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3 ;E]W XS 1EOI 1SVI 1SRI] 2I\X =IEV Get set for 2018 with smart strategies that will help you pump up your earnings, trim your spending, and make yourself at least $1,000 richer. B Y A L I C I A A DA M C Z Y K , K AITLIN MULHERE, ELIZABETH O’BRIEN, AND KERRI ANNE RENZULLI

8LMW 6IXMVIQIRX 6YPI 7LSYPH ,EZI &IIR +VIEX JSV -RZIWXSVW Oops. A look inside the uneven rollout of what was intended as a huge consumer protection but has instead generated big paperwork, surprise fees, and a swirl of confusion. BY M E G A N L EO N H A R D T

J O DY D O L E— G E T T Y I M AG ES

8LI *YXYVI SJ 7LSTTMRK The way you shop has been altered forever. But those places where you used to go and buy things? Don’t count them out just yet. BY KRISTEN BAHLER AND BRAD TUTTLE

DECEMBER 2017

M O N E Y. C O M

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Here’s What Everyone Gets Paid on a Movie Set Spend Less Eating Out! 9 Successful People on the Books That Changed Their Lives

O N T H E C O V E R : VA A R A — G E T T Y I M A G E S ( W A S H I N G T O N ) ; T H I S PA G E : Z U C K E R B E R G : D AV I D R A M O S — G E T T Y; G AT E S : T H E A S A H I S H I M B U N /G E T T Y; N O O Y I : D A R I O P I G N AT E L L I — B L O O M B E R G /G E T T Y; B U F F E T T: D A N I E L Z U C H N I —W I R E I M A G E /G E T T Y

IN THIS ISSUE

Editor’s Note Letters & Comments The Numbers

Cover illustration by ADAM HAYES

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In the wake of the Equifax hack, a DIY credit freeze offers peace of mind—for a lot less than paid monitoring services.

Tax-deferred savings can be great, but you have to ďŹ nd the right balance among your retirement accounts.

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Has a bull market lulled you into complacency? Take these seven steps now to make sure your portfolio is set up for 2018 and beyond.

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It’s not enough to get the basics right. Be sure to avoid these common pitfalls.

In cozying up to Amazon, the traditional retailer is taking a big risk. Will it pay off?

Waking up at 5 a.m. won’t necessarily make you more productive. Here’s what will.

1MPIWXSRIW XS ,MX F] %KI You don’t need to have all the answers by now, but you should be laying solid groundwork for adulthood.

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'30912 THE MONEY TALK WITH ‌

'LMT +EMRIW HGTV’s Fixer Upper is coming to a close. A look at the star’s new vision. BY M I K E AY E R S

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MONEY (ISSN 0149-4953) is published monthly (except one in January/February) by Time Inc. PRINCIPAL OFFICE: 225 Liberty Street, New York, N.Y. 10281-1008. Periodicals postage paid at New York, N.Y. and additional mailing offices. POSTMASTER: Send all UAA to CFS. (See DMM 507.1.5.2). NON-POSTAL AND MILITARY FACILITIES: Send address corrections to MONEY Magazine, P.O. Box 62120, Tampa, FL 33662-2120. Canada Post Publications Mail Agreement No. 40110178. Return undeliverable Canadian addresses to: Postal Station A, P.O. Box 4326, Toronto, Ontario M5W 3H4. GST No. 888381621RT0001. Š 2017 Time Inc. All rights reserved. Reproduction in whole or in part without written permission is prohibited. MONEY is a registered trademark of Time Inc. U.S. subscriptions: $15 for one year. BACK ISSUES: Back issues are available for $5.95 for the current year and $6.95 for prior years (or at quantity rates for more than 10 copies). Call 800-633-9970 or visit backissues.money.com. REPRINTS: To order 1,000 or more custom reprints, or for photocopy permission, call 212-221-9595, ext. 437, or go to timeincreprints.com. Reprints reproduced by others are not authorized. SUBSCRIBERS: If the Postal Service alerts us that your magazine is undeliverable, we have no further obligation unless we receive a corrected address within two years. Your bank may provide updates to the card information we have on ďŹ le. You may opt out of this service at any time. CUSTOMER SERVICE AND SUBSCRIPTIONS: For 24/7 service, go to MONEY.COM/CUSTOMERSERVICE. You can also call 800-633-9970; write MONEY, P.O. Box 62120, Tampa, FL, 33662-2120; or email help@money.customersvc.com. MAILING LIST: We make a portion of our mailing list available to reputable ďŹ rms. If you would prefer that we not include your name, please call or write us. PRINTED IN THE U.S.

DECEMBER 2017

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M O N E Y. C O M

DECEMBER 2017

story, we’ve left some space for you to jot down your notes and goals, so get your pencil ready. The end of the year is also a good time to assess your retirement portfolio. Are you striking the right balance between traditional accounts, which are tax-deferred, and Roth accounts, where you pay taxes upfront so you can withdraw money tax-free later on? It’s worth considering; according to research from the Investment Company Institute, only a tiny fraction of retirement assets are held in Roth IRAs. On page 25, MONEY’s Elizabeth O’Brien explains the optimal strategy, which will depend on where you are in life. That’s it for 2017. We’ll be back in January with our annual Investor’s Guide. Have a happy New Year, and, as always, thank you for reading! Keep in touch.

Adam Auriemma EDITOR-IN-CHIEF @adamauriemma Write the Editor: editor@moneymail.com

TAY L O R J E W E L L ( A U R I E M M A P O R T R A I T )

I gave one of my colleagues an early look at this month’s cover story, “101 Ways to Make $1,000” (page 41). His reaction? “Boy, you guys are no fun!” I get it! While they’re totally practical, many of our recommendations for saving money next year require cutting back on things we enjoy—like watching cable TV, eating out, and going to destination weddings. And even though most of us would welcome some extra income, I admit that babysitting on Friday nights or picking up delivery shifts with Postmates probably won’t be a blast. But here’s the thing, and many longtime readers already know it: When you can get as much joy out of saving as you do out of spending, you’ll be well on your way to financial success. Combine frugal habits with a smart long-term investing strategy and you’re nearly unstoppable. So have a look through the list and pick out a few things that could work for you; a thousand dollars here or there can make a big difference in your financial outlook. Plus, there are several great tax tips scattered throughout, so take note of those. As for that long-term investing strategy, we’ve got you covered there as well. On page 33, MONEY’s ace investing editor Paul J. Lim has compiled a year-end investment checklist. Is it time to fix your mix of stocks and bonds? Have you looked into a health savings account lately? You may also want to trim some of the priciest stocks in your portfolio—the ones that could fall hardest in a downturn. In this A FEW DAYS AGO,

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CHIEF EXECUTIVE OFFICER Rich Battista CHIEF CONTENT OFFICER Alan Murray EDITORIAL DIRECTOR, NEWS GROUP Nancy Gibbs DIGITAL DIRECTOR, NEWS GROUP Edward Felsenthal

MONEY EDITORIAL EDITOR-IN-CHIEF

Adam Auriemma

DEPUTY EDITORS Rachel F. Elson, Paul J. Lim MANAGING EDITOR Tari Ayala SENIOR EDITORS Mike Ayers, Ian Salisbury AUDIENCE ENGAGEMENT EDITOR Matt Bemer SENIOR WRITERS Elizabeth O’Brien, Brad Tuttle WRITERS Alicia Adamczyk, Kristen Bahler, Jennifer Calfas, Megan Leonhardt, Kaitlin Mulhere, Kerri Anne Renzulli SOCIAL MEDIA WRITER Veronica Quezada DIGITAL PRODUCER Allana Akhtar COPY EDITORS Maria Carmicino, Judith Ferbel, Lauren Goldstein, Kathleen Kent EXECUTIVE CREATIVE DIRECTOR Paul Martinez DIRECTOR OF PHOTOGRAPHY Mia Diehl LEAD ART DIRECTOR Peter Herbert ART DIRECTOR Josue Evilla SENIOR GRAPHIC DESIGNER Julia Bohan CONTRIBUTING DESIGNER Namita PHOTO DEPARTMENT Kacy Burdette, Sarina Finkelstein, Armin Harris, Alexandra Scimecca SENIOR VIDEO PRODUCER Kate Santichen ASSOCIATE VIDEO PRODUCERS Mercedes Barba, Katie Meyer PRODUCTION ASSISTANTS Walter Kelly, Will Linendoll CONTRIBUTORS Ryan Derousseau, Paul Schrodt, Walter Updegrave, Martha C. White, Rob Wile NEWS AND BUSINESS GROUP SENIOR VICE PRESIDENT AND GENERAL MANAGER Meredith R. Long DIRECTOR, EDITORIAL OPERATIONS AND FINANCE George Kimmerling CHIEF MARKETING OFFICER, NEWS AND BUSINESS Michael Joseloff TIME INC. ADVERTISING SALES Karen Kovacs (GROUP PRESIDENT); Andrew Reedman, Thu Phan Rodriguez (DIGITAL STRATEGY) BRAND SALES VICE PRESIDENT, SALES, NEWS AND FINANCE Jorg Stratmann EXECUTIVE BRAND SALES DIRECTOR, NEWS AND BUSINESS Jody Reiss BRAND SALES DIRECTOR, NEWS AND BUSINESS, N.Y. Will Cusack VICE PRESIDENT, BRAND SALES DIRECTOR, NEWS AND BUSINESS, L.A. Farhad Fozounmayeh BRAND SALES DIRECTOR, NEWS AND BUSINESS, CHICAGO Leah Root BRAND SALES DIRECTOR, NEWS AND BUSINESS, DETROIT John Wattles CATEGORY SALES Lauren Newman (BEAUTY); Ellie Duque (ENTERTAINMENT); Matt Rice (FASHION AND RETAIL); Michael Schneider (FINANCE); David Gensler (FOOD AND BEVERAGE); Heidi Anderson (HEALTH CARE); Ann Gobel (HOME); Nate Stamos (INDUSTRY/GOVERNMENT/TOBACCO/GOLF); Scott Kelliher (TECHNOLOGY/TELECOMMUNICATIONS/AUTO); Jay Meyer (TRAVEL AND LUXURY) For all advertising inquiries, please email advertising_contact@timeinc.com INTERNATIONAL Marty Gardner (SENIOR VICE PRESIDENT, FINANCE AND OPERATIONS); Jennifer Savage (SENIOR VICE PRESIDENT, PARTNERSHIPS, LICENSING AND SYNDICATION); John Marcom (SENIOR VICE PRESIDENT, BRANDS AND SALES, INTERNATIONAL) INTERNATIONAL ADVERTISING SALES Khoon-Fong Ang (VICE PRESIDENT, NORTH ASIA); Tim Howat (VICE PRESIDENT, SOUTHEAST ASIA); Rupert Turnbull (VICE PRESIDENT, EMEA) MARKETING SENIOR VICE PRESIDENT, ADVERTISING AND BRAND MARKETING Susan Parkes-Cirignano INTEGRATED MARKETING Sheyna Bruckner (EXECUTIVE DIRECTOR); Rosalie Fazio (ASSOCIATE MANAGER) ACCOUNT MANAGEMENT Lisa Horstmann CREATIVE SERVICES Orville Clark (CREATIVE DIRECTOR, BRAND MARKETING, NEWS, BUSINESS & SPORTS); Jess Harrison, Mario Paulis (SENIOR INTEGRATED GRAPHIC DESIGNERS) LIVE MEDIA Lisa Cline (SENIOR VICE PRESIDENT); Delwyn Gray (VICE PRESIDENT); Jennifer Current, Kim Lovett, Cindy Shieh, Virginia Slattery, Amy Winiker CONSUMER MARKETING AND REVENUE Chris Gaydos, Beth Gorry (SENIOR VICE PRESIDENTS); Ann Marie Doherty, Yvonne Gerald, Melissa Mahoney, Karan Simoneau, Eric Szegda (VICE PRESIDENTS); Eunice Chi (DIRECTOR); Nicole Felix (SENIOR MANAGER); Yuri Kim (ASSOCIATE MANAGER) CONSUMER INSIGHT Andrew Borinstein (EXECUTIVE DIRECTOR); Joel Kaji (EXECUTIVE DIRECTOR); Rachel Lazarus (SENIOR RESEARCH MANAGER) COMMUNICATIONS Kerri Chyka (VICE PRESIDENT) Raina Dembner, Kristin Matzen (SENIOR MANAGERS); Hailey Murphy (PUBLICIST) FINANCE Maria Beckett (SENIOR VICE PRESIDENT); Wajeeha Ahmed (VICE PRESIDENT); Arbena Bal (DIRECTOR); Paula Esposito, Catherine Keenan (MANAGERS); Christopher Santigate (ASSOCIATE MANAGER); Jessica Piro BRANDED CONTENT SOLUTIONS Carolina Stavrositu (EXECUTIVE DIRECTOR); Gregory Leeds, Jamie Waugh Luke, Ron Moss, Cindy Murphy, Christiaan Rizy (DIRECTORS); Joel Baboolal, Melissa Brice, Blair Stelle DIGITAL PRODUCT, DESIGN, AND ENGINEERING Shameel Arafin, Aleksander Mielczarek, Sean Villafranca PRODUCTION Valerie Langston (DIRECTOR); Mieko S. Calugay (SENIOR MANAGER); Sara Decker (ASSISTANT MANAGER); Vishal Prasad (SPECIALIST) PREMEDIA Richard K. Prue (EXECUTIVE DIRECTOR); Angel Mass (SENIOR MANAGER) TIME INC. CHIEF OPERATING OFFICER AND PRESIDENT Jennifer L.Wong CHIEF FINANCIAL OFFICER Sue D’Emic EXECUTIVE VICE PRESIDENTS Leslie Dukker Doty, Brad Elders, Lauren Ezrol Klein, Greg Giangrande, Steve Marcopoto, Erik Moreno SENIOR VICE PRESIDENT, HUMAN RESOURCES Roxanne Flores SENIOR VICE PRESIDENTAND DEPUTY GENERAL COUNSEL Steven Weissman ASSISTANT GENERAL COUNSEL Andrew Goldberg DIGITAL PRODUCTAND ENGINEERING Nicholas Butterworth (SENIOR VICE PRESIDENT) GLOBAL TECHNOLOGY SERVICES Kurt Rao (CHIEF INFORMATION OFFICER)

M O N E Y. C O M

DECEMBER 2017

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LETTERS & COMMENTS RE: BEST PLACES TO LIVE IN AMERICA [OCTOBER]

-X [EW KVIEX XS WII Q] LSQI XS[R MW 2S I do have some suggestions that might improve next year’s version: 1. Compare home prices with incomes to get a sense of what /MHW TPE] SR XLI WLSVIW SJ E you need to buy a typical home GSQQYRMX] TSRH MR *MWLIVW -RH in each city. 2. Add the unemployment rate beside projected job growth rate to give readers a better sense of the job market. 3. Offer the number of clear days as a percentage of the whole year to make the stat easier to read. LEONARD GURIN, FISHERS, IND.

COMMENT ABOUT A RECENT STORY ON MONEY.COM

Re: “There’s a Massive Racial Gap in Student Loan Defaults, New Data Shows�

Of course, let’s not ignore how job discrimination is real ‌ I’m just blessed that I had scholarships, and after starting my own business I was able to pay for my college education. christina parker

CORRECTIONS

DO AS SUZE DOES Suze Orman [“Retire Like Suze!â€? November] is adamant that all of us plan to work until 70, yet she is spending the majority of her days at age 66 ďŹ shing in the Bahamas. Good for her;

she deserves to enjoy the fruits of her labor. But wake up, Suze. Some of the rest of us want to enjoy our retirement years as soon as we can too. M E L A N I E M C CA M M O N

Maryville, Tenn.

P H OTO G R A P H B Y T Y C O L E

OUR FAVORITE COMMENT

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Suze Orman’s notion that Roth IRAs are an appropriate investment because “our country’s increasingly large debt means tax rates may eventually need to go up—not downâ€? is misguided. Our government could just as easily reduce or eliminate the beneďŹ t of Roth IRAs in the future to reduce the country’s debt burden. It’s not unprecedented— just look at the sudden taxation of Social Security beneďŹ ts in the 1980s. B E N J A M I N CAU L E Y

Worcester, Mass.

Write to MONEY: letters@moneymail.com

[NOVEMBER] I“The 10 Richest People of All Timeâ€? mistakenly included a photograph of John D. Rockefeller Jr., instead of his father, John D. Rockefeller Sr. [NOVEMBER] “The Best Bank in Every Stateâ€? mistakenly identiďŹ ed Utah’s winner and its logo as America’s First Federal Credit Union. The actual winner is America First Credit Union. Also, members of Alliant Credit Union earn interest on the High-Rate Checking account with e-statements and at least one monthly electronic deposit, including direct, ATM, and mobile deposits or transfers from another bank. The article listed only direct deposits. Finally, Northwest Bank’s MyNorthwest Checking account has no monthly service fee, regardless of whether you receive e-statements.

DECEMBER 2017

M O N E Y. C O M

,IVIŞW ,S[ 1YGL )ZIV]SRI +IXW 4EMH SR E 1SZMI 7IX What you can earn in Hollywood—even when your name isn’t on the marquee. BY B R A D T U T T L E WANT TO MAKE MONEY IN HOLLYWOOD? Sadly, the chances of becoming a movie star are about 1 in 1,190,000, according to The Book of Odds. It’s much easier to make it behind the camera, however, where, even if you don’t make millions, you can still earn a decent living. So how much do people in show business really make? The Hollywood Reporter published typical salaries for a variety of jobs on small- and big-budget movies. We combined THR’s numbers with additional data from salary research site PayScale.com and a Vanity Fair project about a theoretical $200 million budget film to get a sense of what you can truly expect to make if you break into Hollywood.

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Film industry makeup artists earn about $48 to $79 an hour, depending on the size of the production, notes The Hollywood Reporter. That’s way above what PayScale reports as the job’s nationwide median pay of $18 an hour.

A camera operator’s median earnings in the film or television business are just under $50,000 a year. But the lucky few who score gigs on big-budget films can take home three times that amount.

Writers Guild rules stipulate screenwriters earn at least $72,600 for an original film script ($63,500 for an adaptation), but The Hollywood Reporter says stars like Aaron Sorkin can demand $3 million to $5 million. Annual median pay is $72,414.

PayScale reports that the median annual salary for a producer in TV and films is just $66,121. However, the typical Hollywood film producer earns $750,000 to $1 million per movie. Producers behind a box office smash can pull in tens of millions.

M O N E Y. C O M

DECEMBER 2017

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Big-budget directors make around $500,000—until they have a hit, says The Hollywood Reporter. Patty Jenkins, who reportedly took home $1 million for Wonder Woman, will earn $8 million to $9 million for the sequel.

The boom operator, who dangles the microphone above actors’ heads (but outside the camera frame), earns about $37,000 working on lowbudget films. And that goes way up on big projects, according to The Hollywood Reporter.

The key grip, who oversees equipment supporting cameras and lighting—such as dollies, tripods, and cranes— makes an estimated $113,920 on a big-budget film, and $25 to $35 an hour on TV shows and low-budget films.

