Do You Get Your Money’s Worth From Buying An Annuity?

Coin Stacks And Chart Graphs On A Chessboard

Once upon a time, in the (somewhat mythical) past of traditional defined benefit pensions, your employer protected you from the risk of outliving your money in retirement, by acting, more or less, as an insurance company providing an annuity. With that benefit receding into the past, many experts have been hoping that Americans with 401(k) plans would avail themselves of annuities on their own, to give themselves the same sort of protection, and, indeed, the SECURE Act of 2019 made it easier for those plans to offer their participants an annuity choice, and, when surveyed, 73% of those participants said they would “consider” an annuity at retirement.

At the same time, though, Americans distrust annuities — in part because traditional deferred annuities had high fees and expenses and only made sense in an era predating IRAs and 401(k)s, when they were attractive solely due to the limited tax-advantaged options for retirement savings. But that’s not the only reason — annuities, quite frankly, aren’t cheap.

How do you quantify the value of an annuity? In one respect, it’s subjective and personal: do you judge yourself to be in good health, or does family history and your list of medications say that you’ll be one of those with the early deaths that longer-lived annuity-purchasers are counting on? Do you want to be sure you can maintain your standard of living throughout your retirement, or do you figure that you won’t really care one way or another if you have to cut down expenses once you’re among the “old-old”?

But measuring the value of annuities, generally speaking, does tell us whether consumers are getting a fair deal from their purchases, and here, a recent working paper by two economists, James Poterba and Adam Solomon, “Discount Rates, Mortality Projections, and Money’s Worth Calculations for US Individual Annuities,” lends some insight.

Here’s some good news: using the costs of actual annuities available for consumers to purchase in June 2020, and comparing them to bond rates which were similar to the investment portfolios those insurance companies hold, the authors calculated “money’s worth ratios” that show that, for annuities purchased immediately at retirement, the value of the annuities was between 92% – 94% (give-or-take, depending on type) of its cost. That means that the value of the insurance protection is a comparatively modest 6 – 8% of the total investment.

But there’s a catch — or, rather, two of them.

In the first place, the authors calculate their ratios based on a standard mortality table for annuity purchasers — which makes sense if the goal is to judge the “fairness” of an annuity for the healthy retirees most likely to purchase one. But this doesn’t tell us whether an annuity is a smart purchase for someone who thinks of themselves as being in comparatively poorer health, or with a spottier family health history, and folks in these categories would benefit considerably from analysis that’s targeted at them, that evaluates, realistically, whether annuities are the right call and whether their prediction of their life expectancy is likely to be right or wrong.

In the second place, the 92% – 94% money’s worth calculation is based on the typical investment portfolio of insurance companies, approximated by the returns of BBB-rated bonds. This measures whether the annuity is “fair” or not, in that “moral” sense of whether the perception that the company is “cheating” is customers is real (it’s not).

But these interest rates are very low. The authors, in addition to their calculations of “money’s worth,” back into the implied discount rate from the annuity costs themselves. For men aged 65, that interest rate is 2.16%; for women aged 65, 2.18%.

Now, imagine that you compare this annuity to an alternative plan of investing your money in the stock market, earning 7% annual returns, and believing you can predict your death date (or not really caring if you fall short or end up with leftover money for heirs).

The cost of the protection offered by the annuity, the guarantee that you will never run out of money, and that you will not suffer from a market crash, is very expensive indeed — when you compare apples to oranges in this manner, the money’s worth ratio is, according to my very rough estimates, more like 60%, meaning that about 40% of your cash is spent to purchase the “insurance protection” of the annuity.

And, again, that’s not because insurance companies are cheating anyone; that’s solely because of the wide gap between corporate bond rates and expected returns when investing in the stock market— a gap which was particularly wide in the summer of 2020 when this study was competed, but remains nearly as wide now.

As it stands, Moody’s Baa rates are in the 3% range; in the 2000s, they were in the 6% range, and in the 1990s, from 7% – 9%. Although this drop in bond rates is good news for American homebuyers because this marches in tandem with mortgage rates, it makes it far harder for retirees to manage their finances in ways that protect them from the risks that they face in their retirement.

Perhaps interest rates in general, and bond rates specifically, will increase as we leave our current economic challenges, but there’s no certainty, and as long as this gap between bond rates and expected stock market returns remains so substantial, retirees will be challenged to find any sort of safe investment that makes sense for them. Which means that what seems like a great benefit for Americans looking to borrow money — for mortgages, car loans, credit cards — can pit the elderly against the young in a generational “us vs. them” contest.

As always, you’re invited to comment at JaneTheActuary.com!

Follow me on Twitter. Check out my website.

Yes, I’m a nerd, and an actuary to boot. Armed with an M.A. in medieval history and the F.S.A. actuarial credential, with 20 years of experience at a major benefits consulting firm, and having blogged as “Jane the Actuary” since 2013, I enjoy reading and writing about retirement issues, including retirement income adequacy, reform proposals and international comparisons.

Source: Do You Get Your Money’s Worth From Buying An Annuity?

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Critics:

An annuity is a series of payments made at equal intervals.[1] Examples of annuities are regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments and pension payments. Annuities can be classified by the frequency of payment dates. The payments (deposits) may be made weekly, monthly, quarterly, yearly, or at any other regular interval of time. Annuities may be calculated by mathematical functions known as “annuity functions”.

An annuity which provides for payments for the remainder of a person’s lifetime is a life annuity.

Variability of payments

  • Fixed annuities – These are annuities with fixed payments. If provided by an insurance company, the company guarantees a fixed return on the initial investment. Fixed annuities are not regulated by the Securities and Exchange Commission.
  • Variable annuities – Registered products that are regulated by the SEC in the United States of America. They allow direct investment into various funds that are specially created for Variable annuities. Typically, the insurance company guarantees a certain death benefit or lifetime withdrawal benefits.
  • Equity-indexed annuities – Annuities with payments linked to an index. Typically, the minimum payment will be 0% and the maximum will be predetermined. The performance of an index determines whether the minimum, the maximum or something in between is credited to the customer.

