Month: June 2020

Pain and Gain

© Can Stock Photo / Anke

Great thinker Morgan Housel talks about the scene in Lawrence of Arabia in which one man snuffs a match out with his fingers and doesn’t flinch. Another tries it, yells in pain, and asks what the trick is. “The trick is not minding that it hurts.”

Housel concludes “accepting a little pain has huge benefits. But it will always be rare, because it hurts.”

The implication for our business with you is clear. Housel concisely states what we’ve been working to convey for years: “The upside when you simply accept and endure the pain from market declines is that future declines don’t hurt as bad. You realize it’s just part of the game.”

That you have learned this lesson, and tend to live by it even when it is uncomfortable is why we say you are the best clients in the world. We feel fortunate, because it is rare. Somehow we found or attracted people with effective investing instincts, or helped to instill those.

The key to making this work in the real world is avoiding the need to sell at bad times. Cash reserves and adequate cash flow are the things that let us live with short term fluctuations with our long term money.

When we are all on the same page, we spend less time worrying about, and explaining, day to day or week to week market action. Almost all financial market commentary may be summarized by saying “it goes up and down.”

This gives us time to hunt for bargains, think about trends on the horizon, and work on your plans and planning. All of these are more worthwhile uses of our time than attempting to explain why the market went up or down yesterday, or predict what it might do tomorrow.

Clients, if you would like to talk about this or anything else, please email us or call.

Transitions Mean Change

© Can Stock Photo / Bialasiewicz

One of the hardest things about major life transitions is that many habits, customs, traditions, and ways of doing things become obsolete or counter-productive at once. It takes time to deal with these cascading effects, big and small, on our lives.

One friend who lost a spouse to a fast-progressing illness had to quickly deal with decades of deferred home maintenance, previously a mutually agreeable way of life. Who had time to fix stuff when leisure pursuits or travel beckoned? It was a difficult situation.

Another had to confront a set of retirement intentions that had everything to do with the couple, but zero to do with the survivor. It was like waking up a few years before retirement, with plans that made no sense at all, and no prior thoughts about alternatives.

And many are forced to learn how to deal with things a spouse formerly handled: everything from oil changes to investment decisions. If the spouse had been a do-it-yourselfer in a particular role, the survivor sometimes has trouble envisioning the need to pay for services. Their life experience taught them that paying for that service is not worth it.

That lesson is incomplete, of course. Paying for the service is not worth it if you have the interest, knowledge and experience to do it yourself. But when the experience and knowledge is taken out of the equation, then the DIY course may be vexing and expensive.

Changing circumstances sometimes require a change in ways of doing things. What was done before made sense for the conditions that prevailed then. It can be hard to recognize the things that have changed. Our affection for those who are gone sometimes leaks into a positive view of their way of doing things, even when those ways may no longer be appropriate.

My own life experience has taught me patience and empathy for survivors who are grappling with these things. Each of us is on our own journey. We each make decisions in our own time, when they make sense to us. All we can do here at 228 Main is listen, provide a framework for thinking about things, and support people going through transitions.

Clients, if you would like to talk about this or anything else, please email us or call.

The Book of Life

© Can Stock Photo / photocreo

Books have chapters, each one a thread that is woven together with the other chapters to tell a story. Characters come and go, things happen, the plot advances. When a character’s part is finished, they do not appear in future chapters.

They were there for a reason; we remember them through the rest of the book. I’ve come to see that life is like that, too.

Our lives are a book with different chapters. In the hardest times, it helps to think there are more chapters out there. It will not always be the way it is now. The current chapter is not the whole book.

And in the best times, the same framework reminds us to be grateful for the moment, for what we have.

The way things unfold for some people, it may seem like half or more of their lives are in a single chapter. When the chapter ends, one might wonder if life is ending. But the chapter is not the book. (Or at least it does not have to be.)

C.S. Lewis noted we cannot go back and change the beginning, but we can start now and change the ending. Our sorrow is that we cannot change the prior chapter, but there is joy in being able to change the next chapter. This is why we make plans for the future!

Clients, if you would like to talk about this or anything else, please email us or call.

What Are We Going To Do With All This Future?

© Can Stock Photo / rbouwman

It is tempting to think of the future as a place of endless possibilities, fulfilled dreams, unleashed potential. “What are we going to do with all this future?” is the work of Spanish artist Coco Capitan, in collaboration with the Gucci fashion brand. It seems to capture that spirit of possibility.

Our work together with you is about the future. But when you get down to it, saying yes to one goal might mean saying no to others. We cannot do everything.

Resources are finite. As we think about retirement destinations or second home locations, choosing a Rocky Mountain high might mean that finding your beach is out of the question. Relocating may mean less time with family. Retiring at a younger age could mean getting by with less money.

This is why we invest so much time in striving to understand and clarify your priorities.

Of course, creative thinking may let us meet apparently contradictory goals by making thoughtful adjustments. A more modest home in one location may free up money to travel other places, or even have a second home. (This is the strategy I employ to live in Floribraska, Florida and Nebraska.)

