In the wake of the Covid-19 pandemic, the world of retail investing has experienced a growing number of new arrivals looking to place their money in the stocks and shares that they believe in.
Emotional investments and allowing fear or greed to control decisions can lead to clouded judgement in the investing landscape. In these cases, it’s vital to look at the bigger picture–stock market returns may debate significantly in short-term waves. However, the historical returns for large-cap stocks can average 10% over longer-term scales.
(Image: Financial Times)
As the data above shows, increasing volumes of retail investors have led to unprecedented levels of option trading–with over 40 million contract calls being taken out in February 2021 alone.
(Image: Financial Times)
Despite more retail investors entering the market in the wake of the pandemic, the fluctuating trading themes in the chart above shows that many are still struggling to settle on a place where their money is best invested. Although ETFs have seen the largest volume of net purchases taking place over time, meme stocks, ESG stocks and growth stocks have all risen to the fore in recent months respectively.
The world of investing is a tremendously rich and diverse place, with countless opportunities for individuals to grow their wealth.
1. Avoid Falling in Love with a Company
One of the most significant issues that retail investors can face stems from allowing their emotions to control their decisions. They can make investments in a company with healthy fundamentals, experience impressive growth, and build too much of an emotional connection with their stock to pay attention when the fundamentals change and their holdings start to decline.
Keeping vigilant, and regularly zooming out to see the bigger picture can pay dividends when it comes to investing – particularly in companies that you feel yourself developing a rapport with.
2. Lack of Patience
On the flip side, it’s also vital to avoid falling out of love with your investments early, too. This can cause you to miss out on excellent opportunities simply by believing that you’ve arrived too late, or by getting fed up with waiting for the stock to move.
By adopting a more slow and steady approach to building your portfolio, it’s possible to yield greater returns over the long term. However, expecting a portfolio to do something that it isn’t prepared for is a path to disappointment. Remember to maintain realistic expectations for your portfolio growth and prospective returns.
3. “Over-trading”
As we saw in the above chart regarding the rather erratic investment patterns of retail investors, newcomers to the space may well be indulging in ‘over-trading.’
In February, Bloomberg ran an article warning about how ‘bored lockdown traders are a danger to themselves.’ Repetitive position shifting, or hopping from one position to another, is another sure-fire way to kill your profits. Significantly, transaction costs can significantly impact your bottom line – as well as the opportunities for sustainable growth you avoid through jumping out of the long term returns of your investments.
4. Choosing to Stay Loyal to a Losing Bet
The definition of insanity may be the act of doing the same thing over and over again and expecting different results, but in the world of investing, this can more appropriately refer to sitting by and watching your stock shed its value further and further whilst expecting it to eventually move back up.
“Behavioural finance calls this ‘cognitive error,’” explains Maxim Manturov, head of investment research at Freedom Finance Europe. “By not realising a loss, investors lose in two ways. First, they avoid selling the loser, which may continue to fall until it becomes worthless. Secondly, it is a missed opportunity to make better use of investment funds.”
“So, before you invest in a company, you should research the company and know how it operates,” Manturov adds. “You should also adhere to the principle of diversification to reduce the risks of individual sectors or companies and not allocate more than 5-10% of the portfolio to one company.”
As painful as it may be, sometimes, it’s a good move to sell your stocks in a company that’s continually falling. By cashing in your losses, you may be able to free up enough liquidity to invest in a stock with far better fundamentals.
5. Lack of Rebalancing
Rebalancing refers to the process of returning your portfolio to the target asset allocation as specified in your investment plan. Rebalancing isn’t an easy process because it can force you to sell an outperforming asset class and buy more from the asset class with the worst performance.
Because of this, rebalancing can seem like a counterintuitive move for newcomer investors. However, a portfolio that is allowed to drift with market returns ensures that asset classes can become overweight at market peaks and undervalued at market lows – resulting in poor performance.
The lack of rebalancing can hurt your portfolio in a similar way to sitting on losses whilst hoping for a change of fortune. By having the strength to sell your high performing asset class and to spend it on fresh, relevant investments, you can help to ensure the long-term sustainability of your portfolio.
6. Ignoring risk tolerance
Sadly, for many investors, it may be difficult to understand their risk tolerance prior to making their first investments. However, it can be extremely beneficial to listen to what your head is telling you during periods of severe volatility and building your portfolio around the level of risk you can cope with being exposed to.
(Image: Medium)
Some markets are more volatile than others by nature, and this is particularly true of cryptocurrency investing – where the price of assets like Bitcoin have been known to rise and fall by as much as 50% over a matter of weeks.
With this in mind, it may be worth beginning your investment journey piece by piece, measuring how well you can respond to volatile stocks before placing larger volumes of your portfolio in them.
7. Practice patience
Finally, it’s imperative that new investors practice patience when making their first investments. With this in mind, it’s important to avoid letting greed control your decisions – and this can extend to buying stocks in which you’re expecting quick growth.
Markets can move in unpredictable ways, and external news events can cause market turbulence where none could’ve been anticipated. With this in mind, it’s important to remain patient with stocks that display good fundamentals but aren’t moving in an affirmative manner.
At its best, investing can be a wholly rewarding and engaging experience for individuals to grow their wealth through hard work and market insights. With these seven tips, it’s possible for you to begin your investment journey whilst giving yourself the best chance of finding your feet in the market as soon as possible.
This GoBundance special features two segments with two inspirational guests. First, motivational speaker Craig Valentine outlines how to influence an audience through the power of storytelling. After that, financial columnist Morgan Housel explains how to get—and stay—rich. Other episode highlights include Craig’s coaching journey with former Real Estate Rockstars host Pat Hiban and Morgan’s explanation of the real drivers behind major economic shifts.
Listen to today’s show and learn:
Stay Ready with Craig Valentine
How Craig became Pat Hiban’s coach [1:46]
Giving powerful public speeches on Zoom [2:26]
How to influence your audience [3:20]
Craig’s World Championship of Public Speaking win [4:22]
The power of storytelling and foundational phrases [5:52]
Where to get Craig’s public speaking tips for FREE [9:13]
The Psychology of Money with Morgan Housel
About Morgan Housel [13:00]
The difference between getting rich and staying rich [14:29]
Covid-19’s impact on real estate [17:11]
What really moves the economic needle [20:06]
Why diversification is vital for investors and business owners [21:41]
What’s next for Morgan [22:39]
Where to find more from Morgan [23:33]
Craig Valentine
Craig Valentine, MBA, an award-winning speaker, and trainer, has traveled the world helping thousands of individuals and hundreds of organizations reap the profitable rewards that come from presenting with impact and persuading with ease.