PHOTOGRAPH BY WARNER BROS./PHOTOFEST

A-list stars routinely make $15 million to $20 million for leading roles in big-budget movies. Meanwhile, lesserknown actors like Gal Gadot in Wonder Woman might get only $150,000 to $300,000. According to PayScale, the median salary for an actor or actress in general—in plays, TV, and the movies, without regard to the size of the role—is far, far less: $50,529 per year.

DECEMBER 2017

M O N E Y. C O M

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FOOD

7TIRH 0IWW )EXMRK 3YX Seven ways to order smart—even at fancy places. BY PAU L S C H R O DT to finish a nice meal with the sneaking suspicion you just got ripped off. Which is why it’s important to go into any restaurant—whether it’s fast food or haute French—with some knowledge about what you should be getting. We talked to Mark Pastore, president of New York City’s acclaimed meat purveyor Pat LaFrieda—which works with high-end establishments including the Spotted Pig and Minetta Tavern—about how to find value when you go out to eat. Pastore knows of what he speaks: He says he eats out four or five days a week. The next time you’re ordering at a restaurant, keep these tips in mind. IT’S NEVER FUN

1. BEING VEGETARIAN PAYS.

2. NOT ALL MEAT IS CREATED EQUAL. At least in terms of cost,

M O N E Y. C O M

there is a clear order. “Poultry is always going to be the cheapest,” Pastore says. From there it goes pork, beef, veal, and then lamb, which is the “most expensive.” So load up on duck and pork chops.

3. DON’T WRITE OFF STEAK. That is, if you know what cut you’re getting. Top-grade prime beef (or as Pastore calls it, “the Rolls-Royce” of steaks) has indeed gotten “very expensive.” Look for “lunchtime cuts” that can be amazing in the hands of a talented chef, lunchtime or no: flatiron steaks, skirt steaks, hanger steaks, and flank steaks.

DECEMBER 2017

4. GO TO LUNCH INSTEAD OF DINNER. “Lunch menus will always be less expensive than dinner,” Pastore says. The same dishes will be cheaper, and restaurants are more likely to feature budget-conscious items in the middle of the day.

5. SEEK OUT NEIGHBORHOOD STANDBYS. Restaurants that specialize come with an added cost. “If you want a great steak … you go to one of the classic steak houses, and you’re prepared to pay those prices,” Pastore says. But New American– style restaurants, especially ones full of locals, offer many dishes at different price points.

6. AVOID SPECIALS. The problem with specials, Pastore says, is that the food tends to be something “they either want to feature, or I joke a lot of the time it’s what they’re pushing that they can’t sell.” There’s an old saying in the restaurant business: “You sell it, or you smell it.”

7. TRY THE PRIX FIXE. Many great, normally expensive restaurants offer fixed-price menus, whether every night or only at certain times. They limit what you can experience, but they also tend to highlight signature dishes at a discount.

E R I C M E DS K E R — B LO O M B E RG V I A G E T T Y I M AG ES

“There’s really no cheap meat” in the U.S., Pastore says, as long as it’s quality product. So if you’ve been thinking about removing animals from your diet, it certainly won’t hurt your wallet.

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CAREERS

Need inspiration, or just a good read? Take a cue from these career all-stars. BY K R I ST E N BA H L E R recommendation for your Christmas list? Or some words of wisdom to pump up your own bookshelf? We got you. MONEY compiled a reading list of the books several CEOs, COOs, and company founders have said changed the trajectory of their lives. Some are business how-tos like The Intelligent Investor, while others are literary classics, such as A Wrinkle in Time, or feats of investigative journalism like The New Jim Crow. All helped build some of the most inspiring careers of our time. LOOKING FOR A BOOK

M O N E Y. C O M

DECEMBER 2017

SHERYL SANDBERG

RICHARD PLEPLER

The Remains of the Day

A Wrinkle in Time

Kazuo Ishiguro

Madeleine L’Engle

The Stories of John Cheever

“Bezos has said he learns more from novels than nonfiction,” author Brad Stone writes in a biography of Amazon’s head honcho. This portrayal of post– World War II England by 2017 Nobel laureate Ishiguro tops “Jeff’s Reading List” for Amazon employees, according to Stone.

In an interview for the New York Times, the Facebook COO and Lean In author said she connected with the “admittedly geeky heroine” of Madeleine L’Engle’s fantasy novel at a young age.“I wanted to be Meg Murry,” the tech exec recalled. “I loved how she worked with others to fight against an unjust system.”

John Cheever In another Times column, HBO chief executive Richard Plepler called fiction writer John Cheever’s collection of short stories “a jewel” that he frequently rereads.“My dad gave me the Cheever book for my 20th birthday,” Plepler said. “There’s a lot in there about what Kant called ‘the crooked timber of humanity.’ It’s a masterpiece.”

B E Z O S : A P R I L G R E E R —T H E W A S H I N G T O N P O S T/G E T T Y; S A N D B E R G : J A S O N A L D E N — B L O O M B E R G /G E T T Y; P L E P L E R : J A S O N L AV E R I S — F I L M M A G I C /G E T T Y; C H A M B E R S : I S A H A R S I N — S I PA V I A A P ; H U C K L E B E R R Y F I N N : C H R O N I C L E — A L A M Y; Z U C K E R B E R G : D AV I D R A M O S — G E T T Y

7YGGIWWJYP 4ISTPI SR XLI &SSOW 8LEX 'LERKIH 8LIMV 0MZIW

JEFF BEZOS

B A R T Z : R A M I N TA L A I E — C O R B I S /G E T T Y; N A N C Y D R E W: T H E A D V E R T I S I N G A R C H I V E S — A L A M Y; G AT E S : T H E A S A H I S H I M B U N /G E T T Y; N O O Y I : D A R I O P I G N AT E L L I — B L O O M B E R G /G E T T Y; B U F F E T T: D A N I E L Z U C H N I —W I R E I M A G E /G E T T Y

JOHN CHAMBERS

MARK ZUCKERBERG

CAROL BARTZ

BILL GATES

INDRA NOOYI

WARREN BUFFETT

The Adventures of Huckleberry Finn

The New Jim Crow

“Everything Nancy Drew”

The Better Angels of Our Nature

The Road to Character

The Intelligent Investor

Steven Pinker

Mark Twain

Facebook CEO Mark Zuckerberg became a strong advocate for criminal justice reform after reading civil rights lawyer Michelle Alexander’s 2010 book on mass incarceration. In a 2015 Facebook post, Zuckerberg said the book inspired him to visit San Quentin State Prison: “I’m going to keep learning about this topic, but some things are already clear. We can’t jail our way to a just society, and our current system isn’t working.”

The former Yahoo chief executive told the Mercury News she drew inspiration from the mystery series written by different authors under the name Carolyn Keene. Nancy “was smart, in control and lived an exciting life—plus she had a sports car,” Bartz said.

The former Cisco CEO recently told Silicon Valley newspaper the Mercury News that Twain’s watershed novel helped him learn to manage dyslexia as a young person. “It was a book that helped me turn one of my greatest challenges into a strength,” he said.

Michelle Alexander

In a May tweet aimed at new graduates, Gates called Steven Pinker’s bestseller “the most inspiring book” he’s ever read. The Microsoft cofounder went on to say that the 2011 book, which asserts that violence has declined across time, shows “how the world is getting better.”

David Brooks

Benjamin Graham In 2015, Pepsi CEO Nooyi told Fortune that the New York Times columnist’s account of historical adversity “sparked a wonderful discussion with my two daughters about why building inner character is just as important as building a career.” She added, “The moral compass of our lives must also be the moral compass of our livelihoods.”

DECEMBER 2017

The Oracle of Omaha is a big reader—but one book in particular stands out for him. In an interview with Charlie Rose earlier this year, Buffett said a 1949 business title, The Intelligent Investor, is tops. The book preaches value investing, or buying stocks when they are really low and holding on to them for a long, long time. “I just happened to pick up that book at a bookstore in Lincoln, Nebraska,” he said in the interview.

M O N E Y. C O M

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,S[ XS 7EJIKYEVH =SYV 3[R 'VIHMXĹœERH 7EZI E =IEV A DIY credit freeze offers peace of mind for a fraction of the cost of paid monitoring services. J O H N KUCZ A L A— G E T T Y I M AG ES

BY E L I Z A B E T H O’ B R I E N

to run out and sign up for a credit monitoring service following news this fall of a massive data breach at Equifax, a hack that potentially exposed the sensitive information of 143 million consumers. Identity-theft protection is about a $3 billion business in the U.S., according to market research ďŹ rm IBISWorld. Many ďŹ rms offer basic credit monitoring for about $10 a month—or $120 a year—which may seem like a bargain for peace of mind. But some experts recommend saving your money by doing something that’s potentially even more effective: freezing your credit on your own. YOU MAY BE TEMPTED

THE PROBLEMS WITH MONITORING Credit monitoring services protect you by keeping tabs on your credit reports at the

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IDENTITY THEFT

three major credit reporting agencies—Equifax, Experian, and TransUnion—and alerting you to any activity that could indicate possible fraud. For example, if you get an alert that there’s a new credit card application on your file, but you didn’t apply yourself, then that signals that a fraudster could be applying for a card in your name. Monitoring is reactive, says John Ulzheimer, a credit expert formerly of FICO and Equifax. “It tells you, ‘By the way, your arm is broken,’ ” he says. Freezing your credit, by contrast, is proactive. Monitoring also requires subscription fees that typically far exceed the cost of implementing a credit freeze, which varies by state and can range from no charge to about $10 per lock.

How to PutYour Credit on Ice =SY GER GSRXEGX IEGL SJ XLI XLVII QENSV GVIHMX VITSVXMRK FYVIEYW XS TPEGI E JVII^I SR ]SYV GVIHMX VITSVX TVIZIRXMRK PIRHIVW JVSQ EGGIWWMRK ]SYV ƙPI XS ETTVSZI RI[ GVIHMX GEVHW SV PSERW Lenders typically look at your credit report before extending credit, and a credit freeze restricts their access to it. You can’t apply for a new credit card or a loan until you unlock the freeze yourself, a process that can take up to a few days. You’ll need the personal identification number the bureaus gave you to unlock it. You must contact each credit reporting company individually to institute a freeze. Here are the phone numbers for each: Equifax: 800-349-9960 Experian: 888-397-3742

TransUnion: 888-909-8872 Depending on your state, you may have to pay a nominal fee to freeze and unfreeze your report. There should be no activity on your credit reports following a freeze. But if a freeze doesn’t make sense for you—say, you’re actively shopping for a mortgage—then you can monitor your report on your own. And even if you do institute a freeze, it’s a good idea to check your reports occasionally for irregularities.

Federal law requires that all three major credit reporting companies provide you with a free copy of your credit report every year. But these days, the rise of personal finance firms such as Credit Karma means that you can get a free credit report pretty much anytime you want one, experts say. Credit Karma offers free credit scores, reports, and monitoring for consumers and provides loan recommendations based on their profiles; the firm makes money when a consumer signs up for a recommended product.

WHAT KINDS OF FRAUD AREN’T REFLECTED IN YOUR REPORT Some fraud occurs largely outside the credit system. For that reason, credit monitoring or freezing won’t tell you when someone has filed a tax return and claimed a refund in your name— or prevent it from happening. The only way you’ll find that out is when you go to file your legitimate return and the IRS rejects it, saying it already got one from you. Another type of fraud that generally isn’t captured by credit monitoring is conducted through payday lending and pawnshops, Ulzheimer says. You generally discover that someone took one of these loans out in your name when you get a call from a debt collector. Lastly, medical insurance fraud doesn’t go through credit channels. This is when someone

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DECEMBER 2017

accesses medical services after obtaining your insurance information. You would find out about this when you get an explanation of benefits from your carrier for a service you never received. All lenders and insurance companies have processes in place to handle fraud and abuse, Ulzheimer says. You will have to fill out plenty of paperwork, but it’s generally a process that you can handle yourself without hiring an attorney. That should be a last resort if your own efforts aren’t successful, Ulzheimer notes.

SAY NO TO RECOVERY AND INSURANCE PRODUCTS Some credit monitoring services also offer recovery services—that is, help cleaning up the mess after

your identity has been stolen. The quality of these services varies widely, according to a March report by the Government Accountability Office. Some firms offer hands-on assistance, while others do little more than direct customers on how to repair the damage themselves. The Federal Trade Commission offers detailed help on how to recover from identity theft at identitytheft.gov. Steer clear of identity-theft insurance. It generally doesn’t cover direct losses such as theft, and just 5% of victims reported indirect losses such as legal fees, according to government statistics. The real loss with identity theft is the time and energy it takes to recover.

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PRODUCTIVITY

+S %LIEHŜ4VIWW XLI 7RSS^I &YXXSR Waking up early doesn’t necessarily make you more productive. Here’s what will. BY K R I ST E N BA H L E R YOU’VE HEARD THE STORIES.

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E ASY BUY 4 U — G E T T Y I M AG ES

Apple CEO Tim Cook wakes up at 3:45 every morning. Both Vogue’s Anna Wintour and Twitter’s Jack Dorsey have alarms that go off before 6 a.m. Ernest Hemingway and Margaret Thatcher never slept in. Maybe that’s all true. But showing the world our best, most productive selves may have little to do with the time we wake up—or go to bed. According to a growing body of research, what really counts is doing both consistently. A study from Brigham and Women’s Hospital tracked the sleep patterns of 61 full-time students at Harvard College for 30 days, and compared their academic performance. The students all got about the same amount of sleep, but those with irregular bed and wake-up times fared worse than those who stuck to the same sleep routine. “Our results indicate that going to sleep and waking up at

approximately the same time is as important as the number of hours one sleeps,” lead author Andrew J.K. Phillips, a biophysicist at Brigham and Women’s Hospital, says in a statement. The findings are the latest in a string of research claiming that a good night’s sleep isn’t just getting seven to nine hours of shut-eye— it’s also about getting the same seven to nine hours every night. This spring, researchers at Baylor University ran a similar case study on the nighttime routines of young adults and found that the more variable their sleep schedule was, the worse they performed throughout the week. Our circadian rhythm, or “body clock,” regulates melatonin, the hormone that helps us fall and stay asleep. A fluctuating sleep pattern screws up that body clock—which, in turn, screws us up too. “Sleep is a part of a larger system of biological rhythms that regulate everything from brain function to muscle repair,” says Michael Grandner, director of the Sleep and Health Research Program at the University of Arizona. “The more variable your sleep schedule, the more these systems are not working optimally together.” The actual hours you sleep are up to you. Everyone has her own “biological night”—a personalized time frame when the body wants to go to bed, Grandner says. So if “early to bed, early to rise” feels more like a punishment than a personal philosophy, committing to a regular sleep schedule is a smarter bet than trying to fake it as a morning person. The key is finding your own rhythm.

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SAVING

1MPIWXSRIW =SY 7LSYPH ,MX &IJSVI 8YVRMRK While you don’t need to have all the answers by the time you hit the big 3-0, you should lay a solid financial groundwork for adulthood by this age. BY PAU L S C H R O DT

sooner you keep in mind your overall financial state, the better prepared you’ll be to reach later goals across different ages. Depending on how much you earn and your expenses, these shorterterm goals will mean different things. While there is no one right path for everyone, these milestones can help guide you to success as you get older.

1. HAVE A BUDGET TO TRACK YOUR EXPENSES AND WEALTH No, “budget” isn’t a dirty word, though it can have discomforting connotations for some. Just know that your budget is what you make it: Figure out realistic goals based on your income and spending habits. Calculate your expenses: How much of your income goes to rent and groceries? How much goes to travel and fun? And how much are you putting away in savings? The right answers will differ for everyone, but keeping these questions in mind will help you put an emphasis on saving. Calculate each weekend what you spent that week. Luckily, these days, apps like Mint and Digit make it much easier to see where your money goes. “Young people make the budgeting process so complicated they don’t do it,” says Jay Hummel, senior vice president of direct sales and services at American Century Investments.

30 looms like a terrifying deadline. It’s when a lot of people ask themselves: Am I financially secure? Am I on the right path to stability and, eventually, retirement? Am I finally a responsible adult? The first thing to know is that you won’t work out everything, in finances or life, by the time you’re 30. And that’s okay. But the FOR MANY OF US,

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You shouldn’t expect to have cushy retirement savings by the time you’re 30, which for most is unrealistic, but it’s important to save for retirement across stages of your life. First, it simply gets

P I X D E LUX E— G E T T Y I M AG ES

2. HAVE MONEY FOR YOUR RETIREMENT ALREADY IN THE BANK

you in the habit of saving. But it also makes things much easier down the road, particularly in case you should hit any expensive calamities later in life. Put a certain portion of your salary into an employer’s 401(k) plan or a retirement account like an IRA at a brokerage firm. “Starting early, and saving whatever you can, puts you in a better position down the road compared with someone who waits to save until they are more established in a career,” says Chuck Mattiucci, financial consultant at Fort Pitt Capital Group in Pittsburgh. Savings have more time to grow when you start early. Many financial planners recommend setting aside 10% of your salary into a 401(k). Say you save from age 25 to 40, socking away $10,000 a year, including any matching contributions from your employer. Your friend, meanwhile, waits until age 35 to begin and saves the same $10,000 annually for the next 30 years. Assuming 6% returns, you’ll still have more money than your friend at age 65, despite having saved for half the time, according to Vanguard. Start with what you can, and work up to 10%.

3. HAVE SAVINGS IN CASE OF AN EMERGENCY When you’re young and healthy, it’s easy to think optimistically about life. Young people tend to save less for their future, according to research on retirement plan contributions from the Employee Benefit Research Institute. Not only should you save in your twenties for retirement, but you should also be prepared for bumps

Little Contributions Can ReallyAdd Up MONTHLY AMOUNT

AFTER 10 YEARS

AFTER 20 YEARS

AFTER 30 YEARS

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$150,6777 $

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in the road. That could mean anything from a totaled car to a necessary surgery. Try to keep an emergency fund of at least a few thousand dollars in a liquid savings account, meaning one that you can access without delay. That way you won’t have to dip into your 401(k) to deal with a rainy day. If you tap your traditional 401(k) before age 59½, you’ll have to pay a 10% early withdrawal penalty on top of ordinary income taxes on the withdrawn amount. Roth IRAs, by contrast, can act like a backdoor emergency fund: Money is taxed on the way in, so contributions can be withdrawn penalty-free at any time.

4. HAVE ZERO CREDIT CARD DEBT Credit cards generally have much higher interest rates than student loans, so it makes sense to pay off your credit card debt earlier. While you should ideally have a certain amount in emergency savings and consistently contribute to your retirement, paying down highinterest credit card debt takes top priority. (Even better: Build a small emergency fund at the same time as you pay down your debt. Set aside as little as $25 a month for

emergencies, then ramp up your savings after you tackle your high-interest debt.) Pay your balance off as soon as possible, ideally at the end of every month; try to keep your balance below 30% of your credit line. Doing that will avoid damaging your credit score, says Matt Schulz, senior industry analyst at CreditCards .com. That FICO score, which you should regularly check, will have major implications for your ability to get loans.

