Is a College Education Worth It? A Halloween Tale

Posted by Carlos Sera on Oct 29, 2015 3:00:54 PM

Halloween seems like the perfect time to post about the college selection process and the aftermath of the decision.  High school seniors are busy completing their final applications and soon they will know where they will spend the next four years of their lives.  Let me rephrase, hopefully spend the next four years of their lives.

I recently came across two articles that captured my attention.  The first is about a college senior that ran out of money to pay her final year. The second is about a recent college graduate that works at Google and lives in the Google parking lot in his truck in order to pay off his student loans.  I find the extremes in attitude to be significant. 

One accepts personal responsibility and will do whatever it takes to achieve his goal while the other seems caught between a feeling of entitlement and victimhood.  It is always instructive to look at extremes when making what is now arguably the most expensive decision of your life. 

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Topics: Innocent Tales, Saving for college

The Best Way to Save for College: A Fair Tale

Posted by Carlos Sera on Oct 9, 2015 2:53:00 PM

From the time our children were born, my wife and I wanted to make sure they would have the resources available to seek a college education.  We wanted to be as fair as possible in allocating family resources and not favor one over the other.  However, as this tale will teach you, if you want to do what is best for them and your family, it is beyond your control.  So sit back and let nature take its course, because you’re not in charge.  You can control your actions, but the outcome is pure luck.

You Can't Measure Fairness with Money

People have a need to be fair, especially with their children.  A sure path to family dysfunction is to show blatant favoritism toward one child over another.  Unfortunately, when dealing with your children, you can’t measure fairness with money.  Doing the best for each of your children is the only way I know a parent can be fair.  Why do I say this?  Because life is far more complicated than what we can measure monetarily.  Let me give you some examples that come up frequently.  As the father of four children, I deal with the issue of fairness and money all the time.  Like every other parent, I struggle with the notion of what is fair.

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Topics: Innocent Tales, Saving for college

A Taco Tale: "The $36.99 Taco"

Posted by Carlos Sera on Sep 3, 2015 1:47:00 PM

One of my pet peeves is paying fees or charges to banks or credit card companies. It’s a pet peeve because in my opinion they really aren’t fees or charges they are loans. Banks and credit card companies have a very powerful lobby in Washington that permits them to charge loan rates that the local loan shark would consider criminal. Nevertheless we’re not going to change the way that these companies take from the poor so we must make sure that we are aware of their practices and make sure we don’t fall victim. I consider it a badge of honor to avoid these unnecessary loans disguised as fees and charges. You should too.

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Topics: Tales, Innocent Tales

Save Money with Dollar Cost Averaging: A Tale of Perspective

Posted by Carlos Sera on Sep 3, 2015 11:57:00 AM

Every new investor to the stock market or new 401(k) plan participant is shown a chart that espouses the virtues of dollar cost averaging.  So what is dollar cost averaging or DCA?  DCA is when you commit to invest a certain dollar amount or percentage of salary to an investment program, usually in a mutual fund or exchange traded fund (ETF), over a consistent period of time.  For example, you are eligible to participate in your company’s retirement plan and you commit to invest 6% of every paycheck into a mutual fund of ETF that invests in equities.

The standard DCA pitch goes like this and let me reiterate, is best suited for mutual fund investing or exchange traded fund (ETF) investing with firms like Charles Schwab that have commission free access for their clients.  What if you were to invest $100 per period into a mutual fund of ETF that initially declines and then rises?  The importance of the last sentence is because new investors are always cautious and they want to know what if my investment goes down initially.  The example that is always illustrated is meant to appease new investor fears.  The math is simple. 

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Topics: Tales, Innocent Tales

How Can I use the Rule of 72? A Double Your Money Tale

Posted by Carlos Sera on Sep 2, 2015 3:14:00 PM

I learned the rule of 72 when I was a youngster. I’m not sure how old I was exactly but I know that it opened up a whole new world for me and gave me insights that let me see the world in a different way than before. Why it works isn’t important and is beyond the math skills of most people, just recognize that it does. The rule of 72 is so important that it should be taught in every school. If it were then every child would understand compound interest.