As a motivational speaker, he has spoken in the United States, Taiwan, Canada, Jamaica, Qatar (Doha), England, Bahamas, Hong Kong, China, Saudi Arabia, Kuwait, Indonesia, Japan, South Africa, India, Sri Lanka, and Australia giving as many as 160 presentations per year. He is the 1999 World Champion of Public Speaking for Toastmasters International.
Craig is also the Co-Founder of the World Class Speaking program, which helps up-and-coming speakers and speech coaches turn their presentations and programs into huge profits. Craig is the author of the groundbreaking book, The Nuts and Bolts of Public Speaking, Co-Author of the books, World Class Speaking and World Class Speaking In Action, and contributing author for the books Guerrilla Marketing on the Front Lines, Success Secrets of the Social Media Marketing Superstars, and Guerrilla Marketing Remix.
Craig has an MBA from Johns Hopkins University.
Morgan Housel
Morgan Housel is an award-winning expert on behavioral finance and investment history. Using insights from psychology, history, neurology, and sociology, he walks audiences through the cognitive biases that cause investors to become their own worst enemies and explains how understanding your own behavior can be the key to reaching your financial goals. Housel’s presentations combine storytelling with the latest research to discuss the current state of financial markets, the investment industry, and personal finance.
Housel is a partner at the Collaborative Fund, a venture capital firm backing young companies that are moving the world forward. Previously, he was a columnist at The Wall Street Journal and The Motley Fool. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, winner of a Sidney Award for “outstanding investigative journalism in service of the common good,” and his writing was selected by the Columbia Journalism Review to be included in its Best Business Writing 2012 anthology.
Housel is also an author of three books, including Everyone Believes It; Most Will Be Wrong and 50 Years in the Making: The Great Recession and Its Aftermath. His latest, The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness, offers 19 short stories that explore the strange ways people think about money and how we can learn to make better sense of one of life’s most important topics.
Related Links and Resources:
Thank You Rockstars! It might go without saying, but I’m going to say it anyway: We really value listeners like you. We’re constantly working to improve the show, so why not leave us a review? If you love the content and can’t stand the thought of missing the nuggets our Rockstar guests share every week, please subscribe; it’ll get you instant access to our latest episodes and is the best way to support your favorite real estate podcast. Have questions? Suggestions? Want to say hi? Shoot me a message via Twitter, Instagram, Facebook, or Email. -Aaron Amuchastegui
Today we’re embarking on a unique journey – diving into the intriguing world of superstitions. One superstition, in particular, has caught our eye: the belief that an itchy left palm indicates a lottery of jackpot win on the horizon. Now, that’s quite a claim! So, get ready as we unravel this cultural phenomenon’s truth, fact by fact, itch by itch.
A World Rich with Superstitions
Superstitions, by definition, are beliefs or practices resulting from ignorance, fear of the unknown, trust in magic, or chance. Throughout history, they’ve guided people’s actions, especially when it comes to attracting wealth or good fortune. Superstitions and signs of good luck are as varied and colorful as human cultures themselves. Here are a few widely recognized ones from around the world:
1. Ringing in the New Year: In many cultures, the New Year is seen as a fresh start, and various superstitions and traditions are associated with ensuring good luck for the coming year. In Spain, for instance, people eat 12 grapes at midnight, each grape representing good luck for one month of the coming year. In the southern United States, eating black-eyed peas on New Year’s Day is considered to bring prosperity.
2. Knocking on Wood: This is a common superstition in Western cultures used to ward off bad luck after making a favorable prediction or boast, or when one mentions good fortune that one has had so far. The idea is that by knocking on wood, you’re seeking protection from the “evil spirits” that might hear and ruin your good luck. It’s believed that this superstition may have come from ancient pagan traditions where certain trees or groves were thought to be the homes of benign spirits or gods.
3. Carrying a Rabbit’s Foot: This is another common symbol of good luck in many Western cultures, especially in North America. It’s thought to originate from African-American folk magic known as “Hoodoo”. It’s typically the left hind foot of a rabbit that is considered lucky, and even more so if the rabbit was killed in a cemetery under a full moon.
4. Four-Leaf Clovers: These are considered to be a sign of good luck in Irish tradition. Each leaf in the clover symbolizes something: the first for faith, the second for hope, the third for love, and the fourth for luck. Finding a four-leaf clover is considered particularly lucky because they are rare.
5. Lucky Number Seven: In many cultures, the number seven is considered lucky. It’s a significant number in various religions and cultures. There are seven days in a week, seven continents, seven colors in a rainbow, and seven notes on a musical scale, which all contribute to the positive connotations of the number.
6. Horseshoes: In many cultures, horseshoes are considered symbols of good luck due to their association with horses, which were often seen as symbols of speed, power, and protection. The luck of the horseshoe is thought to work best when it’s hung in a U shape so it can “collect” good luck.
7. Money Plant: In the Hindu religion, the Money Plant (Epipremnum aureum, also known as Golden Pothos, Devil’s Ivy, or Silver Vine) holds a special place. This vining plant, common as an indoor houseplant worldwide, is considered a symbol of good luck and prosperity.
The association of the Money Plant with wealth comes from a popular belief rooted in Vastu Shastra – the traditional system of architecture in India, akin to Chinese Feng Shui. According to Vastu, certain plants promote positive energy in the environment, and the Money Plant is one of them.
The superstition around the Money Plant is connected to Goddess Lakshmi, the Hindu deity of wealth, fortune, and prosperity. It’s believed that nurturing a Money Plant at home can attract the blessings of Goddess Lakshmi and pave the way for a prosperous life. To this end, some people even practice a ritual of wrapping the plant’s creeper around a coin and placing it in the pot, symbolizing the growth of wealth.
However, like all superstitions, it’s important to remember that these beliefs aren’t scientifically validated. The positive impact of keeping houseplants, including the Money Plant, can be more accurately attributed to their air-purifying properties and the psychological benefits of being around greenery. The superstition involving the Money Plant and Goddess Lakshmi provides an interesting insight into the cultural practices tied to prosperity in the Hindu tradition.
Origins of the Itchy Left Palm Superstition
The old wives’ tale regarding an itchy left palm is steeped in history and varies from culture to culture. The belief in this particular itch’s predictive power seems to have originated in Europe, especially in the British Isles.
There, it was believed that if a person rubbed their itchy left palm on wood, it would assure the arrival of money. The superstition was later carried across the Atlantic and became fairly well-known in the United States, too.
Why the left hand specifically? In many cultures, the left side is considered to be less lucky or even negative. In Christianity, for instance, the left hand is often associated with betrayal – consider the seating arrangement at the Last Supper, where Judas Iscariot is often depicted sitting to Christ’s left.
The left-hand itching belief is also tied to the distinction between giving (associated with the right hand) and receiving (associated with the left hand). This can be found in many cultures globally, where the right hand is traditionally used for giving or paying out money, while the left hand receives it. So, an itching left palm would signify money coming in, while right hand itching could suggest money going out.
