-down plan our two cubs conspired to make this year the year we consumed more healthcare than any since Lil’ Fox was hospitalized for four days with croup in 2012.

Foxy Lady and I had no health issues.  We just did our normal check-ups.  For the first few months everything was fine and we didn’t have to go to the doctor at all, but then the dam broke:

  • Mini Fox broke his leg at one of those trampoline places.  Total cost $1700
  • Mini Fox got a nasty cold and had to go to the doctor a couple times.  Total cost $200
  • Lil’ Fox was the only one who wasn’t sick in the family in December but then he came down with a NASTY case of strider.  We ended up going to the doctor about six times.  Total cost $600
  • One of the times Lil’ Fox was really struggling breathing we had to go to the ER.  They gave him breathing treatments and a steroid, but then sent us home in the evening.  Total cost $2300
  • We had to get an inhaleable steroid for Lil’ Fox that was not on generic so it was fairly expensive (this is one of the places we would have saved a lot by having a full-on plan).  Total cost $300
  • Lil’ Fox went to an ENT and found that his adenoids were very enlarged, and that was largely responsible for all the breathing issues he was having.  Plus, his tonsils were infected and were the perfect place for nasty bugs to hang out, likely allowing his cold to persist.  We took the adenoids and tonsils out.  It was considered an elective procedure so we had to pay cash.  Total cost $4000

Yikes!!!  Those are some big numbers.  And of course, the financial gods chose to humble our family by hitting us with all this the very first year we went on our own for health insurance.  Any one of those on its own would have been more than we paid in any of the previous five years.  I guess sometimes timing sucks.

Yet, we’re ahead of the game.

But as expensive as all that stuff was for us out-of-pocket, we actually ended up WAY AHEAD.  How so?

Sure, we had to pay about $9000 out-of-pocket when you add it all up.  But that’s over a whole year (14 months actually—from March 2018 to May 2019).  And the key was that the coverage we got that exposed us to those higher out-of-pocket expenses only cost about $500 per month instead of the $2200 that an Obamacare plan would cost us each month.

Do you see where I’m going with this?  Because I am a financial nerd, I track this stuff obsessively.  We paid $1700 less each month in premiums ($2200 – $500).  If we took that money and stuffed it in a mattress, after 14 months we’d have about $24,000.  Subtract that $9000 in out-of-pocket expenses (actually it would be less than that because Obamacare also has out-of-pocket costs), and you get about $15,000. 

If instead of stuffing the extra money in a mattress, we invested it in the stock market instead, so we ended up with $16k, rather than $15k.

That’s pretty powerful.  We got less insurance coverage but paid a lot less for it.  Now we have a $16k buffer to take care of any of those higher out-of-pocket costs.  Plus, our insurance does cover us for catastrophic expenses beyond $3000, so it’s hard to see how we lose this game now.  To use a gambling analogy (and isn’t insurance really just another form of gambling?), we’re playing with house money.

Should you go with Mint or Quicken?

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“You can’t hit what you can’t see”  –Walter Johnson, major league pitcher from 1910s

As you take more control of your personal finances, there will come a time when you need to start tracking it somehow.  Maybe you’ll be hyper-obsessive like I am and look at it multiple times a day (which objectively is stupid since the numbers don’t change that fast, but I do it anyway).  Or maybe you’ll want to see what things look like every week or every month to make sure you are on track.  Either way, you’ll need some way to track your finances.

There are two major options: a program you purchase and install on your computer like Quicken, or an internet website that consolidates your online accounts like Mint.  For the longest time I was a Quicken devotee (and before that I used Microsoft Money), and then I recently switched to Mint.  This post is going to be looking at the pros and cons of each, Dr Jack-style, to help you pick the one that will work best for you.

TRACKING SPENDING:  Both do this fairly well.  You can download your bank and credit card activity, and both do a somewhat decent job classifying the expenses into the different categories.  I think this is a bit of “the price of admission” that you should absolutely expect.

There is one feature that I really liked about Quicken that I don’t get with Mint—the ability to split expenses.  When I go to Costco and spend $300, I can only use a single category in Mint, so I use “groceries”.  However, in real life, that $300 was split into $150 for groceries, $30 for pet food, $70 for Foxy Lady’s contacts, and $50 for some pool toys for Lil’ and Mini.  In Quicken I can split that $300 expense into those different categories which is really nice when you want to compare your spending to your budget.

