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We break down Dave Ramsey’s investing strategy.  Can we all retire millionaires as he promises?  Today we find out. Dave Ramsey is a well respected financial guru. He has helped many people begin their personal finance journey. While we disagree with the math behind Dave’s snowball method of debt reduction, you will pay off debt if you follow it. We reviewed Total Money Make Over and came away pretty (but not entirely) impressed. Today we take a look at his investment strategy. Guide Dave Ramsey’s Guide to Investing is a free PDF available on-line. It’s not exactly a weighty tome, just 17 pages, two of which are the cover page and table of contents. Dave’s investing strategy consists of just three steps: * Ask yourself specific questions. Things like at what age you want to retire, what kind of lifestyle you want to live, etc. * Diversify. This section is just four sentences long, and two of them speak of eggs and baskets. * Stay focused. This is basically the sum total of Dave Ramsey’s investing strategy. It is heavy on cliches (I counted four) and light on advice or even basic information like explaining different types of investments. If you don’t know anything about investing, Dave’s advice won’t tell you much. At LMM, we want our listeners and readers to be fully informed. That’s why we produce things like Investing 101: An Introduction to Simple Investing. Once you understand the basics, we’ll explain the various types of investments available. The Rule of 72 The rule of 72 is a method Dave recommends as part of building your investment strategy; it identifies your investing timeline. You divide 72 by the rate of return you get on an investment. That number is about how many years it will take for your investments to double in value. There are a few problems with this. Numbers and averages aren’t the same things. The bigger problem is that Dave uses 12% as the average return you can expect to earn. This number is exaggerated. At LMM, we use 7% which is a little lower than the average rate of return you can expect in the market over the long term. He posits that if you invest $100 a month from age 25-35 with a return of 12%, you will retire with just over one million dollars. The backlash was immediate. Dave’s defense was that his advice was “inspirational and instructional.” He continued, “…if you save money over time, you’ll have some.” Well, no shit Dave. I get the inspirational part. One hundred dollars a month doesn’t sound unreasonable, and a million dollars sounds like a lot. But I think most of us could do with a bit more of the instructional bit. But you don’t need instructions because Dave will hand you off to one of his ELP’s! More on that to come. Buy and Hold Dave encourages long-term investing. In order to play the long con, you have to tune out a lot of the coverage about the stock market and the economy. Good news doesn’t sell as well as doom and gloom, and if you jump every time you hear scary economic news, you will never be a successful investor. We show you how to take the emotion out of investing so that your decisions are based on data and not the lates... Learn more about your ad choices. Visit megaphone.fm/adchoices

We hope LMM  is your go-to place for all things personal finance but there are other resources available. We share some of our favorites. Podcasts APM Marketplace:  News on business, money, and economics. Stacking Benjamins:  Our buddy Joe!  If you like LMM, you’ll love this podcast.  Joe was a recent guest on Episode 81. Books The Simple Dollar:  Trent Ham’s guide to wiping out debt. I Will Teach You to Be Rich:  Ramit Sethi’s book for young people at the start of their personal finance journeys. The Richest Man in Babylon:  Personal finance taught through fables by George Clason. Wildcat Currency:  Recent guest Professor Edward Castronova’s new book on digital currencies. The Intelligent Investor:  Written by Benjamin Graham, Warren Buffett’s mentor.  Can’t get much better PF bona fides than that. The Four Hour Work Week:  Tim Ferriss’ first book which has evolved into a wildly successful series. Blogs Get Rich Slowly:  We’ve interviewed founder JD Roth and writer Kristen Wong.  One of the first successful PF blogs and still a major player. Jim Collins:  The inspirational proponent of “eff you money.”  His blog is hidden but we found it for you! Ready for Zero:  Great friends of LMM’s.  If you’re in debt, they’ll get you out.  We spoke to Claire in Episode 42 about this invaluable service. Financial Samurai:  Reach financial independence sooner. Mr Money Mustache:  Early retirement through extreme frugality. Tools Mint:  Our favorite budgeting tool.  If you’re a beginner to PF, this is the place to start. Betterment:  LMM’s favorite investing tool for beginners. Movies Maxed Out:  A documentary about predatory lending practices. How the Economic Machine Works:... Learn more about your ad choices. Visit megaphone.fm/adchoices