How can I use the rule of 72? The rule has one purpose. It is designed to let you estimate with amazingly close accuracy how long it would take a person to double their money at a given interest rate. I use it almost daily to determine the particular merit of an investment. It is a good skill to have when making investment decisions. The formula is simple. It is as follows,

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Topics: Tales, Innocent Tales

How Can I Pay Off My Mortgage Early? A Mortgage Tale

Posted by Carlos Sera on Sep 2, 2015 1:45:00 PM

Before I get into this tale I need to write about a home purchase in general. Also, since many of you may be asking What is a mortgage? Let me explain; a mortgage is a loan you commit to repay on a monthly basis until it is paid in full. When you hear the word mortgage think loan or debt.

There are so many golden rules in real estate that I can’t repeat them all. One I generally agree with is the phrase location, location, location. The phrase means that you should throw out all the other golden rules because all that matters is where you buy. If you do you can get in a lot of trouble. There is more to buying a home than a great location. My phrase would be location, location, affordability and terms. By this I mean that the wise investor avoids a great location they can’t afford as well as a great location offered at an inflated price. The recent mass destruction of wealth in the United States and other countries that surrounds housing is due to unwise investors buying great locations they couldn’t afford or paying inflated prices or both. You need to avoid this throughout your life. Location isn’t everything but it is the first thing.

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Topics: Tales, Innocent Tales

How to Save Money (and Get Out of Debt): A Green Tale

Posted by Carlos Sera on Sep 1, 2015 1:43:00 PM

I am a sucker for the Academy Awards show. When I hear those magic words “The Envelope Please” and the winner is? I get a thrill as my favorite is surely to be announced. In this tale if you follow what I prescribe the winner will be you. This is a how to save money and get out of debt tale, and it works. I learned the concept as a young boy and though my advice will probably fall on deaf ears it’s worth telling because it can change your life. This tale is for people that want financial transformation and are willing to try what may seem offbeat in this day and age of plastic. The reason why it works is because when we use plastic or a credit card to make purchases we tend to overspend. I am no different. We buy things that we wouldn’t otherwise if we used cash.

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Topics: Tales, Innocent Tales

An Actual Tale: An Average Return vs. An Actual return

Posted by Carlos Sera on Sep 1, 2015 1:19:00 PM

My daughter recently asked me to explain how the stock market calculates the rates of return that are so often quoted because according to her calculations–the numbers didn’t add up.  She kept telling me that something was seriously wrong because no matter how she looked at the numbers they were consistently lower by between 2% to 2.5%.  The best way to explain what my daughter was experiencing is to eavesdrop into a typical conversation between two investors.  It’s a conversation we’ve heard countless times and I’m sure it will sound familiar to you as well.

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Topics: Tales, Innocent Tales

Is College Worth It? A Twenty Million Dollar Tale

Posted by Carlos Sera on Aug 31, 2015 4:31:00 PM

I have a strong belief that a college degree is a critical component to financial success since we know that college graduates earn more income than their non-graduate peers. It is a type of filter for future employers that begins when the student completes the eleventh grade. I would argue however, that the reasons that motivate people to attain their college diploma are the reasons they are more successful and not because of the diploma. If you’ve seen the movie The Wizard of Oz, there is a scene where one of the characters, The Scarecrow, gets bestowed with an honorary diploma from a wise person called theWizard of Oz. It’s is a fantasy scene because as soon as The Scarecrow got his diploma it seems he is instantly transformed from dunce to genius. Like the Scarecrow from the movie such is the fantasy about the college graduate. The reality is the Scarecrow was wise and Oz just confirmed it. The reality is that colleges preselect the best and the brightest and these “pre-selectees” would do well in any environment.

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Topics: Tales, Innocent Tales

Term vs Whole Life Insurance: A Tale of Insurance

Posted by Carlos Sera on Aug 29, 2015 3:47:00 PM

Sometime before the age of 25 you will probably find yourself sitting across from a friend or friend of a friend that is trying to sell you life insurance. The pitch will sound compelling and if you are married rest assured that there will be a love component to the sales presentation. You will hear the classic, “Carlos, if something were to happen to you wouldn’t you want Stephanie to be financially secure?” As I and everyone that has ever heard this line bobs their head up and down in agreement, the next line, like a boxer’s knock out punch follows, the salesman says “Not only will you be taking care of Stephanie, in the event that something happens, it is a pretty good investment.” You are knocked out. You look lovingly into your wife or husband’s eyes and say to yourself, how did I go so long without this product? I need life insurance.

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Topics: Tales, Innocent Tales

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