Forget this year’s stock market angst—and ponder the riches that will accrue to those who can ignore it.

This Week/Jan. 14-20

SET UP TWO-FACTOR AUTHENTICATION. If a thief gets online access to your financial accounts, your life’s savings could be at risk. What to do? If your bank, brokerage firm or fund company offers it, set up two-factor authentication. The firm will text you a special access code every time you log on or when you log on from an unrecognized computer.

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Money Guide

Everything you need to be smarter about money—all in one place.

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Present vs. Future Value

WHEN YOU ESTIMATE HOW MUCH a dollar today will be worth in the future, or how much a series of regular deposits will be worth in the future, you’re calculating a future value. But sometimes, you’ll want to reverse engineer this calculation. Suppose you figure you’ll need $40,000 in four years to make a house down payment. To have that sum, how much would you need to set aside today—or how much would you need to save every month? This is a present value calculation. To do the calculation, you need to estimate your likely rate of return. Let’s say you can earn 3% a year. To have $40,000 in four years, you would need to invest $35,539 today, assuming a 3% annual return. Alternatively, to have $40,000 in four years, you would need to save $783 every month, again assuming a 3% annual return. You can do these calculations with a financial calculator or by playing around with the Present Value Goal Calculator at Dinkytown.net. On occasion, you might hear experts refer to the “time value of money.” The notion: $1 today is worth more than $1 a year from now, because you could earn interest or investment returns during the intervening 12 months. In the above example, you can see that, to have $40,000 in four years, you need less than $40,000 today—illustrating the time value of money. Next: Withdrawals and Compounding Previous: Compounding and Time
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Latest Blog Posts

Perking Up

EACH SPRING, I WATCH a fresh crop of college graduates transition from the world of fulltime academics to the world of fulltime employment. Eager to begin “adulting,” many of them focus on the salaries offered by their employer-of-choice and give little consideration to the various benefits that supplement that salary.
That’s a mistake. As someone who’s been employed fulltime for the last 26 years, I’ve learned the importance of performing a cost-benefit analysis on the perks offered by various employers.

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About That 22%

THE STOCK MARKET HAD A GREAT 2017, gaining more than 20%. But was that kind of gain justified—or should it worry us, especially after the market had already tripled in recent years? I think it’s useful to understand the range of viewpoints, so we’re better prepared for 2018 and beyond. Here are the bull and bear cases:
Bull Case. As measured by the S&P 500 index, the U.S. market gained nearly 22% last year.

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DaveRamsey.com

MY FIRST ENCOUNTER WITH DAVE RAMSEY was in 2010, when I stumbled across a radio broadcast featuring one of his recorded presentations. His style was funny and engaging, and I thought he might be helpful in teaching my kids about money.
I bought each of them his book The Total Money Makeover and gave them reading assignments, which were followed by group discussions in the weeks that followed. Later, I also attended his local Financial Peace University (FPU) classes with daughter Karah.

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Money Guide

Everything you need to be smarter about money—all in one place.

Start Here

Present vs. Future Value

WHEN YOU ESTIMATE HOW MUCH a dollar today will be worth in the future, or how much a series of regular deposits will be worth in the future, you’re calculating a future value. But sometimes, you’ll want to reverse engineer this calculation. Suppose you figure you’ll need $40,000 in four years to make a house down payment. To have that sum, how much would you need to set aside today—or how much would you need to save every month? This is a present value calculation. To do the calculation, you need to estimate your likely rate of return. Let’s say you can earn 3% a year. To have $40,000 in four years, you would need to invest $35,539 today, assuming a 3% annual return. Alternatively, to have $40,000 in four years, you would need to save $783 every month, again assuming a 3% annual return. You can do these calculations with a financial calculator or by playing around with the Present Value Goal Calculator at Dinkytown.net. On occasion, you might hear experts refer to the “time value of money.” The notion: $1 today is worth more than $1 a year from now, because you could earn interest or investment returns during the intervening 12 months. In the above example, you can see that, to have $40,000 in four years, you need less than $40,000 today—illustrating the time value of money. Next: Withdrawals and Compounding Previous: Compounding and Time
Read more »

Our Free Newsletter

Short and Sweet

AS I WAS PREPARING for HumbleDollar’s January 2017 launch, my web developer suggested I add a mission statement to the top of the homepage. That mission statement morphed into a daily insight, which then became a daily Tweet that also found its way onto my Facebook page. Like the family that moves from a three-bedroom house to a one-bedroom apartment, I embraced the challenge of shoehorning financial ideas into 140 characters or less.
Twitter has since expanded the allowable character count to 280,

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Jonathan Clements

About Jonathan

Jonathan Clements is the founder and editor of HumbleDollar. He spent almost two decades at The Wall Street Journal, where he was the personal finance columnist. His latest book: How to Think About Money.

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