6 Simple Steps to $1 Million
by Glenn Curtis
Monday, October 26, 2009
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Let's face it; we all don't make millions of dollars a year, and the odds are that most of us won't receive a large windfall inheritance either. However, that doesn't mean that we can't build sizeable wealth - it'll just take some time. If you're young, time is on your side and retiring a millionaire is achievable. Read on for some tips on how to increase your savings and work toward this goal.
Stop Senseless Spending
Unfortunately, people have a habit of spending their hard-earned cash on goods and services that they don't need. Even relatively small expenses, such as indulging in a gourmet coffee from a premium coffee shop every morning, can really add up - and decrease the amount of money you can save. Larger expenses on luxury items also prevent many people from putting money into savings each month.
That said, it's important to realize that it's usually not just one item or one habit that must be cut out in order to accumulate sizable wealth (although it may be). Usually, in order to become wealthy one must adopt a disciplined lifestyle and budget. This means that people who are looking to build their nest eggs need to make sacrifices somewhere - this may mean eating out less frequently, using public transportation to get to work and/or cutting back on extra, unnecessary expenses.
This doesn't mean that you shouldn't go out and have fun, but you should try to do things in moderation - and set a budget if you hope to save money. Fortunately, particularly if you start saving young, saving up a sizeable nest egg only requires a few minor (and relatively painless) adjustments to your spending habits.
Fund Retirement Plans ASAP
When individuals earn money, their first responsibility is to pay current expenses such as the rent or mortgage expenses, food and other necessities. Once these expenses have been covered, the next step should be to fund a retirement plan or some other tax-advantaged vehicle.
Unfortunately, retirement planning is an afterthought for many young people. Here's why it shouldn't be: funding a IRA early on in life means you can contribute less money overall and actually end up with significantly more in the end than someone who put in much more money but started later.
How much difference will funding a vehicle such as a Roth IRA early on in life make?
If you're 23 years old and deposit $3,000 per year (that's only $250 each month!) in a Roth IRA earning and 8% average annual return, you will have saved $985,749 by the time you are 65 years old due to the power of compounding. If you make a few extra contributions, it's clear that a $1 million goal is well within reach. Also keep in mind that this is mostly interest - your $3,000 contributions only add up to $126,000.
Now, suppose that you wait an additional 10 years to start contributing. You have a better job and you know you've lost some time, so you contribute $5,000 per year. You get the same 8% return and you aim to retire at 65. When you reach age 65, you will have saved $724,753. That's still a sizeable fund, but you had to contribute $160,000 just to get there - and it's no where near the $985,749 you could've had for paying much less.
Improve Tax Awareness
Sometimes, individuals think that doing their own taxes will save them money. In some cases, they might be right. However, in other cases it may actually end up costing them money because they fail to take advantage of the many deductions available to them.
Try to become more educated as far as what types of items are deductible. You should also understand when it makes sense to move away from the standard deduction and start itemizing your return.
However, if you're not willing or able to become very well educated filing your own income tax, it may actually pay to hire some help, particularly if you are self employed, own a business or have other circumstances that complicate your tax return.
Own Your Home
At some point in our lives, many of us rent a home or an apartment because we cannot afford to purchase a home, or because we aren't sure where we want to live for the longer term. And that's fine. However, renting is often not a good long-term investment because buying a home is a good way to build equity.
Unless you intend to move in a short period of time, it generally makes sense to consider putting a down payment on a home. (At least you would likely build up some equity over time and the foundation for a nest egg.)
Avoid Luxury Wheels
There's nothing wrong with purchasing a luxury vehicle. However, individuals who spend an inordinate amount of their incomes on a vehicle are doing themselves a disservice - especially since this asset depreciates in value so rapidly.
How rapidly does a car depreciate?
Obviously, this depends on the make, model, year and demand for the vehicle, but a general rule is that a new car loses 15-20% of its value per year. So, a two-year old car will be worth 80-85% of its purchase price; a three-year old car will be worth 80-85% of its two-year-old value.
In short, especially when you are young, consider buying something practical and dependable that has low monthly payments - or that you can pay for in cash. In the long run, this will mean you'll have more money to put toward your savings - an asset that will appreciate, rather than depreciate like your car.
Don't Sell Yourself Short
Some individuals are extremely loyal to their employers and will stay with them for years without seeing their incomes take a jump. This can be a mistake, as increasing your income is an excellent way to boost your rate of saving.