[EDITOR’S NOTE:  After posting this, a reader named Ashleigh mentioned that you could indeed split transactions in Mint.  It took some tinkering around but I figured out how to do it.  She was indeed correct.  That said, I must say that it’s not the most user-friendly or intuitive process.  But hey, it’s free so I can’t complain, even though I just did.]

Advantage: Slight edge to Quicken

PROJECTING FUTURE SPENDING:  This is a really nice feature in Quicken that you don’t have in Mint.  When you look at the cash flow of your checking account, it’s nice to look into the future to make sure that your balance doesn’t fall below a certain level.  So you might get a paycheck or two, but then you’ll have your mortgage, a credit card payment, and a couple bills, all of which are hitting on different dates.  That’s a lot of moving parts.

If you’re like me and you try to keep your checking account’s balance fairly low, freeing up the extra money to invest where you can get a higher return, then you need to be a little more precise.  This is probably the single biggest feature that I miss by switching from Quicken to Mint.

Advantage:  Quicken

ACCURACY:  With Mint the website downloads your transactions and then does its thing.  Most of the time this works well but sometimes it doesn’t work and the results look goofy.  Look at the picture from Mint for one of my investments.  Notice how it thinks that I invested $321.69 and that has increased $26,747.  While I would like to think that I am that brilliant of an investor, I can assure you I’m not.  For some reason the download had a bug in it.  With Quicken, you can actually go into the file and manually change things to take care of stuff like that.


Advantage: Quicken

NON-BANK STUFF:  A lot of people have financial “stuff” going on that isn’t with your bank or brokerage account.  Sometimes it might be off-the-book loans like maybe your parents helped with the down payment on your house.  With us, I have stock options that aren’t in an account compatible with Mint, so I don’t have visibility to them.  With Mint, if you can’t download them they don’t exist.  Obviously that creates a bit of a problem if you want to take these into account.

With Quicken if you have stuff like that you can manually create accounts and transactions.  It’s not ideal and certainly not as easy as downloading them, but sometimes something is better than nothing.

Advantage: Quicken

ANALYSIS:  Quicken has a lot more robust offering of analyses that you can use, including a host of reports that you can customize to show whatever you want.  I used these to track how my spending was doing to my budget as well as a report that showed how my investments were doing.  Mint has some useful reports, but it isn’t anything near as robust as what Quicken has.

However, Quicken does have a bit of overkill.  There are all kinds of reports that it offered that I didn’t use, or even worse used and thought gave bad advice.  Quicken had a retirement projection tool that I played around with.  It said that at 65 I would have something like $5 million, but that I would run out of money by 90.  Ludicrous.  I didn’t use that tool after that.

Advantage: Quicken

CONNECTIVITY:  This is one of the areas where Mint really shines.  Its whole platform is based on smooth, seamless connectivity with all your accounts.  Everything is designed to make this easy—from initially linking your accounts to Mint, to updating them.  I love Mama and Papa Lynx (my in-laws) to death, but sometimes they aren’t the most technologically savvy.  They got everything up and running in Mint without any problems, so you know it’s pretty user-friendly.

This is the main reason that I don’t use Quicken anymore.  I kept having problems where my accounts wouldn’t update.  Sometimes it was my accounts would change (like when my Vanguard account got large enough to go to their Admiral shares), other times it would be a cookie or some other technical thing on my browser that I don’t really understand.  No matter, it would be a royal pain in the butt.  I’d have one of three options, none of which were good: I could spend time with their technical support, I could manually enter the transactions, or I could just not update (what I ended up doing).  We live in a technical age, so to have this not work really well is a problem.

Advantage:  Big advantage to Mint

TECHNICAL SUPPORT:  As you would expect with a free site on the internet, Mint doesn’t offer you a lot of help if things go wrong or you screw something up.  If you click on the “get help” link it sends you to a page that recommends you try to find the answer to your problem in their community.  So basically you’re hoping that you can find someone who had the same problem you did and wrote about it.  That’s kind of an “f-you”, isn’t it?  I’ve struggled a couple times and found my answers by googling for it, and it worked but it took a bit of effort.