If you read or listen to anything related to personal finance, you have heard of Vanguard Funds. But WTF are Vanguard Funds and why are they so popular? Vanguard and its founder, John Bogle, are investing legends and for a good reason. Bogle founded the first index fund, beloved of hands-off investors everywhere, in 1975. That Vanguard Fund, the Vanguard 500 Index Fund now has more than $500 billion under management. What is Vanguard? Vanguard is an investment advisor with more than $5.1 trillion under management. Vanguard is also the leading provider of mutual funds and second largest provider of ETFs. The founder, John Bogle, has long been a champion of offering low cost, low effort investing to the average person. Why are Vanguard fund fees so low? Because Vanguard is not owned by outside stockholders as most investment management companies are. Outside investors want returns, and those returns come in the form of fees charged to customers. Vanguard has no outside investors. The company is owned by its funds, and the funds are owned by their shareholders, which is everyone who invests with Vanguard. This structure is why Vanguard funds have low fees. Those low fees mean more money in the pockets of Vanguard’s investors/owners. Why Fees Matter When you see a fee of 2% (if you pay attention to investing fees at all), you think that sounds pretty good! Two percent is nothing. And that’s true. A 2% interest rate on your savings account is nothing. Getting 2% off when you buy a dress is nothing. But a 2% investing fee isn’t nothing. It’s something; it’s a lot of something. And that something is the money you have to live on in retirement. If you had $100,000 invested earning 6% for 25 years and paid no fees, your $100,000 would become $430,000. If you paid a 2% fee in that same scenario, your $100,000 would become a mere $260,000. That seemingly small 2% just obliterated nearly 40% of your retirement savings! Why We Love Vanguard Funds We love Vanguard, and we aren’t alone. “According to a recent Harris Poll, which identifies and ranks the strongest brands in nearly 100 categories, Vanguard is the only financial services company in the “Top 13 Brands of the Year with the Largest Equity Increases.” They are also ranked as the top financial services brand in the investment category.” Vanguard opened up investing to the masses. You no longer had to have a million dollars and a personal financial advisor to grow your money in the stock market. Investors also love the Vanguard philosophy that a mutual fund company should be managed with the interests of the fund shareholders at the forefront. And low fees are in the interest of the shareholders. Vanguard funds average expense ratio is 0.19% compared to the industry average of 1.08%. And putting paid to the myth that paying more means better performance, 86% of Vanguard funds have outperformed similar funds for the last five years and had an outperformance rate of 94% over a ten year period. VG Mutal Funds When you invest in a mutual fund, you are invested in hundreds of individual securities at the same time. This protects your investment by lowering your risk. All of your eggs are not in the same basket. If one basket does poorly, the other baskets can offset it. Mutual funds are an inexpensive way to invest. You pay one expense ratio rather than paying a commission each time you buy or sell individual securities. Learn more about your ad choices. Visit megaphone.fm/adchoices

Want to earn some extra cash?  Have some credit card or student loan debt you would like to pay off? Maybe you want to finally take your dream vacation or have some extra money to crank up your investing. We’ll teach you how to make money on the side to put toward whatever your goals are. How to Make Money With a Side Hustle? A side hustle is a way to make some extra money that is outside of your normal day job. For many people, the hustle will be something that they’re passionate about, a hobby. The idea is to find a way to monetize that hobby. Your hustle doesn’t have to be a hobby, nor does it have to be something done online although a lot of the information you find on the web will be about online hustles. If you’re into real estate, then getting to rental property investments could be great side hustle and a great way to to make some passive income. If you baby sits on the weekends, that’s a side hustle too. Choosing A Hustle Choose your hustle carefully. It’s ideal if can monetize something you enjoy, cooking for instance. Is your cooking good enough that other people would be willing to pay for it? Can you find enough clients to make it worth your time? Just because you enjoy something doesn’t mean it’s something people will pay you for or that there is a big enough market for that thing. Maybe you don’t exactly feel passionate about babysitting the way you do about cooking but you live in a neighborhood with lots of families and they would pay you to mind their children. The hustle really shouldn’t be something you hate doing though. Great, people will pay you to mow their lawns and you found enough clients to make some good money. But if you hate mowing lawns, it’s hard to stay motivated. Money isn’t enough motivation for everyone. Try to find that sweet spot where you’re being paid and maybe not loving what you’re doing, but not loathing it either. Try to think of a niche within your chosen hustle. You love taking photos and who needs photos? People getting married! There are lots of wedding photographers though and many of them are full-time professionals which you are not. Not yet at least. You know who else needs photos? Competitive Bodybuilders. And there are a lot fewer photographers specializing in this so there will be less competition for clients. I know this is a weird example but I have a friend who did this, so it’s a real-life one! When Do You Hustle? Even though we all have the same 24 hours in a day, some people have more time than others. If you have a lot of responsibility, you will need to deliberately carve out time to work on your hustle. Getting up an hour earlier than normal is a good time to work because you are less likely to have interruptions. If you don’t have a family, you might have a fair amount of free times on weekends to work. You might also need to re-prioritize your time. If you’re spending an hour or two watching television, that is a poor use of time. Take that time and set it aside to work on your project. How To Monetize Spread the word. Let’s go back to the babysitting example. You can always tell who has kids because people with kids never shut up about them! And people who have kids are friends with other kid having people. It just takes one happy client to get word of mouth recommendations rolling. Find online forums and parent meet up groups in your area. Post your services in the forums, post signs where the meetups are happening. Attend any gatherings related to your hustle, meetups, conferences. The connections you make might not pay off immediately but the more people you meet, the more potential clients you meet. If your hustle is online, the same rule applies, Learn more about your ad choices. Visit megaphone.fm/adchoices