Always keep your eye out for other opportunities and try not to sell yourself short. Work hard and find an employer who will compensate you for your work ethic, skills and experience.
Bottom Line
You don't have to win the lottery to see seven figures in your bank account. For most people, the only way to achieve this is to save it. You don't have to live like a pauper to build an adequate nest egg and retire comfortably. If you start early, spend wisely and save diligently, your million-dollar dreams are well within reach
Friday, October 30, 2009
Monday, October 26, 2009
Human Evolution: Are Humans Still Evolving?
Modern Homo sapiens is still evolving. Despite the long-held view that natural selection has ceased to affect humans because almost everybody now lives long enough to have children, a new study of a contemporary Massachusetts population offers evidence of evolution still in action.
A team of scientists led by Yale University evolutionary biologist Stephen Stearns suggests that if the natural selection of fitter traits is no longer driven by survival, perhaps it owes to differences in women's fertility. "Variations in reproductive success still exist among humans, and therefore some traits related to fertility continue to be shaped by natural selection," Stearns says. That is, women who have more children are more likely to pass on certain traits to their progeny. (See the top 10 scientific discoveries of 2008.)
Stearns' team examined the vital statistics of 2,238 postmenopausal women participating in the Framingham Heart Study, which has tracked the medical histories of some 14,000 residents of Framingham, Mass., since 1948. Investigators searched for correlations between women's physical characteristics - including height, weight, blood pressure and cholesterol levels - and the number of offspring they produced. According to their findings, it was stout, slightly plump (but not obese) women who tended to have more children - "Women with very low body fat don't ovulate," Stearns explains - as did women with lower blood pressure and cholesterol levels. Using a sophisticated statistical analysis that controlled for any social or cultural factors that could impact childbearing, researchers determined that these characteristics were passed on genetically from mothers to daughters and granddaughters.
If these trends were to continue with no cultural changes in the town for the next 10 generations, by 2409 the average Framingham woman would be 2 cm (0.8 in) shorter, 1 kg (2.2 lb.) heavier, have a healthier heart, have her first child five months earlier and enter menopause 10 months later than a woman today, the study found. "That rate of evolution is slow but pretty similar to what we see in other plants and animals. Humans don't seem to be any exception," Stearns says. (See TIME's photo-essay "Happy 200th Darwin Day.")
Douglas Ewbank, a demographer at the University of Pennsylvania who undertook the statistical analysis for the study, which was published Oct. 21 in the Proceedings of the National Academy of Sciences (PNAS), says that because cultural factors tend to have a much more prominent impact than natural selection in the shaping of future generations, people tend to write off the effect of evolution. "Those changes we predict for 2409 could be wiped out by something as simple as a new school-lunch program. But whatever happens, it's likely that in 2409, Framingham women will be 2 cm shorter and 1 kg heavier than they would have been without natural selection. Evolution is a very slow process. We don't see it if we look at our grandparents, but it's there."
Other recent genetic research has backed up that notion. One study, published in PNAS in 2007 and led by John Hawks, an anthropologist at the University of Wisconsin at Madison, found that some 1,800 human gene variations had become widespread in recent generations because of their modern-day evolutionary benefits. Among those genetic changes, discovered by examining more than 3 million DNA variants in 269 individuals: mutations that allow people to digest milk or resist malaria and others that govern brain development. (Watch TIME's video "Darwin and Lincoln: Birthdays and Evolution.")
But not all evolutionary changes make inherent sense. Since the Industrial Revolution, modern humans have grown taller and stronger, so it's easy to assume that evolution is making humans fitter. But according to anthropologist Peter McAllister, author of Manthropology: the Science of Inadequate Modern Man, the contemporary male has evolved, at least physically, into "the sorriest cohort of masculine Homo sapiens to ever walk the planet." Thanks to genetic differences, an average Neanderthal woman, McAllister notes, could have whupped Arnold Schwarzenegger at his muscular peak in an arm-wrestling match. And prehistoric Australian Aborigines, who typically built up great strength in their joints and muscles through childhood and adolescence, could have easily beat Usain Bolt in a 100-m dash.