Quicken on the other hand has a bonafide help center.  You can chat with a real person who will try to help you.  This is what I used when I had connectivity issues.  By and large, they’re pretty good and can solve most problems with a minimum of hassle (although it’s probably a minimum 30-minute time commitment).  Maybe I’m stuck in the past, but I do like it when I can talk (either over the phone or via chat) to a live person.

Advantage:  Quicken

INTEGRATION TO OTHER PRODUCTS:  Quicken allows you to upload your files to programs like Turbo Tax and also to spreadsheets if you really want to do some hardcore analysis.  But this is another feature that I think sounds really great, but when you really think about it, it might not be all that valuable.

Take the tax thing for instance.  I supposed you could download all your stock sales from Quicken into your tax program to calculate your capital gains, but who really does that?  Doesn’t everyone just take the form that Vanguard or Fidelity or whoever sends you and plug all those numbers into your taxes?  In all the years I used Quicken I never once used these features.

Advantage:  Irrelevant edge to Quicken

COST:  Mint is free, and that is awfully hard to beat.  Quicken on the other will set you back between $50 and $100.  Plus Quicken uses planned obsolescence where their product stops working after a while (it stops connecting to the internet to update your accounts), so you have to buy a new version every couple years.  Certainly a few hundred dollars over a decade isn’t going to change the world, but I’d rather have it in my pocket than in Intuit’s.

Advantage: Big advantage to Mint

So there you have it.  Looking at it, Quicken has more advantages than Mint, and that makes sense.  Quicken is a better, more powerful product, no question.  However, Mint has probably the two biggest advantages—its connectivity and it’s free.

I appreciate that I am a power user when it comes to these things, and even I find a lot of Quickens extra features overkill, and I just don’t end up using them.  That makes me give the verdict that Mint is probably the better choice for most of you out there.  But don’t shed a tear for Quicken and their parent company, Intuit.  It turns out that Intuit owns Mint as well.  So there’s a lesson in cannibalization.

What is your opinion on Mint or Quicken or any other system you use to track your finances?

Mailbag–how to get started?

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Here’s a question that I received from a reader the other day:

Stocky—my 26-year-old son has saved about $20,000.  Right now it’s just sitting in his checking account.  What should he do with it?


The first thing is to ask if he “needs” that money for anything in the short-term.  Does he need to buy a car, or is he going to buy a house and use that as a down-payment, or something? 

If the answer to that is “yes”, then he can open an account with Vanguard or Fidelity, and invest the money in a broad bond fund like VBLTX or BND.  That will provide a decent return (about 3-4%).  Of course, there’s a chance that he could lose money, but based on historical data the chances of that are pretty low, and if he did lose money it wouldn’t be a huge percentage of his investment.  This isn’t like stocks.

Investing for the long-term

Now let’s get to the more interesting stuff.  Let’s assume that the $20k is just hard-earned savings that can be invested for the long-term.

401k—The very first place I would start is with his 401k if he has one at work.  Hopefully, he is already contributing to that at some level, and this $20k is on top of that.  The max you can contribute to your 401k in 2019 is $19,000.

With a 401k you can’t really take the $20k he has saved and put it directly into the account, so we have to do it in a bit of a two-step process.

Let’s say in his normal budget he is able to contribute $200 per paycheck into his 401k (that comes to $5200 per year).  That means that he could contribute $13,800 more. 

Crank the percentage up as high as it will go (usually something like 50%), and that will accelerate his contributions until it hits $19k for the year.  Then the law forces the contributions to stop.

That will greatly reduce his paycheck, but then that’s where the $20k he saved comes in.  He can use the $20k he saved to replace the big chunk of his paycheck that went to his 401k.  Actually, since 401k contributions are pre-tax he’ll actually only need to take $11k or so to replace the extra $13,800 he is adding to his 401k.

If he has $20k in the bank he could do this for about 2 years.  Just remember that when his $20k runs out to set the 401k contribution percentage back to a normal level.

As far as investments go, a 401k is meant to be a long-term investment so I would make sure he is invested in some type of broad stock index fund.

IRA—If he doesn’t have a 401k or even if he does, he should open an IRA.  He can do this at any brokerage, but I would suggest Vanguard or Fidelity. 

Here he can contribute directly to an IRA (instead of the two-step process for a 401k).  Once his IRA is open he can contribute up to a limit of $6000.  Just like with the 401k, this money is meant for the long-term, so I would invest it in a stock index fund. 

