Side Hussle Series – Declutter & Make Money

We all have things lying around our homes that we have no use for anymore. Instead of holding on to them, sell them to someone who wants them and who will pay you for them. Look around, if you have unwanted electronics, clothes, furniture, books or CDs and DVDs, there’s a market.

Used Electronics – Those old phones, computers and tablets sitting around your home could make you some quick cash. Companies such as www.Gazelle.com, www.BuyMyTronics.com, www.NextWorth.com and www.uSell.com want your used electronics and will pay you for them. The items don’t even need to work! The process is largely the same for all four companies. Simply go to their websites, get a quote for your unwanted electronics, ship the items and get paid. These companies all provide free shipping and some are associated with national retailers so you can get paid right away.

Clothes, Shoes & Handbags – If you’re like me, you have items in your closet that you haven’t worn in years and chances are, you will never wear them! Consignment shops are a great option for helping you free up some closet space while making a little extra dough. A quick Google search will bring up consignment shops in your area. If you don’t have one nearby, try www.thredup.com. Thredup will mail you a bag for your unwanted items, with a shipping label so you can send your goods to them at no cost to you. They review your items and pay you up to 80% of the resale value of your clothes. Items that they don’t accept are either donated to a charity, recycled or mailed back to you.

If you have luxury clothing, jewelry or bags, you can try selling them through www.therealreal.com. They pay up to 70% of the item’s sale price. Like Thredup, The RealReal will send you a bag to mail in your luxury items. Alternatively, you may schedule a “White Glove Pick-up” with your Luxury Manager.

Furniture & Home Accessories – Like selling used clothing, consignment shops may be a good solution for selling your unwanted furniture and home accessories. These shops generally charge 50% of the sale price, but there are some advantages to selling this way. Namely that the consignment shops do the marketing for you and secondly, you don’t have to worry about strangers coming to your home. If you want to cut out the middleman, try www.Craigslist.com. Craigslist allows you to list items for free and buyers come to you. 100% of the sales proceeds are yours.

CDs and DVDs – Many independent music stores sell used CDs and DVDs. Search online for local shops in your area. Depending on the number of CDs and DVDs you are wanting to sell, they can often sort through your goods and let you know how much they can offer while you wait.

Books – There are plenty of online companies that are willing to buy back your unwanted books and text books. www.BookScouter.com will simplify the work for your by scanning 40 other websites and let you know which one will offer you the best price. For text books, www.amazon.com offers the most competitive buyback prices according to www.ExtraBucks.com.

With a little effort and some “letting go” you can free up some extra space and make a few extra bucks!

Seven Deadly Sins of investing

The single most important risk to a portfolio of investments is a poorly defined or constantly changing strategy. You must have a long-term approach to which you adhere over time regardless of the current favor of the particular strategy. You will need to resist the psychological pressures of investing:

Consider these “seven deadly sins of investing”:

  • //gluttony//– hoarding cash when you should invest or evaluating by only one category when you should look at the big picture;
  • //greed//– looking for big winnings when time and patience pay off;
  • //pride//– not selling your losers or old, familiar holdings when a new idea is better;
  • //lust//– listening to the information barrage and adjusting your portfolio constantly rather than filtering it out to stick with a plan;
  • //envy//– chasing fads or looking at a friend who has “winners”, making investing look more like gambling, when actually you should sell your best and buy trailing but good positions (as in the “dogs of the Dow” technique);
  • //anger//– not forgiving yourself for mistakes and moving on; and
  • //sloth//– changing beliefs to fit your decisions or portfolio rather than applying the lesson that you should review a portfolio intellectually and objectively and decide if you would still buy the holdings today.

You should review your asset allocation at least annually. A stock market rise will leave you over-weighted in stocks, meaning that you should sell out of stocks and buy into bonds and cash to maintain the allocation. If the stock market goes down, you should do the reverse. In fact, you should sell from your better mutual fund managers and buy the managers that have not done as well recently because those excelling and those lagging are both likely to return to the mean over time. Reallocating may seem wrong, especially when bond yields are low and CD rates are low. Nonetheless, history tells us to override the psychological urges, take “profits” from those currently doing well, and re-deploy them with assets that are more likely to provide future returns.

Adhering to a sensible investment strategy is how money is made over time. You may feel that you missed out compared to someone who is all in the right stocks now. However, you will also be glad to miss out when that person’s holdings go down faster than the market and you have non-stock investments that increase in value. Also, when there is a new influx of capital, you need to have a strategy so you can sensibly filter the barrage of information from people wanting to help you handle you finances.