See also

References

  • Kellison, Stephen G. (1970). The Theory of Interest. Homewood, Illinois: Richard D. Irwin, Inc. p. 45
  • Lasher, William (2008). Practical financial management. Mason, Ohio: Thomson South-Western. p. 230. ISBN 0-324-42262-8..
  1. Jordan, Bradford D.; Ross, Stephen David; Westerfield, Randolph (2000). Fundamentals of corporate finance. Boston: Irwin/McGraw-Hill. p. 175. ISBN 0-07-231289-0.
  • Samuel A. Broverman (2010). Mathematics of Investment and Credit, 5th Edition. ACTEX Academic Series. ACTEX Publications. ISBN 978-1-56698-767-7.
  • Stephen Kellison (2008). Theory of Interest, 3rd Edition. McGraw-Hill/Irwin. ISBN 978-0-07-338244-9.

How to Buy Happiness (Responsibly)

The great reopening offers ample opportunity to lift your spirits if you have some money to spare. Here’s how to do it right. Bring on the nationwide spending binge. Half of all people over 18 in the United States are now fully vaccinated. Tens of millions of them are emerging, blinking in the springtime sunshine, and heading straight for restaurants, movie theaters or a flight to somewhere — or anywhere, really.

It is true that millions of people are still trying to get their hotel jobs or theater gigs back. But collectively, Americans are holding on to a larger share of their income than they have in decades.

That leftover money is a kind of kindling. We may look back on this moment as a once-in-a-lifetime period, when many millions of Americans felt that money was burning actual holes in their pockets.

It is an unfamiliar sensation for many of us. “There is a puritanical streak that runs through all aspects of money in America,” said Ramit Sethi, an author who focuses more attention than most on spending well in addition to saving intelligently. “And most of the conversations start with no.”

But we should consider the strong possibility that saying yes right now could bring a true improvement in happiness. So this column — and another one next week — will be about maximizing it through strategic spending.

The conversation begins with “Yes, and … — with perhaps with a side order of “Yes, but …” To help us all get there, I called on some of my most thoughtful contacts among people who talk, think or write about money. And I made sure to ask them this: What are you doing yourself?

Brian Thompson, a financial planner in Chicago, was prepared for this moment. He generally has two questions at the ready: What do you want to spend your money on? And why are you really spending it?

There are no wrong answers, Mr. Thompson said. “I always come from the approach that there is no judgment, and I try to come with empathy to help people clarify what the money means for them,” he said.

Paradoxically, the first thing to think about here is saving. Paulette Perhach said it better than I could here in her classic 2016 article exhorting everyone to build a freedom fund. (“Freedom” is my word — she uses an F-bomb, if you’re trying to find it via internet search.)

Savings aren’t just for when your car breaks down or you get sick. Having a freedom fund means you are not beholden to someone else — whether that’s a significant other who is treating you like garbage or a boss who is harassing you or otherwise making you miserable.

“This is about power, and power comes in a lot of different forms,” Ms. Perhach, an essayist and a writing coach, told me this week. “It comes from options. From looking at life and making sure one person does not have so much say over the outcome of your finances that you would have to tolerate behavior that goes against your own self-respect.”

Every few years, I reopen my well-worn copy of “Happy Money: The Science of Happier Spending,” a book from 2013 by Elizabeth Dunn and Michael Norton, for a review session. This time, I called Professor Dunn, a member of the psychology department at the University of British Columbia, to help me along.

A first principle of research in this area has generally been that buying an experience brings more satisfaction — and less buyer’s remorse — than buying stuff. In the years since the book was published, Professor Dunn said, this conclusion has largely held up for people with more money, though it can be less true for people farther down the socioeconomic ladder.

So what types of experiences should we be making a priority?

After a year marked by loss, I adopted a narrow approach focused on things that I might not have a chance to do again. I will never attend another John Prine concert or again eat food touched by the hands of Floyd Cardoz, both of whom were among the many we lost to the pandemic.

But there are things I can do instead that aren’t likely to recur, like attending my friend’s swearing-in ceremony as police chief in another state. And I’m prioritizing a trip with my daughters to the Great Barrier Reef (using approximately 9,000 years of frequent-flier mile savings) before it is no more.

Professor Dunn endorsed my plans, and the need to get out into the world again. “The only experiences I’ve been having are Netflix and DoorDash,” she said.

Professor Dunn lost her mother, Winifred Warren, to lung cancer in September and has a plan to celebrate her someplace other than a Zoom chat. Soon, she’ll get over the border to California and dine with her aunt and her mother’s best friend at the famed French Laundry — where Ms. Warren had been hoping to go herself, once she got better.

But just because so much fun seems available again all at once, it doesn’t mean you should pursue it all simultaneously. People who have reasonably high incomes — but the proclivity to go the immediate gratification route — can rack up quite a bit of debt,” Professor Dunn said.

Indeed, credit card issuers are licking their lips in anticipation of whatever orgy of spending ensues this year. Ms. Perhach found herself impulsively buying concert tickets recently and was inspired to pen a warning about the behavioral science of overspending for Vox.

The gratification doesn’t necessarily last long — and can even be wiped out by the dread of any new debt, she said. “I’ve done trips with an undercurrent of ‘I’m about to be in trouble,’” she told me this week. “And that’s not a great recipe for fun.”

If you are among the many lucky millions who are better off financially than you were at the beginning of 2020, consider how good it might feel to give something away.

Minnie Lau has spent much of the past year helping her accounting clients in the San Francisco Bay Area spend and save the windfalls from initial public offerings and other stock winnings in as tax savvy a manner as possible. Both they and she have done quite well. They did nothing wrong and have nothing to apologize for.

But amid so much death, fear and suffering, coming out ahead still leads to conflicted feelings. “My ill-gotten gains are going to the food bank,” Ms. Lau said of the money she has made investing this year. “People should not have to line up for food. Didn’t California just announce that it had a surplus? What kind of crazy world is this?”

Everyone else I talked to this week felt a similar urge. Professor Dunn recalled being overwhelmed with gratitude after receiving her coronavirus jab. Now, she’s a monthly donor to UNICEF’s vaccine equity initiative. Ms. Perhach is supporting VONA, which helps writers of color, while Mr. Sethi busted into his emergency fund to donate to Feeding America and match his readers’ donations.

Mr. Thompson, the financial planner, has given money to help people who are both Black and transgender — a segment of the population that he believes needs more help than most. And he’s redoubling his efforts at work to reduce the racial wealth gap.