5. DESIGNATE BENEFICIARIES ON YOUR ACCOUNTS AND LIFE INSURANCE When you die, what will happen to your money? Even when everything seems to be going right, you should still make sure you have designated those closest to you as beneficiaries on any bank and retirement accounts you may have, as well as on any life insurance policies. Share the passwords to your online accounts with your beneficiary. And don’t forget to update your records as needed: If you get married, for example, you’ll likely want to name your spouse as your beneficiary.

DECEMBER 2017

M O N E Y. C O M

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C O F F E E C U P : A D A M G A U LT— G E T T Y I M A G E S

6IXMVI

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IT’S VIRTUALLY IMPOSSIBLE TO SAVE

too much for retirement. While the 1% might worry about dying with too much cash on hand, the vast majority of us are simply struggling to stash away some savings amid the daily grind. But “is it possible to put too much money in a 401(k)? The answer is yes,” says Greg Geisler, professor of accounting at the University of Missouri at St. Louis. If your entire nest egg winds up in a traditional 401(k)—or for that matter a traditional IRA—you could be setting yourself up for a higher tax bill in retirement. That’s because a fat 401(k) comes with a

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LOOKING FORWARD

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WHEN YOU’RE JUST STARTING OUT IN YOUR CAREER A Roth account makes sense for most young workers, says Matt Fellowes, founder and CEO of United Income, a money management firm focused on retirement. Why? If you’re just out of college, you’re probably earning a starting or modest salary in your profession. That means you’re likely to be in a low income tax bracket— or at the least, a lower bracket than you’ll be in as you get more established, and your earnings grow. In that case, it makes sense to pay taxes on some retirement savings now. You’ll pay them at a lower rate than you would later in your career, and you’ll enjoy decades of tax-free growth and tax-free withdrawals in retirement. Of course, there are some exceptions. Professional athletes and successful tech entrepreneurs may see their earnings peak in their youth. But these high earners wouldn’t be eligible to contribute to a Roth in any case: The income threshold for contributing to a Roth (at any age) in 2017 is under $196,000 for married couples filing jointly and under $133,000 for singles or head of household filers.

S U G A R C U B E S : P E T E R D A Z E L E Y— G E T T Y I M A G E S

downside: In retirement, taxes are going to take a big bite out of any funds you withdraw when you’re no longer earning a paycheck. Say you file as single and are in the 15% federal income tax bracket in retirement and you collect an average amount of Social Security benefits each month. If you withdraw an additional $10,000 from your traditional 401(k) or IRA, you’ll pocket only between $7,750 and $7,225. Money in a Roth IRA, by contrast, can be withdrawn tax-free in retirement. In other words, you pocket $10,000 of every $10,000 you withdraw from these accounts. That’s because in a Roth, you’ve already paid taxes on your contributions at the point of deposit. Financial advisers generally recommend spreading your money around. That means diversifying your portfolio—that is, your allocation to stocks, bonds, and other assets—but also the types of retirement accounts that you use to hold those investments in. Having a pot of tax-free funds in a Roth IRA or even a Roth 401(k)— if your employer offers one, and a growing number of employers do—can increase your financial flexibility in retirement. Still, these retirement vehicles remain relatively underused. Roth IRA assets represent just 8% of overall IRA assets, according to the most recent figures from the Internal Revenue Service. And 43% of companies that provide traditional 401(k)s to their workers don’t offer a Roth option, according to Bank of America Merrill Lynch. To figure out if a Roth is right for you, here are some considerations to weigh at various stages of life.

LATE IN YOUR CAREER

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If you have the option of a Roth 401(k) at work, then you may not need to open a Roth IRA, experts say. The annual contribution limits are much higher for a 401(k) than an IRA, at $18,500 for 2018 vs. $5,500 for both a traditional and a Roth IRA. If you don’t have access to a Roth 401(k), a good rule of thumb is to put just enough money into your traditional 401(k) to get the company match, and then put any additional savings in a Roth IRA.

Tax Imbalance Only a tiny fraction of retirement assets are held in Roth IRAs, where withdrawals are tax-free. TOTAL ASSETS HELD

$11.8

TRILLION

AT MID-CAREER The decision to contribute to a Roth gets a bit more complicated the further along you get in your career, Fellowes says. For starters, mid-career workers may have serious expenses that increase the value of a traditional 401(k)’s current deduction. If your child’s college tuition bill is due, then you may want to pocket the tax savings now, rather than later. Moreover, at mid-career, you’ll most likely be nearing your peak earnings, so your income tax bracket may be about as high as it will ever be. You may want to take the deduction now on a traditional 401(k) contribution and then pay taxes in retirement, when you’ll probably be in a lower bracket.

$660

BILLION

401(k)s and traditional IRAs

Roth IRA

SOURCE: Investment Company Institute

In the ďŹ nal stages of your career, you’ll have a better idea of what your tax bracket will look like in retirement. Do you expect to do some kind of paid work once you quit your main career? Do you plan to take Social Security at age 62, at 70, or at some point in between? It’s common for professionals, when they stop working, to drop from the 25% federal tax bracket to the 15% bracket, where the upper limit is $37,950 for a single ďŹ ler and $75,900 for couples ďŹ ling jointly. But a drop is not a given. You might have some part-time work or rental income that could keep you in the higher bracket. And even if you drop a bracket in early retirement, there’s a chance you’ll pop back up again when you reach your seventies and the government requires you to begin withdrawing money from your traditional 401(k) or IRA. These are called required minimum distributions (RMDs), and they’re Uncle Sam’s way of ďŹ nally getting a piece of your money that has grown taxdeferred for decades. These RMDs increase every year and can push diligent savers (with large required withdrawals) back up into the same tax bracket they were in before retirement. Here’s where a Roth can really come in handy. If you’re able to dip into tax-free funds to cover necessary expenses, then you can remain in a lower bracket and save on your tax bill. These savings have a magnifying effect, Geisler notes, since extra taxable dollars can trigger higher income tax on Social Security beneďŹ ts.

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M O N E Y. C O M

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MAKING YOUR MONEY LAST

NO. 2: NOT KNOWING WHAT TO SAVE

8LIWI 1MWXEOIW 'ER 'VEGO )ZIR XLI &IWX 6IXMVIQIRX 4PER It’s not enough to get the basics right. BY WA LT E R U P D EG R AV E IF YOU’VE BEEN SAVING DILIGENTLY AND INVESTING

prudently for retirement, that’s terrific. But it’s not enough. Even people who get the basics right often fall short when it comes to other key areas of retirement planning, such as these three big mistakes that new research shows can often trip us up:

MISTAKE NO. 1: UNDERESTIMATING HOW LONG YOU’LL LIVE

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NO. 3: NOT REALIZING THE BENEFITS OF POSTPONING SOCIAL SECURITY Unless your net worth rivals that of Mark Zuckerberg, the income you receive from Social Security will represent a significant portion of your money in retirement. But almost two-thirds of people polled don’t know they can collect an extra 6% to 8% for each year they delay claiming benefits between ages 62 and 70. Claiming Social Security too early may cost individuals as much as $100,000 in lifetime benefits, according to Financial Engines (couples could be giving up twice that). You can get an estimate of the monthly benefit you’d receive at various ages by going to Social Security’s Retirement Estimator. To see how much more you’d get by maximizing your benefits, check out Financial Engines’ free Social Security Planner tool.

LUCY L A M B R I E X— G E T T Y I M AG ES

Nearly three out of four people don’t know that a 65-year-old man can expect to live another 20 years or so, a Financial Engines survey found. That sort of misunderstanding can wreak havoc on your plan. Turn to a tool like the Actuaries Longevity Illustrator. Unlike other calculators that merely estimate your life expectancy—the age, on average, to which someone your age is likely to live—the Longevity Illustrator provides you with a broad range of possibilities. For example, it shows that a 60-year-old nonsmoking woman in average health has a 46% chance of living another 30 years to age 90 and a 26% probability of living another 35 years to 95.

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Contributing to your 401(k) and IRAs is critical. But you must also gauge whether you’re saving enough to get you to a secure retirement. Unfortunately, nearly half of workers 55 and older haven’t attempted to calculate how much they’ll need to ensure a comfortable retirement, according to a survey by the Employee Benefit Research Institute. Turn to T. Rowe Price’s Retirement Income Calculator or the Boston College Center for Retirement Research’s Target Your Retirement tool. They focus on how much of your income you’ll need to replace, and then help you tell if you’re on track to generate that income from Social Security, savings, and other sources.

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ANNUITIES

(SIW +YEVERXIIH -RGSQI JSV 0MJI 7SYRH 6MKLX JSV =SY# For some retirees, an immediate annuity can make a lot of sense. BY WA LT E R U P D EG R AV E PEOPLE LOVE ANNUITIES IN

concept but aren’t nearly as enthusiastic when it comes to buying these insurance products— the only investments that can provide guaranteed income for life. A survey by the Insured Retirement Institute and Jackson National Life Insurance Co. found that while more than 90% of people 65 and older were interested in lifetime income, only one in four planned to buy an annuity. There are plenty of reasons to be wary of annuities, as many can be mind-numbingly complex and laden with onerous fees to boot. Still, you can reap their benefits while mitigating the downsides by sticking to the most straightforward type—“immediate annuities,” which are designed to convert savings to monthly income for life. Here are three ways to tell if it makes sense for you to “annuitize” a portion of your nest egg:

The Importance of Guarantees A majority of older Americans believe guaranteed income is vital, especially to cover basic costs in retirement.

1. YOU WANT MORE GUARANTEED INCOME THAN SOCIAL SECURITY AND ANY PENSIONS WILL PROVIDE. Many people like to have enough assured income to cover most or all of their essential living expenses—housing, food, transportation, insurance, etc. If your basic living costs will exceed the income you’ll receive from Social Security and any pensions, you may want to bridge all or part of that gap by investing some of your savings in an immediate annuity. Be aware, though, that in most cases the money you invest in an immediate annuity will no longer be available to you. So if you decide to devote a portion of your savings to an annuity, make sure that you’ll still have enough money left over to take care of expenses in excess of what your guaranteed income will cover—and to provide a hedge against rising prices over the course of a long retirement.

Percentage of 55- to 75-year-olds who think guaranteed income is important to cover …

60%

51%

Essential living expenses

Discretionary expenses

SOURCE: Greenwald & Associates

M O N E Y. C O M

DECEMBER 2017

2. YOU’RE WORRIED YOU MIGHT RUN THROUGH YOUR SAVINGS. There are plenty of ways to draw money from a nest egg that can generate cash to meet your spending needs while limiting the chance that you’ll run out of money before you run out of time. But if you’re unsure about your ability to follow such a regimen— or prefer to have an extra margin of safety—then you may want to consider putting a portion of your savings into an immediate annuity.

3. YOU WANT THE PEACE OF MIND. Even if you’re ambivalent about the financial case for an immediate annuity, there’s another reason to consider one: Guaranteed lifetime income can make for a happier and more satisfying retirement. A 2003 Rand study found that retirees with annuity income tended to feel more satisfied in retirement than those without such income and were also more likely to maintain that feeling throughout retirement. That’s not too surprising. You’re more likely to be able to relax if you don’t have to worry whether a market meltdown will force you to ratchet down spending and scale back your lifestyle. To find how much immediate annuities pay—and cost—go to immediateannuities.com or companies that sell them, such as Charles Schwab and Vanguard.

Nothing runs on empty. Especially 1 in 8 Americans who struggle with hunger. Join the Feeding America nationwide network of food banks to help end hunger. Act now at HungerActionMonth.org.

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TO-DO LIST

=IEV )RH -RZIWXQIRX 'LIGOPMWX are going really well—as is the case right now on Wall Street and probably in your retirement portfolio— it’s only natural to want to leave things be. Why try to fix what’s not broken? But even the most patient buy-and-hold investors understand that you must revisit your strategy from time to time to make sure things are unfolding as you originally envisioned. The end of the year, when your thoughts are naturally focused on family, the coming year, and to-do lists, is a perfect time to do just that. To make this process easier, MONEY has put together a checklist of seven important steps to take now before the year ends to set your investment portfolio up for 2018 and beyond.

P H OTO G R A P H : C H A D G R I F F I T H

W

H E N E V E R T H I N GS

BY PAU L J . L I M

Lim, the author of three investing books, has been in charge of MONEY’s investing coverage since 2007.

PENCILS READY? This is a real checklist with spaces for your own notes and dates.

DECEMBER 2017

M O N E Y. C O M

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YEAR-END INVESTMENT CHECKLIST

01

6IQIQFIV XS KMZI ]SYVWIPJ E VEMWI CHANCES ARE, you got a slight

bump in pay this year—perhaps a modest cost-of-living adjustment or a merit raise. Average pay for American workers rose a little over 2% over the past 12 months. If you can, boost your 401(k) savings rate by that amount in the new year. The beauty of an employersponsored 401(k)—especially one where you’re automatically enrolled—is that inertia works for you. You don’t have to keep remembering to sock away money into your retirement account. Your company automatically does that for you with each paycheck. But inertia cuts both ways. If you simply stay the course and fail to raise your contribution rate periodically, you’re leaving money on the table. That’s because over time, being an aggressive saver and mediocre investor beats being a good investor with just average saving habits. Case in point: A 35-year-old making $75,000 a year, putting 7% of pay in a 401(k) and earning a better-than-average 10% annual return would have nearly $1.2 million after 30 years. That same worker who socks away the recommended 15% of pay while earning more-typical 7% annual

M O N E Y. C O M

DECEMBER 2017

gains winds up with $1.4 million. “Your goal should be maxing out your retirement contributions. If you can’t do it all at once, adjust your savings rate gradually over time,” says Jan Blakeley Holman, director of adviser education at Thornburg Investment Management. And if you’re 50 or older, remember to play catch-up. The IRS allows older workers to stuff an added $6,000 into their 401(k)s. The 2018 cap for workers under 50 is $18,500.

THE 2% DIFFERENCE If you don’t think a small percent or two boost in your 401(k) savings rate matters, think again: 401(k) BALANCE AFTER 35 YEARS

$987,000

$835,150

Saving 10% of pay at age 30

Saving 8% of pay at age 30

NOTES: Assumes starting salary of $50,000, 2%

annual pay raises, a 50% company match up to 6% of pay, and a 6% annual return. SOURCE: Fidelity

02

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I F YO U CA N ’ T D O I T A L L AT O N C E , A DJ U ST YO U R S AV I N G S G R A D UA L LY OV E R T I M E .” —JAN BLAKELEY HOLMAN, THORNBURG

“WE’RE ENTERING the ninth year

of a bull market, and we’ve hit more than 45 new highs just this year alone,” says Francis Kinniry, a principal in Vanguard’s investment strategy group. “Chances are, rebalancing will be an issue.” So take care of it now, to set your portfolio up for success in the coming year. If you started out with a moderate 60% stock/40% bond portfolio five years ago—and neglected to routinely reset that mix back to your original strategy—your portfolio would have drifted into a far more aggressive 75% equity/25% fixed-income strategy. That may seem harm-

less, but in the event of a market downturn, having 75% of your nest egg in stocks will lead to far greater losses than a moderate 60% equity stake. Research shows it actually makes little difference when you rebalance—at year-end, on your birthday, or whenever your allocation drifts slightly. So now is just as good a time any. But if you are resetting your allocation, remember “that the best way to rebalance is the most tax-efficient way,” says Kinniry.

N OT E S

DID YOU REMEMBER THESE DATES? Jan. 1: Begin 2018 retirement saving. April 16: Deadline for making 2017 IRA contributions. Dec. 31: Deadline to take required minimum distributions.

Before you start selling your winning investments—which will trigger a tax bill—start by redirecting new contributions for the following year into lagging investments. In other words, since your stocks have been outperforming your bonds by a wide margin, use most of your new contributions to pad your fixedincome exposure. Also, rather than reinvesting dividends and gains back into the same funds, use those distributions to add to your weakest-performing asset class.

03

1E\MQM^I ]SYV SXLIV XE\ WLIPXIVW the contributions you’re making to your 401(k), don’t forget to fund all

AS YOU “TOP OFF”

your other tax-sheltered investment accounts that often get overlooked. Start with your IRAs. While most Americans with income have access to at least one type of individual retirement account—a traditional IRA, a Roth, a spousal IRA, or even a nondeductible account—only 33% of Americans currently contribute to these accounts. You can save up to $5,500 in 2018, or $6,500 if you’re 50 or older. Though you have until April 15, 2019, to make your 2018 IRA contribution, don’t delay. By immediately contributing when you’re eligible on Jan. 1, you’ll maximize the impact of that taxdeferral (see “101 Ways to Make $1,000,” on page 54). In addition to IRAs, don’t overlook health savings accounts. “HSAs are kind of a stealth retirement savings vehicle,” says Rob Williams, director of income planning for the Schwab Center for Financial Research. That’s because HSAs are triple tax advan-

taged: Money goes in tax deferred, grows tax sheltered, and, if withdrawn for qualified medical expenses, comes out tax-free. You’re likely to have plenty of those costs in retirement, which, if not addressed, can eat into your nest egg. A recent Fidelity analysis found that a typical 65-year-old couple retiring this year can expect to spend $275,000 in health-related expenses throughout the course of their retirement. To qualify, you have to be covered by a high-deductible health plan. In 2018 the maximum contribution for an eligible individual is $3,450. For families, it’s $6,900. As with other taxdeferred accounts, it’s important to max out if you can, yet only 15% of HSA users actually do.

04

1EOI WYVI ]SYV LEXGLIW EVI FEXXIRIH HS[R DIVERSIFICATION serves many

purposes. In addition to ensuring that some of your money is held in assets that outperform when times are good, you’re also making sure that you have some exposure at all times to investments that are likely to hold up in a market storm.

DECEMBER 2017

M O N E Y. C O M

-RZIWX

YEAR-END INVESTMENT CHECKLIST

But how sure are you that you have enough defensive investments heading into the new year? “Everyone should look at their accounts now and make sure they have some ballast,” says financial planner Lewis Altfest. What steps should you take? After a spectacular year for equities in 2017—with the Dow Jones industrial average up more than 20%—now’s the time to “trim some of the high-flying stocks with high P/Es,” he says, referring to companies sporting lofty price/ earnings ratios. That’s because in a market downturn, stocks with high P/E ratios tend to fall more. Altfest says you can replace those holdings with exposure to defensive stocks, such as shares of consumer-staples companies that make things people need, not want, like toothpaste and soap. You can also look to economically insensitive companies such as drug makers that aren’t reliant on a robust economy to thrive. And if you’re worried about market turmoil in the coming year, now is a good time to trim some of your holdings in noninvestment-grade “junk” bonds. This is debt issued by companies with less-than-pristine balance sheets and financials. Because of that risk, junk bonds have historically acted more like stocks than bonds. In 2008, for instance, the typical junk-bond fund lost nearly 30% of its value, according to Morningstar, which was on par with the 37% decline for the S&P 500 index of blue-chip stocks.

