Most People Can't Afford to Invest in Stocks??

I've been absentee but had to stop and quickly put up a link to an article interviewing economist Zvi Bodie, who says that people who need the arguably or historical higher return of stocks probably can't afford to take on the associated risk of stocks:

"You can't handle the truth about stocks" on CNNMoney

Brodie more or less says that most people are better off saving a higher percentage of their salary, investing 100% in Treasury Inflation-Protected Securities (TIPS), and retiring later -- even if they have a long time horizon until retirement. In other words, he turns what most pundits on financial planning and what many, many of us are doing on its head.

Read the article, and then come back here to comment on what you think of Brodie's advice!


Blog, Blog, Bo-Blog

Can I Get Rich On A Salary participated in three personal-finance blog carnivals last week. And by the way, I found a new personal-finance blog that is heavier on consumer orientation—authored by an experienced blogger whose writings I had already enjoyed on other blogs—so I recommend you check it out: The Smarter Wallet (tagline: "Money Tips, Consumer News and Product Reviews To Improve Your Finances").

Carnival of Personal Finance:

BankerGirl hosted Carnival of Personal Finance at BankerGirl, on September 8. Here are some selected excerpts:

Quest For Four Pillars - 4% Rule Revisited - I want a raise!

Living Almost Large - Why aren't we honest?

Check out the rest of the Carnival! My post, The Lady Whose $50,000 Emergency Fund Wasn't Enough?, was included under "Saving and Budgeting."

Carnival of Money Stories:

The Copyeditor's Desk hosted The Carnival of Money Stories on September 9. Here are some excerpts:

FMF, Free Money Finance, My Kids Tell Me Why We Pay Taxes

PT, Prime Time Money, Millionaires in the Making: The Rodrigueses

MoneyNing, Buy an Investment Property or Dividend-yielding Stocks?

Silicon Valley Blogger, The Digerati Life, An Immigration Story

Glblguy, Gather Little by Little, Share Your Story: What Is the Dumbest Thing You've Ever Spent Money On?

Don't miss the rest of the Carnival! My post, Ed McMahon Personal Finance Fairy Tale?, was mentioned under "Tales of the Rich and Famous."

Money Hacks Carnival:

Living Almost Large hosted Money Hacks Carnival #29: Food Heaven, on September 10. Here's a sampling:

Austin asks the question if you won money what would you do with it in What if I gave you 100,000 bucks? posted at The Orange Paper

Sandy Naidu tells us about credit card tricks in Top 5 Dirty Little Credit Card Tricks posted at Future Nest Egg

Lisa Spinelli gives us 10 way to get into debt in 10 Ways to Bury Yourself In Debt posted at Greener Pastures

Del Sandeen explains about debt settlement in 3 Reasons to Run from Debt Settlement Companies posted at Fiscal Liberty

Sam talks about insurance you don't need in 14 Totally Ridiculous Insurance You Probably Don?t Need posted at Fix My Personal Finance - Personal Finance Advice - Money Management Advice

The Shark Investor talks about career development in Investing In Yourself posted at The Shark Investor

Visit the Carnival! My post, 40% Wealthier?, was included under "Savings/Budget."

Other Links

Outside of blog carnivals, I found the following posts at personal-finance blogs interesting, educational, informative, entertaining, or some combination of those—consider checking them out!

Other Mentions

Here are some other mentions of Can I Get Rich On A Salary, outside of blog carnivals, from the past week or so.

Thanks to all of these great personal-finance blogs for mentioning Can I Get Rich On A Salary to their readers. Please visit their blogs!

[Editor's Note: In case you are not familiar with blog carnivals, a blog carnival is a multi-blog event in which a number of bloggers aggregate their articles within a certain theme or subject area into one post. The "host" of the carnival writes up the post on his or her blog and includes links to the various articles. Hopefully, this helps readers as they get a "one stop shop" of articles. I post a weekly recap of the blog carnivals in which I have participated—and try also to cull out a few articles that I'd like to share with you here.]