Steve Jones, an evolutionary biologist at University College London who has previously held that human evolution was nearing its end, says the Framingham study is indeed an important example of how natural selection still operates through inherited differences in reproductive ability. But Jones argues that variation in female fertility - as measured in the Framingham study - is a much less important factor in human evolution than differences in male fertility. Sperm hold a much higher chance of carrying an error or mutation than an egg, especially among older men. "While it used to be that men had many children in older age to many different women, now men tend to have only a few children at a younger age with one wife. The drop in the number of older fathers has had a major effect on the rate of mutation and has at least reduced the amount of new diversity - the raw material of evolution. Darwin's machine has not stopped, but it surely has slowed greatly," Jones says. (See TIME's special report on the environment.)
Despite evidence that human evolution still functions, biologists concede that it's anyone's guess where it will take us from here. Artificial selection in the form of genetic medicine could push natural selection into obsolescence, but a lethal pandemic or other cataclysm could suddenly make natural selection central to the future of the species. Whatever happens, Jones says, it is worth remembering that Darwin's beautiful theory has suffered a long history of abuse. The bastard science of eugenics, he says, will haunt humanity as long as people are tempted to confuse evolution with improvement. "Uniquely in the living world, what makes humans what we are is in our minds, in our society, and not in our evolution," he says.
A team of scientists led by Yale University evolutionary biologist Stephen Stearns suggests that if the natural selection of fitter traits is no longer driven by survival, perhaps it owes to differences in women's fertility. "Variations in reproductive success still exist among humans, and therefore some traits related to fertility continue to be shaped by natural selection," Stearns says. That is, women who have more children are more likely to pass on certain traits to their progeny. (See the top 10 scientific discoveries of 2008.)
Stearns' team examined the vital statistics of 2,238 postmenopausal women participating in the Framingham Heart Study, which has tracked the medical histories of some 14,000 residents of Framingham, Mass., since 1948. Investigators searched for correlations between women's physical characteristics - including height, weight, blood pressure and cholesterol levels - and the number of offspring they produced. According to their findings, it was stout, slightly plump (but not obese) women who tended to have more children - "Women with very low body fat don't ovulate," Stearns explains - as did women with lower blood pressure and cholesterol levels. Using a sophisticated statistical analysis that controlled for any social or cultural factors that could impact childbearing, researchers determined that these characteristics were passed on genetically from mothers to daughters and granddaughters.
If these trends were to continue with no cultural changes in the town for the next 10 generations, by 2409 the average Framingham woman would be 2 cm (0.8 in) shorter, 1 kg (2.2 lb.) heavier, have a healthier heart, have her first child five months earlier and enter menopause 10 months later than a woman today, the study found. "That rate of evolution is slow but pretty similar to what we see in other plants and animals. Humans don't seem to be any exception," Stearns says. (See TIME's photo-essay "Happy 200th Darwin Day.")
Douglas Ewbank, a demographer at the University of Pennsylvania who undertook the statistical analysis for the study, which was published Oct. 21 in the Proceedings of the National Academy of Sciences (PNAS), says that because cultural factors tend to have a much more prominent impact than natural selection in the shaping of future generations, people tend to write off the effect of evolution. "Those changes we predict for 2409 could be wiped out by something as simple as a new school-lunch program. But whatever happens, it's likely that in 2409, Framingham women will be 2 cm shorter and 1 kg heavier than they would have been without natural selection. Evolution is a very slow process. We don't see it if we look at our grandparents, but it's there."
Other recent genetic research has backed up that notion. One study, published in PNAS in 2007 and led by John Hawks, an anthropologist at the University of Wisconsin at Madison, found that some 1,800 human gene variations had become widespread in recent generations because of their modern-day evolutionary benefits. Among those genetic changes, discovered by examining more than 3 million DNA variants in 269 individuals: mutations that allow people to digest milk or resist malaria and others that govern brain development. (Watch TIME's video "Darwin and Lincoln: Birthdays and Evolution.")
But not all evolutionary changes make inherent sense. Since the Industrial Revolution, modern humans have grown taller and stronger, so it's easy to assume that evolution is making humans fitter. But according to anthropologist Peter McAllister, author of Manthropology: the Science of Inadequate Modern Man, the contemporary male has evolved, at least physically, into "the sorriest cohort of masculine Homo sapiens to ever walk the planet." Thanks to genetic differences, an average Neanderthal woman, McAllister notes, could have whupped Arnold Schwarzenegger at his muscular peak in an arm-wrestling match. And prehistoric Australian Aborigines, who typically built up great strength in their joints and muscles through childhood and adolescence, could have easily beat Usain Bolt in a 100-m dash.