The finer points of my personal investment strategy including emergency funds, checking and savings accounts, and investing beyond Betterment. An emergency fund is vital as we discussed in Episode 64. But we define that a bit differently than a lot of people.   You should not have a savings account.  You need a checking account that contains one month’s expenses plus 150%. So if you spend $2000 a month, your checking account should contain $5000.  In lieu of a savings account which makes less than 1% interest, you should use a tool like Betterment to stash your emergency fund.  The money here will grow at an average of 7% a year and is liquid within a few days.  This is controversial to some but it is not risky.  This account should be funded up to $25,000. Should you participate in your company’s 401K?  Never turn down free money. If your company matches, you should contribute the same amount into a 401K even if you have credit card debt. Now things are a bit more comfortable.  Between your checking account and investment account, you have about $30,000.  This is your working capital.  We’re comfy now but it’s no time to get complacent.  We’re going to take a little risk by investing in something like individual stocks or a fund with a company like Vanguard or Fidelity. The next step is for advanced investors with $100,000 or more invested.  You can afford a little more risk.  Andrew has had very good returns with Lending Club.  Not for the faint of heart but the rewards can be enormous. Don’t forget, we’ve also put together a list of the top vanguard funds we know about – you should check them out! Now go out and be the best investor you can be! Show Notes The Ultimate Investment Strategy Blueprint:  Andrew’s recent blog article. Vanguard: A low fee investment management company. Betterment:  Where your emergency fund should be stored.  Use this link and get six months free investing! Nominate our Podcast for a FinCon Spotlight Award: We all know someone in the FinCon Community or beyond that is doing interesting, far-reaching work to help people with their money. Learn more about your ad choices. Visit megaphone.fm/adchoices

  You ask and we answer.  Five listener questions on everything from Dave Ramsey to credit cards to how to stay disciplined with spending. 1.  What is Lending Club and how is it classified?  Lending Club is a market place for crowd sourced loans.  It should be a tiny portion of your portfolio because it’s very risky.  It would be more akin to something like a penny stock than a bond. 2.  Why do we rag on Dave Ramsey so much?  Oh, you noticed.  A couple of reasons.  LMM’s doesn’t like the religious overtone to everything he says and writes.  We also disagree with his snow ball method of debt reduction.  It doesn’t make sense mathematically.  We go into this in great detail in Episode 95.  We also give Dave a lot of credit for making people think about personal finance.  Anyone doing that is doing a good thing even if we disagree with the tone or approach. 3.  How do you develop the discipline to not spend money?  In the beginning at least, surround yourself with personal finance.  Read books, listen to podcast, discuss your goals with your friends and family.  Put it in the front of your mind until it’s just a habit.  Also use our friend Tony Stubblebine’s Lift app to help you build good habits. 4.  Is it crazy to value time and freedom over money when it comes to the hours you work?  Definitely not crazy!  LMM’s delved into this in Episode 41 and it’s an important issue for us.  The five day work week is largely a result of our Puritan work ethic here in the states.  There are plenty of examples of other countries and increasingly, companies here at home that are moving to four day work weeks.  There are many benefits to both employer and employee.  Try to foster this way of thinking in your own company.  The government isn’t going to help us out here.  It has to be a grass roots effort one company at a time. 5.  I grew up being told credit cards are evil, you seem to disagree, why? And do credit scores really matter? If someone steals your cash, the cash is gone.  If your credit card is stolen, you’re out nothing.  With cash back rewards, your life can be a small percentage cheaper than if you had paid with cash.  Spending via a credit card is easier to track than cash spending.  Credit scores do matter.  When you take out a loan for a home or car, the higher your score, the better your loan terms.  They are increasingly mattering for things like renting an apartment and getting a job too.  Having a good credit score is never a bad thing.  The best way to do that is to pay your balance in full every month, no exceptions. We love these episodes.  Keep sending in your questions! Show Notes The Lost Art of Negotiation:  Andrews’ article on how to get a raise, more time off, maybe even a four day work week! Betterment:  LMM’s favorite investing tool. Use our link and get six months free! Learn more about your ad choices. Visit megaphone.fm/adchoices