Success Stories: Dry Cleaner and Part-Time Janitor with Third-Grade Education Accumulates More than $2,300,000

In 2004, Geno Morlacci died at age 102—and left $2.3 million to the University of Great Falls, where he had worked as a part-time janitor. Morlacci never had more than a third-grade education. He immigrated to the United States in 1921 at age 19, to help his father run a tavern; he then worked in dry-cleaning for 20 years; and he started his own a dry-cleaning business in 1948, which he ran until he sold it in 1962. He handled every part of his dry-cleaning business—pick-up, delivery, cleaning, and pressing—with his only outside help coming from a cashier. After selling the business, he went into semi-retirement, taking on a part-time job as a janitor at the university, which he left when the university decided it needed full-time help.

How did he do it?

As best as I can tell:

  • He worked very hard through most of his life, with articles mentioning 18-20-hour days (presumably mostly in connection with his dry-cleaning business).
  • He kept the expenses in his business very low, by doing most of the work himself and hiring only a cashier. But he was not strictly cheap—he bought top-of-the-line equipment, thinking this was a better value because it would outlast the cheaper equipment.
  • He was quite frugal.
    • He patched the pants on his pants.
    • He turned the collars on his shirts (meaning he removed the collars, turned them over so the frayed side would be hidden, and stitched them back into place).
    • He and his wife dined out rarely, and when they did, they chose "budget restaurants."
    • He never ha a fancy car.
    • He lived next door to where he had his dry-cleaning business.
    • His and his wife's occasional splurges were measured—an couple of trips to Italy, both times preceded by a purchase of exactly one new dress.
    • As a widower in retirement, he lived in a retirement home that charged about $500 a month for meals, room, and housekeeping—choosing that over an upscale facility.
    • He felt "if you didn't need it, you shouldn't buy it" and was critical of people who "needed, in his eyes, instant gratification." He felt that the government and many people spent beyond their means.
  • He rented out the basement of his home for additional income.
  • He invested—though the only note I found on his approach or practices was one mentioning he had a "fondness" for tax-free municipal bonds. He did appear to have used a professional investment advisor, from Piper Jaffray.
  • His home life was stable—with a 46-year marriage (before his wife passed away).

I don't know squat about the dry-cleaning business, but it doesn't seem likely that Morlacci was earning a huge income there. One writer specifically stated he, as a newspaper reporter for the Deseret Morning News, "probably ma[d]e a lot more than Morlacci did cleaning clothes 18 hours a day." So Morlacci's path to millions seems to be summed up as extremely diligent saving and investing over many years. I wish it was a little clearer what he did with his investments and, for instance, at what price he sold his business and what he did with that lump sum.

Now with some of the previous Success Stories on this blog, folks have commented that it seemed pointless to retire or pass away with so much money and then just give it all away. That's not really my takeaway—and I'm not really trying to judge what Morlacci or others do with their money (though you're welcome to comment on whatever you like!). The point for me is really a broken record: if you save and invest for many years, a million or a couple of million dollars is certainly in reach. And this appears to hold true even if your income is low.

And if your income's not low, you really have no excuse.

(Sources: Will of 102-Year-Old Janitor, Dry Cleaner Leaves $2.3 Million to University; University benefactor recalled as simple, thrifty man; Geno Morlacci set an example for all to follow.)

Related Posts:

Success Stories: Drama Teacher with Modest Salary Accumulates Well Over $4,000,000

Success Stories: Elementary School Teacher Becomes Multimillionaire Through Saving and Investing


Man Bites Dog — Beats Airline in Dispute Over Canceled Flight!

I don't know if this is much of a personal-finance blog post, but it's too good a consumer story not to mention and link: A Flier Strikes Back (in Fortune magazine).