Cultural Differences
So, what does it mean when your left hand itches? In many cultures, an itchy left palm implies unexpected money coming your way. How did this superstition begin? Some believe it traces back to Saxo Grammaticus, a Danish historian who mentioned ‘itching palms’ in relation to greed. For others, it’s an old wives’ tale passed down generations. But does the superstition differ for men and women? Not typically. The interpretation of the left palm itching is usually consistent across genders.
Now, I bet you’re thinking, “What about the right hand itching?” Interestingly, in some cultures, an itchy right palm signifies that money is going out, hinting at potential bad luck. Don’t worry, though – it’s just a superstition!
Differences Between Men and Women
The superstition about an itching left hand indicating incoming wealth or financial windfall doesn’t specify any gender differences. The belief is generally applied to all individuals, regardless of their gender.
However, the way this superstition is interpreted or applied may vary depending on cultural norms or societal roles. For example, in some societies where women are traditionally homemakers and males are seen as the primary earners, an itchy left hand in a man might be more likely to be associated with an increase in salary or a profitable business deal. Meanwhile, for a female, it could be linked to her husband’s earnings or seen as an indicator of good luck around the home.
On a medical level, certain conditions causing itchy palms like hand eczema or psoriasis do not discriminate between men and women. However, it is noteworthy to mention that autoimmune diseases (including psoriasis) are generally more common in women than men, which might indirectly affect the prevalence of symptoms like itchy palms.
Medical Reasons for Itchy Palms
There can be a multitude of reasons why your palms may itch, and while we’d love it to be a sign of an impending windfall, it’s more often related to skin conditions or underlying health issues. Here are a few possible causes:
Dry skin: Dry skin, or xerosis, can make your palms itchy. This condition can result from environmental factors like cold, dry weather, or overwashing your hands.
Eczema: Eczema, or atopic dermatitis, is a condition that causes your skin to become itchy, red, and dry. Dyshidrotic eczema specifically affects hands and feet and could lead to an itchy palm.
Psoriasis: This is a chronic autoimmune condition that can cause a buildup of skin cells and form scaly patches on your skin. Palm psoriasis can make your palms itchy and want to scratch them.
Allergic reaction: Contact dermatitis is a skin reaction that happens when you touch a substance that irritates your skin or causes an allergic reaction, such as certain types of metals, soap, or plants.
Diabetes: In some cases, diabetes can lead to itchy skin, including the palms, due to poor blood circulation or yeast infections that are common in people with diabetes.
Liver disease: Itchy skin can be a symptom of liver disease. The itchiness is likely due to your liver’s inability to filter toxins from your body efficiently.
If your itchy palms persist or cause concern, it’s always best to seek medical advice.
Other Non-Medical Reasons for Itchy Palms
Outside of medical causes, people often attribute itchy palms to various superstitions and beliefs. Here are a few:
Astrology: Some people believe that itchy palms can be related to the movement of the planets or a particular person’s horoscope.
Energy and Chakras: In certain spiritual practices, itchy palms might suggest that you’re coming into contact with certain energies, or experiencing a blockage or overactivity in your hand chakras.
Psychic Phenomena: Some people believe that itchy palms could be a sign of a psychic phenomenon. They might think that their left palm itches when someone is thinking of them or when something significant is about to happen in their lives.
Spiritual Communication: In certain belief systems, physical symptoms like itching are interpreted as messages from the spiritual realm. An itchy palm could be taken as a sign or message from a spirit guide.
It’s important to note that while these beliefs are held by some, they’re not supported by scientific evidence. They offer a window into the fascinating ways that different cultures interpret and ascribe meaning to everyday physical experiences.
Itchy Palm Lottery Win Stories
When it comes to left hand itching and lottery winners, the tales are as intriguing as they are varied. Let’s delve into a few of these stories.
Mary Shammas
A popular tale when it comes to the itchy left palm superstition and lottery wins involves Mary Shammas, a Brooklyn grandmother who credited her left hand’s itch for her good fortune.
In 2010, Mary Shammas was riding on a Brooklyn bus when her left palm began to itch. Remembering the old superstition her mother had told her about – that the left hand itching meaning, it that money is on its way – she decided to act upon it. She immediately asked her daughter to purchase a lottery ticket using family members’ birthdays as the numbers.
The result? A whopping $64 million New York Lottery jackpot – one of the biggest in the state’s history at the time.
This tale has undoubtedly added fuel to the fire of the left hand itching superstition. However, while the story is truly remarkable and memorable, it’s important to take it in context. Mary’s win was more about chance and the decision to purchase a lottery ticket than the itch itself. It’s a classic example of “post hoc, ergo propter hoc” reasoning – Latin for “after this, therefore because of this.” This logical fallacy assumes that because one event happened after another, then the first must be the cause of the second. The itching of Mary’s left palm occurred before the lottery win, but it did not cause the win.
So, while Mary’s story is indeed an entertaining tale of an itchy left palm leading to lottery luck, it doesn’t offer empirical evidence to support the superstition. Just like other similar anecdotes, it serves to highlight how we, as humans, love to find patterns and establish cause-effect relationships, even when they’re a product of random chance.
Donald Pittman
from North Carolina, claimed his left palm itch was the reason behind his purchase of a $5 lottery ticket that won him a staggering $200,000 in 2016. Pittman stated that whenever his left hand itches, money’s coming. And this time, it did.
But can we establish a direct connection between his itchy palm and the win? The fact is, it was Pittman’s decision to buy a lottery ticket that led to his win, not the itching per se. There’s no scientific proof linking physical symptoms to a future event. So, while it’s an exciting narrative, it seems more about chance and coincidence than causation.
Melissa Ede
Melissa Ede, a taxi driver from Hull, England, scooped a £4m lottery win in 2017. She shared that she often experienced itchy hands before something ‘big’ happened, making a link between the itch and her major win.
It’s possible that Ede’s claim might be based on the Baader-Meinhof phenomenon, where one stumbles upon some obscure piece of information—often an unfamiliar word or name—and soon afterwards encounters the same subject again, often repeatedly. Any small itch before a ‘big’ event may stand out more in her memory due to this phenomenon, leading her to make a connection where none exists.
In all these cases, the common thread is that these individuals chose to attribute their good fortune to an itchy hand, but this is a matter of personal belief rather than empirical fact. There’s no denying these are fun, entertaining stories, but they shouldn’t be taken as evidence of a left hand itch being a legitimate sign of lottery luck. Instead, they serve as fascinating examples of how humans seek patterns and causality, even in the face of pure chance.
Coincidence or Causation?
