Posts Tagged "manage money"

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Financial Perils of the Single Woman

Being a single woman is serious stuff – financially that is.

One website recently published a humorous list of the advantages of being a single woman today.  “You don’t have to be worried about not getting a special gift from Him on your special day because there is no Him.”  Or: “There is no argument about where or when to go on vacation.”  Toilet seats were also mentioned.

This may not amuse 30-something women with serious concerns about whether they’ll marry and have children.  But face it: single women of all ages have more difficult money issues than their married friends.  When two incomes are coming into the household, a couple shares the rent or mortgage.  Fixed expenses can add up over a single woman’s life or during long bouts after, say, divorce.

“Single women are far more at risk,” said Wendy Weiss, a former financial adviser who writes a blog on her website, Hot Flash Financial.  “If we make 77 cents on every dollar [men earn], men have 23 percent more discretionary income, and that’s usually the amount we advisers recommend you put away,” she said.  Women also live longer and need more money to get through retirement, she said.

Prior to retirement, the rule of thumb is that single people need well more than half, possibly as much as 70 percent, of a childless couple’s combined income to afford the same lifestyle.  It is higher for the poor (whose fixed expenses consume more of their total income) and for single mothers (for obvious reasons). …Learn More

Mysterious Math Fuels Financial Markets

The stock market is on a downward jag, reminding us that financial events and products not in our control often determine our well-being. Thriller writer Robert Harris calls the markets an “alien force that slips human control.”

In today’s featured video, a California entrepreneur discusses how complex math, beyond our ability to comprehend, increasingly shapes the financial markets. He’s referring to various developments on Wall Street: the rise of computerized trading; Wall Street firms hiring math and engineering PhDs to design investing strategies; and institutional investors that use formulas to break multibillion-dollar stock trades into smaller transactions to evade detection by their competitors.

These are accomplished using “algorithms,” which are a bit like formulas but are far more complex mathematical progressions. Nobody really understands it, including narrator, Kevin Slavin, an independent tech consultant. And that’s the point.

He explains the mysteries of Wall Street’s “black box” in an simplified and elegant way that will wow viewers as he educates them.

“We’re writing these things we can no longer read,” Slavin said. “We’ve lost the sense of what’s actually happening in this world that we’ve made.” He adds, we are “only starting to make our way” to understanding it.Learn More

Academics Question Stock Investing

The Standard & Poor’s 500 index has soared 27 percent since October! These times of strong market gains are the brass ring for a large swath of well-educated, well-off Americans.

But recent academic research on three topics – value investing, the record of individual investors, and the usefulness of investment advisers – raises serious questions about buying individual stocks or actively invested stock funds.

The upshot of this research, it seems, was neatly summed up by Nobel Prize-winning economist Daniel Kahneman’s bestseller, “Thinking, Fast and Slow:” stock picking “is more like rolling the dice than like playing poker.”

The papers are complex (though not difficult to read), so here are synopses and links to them: …Learn More

I’ll Save More – Just Not Today Please

We know that not enough Americans save for retirement. Behavioral finance professor Shlomo Benartzi devised a way to fix it – quite awhile ago, in fact.

To ease the pain of saving money, Benartzi and economist Richard Thaler designed a now-famous program in which employees can commit to increase their 401(k)s savings when they get a raise.

Saving is painful because it requires sacrifice, but committing to save money that one doesn’t yet have synchs with human psychology. In 1998, Benartzi and Thaler tested their theory on blue-collar workers in a Midwestern manufacturing plant, and it worked.

The key to saving, Benartzi said, is “embarrassingly simple but extremely powerful.”

The finding was nothing short of ginormous, though employer adoption has been modest. David Wray, president of the Plan Sponsor Council of America, estimated that about 10 percent of U.S. employees with 401(k) plans at work have automatic savings increases, typically at raise time. It’s much more common among mega-employers, he said.

If you’ve heard about behavioral economics but haven’t had time to learn what it’s really about, this 15-minute TED video in which Benartzi explains is an excellent start.

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Bracketology Simulates Stock Picking

Odds, outliers, random – such terms are batted around like gnats among the economists and statisticians here at the Boston College research center that sponsors this blog. Recently, we tossed around some parallels between the art of NCAA Basketball Bracketology and picking stocks or actively managed mutual funds.

Here’s our Final Four:

  • A fresh printout of an unscrawled bracket is like a new pool of money to invest – it engenders the hope of winning big. The thrill can give way to defeat — very suddenly.
  • Admit it: Most people fill in their bracket winners without doing any research on the teams they’re selecting. (And who reads a prospectus?)
  • A team (or stock) on a winning streak is a prime candidate for losing – and it takes only one in the single-elimination championship.
  • Past performance is not a reliable predictor of playoff results. Remember the 2011 NCAA basketball champion? UConn lost last week. And I won’t even mention the Duke Blue Devils.

Send in your own ideas to Squared Away! To do so, click “Learn More.”Learn More

Fraudsters Hone Art of Disguise

Tried-and-true financial frauds – Ponzi schemes, high-yield investments, and “pump and dump” stock scams – have victimized unsuspecting targets for decades, even centuries.

These well-known frauds are effective, because con men change their disguises so they won’t be recognized. Six common disguises are detailed in a report I wrote for the Financial Security Project at Boston College’s Center for Retirement Research, which hosts this blog.

Fraud Disguises from Squared Away on Vimeo.

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Bosworth: Why It’s Hard to Save


In this video, a senior fellow at the Brookings Institution talks about his latest book and offers a clear-sighted explanation for complex macro-economic forces that shape all Americans’ saving habits and financial security.

Starting in the early 1980s, stock markets boomed and housing prices increased year after year, and Americans “thought they were getting rich,” explains economist Barry Bosworth. “So they thought, ‘Let’s spend a little bit of it.’ “

Billions of dollars of wealth vanished in the 2008 financial market collapse, marking what may be the end of a golden era of wealth formation and undermining plans laid by workers and retirees, he said. Bosworth’s book was released last month: “A Decline in Saving: A Threat to America’s Prosperity.”

Full disclosure: The book incorporates research funded by the U.S. Social Security Administration (SSA) through the Retirement Research Consortium, which also funds this blog. The opinions and conclusions expressed are solely those of the blog’s author and do not represent the opinions or policy of SSA or any agency of the federal government.

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