M O N E Y. C O M

DECEMBER 2017

05

1EOI ]SYV [MWL PMWX IF THE GOAL of investing is to buy low and sell high, at some point you have to commit to investing in assets that are beaten down or unloved. Alas, after nearly nine years of rallying, stocks are pretty expensive across the board. But just as you put together a Christmas shopping list well before the holidays, investors ought to list the stocks they’d like to own before the next downturn comes around so they’ll know

E V E RYO N E S H O U L D LO O K AT T H E I R AC C O U N TS N OW AND MAKE SURE THEY H AV E S O M E BA L L A ST.” —LEWIS ALTFEST, NEW YORK CITY FINANCIAL PLANNER

N OT E S

what to buy once the price is right. Among highly profitable companies that will trade at single-digit price/earnings ratios if their shares fall by a third (which is typical in a bear market): Apple (ticker: AAPL), Intel (INTC), HP (HPQ), and Applied Materials (AMAT). Meanwhile, as you wait for buying opportunities to open up after a downturn, you can start putting new money to work now in the one place that’s relatively cheap: foreign stocks. “We have a significant position—40% if you X-ray our funds— in international securities,” says Altfest. “They’re all cheaper than the U.S.,” he says, adding that not only is Europe growing faster than the U.S. now, many foreign economies, including the emerging markets, aren’t as far along in their recoveries as is America. In our MONEY 50 recommended list, you can go with Vanguard Total International Stock Index (VGTSX) for broad exposure or T. Rowe Price Emerging Markets Stock (PRMSX), focusing on the fast-growing emerging markets, which trade at a P/E ratio half that of the U.S.

06

,EVZIWX ]SYV XE\ PSWWIW ADMIT IT: You hate it when the

government takes a cut of your proďŹ ts every time you sell any investment that has gone up in price. But you can get Uncle Sam back by making him share your pain when you sell investments that have lost value. It’s called tax-loss harvesting, and “now’s the time to be looking at that strategically,â€? says Schwab’s Williams. (See page 51.) Isn’t selling at a loss admitting defeat? It doesn’t have to be. When you sell a stock or fund at a loss, you are realizing the loss for tax purposes. And you can use that loss to reduce your taxes— by offsetting gains elsewhere in your portfolio or reducing ordinary income up to $3,000. But you can turn around and reinvest in the same type of asset, as long as it’s not “substantially identical.â€? Or wait 30 days and step back into the exact same investment.

N OT E S

BEFORE THE YEAR ENDS, ASK YOURSELF THE FOLLOWING QUESTIONS: Did you remember to increase your 401(k) contribution rate for the following year? Did you check if you’re eligible to fund an IRA? And if so, did you schedule to fund that IRA?

Did you check if you’re eligible for a health savings account? And did you schedule to fund it?

Did you reassess whether your asset allocation strategy is still appropriate for you based on your current circumstances? Did you rebalance your investment mix across your 401(k)s, IRAs, and taxable accounts? Did you harvest the losers in your portfolio to sell and scope out bargains to buy?

07

'LIGO SR ]SYV VSFSXW WHEN IN DOUBT, put it on auto-

pilot. In most situations, that’s wise ďŹ nancial advice. “There’s a huge beneďŹ t to having your accounts automated, so that contributions are automatically deducted into your 401(k) and invested for you without requiring you to think about it,â€? says Holman. It goes well beyond putting money into a 401(k), though. Automation now allows for savings rates to be increased over time, or for your portfolio to be rebalanced at periodic intervals, or even for tax losses to be realized. Still, “you need to check on your autopilots annually to see what’s being deducted and how it’s being invested,â€? says Holman. Start by making sure your 401(k) contribution increases aren’t too conservative. Many plans allow for savings rates to rise by one or two percentage points a year. If you can afford more, override the autopilot to put your portfolio on a faster path. Also, make sure the stockand-bond mix that you are being automatically rebalanced into is still appropriate for you. Chances are, you set up your allocation strategy several years ago and may have forgotten about it. But as the end of the year should remind you, time marches on quickly. And things change.

DECEMBER 2017

M O N E Y. C O M

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STOCK X-RAY

7XSGO < 6E] /SLPŞW The retailer is taking a big risk sleeping with the enemy—Amazon.

BY RYA N D E R O U S S E AU

A surprising number of brick-and-mortar retailers such as Home Depot, Bloomingdale’s, and Sears either sell their goods on Amazon.com or have agreed to sell Amazon products like the Kindle or Echo. Yes, these are the same traditional stores the e-commerce giant is effectively trying to put out of business. The latest retailer to join this list: Kohl’s, the department-store chain whose sales have declined 3% since 2012. The company is now accepting returned merchandise for Amazon in 82 of its stores, and has created 1,000-square-foot areas within 10 of its Chicago and L.A. stores to showcase Amazon “smart home” products. Some analysts say this is an example of Kohl’s playing offense in an everchanging digital world. Yet, it’s much easier to see how consumers and Amazon benefit from this deal than Kohl’s.

IT’S NOT JUST CITIES THAT ARE LINING UP TO DO BUSINESS WITH AMAZON.

YES, THERE’S OVERLAP BETWEEN AMAZON AND KOHL’S. BUT THAT CUTS BOTH WAYS.

EVEN WITH THE ADDED FOOT TRAFFIC, KOHL’S SALES AREN’T EXPECTED TO SIZZLE.

KOHL’S IS SEEN AS AN ACQUISITION TARGET. BUT DOES AMAZON REALLY NEED KOHL’S TO SELL CLOTHES?

% OF KOHL’S CUSTOMERS WHO SHOP AT AMAZON

SAME-STORE SALES GROWTH

AMAZON’S SHARE OF U.S. APPAREL SALES

81.7%

85.3%

87.7%

0%

15%

–1 –2

10%

–3 5% July 2013

July 2015

July 2017

Kohl’s strategy is clear: Management hopes that as Amazon shoppers traipse through their department stores to return online purchases, they may do a little in-store shopping. “We expect this initiative to help lift traffic,” noted Jefferies analyst Randal Konik. But will added foot traffic lead to greater sales? Nearly nine in 10 Kohl’s customers also shop at Amazon, so a decent chunk of those Amazon shoppers may in fact be familiar with Kohl’s. But J.P. Morgan found a different overlap—nearly threequarters of the national brands sold at Kohl’s are also available at Amazon. What’s to stop those Amazon customers from buying that toaster oven they just saw at Kohl’s using their Prime membership if Amazon’s prices are cheaper?

M O N E Y. C O M

DECEMBER 2017

2016

2017

2018

Even if foot traffic rises, this isn’t a slam dunk. Kohl’s sales may “increase less than 1% on average annually over the next five years,” notes Morningstar’s Bridget Weishaar, as Kohl’s goes up against off-price retailers. Kohl’s did not respond to requests for comment. Meanwhile, partnering with Amazon hasn’t historically been a boon to retailers. In 2001, Target partnered with Amazon to sell and ship Target products. But that relationship ended in 2011 as Target’s revenue growth declined from 13% in 2006 to 4%. In 2000, Toys “R” Us signed a 10-year deal to become Amazon’s primary toy provider. Shortly after, Amazon moved away from exclusive retailer arrangements. Toys “R” Us sued, and the two sides settled in 2009.

2016

’17

’18

’19

’20

If this deal goes well, some investors believe it could lead to even closer ties— with Amazon perhaps even acquiring the retailer. Just as Amazon bought Whole Foods to become a major player in groceries, “we suspect a brick-andmortar apparel acquisition (or strategic partnership) could align with Amazon’s rising fashion ambitions at some point,” noted Baird analyst Mark Altschwager. Adding to speculation: Kohl’s stores may be too big for its needs, while Amazon needs physical square footage to help combat rival Walmart’s digital efforts. Sounds like a match, but Amazon is well on its way to becoming the nation’s largest apparel seller this year on its own. And does Kohl’s have the cool or aspirational image of a Whole Foods?

SOURCES: Cowen and Co., Telsey Advisory Group, and Bloomberg

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;32ŭ8 4%= *36 -87)0* Switch to GEICO and save money for the things you love. Maybe it’s that high-end client dinner. Or the last-minute flight overseas. Doing business is what you love – and it doesn’t come cheap. So switch to GEICO, because you could save 15% or more on car insurance. And that would help make the things you love that much easier to get.

Auto • Home • Rent • Cycle • Boat geico.com | 1-800-947-AUTO (2886) | local office Some discounts, coverages, payment plans and features are not available in all states or all GEICO companies. Homeowners and renters coverages are written through non-affiliated insurance companies and are secured through the GEICO Insurance Agency, Inc. Boat and PWC coverages are underwritten by GEICO Marine Insurance Company. Motorcycle and ATV coverages are underwritten by GEICO Indemnity Company. GEICO is a registered service mark of Government Employees Insurance Company, Washington, D.C. 20076; a Berkshire Hathaway Inc. subsidiary. © 2017 GEICO

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MONEY

We’d all like to finish next year with a bit extra in our pockets. The good news is, when your goal is relatively modest, there are plenty of ways to get there. On the following pages you’ll find our best saving and earning ideas—each with the aim of winning you an extra $1,000 in 2018. Few of these strategies are easy, but none will require a major life change. While you are certainly free to give up your daily trip to Starbucks ($3.65 for a grande latte x 365=$1,332.25), we aren’t even going to ask you to do that. C O M P I L E D BY A L I C I A A DA M C Z Y K , K A I T L I N M U L H E R E , E L I Z A B E T H O’ B R I E N , A N D K E R R I A N N E R E N Z U L L I

ILLUSTRATIONS BY ADAM HAYES

DECEMBER 2017

M O N E Y. C O M

6

Tens of millions of Americans have dropped cable—and for good reason. The average bill hit $103 a month last year, according to the Leichtman Re-

ssearch Group. But there are a countless streamingg options. A comprehenoptions comprehen sive package would include HBO Now, Netflix, Hulu, and CBS All Access, totaling around $37 a month, or $444 a year, for a savings of almost $800. Go with just HBO and Netflix and you’ll save $968.

7[MXGL GEVHW The average household with credit card debt

FAMILIES SAVE $1,000 BY SWITCHING TO A LOW-COST, PREPAID CELL PHONE PLAN. The average family of four’s cell phone bill adds up to about $2,880 a year. But Sprint’s Family Plan—the cheapest we found—is only $1,260.

SINGLE

pays y $ $1,292 in interest a year, according to y NerdWallet. A balance NerdWallet transfer can give you a year of 0% APR to help you catch up.

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sstep. Also focus on keeping yyour “creditt utilization ratio” ratio —the the amount of your credit limit you use—below 10%. Your new, higher credit score could

shave sh e as much uch as oonee percentage point offf your mortgage rate in today’s market, says McBride. That will save you $1,000 a year on a $150,000 home loan.

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Doing it in a year won’t be easy, but you can get there, says Greg McBride, chief financial analyst at Bankrate. Paying your bills on time is the first

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AVERAGE ANNUAL COST

PLAN NAME

ANNUAL COST

SAVINGS

$360

$360

$720

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COUPLE

$1,440

AT&T GoPhone 6GB

$900

$540

FAMILY

$2,880

Sprint Family Plan

$1,260

$1,620

NOTE: All prices include activation fees and autopay discounts. SOURCES: MONEY’s Best Cell Phone Plans 2017; Quicken

M O N E Y. C O M

DECEMBER 2017

P R E V I O U S PA G E , M O N E Y: D E M 1 0 — G E T T Y I M A G E S ; 6 . G R A N T: Y U R C H E L L O 1 0 8 — G E T T Y I M A G E S ; H A M I LT O N A N D L I N C O L N : A K O VA — G E T T Y I M A G E S ; WA S H I N G T O N : VA A R A — G E T T Y I M A G E S

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LOW E R YO U R COST O F L I V I N G

Adjustable-rate mortgages got a bad rap during the ďŹ nancial cri-sis, but they can make a lot of sense if you aren’t planning to stay m. in your home long term Right now the average 30-year rate is 4.1%, according to Bankrate, compared with just 3.6% for a ďŹ ve-year adjustable-rate loan. Onn a $300,000 mortgage, that half a percentage point should save you about $86 a month, or $1,032 a year.

SKIP THE GYM The average membership costs $50 a month—and much more for boutique classes like SoulCycle. Try a free ďŹ tness group like the November Project, which is active in over 40 cities, or an intramural team through work. If all else fails, Janis Isaman, a nutrition coach and Pilates instructor based in Calgary, Alberta, recommends looking on Facebook and Craigslist to ďŹ nd people nearby who also want to form an ad hoc ďŹ tness club.

STAFF PICK

—RACHEL F. ELSON

+IX E

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all the surfaces: We subbed in new tile, faucet hardware, lighting, paint, and a new vanity. The bathroom looks brand new, but the end cost was half of the sin-

As many as 14.9 million Americans live with a roommate, according to the U.S. Census. It’s easy to see why: In cities like San Francisco, a roommate can save you more than $1,000 a month, per a 2017 report from SmartAsset, a real estate website. In less expensive markets like Detroit, you’ll save over $300 a month withh $ a roommate, totalingg al-most $4,000 each yyear.

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When we redid our bathroom this year, wee couldn’t get many contractors to return our calls for such a small project—so we scaled back our plans. We avoided major plumbing, electrical work, or anything else that would require a permitt or that our handyman couldn’t handle. Instead, we had him redoo

SELL IN MAY Homes sold between May 1 and May 15 sell for about 1% more than the average listing, according to a 2017 report from Zillow, translating to an extra $1,500 in your pocket.

DECEMBER 2017

M O N E Y. C O M

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Blogger Jason Wuerch says he’s earned $10 to $15 an hour filling out online surveys. While Survey Junkie and SwagBucks are the best known, you can maximize your haul by signing up for 10 to 15 and rotating among them, focusing on each site’s

most o lucrative uc e offers. o e . (Find a list on Wuerch’ss ( site, FrugalForLess .com.) Spend an hour or two a few mornings each week—or work on them during your commute—and you’ll reach $1,000 by year-end.

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POSTMATES Deliverymen and women have lots of freedom with Postmates, which allows workers to walk, bike, or drive to deliver goods and food in major cities across the U.S. Log on whenever you want. The company says that you can earn as much as $25 an hour, plus tips.

UBER Uber drivers make an average of $15.68 an hour, according to the popular RideShareGuy blog, though that varies by city and doesn’t include the cost of maintenance or gas (Lyft drivers make even more, $17.50). Still, a few hours each week will easily net you $1,000 by year-end.

M O N E Y. C O M

TASKRABBIT If you really enjoy building Ikea furniture or don’t mind carrying a couch up three flights of stairs, you can make some serious money on TaskRabbit— about $35 an hour, on average, the company says. Many of the in-demand tasks, like installing shelves or moving furniture, require a skilled hand (or a truck), but if you have the know-how you can bank a lot of extra money in your off time.

DECEMBER 2017

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JVIIPERGMRK Whether you’re a writer, designer, or coder, you can sell your skills in your free time at sites like Upwork and Fiverr. Some of the most popular services on Fiverr’s marketplace are graphic design–oriented like

1 7. H E L E N A Q U E E N — G E T T Y I M A G E S

home by providing feedback on new websites at sites like UserTesting.com, TryMyUI.com, and Userlytics.com, through which you can earn $10 per testing session. SideIncomeJobs.com is another option that has a user fee but guarantees you’ll make $100 in your first 30 days. You won’t be eligible for every testing session, so this is a less steady stream of income than surveys, according to blogger Scott Alan Turner, but it could add up to hundreds of dollars a month.

MONEY

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HELP SANTA Retailers hire tens of thousands of extra workers for the holidays, with some gigs paying as much as $16 an hour (although $11 to $14 is more common).

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creating logos, as well as copywriting and translation services, says a spokesman. Prices vary per project, from $5 for a simple WordPress bug fix to hundreds or thousands of dollars for something like website design.

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RIMKLFSVWŞ OMHW Nationally, babysitters earned $13.97 an hour on average last year, according to a Care .com survey. That means by working 6 p.m. to midnight one Friday night a month you can earn $1,006.

8EOI ER I\XVE WLMJX For everyone from retail clerks to housekeepers, job website SnagAJob focuses on hourly work. You can search for parttime jobs and specify when you want to work, like nights or weekends.

H O N E YO U R H E A LT H CA R E

HIHYGXMFPI TPER Workers with health insurance through their employer pay an average family premium of $467 a month for a PPO vs. $321 for a highdeductible health plan, according to Mercer. That’s $1,752 a year in premium savings. The strategy can pay off even if you aren’t in perfect health. Just make sure you have enough cash on hand to cover your higher deductible.

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Paired with highdeductible health plans, these portable accounts allow you to set aside pretax dollars for medical expenses

now or in the future. A single person making $60,000 (in the 25% federal tax bracket) who puts away $288 a month in an HSA would save $863 a year in federal income taxes. Once you’re retired, you can use HSA money for Medicare premiums.

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National Business Group on Health. Make a healthy salad for dinner instead of getting takeout a couple of times a month, and you’re up to $1,000.

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Nearly all large employers offer wellness programs, and about three-quarters of those offer financial incentives to employees to participate. You can earn money for activities like getting your cholesterol checked or signing up for a workplace exercise program. The average employee incentive adds up to $742, according to the

You’ve probably already heard about Groupon’s restaurant, fitness, and beauty deals, but did you know you can also use the site for discounted eye, dental, and chiropractic exams? If you visit the chiropractor twice a month, and your insurance doesn’t pay the average $68 fee (as per Chiropractic Economics magazine), you’ll save around $1,000 by using pack-

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Members of Congress want to overhaul the nation’s tax code. All our recommendations are based on current law.

MONEY

ages advertised on Groupon—which often work out to $25 or less a visit. Just be sure to research each office on Google, Yelp, and social media beforehand. Groupon doesn’t vet its merchants, so if a business doesn’t have a solid Better Business Bureau rating and plenty of good customer reviews, it’s probably worth skipping.

EAT AT HOME Want restaurant-quality fare without spending the money for a meal out? Budget meal-kit services, like Dinnerly, can take the hassle out of cooking and save you money if you are willing to skip dining out. A couple spend about $3,000 a year in restaurant and takeout expenses. Dinnerly charges $38.99 for three meals a week— saving almost $1,130 a year.

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Generally if you don’t sign up for Medicare Part B by age 65Âź, your monthly premium increases by 10% for every 12-month period that you’re late. This penalty lasts as long as you have Part B. Most new beneďŹ ciaries paid $134 a month for 2017, which means that enrolling a year late will cost you $1,000 extra after just six years.

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The typical family of four with school-age children spends $1,054 a month on food, according to the U.S. Department of Agriculture. On average, store brands are

M O N E Y. C O M

30% to 40% 30 0 cheaper than ffamous ou namee oones, says y ffood marketing analyst y Phil Lempert. That means, over the course of a year, shaving $1,000 from your grocery bill should be well within reach. One tip: Compare ingredients and nutritional information on the packages. If they are the same, chances are both products are being made by the

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The average American household throws out between $1,350 and $2,275 in food each year, according to the Natural Resources Defense Council.

'YX SYX QIEX Vegetarians save $750 a year, according to the Journal of Hunger and Environmental Nutrition. Those ďŹ gures still include plenty of pricey ingredients like olive oil. Want to save a bit

2 8. COU RT ESY O F B LU E A P RO N

Prices for medications under Part D drug plans vary widely, even within the same zip code, according to a study by the Senior Citizens League. The price of Ventolin, an inhaler used to treat asthma, varied by $119 a month, for example. Choosing carefully during open enrollment, which runs from Oct. 15 through Dec. 7 each year, could save you $1,400 annually for that one drug.