Ignore Most Financial Planning Rules

General rules of thumb for financial planning rarely work. Here are some with my critiques:

“Stocks minus your age should equal 100” – Bad rule – your investment allocation depends on your risk tolerance, the rate of return required to achieve your goals, when you add to investments from annual savings or stock option exercises and when you remove investments to fund lifestyle needs.

“Life insurance must equal six times compensation” – Bad rule – your spouse or partner would use all of your resources, including insurance, to fund lifestyle needs after you die. If you review this and determine a short-fall, that is the amount to be funded by insurance. It could be more or less than the six-fold multiple but ensures that your survivors have adequate resources to be protected.

“Save 10% of income annually” – Decent rule – however, some may need to save even more and others may have no savings need. As with life insurance, the question is whether the return from assets plus annual savings over your life expectancy will fund your lifestyle.  

“You only need 70% of income in retirement” – Bad rule – in fact, many people spend more in the first years of retirement as they travel more while spending far less in their 70’s and 80’s as their needs become fewer. This can be further complicated by estate planning goals of gifting to children or charities.

“Hold six months after-tax income for a rainy day” – Decent rule – however, this depends on liquidity, borrowing ability (e.g., home equity line) and cash flow. If annual income permits substantial savings, such that you could pay for a new roof without affecting lifestyle, your “rainy day” reserve can be much less.

“Monthly payments on debt should not exceed 20% of income” – Decent rule – in fact, the rule is somewhat irrelevant in that most lenders apply rules to limit mortgage payments plus home insurance and property taxes to a percentage of income. As with the savings rule, your level of debt may be more or less depending on assets available, risk tolerance and lifestyle costs.

“Do not refinance until rates drop 2%”– Bad rule – the test is simple: how soon will the cost of refinancing be recouped by lower payments? With no points/no closing cost loans, this can a year or less. Buying down a rate by paying points will make sense if the pay-off is in 12 to 24 months and if you plan to stay in the residence for seven years or more.

“Delete collision coverage on a car more than 7 years old” – Decent rule – as with the “rainy day” reserve, this depends on cash flow and other resources. It also depends on whether the car is your “antique.”

“Do not spend more than 7% of income on long-term care insurance”– Uncertain rule – some people may have sufficient assets to self-insure. Some people will not risk nursing care due to bad family health history; they will want to pay for full insurance.  

Are you going to break the rules?

While breaking rules may or may not work for you, creating and sticking to a financial plan will!

The results from retirement calculations on different websites vary. Why?

Results from online financial calculators are not equal. But, why do the results differ? Usually, it is because different assumptions were used. That is, the calculators control the variables in different ways.

Performing complete and accurate calculations well is difficult, and thus designing a web-based calculator can be expensive. The variables a retirement calculator must address include rate of inflation, rate of return on investment, life expectancy, how much of current salary you need to support yourself at retirement, and social security benefits. Some calculators offer Monte Carlo simulations (click here for an explanation of Monte Carlo Simulation ) to help you predict your retirement funding. On this, my vote is to ignore the Monte Carlo simulation for the same reason many websites will tell you not to count on past returns as to predict your future investment results.

Some calculators allow you to alter their assumptions. However, none of them is able to accommodate either decreasing spending in later years, which is typical of most people during retirement, or the cost burden of major health problems. Any attempt to address these issues would be quite costly.

Others take an easy out by limiting variables, e.g., keeping your contributions flat. This facile solution provides little insight into what your retirement savings will actually look like because it ignores your ability to save more as your income increases. Also, by assuming flat contributions, your need to act will look more urgent due to the big shortfall in saving to meet your retirement goal. The company using this assumption may hope you contact them to help you solve the retirement problem that their formula, in part, has created. A calculator that assumes annually increasing savings makes more sense.

We have designed formula for the website we launched in 2015 (then took down in 2016). Our approach allowed you to alter almost all variables. This may or may not be a good thing, as shifting some variables too much could lead to unrealistic results and misdirect you. Nonetheless, this approach should allow you to test all of your concerns so you can establish a good retirement strategy.

In the end, using any of these calculators gives you a sense of where you stand //vis a vis// your retirement goal. If you are far off, it gives you impetus to act so you get on track; and if you are on track, then you it gives you a sense of security. For me, the most important result from using any calculator should be assessing and sticking to a good strategy for saving and investing with a long-term perspective.

Here are links to the most popular retirement calculators, which will come up in a web search:

AARP, Bloomberg, CNN, Fidelity , Schwab and Vanguard.