As he opens his IRA account he’ll also need to decide if he wants to do so with a Roth IRA or a traditional IRA.  I have written extensively on this, and generally his choice should be a traditional IRA (unless his income this year is very low—let’s say below $30k). 

After he’s made his $6k contribution ,that will mean that he’ll have a lot left over.  That takes us to a normal brokerage account.

Brokerage—These are similar to IRAs but without the special tax treatment or contribution limits.  You can open these up at the same place as you do your IRA.  So if you open your IRA up at Vanguard, I would keep it all in the family and open your brokerage account at Vanguard as well.

Once you have contributed to your 401k and IRA for the year, you can put the rest in that same stock index fund.  Next year, especially if he’s going the IRA path, he can just transfer the money from the brokerage mutual fund to the IRA mutual fund and it’s all easy.  Of course, there may be tax implications for this, but that’s one of the reasons why you want to get the money tucked away in a 401k or IRA as fast as you can.

I hope this helps.  Congrats to your son for having suck a strong head start.  Now that he’ll have that money invested, it will be turbo-charged.

When does it go from gambling to investing?


I’ve done a ton of posts on how over time stocks are a great investment, and I absolutely believe that.  However, like with all things, if you look at the extremes you start to see funny results.  Particularly, over the very short term, stocks aren’t really good investments at all.  In fact, if you “invest” in stocks and have a really short time horizon, you aren’t investing at all but rather you are gambling.  So investing or gambling, what’s the difference?  And when does stock ownership switch from gambling to investing?

As always, this is when I nerd out and get my handy dandy computer and free data from the internet and see what the numbers say.  Hopefully it’s not surprising that the longer you hold on to an investment, the lower the probability that you lose money.  But it is interesting how the numbers work out.

On any given day, there is a 46% chance that stocks will go down.  That’s not quite a flip of the coin (since stocks go up over the long run, you’d expect them to have more good days than bad), but that’s pretty darn close.  So let’s agree that if you’re investing for only a day, then you’re gambling.


Obviously, you can contrast that with the other end of the spectrum where historically there hasn’t been a 20 year period where you would have lost money.  0% chance of losing is not gambling, that’s clearly investing.

So where do you draw the line?  If you move from a day to a week, the chances of you losing money drop from 46% to 43%.  That’s a little better, but that still feels like a flip of the coin to me.  Go from a week to a month, and the chances of you losing money drop a little bit more, down to 40%.  It’s going in the direction that you would expect—probability of losing money drops the longer you hold on to the investment—but we’re still squarely in gambling territory.  If you do something and there’s a 40% chance of it coming out bad, I definitely don’t like those odds.

You can follow the table and see that at 5 years, the chances of you losing money on stocks is about 10% and at 10 years it’s at about 2%.  Clearly there is no right answer, and this is an opinion question so everyone is different, but I figure that somewhere between 5 and 10 years is when purchasing stocks ceases to be a gamble and starts being an investment.

Recreational investing

One of the things I try to do with this blog is help people better understand the stock market and how it behaves by looking at historic data.  I think this is a good example.

As I said at the start, the stock market is a great place to build wealth but you have to be smart about it and you have to have your eyes wide open.  If you’re investing just for a month or a week or a day, just understand that what you’re doing looks a lot less like investing and a lot more like gambling.  If that’s what you want to do that’s great.  Just be honest with yourself.

This brings me to an interesting topic which is “recreational investing”.  A lot of people come up to me and say they understand that slow and steady, and index mutual funds, and a long-term view are probably the best way to build wealth.  But it’s boring (a sentiment I totally agree with), and they want to keep a small portion of their money so they can “play,” investing in particular stocks they like, similar to the way someone would pick a horse at the track or play the table games in Vegas.  To this I say: “go for it”.

Life is too short, and that stuff can be really fun.  If it’s fun for you to “play the market” and gamble on some stocks, rock on.  Just know that you’re gambling and not investing.  But I’ll tell you, if you have a gambling bug, I’d much rather do it with stocks than blackjack or the ponies.  With stocks, as we saw above, even over a short time frame, you have the “house advantage”.  With other types of gambling, the house has the edge.  So I totally support recreational investing if that’s what you’re in to.

What do you think?  At what point does buying stocks change from gambling to investing?  I’d love to hear.