Denali Northern Expenditure

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How to Insure Against Your Money Fears (And When an Annuity Makes Sense)

I just finished reading Die With Zero (affiliate link). The basic premise is that your money is worth more at different stages of your life (ie: when you’re younger you can do more things, so you shouldn’t wait until you’re old and retired to enjoy your money). The book is a good balance to all the “do nothing but work until you can retire early” literature available, but the most interesting idea to me was the fact that you can insure against all of your money fears.

People often save WAY too much money because they fear leaving their kids in the lurch, ending up in a retirement home, or outliving their money. Insurance can help you overcome these fears.

When You Need Life Insurance

Life insurance is a way to make sure your kids will be okay financially when you die. Term life insurance is the way to go because it’s cheaper and you likely don’t need life insurance for your entire life. I firmly believe everyone should have life insurance if you have young kids. Life insurance would allow your family the financial options of being able to pay for the funeral and end of life expenses, but also be able to take the time they need to adjust to just one parent. Even stay-at-home parents need life insurance. They are covering the bulk of the childcare and housework and those things are NOT free. Also, again, the loss of a parent/spouse would be a serious adjustment. Money can help the other spouse take a break from work to figure things out.

At the end of a 20 or 30 year life insurance term, you likely won’t need life insurance any longer. If your children are adults and you have enough savings to be able to continue to help them with college (if you’re still doing so) AND live your current life AND pay funeral expenses, you’re successfully self insured and no longer need life insurance. Indeed, your savings will no longer need to cover two of you (as one of you will no longer be around).

Long-Term Care Insurance

Long-term care insurance is complicated and expensive, but if your biggest fear is not being able to afford expensive long-term care toward the end of your life, you can help relieve that fear through insurance. Nursing homes can cost upwards of $100,000/year, so it’s a legitimate concern. However, in the worst case scenario, you run out of money, they don’t kick you to the curb. If your assets have been depleted, Medicaid kicks in.

I don’t think long-term care insurance is a good fit for everyone, but I do think it’s a great idea if your biggest concern is long-term care.

When an Annuity Makes Sense

An annuity is an insurance plan against outliving your money. This was maybe the most interesting idea Die With Zero introduced. Annuities are terrible investments and only exist because people think they will live longer than they actually do, so the annuity makes money because they don’t pay out as long as you think they will.

HOWEVER, if your biggest fear is outliving your money, an annuity is a great idea. Guaranteed income forever to help you overcome that fear!

Do I think everyone should go out and get annuities? Nope. They’re still terrible investments, but prior to this book, I didn’t see a reason anyone should get one.

Money is Emotional

Anything that pretends we can all make totally rational money decisions based entirely on math is crazy. We’re emotional. We have histories with money that color our decisions. We have actual fears about money that lead us to make other decisions. Using insurance products to help people have less fear is actually a great idea. If you won’t be comfortable knowing you may not be able to pay for long-term care or will never feel like you have “enough” because your biggest fear is outliving your money, there are ways to help you overcome those fears!

Spend More Money Now

I think Die with Zero is actually a great book to read in the middle of a pandemic, because if you’re anything like me, you feel like after the past year and a half of being stuck a home, you’re a bit concerned about how much you’re going to “let loose” financially when it’s safe to go and do things again. I’ve already prepped Mr. T that if cheap tickets to somewhere I want to go pop up, I’m not going to be as rational as I once was about my decisions and will probably be purchasing said tickets (work and school can work around TRAVEL for a change!). This book will make you pat yourself on the back and say: I’m in my golden years when I can go and do and have the health to do so, so it’s time to be SPENDYPANTS. (Also, this is your warning that if you’re following for frugality tips or semi-minimalism, that Maggie is no longer with us. The current Maggie goes to Goodwill weekly and plans to go hog wild the next few years financially. It’s gonna be a wild ride.)

QUIZ: What's your financial personality

QUIZ: What’s Your Financial Personality?

Coming at you today is a super fun quiz I made up determining your financial personality. It’s full of pictures and not at all research-based! Have fun and tell me what you get!

Also, when you’re done with this super easy quiz and if you haven’t taken my SUPER AWESOME quiz (which takes just a bit longer) – go do that. We’re up to 671 responses (THANK YOU FRIENDS!).

How Money is like Toilet Paper

How Money is Like Toilet Paper

Money is like toilet paper. But, in all honesty, I wish it was a lot more like toilet paper! Let’s get rolling (pun intended):

Calculation Financial Scenarios: Roth IRA Edition

Calculation Financial Scenarios: Roth IRA Edition

On Monday, we we used our portfolio balance and our current savings rate to calculate the impact of different market conditions on our future portfolio. Today, we’re going to mix it up just a little bit. Same market scenarios. Different savings rate. Since Alaska is solidly in its own recession, we’re going to assume that Mr. T loses his job by the end of the year (Debbie Downer? I don’t actually think this will happen, but again, I love a good calculation scenario!), so instead of considering our current savings rate, we’re going to assume that we can only max out our Roth IRAs at a total of $11,000/year (or $916/month).

This scenario is more broadly applicable. You have $150,000 portfolio? You max out 2 Roth IRAs? This is the post for you! Again, to make these calculations, I use my very favorite compound interest calculator to plug in the numbers. We’re looking at 4 scenarios: from major recession to bonkers markets to see how long it would take to reach $1,000,000 and $2,000,000. Here we go:

The Recession Starts Tomorrow!