It’s easy to see a correlation where one might not exist. In the cases of Pittman and our Reddit friend, it seems more like a coincidence than causation. As humans, we’re prone to remember instances that confirm our beliefs (like getting lottery winnings when our hand itched) and forget the ones that don’t (all the times our hand itched, and we didn’t win). This is a cognitive bias known as the “confirmation bias.”
Also see: Money traps people often fall for
The Mathematical Reality of Lotteries
Playing the lottery can be a fun pastime, but it’s critical to understand the mathematics behind it. Here are some key points to consider:
Odds of Winning: The odds of winning a major lottery such as the Powerball or Mega Millions are incredibly slim. For instance, the chances of winning the Powerball grand prize are approximately 1 in 292.2 million. That means you’re about 20 times more likely to be struck by lightning in your lifetime than to win the Powerball.
Expected Value: The expected value of a lottery ticket, which is the average amount of money you would win if you played the lottery an infinite number of times, is usually negative. This means that in the long run, you’re expected to lose money.
Probability Theory: The lottery is a game of independent events. This means that each draw is independent of the previous one. So the idea of a “due number” that has to come up soon because it hasn’t been drawn recently is a misconception.
Law of Large Numbers: While in the short run, outcomes might deviate from the expected result; in the long run, the outcomes will converge to the expected result. In the case of a lottery, the more you play, the more likely you are to lose.
The lottery, despite the dreams it evokes, is a game of chance with highly unlikely odds. If you play, play responsibly, and never view it as a means to fix financial troubles or secure a stable future. Remember, an itching palm – left or right – doesn’t change the statistical reality of your lottery number being drawn.
Superstition and Reality: Finding the Balance
Superstitions like the itchy left palm can add some fun to our routines, but it’s vital not to let these beliefs guide our financial decisions. The thrill of buying a lottery ticket with the hope of winning big can be a rush, but it shouldn’t overshadow the need to save money and live frugally.
The world of superstitions is a fascinating one, offering a glimpse into human psychology and the patterns we try to find in life’s unpredictability. The belief that an itchy left palm means money is coming is just one such example. But remember, whether it’s the itchy right hand indicating potential loss or an itchy left palm suggesting impending wealth, these are just superstitions, not fact.
Financial responsibility remains key, regardless of whether your palm itches or not. So, the next time your left hand itches, before rushing to buy a lottery ticket, remember this article and maybe just reach for some good ol’ moisturizer for that dry skin instead.
What’s your experience with this superstition? Do you have a money superstition of your own? Let’s continue the conversation about the enthralling world of superstitions and financial responsibility in the comments.
A federal judge on Friday sentenced a downtown Los Angeles real estate developer to six years in prison for providing cash bribes to former City Councilmember Jose Huizar, then attempting to hide the transaction from investigators.
Dae Yong Lee, who also goes by David Lee, was found guilty last year of giving $500,000 in bribes in exchange for the approval of a 20-story residential tower on Olympic Boulevard and Hill Street. He was also convicted of wire fraud and obstruction of justice.
Lee, appearing before the judge, apologized for his actions, saying he had created “much pain and heartbreak” for his wife, his family and the people around him.
“Due to my greed and ambition, I did something I will regret for the rest of my life,” the Bel-Air resident told the court.
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U.S. Dist. Court Judge John F. Walter said he took into account letters sent to the court from Lee’s family and supporters, particularly his wife’s characterization of him as “a good man who made a huge mistake.” But Walter said Lee’s crimes — bribing an elected official and then ordering a subordinate to falsify his company’s internal record of that transaction — merited a sentence that would serve as “a warning to others.”
“The court must send a message to discourage others who are in similar situations from engaging in similar crimes,” he said.
Lee, the first figure in the Huizar scandal to go on trial, was also ordered to pay a $750,000 financial penalty. His development company, 940 Hill, was separately sentenced to five years of probation and fined $1.5 million.
The case against Lee and 940 Hill was among the more sensational of the schemes spelled out in the federal indictment of Huizar, who pleaded guilty to racketeering and tax evasion charges earlier this year. During Lee’s trial, a former Huizar aide testified that he twice picked up paper bags of cash from a consultant working for Lee, saying the money was intended for Huizar and distributed in stacks of $100 bills.
George Esparza, who worked as Huizar’s special assistant, described during the trial how, at one point, he delivered $100,000 in a Don Julio tequila box to the council member’s Boyle Heights home in 2017.
Esparza, who later pleaded guilty to a single racketeering charge, took copious notes on his criminal activities, at one point writing the words “Giving cash to CM Huizar 2/10/2017” on a napkin. He then photographed the napkin.
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Huizar, who served on the council from 2005 to 2020, is scheduled to be sentenced in December. Esparza, who is also awaiting sentencing, may still be called as a witness in an upcoming trial stemming from the Huizar case.
Prosecutors had asked for Lee to be sentenced to seven years in prison, saying it would dissuade others from engaging in political corruption. In their filing, they repeatedly highlighted Lee’s wealth, saying he “enjoyed a lavish lifestyle” and had extensive real estate holdings.
In 2015, Lee proposed the construction of a $170-million high-rise a few blocks east of the L.A. Live entertainment complex. His project soon drew opposition from a group of construction trade unions, which threatened to slow or halt the approval process for his project, adding millions in additional development costs.
Lee agreed to provide Huizar, who represented much of downtown and wielded enormous power over real estate decisions, a cash bribe to ensure that the council member would oppose the union challenge, prosecutors said.
“He wasn’t under financial pressure, like some people are,” said Assistant U.S. Atty. Cassie Palmer. “He had a lot of money and wanted more.”
Attorneys for Lee requested leniency, asking for a 20-month sentence. Lee’s devotion to his family, his friends and his faith all warranted a lower sentence, his lawyers said.
“The limited window of conduct that was presented at trial does not accurately reflect the hardworking, honest person that he has been in all other aspects of his life,” wrote Lee’s attorney, Ariel A. Neuman.
During Friday’s hearing, Neuman objected to the prosecution’s repeated focus on his client’s wealth. He also argued that Lee was receiving disparate treatment when compared to Huizar, who has admitted responsibility for a much greater amount of criminal activity.
Huizar reached a plea agreement earlier this year in which prosecutors agreed not to seek more than 13 years in prison. Walter, the federal judge, told the defense lawyer he will not be bound to that agreement when he issues his sentence.
Huizar is one of several high-profile figures at City Hall to face criminal charges in recent years. Former City Councilmember Mitchell Englander, who stepped down in 2018, pleaded guilty three years ago to providing false information to investigators, which resulted in a 14-month prison sentence.
Former City Councilmember Mark Ridley-Thomas was convicted earlier this year on conspiracy, bribery and fraud charges and is awaiting sentencing. Meanwhile, Councilmember Curren Price is fighting perjury, embezzlement and conflict-of-interest charges, which were filed by the district attorney’s office earlier this year.