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JUST SAY NO 84% of us have bought something on a whim. Many of these purchases are $25 or less, but 54% of people say they have spent more

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You can’t save if you don’t know how you’re spending your money. “By seeing how much money is going in vs. going out, you will be able to make better buying decisions to help reach your ďŹ nancial goals,â€? says Andrea Woroch, a consumer ďŹ nance expert. Apps like Mint or PocketGuard help because they make it easy to see which needless purchases you can eliminate in the future. Woroch says most of the wiggle room will probably come from clothing, grocery, and entertainment spending.

I put my savings on autopilot with Digit. You select a goal and a time frame in which to accomplish it (mine is to save $2,000 in the next year for a vacation), and the app saves small amounts of money for you. Digit has a monthly fee of $2.99 after a 100-day free trial, which is something to be aware of, but so far I’ve saved over $400 in just a few months, which I just wouldn’t have done on my own. Plus, I get daily text messages with my bank balances and how far I’m progressing toward my goal. —ALICIA ADAMCZYK

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People who buy lunch every weekday burn through serious cash— about $2,500 a year, if you spend $10 on an average meal. Mona Meighan, author of What Are You Doing for Lunch?, estimates that brown bagging can cut your costs by 80%. You don’t even have to go that far. Swap your $10 lunch-out habit for a meal from home that costs $4, Monday through Thursday, and you will save about $1,200.

than $100, and 20% more than $1,000, according to CreditCards.com. Set up a rule, say a 24- or 48-hour hold period, before you buy anything over a certain price threshold. “We tend to provide a greater weight to current payoffs than future ones, so waiting 24 or 48 hours before making a bigger purchase is an excellent way to overcome our present bias,� says Joe Sterf, a CPA and founder of Average Joe Finance. “Instituting a holding period gives us time to think about the future and not impulsively react. With that extra time, we’ll be less likely to make the purchase.�

STAFF PICK

Or you can simply check your banking app more often. Research by economists Shlomo Benartzi at UCLA and Yaron Levi at USC found people who downloaded a ďŹ nancial app looked at their account 12 times each month, compared with going to the website twice a month. The results: Spending fell 16% in the four months after people loaded the app, led by less discretionary spending. Dining-out expenses dropped by 19%, and grocery bills by 21%. Annual savings on the average grocery bill alone could net you over $880.

DECEMBER 2017

M O N E Y. C O M

MONEY

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ƚMKLXW MR EHZERGI For a family of four, booking flights before Halloween saves about $1,200 on average if you are planning to travel for both Thanksgiving and Christmas or Hanukkah, based on price estimates from Hopper.

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Booking early doesn’t save enough? With the

average cost of a roundtrip U.S. flight hovering at $367, the rule of thumb is to drivee if the destination is lesss than 500 miles away. A family of four can save more than $1,200— even when you include an overnight stopover.

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For a weeklong vacation with kids, consider skipping a conventional hotel where you’ll have

FOR YOUR NEXT TRIP, check k ou outt a vac vacati ation on ren rental tall th throu hrough gh sit sites ess

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like Airbnb, VRBO, or Ho 6 omeAwa ome Away. y. A re recen centt stud studyy foun found d that that in 16 of the top 22 cities for ttr trave aveler lers, s, Airb Airbnb nb sta stays ys were were ch cheap eaper er tha than n hotels by an average of $ $56 a nig night. ht. Tha Thatt may may net on only ly the he heavi avi-est travelers $1,000 a ye y ar. Bu d year. Butt in in some some ci citie ties, s, lik likee Lond London on and Paris, the savings were much gr great eater— er—ecl eclips ipsing ing $ $100 $1 00 a nigh night. t. In other locations, including T Toronto, and t Vienna, Vi d Madrid, M d id id you could ld save $90 to $100 on average by renting a room in an apartment where guests share the kitchen and bathroom.

CITY

HOTEL

AIRBNB

SAVINGS

NEW YORK

$245

$164

$81

LONDON

$252

$144

$108

VENICE

$233

$147

$86

NOTE: Average daily room rates. SOURCE: Busbud

DECEMBER 2017

4 0 . WA S H I N G T O N : VA A R A — G E T T Y I M A G E S

Try a “no spend” month, or a day each week, by picking a time in which you pay bills but buy nothing except the necessities (groceries, gas, etc.). It may seem difficult, but there are plenty of forums on the web for support—try Reddit’s 12-million-subscriberstrong Personal Finance subreddit, or NPR’s Your Money and Your Life Facebook group, where commenters update their “no spend” challenges daily. “Small challenges lead to small wins, and it’s super empowering to see that you’ve actually saved some cash,” says Wong.

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C H E A P E N YO U R T H R I L LS

The 52-Week Money Challenge is simple: Save an extra dollar every week of the year— $1 the first week, $2 the second week, and so on, until you reach $52 saved in the last week of the year, for a total savings of $1,378. “So many of us don’t deal with money, because we have negative associations with it,” says Kristin Wong, author of the forthcoming book Get Money, who led a similar challenge for Lifehacker.com. “If you can make it fun and empowering to save money, you’re going to actually want to deal with it.”

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to boo ook two rooms and insteaad take advantage off an eextended stay hotel te likee TownePlace Suitess or Candlewood Suitess. On average, you’ll y save $157 a night at a thiss type of lodging— which usually includes a kitch chenette and a sofa bed e fo for the kids.

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Earning money requires effort. But it doesn’t have to be work. Try turning your passion into a side job.

PEN GREETING CARDS Publishers pay anywhere from $50 to several hundred dollars for a “complete conceptâ€?—the text and the idea for an illustration, says Ron KanďŹ , president of gag card company NobleWorks. Carefully research the publisher ahead of time, so that you can write in the house style, then send six to 10 of your best ideas, he recommends.

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VI[EEVHW KEQI For ffreequent travelers it can paay to rack up points p s on a rewards card. P Put all of your purchasess, especially on diningg and travel, on a card like Chase Sapph pphire Preferred or American Express Platinuum, and your miles sshould save you $1,000 0 or more a year on igghts.

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Americans spend more A than $ billion a year t $70 on lotttery tickets, well over $1,000 $ per household o inn some states like Massaachusetts ($1,976) and a Geeorgia ($1,211), accord a ding to data site Metro e ocosm. Your chances off w winning Powerball: about a 1 in 292 million.

SKIP GADGETS The new iPhone X is priced at $999 and up. Don’t buy it.

9WI EPP SJ ]SYV FIEYX] TVSHYGXW The average American woman spends $8 a day on makeup and other skin care products, according to retailer SkinStore. The good news: Most women have plenty of unused makeup at home—more than $2,000 worth, according to beauty site escentual.com.

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SELL YOUR CRAFTS ON EBAY OR ETSY Whether you cross-stitch or handcraft jewelry, the trick to selling your stuff online is promoting it with frequent social media posts and beautiful photos, says Debby McClain, who operates two Etsy shops. “In a huge sea of sellers, you have to make sure you are seen,� adds McClain, who has sold crafts online for 19 years.

BECOME A HIGH SCHOOL REFEREE Youth sports officials make around $20 a game, says Barry Mano, president of the National Association of Sports Officials. High school referees can earn between $50 and $70, while college-game pay starts at over $100. As an initial step, join your local officials association, which will provide training, and begin scheduling games. SING IN A CHOIR Many churches and synagogues pay singers to perform as part of their regular ensemble or for special events. While rates vary, common listings offer anywhere from $50 to $200 for each practice and performance. The easiest way to ďŹ nd such gigs in your area: Reach out to local institutions, and search online ads such as those at choralnet.org.

DECEMBER 2017

M O N E Y. C O M

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GET SOME CARPOOL BU BUD DDIES S At $3.08 a gallon—the ďŹ ve-y yearr national average for gas—a 252 mile commute costs about $2,000 annually in gas alon ne. And d while gas prices have been low l w recently, gas-price research herr GasBuddy predicts they will go up p in 2018. By alternating the d days you drive to work, you stand d to o save roughly $1,000—and that’s s eprecibefore you factor in tolls, de s. ation, and any parking costs. the Bring in a third buddy, and th savings climb to $1,300.

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saved an average of $388 in 2015.

Check the value of your car via Kelley Blue Book. If you’re driving an older model that is worth less than 10 times your insurance premium, consider dropping comprehensive and collision coverage, suggests the Insurance Information Institute, which could save you between $375 and $1,500 a year on that item alone, the group estimates. And always shop around for a new policy: According to J.D. Power, consumers who switched insurers

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Buying th Buying thee most most po popul pular ar mod model el of a vehic vehicle— le—com com-m lly a Hond monly mon Honda da or or T Toyota—m Toyot a—may ay mea mean n you’r you’re ’ e payi paying ng m e than d to, ac d more mor th han you ne need ed accor cordin ding g to to car car sit sitee EdEdmunds. munds mun ds There There are often often comparable, compa co mparab rable le less less popular popula pop ularr vehi vehivehicles that cost much less after cash-back incentives.

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2017 Ford Escape

2017 Honda CR-V

$3,244

2018 Hyundai Sonata

2018 Toyota Camry

$2,920

2017 Ford Explorer

2017 Toyota Highlander

$1,949

NOTES: Based on October 2017 cash-back incentives. SOURCE: Edmunds

These days the average car is on the road for more than 11 years, up from nine in 2000, according to the Transportation Department. Resisting the urge to trade in for a newer model will easily save $1,000 in payments.

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DECEMBER 2017

STAFF PICK

ated could save you $112 a year in gas money, according to one survey by Edmunds—or as much as $800 if they’re severely deated. Additionally, aggressive driving can lower your gas mileage by anywhere from 10% to 40% in

stop-and-go traffic, according to SAE International, an auto industry trade association. With the average American estimated to spend more than $1,500 on gas this year, that’s another $156 to $624 in your pocket.

&I &I ZIV] ZIV] TEXMIRX [LIR FY]MRK E GEV We broke down and bought a new car this summer, but only after three months of waiting out dealerships. We wanted a Honda Pilot, and dealers had plenty of models, but

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MAKE IT IN THE MARKET

8VEHI ]SYV FVSOIV JSV E VSFS EHZMWIV Ditching your human adviser can save you some money if you’re comfortable with an online, technology-ďŹ rst solution. Robo-advisers like Schwab Intelligent Portfolios and WiseBanyan don’t charge a fee to manage your money, compared with the 1.1% fee, on average, charged by human advisers. If you have $100,000 saved up in your retirement piggy bank, switching could easily net you an extra $1,000 a year.

IS PART OF YOUR PORTFOLIO UNDERWATER? If you sell now and lock in the loss, you can count it against gains realized on your winners. You can’t buy back the loser for 30 days, but you can buy something similar, a largecompany stock fund, say, instead of a midcap one. Workers making $37,950 to $418,400 (15% capital gains bracket) will save $1,000 for every $6,667 in gains they offset.

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The average actively managed stock fund charges investors 1.02% of assets a year, according to Morningstar. Popular large-cap index funds, including versions from Vanguard and Fidelity, routinely charge less than 0.1%.

REAP LOSSES THAT EXCEED YOUR GAINS You can also deduct up to $3,000 of capital losses from your income. You need to make more than $190,000 to net $1,000. But even if you earn $91,900 to $191,650 you will still save $840.

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Sick of U.S. stock funds’ anemic 0.8% average yield? International stock funds boast 1.7%.

INVEST IN VALUE STOCKS Boost your investment all with extra features we didn’t want and which cost $5,000 to $7,000 more. So instead we waited. Two dealers eventually got the base model we were looking for—and one offered to sell it for $1,000 less than the other. —BRAD TUTTLE

returns by tilting your stock portfolio toward small value stocks, which tend to outperform blue-chip names over the long haul. Just remember it’s not a free lunch. Small value stocks tend to be more volatile, meaning steeper bear market drops.

15-YEAR AVERAGE ANNUAL TOTAL RETURNS BY STOCK FUND CATEGORY

9.4%

U.S. LARGE BLEND

10.5%

U.S. MIDCAP BLEND

11.1%

U.S. SMALL VALUE SOURCE: Morningstar

DECEMBER 2017

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KEEP YOUR JOB (AND GET A COST OF LIVING INCREASE) In some cases, earning an extra grand could be as simple as doing nothing but continuing at your current job. Salaries are expected to increase 3.2% on average next year, according to the Economic Research Institute, meaning if you make the average U.S. wage of $49,630, you’ll bank almost $1,590.

GET A MERIT RAISE Consider yourself a top performer? In recent years more and more companies have been favoring merit raises as a way to get the most out their employees, according to payroll company ADP. The average merit raise for full-time job holders was 4.3% in 2017—or $2,134 for the average earner.

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Most companies will give you a referral bonus if you recommend someone for a job and the company does indeed hire her. The most common referral bonus is between $1,000 and $2,500, according to a 2016 report from WorldatWork, a nonproďŹ t human resources

association. (Referrals for clerical positions are typically lower, from $500 to $1,000, the report found.) In 2015 an average of 13% of new hires came from referrals. I recommended a friend from my college paper. She got hired just as I was moving apartments, and the bonus paid for the movers and some new furniture. —ALICIA ADAMCZYK

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While you may think getting a raise is the key to making you happier, research suggests it actually happens the other way around: Fostering a positive attitude in your day-to-day work could help you move up in your company or land a big project. According to the Harvard Business Review, an easy way to

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M O N E Y. C O M

DECEMBER 2017

do so could be through simply helping your coworkers. A 2011 study found that people who coordinated lunches and organized office activities were 10 times as engaged at work— and 40% more likely to get a promotion (and a raise)—as those who didn’t.

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Job switchers averaged a 4.5% wage increase in 2017, according to ADP. Workers between the ages of 25 to 34 in fulltime jobs saw their wages increase the most. Chris Martin, lead data analyst for compensation data company PayScale, says a lot comes down to your job—those in “hot markets,� like software development, will likely see an increase if they switch, while pay for administrative assistants depends on how long they have been with a certain company.

M A K E M O N EY O F F YO U R ST U F F

STAFF PICK

SE ELL YOUR R ST TUFF: HO OLD A GA A ARAGE S SALE “O O Of course it’s possib ble b to make $111,000 at a yard sa ale,� a says y Y YardSaleQu ueen.com m author Chris Heisk Ch ka. Her tips: p Make sure s to advertise properly, p and if your home is in a remote e area, consider re enting out space p at a a location with m more foot h as a traffic, such oc churc c ch or local g . synagogue

median, which may reflect a more typical experience, is $440.

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6IRX ]SYV LSYWI Though not everyone has extra space to rent out, those who do can earn a decent amount of money via platforms like Airbnb. “I pulled in over $800 a month—all from renting out a spare room that was getting no use,� says Kevin Han, who writes the Finan-

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cial Panther blog. Earnest, a lending company, reports that Airbnb hosts make an average of $924 a month, although the

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Similar to Airbnb, sites like Getaround and Turo provide marketplaces where individuals can rent out their vehicles. Again, how much you make will depend on your car: A Honda Civic can earn over $367 a month, according to data provided by Turo, while the average monthly earnings for all users is $539, which accounts for insurance costs.

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You don’t have to have a super-yacht. Catamarans, sailboats, motorboats, and even kayaks are in demand. Renting your bowrider in Miami could earn you $39 an hour, while a weeklong rental of a deck boat in Seattle could net you $5,000, according to listings on GetMyBoat.

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There’s no shortage of sites that want to be the Airbnb for your

other stuff. On ShareGrid, professional photographers offer gear for as much as $1,000 a month. If you have a parking space or driveway in a city like Chicago or New York, CurbFlip and JustPark help you ďŹ nd renters— about a third of parking space owners earn $1,000 a year or more, according to CurbFlip. Omni is a San Francisco–based company that stores your extra stuff—from bikes to camping gear to Halloween costumes—and rents it out for you if you opt in.

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DECEMBER 2017

M O N E Y. C O M

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With diapers costing 33¢ a pop (Pampers, size 5, on Amazon.com, for example) you can easily save $1,000 by potty training your child at age 2 instead of 3. As recently as the late 1950s most Americans did this, and parents in many other countries still do, says Michelle Swaney, who runs the website thepottyschool.com.

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enlist about ďŹ ve families, at least at the start. It’s “kind of like a ďŹ re,â€? she says. “You have to fan the ames a lot in the beginning to get it going.â€?

+IX HMWGSYRXW SR OMHWĹž WTSVXW Activities like gymnastics can easily top $1,000 a year. But you don’t always have to pay full freight. “Call and ask,â€? says Elisabeth Leamy, host of the Easy Money podcast. “It’s not always on the website.â€? Leagues that don’t offer aid may still know about government grants. Local city councils near Leamy’s home in the D.C. suburbs b offer ff ggrants t ffor both o low-income o co e andd militaryy kids, she says. y .

,MVI ER EY TEMV The average weekly cost for a nanny: $556, says Care.com. Willing to try someone with a bit less experience who perhaps speaks a foreign language? You can save about $200 a week with an au pair, according to the website.

DECEMBER 2017

MOVE THE DAY “If a venue costs $7,000 on a Saturday, you can most likely negotiate [to lower] that price on a Friday, a Sunday, or a Thursday,� says Norfolk wedding planner Crystal Salazar. For instance, the Kimpton Hotel Eventi in New York City offers promotional packages discounted for weddings on Fridays and Sundays by $36 to $66 per person—meaning for weddings of 100 guests, this could save you $3,600 or more.

CUT BACK ON FLOWERS Flowers can cost upwards of $5,000, according to TheKnot.com. Lower your bill by hanging colored linens on the walls and tables, then combining the owers you do buy with eclectic vases or a centerpiece, says San Diego wedding planner Nahid Farhoud. Doing so can save about $2,000 for weddings of 100 to 200 guests.

STAFF PICK

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9 8 . M A L E R A PA S O — G E T T Y I M A G E S

M O N E Y. C O M

SERVE WINE AND BEER Mixed drinks typically cost $10 to $12 at the bar, while beer costs $6 and wine around $8, according to Farhoud. That means for a wedding with 150 guests, skipping hard liquor can easily save you about $1,000, assuming three drinks per guest. Another tip: Serve tap water instead of bottled—which can run up to $6 a pop at high-end venues.

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The wedding-industrial complex wants you to fork over thousands. The good news is there are plenty of ways to shave the cost. Here are three options, each of which could save $1,000.

33

Set up a local babysitting co-op. Amy Suardi, the mother of ďŹ ve behind the blog Frugal Mama, says aim to

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and 2015.* That means while there is some risk of principal loss, investing in rated investment-grade municipal bonds can be an important part of your portfolio. Potential Regular Predictable Income Municipal bonds typically pay interest every six months unless they get called or default. That means that you can count on a regular, predictable income stream. Because most bonds have call options, which means you get your principal back before the maturity date, subsequent municipal bonds you purchase can earn more or less interest than the called bond. According to Moody’s 2016 research,* default rates are historically low for the rated investment-grade bonds favored by Hennion & Walsh. Potential Tax-Free Income Income from municipal bonds is not subject to federal income tax and,

depending on where you live, may also be exempt from state and local taxes. Tax-free can be a big attraction for many investors in this time of looming tax increases. About Hennion & Walsh Since 1990 Hennion & Walsh has specialized in investment-grade tax-free municipal bonds.The company supervises over $3 billion in assets in over 16,000 accounts, providing individual investors with institutional quality service and personal attention. Our FREE Gift To You We’re sure you’ll want to know more about the benefits of tax-free Municipal Bonds. So our specialists have written a helpful Bond Guide for investors. It’s free and comes with no obligation whatsoever.