Steve Jones, an evolutionary biologist at University College London who has previously held that human evolution was nearing its end, says the Framingham study is indeed an important example of how natural selection still operates through inherited differences in reproductive ability. But Jones argues that variation in female fertility - as measured in the Framingham study - is a much less important factor in human evolution than differences in male fertility. Sperm hold a much higher chance of carrying an error or mutation than an egg, especially among older men. "While it used to be that men had many children in older age to many different women, now men tend to have only a few children at a younger age with one wife. The drop in the number of older fathers has had a major effect on the rate of mutation and has at least reduced the amount of new diversity - the raw material of evolution. Darwin's machine has not stopped, but it surely has slowed greatly," Jones says. (See TIME's special report on the environment.)
Despite evidence that human evolution still functions, biologists concede that it's anyone's guess where it will take us from here. Artificial selection in the form of genetic medicine could push natural selection into obsolescence, but a lethal pandemic or other cataclysm could suddenly make natural selection central to the future of the species. Whatever happens, Jones says, it is worth remembering that Darwin's beautiful theory has suffered a long history of abuse. The bastard science of eugenics, he says, will haunt humanity as long as people are tempted to confuse evolution with improvement. "Uniquely in the living world, what makes humans what we are is in our minds, in our society, and not in our evolution," he says.
Tuesday, October 20, 2009
Poverty Gaps
Countries with the Biggest Gaps Between Rich and Poor
by Bruce Einhorn
Friday, October 16, 2009
Friday, October 16, 2009
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The U.N. Development Program recently came out with a report looking, among other things, at income inequality worldwide.
| More from BusinessWeek.com: • A Rebound for China and India's Millionaires • World's Best and Worst Property Markets • The World's Best Places to Live 2009 |
The UNDP ranked countries and regions based on a number of factors, including their Gini coefficient, named for Italian statistician Corrado Gini.
We have listed the world's most advanced economies based on their Gini score, with zero marking absolute equality and 100 absolute inequality. Scandinavian countries, Japan, and the Czech Republic have the least amount of inequality. The U.S. is among the most unequal, but it's not No. 1. To see which economy is, read on.
Top 11 Countries With the Biggest Gaps Between Rich and Poor
No. 1 Hong Kong
 ED Jones/AFP/Getty Images, PHILIPPE LOPEZ/AFP/Getty Images |
Gini score: 43.4
GDP 2007 (US$ billions): 207.2
Share of income or expenditure (%)
Poorest 10%: 2.0
Richest 10%: 34.9
Ratio of income or expenditure, share of top 10% to lowest 10%: 17.8
Renowned for its high concentration of Rolls-Royces, expensive real estate, and posh shops, the Chinese special administrative region has plenty of rich who enjoy showing off their wealth. However, Hong Kong also has one of the largest public housing sectors in the world, with about half the population living in government-supported or -subsidized housing estates. The city has no minimum wage—except for domestic helpers from the Philippines, Indonesia, and other countries.
No. 2 Singapore
Gini score: 42.5
GDP 2007 (US$ billions): 161.3
Share of income or expenditure (%)
Poorest 10%: 1.9
Richest 10%: 32.8
Ratio of income or expenditure, share of top 10% to lowest 10%: 17.7
Singapore is one of the world's most open economies, and it suffered badly following the bankruptcy of Lehman Brothers last year. Recently, though, the city-state's economy has rebounded, with GDP growing an annualized 14.9% rate in the third quarter compared with the previous quarter.
No. 3 U.S.
 Spencer Platt/Getty Images, Justin Sullivan/Getty Images |
Gini score: 40.8
GDP 2007 (US$ billions): 13,751.4
Share of income or expenditure (%)
Poorest 10%: 1.9
Richest 10%: 29.9
Ratio of income or expenditure, share of top 10% to lowest 10%: 15.9
The share of income for the top percentile of Americans was 23.5% in 2007, the highest since 1928, according to Emmanuel Saez, a Berkeley economist who won the prestigious John Bates Clark Medal in April. Income for the top 0.01% hit a record-high 6.04%. And the recession may be exacerbating income inequality.