Your resume can make all the difference in a tough job market.  We’ll find out what you need to build the perfect resume so you land that job. If you haven’t done a new resume for a while, some things have changed.  Since most resumes are sent electronically, you don’t have to buy the fancy paper.  It’s a good idea to have a few copies to bring to interviews but plain printer paper will do. Keywords are important.  Some companies have a program that will scan through them.  Use the words that are in the job post in your resume so those keywords get a hit. A cover letter is still important if the interview will be the first time you are meeting the interviewer.  Include your skills, why you are applying and why you want to work for that company.  Again, using keywords are important. Some things you want to leave off your resume:  any job you worked for less than six months unless it’s covering a gap in employment.  Don’t use action words like, “achieved” or “adapted.”  Don’t do a “cutesy” resume, just a standard one.  Don’t use an unprofessional e-mail address like sexykittyforyou@hotmail.com.  Get a g-mail address using your name or initials.  You can leave hobbies and interests off entirely unless you’ve just graduated and need something on your resume. These are some things you should include in your resume:  Use a standard font like New Times Roman or Arial and a font size between 10-12 point.  If you have more than five years experience, you can spill over to a second page, if it’s less than five years, it should be a single page. The bullet points under each job should number ten or fewer with the greatest amount under the most recent job and tiered down from there.  Jobs that you held while going to school should be included even if they aren’t related to your field.  It shows that you were ambitious and any job will develop certain skills, like dealing with customers or learning new software. If you’ve never done a resume or yours’ is out of date, there are lots of resources available to help you and I’ll include them in the show notes.  There are even services that will create a resume for you so if you aren’t comfortable with Word, that is an option but they do charge a fee. Now that we’ve helped you create a killer resume, what next?  Build a good Linkedin profile.  This is the first place a lot of recruiters and companies go when looking to hire.  Get in touch with a recruiter to let them know you’re looking and the same with your network.  Get the word out to as many people as possible. The most important thing to remember is to make certain that there are no grammar or spelling errors on your resume.  Not proofreading is sloppy and will turn any potential employer off. Getting a resume together isn’t hard but it does take some finesse to get it right.   Use our tips and Mark’s website to get the job you really want. Show Notes Career Alley:  Mark’s site featuring job search lessons. Resume Templates:  Pages of resume templates for every type of job. Betterment:  Get started investing the easy way.  Use this link to get 6 months free! Featured Image Photo Credit: “Pen and Paper” by Guudmorning! on Flickr Learn more about your ad choices. Visit megaphone.fm/adchoices

If you haven’t noticed, everyone has been hysterical lately about Bitcoin (to say the least). We talked to Professor Edward Castronova, an expert on investing in cryptocurrency to talk about how the market works. What is the definition of money? According to economists, anything used as a medium of exchange, as a unit of accounting, and as a store of value.  This is why anything from the dollars in our wallets to cigarettes in  POW camp, to Bitcoins can be considered money. What makes it money? Social expectation.  If you have a stone and someone is willing to trade your stone for a cup of coffee, then your stone is money and has value. The difference in forms of currency is how well they perform.  Stones are bulky and heavy, dollars are small and lightweight.  A dollar also has security.  Legally dollars must be accepted as a form of payment.  There is no such law governing stones.  If a vendor won’t accept your stone for a coffee, your stone is worthless. Cryptocurrencies are not regulated And also not taxed. Crypto transactions happen at a microscale and are not easily traced by the government.  When Bank of America, Visa, MasterCard, PayPal, and Western Union blocked donations to WikiLeaks in 2010, WikiLeaks set up a page to accept Bitcoin donations. Invest in cryptocurrency? One day we may all have multiple bank accounts each holding different types of currencies that we use for different things. The danger of these currencies would be if one major sector of the economy, the housing market, for example, was dominated by one type. If that currency plummeted, it could cause a panic. Of course, dollars have caused panics so that is not unique to cryptos. They will also need to become as easy to use as dollars and currently they are a bit complicated. Show Notes Wildcat Currency:  How the Virtual Money Revolution is Transforming the Economy. Professor Castronova’s book on cryptocurrencies. Learn more about your ad choices. Visit megaphone.fm/adchoices