The article describes our "hero," Mitchell Berns—and his beatdown of Delta Airlines. Delta canceled Berns' direct flight from Las Vegas to New York City and rescheduled him for a redeye that connected through Boston, claiming "snow" as the reason for cancellation. Berns noticed that other airlines were still making the same flight as scheduled. So he asked Delta for a refund. Delta told him that weather-related cancellations were not its fault and could not be refunded. Undaunted, Berns booked a JetBlue flight that was departing at the same time as his canceled Delta flight and got home to New York on schedule.

Berns found out that the National Weather Service report said snow was expected at 5:00 a.m. the next morning, hours after his canceled Delta flight was supposed to have landed. This of course explained why he had no problem getting another flight with another airline. So he took Delta to small claims court and won a $938 judgment. Check out, A Flier Strikes Back, for the rest of the details!

Berns reported that pursuing the refund took him about four hours. This is a good reminder that it can be worthwhile to take the time to push back when a store or even an airline does not provide the product or service for which you have paid!


Frugality Tips from a Setsuyaku No Tatsujin

I don't ordinarily think of BusinessWeek as much of a source for frugality tips, but the September 15, 2008 issue of BusinessWeek mentions some frugality tips from Japan in its article, A Nation of Yen-Pinchers. In particular, it features some of the ideas from a leading Japanese personal-finance blogger named Yuki Wada, a setsuyaku no tatsujin—master penny pincher. Inflation is a big problem in Japan, where gas costs $7.15 a gallon and average household spending is expected to go up about $840 for the year. So Wada and other Japanese bloggers writing on how to save money are quite popular!

Wada's tips mentioned in the article include:

  • recycle bathwater to do laundry and clean toilets;
  • track how much electricity each appliance uses;
  • cut power to most of the home when going out;
  • save tangerine peels for use in polishing shoes;
  • clean refrigerator to improve performance;
  • put a brick in the toilet tank to reduce the water used in each flush; and
  • save sour milk for use in polishing floors.

I'm not sure how many of these might be for me, but I was interested enough to try and find Yuki Wada's blog. It didn't come up quickly (though other articles about her did). Perhaps it's in Japanese and inaccessible to me in any event. Yuki Wada's overall tip, from the article, is:

I tell people you shouldn't be thrifty just in response to rising prices. It should become a daily habit.


Is It Better To Think Short-Term When It Comes to Saving?

The September 15, 2008 issue of BusinessWeek includes a Plus column tidbit titled, Short-Term Thinking May be a Saver's Best Friend. It discusses research by Professor Utpal Dholakia of Rice University and Professor Leona Tam of Old Dominion University—and their conclusion that "those who planned savings for next month did far better than those who tried to plan further out." In one of their experiments, people were asked how much they would save the following month and reported (on average) $287. This in mind, they then went on to save (on average) $440 that following month. But when asked to plan ahead four months, people said they would save (on average) $946 over that time. And they then went on to save (on average) a grand total of only $123—which translates to $30.75 per month. If I've read the experiment description in the article correctly, people concentrating a one-month savings goal did more than 14 times better than those concentrating on a four-month savings goal.

Professor Dholakia indicated he was "shocked" by the results. In advising that people concentrate on saving for the following month, he told BusinessWeek:

Don't plan in advance because it makes you overoptimistic. You think: "I might get a windfall or a raise." And not only do people who give a savings estimate for four months from now estimate too high but they become more risk-seeking.

The risk-seeking behavior seems to include making riskier (and impliedly inappropriate) investments and preferring jobs with high pay but low job security. In other articles reporting on the same study (Study: When saving, it's best not to think long term and Lower Stress by Saving A Little From Each Paycheck), Professor Tam echoed the advice to concentrate on the following month: "[Y]ou have more control over it. You can actually formulate how to do it in more concrete ways." She elaborated:

The easiest thing to do is to be a smarter consumer and make spending and saving decisions thoughtfully on a daily basis — that extra cup of coffee every morning, carpooling with a co-worker and cutting out the 'extras.'