Assistant U.S. Atty. Mack Jenkins said he hoped that Lee’s sentence would serve as a deterrent to political corruption. He pointed out the judge’s sentence was nearly four times longer than the one sought by Lee.
“We think future criminals will take note of that,” he said.
“Hell, no, we won’t go!” The spirited chant sounded familiar, although it had been 51 years since I last shouted it alongside other demonstrators.
This time, instead of protesting the Vietnam War at UC Berkeley’s Sproul Plaza, I stood with 25 other impassioned tenants on a corner of Wilshire Boulevard in West Los Angeles, in front of Barrington Plaza — the apartment complex from which we are being unlawfully evicted.
My motivations for participating in both were altruistic and self-serving. I opposed the war in Vietnam on moral grounds, appalled by the unnecessary devastation, but I also did not want to join the thousands of Americans who had already perished in it.
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I’m helping to organize the tenants’ resistance to the eviction to preserve my own home, but I’m equally motivated to protect our community, especially my fellow boomers, some of whom suffer from dementia, diabetes or cancer.
The multibillion-dollar corporate landlord and developer, Douglas Emmett, decided to evict all the largely working-class tenants from their 577 occupied units in one of the biggest rent-stabilized buildings on Los Angeles’ pricey Westside. The company says it intends to retrofit the fire sprinkler system, following dangerous fires in 2013 and 2020, and make other needed repairs. Yet if it requires units to be vacant to do the work, the city requires the filing of a Tenant Habitability Plan, under which tenants should be temporarily relocated, not evicted.
Emmett is also claiming the Ellis Act as justification for the mass eviction. Passed in 1985, this California law was created to allow landlords to evict tenants from rent-controlled units that they plan to take off the rental market. But the company won’t commit to removing Barrington Plaza from the rental market when the renovations are complete, and they may gentrify and then re-rent the units at inflated market prices.
Another inescapable irony: Barrington’s eviction announcement came on May 8, the same date in 1959 that Los Angeles officials used eminent domain and other political machinations to bulldoze Chavez Ravine and destroy the homes of that vibrant, historic Mexican American community to make way for Dodger Stadium. If the Barrington evictions go through, they’ll join Chavez Ravine as among the largest evictions in the city’s history.
While I watched L.A.’s rush-hour traffic crawl by our tenant protest, many of the vehicles honking in support of our ragtag crew carrying signs and joined by our dogs, I reflected that this time the power we were fighting was not the military-industrial complex, but “Big Development” and corporate greed. Emmett donated $400,000 to the campaign of the current City Council member for Barrington Plaza’s district.
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The wonderfully inclusive, intergenerational, international community at Barrington represents the best of L.A., with a wide range of jobs and backgrounds. Tenants I’ve spoken with since we received notice include an Uber Eats driver, a waitress at El Pollo Loco, a professional dog walker, a Beverly Hills hairstylist and others who service our more affluent Westside neighbors.
Many of us, myself included because of the current writers’ strike, are on some form of government assistance. Others, even more vulnerable, are still financially recovering from the COVID pandemic and struggling with child-care costs; or are elderly and disabled, depending on nearby loved ones for trips to go shopping or attend medical appointments.
One tenant I spoke with has suffered with PTSD from rape and attempted murder. She previously lived in her car. For her, the very real possibility of losing her apartment triggers sleepless nights along with anxiety, depression and panic. Another tenant has worked for the county assisting homeless people in South Central for 20 years. Now she could be relocated to the same neighborhood where she spends her days helping those who live in makeshift tents on the street.
We are facing either imminent relocation to a distant part of the city, a premature placement in an extended care facility — or homelessness.
This tragedy is not just about us. At stake is the fate of an entire city where more than 75,000 people are homeless on any given night. If Emmett’s mass eviction is allowed to stand, it will displace hundreds of us, set a devastating precedent for rent-stabilized housing in Los Ange les and unleash a catastrophic burden on our already strained social services.
Our Barrington Plaza Tenant Assn. is working with the Coalition for Economic Survival to fight our eviction, and we’ve created a GoFundMe page to collect donations. It will take all of us to stop Douglas Emmett’s unlawful use of the Ellis Act.
A lot has changed since I was a 20-year-old, long-haired activist who chanted, “Hell, no, we won’t go!” at a Vietnam War rally. But the stakes for this community are just as high now.
Robert Lawrence is a producer whose films include “Clueless,” “Die Hard with a Vengeance,” “Rapid Fire” and “Rock Star.”
Average mortgage rates tumbled yesterday following a first-class inflation report. In some cases, they are now back below 7% for an excellent borrower wanting a conventional, 30-year, fixed-rate mortgage. Phew!
First thing, markets were signaling that mortgage rates today might fall but perhaps only a little. However, these early mini-trends often switch speed or direction later in the day.
Current mortgage and refinance rates
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.122%
7.147%
+0.15
Conventional 15-year fixed
6.297%
6.321%
+0.1
Conventional 20-year fixed
7.34%
7.403%
+0.03
Conventional 10-year fixed
6.872%
6.985%
+0.05
30-year fixed FHA
7.065%
7.685%
+0.02
15-year fixed FHA
6.503%
6.972%
+0.16
30-year fixed VA
6.75%
6.959%
+0.25
15-year fixed VA
6.625%
6.965%
Unchanged
5/1 ARM Conventional
6.75%
7.266%
Unchanged
5/1 ARM FHA
6.75%
7.532%
+0.11
5/1 ARM VA
6.75%
7.532%
+0.11
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock a mortgage rate today?
The chances of mortgage rates falling far and for long later this year improved yesterday. That day’s inflation report helped a lot.
But I reckon we’ll probably need a heap more similarly rate-friendly data in order to bring about that significant and sustained fall. And, while it’s possible such a heap will be delivered quickly, it’s probably more likely we’ll see any improvements late this year or sometime in 2024.
So, my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCK if closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data, compared with roughly the same time yesterday, were:
The yield on 10-year Treasury notes tumbled to 3.81% from 3.91%. (Very good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were higher. (Bad for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices decreased to $75.65 from $75.94 a barrel. (Neutral for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices rose to $1,964 from $1,959 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — held steady at 81 out of 100. (Neutral for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic and the Federal Reserve’s interventions in the mortgage market, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today might fall. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
What’s driving mortgage rates today?
Yesterday
Yesterday’s consumer price index (CPI) was a real tonic for mortgage rates. Comerica Bank’s chief economist said that “the fever is breaking“ for inflation.
And The Wall Street Journal (paywall) suggested: “Inflation cooled last month to its slowest pace in more than two years, giving Americans relief from a painful period of rising prices and boosting the chances that the Federal Reserve will stop raising interest rates after an expected increase this month.“
Note that the Journal’s writers (and many others) still expect a rise in general interest rates on Jul. 26. And that might limit how far mortgage rates can fall in the short term.