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Call (800) 316-1837 © 2017 Hennion and Walsh. Securities offered through Hennion & Walsh Inc. Member of FINRA, SIPC. Investing in bonds involves risk including possible loss of principal. Income may be subject to state, local or federal alternative minimum tax. When interest rates rise, bond prices fall, and when interest rates fall, bond prices rise. *Source: Moody’s Investor Service, May 31, 2016 “US Municipal Bond Defaults and Recoveries, 1970–2015. Past performance is not a guarantee of future results.

MONEY

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M O N E Y. C O M

DECEMBER 2017

ILLUSTRATION BY RYAN SNOOK

DECEMBER 2017

M O N E Y. C O M

8 ,) * -(9' - % 6 = 6 90 )

Judith Hamill needed. She was already trying to sell a house while taking care of her beloved horse’s hospitalization and coping with her stepmother’s death. Then, in early June, the North Carolina native received what she considered a surprising letter from her longtime brokerage firm.

MORE STRESS WAS THE LAST THING

“We are writing to update you on planned changes to the services that Merrill Lynch and your adviser offer to certain types of brokerage retirement accounts as a result of the pending implementation of the new Department of Labor Fiduciary Rule (DoL Rule).” The letter was prompted largely by a new regulation that was set to take effect June 9, 2017. Called the fiduciary rule, it was seen as the biggest investor reform in a generation and was widely welcomed by consumer advocates. At its core, the rule requires all financial advisers working with retirement investments to act in their clients’ best interests—a seemingly innocuous mandate that has thrown the financial industry into turmoil. In theory, the fiduciary rule was supposed to be a win for consumers. But political change in Washington has hobbled the rule, and big financial advice firms have scrambled to comply with what has become a shifting regulatory landscape. As a result, some investors have gotten caught in the cross draft: Pushed into new types of accounts, they face a complex set of changes fraught with financial risk. That’s what happened to Hamill, 68. The Merrill Lynch letter arrived just days before the rule was set to take effect on June 9. She saw two main options. She could keep her existing commission-based accounts—a brokerage account and a Roth IRA—exactly as they were, but

M O N E Y. C O M

DECEMBER 2017

she would be unable to make any changes inside the Roth going forward. Or she could shift her Roth into a different account, where she would pay a yearly fee and have an adviser actively manage her retirement assets. (A spokeswoman for Merrill Lynch says the first communications of the account changes were sent in 2016.) Hamill phoned her broker’s office to find out more. After a few conversations, she confirmed that her annual fee, if she switched to the new account, would be 1% of assets. Such fees are supposed to pay advisers for time they spend managing investments and helping clients with planning—work for which they were previously compensated by mutual fund commissions. Those commissions caused some of the industry’s conflicts of interest; under earlier rules, advisers weighing two similar funds were free to choose the one that offered them a higher payout, as long as the fund was “suitable” for the client. The White House’s Council of Economic Advisers estimated in 2015 that such conflicted advice cost American investors $17 billion a year. But Hamill didn’t want to pay even a 1% fee. “It is outrageous to inflict these kinds of charges on retirement accounts,” she says. “Since I have not traded an issue in the Roth in over three years, the additional cost of making it a ‘managed’ account would have been thousands of dollars.” And Hamill wasn’t convinced she’d get any additional advice. “He never called to introduce himself when he took over my account, more than a year ago, and never asked about my goals, interests, or background,” she says. The adviser had initiated only one conversation with her, Hamill adds, after some lingering estate funds started to roll into the account. “He just wanted to trade the stocks, and that was the only conversation we ever had.” In the end, she bailed out. While she didn’t dump the brokerage entirely—she liked the high credit limit it allowed on her linked Bank of America credit card—she avoided the advisory fee by moving everything to Merrill Edge, the company’s online brokerage. The service provides little personalized advice, and she’ll still pay $6.95 every time she makes a trade, but that’s far less than the thousands she would’ve paid through a fee-based account.

% 63'/= 6300398 You could certainly call Hamill’s case a one-off—a stressful transition, communication misfires—but in phone and email exchanges with more than 50 investors (at a variety of firms) and industry observers, MONEY found her experience was not unusual. Nor, it seems, are the problems

PA B L O M A R T I N E Z M O N S I VA I S — A P

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limited to one big Wall Street institution. Some of the issues stem from the rule’s interrupted rollout—and uncertain future. An Obama-era initiative, the regulation emerged from the Labor Department, whose purview includes retirement accounts. But while finalized in 2016, the rule wasn’t slated to take effect until April 2017. That timeline may have seemed fine amid expectations that another Democratic administration would see the rule through to completion—yet it proved lethal once President Donald Trump took office, with Republican majorities in both houses of Congress. The GOP has generally opposed the measure, echoing Wall Street’s line that the rule would hurt less wealthy consumers by making it financially impossible for advisers to give them crucial advice. A Trump memorandum in February effectively pushed back the initial rollout to June 2017, and delayed until 2019 a second part of the rule, which among other provisions would have let consumers bring class-action suits against firms that violated their fiduciary duties. The House of Representatives, meanwhile, is weighing legislation that would roll back the standards already in effect. And the new SEC chairman told lawmakers in October the agency was drafting its own fiduciary rule that would supersede the Labor Department’s version. Such flux has caused confusion for both investors and

-8 -7 3986%+)397 83 -2*0-'8 8,)7) ?*))7A 32 6)8-6)1)28 %''39287 š —INVESTOR JUDITH HAMILL

financial firms. In seeking to standardize practices and limit their legal risk, some firms have interpreted the fiduciary rule as a mandate to shift all their clients into fee-based accounts, avoiding commissions altogether.

&38831 0-2) &)2)*-87 In truth, the financial services industry was already pushing clients over to fee-based accounts—in part because the change was good for business. While financial advisory firms’ revenues have remained essentially flat since 2014, revenue from fee accounts has grown by over 5%, according to Aite Group research. Among the biggest firms (Merrill Lynch, Morgan Stanley, Wells Fargo, and UBS), fee-based investments now make up 38% of assets managed, Aite found. Even off Wall Street, firms have seen an uptick in their fee-based business. Brokerage Stifel Financial announced the second best quarter in firm history in

DECEMBER 2017

M O N E Y. C O M

8 ,) * -(9' - % 6 = 6 90 )

October, with total revenue climbing to $721 million. Just one quarter earlier, CEO Ron Kruszewski said that the fiduciary rule was one key reason for Stifel’s “shift” from commission revenue to fee revenue. “And as a result of this shift, we continue to be pleased with the growth in asset management revenues,” he noted. At Raymond James, assets in fee-based accounts are up 27% over the past year, the company said in October. That increase is “due to net adviser growth and market appreciation and increased use of fee-based accounts,” CEO Paul Reilly said at the time.

ŝ8,) 0-2+3 -7 -28-1-(%8-2+Ş One Raymond James client, New Jersey nurse Gina Wise, received her mailing in early August. Her financial adviser had been managing assets in a small Roth IRA that she kept in an outside account at OppenheimerFunds. But in the 51 pages of paperwork she received, she was told that she had to transfer her Roth to Raymond James. “One change prompted by the fiduciary rule is Raymond James is requiring all financial advisers to transfer clients’ IRAs directly held at mutual fund companies to Raymond James custodial by October 1, 2017.” Raymond James declined to comment on the policy shift, but Wise found the letter daunting. “The lingo is very intimidating,” Wise says. “It’s no different than someone coming into my world—I’m an oncology nurse—and the lingo, the medical terms, and the names of the drugs are another language. You wouldn’t understand it either.” At her husband’s urging, she called Oppenheimer, which told her she didn’t need to shift anything to Raymond James unless she wanted an adviser to help her make changes to her account. “That’s all I needed to hear,” she says. “I’m going to cut them out; I don’t need the nonsense. I don’t need the middle person.” For now, she’s sticking with Oppenheimer and opting to forgo advice on the account—dropping Raymond James altogether.

=396 1-0)%+) 1%= :%6= As the industry implements the new rules, investors’ experience may vary widely, depending on their age, life stage, and goals. If you’re a younger investor, starting from scratch, the rule may work well for you. If you want a human adviser

M O N E Y. C O M

DECEMBER 2017

=39 '%2Ş8 *3-78 7)6:-')7 32 -2:)78367 8,%8 8,)= (32Ş8 ;%28 83 .978-*= %c,-+,)6 46-') š — BARBARA ROPER, CONSUMER FEDERATION OF AMERICA

to help you figure out retirement, that person will need to put your interests first—by law. And if you have less money and don’t need comprehensive advice, you can skip a planner for now and just use either a discount brokerage or one of the new robo-advisers: computer algorithms that invest for you, based on factors like age and appetite for risk, and tend to charge much lower fees. If you’re already working with a broker, however, there are pitfalls. With some firms limiting their commission account options, you may be pushed to shift accounts and start paying an annual fee. If your adviser charges the average and you have $500,000 in retirement savings, you’d be looking at new fees of over $5,000 every year— and if you leave, you may face losses or other consequences from selling off your holdings. MONEY has long recommended fee-based compensation for financial advice. If you’ve got complex investments and need help managing different financial priorities, paying a fee may be money well spent. But as several people interviewed for this story noted: You’ve probably already paid commissions on everything in your portfolio; if you’re already retired, in fact, you may just be spending down your holdings rather than changing them around. So for that 1% fee, you should be getting ongoing service, advice, and performance. Moreover, not every investor needs, or wants, either the extra service or the accompanying price tag. Almost 60% of investors who pay commissions said they didn’t want to switch to a fee-based account, according to a recent J.D. Power survey of 1,000 investors. “With robo-advisers becoming more mainstream and online brokerages charging rock-bottom prices, if you don’t want any management and you just want execution, charging a 1% fee is going to be a tough thing,” says Bill Butterfield, a senior analyst specializing in the wealth management industry for research firm Aite Group. Some investors say the fee was tolerable—once it got cheaper. Take John, a retiree who asked that his last name be withheld because he doesn’t want to damage his relationship with his adviser. He spent two months running the numbers this spring after his Merrill Lynch adviser asked him to change accounts—and start paying a 2.2% advisory fee. “I’m not doing a lot of buying and

;,%8 83 (3 23; selling,” says John, who also shared with MONEY the paperwork Merrill provided him about the new account structure. “I’m not that type of person who would generate a lot of commissions and therefore save money on a fee-based account.” After several rounds of conversations, he agreed to move some assets into a fee-based account that charged 0.5% annually, while keeping others untouched in a commission account. But he feels the agreement has only bought him some time to figure out a long-term solution. “As that portfolio becomes all fee-based, it’s not going to be in my best interest,” he says.

*))7 (32Ş8 '6)%8) *-(9'-%6-)7 Amid all the changes, it’s easy to lose sight of the fact that transferring investors completely out of commission-based accounts was never required by the rule—nor do fee accounts automatically confer fiduciary-level service. “I’m having trouble wrapping my arms around how simply switching a client to a fee-based account equals fiduciary service,” says Butterfield, the industry analyst at Aite. Even if a firm decides to offer only a fee option, the prices must be reasonable for the services offered, says Barbara Roper, director of investor protection at the Consumer Federation of America. “You can’t foist services on investors they don’t want or need in order to justify charging them a higher price,” Roper says. “If the firm only has a fee account option, and the investor doesn’t want or need all the services traditionally provided to fee accounts, then at the very least they ought to have a pricing option that’s designed with those investors in mind. “You can’t shift people into fee accounts and then point to the higher cost and say, ‘Gee, investors are being harmed,’ ” Roper adds. “Lower the fees to reflect the level of service.” For an investor like Hamill, who needed very little ongoing account management and felt her current adviser was not providing any additional advice, the solution turned out to be Merrill’s online brokerage. She got access to the same research on the markets, but she could make her own buy-or-sell decisions. More changes are likely to come for the fiduciary rule—and for investors. It’s a lot to keep track of, but your retirement is definitely worth the effort. In the end you may find that you’re happier making a change, as Hamill is. “I set up the Merrill Edge through my local branch, and they’ve been really nice to me,” she says. “I’ve been really impressed so far.”

7S [LEX WLSYPH ]SY HS MJ ]SY KIX E PIXXIV JVSQ ]SYV EHZMWIV EWOMRK ]SY XS GLERKI ]SYV EGGSYRX# (32Ş8 697, 8,-2+7 Take the time to carefully review any communications. “Most of this business is based on trust and relationships, so if the adviser says, ‘Hey, we’re moving you to a new account,’ you assume it’s in your best interest,” Butterfield says. Don’t assume anything, and don’t let the jargon intimidate you into rushing or making a rash decision. Explore all your options, even if it means having some uncomfortable conversations with your current adviser and the firm. '314%6) 8,) '3787 Once you know what the annual advisory fee will be— and whether there will be any other charges under the new system—it’s time to pull out your calculator. Some bigger firms, like Merrill, will provide you with a cost breakdown of your past trading fees; to get a good apples-to-apples comparison, you’ll also want to find out if you were paying anything else—such as an annual maintenance fee charged on the account—and factor those costs in as well. You can also sign up for FeeX, a free service that scans your accounts, calculates what you have been paying, and lets you know if you’re paying high, average, or low fees. (It also generally makes recommendations on what funds or services you could use to lower your costs.) ;%8', *36 79646-7)7 Another potential land mine: Are you being asked to close out an account and

sell off your positions before opening a new account and reinvesting? If so, you’ll need to factor in the cost of any losses, possible taxes on any gains, and any trading costs. (If you’re transferring from a commission account to a fee-based one within the same firm, you can often shift some securities without selling.) 498 % 46-') 32 =396 %(:-') 2))(7 Once you figure out the cost comparison, do some mental math around the benefits of the advice you get. Are you simply sticking to a routine of buying shares of target-date funds, or do you actually want regular advice on your portfolio—and if so, how much is that worth to you? 033/ %8 %08)62%8-:)7 If you don’t want to pay for advice, you have a few options. You can follow Hamill’s example and shift your assets into an online discount brokerage, like Merrill Edge, Fidelity, Schwab, or TD Ameritrade. You can also go directly to a fund company, like Vanguard. In either case, you’ll be in the driver’s seat and pay rock-bottom prices to trade. (You can also pair this approach with a financial planner who works by the hour to get your toughest questions answered in person.) If you want a managed portfolio, check out a robo-adviser—some of which even offer human advisers for you to occasionally talk through your thornier financial issues.

HAVE YOUR FINANCIAL ADVISERS CHANGED THEIR FEES LATELY? Tell us at letters@moneymail.com.

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Before investing in any mutual fund or exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully. ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund. Sectors are defined by the Global Industry Classification Standard (GICS). Source for A.I. Revenue Forecast: IDC 2 Source: McKinsey Global Institute, “Artificial Intelligence: The Next Digital Frontier” 3 Expense ratio data as of 8/22/2017. Based on a comparison of total expense ratios for U.S. technology sector-level ETFs with similar holdings and investment objectives, within the universe of 46 U.S. ETFs in the Morningstar technology category. 4 FTEC expense ratio, .084%. Expense ratio is the total annual fund operating expense ratio from the fund’s most recent prospectus. Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies. Fidelity Brokerage Services LLC, Member NYSE, SIPC. © 2017 FMR LLC. All rights reserved. 812469.2.0

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I ILLUSTRATION BY MARTIN LAKSMAN

DECEMBER 2017

M O N E Y. C O M

THE FUTURE OF SHOPPING

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M O N E Y. C O M

DECEMBER 2017

Above: Josh Jones checks the fit of a coat on Tyler Kantor at the Madison Avenue location of Bonobos in New York City.

P H OTO G R A P H B Y W I N N I E AU

;,)2 =39 ;%0/ -283 8,) 1%(-732 Avenue Bonobos, don’t expect to walk out with anything. Sure, you can try on a pair of pants, or about a dozen different gingham work shirts, but when you pick your favorite, there’s no cashier to ring up your purchase, no line to stand in, nor shopping bags to haul it home. Instead, Joshua Jones—you call him Josh—swipes your card on his iPad and offers you a bottle of Perrier “for the road.” If you’re not in a rush, he’ll help you rank Jessica Alba movies, or chat about your upcoming vacation. Within a few days, your clothes will arrive at home, shipped from a warehouse in Massachusetts. Josh isn’t a sales associate. He’s what the upstart menswear company deems a “guide.” He knows the intricacies of menswear intimately (style, fit, comfort), and has a client book of regulars who trust his taste. On a recent weekday afternoon, he convinced Phil, a new customer, to try on a pair of olive trousers he ended up buying. After Phil rushed out the door to make a business meeting, Josh made a mental note to follow up with him by email to make sure there’s no buyer’s remorse. “I make it easy for them,” Josh says. “People say all the time, ‘I hate shopping. You made this enjoyable.’ ” Josh doesn’t work on commission. When he hands you that sparkling water, remembers your kid’s name, or waves to you through the store window, it feels sincere. At past retail jobs, employers encouraged him to upsell constantly, and to adhere to strict styling guidelines. Here, things are a little different. Bonobos is a newcomer to the brick-and-mortar game and is betting on a new trend called “experience shopping,” a catchall term that has come to define physical spaces that seek an emotional

connection with their customers, and a relationship that goes beyond a ďŹ ttingroom handoff and debit card swipe. As industry giants move their operations online, shuttering stores and shedding thousands of employees, Bonobos and other brands that offer experience shopping are taking the opposite approach. The company started as an e-commerce men’s pants store in 2007 and branched into physical spaces ďŹ ve years later, adding suits, dress shirts, and other clothes that cost about the same as those at any retailer that targets the upper middle class. But while a dress shirt at Bonobos will run you about $98, just like a shirt at J. Crew, the retail climate for those two brands has been radically different. This year, as J. Crew, loaded with debt, announced closings and

staff layoffs, Bonobos announced a string of new stores. Today there are 44 physical “guideshopsâ€? in the U.S. and about 300 guides. For Josh, this job isn’t just a paycheck or a placeholder for more meaningful work. At 25 years old, he wants to manage his own brand one day. When he ďŹ rst interviewed at Bonobos, the general manager who hired him asked about his ďŹ ve-year plan. “I was kind of shocked,â€? Josh recalls. “And then he said, ‘I want to help you get there.’ â€? Josh’s story might seem a little strange. Eight years after the recession, charismatic college graduates aren’t supposed to be working in retail—and they’re deďŹ nitely not supposed to like working in retail. And yet, as these jobs teeter on the brink of what pundits have dubbed the “retail apocalypse,â€? Josh and a eet of new, energetic employees are taking up the ďŹ ght. Together, they’re challenging everything you think you know about shopping. -8Ĺž7 23 7)'6)8 8,%8 8,) 6-7) 3* ) '311)6') ,%7 0)*8 a stain on traditional retail.