I'm trying to get ahold of a copy of the study to learn more, but so far, this seems like pretty interesting stuff. Though I don't know the details of the study yet, my initial reaction is to take the buzzworthy headlines and synopses advising not to think long-term with a grain of salt. I'd suggest interpreting the study to mean we should approaching savings goals like this:

  1. Set a long-term savings goal.
  2. Break up the long-term savings goal into smaller savings goals (such as monthly goals).
  3. Look at the savings goal for the upcoming month and make that your focus.
  4. Consider specific, concrete steps to achieve the savings goal for the upcoming month.
  5. When you consider your daily spending or saving decisions, think about them in terms of the savings goal for the upcoming month.

From the concededly brief news articles on Professors Dholakia's and Tam's study that I've read, this would achieve the gains of short-term thinking—without sacrificing what I would still call the necessity of longer-term thinking. After all, if you are only thinking about the coming month, it may be harder to identify an issue such as a need to make more money that may drive you to reconsider how you look at your current job. And remember, if you follow what I think is one of the best ways to save—automating your savings—this might well shield you from some of the problems revealed by Professors Dholakia's and Tam's study.

Related Posts:

There Are Only Two Ways To Save More Money

Four Specific Paths To Automatic Saving and Investing


Warren Buffet’s “10 Ways to Get Rich”?

The front cover of Parade magazine features a photo of a smiling Warren Buffet next to the headline, "10 Ways to Get Rich: Warren's Buffett's Secrets That Can Work For You!"

For me? Really?

Okay, tabloid-style headline aside, if you've been reading me long enough, you know I'm a big fan of Warren Buffett. So I promptly stole away the Parade magazine before my wife got to the paper or before my kids could strew it all over the house (a process which takes them approximately 3.6 seconds)—and retreated to somewhere I had half a chance of getting through the article. The article is based on a new book that is coming out later this month, The Snowball: Warren Buffett and the Business of Life. It's an "authorized biography," and the author, Alice Schroeder apparently spent hundreds of hours interviewing Buffett for the book. Hundreds of hours? Pretty sweet.

So here were the 10 "secrets":

  1. Reinvest your profits
  2. Be willing to be different
  3. Never suck your thumb
  4. Spell out the deal before you start
  5. Watch small expenses
  6. Limit what you borrow
  7. Be persistent
  8. Know when to quit
  9. Assess the risks
  10. Know what success really means

I wouldn't call any of these secrets, and I'd be willing to bet that most of these nuggets of wisdom appear in past books, articles, writings, and quotes about or by Buffett (and in his annual letters to shareholders). And I think most of these are pretty self-explanatory, except perhaps, "Never suck your thumb." The article describes that one as being decisive and acting quickly. Get the information you need to make a decision—but then move forward and making that decision on an appropriate timeline or with an appropriate deadline. The article explains that Buffett "calls any unnecessary sitting and thinking 'thumb-sucking.'"

But what was both interesting and powerful in the article for me was the many personal stories woven into the "secrets," illustrating how Buffett learned that particular lesson or how he implements it for himself. For instance, in the article's description of the first point, "Reinvest your profits":

In high school, [Buffett] and a pal bought a pinball machine to put in a barbershop. With the money they earned, they bought more machines until they had eight in different shops. When the friends sold the venture, Buffett used the proceeds to buy stock and to start another business. By age 26, he'd amassed $174,000—or $1.4 million in today's money.


These are what make the article definitely worth checking out: 10 Ways to Get Rich: Warren's Buffett's Secrets That Can Work For You!

Related Posts:

What Buffett's Been Doing Lately—And Does Kiplinger's Have a Man Crush?

Where I Outperform Warren Buffett (And What I Think It Means)

So A Slow-Moving Ape Can Beat The Market?

Diminishing Returns In The Stock Market According to Warren Buffett


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