“If I can help more people build more wealth to pass down, it is a way of serving my purpose and helping people in the process,” he said. “And I think that takes more than just giving. It means systemic change.”

Ron Lieber

 

 

Source: https://www.nytimes.com/

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Critics:

Money management is the process of expense tracking, investing, budgeting, banking and evaluating taxes of one’s money which is also called investment management. Money management is a strategic technique to make money yield the highest interest-output value for any amount spent. Spending money to satisfy cravings (regardless of whether they can justifiably be included in a budget) is a natural human phenomenon.

The idea of money management techniques has been developed to reduce the amount that individuals, firms, and institutions spend on items that add no significant value to their living standards, long-term portfolios, and assets. Warren Buffett, in one of his documentaries, admonished prospective investors to embrace his highly esteemed “frugality” ideology. This involves making every financial transaction worth the expense:

1. avoid any expense that appeals to vanity or snobbery
2. always go for the most cost-effective alternative (establishing small quality-variance benchmarks, if any)
3. favor expenditures on interest-bearing items over all others
4. establish the expected benefits of every desired expenditure using the canon of plus/minus/nil to the standard of living value system.

References

Micro Investing’s Magic Lies in Helping Your Favorite College Grad (or You) Gain Confidence

Micro Investing's Magic Lies in Helping Your Favorite College Grad (or You) Gain Confidence

When you first graduate from college, you might not feel comfortable dumping lots of money into unknown stocks or ETFs. Even if you’re not a new college graduate, you may want to consider a different approach when you don’t have a lot of extra cash lying around. Why not try micro investing?

Micro investing takes the daunting feeling away from investing, and therein lies its true magic. Let’s take a look at what it can do for you and how it can find a place in your portfolio.

What is Micro Investing?

Put simply, when you micro invest, you invest using small amounts of money. In other words, you pony up money to buy fractional shares of stocks or ETFs instead of full shares.

As of today, a single share of Amazon (NASDAQ: AMZN) costs $3,383.87. You may know you can’t even afford one share of Amazon, much less two shares!

Enter micro investing apps. You can buy Amazon for a much smaller amount — even really small amounts, like $10. You can also buy multiple securities to aim for diversification (always a great thing!) and lower your risk in the long run.

Why Micro Invest?

Small amounts, compounded over time, can make an impact. Compound interest makes your money grow faster. You can calculate interest on accumulated interest as well as on your original principal. Compounding can create a snowball effect: The original investments plus the income earned from those investments both grow.

Let’s say you save $1 per day. Your $1 per day adds up to $365 a year. Instead of spending that $365, you could stick it into a micro investing app at 5% interest per year. Your small amount would grow to almost $466 by the end of five years. At the end of 30 years, the amount you originally invested would grow to $1,578.

If you micro invested even more, your investment could grow even faster.

How Does Micro Investing Work?

Have you ever heard of the app, Acorns, which invests small change for you? That’s micro investing. A micro investing app rounds up your purchases to the dollar or makes automatic transfers for you. Think of micro investing as “spare change investing” — many apps round up your transactions from a linked bank account and invest the difference.

In other words, let’s say you go to Chipotle and order a mega burrito with those delicious limey chips. You spend $10.34. The app would take your remaining $0.66 and invest it.

You don’t have to invest a lot to get started, either. Stash allows you to get started with just a penny. Interested in micro investing for your favorite college grad or yourself? Take a look at the following steps to get started with micro investing.

Step 1: Choose a micro investing app.

What’s often the hardest part? Choosing the right investment app. Often the most important question comes down to this: Do you want to get your hands directly on your investments or do you want an app to pilot and direct your money for you?

Quick overview: Acorns and Betterment put a portfolio together for you based on your preferences. Stash and Robinhood allow you to choose the direction you want your money to take by allowing you to choose your own investments.

You may want to choose an app that lets you steer the ship yourself, particularly if you want to take a DIY approach to your investments at some point.

Step 2: Input your information.

Once you’ve chosen a micro investing app, it’s time to let the robo-advisor do its job. You input information to your micro investing app that helps it “understand” how to put together the best portfolio for you. You input your age, income, goals and risk tolerance and it’ll allocate your investment dollars accordingly.

Your money will go into a portfolio of exchange-traded funds (ETFs) based on the level of risk you choose. Based on the information you supply, you could end up thoroughly diversified with shares in many (sometimes hundreds) of different companies.

Step 3: Set up recurring investments.

You can set up investments to go into your investment account on a recurring basis for just a few dollars per month. You can also choose to make one-time deposits. Your robo-advisor will automatically rebalance your account if you have too much invested in a particular asset class. Setting up recurring investing means that you’ll invest without thinking about it. (You’ll never miss pennies!)

Step 4: Don’t quit there.

You can easily track your earnings when you micro invest because those apps are seriously slick. You can even project your earnings through the app’s earnings calculator so you don’t have to wonder how much you’ll have later on.

However, this is important: Remember that micro investing may not make you rich (if, in fact that is your goal). You probably can’t save enough for retirement through micro-investing, either. You probably also won’t net enough to save for larger goals, such as a down payment on a home. You may generate a few hundred dollars a year, which might allow you to save enough to fund an emergency fund, but that’s about it.

The real win involves building the confidence needed to invest. Consider other ways you can invest, such as investing money in a 401(k) or a Roth IRA after you get comfortable with micro investing.

Micro Investing Could Work Wonders

Micro investing can work wonders by breaking down barriers to investing. One of the biggest complaints from young students just starting out is that it’s too expensive to invest.

Micro investing can give you or a new grad the confidence to try bigger things, starting with baby steps. If micro investing is what it takes for a new grad to get more comfortable with smaller investments (then grow investments later), then it’s a great option for young investors just getting started.

By:

Source: Micro Investing’s Magic Lies in Helping Your Favorite College Grad (or You) Gain Confidence

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Critics:

Microfinance is a category of financial services targeting individuals and small businesses who lack access to conventional banking and related services. Microfinance includes microcredit, the provision of small loans to poor clients; savings and checking accounts; microinsurance; and payment systems, among other services. Microfinance services are designed to reach excluded customers, usually poorer population segments, possibly socially marginalized, or geographically more isolated, and to help them become self-sufficient.[2][3]

Microfinance initially had a limited definition: the provision of microloans to poor entrepreneurs and small businesses lacking access to credit.[4] The two main mechanisms for the delivery of financial services to such clients were: (1) relationship-based banking for individual entrepreneurs and small businesses; and (2) group-based models, where several entrepreneurs come together to apply for loans and other services as a group.