No. 4 Israel
Gini score: 39.2
GDP 2007 (US$ billions): 164.0
Share of income or expenditure (%)
Poorest 10%: 2.1
Richest 10%: 28.8
Ratio of income or expenditure, share of top 10% to lowest 10%: 13.4
Gone are the days when Israel was one of the world's most egalitarian societies. Early Labor Zionist pioneers built kibbutzim for Jewish immigrants, but those collectives have fallen on hard times. The growing number of haredim, or ultra-Orthodox Jews, with large families and men who study the Torah rather than work has worsened the inequality problem.
No. 5 Portugal
 Spencer Platt/Getty Images, Justin Sullivan/Getty Images |
Gini score: 38.5
GDP 2007 (US$ billions): 222.8
Share of income or expenditure (%)
Poorest 10%: 2.0
Richest 10%: 29.8
Ratio of income or expenditure, share of top 10% to lowest 10%: 15.0
While Portugal emerged from recession in the second quarter, the unemployment rate tops 9%. The ruling Socialists retained power in elections last month but lost seats to parties on the far left.
No. 6 New Zealand
Gini score: 36.2
GDP 2007 (US$ billions): 135.7
Share of income or expenditure (%)
Poorest 10%: 2.2
Richest 10%: 27.8
Ratio of income or expenditure, share of top 10% to lowest 10%: 12.5
According to the OECD, New Zealand had the biggest rise in inequality among member nations in the two decades starting in the mid-1980s. The country's economy emerged from recession in the second quarter, but with growth of just 0.1%, the central bank is likely to keep interest rates low until well into 2010.
No. 7 (tie) Italy
 Vittorio Zunino Celotto/Getty Images, GERARD JULIEN/AFP/Getty Images |
Gini score: 36.0
GDP 2007 (US$ billions): 2,101.6
Share of income or expenditure (%)
Poorest 10%: 2.3
Richest 10%: 26.8
Ratio of income or expenditure, share of top 10% to lowest 10%: 11.6
Italians are focused now on the melodrama surrounding embattled Prime Minister Silvio Berlusconi. The political crisis comes at a time when the economy is still mired in recession even as countries like Germany and France are growing again.
No. 7 (tie) Britain
Gini score: 36.0
GDP 2007 (US$ billions): 2,772.0
Share of income or expenditure (%)
Poorest 10%: 2.1
Richest 10%: 28.5
Ratio of income or expenditure, share of top 10% to lowest 10%: 13.8
According to Britain's Institute of Fiscal Studies, a government-funded think tank, the average national income, adjusted for inflation, grew 0.5% between 2004 and 2008. In contrast, the same figure for the top 90% income bracket jumped 1.2% over the same period. That was predominantly driven by large salaries and bonuses from the financial services sector in the pre-credit crunch era.
No. 9 Australia
 GREG WOOD/AFP/Getty Images, Scott Barbour/Getty Images |
Gini score: 35.2
GDP 2007 (US$ billions): 821.0
Share of income or expenditure (%)
Poorest 10%: 2.0
Richest 10%: 25.4
Ratio of income or expenditure, share of top 10% to lowest 10%: 12.5
While developed economies elsewhere fell into recession, the Lucky Country's good fortune held out, with Australia continuing to grow thanks in part to strong demand from China for its resources. This month the central bank raised interest rates, making Australia a leader among countries moving away from monetary easing.
No. 10 (tie) Ireland
Gini score: 34.3
GDP 2007 (US$ billions): 259.0
Share of income or expenditure (%)
Poorest 10%: 2.9
Richest 10%: 27.2
Ratio of income or expenditure, share of top 10% to lowest 10%: 9.4
Put aside the old comparisons to Asia's tiger economies. Ireland's workers are suffering badly from the recession; the unemployment rate soared in August to 12.5%. That's the second-worst in the EU, behind only Spain.
No. 10 (tie) Greece
 getty images, ROBERT ATANASOVSKI/AFP/Getty Images |
Gini score: 34.3
GDP 2007 (US$ billions): 313.4
Share of income or expenditure (%)
Poorest 10%: 2.5
Richest 10%: 26.0
Ratio of income or expenditure, share of top 10% to lowest 10%: 10.2
Newly elected Prime Minister George Papandreou's government faces potential disciplinary action from the European Union, which has reprimanded Greece for a budget deficit of 6% of GDP, twice the EU limit. The IMF projects the economy will shrink 0.8% this year.
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