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M O N E Y. C O M

THE FUTURE OF SHOPPING

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M O N E Y. C O M

DECEMBER 2017

Right: Customers trying on clothes at Rent the Runway in San Francisco.

on the decline,” says Andrew Chamberlain, Glassdoor’s chief economist. “What’s happening instead is a shift. People are still going into the brick-and-mortar stores that feel good to be in, and where you can expect to find a person to help you navigate a complicated product space.” Retailers that are thriving, Chamberlain says, have learned the not-so-secret formula for winning over an audience spoiled for choice: a strong e-commerce presence to snag online sales, paired with an in-store experience to keep them coming back. You may have noticed what’s called the “omni-channel strategy” trickling into the places you already shop. Sportswear giants Adidas and Nike have recently unveiled massive, immersive retail experiences, with basketball courts, treadmills, and soccer practice zones. Outdoor activewear brand REI has outfitted stores with rock-climbing walls and has added mobile offerings like hiking-trail apps and instructional videos for the gear it sells. Last year, as competitors’ sales dipped, REI announced record revenues. At Sephora, a makeup behemoth that has long embraced experience shopping, stores function like massive test labs, where customers (“clients”) try on hundreds of makeup and skin-care brands, and consultants (“cast members”) mosey around to demonstrate as

P H OTO G R A P H BY E R I N K U N K E L

In the past year alone, a laundry list of once-thriving shopping mall staples like Payless, Toys “R” Us, and Wet Seal have filed for bankruptcy. Other iconic brands that shaped fashion in the ’90s and ’00s, like American Apparel and the Limited, have shut down in-store operations for good. Brick-and-mortar jobs are also disappearing: In the first nine months of 2017, layoffs at department stores like Macy’s and J.C. Penney led to the loss of more than 70,000 jobs, according to the outplacement firm Challenger Gray & Christmas. Delivery from Amazon Prime can now fetch your coffee beans, tampons, dog treats, printer ink, Ziploc bags, daily vitamins, and tube socks in a matter of days, if not hours—and can be scheduled on a self-reliant loop. If you live in a major metropolitan area, FreshDirect, Boxed, and Seamless will gladly handle your grocery, toiletry, and takeout needs. And companies like Netflix and Spotify provide endless, on-demand entertainment. So why would you stand in an exceedingly long line, spar with a quick-tempered cashier, or wander aimlessly around a megastore if you no longer have to? For physical retailers, it’s not enough to have things anymore, experts say. Now you need an experience—a convenience, activity, or ambiance—to rope people in. “There’s been a lot of fear that retail is

needed. Employees don’t need a ton of beauty expertise to work at Sephora, but they do need some digital fluency—enough to school customers in its expanding range of digital tools. “We know the lines are blurring,” says Karalyn Smith, senior vice president of human resources at Sephora. “We’re embracing every way the client wants to interact with us, and equipping our cast members in the store to be a part of that.” Most important, Smith says, Sephora’s employees need to be emotionally intelligent and know how to create a “human experience” in this increasingly digital space. For new entrants to the retail space, baking experience shopping into a business plan is a no-brainer. Many of them, like clothing retailer Everlane and prescriptionglasses company Warby Parker, opened physical locations after growing a customer base online first. Their physical stores share a renewed faith in that warm and fuzzy, the-customer-is-always-right mentality that Mom and Pop figured out ages ago. And they’re making sure every hire you interact with reflects that. “Roles are changing,” says Jane Greenthal, a senior design strategist focused on the retail industry at the design and consulting firm Gensler. “It’s a different skill set. Employees aren’t just there to stock merchandise; they’re building relationships.”

-* +,378 1%007 %2( )148= 4%6/-2+ lots point to a tragic end for apparel retail, Rent the Runway exists in a parallel universe. In its New York City flagship store, color-coded formalwear and airy fitting rooms fill 6,000 square feet of prime Manhattan real estate. On a recent weekday afternoon, it was buzzing with activity. “This is nothing,” says 26-year-old Luisa Orozco, one of four store managers. Before it opened at 9 a.m., there was a line of about a dozen women waiting to get in, she says. “You should have seen it at lunchtime.” Rent the Runway is an omni-channel pioneer: The company launched in 2009 as an online destination for designerdress rentals and branched into physical stores in 2013. In 2016 it added a subscription service that lets customers

DECEMBER 2017

M O N E Y. C O M

THE FUTURE OF SHOPPING

rent a rotating closet of designer clothes for $139 a month, and in October it introduced a new tier that lets them rent four pieces for $89 a month. For all its Pinterest-perfect accoutrements (blush-pink accents, jewelry arranged like artifacts), the shop is surprisingly comfortable—staff and customers chat like girlfriends in a beauty salon or at a neighborhood bar. For special occasions, they meet with stylists in private appointment rooms, mingling with other maids of honor, job seekers, and prom dates to be. “It’s kind of like Cheers,â€? says CEO Jennifer Hyman. “Everybody knows your name.â€? Hyman likens Rent the Runway’s brick-and-mortar outposts to mini community centers. At the San Francisco location, regulars use the store as a coworking space, dropping by in the morning and huddling around marble communal tables for hours, she says. From a hiring perspective, that’s an important distinction. You can’t fake community with apathetic college students. So when the company hires, it looks for applicants who have worked intimately with customers in the past, usually in hospitality roles at hotel concierge desks, ďŹ ne restaurants, and cult-favorite ďŹ tness studios like SoulCycle. Rent the Runway also looks for employees who are gifted conversationalists, judicious, and patient. Compared with other brands, employee turnover is low. The majority of managers have been with their stores since they opened, including the entire managerial team in Washington, D.C., Hyman says. Orozco, who worked as a celebrity stylist before joining Rent the Runway, has been with the company for four years—a year longer than the average retail employee stays at her job, according to the Bureau of Labor Statistics. She’s

M O N E Y. C O M

DECEMBER 2017

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already got more responsibility than managers in similar posts, helping the executive team suss out which marketing, sales, and service strategies work for New York customers. She even draws career maps for the stylists who work in her store. On all levels, experience-shopping venues tend to pay better than traditional retail stores. At Bonobos, employees like Josh (experienced nonmanagers, or “lead guidesâ€?) make an average of $17 an hour, and new guides make an average of $15 an hour, according to a company spokeswoman. BeneďŹ ts, too, are abundant: Bonobos offers nearly unlimited vacation, maternity and paternity leave, and an annual team-building retreat for full-time employees. Glassdoor data shows that the average wage for entry-level sales associates at other experience stores, like Warby Parker, is about the same as Bonobos’. Compared with Glassdoor estimates for stores like Gap ($10 an hour) and Macy’s ($9 an hour), and the BLS national average for sales associates ($12 an hour), it’s clear these brands are willing to pay a premium for talent. “They have to be a good listener, a good problem solver,â€? Glassdoor’s Chamberlain says. “Skills that go beyond scanning an item. That’s deďŹ nitely valuable today.â€? &6-'/ %2( 1368%6 6)8%-0 ,%7 &))2 13:-2+ in this direction for years. When was the last time you saw an empty seat at Apple’s Genius Bar? Or a deserted Trader Joe’s checkout line? Like any industry shift, there are growing pains. Rent the Runway tried an accessoriesfocused subscription service that never left beta. The company also went through staff shake-ups and lost several of its executives; it became proďŹ table in 2016.

THE FUTURE OF SHOPPING

Sustainability is another constant concern for the omni-channel. Companies with e-commerce origins may be better equipped to compete with Amazon than traditional brands, but there’s no guarantee the retail behemoth won’t scoop up their customers anyway. Amazon already has its sights set on the fashion industry: Prime Wardrobe, a subscription clothing service, is currently in the works. But perhaps the biggest tell is coming to Walmart. In the past two years, America’s largest private employer—long plagued by a bad customer service reputation and consistent reports of low wages—has spent $2.7 billion on training programs designed to improve how employees interact with customers. It has also raised wages: The average pay for nonmanagerial full-time employees is now $13.85, up 17% from three years ago. “The human touch becomes a competitive differentiator,� says Walmart spokesman Ravi Jariwala. Over the past year, Walmart has doubled down on the experience philosophy. This spring, the company tapped Rent the Runway cofounder Jenny Fleiss to oversee a tech startup it’s calling Code Eight, a project from a Walmartbacked tech incubator rumored to revolve around highly personalized shopping. A few months later, Walmart announced it had acquired Bonobos and named its CEO Andy Dunn senior vice president of digital consumer brands. For longtime Bonobos customers, the Walmart buyout was predictably contentious. Josh, though, isn’t stressed. He suspects the merger will only lead to more personal career growth. Plus, he’s got too much going on to think about that right now—like that follow-up email to Phil.

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ILLUSTRATIONS BY MARTIN LAKSMAN M O N E Y. C O M

DECEMBER 2017

Retailers will shift to encouraging consumers to interact with products—to explore and play—with the idea this will result in sales in the long run. Last year, Samsung opened a 40,000-square-foot “immersive cultural center� in New York City that doesn’t stock any products for sale. Instead, it boasts a three-story wall of digital screens, a multimedia studio, and a demo kitchen designed for showing off things like smart appliances. It welcomes the public by hosting parties, movie screenings, book signings, and talks by people like wine industry entrepreneur Gary Vaynerchuk. Customers of the future will also be able to see, try on, and even feel clothing in any style, size, color, and fabric imaginable, thanks to biometric scans and augmented reality. And this won’t necessarily have to take place in a store. “With virtual reality, you’ll be able to sit behind the wheel of a Mercedes in your living room—to literally feel what it’s like driving it,� says Doug Stephens, author of Reengineering Retail: The Future of Selling in a PostDigital World. “You could virtually visit a hotel room you’re thinking of booking or walk around in a restaurant too.�

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Get ready to say goodbye to checkout waits, and you probably won’t ever need cash, credit cards, or even a wallet or smartphone. Retail prototypes like the Amazon Go store in Seattle show where things are headed by dramatically increasing convenience, with payments made via a virtual shopping cart rather than an old-fashioned checkout line. Jim Carroll, a renowned futurist, says that within 10 years, stores will be capable of accepting payments with a retina scan or thumbprint. And your car could be your wallet for that next run to the drive-thru liquor store or burger joint too. “Your vehicle will basically turn into a credit card,” he says. “It will be authenticated in advance, and you’ll be charged automatically when you go through the drive-thru.” Depending on how driverless car technology progresses, you might not even need to be behind the wheel when the transaction happens—but if you spill some ketchup, that’s still on you.

So-called husband pods opened this year at a mall in China, allowing bored dudes to zone out with video games in glass enclosures rather than be dragged around to clothing stores. Weird? Yes. But it’s also a great example of what retailers and malls are doing with the knowledge that the act of physically going shopping is rarely a necessity nowadays— and that some people actually hate doing it. Expect more events and nonshopping distractions to give even the haters a reason to show up in shopping centers—a term that may soon be a misnomer, says Stephens. “Today, 70% of mall space is dedicated to retailers, and most of them are selling apparel,” he says. “The whole model will shift, and down the line 30% of the space will be for shopping, while 70% will be dedicated to food, entertainment, lifestyle, and community activities.”

7XSVIW 8LEX 6IGSKRM^I =SY Retailers have been trying to merge online and in-store operations for years, and the full synchronization of the two experiences will soon be at hand. This means that in the same way a website knows who you are when you’re shopping online, physical stores will identify you in the aisles via facial recognition and retrieve your browsing and purchase history instantly. Sure, that’s creepy, but the upside is, because the store knows what you like, it might offer pop-up discounts on your favorite products or free samples. You’ll also have the same benefits of online shopping, like one-

click purchasing, easy free shipping, and endless information like price comparisons and product history from touch screens or voice command. The options for what you can buy will be limitless too. “You’ll be able to rapidly search everything a store sells and find or customize the exact thing you want,” says Stephens, who uses the term “living websites” to describe stores of the near future. Stores won’t be restricted by what they happen to have in stock or even by what manufacturers produce. Take running shoes: In the future there will be no restrictions on what size, color, and style of sneaker you can purchase. “A scan of your foot will be sent to a 3D printer, and it’ll make customized footwear on the spot,” Carroll says.

THE FUTURE OF SHOPPING

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-8Ĺž7 23 '3-2'-()2') 8,%8 ,36636 (-6)'836 George Romero’s 1978 zombie ick, Dawn of the Dead, culminates in a mall, with legions of zombies drawn to the place to gorge mindlessly. If the undead were craving bargains rather than human brains, it could have been just any old Black Friday—a hellscape like none other, in the minds of many shoppers and nonshoppers alike. Agitated crowds. Brawls. Trampling. The mayhem supposedly happens in the pursuit of bargains, and in 2017 it’s fascinating that this phenomenon—much like a zombie—can’t seem to die. Customers ďŹ le into Macy’s in New York City on Thanksgiving, Nov. 26, 2015.

DECEMBER 2017

M O N E Y. C O M

THE FUTURE OF SHOPPING

WHY IS THIS?

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M O N E Y. C O M

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The retail analytics ďŹ rm ShopperTrak forecasts that Black Friday will be the 2017 season’s busiest day for foot traffic in stores.

DECEMBER 2017

For those eager to avoid crowds, take note that this day is predicted to be the season’s least-crowded day at shopping centers.

they know Black Friday doesn’t necessarily have the lowest prices. Fewer shoppers wake before dawn to hit the stores on Black Friday, and many more shoppers seem content to browse online rather than battle it out with Black Friday crowds in person—assuming they’re shopping at all this day. But the fact is there are still insane numbers of Black Friday crowds. According to a Mintel survey, 23% of American holiday shoppers say they will go shopping in a physical store on Black Friday 2017. Tech-savvy younger consumers, who are presumably most comfortable with online shopping, are particularly likely to partake in the traditional Black Friday experience; 42% of survey participants ages 18 to 22 said they planned on shopping in brick-andmortar stores on the day. So what’s happening? Why don’t they just stay home and chill, perhaps do a little no-stress online shopping where the deals are just as compelling? Part of the reason that Black Friday is a phenomenon is simply that, well, Black Friday is a phenomenon and not about low prices. “They want to experience the excitement of the event ďŹ rsthand,â€? says DealNews.com’s director of content marketing Lindsay Sakraida. The site polled people at Target to see if they were there for anything speciďŹ c. The answer? Not really. “They just wanted to see what all the fuss was about,â€? she says. In other words, many people view

Just under one-quarter of shoppers planned on going to physical stores on Black Friday, per a Mintel survey.

P R E V I O U S S P R E A D : K E N A B E TA N C U R — G E T T Y I M A G E S

The term “Black Fridayâ€? was ďŹ rst used by retail marketers after World War II. But it wasn’t until the consumerism-crazed 1980s that it truly became a big deal nationally. As Black Friday became hyped as a standout day when stores were ooded with ultracheap prices and amazing discounts, something of an arms race arose. Retailers began opening earlier and earlier on the Friday morning after Thanksgiving, and crowds waiting outside in the frigid predawn grew bigger and bigger in antsy anticipation of the “doorbusterâ€? deals lying inside. But for years now, online and physical retailers alike have hosted ash sales and deep markdowns long before and long after. Black “Fridayâ€? sales now launch on Thanksgiving Day itself, and the concept of “Christmas creepâ€?—promotions as early as September and October—has signiďŹ cantly expanded the holiday shopping season. Shoppers can often ďŹ nd cheaper prices on days during the holiday shopping season other than Black Friday, including Cyber Monday. Sales-tracking sites like DealNews.com say that the vast majority of deals on Black Friday itself can be ordered online, negating any reason to hit the store. Retailers seem to be phoning it in on this supposedly special day too: After looking over several seasons’ worth of Black Friday ads, consumer-deals tracking site BradsDeals.com has concluded that stores like Target, Walmart, and Macy’s repeat the lion’s share of Black Friday promotions. Same items, same prices, year after year. All of this feeds into the theory oated annually by retail analysts that Black Friday is dying, or is perhaps already extinct or at least irrelevant. Except it’s not. Yes, foot traffic and spending in brick-and-mortar stores have been decreasing on Black Friday, and in surveys there’s a steady increase of consumers saying

&PEGO *VMHE] (IEPW E 'LIEX 7LIIX With so much choice now to lure shoppers in for the best bargains, the hunt can be overwhelming. But having a strategy can ďŹ x that. Here are four tips on how to approach the holiday shopping madness—and save some money (and your sanity) in the process.

Black Friday as the shopping equivalent of the Super Bowl: They look forward to it not necessarily for the game itself (which can be underwhelming) but because of the desire to be a part of the action, and to evaluate how this extremely hyped event unfolds—pomp, circumstance, commercials, and all. Beyond FOMO (fear of missing out), consumer psychologist Kit Yarrow explains that Black Friday is simply an ingrained tradition for families and friends. People typically have the day off work and need something to do with out-of-town visitors. They just spent the previous day mostly indoors, eating too much food and watching too much TV. An outing at the mall is something toddlers, tweens, and grandparents can get behind. “You might look at the Black Friday crowds and feel bad that they’re that desperate for a bargain,â€? says Yarrow. “That’s not it at all. They’re excited about this day. It’s a group activity. This is fun with friends.â€? Sure, you could shop on Black Friday with your best friend or favorite aunt with a tablet from the comfort of your couch, but it’s just not as thrilling as being in the mall, among the gaggles clamoring for deals. There’s something about touching the merchandise that gets those competitive juices owing. “It’s an element of instant gratiďŹ cation and satisfaction that comes with toughing it out for a deal,â€? adds Sakraida. Yarrow also says that in today’s retail scene, when shoppers are routinely confronted with 40%-off promotions and it’s more impossible than ever to grasp what a decent price is, consumers glom onto Black Friday as a day when they can lower their guard and just buy some stuff. “We are in an era of distrust, when you never know when a deal is a good deal,â€? she says. The arrival of Black Friday “tells them they’re at least not going to get ripped off.â€? So go ahead and walk with the zombies. Don’t feel guilty. And remember: You’ll never be alone.

The average discount at J.C. Penney on a recent Black Friday, the biggest markdown of all major stores in one study.

THINK CHEAP ELECTRONICS

LOOK FOR ACROSSTHE-BOARD DISCOUNTS

Forget about discounts on new iPhones or cutting-edge top-brand TVs. Instead, Black Friday tends to feature rock-bottom prices on no-name electronicsâ€”ďŹ gure less than $200 for a 40-inch 1080p TV. Starting on Thanksgiving or even earlier, Amazon has been slashing prices on its tablets and smart speakers.

Normally, bargain hunters must sift through what’s on sale and consider if it’s actually something they want. Inevitably, what you really want winds up being full price. Retailers like Abercrombie & Fitch, Children’s Place, Gap, Hollister, and Old Navy have made the hunt easier by offering 40% to 50% off storewide on past Black Fridays—and the discount’s often the same in store or online. Look for similar across-the-board markdowns on Black Friday 2017 as well as on Cyber Monday.