Over time, microfinance has emerged as a larger movement whose object is: “a world in which as everyone, especially the poor and socially marginalized people and households have access to a wide range of affordable, high quality financial products and services, including not just credit but also savings, insurance, payment services, and fund transfers.

Proponents of microfinance often claim that such access will help poor people out of poverty, including participants in the Microcredit Summit Campaign. For many, microfinance is a way to promote economic development, employment and growth through the support of micro-entrepreneurs and small businesses; for others it is a way for the poor to manage their finances more effectively and take advantage of economic opportunities while managing the risks. Critics often point to some of the ills of micro-credit that can create indebtedness. Many studies have tried to assess its impacts.

New research in the area of microfinance call for better understanding of the microfinance ecosystem so that the microfinance institutions and other facilitators can formulate sustainable strategies that will help create social benefits through better service delivery to the low-income population.

Due to the unbalanced emphasis on credit at the expense of microsavings, as well as a desire to link Western investors to the sector, peer-to-peer platforms have developed to expand the availability of microcredit through individual lenders in the developed world. New platforms that connect lenders to micro-entrepreneurs are emerging on the Web (peer-to-peer sponsors), for example MYC4, Kiva, Zidisha, myELEN, Opportunity International and the Microloan Foundation.

Another Web-based microlender United Prosperity uses a variation on the usual microlending model; with United Prosperity the micro-lender provides a guarantee to a local bank which then lends back double that amount to the micro-entrepreneur. In 2009, the US-based nonprofit Zidisha became the first peer-to-peer microlending platform to link lenders and borrowers directly across international borders without local intermediaries.

See also

Is Patient Financing Right for Your Health Practice?

In these times of post-pandemic financial uncertainty, additional return on investment for medical providers is more welcome than ever. Patient financing — which for the purposes of this article means partnering with an external lender to provide service and procedure payments — can produce not just steady income for a practice, but help ensure that patients won’t have to put off procedures or, worse yet, abandon them altogether.

For example, Toronto Plastic Surgeons provides this facility to its patients through Medicard Patient Financing. There are also veterinary financing services for pets available through Medicard Patient Financing. What are some reasons practitioners might have employed in deciding upon this option?

No More Delays

There are, unfortunately, economic disparities when it comes to accessing healthcare services. Too often, the high-income and privileged have more access to healthcare resources than the medium- and low-income populations. Patient financing can help in reducing this imbalance, because the simple and daunting truth is that many medical problems don’t come announced, and it’s often impossible to plan for their associated expenses. With financing, patients don’t need to wait to get their accounts in order before opting for procedures — the result is, ideally, prompt and less stressful treatment.

Related: Fintech fuelling growth in Healthcare Financial Industry

Increased Patient Satisfaction

Since clients can often better manage their expenses via patient financing, they tend to be more satisfied on the whole. In part this is because they are not stressed and burdened with sudden financial decisions associated with urgent medical procedures. Better yet, they are more likely to stay loyal to a practice if they don’t have to worry as much. Compared to other practices that don’t offer this option, they are more likely to choose the former, which can mean increased business through word of mouth.

Reduced Collection Costs

When you partner with a patient financer, you receive payments on time. It also means that your team won’t spend needless hours and energy trying to collect payments.

Steady Cash Flow and Less Bad Debt

In setting up a conventional payment plan for a patient, your team is taking the responsibility of keeping tabs on payments and collecting them on time. It’s essentially extending a loan to a patient, typically without any interest. However, expenses like bills, payroll and lease/rent go on as usual. This can lead to tied up in , which will easily and quickly impact a budget. But when you opt for association with a patient financing company, the latter bears the cost of collections, including giving you the option of getting payment upfront.

Related: Healthcare is in Turmoil, But Technology Can Save Businesses Billions

Better Marketing

Association with a financing company with its own marketing arm can help promote a business — making your clinic stand out in comparison to competitors.

Which to Choose?

When it comes to financing models, three predominate. In the first, Self-Funding, you as the healthcare provider are responsible for receivables. From creating a payment schedule to collecting funds to following up with the patient, your team carries out all the tasks. In the Recourse Lending model, you work with a patient financier/lender, which will approve a patient’s loan after the business/practice passes qualifying criteria.

If the patient doesn’t pay, the lending/financing company will recover the losses from you. Among the drawbacks here is that the practice will have to bear the losses and lender’s fees. Lastly, there is the Non-Recourse Lending model. Similar to the second, you work with a lending company. Key differences are that it is the patient who has to pass the underwriting criteria (if the lender doesn’t approve the patient, no funding is provided by them), and that losses are borne by the lender. One disadvantage of this method is that the lenders charge interest from patients; when rates are high, patients might not be interested. Also, patients with a weak credit history might be rejected during the underwriting evaluation.

By : Chris Porteous / Entrepreneur Leadership Network Contributor – High Performance Growth Marketer

Source: Is Patient Financing Right for Your Health Practice?

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Critics:

Publicly funded healthcare is a form of health care financing designed to meet the cost of all or most healthcare needs from a publicly managed fund. Usually this is under some form of democratic accountability, the right of access to which are set down in rules applying to the whole population contributing to the fund or receiving benefits from it.

The fund may be a not-for-profit trust that pays out for healthcare according to common rules established by the members or by some other democratic form. In some countries, the fund is controlled directly by the government or by an agency of the government for the benefit of the entire population. That distinguishes it from other forms of private medical insurance, the rights of access to which are subject to contractual obligations between an insured person (or their sponsor) and an insurance company, which seeks to make a profit by managing the flow of funds between funders and providers of health care services.

When taxation is the primary means of financing health care and sometimes with compulsory insurance, all eligible people receive the same level of cover regardless of their financial circumstances or risk factors.

Most developed countries have partially or fully publicly funded health systems. Most western industrial countries have a system of social insurance based on the principle of social solidarity that covers eligible people from bearing the direct burden of most health care expenditure, funded by taxation during their working life.