But other things could also limit the extent and duration of further decreases in mortgage rates. More and more people are talking up the possibility of a “soft landing.“ That refers to the Fed successfully driving down inflation without throwing the country into a recession.
But those of us wanting lower mortgage rates were kind of hoping for a recession. Of course, we didn’t want the bad stuff for the wider population. But mortgage rates tend to fall when the economy is in trouble and rise when it’s doing well.
So, while some falls in mortgage rates might be on the cards later in the year or in 2024, they might not be as big as we’d once been able to hope.
The rest of this week
This morning’s producer price index (PPI) for June was nothing like as important to mortgage rates as yesterday’s CPI. It and tomorrow’s import price index (IPI) are generally seen as secondary inflation measures. But, with markets hyper-sensitive to inflation news right now, they’re worth observing.
Today’s PPI was probably good for mortgage rates. The headline figure (PPI for final demand) came in at 0.1% in June, compared with the expected 0.2%. Just don’t expect it to have as positive an effect as yesterday’s news.
Please read the weekend edition of this daily report for more background on what’s happening to mortgage rates.
Recent trends
According to Freddie Mac’s archives, the weekly all-time low for mortgage rates was set on Jan. 7, 2021, when it stood at 2.65% for conventional, 30-year, fixed-rate mortgages.
Freddie’s Jul. 6 report put that same weekly average at 6.81%, up from the previous week’s 6.71%. But Freddie is almost always out of date by the time it announces its weekly figures.
In November, Freddie stopped including discount points in its forecasts. It has also delayed until later in the day the time at which it publishes its Thursday reports. Andwe now update this section on Fridays.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the current quarter (Q2/23) and the following three quarters (Q3/23, Q4/23 and Q1/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. They were both updated in June.
In the past, we included Freddie Mac’s forecasts. But it seems to have given up on publishing those.
Forecaster
Q2/23
Q3/23
Q4/23
Q1/24
Fannie Mae
6.5%
6.6%
6.3%
6.1%
MBA
6.5%
6.2%
5.8%
5.6%
Of course, given so many unknowables, the whole current crop of forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change, unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
For the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
In fact, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. This gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements, or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders — and it could save you thousands in the long run.
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
I read a lot of personal finance books. Most possess a certain sameness. They offer good advice, yes, but there’s nothing special about them. Perhaps that’s why I’m drawn to two specific types of financial books: narratives and histories. If a book can combine both of these elements, it’s a good bet I’m going to like it.
Between 10 June 1922 and 26 May 1923, The Saturday Evening Post published a series of twelve articles by journalist Edwin Lefèvre. These stories, collectively entitled “Reminiscences of a Stock Operator”, told the thinly-veiled biography of stock-market speculator Jesse Livermore, and were published as a book by the same name later in 1923.
Reminiscences of a Stock Operator gives the first-person account of the career of “Lawrence Livingston” (a slightly fictionalized Livermore), who, just out of grammar school, goes to work as a quotation-board boy in a stock-brokerage office. (This was during the 1890s, one hundred years before the advent of real-time internet stock quotes. Stock quotes had to be written on a chalkboard!)
Livingston develops a feel for the stock market and, in time, begins to speculate. He’s not an investor — he’s a speculator. He gambles in stocks. And he does a good job of it, too, building a million-dollar fortune during his twenties. But then he loses everything. In fact, Livingston builds — and loses — several million-dollar fortunes between 1901 and 1921. And each time he makes a mistake, he extracts a lesson.
I never thought stories of stock-market trading could be so entertaining. I was wrong. The book does contain plenty of mumbo-jumbo about stock prices, but most of the time it’s entertaining — and educational. Here are just a few of my favorite passages:
After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It was never my thinking that made the big money for me. It was always my sitting. Go that? My sitting tight!
[…]
Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics the one thing that strikes you most forcibly is how little either stock speculation or stock speculators today differ from yesterday. The game does not change and neither does human nature.
[…]
Tips! How people want tips! They crave not only to get them but to give them. There is greed involved, and vanity…It has always seemed to me the height of damfoolishness to trade on tips…The belief in miracles that all men cherish is born of immoderate indulgence in hope. There are people who go on hope sprees periodically and we all know the chronic drunkard that is held up before us as an exemplary optimist. Tip-takers are all they really are.
[…]
There is profit in studying the human factors — the ease with which human beings believe what it pleases them to believe; and how they allow themselves — indeed urge themselves — to be influenced by their cupidity or by the dollar-cost of the average man’s carelessness. Fear and hope remain the same; therefore the study of the psychology of speculators is as valuable as it ever was.
[…]
The sucker has always tried to get something for nothing, and the appeal in all booms is frankly to the gambling instinct aroused by cupidity and spurred by a pervasive prosperity. People who look for easy money invariably find that it cannot be found on this sordid earth.
At first, when I listened to the accounts of old-time deals and devices I used to think that people were more gullible in the 1860s and ’70s than in the 1900s. But I was sure to read in the newspapers that very day or the next something about the latest Ponzi or the bust-up of some bucketing broker and about the millions of sucker money gone to join the silent majority of vanished savings.
I actually dog-eared more than 20 pages, but don’t have room to reproduce all of the good stuff here. If you’re interested in an extended glimpse of this book, you can preview the text at Google Book Search.
I loved Reminiscences of a Stock Operator. Though the stock market is a much different place than it was during the early 20th century, most of the principles described here still apply. Plus, it’s filled with entertaining anecdotes and practical descriptions of how stock speculators operate. This book won’t appeal to everyone. But if, like me, you enjoy inside glimpses of how the stock market operates, try to find a copy at your local library.
Postscript: I’ve begun to collect old finance books. I would love a 1923 or 1938 edition of this, but I’m not interested in paying hundreds of dollars. If you ever see a beat-up old copy, please let me know.
Average mortgage rates fell just a little last Friday. But last Thursday’s massive jump means they finished that week — and last month — higher than when they started them.
First thing, it was looking as if mortgage rates today might again barely budge. But that could change as the hours pass.
Markets will be closed tomorrow for the Independence Day holiday. And we’ll be back on Wednesday morning. Enjoy your celebrations!
Current mortgage and refinance rates
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.129%
7.158%
Unchanged
Conventional 15-year fixed
6.638%
6.651%
Unchanged
Conventional 20-year fixed
7.506%
7.558%
Unchanged
Conventional 10-year fixed
6.997%
7.115%
Unchanged
30-year fixed FHA
6.672%
7.303%
Unchanged
15-year fixed FHA
6.763%
7.237%
Unchanged
30-year fixed VA
6.729%
6.937%
Unchanged
15-year fixed VA
6.625%
6.965%
Unchanged
5/1 ARM Conventional
6.75%
7.266%
Unchanged
5/1 ARM FHA
6.75%
7.532%
+0.11
5/1 ARM VA
6.75%
7.532%
+0.11
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock a mortgage rate today?