Before paying more than you need to for any “bargain,� use a price-comparison app like ShopSavvy to see if the same item costs less through a competing retailer. It’s also helpful to know how much that item cost in the recent past, so check out the CamelCamelCamel app, which tracks the pricing history of merchandise at Amazon.

COMPARE PRICES QUICKLY

KNOW WHEN TO WAIT

By no means does Black Friday have the best prices on everything. Toys traditionally see their biggest discounts in the second or third week of December. Retailers slash prices on winter apparel right after Christmas, with discounts growing larger in January and February. So don’t freak out if you miss some supposedly “One Day Only!� deal.

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According to a National Retail Federation survey, the average person spent $140 on him or herself during the 2016 holidays.

Do you have a Black Friday memory you’d like to share? Tell us at letters@moneymail.com.

58% of shoppers will buy gifts for themselves (a.k.a. “self-gifting�) on Black Friday or other days during the holiday season.

DECEMBER 2017

The most popular answers selected in a Bankrate survey when shoppers were asked how much they expected to spend on Black Friday.

M O N E Y. C O M

THE NUMBERS

783'/7

*92(7

&-++)78 1989%0 *92(7 &= '%8)+36= CATEGORY

)GSRSQ] ERH 7XSGOW ,IEX 9T the U.S. economy grew at or above an annual rate of 3%—which hasn’t happened since 2014. As a result, economically sensitive sectors such as technology, ďŹ nancials, and basic materials led the market in the four weeks ended Oct. 25.

FOR TWO STRAIGHT QUARTERS,

7 4 6%8-37

2.3%

23.0

Fidelity Contrafund (FCNTX) American Funds Growth Fund of America (AGTHX) Dodge & Cox Stock (DODGX) American Funds Investment Co. of America (AIVSX) American Funds Wash. Mutual Investors (AWSHX)

26.7% 22.1 24.2 18.4 21.4

13.3% 12.3 10.9 9.7 10.5

0.68 0.66 0.52 0.60 0.58

19.6 20.3 18.8 21.4 21.0

9.9 8.9 10.2 10.4 10.0

0.06 0.68 0.07 0.18 0.58

21.4 22.9 20.7 23.5 26.3

10.4 10.4 10.9 10.3 12.7

0.06 0.07 0.07 0.34 0.92

13.5 14.9 12.8 15.3 15.3

8.3 7.9 7.7 7.7 8.2

0.60 0.55 0.07 0.32 0.56

21.8 33.7 24.4 16.7 32.4

6.6 11.1 8.7 4.5 11.8

0.18 1.00 0.85 0.79 0.33

21.9 19.2 25.2 27.4 23.6

6.7 5.2 9.5 8.9 6.2

1.08 0.14 1.26 1.01 0.31

–1.1 –0.5 –1.3 0.0 –1.1

1.3 1.3 0.9 1.1 1.4

0.45 0.65 0.88 0.80 0.75

0.0 0.2 2.5 1.4 0.5

2.0 2.2 2.9 2.0 2.1

0.09 0.05 0.43 0.10 0.54

6.7 11.4 7.7 8.7 8.2

5.3 6.4 4.0 5.2 4.1

0.13 0.73 0.72 0.72 0.81

1.9 1.3 0.7 1.1 0.4

2.7 1.3 0.3 0.8 0.2

0.09 0.09 0.15 0.09 0.41

MIDCAP Vanguard Mid-Cap Index (VIMAX) Fidelity Low-Priced Stock (FLPSX) Vanguard Mid-Cap Value Index Fund (VMVAX) Vanguard Strategic Equity Fund (VSEQX) Fidelity Mid-Cap Stock Fund (FMCSX)

SMALL-CAP Vanguard Small-Cap Index (VSMAX) Fidelity Extended Market Index Fund (FSEVX) Vanguard Small-Cap Value Index Fund (VSIAX) Vanguard Explorer (VEXRX) T. Rowe Price Small-Cap Value (PRSVX)

INTERNATIONAL

2.2

22.2

CURRENT

2.1

2.1

ONEYEAR RANGE

ONEYEAR RANGE

2.0 20.0

1.9

TOTAL RETURN

ONE O E MONTH MO H

INDEX

S&P 500 Nasdaq2 Russell 2000 Morgan Stanley EAFE Dow Jones industrial average Barclays U.S. aggregate bond index

ONE YEAR

THREE YEARS1

2 2.6% 3.0 0 3.0 0 13 1.3 4.7 –0 –0.7

21.8% 24.2 24.5 22.4 31.6 0.2

11.5% 13.6 11.7 6.7 14.4 2.2

6.0 0 0 5.0 3.6 2 2.11 19 1.9 15 1.5 1.4 4 – .2 –1.2 – –1.5 – 6 –7.6

32.1 37.1 28.0 21.9 16.9 27.1 16.4 4.8 –0.4 –0.3

19.3 14.7 8.6 10.2 10.9 12.2 12.8 8.1 –4.7 3.4

SECTOR

Information technology Financials Basic materials Health care Utilities Industrials Consumer discretionary Consumer staples Energy Telecom services

NOTES AND SOURCES: Stock index data as of Oct. 25 from Lipper, New York; 877-955-4773.

Sector returns from Bloomberg. Bond index data from Barclays. Monthly S&P 500 ratios are from Standard & Poor’s. P/E ratios are based on previous four quarters of operating earnings. Biggest funds ranked by total net assets. 1Annualized. 2Price change only.

M O N E Y. C O M

Vanguard Total International Stock Index (VGTSX) Oakmark International Fund (OAKIX) American Funds EuroPaciďŹ c Growth (AEPGX) Harbor International (HAINX) Vanguard International Growth Fund (VWILX)

EMERGING MARKETS American Funds New World (NEWFX) Vanguard Emerging Markets Stock Index (VEMAX) T. Rowe Price Emerging Markets Stock (PRMSX) Fidelity Emerging Markets (FEMKX) Northern Emerging Markets Equity Index Fund (NOEMX)

U.S. GOVERNMENT BONDS

&)2',1%6/7

EXPENSES (AS % OF ASSETS)

LARGE-CAP STOCKS

American Funds American Balanced (ABALX) Fidelity Balanced (FBALX) Vanguard Balanced Index Fund (VBIAX) Vanguard STAR Fund (VGSTX) Fidelity Puritan Fund (FPURX)

DIVIDEND YIELD

CURRENT

21.0

THREE YEARS1

BALANCED

P/E

22.0

TOTAL RETURN

ONE YEAR

DECEMBER 2017

Fidelity Government Income (FGOVX) American Funds U.S. Government Securities (AMUSX) MFS Government Securities (MFGSX) Sit U.S. Government Securities (SNGVX) JPMorgan Government Bond (OGGAX)

INVESTMENT-GRADE Vanguard Total Bond Market Index II (VTBIX) Vanguard Total Bond Market Index (VBTLX) Dodge & Cox Income (DODIX) Vanguard Short-Term Investment-Grade (VFSUX) T. Rowe Price New Income (PRCIX)

HIGH YIELD Vanguard High-Yield Corporate (VWEAX) Fidelity Capital & Income (FAGIX) American Funds American High-Income Trust (AHITX) Fidelity High Income (SPHIX) Northern High Yield Fixed Income (NHFIX)

TAX-EXEMPT Vanguard Intermediate-Term Tax-Exempt (VWIUX) Vanguard Limited-Term Tax-Exempt (VMLUX) Vanguard Tax-Exempt Money Market (VMSXX) Vanguard Short-Term Tax-Exempt Fund (VWSUX) Fidelity Municipal Money Market (FTEXX)

FIRSTS

WHAT DOES IT TAKE TO BE THE FIRST?

HEAR THE STORIES OF GROUNDBREAKING WOMEN W W W.T I M E .COM / F I R ST S

THE NUMBERS

MONEY 50

8IGL 7XSGOW 7YVKI 9L 3L# and revenue growth, tech stocks soared in the four weeks ended Oct. 25, with Google-parent Alphabet, Amazon, Apple, Facebook, and Microsoft all recently hitting new all-time highs. In our MONEY 50 list of recommended mutual and exchange-traded funds, T. Rowe Price Blue Chip Growth was the big winner, gaining 4% in the past month and nearly 30% over the prior year. The fund’s top three holdings are Amazon, Facebook, and Alphabet. Another large growth stock fund, Primecap Odyssey Growth, with big stakes in medical technology and financial stocks, wasn’t far behind with a 3.8% gain for the month (it’s also up 29% for the past year). While tech has returned handsomely, valuations that are beginning to rival those of the late 1990s are raising concerns of another bubble. — IAN SALISBURY

THANKS TO HUGE PROFIT

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Building-block funds: For broad exposure to core asset classes Custom funds: Specialized investments that can tilt your strategy One-decision funds: If you want stocks and bonds in one portfolio

TOTAL RETURN

FUND (TICKER)

O ONE E MONTH MO H

EXPENSES (AS % OF ASSETS)

PHONE NUMBER (800)

21.7% 11.4% 21.9 11.2

0.03 0.03

435-4000 435-4000

21.4 25.3

11.4 13.5

0.07 0.07

474-2737 474-2737

22.0 21.8 21.7 19.0

6.5 6.6 8.2 5.0

0.16 0.18 0.27 0.32

544-8544 662-7447 662-7447 662-7447

3.6

6.6

0.26

662-7447

0.1 0.3

2.1 1.1

0.15 0.15

662-7447 662-7447

ONE YEAR

THREE YEARS 1

BUILDING-BLOCK FUNDS Large-Cap Schwab S&P 500 Index (SWPPX) 2.5% 5% SchwabTotal Stock Market Index (SWTSX) 2.55 Midcap/Small-Cap iShares Core S&P Mid-Cap (IJH) 22.9 9 iShares Core S&P Small Cap (IJR) 3.5 35 Foreign Fidelity Spartan International (FSIIX) 1.4 .4 Vanguard Total Intl. Stock (VGTSX) 1.55 Vanguard FTSEA/W ex-U.S. Small (VFSVX) 1.6 6 Vanguard Emerging Markets (VEIEX) 22.3 3 Specialty Vanguard REIT Index Investor (VGSIX) –0.55 Bond Vanguard Total Bond Market (VBMFX) ––0.6 Vanguard Short-Term Bond (VBISX) –0.3

M O N E Y. C O M

TOTAL RETURN

FUND (TICKER) Vanguard Inflation-Protected (VIPSX) Vanguard Short-Term Infl.-Prot. (VTIP) Vanguard Total Intl. Bond Index (VTIBX)

ONE YEAR

–1.1% –0.3 0.0

–1.1% 0.3 0.0

THREE YEARS 1

EXPENSES (AS % OF ASSETS)

PHONE NUMBER (800)

0.20 0.07 0.15

662-7447 662-7447 662-7447

1.0% 0.5 3.1

CUSTOM FUNDS Large-Cap Dodge & Cox Stock (DODGX) PowerShares FTSE RAFI U.S. 1000 (PRF) Sound Shore (SSHFX) PowerShares S&P High Quality Port.(SPHQ) Primecap Odyssey Growth (POGRX) T. Rowe Price Blue Chip Growth (TRBCX) Midcap Vanguard Mid-CapValue Index Fund (VOE) WisdomTree MidCap Dividend (DON) T. Rowe Price Div. Mid Cap Gro. (PRDMX) Small-Cap PowerShares FTSE RAFI U.S.1500 S-M(PRFZ) Vanguard Small-Cap Value (VBR) WisdomTree SmallCap Dividend (DES) T. Rowe Price QM U.S. Small-Cap Gro.(PRDSX) Specialty PowerShares Intl. Div.Achievers (PID) SPDR S&P Dividend (SDY) Cohen & Steers Realty Shares (CSRSX) SPDR Dow Jones Intl. Real Estate (RWX) iShares N.American Nat. Resources (IGE) Foreign Oakmark International (OAKIX) Vanguard International Growth (VWIGX) T. Rowe Price Emerging Markets (PRMSX) Bond Dodge & Cox Income (DODIX) Fidelity Total Bond (FTBFX) Vanguard Short-Term Inv. Grade (VFSTX) iShares iBoxx $ Inv. Grade Corp.(LQD) Loomis Sayles Bond (LSBRX) Fidelity High Income (SPHIX) Vanguard Intm.-Term Tax-Ex. (VWITX) Vanguard Limited-Term Tax-Ex. (VMLTX) Templeton Global Bond (TPINX)3 Fidelity New Markets Income (FNMIX)

1.4 2.0 3.2 2.1 3.8 4.0

24.2 19.8 20.2 21.2 29.1 29.8

10.9 9.7 9.4 12.4 14.8 15.1

0.52 0.39 0.91 0.29 0.66 0.72

621-3979 843-2639 551-1980 983-0903 729-2307 638-5660

1.8 1.5 2.8

18.8 16.0 24.1

10.2 10.9 11.6

0.07 0.38 0.87

662-7447 909-94732 638-5660

3.3 2.3 2.9 2.9

23.8 20.7 18.7 24.3

11.5 10.9 11.2 12.2

0.39 0.07 0.38 0.81

843-2639 662-7447 909-94732 638-5660

–1.0 2.5 0.3 –1.1 –2.9

14.4 17.7 3.8 4.5 –1.3

–0.5 12.0 7.3 1.8 –5.9

0.56 0.35 0.96 0.59 0.48

983-0903 787-22572 437-9912 787-22572 474-2737

1.4 1.9 2.0

33.7 32.2 25.2

11.1 11.7 9.5

1.00 0.46 1.26

625-6275 662-7447 638-5660

–0.2 –0.5 0.0 –0.3 –0.9 0.6 –0.2 –0.2 –0.5 –0.3

2.5 1.4 1.3 2.1 5.5 8.7 1.8 1.2 6.7 6.3

2.9 3.0 1.9 3.6 2.1 5.2 2.6 1.2 1.3 6.7

0.43 0.45 0.20 0.15 0.91 0.72 0.19 0.19 0.93 0.86

621-3979 544-8544 662-7447 474-2737 633-3330 544-8544 662-7447 662-7447 632-2301 544-8544

0.55 1.02 0.25

544-8544 544-8544 662-7447

0.58 0.63

638-5660 638-5660

0.14 0.15

662-7447 662-7447

ONE-DECISION FUNDS

DECEMBER 2017

Balanced Fidelity Balanced (FBALX) 1.3 14.9 7.9 Fidelity Global Balanced (FGBLX) 1.4 11.8 5.2 Vanguard Wellington (VWELX) 1.5 15.2 8.4 Target Date TR T. Rowee Pric Row Price i eR Reti etirem tirement entt se serie ries i s (STOCK/BOND (STOCK/ (STO CK/BON BOND D ALLOC AL ALLOCATION) LOCATI A ON ATION EExample: l 200 20055 FFundd (4 (45%/55%) (45%/ 5%/55% 55%)) (TRRFX) 0 0.55 88.77 5.1 5 Example: 2020 Fund (68%/32%)(TRRBX) 1.1 13.9 7.2 Vanguard Target Retirement series Example: 2025 Fund (70%/30%)(VTTVX) 1.2 13.8 7.1 Example: 2035 Fund (84%/16%) (VTTHX) 1.6 17.2 8.1

NOTES: As of Oct. 25, 2017. Load funds are included for those who prefer

to use a broker. 1Annualized. 2Phone numbers are 866. 34.25% sales load. SOURCES: Lipper, New York, 877-955-4773; the fund companies

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3 Gold-Medal Super Tuscan 2 Rich Argentine Malbec 1 Iconic-Estate California Cab

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Capital was always the struggle. I always had these amazing visions, had this amazing work ethic, had this amazing work partner in my wife. We had local banks that trusted us, little by little. [Joanna and I] want to be available to people now. We’re calling it Chipstarter instead of Kickstarter. We want to “Chipstart” a few people’s dreams. If their business plan is great—what can we do to get behind you? We want to pay that forward.

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MONEY: In the first chapter of your new memoir, Capital Gaines, you write about not being able to read in the first grade. Did that experience shape the way you view success? GAINES: Most definitely. I was Crayola-ing inside the lines with no fundamental education at all. So when they said, “Hey, here’s a simple book we want you to read,” I said, “Hey, that’s great, sounds fascinating! What do you do with this thing? Chew on it?”

You had to adapt quickly.

M O N E Y. C O M

DECEMBER 2017

After you and Joanna had your first son, you bought a four-wheeler and essentially drove it off a cliff, bashing your face in. Was that bad juju for splurging? It’s never dawned on me that purchasing a beautiful large asset when I was essentially broke as a skunk [made for bad karma]. It forced me to think, “Do you want to be a kid the rest of your life?” I’ve got Peter Pan syndrome. I love building businesses, I want to be a good husband, a good father. But I don’t want to be boring. I don’t want to be normal. When you first started Magnolia Market, what was the biggest stress in getting a family-run business off the ground?

You’re walking away from Fixer Upper. Is pivoting scary? Whenever you’re at a poker table and you’re betting all of your chips—you’re scared. But if I had to calculate 100% certainty on every deal I did, I literally would do zero deals.

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COU RT ESY O F M AG N O L I A

I became a BS-er. I became a salesman, a smooth talker. I’d get called on to read certain things, and on the fly I’d come up with the wittiest circumstances as to why I couldn’t do that task.

When you were in your twenties, you went to Mexico to learn Spanish—and kicked the day-to-day operations of your businesses to your then girlfriend Joanna. It didn’t go so well. What did that experience teach you? It’s really one of my sincere regrets. There were obstacles that presented themselves. In theory, had she and I been equipped to overcome those obstacles, I would have learned Spanish, coming home months later on the white horse. That’s definitely not the way it played out. She and I had only been dating for a few months, and neither of our parents knew the inner workings of my business. So it seemed like a complete emergency. The lesson learned: Be honest, be transparent, overcommunicate the circumstances.

How do you know when to take a financial risk? We’re bad people to ask about that. All we do is risk. We always looked at [Fixer Upper] as a business opportunity. And of course with this exposure came amazing opportunities. And we wanted to parlay those into the next. Had we put [our money] into a savings account somewhere, tucked our heads in the sand like an ostrich—there’s no way we could have built what we built.

Active Matters in taking care of the ones who matter most. Life isn’t a passive activity. Investing shouldn’t be either. Whether it’s navigating your career, raising kids, or planning for retirement, being actively involved matters in achieving better results. When it comes to managing our funds, we share the same active philosophy. Our investment teams navigate down markets and help manage risk so you can stay on track in reaching your goals. Over

80% of T. Rowe Price mutual funds beat their 10-year Lipper average as of 9/30/17.*

Put our active investment approach to work for you today. Call our investment specialists at 877-773-1370 or go to troweprice.com/activematters

Request a prospectus or summary prospectus; each includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. *158 of our 332 mutual funds had a 10-year track record as of 9/30/17 (includes all share classes and excludes funds used in insurance products). 133 of these 158 funds (84%) beat their Lipper averages for the 10-year period. 214 of 319 (67%), 186 of 230 (81%), and 155 of 185 (84%) of T. Rowe Price funds outperformed their Lipper average for the 1-, 3-, and 5-year periods ended 9/30/17, respectively. Calculations are based on cumulative total return. Not all funds outperformed for all periods. (Source for data: Lipper Inc.) T. Rowe Price Investment Services, Inc., Distributor.

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