Among countries with significant public funding of healthcare there are many different approaches to the funding and provision of medical services. Systems may be funded from general government revenues (as in Canada, United Kingdom, Brazil and India) or through a government social security system (as in Australia, France, Belgium, Japan and Germany) with a separate budget and hypothecated taxes or contributions.

The proportion of the cost of care covered also differs: in Canada, all hospital care is paid for by the government, while in Japan, patients must pay 10 to 30% of the cost of a hospital stay. Services provided by public systems vary. For example, the Belgian government pays the bulk of the fees for dental and eye care, while the Australian government covers eye care but not dental care.

Publicly funded medicine may be administered and provided by the government, as in the Nordic countries, Portugal, Spain, and Italy; in some systems, though, medicine is publicly funded but most hospital providers are private entities, as in Canada. The organization providing public health insurance is not necessarily a public administration, and its budget may be isolated from the main state budget. Some systems do not provide universal healthcare or restrict coverage to public health facilities. Some countries, such as Germany, have multiple public insurance organizations linked by a common legal framework. Some, such as the Netherlands and Switzerland, allow private for-profit insurers to participate.

See also

Here’s What Could Happen When $300 Unemployment Expires, According To Goldman Sachs


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Amid reports of labor shortages and fears of economic overheating thanks to what some view as excessive government stimulus spending, a total of 26 states are now planning to end the $300 federal unemployment supplement in order to spur hiring—here’s what analysts from Goldman Sachs expect to happen once payments stop.

Key Facts

Goldman’s analysts point out that since 25 of the states ending the benefit early only account for 29% of pandemic job losses, it’s likely that the pressures on the labor market—worker shortages and a depressed labor force participation rate—will continue until the benefits expire in every state at the beginning of September.

The analysts note that it’s too soon to say how the early end of benefits will affect official employment statistics—that insight will likely be contained in the July jobs report the Labor Department will publish in August.

That said, claims for regular state unemployment insurance benefits have fallen faster in states that have announced they will end the supplement early—the analysts say this is a “hint” that hiring will pick up once the benefits are phased out, but note that other data like the volume of job postings don’t yet support that conclusion.

The analysts say their “best guess” is that the expiring benefits will “provide a significant tailwind to hiring in the coming months,” spurring growth of more than 150,000 jobs in July and more than 400,000 jobs in September, though they note that the prediction is still uncertain.

Based on previous academic studies, the analysts estimate that a typical worker receiving regular state benefits will see those benefits drop by 50% once the $300 supplement expires in their state, and the duration of their unemployment would fall roughly 25%.

Crucial Quote

“The temporary boost in unemployment benefits . . . helped people who lost their jobs through no fault of their own and are still maybe in the process of getting vaccinated, but it’s going to expire in 90 days,” President Biden said during prepared remarks after the release of the May jobs report last week. “That makes sense.”

Big Number

$12 billion. That’s how much local economies in the 24 red states that had announced an early termination of the $300 federal supplement as of June 2 are expected to lose as a result of ending the benefit early, according to a report from Congress’ Joint Economic Committee.

Surprising Fact

On Thursday, Louisiana became the first state with a Democratic governor to announce the early expiration of the $300 supplement. The other 25 states have Republican governors.

Key Background

An emergency federal unemployment insurance supplement was first authorized in the amount of $600 per week as part of the CARES Act last year. A new supplement of $300 was authorized by executive order under President Trump after the first supplement lapsed. The $300 supplement was extended once by Congress as part of a stimulus bill last December, and again by Congress as part of President Biden’s $1.9 trillion American Rescue Plan.

Further Reading

Louisiana’s John Bel Edwards Becoming First Democratic Governor To Cut $300-A-Week Federal Unemployment Benefits (Forbes)

Biden: It ‘Makes Sense’ That $300 Unemployment Will End In September (Forbes)

California And Florida Are Sending Out More Stimulus Checks. Could Your State Be Next? (Forbes)

IRS Releases Child Tax Credit Payment Dates—Here’s When Families Can Expect Relief (Forbes)

Source: Here’s What Could Happen When $300 Unemployment Expires, According To Goldman Sachs

I’m a breaking news reporter for Forbes focusing on economic policy and capital markets. I completed my master’s degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance.

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Critics:

Several coronavirus relief bills have been considered by the federal government of the United States:

The American Rescue Plan Act of 2021, also called the COVID-19 Stimulus Package or American Rescue Plan, is a $1.9 trillion economic stimulus bill passed by the 117th United States Congress and signed into law by President Joe Biden on March 11, 2021, to speed up the United States’ recovery from the economic and health effects of the COVID-19 pandemic and the ongoing recession.First proposed on January 14, 2021, the package builds upon many of the measures in the CARES Act from March 2020 and in the Consolidated Appropriations Act, 2021, from December.

Beginning on February 2, 2021, Democrats in the United States Senate started to open debates on a budget resolution that would allow them to pass the stimulus package without support from Republicans through the process of reconciliation. The House of Representatives voted 218–212 to approve its version of the budget resolution.

A vote-a-rama session started two days later after the resolution was approved, and the Senate introduced amendments in the relief package. The day after, Vice President Kamala Harris cast her first tie-breaking vote as vice president in order to give the Senate’s approval to start the reconciliation process, with the House following suit by voting 219–209 to agree to the Senate version of the resolution.

Prior to the American Rescue Plan, the CARES Act from March and in the Consolidated Appropriations Act, 2021, from December were both signed into law by then-president Donald Trump. Trump previously expressed support for a direct payments of $2,000 along with Joe Biden and the Democrats. Even though Trump called for Congress to pass a bill increasing the direct payments from $600 to $2,000, then-Senate Majority Leader Mitch McConnell blocked the bill.

Additionally, the House voted on the HEROES Act on May 15, 2020, which would operate as a $3 trillion relief package, but it wasn’t considered by the Senate as Republicans said that it would be “dead on arrival”.Prior to the Georgia Senate runoffs, Biden said that the direct payments of $2,000 would be passed only if Democratic candidates Jon Ossoff and Raphael Warnock won; the promise of comprehensive Covid-19 relief legislation was reported as a factor in their eventual victories.On January 14, prior to being inaugurated as president, Biden announced the $1.9 trillion stimulus package.