Recent reporting in the financial media makes me think mortgage rates are unlikely to see any significant and sustained falls until at least the fourth (Oct.-Dec.) quarter of 2023 and probably not until 2024.
And that’s why my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCK if closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data, compared with roughly the same time last Friday, were:
The yield on 10-year Treasury notes edged down to 3.82% from 3.85%. (Good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were mostly lower. (Good for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices inched up to $70.61 from $70.25 a barrel. (Neutral for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices rose to $1,930 from $1,919 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — climbed to 84 from 80 out of 100. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic and the Federal Reserve’s interventions in the mortgage market, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today might again hold steady or close to steady. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
What’s driving mortgage rates today?
Currently
To see sustained lower mortgage rates we need to see the inflation rate halving, the economy weakening, and the Federal Reserve stopping hiking general interest rates. And none of those looks likely anytime soon.
Some progress is being made on inflation. But not enough.
And the economy is showing extraordinary resilience. Last week’s gross domestic product (GDP) headline figure was 50% higher than many expected.
Meanwhile, the Fed seems highly likely to hike general interest rates by 25 basis points (0.25%) on Jul. 26. And there may well be at least one more increase after that in 2023.
Recession
As I’ve written before, our best hope for lower mortgage rates is a recession. That should weaken the economy, reduce inflation and perhaps cause the Fed to at least hold general rates steady.
Economists have been predicting an imminent recession for ages. And, not so long ago, I bought that line and was expecting one at any moment.
But, now, many big hitters aren’t expecting a recession until 2024. Yesterday, CNN Business listed a few of those making that prediction:
Bank of America CEO Brian Moynihan
Vanguard economists
JPMorgan Chase economists
Of course, others disagree, as economists always do. Some think a recession will still land later this year. And others believe there will be no recession at all.
This week
There are a few reports this week that could send mortgage rates up or down a bit. But Friday’s jobs report is the one most likely to have a decisive impact.
The consensus among economists is that the report will show 240,000 new jobs created in June compared with 339,000 in May. Anything lower than 240,000 might see mortgage rates tumble, which would be great.
However, we’ve witnessed economists making similar predictions for employment several times over recent months. And, nearly every time, their forecasts have greatly underestimated the resilience of the American labor market and therefore the American economy.
Of course, they might be right this time. Let’s hope so. But I shouldn’t hold my breath if I were you.
Please read the weekend edition of this daily report for more background on what’s happening to mortgage rates.
Recent trends
According to Freddie Mac’s archives, the weekly all-time low for mortgage rates was set on Jan. 7, 2021, when it stood at 2.65% for conventional, 30-year, fixed-rate mortgages.
Freddie’s Jun. 29 report put that same weekly average at 6.71%, up from the previous week’s 6.67%. But Freddie is almost always out of date by the time it announces its weekly figures.
In November, Freddie stopped including discount points in its forecasts. It has also delayed until later in the day the time at which it publishes its Thursday reports. Andwe now update this section on Fridays.
Expert mortgage rate forecasts
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the current quarter (Q2/23) and the following three quarters (Q3/23, Q4/23 and Q1/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were published on May 23 and the MBA’s on Jun. 21.
In the past, we included Freddie Mac’s forecasts. But it seems to have given up on publishing those.
Forecaster
Q2/23
Q3/23
Q4/23
Q1/24
Fannie Mae
6.4%
6.2%
6.0%
5.8%
MBA
6.5%
6.2%
5.8%
5.6%
Of course, given so many unknowables, the whole current crop of forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Find your lowest rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change, unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
For the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
In fact, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. This gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements, or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders — and it could save you thousands in the long run.
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
By Jay Peroni6 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited March 2, 2013.
What Does The Bible Have To Do With Finances?
The Bible is very clear about how we should handle our finances. God wants to abundantly bless those who obey His Word in this all-important area. Why do you think there are more than twenty-three hundred verses in the Bible about money? Is it a coincidence?
I am convinced that the majority of financial problems facing Americans today are the result of a failure to obey God’s provision of guidelines concerning how He wants us to manage the money He entrusts to us. This failure in turn limits His ability to bless us financially.
As a parent, do you reward your children for foolish behavior or do you sometimes allow them to endure pain so they will learn lessons? God uses money to teach us lessons in life. Jesus spent a considerable amount of time addressing finances in His teaching because He knew that how we handle money reveals our values and priorities.
Do Your Values Reflect The World’s Priorities?
Let me ask you an important question: How do you feel about the moral direction of our country? Are you saddened by any of the items on the following list?
The rising number of abortion clinics and facilities
The increased activity of “pro-abortion” activist groups
The shady, deceptive practices being used by the pornography industry
The number of deaths caused by the tobacco industry
The number of families being torn apart by addictions ranging from alcohol and drugs to gambling
The promotion of homosexuality
If any of these issues deeply sadden you, think of how God must view His creation being destroyed by these issues. It breaks His heart. If Jesus were an investor today, would He place money in any company involved in those areas? Would He choose to start a business of His own that was involved in any of these areas?
The answer to both questions is an emphatic no, but you may be unknowingly profiting from these industries. God has entrusted you with His resources, and it is your duty to be a wise and faithful manager of the assets He has provided you. In order to do this, you will need to follow biblical principles. As a Christian and an investor, it is more important how you make your money than how much money you make.
There is no doubt that sinful activities can be extremely profitable, but if you can invest in a manner that avoids industries that blatantly oppose God’s Word and still make a good profit, why would you choose any other way? Do you think God is more concerned about the amount of money you earn or the manner in which you earn it? How we invest money is a true measure of the values we hold dearly. If we stray from God’s values should we really be surprised when things fall apart?
The World vs. the Word
You may be confused as to how to manage your money simply because you have taken the world’s advice. You may have formed your financial habits from the actions and advice of your parents, friends, school, and the media. How successful has that been for you? For many, the approach is simply not working. Why are so many failing?
When we have an educational system in America that does very little to teach people the basics of financial management, a church that shies away from financial discussions, and an abundance of confusing, contradictory messages from the media and so-called experts, it is no surprise the average Christian is confused about where to turn for advice!
Choosing the world’s way of handling finances over God’s way is a recipe for disaster. Fear and greed are the motivating advice being sold by much of Wall Street. This advice can lead to financial ruin. Many become so confused that they choose to go it alone and rely on the banks to tell them what they can and cannot afford. They may choose to make financial decisions based on the latest advice in Money magazine, on the radio or TV, or their coworkers’ suggestions.