Whether it’s a holiday, a birthday or an anniversary, we all have special days to celebrate.  Find out how to do it up without spending too much. It’s easy to budget for the expected holidays but what about the random co-worker birthday, the niece’s confirmation?  Rather than budgeting “X” for each event, set a dollar amount on how much you spend on each gift.  If you’re giving a check as a gift, make sure to log it somewhere in case the recipient doesn’t cash it right away. Be more selective about what holidays you give gifts for.  Come home without an anniversary gift and you might be in some trouble.  But do you and your significant other really need to buy each other Sweetest Day gifts?  That is a made up holiday.  Focus on the big ones. Have a frank discussion with your extended family.  Once you have a significant other, the number of people you are expected to buy gifts for can increase exponentially.  It’s unfair to be expected to buy a gift for your seven nieces and nephews when you don’t have children.  If your family doesn’t suck I’m sure they would rather have you at the family event without a present than dodging the get-togethers because you don’t have the budget to buy endless gifts. If you want to give a gift but can’t spend a ton of money, there are some great alternatives.  You can get together with other family members and buy one more expensive gift that everyone has chipped in on rather than a dozen smaller gifts.  Or you can buy one gift for the entire family, like a board game they can all play together.  Making a gift is thoughtful and more meaningful than some chotchke from Target. Or my dream, get together with your family and all agree to not buy anyone a gift.  Everyone goes out to a nice dinner together.  More fun, less money, and no crappy bread maker collecting dust in the back of your closet. Keep the spirit of the holidays and special occasions.  They are meant to be a happy time spent with family and friends, not getting trampled in Walmart on Black Friday.  You’ll save money and avoid finding yourself on People of Walmart. Show Notes Mint:  Budget your special occasion expenses. Learn more about your ad choices. Visit megaphone.fm/adchoices

There are lots of ways to save money on food. Here are a lot of ideas for budget meals and what to eat when you’re strapped for cash. That Can’t Be Right Americans spend a lot of money on food as a recent poll found out. The GOBankingRates survey was one of five polls asking Americans about their monthly household expenses. Groceries came in as the second most expensive monthly budget item, followed by rent or mortgage. Respondents spent more on groceries at $302 per month than the combined cost of their car payment ($166), household necessities ($61) and clothing ($50). And a lot of that food goes to waste. We waste about $40 worth of food each month which is about 33 pounds. No wonder food makes up so much of our budget. But you can create budget meals that will not only cut down on the amount you spend on food but the amount of food you waste too. First Thing’s First If you want to know how to save money on groceries, the first step is to plan your meals. This is easier than it sounds. Most people are happy eating the same handful of breakfasts and lunches every day and to rotate through a dozen or so dinners. Make a list of three breakfast and lunch ideas and a dozen dinner ideas. Next list out all of the ingredients you need to make these meals. This list will make up the majority of your shopping list. When you don’t know what you’re going to eat you go to the grocery store and start grabbing stuff at random which is an expensive way to shop. Of course, you will need to add extra things to your list sometimes, you’re out of olive oil, or it’s your anniversary, and you’re cooking a special meal. But most of the time, you will stick to the list of the things required to make your go-to meals. Choosing the Meals Because we want to save money on groceries, our rotation of budget meals needs to be things that are inexpensive and reasonably healthy. Healthy is subjective in that for some of us that means Paleo, and for others it means Vegan. But we all know what kinds of things are not healthy, soda, sugary juices, breakfast cereals with cartoons on the front, Ramen noodles, cheap microwave dinners. Leave that stuff alone. It’s not good for you, and it’s often more expensive than real food. Things like eggs cooked with vegetables, yogurt (full fat, non-flavored) with fresh or frozen fruit, wholemeal toast with natural peanut butter (peanut butter with nothing but peanuts and salt) make excellent, cheap breakfasts. Soups and stews made from root vegetables and beans, lettuce salads with meat left over from the previous night’s dinner, and grain-based salads are good lunch choices. One pot dishes, rotisserie chicken and frozen vegetables, and pretty much anything made in a slow cooker (more on this coming up) can make up your dinner rotation. How to Save Money on Groceries There are a lot of ways to cut down your food budget from where you shop to what you buy. Shop Around Most big grocery stores and even many smaller ones have circulars that show what is on sale for the week and most of them are available online. When you’re making your meal plan for the week, take a look at those circulars and see who has the best bargains. If you live in a big city with farmer’s markets, the food can be expensive but smaller town farmer’s markets often have lower prices than grocery stores and the food is fresher and better. If you live in a rural area, look for farm stands, they’re often cheaper than supermarkets too. A pick your own farm offers good prices and a fun outing. Learn more about your ad choices. Visit megaphone.fm/adchoices