See also

How Much Money Is ‘Enough’? Try This Experiment to Get an Exact Number to Aim For

a wad of money secured with a blue paper clip on a pink background

Have you ever read those articles where some extremely well-off family details their budget and then bemoans that they’re barely getting by?

It’s ridiculous that anyone could complain about raking in $350,000 a year, and it’s clear many of these folks are wildly out of touch with how privileged they are. But while these families may be extreme (and annoying), they aren’t alone. It’s not just the wealthy who fall into the trap of earning more only to spend more and feel just as dissatisfied.

How do you get off this treadmill?

The answer is not to compare yourself with others (Jeff Bezos will always be there to make you feel bad), or to blindly try to keep making more (there will always be some shiny, new thing to covet). The answer is to take a hard look at your own financial realities and aspirations and come up with a goal number. How much money is enough for you?


The Science of Money and Happiness

That number will be different for everyone, depending on your circumstances and values, but science can give us some sense of how much money might be “enough.” Research shows that up to a certain threshold (studies consistently put it at about $75,000 dollars a year, give or take a bit depending on cost of living) money has a big impact on both day-to-day happiness and life satisfaction.

If you’re below this level, making more will likely make you significantly happier. But beyond that point, each additional dollar adds a little less to your life. There is a level of wealth way before Bill Gates status that trading more effort and time for more money ceases to make sense (even Bill Gates says so).


Name Your Number

One way to calculate that point is to figure out how much money you’d need to make decisions based entirely on enjoyment and impact, without pressure to earn. This is the goal of the catchily named FIRE movement (for financial independence, retire early). Its boosters generally say that 25X your expected annual expenses is enough. So if $50,000 a year is enough for you to live comfortably, you need to save $1.25 million.

There are other more elaborate calculators that can give you a sense of what financial independence means for you. But perhaps the best way to get a feeling for your goal number isn’t math but a simple thought experiment from writer Brad Stollery:

Suppose you’re one of five people who have been selected by a mysterious philanthropist to participate in a contest. The five of you all have comparable debt-levels and costs-of-living, as well as similar, middle-class financial situations. You’re all roughly the same age, equally healthy, have the same number of children, and you all live moderately low-risk lifestyles. Privately, and one by one, a representative of the donor approaches each of you with a blank check and a pen, and poses the following question:

How much money would you have to be paid, right here and now, to retire today and never receive another dollar of income (from any source) for the rest of your life?

The catch this time is that whoever among the five players writes the lowest amount on the check will be paid that sum. The other four players will get nothing.

This thought experiment forces you to cut away the natural impulse to aim ever upward (if you do that you’ll bid too high and get nothing). That result is however much you ask for is your number, the amount you’d need to live comfortably and pursue your goals if status and lifestyle inflation weren’t a factor.

Your answer might be a little bit higher or lower than mine or your neighbor’s. That’s fine. It’s not important everyone agree on a number. The important thing is that we each reflect enough to have one.

Because the alternative is being one of those people confessing online how you burn through a healthy six-figure salary and still feel stressed and dissatisfied. Your expenses and desires can be infinite. If you don’t want to chase them miserably forever, you need to put a cap on your financial ambitions yourself.

By: Jessica Stillman

This post originally appeared on Inc. and was published February 5, 2020. This article is republished here with permission.

Did you enjoy this story? Get Inc.’s daily newsletter

Source: Pocket

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References

How To Think Though Hard Financial Choices And Make Better Money Decisions

https://i1.wp.com/onlinemarketingscoops.com/wp-content/uploads/2021/05/shutterstock_710867164-648x364-c-default.jpg?resize=924%2C519&ssl=1

When you first learn to manage your money, you will likely feel like you are drowning in a sea of strict rules to follow: Pay off your debt, create a budget, live within your means, save more, start investing… the list goes on.

The nice thing about being in this stage, however, is that it’s pretty easy to find objectively correct answers to the questions you likely have at this point.

There’s one specific answer if you ask “what is a Roth IRA and what are the income limits if I want to contribute.” There’s a systematic way to figure out the answers to questions like, “how can I save up X amount of dollars in Y amount of time?”

But eventually, you will find an inflection point. It lies just beyond basic financial stability; it’s everything that comes after you develop sufficient financial resources.

At this point, you’ll face a new challenge: feeling confident about your decisions when you have multiple choices you could make with your money, and none of them are objectively better than another.

The Challenges Of Managing Your Money (Once You Have More To Manage)

Before you reach a certain level of income, you don’t really have a lot of agency over how you use your money; it has to go to bills, expenses, basic needs and savings. You don’t have a lot of options.

But at some point, your personal finances can no longer be managed on a spreadsheet alone. You’ll begin to have more freedom and flexibility, and therefore more choice.

When there are multiple avenues you can afford to take, determining which of your multiple choices starts getting hard to do.

One way to make a hard decision is to evaluate the objective facts around the options. This is where numbers do matter and can sometimes point us to very clear answers (like if you’re wondering if you should pay off debt faster or invest more; the answer could be easy to determine just by looking at the interest rate of your debt versus your expected investment return).

Financial choices can start feeling hard — or even impossible — once there is no objective measure of which option is better or worse. If the numbers tell you that either option can work for you, you can’t rely solely on that objective measurement to determine the best course of action.

It’s at this point where the conversation has to shift to subjective values.

The Role Of Your Values, Priorities, And Preferences In Financial Planning

In her TED Talk, Philosopher Ruth Chang says this is what truly makes a hard decision: when we have two options, we seek ways to compare them and make a judgement about which is better.

Comparing options is easy to do when you can quantify the options with real numbers, because you have clear outcomes: one option will be greater than, lesser than, or equal to the other.

But not all choices — even when they are financial choices or decisions about what to do with your money — can be quantified.

As Chang says, “the world of value is different from the world of science. The stuff of the one world can be quantified by real numbers. The stuff of the other world can’t.”

It might seem strange to say there are aspects of your finances that can’t be quantified by real numbers — but that’s exactly what happens when you get to a point where your income sufficiently covers your needs, many of your wants, and you still have money left over each month.

You then get to choose what to do with the money you have available.

Chang again explains that this is exactly what makes a decision hard: you have a number of alternatives that are not greater than, lesser than, or equal to each other.