Rather than knowing for themselves where they stand financially, they listen to bad advice. Hosea 4:6 reads, “My people are destroyed for lack of knowledge” (NIV).
The majority of people have no financial plan or have built their plan on the ways of the world. If what we’ve been doing so far it isn’t working, we need to change direction. Change begins with looking at God’s Word.
Biblical Wisdom On Investing
On diversifying: “Give a portion to seven, or even to eight, for you know not what disaster may happen on earth” (Ecclesiastes 11:2 ESV).
On seeking advice: “Without counsel plans fail, but with many advisers they succeed” (Proverbs 15:22 ESV).
On being steady, patient, diligent, and faithful: “The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty” (Proverbs 21:5 ESV); and “A faithful man will abound with blessings, but whoever hastens to be rich will not go unpunished” (Proverbs 28:20 ESV).
On screening your investments: “You must not bring the earnings of a female prostitute or of a male prostitute into the house of the LORD your God to pay any vow, because the LORD your God detests them both” (Deuteronomy 23:18 NIV).
Longtime readers may remember a few things about me:
At various times, I’ve studied to be a priest, a doctor, a teacher, and a financial advisor (though I was only two of those).
My posts can get so technical (okay, boring) that J.D. has to enliven them with cat pictures.
I’ve tried to lose weight over the past couple of years, and have concluded that reducing heft is very similar to building wealth.
Regarding the latter, I reported in January that I was down about 25 pounds in 18 months. Not bad — at least good enough to get me on public radio’s Marketplace (in case you’re dying to hear my nasally voice). Managing your cash and managing your flesh both start with giving up short-term pleasure for long-term gain.
This occurred to me again as I met earlier this summer with Ben Sterling, my office’s resident Wellness Fool. His scale told us that I had gained back almost seven of the pounds I had lost. I had still been exercising, but not as much and not as intensely, and I didn’t pay any attention to what I ate. Ben, in his wisdom, knew he had to give me more motivation — and given my financial background, he knew that motivator was money (though for me it’s the preservation of it, not the making gobs of it). So we made a bet: I would lose six percentage points of body fat by mid-September or I’d pay him $200 (which would go toward buying exercise equipment for the Fool office).
It got me motivated, but not quite enough — especially when it came to food. After all, it’s summer, a time of cookouts, gatherings, and vacations (and hot dogs, chips, ice cream, and fast food during road trips). Plus, I had three months; why rush things?
But then we did a check-in at the one-month mark, and my body fat percentage had actually gone up! So now I am trying to play catch-up. I exercise once or twice a day, attending cross-fit classes, watching P90X videos, riding my bike to work, dousing the gym rowing machine with sweat, and attending a weekly Kazaxe hour (sorta like Zumba) with these folks<. I also have cut out just about any food that isn’t P&P: produce and protein.
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As I flagellated myself for slacking that first month, I thought about how having three months for the goal didn’t create enough urgency. And then I thought: This is why people don’t save for retirement: There’s not enough urgency. But it’s even worse for retirement, because once people feel that urgency, it’s often too late.
This past weekend, the New York Times published an article by economist Theresa Gharducci, which claimed that “Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts.” In esoteric financial terms, most of these people are screwed. Yes, some have sizeable, secure pensions, but not most of them. And yes, some will just have to work well into their 70s, which isn’t the worse thing in the world. However, that only works if you’re physically able to work, and many senior citizens aren’t. (I am compelled to point out that many of these health problems are due to poor health decisions compounded over decades, which is yet another way weight and wealth are related.)
If I had trouble with a goal that was a whopping three months away, is it any surprise that people lollygag about something that is three decades away?
Fear and Greed, Bit by Bit Despite my midsection deflation procrastination, I have been saving for retirement since age 25, and that’s when I was a teacher, so I wasn’t exactly rolling in the boodle. What got me to save back then for a goal four decades hence? A fear of financial privation and loss of control. You don’t want to hear my family history — and my family doesn’t want me to tell you — but suffice it to say that I had a front-row seat to visits from sheriffs, property repossessions, and debt collectors when I was a young-ish fellow.
Fear might not be the kick in the rear you need; perhaps salivating over future wealth inspires you to forgo some current spending. Whatever it is, finding what motivates you is the first step.
Then, as much as possible, break a long-term goal into short-term chunks. The sooner the goal, the easier this will be. If you want to pay off a credit card or buy a car in five years, it’s relatively easy — perhaps using an online savings calculator — to figure out an annual or semiannual goal. For retirement, it’s more complicated. I’ve written before about how to use a calculator to estimate whether you’re saving enough for retirement. While I think such a process is useful for everyone — and crucial for anyone at least in their early 50s — the truth is that the ability of a calculator to estimate your retirement needs declines the farther you are from retirement.
I have a colleague here at The Motley Fool who is in his early 40s and who has taken a different approach. He has three primary goals:
Remain debt-free, except for a mortgage
Pay off that mortgage in 15 years or sooner
Invest a specific amount each month
He has a spreadsheet that tracks his goals. What’s most interesting to me is #3. Retirement calculators assume you need a specific amount by a certain age to cover a certain retirement income. But the truth is, if you’re a couple of decades from retirement, you don’t really know what your investments will be worth, what your income needs will be, and how much money you’ll need to cover that income (especially given that no one really knows what Social Security and Medicare will look like in the 2030s or beyond).
As he told me:
It would be silly for me to guess what my $5,000 Roth contribution will be worth in 20 years. I can’t control what it will be worth, but I can make sure I have no debt, a paid-for condo, and consistent monthly paid-in capital [i.e., money that has been socked away, which in his case will be at least a few hundred thousand dollars absent any growth whatsoever].
No Potential Pain, No Aspirational Gain The final component is accountability, which for my health goal is that $200 bet with someone who will hold me to it. After this challenge is over, I plan to keep making bets with Ben — such as I can’t permit my body fat percentage to increase more than two percentage points or I owe him $200, with monthly check-ins. Otherwise, I fear it will be too easy to slide back. If you don’t have a fitness expert to make you put money on the waistline, make bets with your friends or use a site like Fatbet.net.
I suppose the same type of bet could be made about a financial goal, but for some reason, it seems counterproductive to make someone pay money if they’re already having trouble accumulating it. One option is determining an annual savings goal, which likely also entails an annual spending limit, so you could target either one — and make bets with friends that would involve you doing something embarrassing or repulsive to you (e.g., if you’re a Democrat, you put a Romney bumper sticker on your car; the Republicans get an Obama sticker; independents like me get both). Or use a site like TweetWhatYouSpend.com.
Or perhaps every six months, you sit down in a quiet space, and spend 10 minutes imagining — in explicit detail — what it must be like to be in your 60s with less than $30,000. That is motivation enough for me.