In this scenario, our entire portfolio takes a 25% hit before the end of the year and then grows at 3% forevermore. Let’s look at the numbers:

Northern Expressions

Northern Expressions: How Close is Money to Your Heart?

Hello Friends! Today’s Northern Expression starts with a pretty famous Jonathan Swift quote, but we recently happened upon Lord Bolingbroke’s response and we loved the two together as a conversation so here you go:

A wise man should take care how he lets money get too much into his head, for it would most assuredly descend to the heart

“A wise man should have money in his head, but not in his heart.” – Jonathan Swift (in a letter to Lord Bolingbroke)

Lord Bolingbroke’s response: “A wise man should take care how he lets money get too much into his head, for it would most assuredly descend to the heart.”

I wonder why we don’t hear Lord Bolingbroke’s response as much as Swift’s quote because it’s basically the same sentiment with clarification. If you spend too much time thinking about money, it becomes the obsession and cannot be separated from your heart. It is a reminder that money is a tool. It is not the goal.

Happy Friday, friends.

Love, Maggie

Northern Expressions

Northern Expressions: Money without brains is always dangerous

Hello fellow money nerds. Today’s quote comes from the very famous book by Napoleon Hill, Think and Grow Rich.

Money without brains is always dangerous. Properly used, it is the most important essential of civilization. -Napoleon Hill, Think and Grow Rich

“Money without brains is always dangerous. Properly used, it is the most important essential of civilization.”

Money plus brains equals nearly endless opportunity! Use your brains. Use your resources. And get out there and make the world wonderful!

Happy weekend!

Love, Maggie

A Simple, Month-Ahead Elimination Budget

A Simple, Month-Ahead Elimination Budget

Mr. T and I were married in the midst of college. We were happiness-rich, but cash poor. We were both lucky to not be in debt because we were both given some assistance from our parents for college. After we were married, we combined our meager bank accounts and started an elimination budget.

We both worked hourly as custodians for our college football team cleaning the locker rooms and the coaches’ offices between 9:30PM and 1AM. Perks: football games were way more engaging because we knew the players intimately though we never met them (“the player that’s got that cute letter from a 6-year-old fan on his locker board has the ball!”). We also got random things out of the trash, like a barely-worn pair of shoes and a dozen tickets to the nearby waterpark. Also, we got to work together and we got a slight pay increase for working nights. Downsides: It was very late and we were tired. We got weekly wheatgrass shots at Jamba Juice to get us through.

The Simple Elimination Budget

How to Choose a Fund Manager

How to Choose a Fund Manager

Over the past year, I’ve come across some pretty interesting studies about fund managers. Based on the research, let’s take a look at who the ideal fund manager is:

Top Performing Fund Managers:

  1. Drive “Practical but Unexciting” Cars – Fund managers who drive sports cars take on more risk… but the risk doesn’t translate into better returns. So, make sure you’re checking the parking lot before choosing your fund manager!
  2. Are from Poorer Backgrounds – It turns out privilege puts people in positions they don’t necessarily deserve to be in. Fund managers from poorer backgrounds may have to prove themselves more because of their lack of connections or status, so the ones that make it are smarter and have more grit than the ones that got a “leg up” to get there.
  3. Actually Do Very Little – This article is about Nevada’s 35 billion dollar fund manager. He describes his method as “bare-bones.” The article says: “The Nevada system’s stocks and bonds are all in low-cost funds that mimic indexes. Mr. Edmundson may make one change to the portfolio a year.”

Be Your Own Manager:

The key, as Mr. Edmundson from the Nevada fund would tell you, is low-fee index funds. Even if you don’t choose Vanguard funds, you can thank Vanguard for creating The Vanguard Effect – The combined savings of Vanguard’s low fees added to the driving down of prices in the industry leading to a savings of over $1 Trillion to the consumer!*

Maybe this is the end of investing as we know it if everyone jumps on the passive funds train. Or maybe you think index funds are communist (I don’t make this stuff up!). Then make up your own mind… but for now, I’m going to drive my sensible car and put my money in index funds and leave it alone!**


*This is similar to the “Costco Effect” in Anchorage. We’re told to be grateful we live in Anchorage after Costco came because before that, prices were much, much higher. 

**I can’t claim I don’t have the privilege card, because I do

Tracking Your Finances Won't Make You Rich

Tracking Your Finances Won’t Make You Rich

Tracking is the First Step

If you don’t know where your money is going, you don’t know how to make it go where you want. Simply having a budget or tracking your finances the right way isn’t going to change your behavior.

In Fall 2016, a study was published about activity trackers (ie: FitBits) and weight loss. It was a randomized controlled trial (the best kind of study there is!). 471 participants spent 6 months on a low calorie diet, group counseling, and physical fitness prescriptions. After 6 months, the group was randomized into 2 groups: “Self-monitoring” (ie: “you’re on your own, but here’s a website where you can enter your data”) or “Activity Tracker” (ie: “here’s a FitBit. It will capture your data.”) After 2 years (!), they all weighed in. Both groups had better levels of fitness, but the group without the FitBit lost significantly more weight!

You read that right… the ones that had the fancy trackers lost LESS weight than those that didn’t have them!

Tracking Your Finances and Celebrating Wins!

Tracking Your Finances and Celebrating Wins!

If you’ve been around Northern Expenditure awhile, you’re probably aware that I like to celebrate. (If you follow me on Twitter, you’re aware I celebrate with dancing gifs!) If you don’t track, you can’t celebrate!

Tracking Your Finances:

It’s a new year (yay for new!) and it’s time to start tracking your finances FOR REAL this year. Here’s what you need:

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