There’s no set answer for the things you “should” do, or “ought” to do. That’s open-ended. The only real answer is what you decide is important to you, and of the highest value.

How You Can Improve The Quality Of Your Financial Decisions

In her TED Talk, Chang provides some advice for making better decisions when we face two options that, objectively, are pretty equal to each other and therefore there is no clear-cut “best” choice:

“When we face hard choices, we shouldn’t beat our head against a wall trying to figure out which alternative is better. There is no best alternative. Instead of looking for reasons out there, we should be looking for reasons in here: Who am I to be?”

Put another way, you can find the right answer to a hard choice if you consider which option best aligns with the person you want to be, or the values you want to live by.

That, at least, is the very philosophical answer to dealing with hard choices, which might not feel practice enough (especially when this is your money we’re talking about).

Using our values and ideal life vision to make financial decisions does not mean we should just completely throw all the numbers out the window and stop caring about financial facts.

We still need to consider your balance sheet, investment strategy, net worth, and a million other technical aspects that go into making a sound financial plan.

We need to look at the convergence of what we can quantify, like the numbers, and what we can’t, like your values and vision for your life.

This is how you can start making much higher-quality financial decisions: when you build a strategy that accounts for your financial reality and reasonable future assumptions and then factor your values, goals, and priorities into that framework.

That allows you to stay grounded in what the numbers are telling you… but it also points to the secret to making final decisions that bring you the most happiness and fulfillment.

Once you understand the objective landscape of your financial life and identify the choices you have available to you, the “best” course of action for you is the one that most closely reflects the person you want to be.

Eric Roberge is a CFP® and the founder of Beyond Your Hammock, a fee-only financial planning firm based in Boston. His goal is to help motivated professionals in their

Source: How To Think Though Hard Financial Choices And Make Better Money Decisions

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References

“The Future of Jobs Report 2018” (PDF).

5 Pieces of Money Advice No One Ever Wants to Hear From Me

You know how adults always told you to “eat your veggies” and greens when you were a kid? Well, that nagging advice doesn’t necessarily stop in adulthood. As a financial planner, I’m constantly giving people good advice they don’t want.

I know no one wants to hear this kind of money advice. But those who do listen — and more importantly, implement these ideas — tend to have better control over their cash flow, higher savings rates, and more financial power.

You might not like it, but much like eating broccoli and kale, taking it in is often for your own good.

1. Don’t buy so much house

Buying a home is rarely a data-driven decision. It’s an emotional one, and for good reason. For many people, homeownership represents stability, security, and even status.

These are not unimportant things, but too many people use their emotions as excuses to throw financial reality out the window when it comes to house hunting.

Set a budget and stick to it. We often recommend keeping your total annual housing costs to no more than 20% of your gross annual household income.

This helps ensure you retain flexibility in other areas of your cash flow so that you can own your home and keep pursuing other important goals or have money available for your other priorities.

2. And don’t assume your house is a good investment

I often caution people against thinking of their home as an investment. Again, that doesn’t mean buying is a bad idea or your house isn’t worth as much as you think it is. But an investment should provide a return.

A single-family home that serves as your primary residence (and does not provide rental income) may be an excellent utility. It is not, however, what I would consider a good investment.

Home values do tend to rise over time, but the cost of ownership, maintenance, and upkeep often erode most of the “gains” you might see when just looking at the transaction of buying and then selling your home on paper.

A reasonable, real return on single-family homes runs about 2%. That’s not nothing, but it’s also not something you can assume will fund your full retirement, either (especially when you have to live somewhere, retired or not, and most people put the equity from a home sale into their next purchase).

3. Save more than you think you need to

It’s really important to me that I help my clients strike a balance between enjoying their lives in the present while also building assets and future financial security. This would be much easier to do if we had a crystal ball and could accurately predict what life would be like in 10, 20, even 30 years.

We’d know your budget. We’d know what kinds of emergencies you’d have to deal with, and prepare accordingly. And we’d understand what your life would look like (including how long it would be).

With that clarity, it would be possible to say, “you need $X. Save just that and feel free to spend the rest.” That is, obviously, not how life works.

The solution? Save more than you think you need to, because then you give yourself a margin of safety. By saving more than you necessarily must save to “be OK,” you can better:

  • Handle emergencies
  • Take advantage of opportunities when they come up (either to spend on an unexpected trip, for example, or to use money on an investment you feel passionate about)
  • Incorporate new goals into your planning over time

Saving more that you think you need today also buys you more choice and freedom in the future. The usual guideline I give to clients to help them achieve this is to save 25% of annual gross income.

4. Have a backup plan

It might sound like a doom-and-gloom approach to finances, but I preach about always having a backup plan — or those margins of safety, or wiggle room, or contingencies.

No one wants to imagine a worst-case scenario, but if something actually went sideways in your financial life, you’ll be glad you had multiple levels of safety net built into your overall plan.

You can do this in a number of ways, including some we’ve already talked about, like saving more than you think you need to save.

Other ways of building in backups is by maintaining an emergency fund, using conservative assumptions around income, and overestimating your expenses when you do any kind of long-term financial projection, and not counting on any kind of windfall (from bonuses and commissions to inheritances) to make your plan work.

5. Stop trying to time the market

It is so tempting to think we can successfully time the market. Why? Because drops and spikes in the stock market look stupidly obvious with hindsight.

It’s very easy to look back at something like 2008 (or maybe even the spring of 2020 at this point) and feel like you know when the best times to buy and sell would have been… because they already happened. 

Guessing what comes next without the benefit of knowing how things played out is not the same thing. Data shows us that even professionals fail to time the market repeatedly. You may get lucky once, but repeating that performance over and over again for the next few decades is virtually impossible.

Build a strategic investing plan — and then stick to it, regardless of current events.

It’s probably not as fun and may not be as sexy as bragging about your stock picks on Robinhood, but it works a whole lot better in the long run.

By:

Eric Roberge, CFP, is the founder of Beyond Your Hammock. He helps professionals in their 30s do more with their money.

Source: 5 Pieces of Money Advice No One Ever Wants to Hear From Me

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More Contents:

Tips For Moms To Take Better Care of Their Money

Tips for moms to take better care of their money

Mother’s month is approaching and the best way to celebrate them is by empowering them and helping them become more independent and financially successful.

Within personal finance there is a “common core”, to call it somehow, a body of knowledge that we should all have, however what works for one does not necessarily work for another.

There are differences in the management of finances between men and women, between a woman without children and a mother, and between a married mother and a single mother.

Let’s take a look at the data first.

Women live 10 years longer than men, increasingly contribute more resources to households, have more breaks in their working life, due to motherhood, and the responsibility of raising their children without leaving them unprotected in the event of an accident or death premature. So there is an urgent need to have a short, medium and long term financial plan.

According to data from the National Institute of Statistics and Geography (INEGI), 7 out of 10 women over 15 years of age are mothers, of those mothers 4 out of 10 contribute financial resources to the operation of the home, and of those who provide financial resources, 97% He combines his work with the burden of household chores, in addition, according to CONAPO, there are 880 thousand single mothers in Mexico, of which 90% have children under 18 years of age.

So the data and therefore here are some tips to improve your finances.

1. Make a personal budget

The budget is a tool that will help you keep your expenses under control, detect unnecessary leaks, pay attention to priorities and do not forget important items such as savings. It includes all the expenses related to the children such as tuition, school supplies, food, entertainment, medical expenses and even gifts.

2. Do you want successful children?

Educate yourself financially! It is very important so that you can teach that to your children and they grow up with good financial habits, you will avoid future headaches and you will too. Remember that there is no better inheritance than education and good habits.

3. Save for your retirement

You don’t want to be dependent on your children in the future, right? It is important that you regularly allocate within your budget a savings amount for your retirement, feed your AFORE or pension plan. That will give you financial certainty when the time comes.

4. Don’t hide financial problems

Keeping these types of situations secret adds problems instead of solving them, damages family ties and can be counterproductive.

5. Safe, safe?

If the father dies and is the breadwinner of the family, it can cause an economic gap that the mother would have to face, so insure the father, and if you are a single mother, be sure! You do not want to leave your children financially unprotected.

And to close I leave you some ideas of financial gifts for mom.

  • A course in personal finance.
  • An investment account (show him how to use it if he doesn’t know).
  • A few ounces of silver (it will start to rise in price).
  • A Tablet with internet access and teach him how to use it if he does not know. Access to information is a great ally of economic well-being.

Iván Vázquez Islas

By: Iván Vázquez Islas

Source: Tips for moms to take better care of their money

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Being a mom is the best job I have, but let’s be real—sometimes, it’s really hard. So, this episode of The Rachel Cruze Show is all about making your life a little easier. Today, you’ll learn: • 7 ways to save money on your morning routine • Things no one tells you about being a mom • How to give yourself grace as you navigate this crazy thing called “life balance” Sponsors pay the producer of this show, The Lampo Group, LLC, advertising fees for mentioning their services or products during programming.
Advertising fees are not based upon or otherwise tied to any product sale or business transacted between any consumer or sponsor. The following sponsors have paid for the programming you are viewing: — Zander Insurance Resources (everything mentioned in this episode): Zander Insurance: http://bit.ly/2Pd6Nss The Contentment Journal: https://www.rachelcruze.com/store/pro… Ramsey Solutions YouTube Channels (Subscribe Now!) • The Dave Ramsey Show (Highlights): https://www.youtube.com/c/TheDaveRams… • The Dave Ramsey Show (Live): https://www.youtube.com/thedaveramsey… • The Rachel Cruze Show: https://www.youtube.com/user/RachelCr… • The Ken Coleman Show: https://www.youtube.com/c/TheKenColem… • Christy Wright: https://www.youtube.com/c/ChristyWrig… • Anthony ONeal: https://www.youtube.com/user/aonealmi… • EntreLeadership: https://www.youtube.com/c/entreleader..
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The Best Advice For Saving As Much As You Can

There’s one question I hear as a personal finance writer more than any other. It’s not how to game the stock market, or become a billionaire—it’s simply how to make a budget work while still saving enough to retire comfortably.

And of course, it’s simple: Change your habits so you can put money aside for the things that matter to you. But that’s also really, really hard to do.

That’s because understanding personal finance is an uphill battle for many Americans. We’re not taught about the practicalities of money in school, because the truth is many industries profit from our ignorance. While wages have hardly budged in decades, shareholders and CEOs have never been richer. The cost of living in many major cities is prohibitive to just about anyone but the super privileged, or those willing to take on a lot of debt or make enormous sacrifices.

While the stock market soars, just 52% of U.S. adults actually owned stock in 2016, according to Gallup, and the wealthiest 1% of households owned 38% of all stock shares in 2013. The government is actively working against consumers to make it easier for financial institutions to prey on its citizens, and a single medical bill can send a person into debt for the rest of their lives.

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We all want to save more money — but overall, people today are doing less and less of it. Behavioral scientist Wendy De La Rosa studies how everyday people make decisions to improve their financial well-being. What she’s found can help you painlessly make the commitment to save more and spend less. The Way We Work is a TED original video series where leaders and thinkers offer practical wisdom and insight into how we can adapt and thrive amid changing workplace conventions. (Made possible with the support of Dropbox) Visit https://go.ted.com/thewaywework for more!

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All of that is true, and makes it easy to feel cynical and think you’ll never be able to get ahead. But it’s also true that you need money—you have to put dinner on the table tonight and fund your kid’s 529 and maybe take a vacation at some point. So what can the average person actually do? There’s no single formula that will turn everyone into a millionaire, but here are the basics I try to keep in mind:

Know that success isn’t going to happen overnight.

Humans are myopic, and it’s never easy to make any sort of real, lasting change in your habits. You’re going to have a few setbacks, and that’s ok.

Knowledge is power.

Don’t rush into any sort of decision-making, and always consult a second (or third or fourth) source. When it comes to money, people will do pretty much whatever they can to get as much as they can, no matter what that means for you.

Automate anything you can (assuming you have enough to cover the bills and aren’t pulling an overdraft fee).

Especially automate your retirement savings. The less we have to think about, the better (see: the work of Nobel Prize-winning behavioral economist Richard Thaler).

Reward yourself.

Unless you’re superhuman, you likely can’t forego every pleasure on earth to save as much as you possibly can. Nor should you—life is short, enjoy it.

By:Lifehacker / Alicia Adamczyk

Source: The Best Advice for Saving as Much as You Can

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