Clients have chosen to retire and work at the same time by making the retirement-age job a part-time or seasonal or flexible hours arrangement in a field they enjoy.

Some couples choose to spend weeks each year pursuing different interests. Golf in the sunshine is hard to reconcile with watching grandchildren play winter sports up north.

So your own answer to ‘what we are going to do with all this future’ may take a lot of thought to get your priorities defined. Some creativity or adjustments may be needed to make the most of it. This really is the first step in long term planning.

Clients, if you would like to talk about this or anything else, please email us or call.

The Abundance Conundrum

© Can Stock Photo / Thilien

People reaching retirement age these days have witnessed a huge evolution in how people live. Growing up, many never saw the inside of a restaurant except maybe once a year. Family road trips usually included a picnic basket with cheese or balony sandwiches. Larger families lived in smaller houses back then, so now each person has about double the living space.

Author Eric Barker notes that we probably have far more now than in the past, but we seem to be no happier. We instinctively believe that more will fix it: more money, more food, more things. The problem is the quest for what makes us feel good doesn’t have a finish line. “It’s a pie-eating contest and first prize is more pie.”

The pressure to fit in, to keep up with the neighbors is now compounded by social media, which generally shows the best version of everyone we know, and none of the problems. There have been many more pictures of expensive cars than of the tow trucks sometimes sent to repossess them. You see vacation photos from exotic places, but not the credit card bills which detail how they were financed.

Aggravating the situation, technology has given many the option of working all the time. Flexibility is nice, but in the olden days, you could leave your work at work and be engaged with your family when you were home. Now our work is in our pocket, so we have to make a decision: answer emails, or play with the kids or talk to neighbors or enjoy some other leisure.

Going with the flow is perhaps more costly than ever to our wealth and sense of wellbeing. Thinking about the fundamentals of our own happiness, pursuing our fondest ambitions in a mindful way, being thoughtful about how we spend our time: these might be the answer to the battle between “more” and “enough.”

Financial planning is at the root of a balanced approach to life and living. It begins with the attempt to define life on your terms, to learn your internal motivations, to clarify your understanding of success.

Clients, if you would like to talk about this or anything else, please email us or call.

Dealing with Financial Emergencies, Three Things

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The dramatic and unexpected events of 2020 have tested our adaptability and resourcefulness like no other. There are patterns in those who are navigating these times successfully.

1. Realize there are usually lessons in history to guide us; maintain perspective.
2. Avoid hasty decisions that could have negative long term consequences.
3. Look for the opportunity in the challenge, not vice versa.

By taking time to think about the context, understand our own situation, and get accurate information about whatever the new reality is, we usually can make better decisions.

In personal finance, tapping high interest credit cards to maintain spending in the face of income reductions may be necessary for some items. But any outlays that can be avoided, or are discretionary, should be deferred, not financed. The average credit card interest rate remains in double-digit territory, a huge drain.

In your investments, long term holdings should not be disrupted by short term considerations. When the situation changes in ways that everyone knows, the new circumstances are likely to be priced into the market already. So there may not be an edge in taking action. If you do not need the funds in hand for pressing purposes, you might leave them be.

The stress of the situation may be alleviated by working on things within your control. Practicing healthier habits with regard to exercise, nutrition, sleep, and alcohol can also reduce stress, while giving you a sense of conrol.

Finally, contact with other people is a necessity for social beings such as humans. It may be especially useful as you talk things out or need someone to bounce ideas off of. We would be happy to visit with you by phone or email, Zoom video or in person – about whatever is on your mind. Email us or call.

Same Old, Same Old

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From 1965 to 1967, more than a hundred US cities were convulsed with riots, another chapter in a long history of violence in America related to race. The promise of the recently passed Civil Rights Act and the Voting Rights Act stood starkly against the poverty endemic to the segregated ghettos across the land.

President Lyndon Johnson set up the National Advisory Commission on Civil Disorders in 1967, asking three questions. What happened? Why did it happen? What can be done to prevent it from happening again and again?

This commission released a report in February 1968. It noted that “our nation is moving toward two societies, one black, one white—separate and unequal.” It faulted failed policies relating to housing, education, and social services, and noted that society’s institutions created the ghettos, which society condoned. It talked about racism as a factor in the violence.

The report recommended the hiring of more diverse and sensitive police forces, housing programs designed to break up racial segregation, and programs to bring needed social services. Americans purchased two million copies of the report; Martin Luther King said it was “a physician’s warning of approaching death, with a prescription for life.”

One month later, King lay dead, assassinated by a white supremacist. Rioting broke out again in a hundred cities. The recommendations in the report were forgotten.

The American miracle has produced so much for so many even as its blessings have been, and are, unevenly distributed. I’m convinced its foundation is the degree to which each of us is free to unlock the highest fraction of our own potential. We would be richer as a people if that freedom were more true for more people, if it extended more fully to each of us, and to our children, regardless of the zip code in which they grow up or the color of their skin or any of the other factors which so needlessly divide us.

Fifty years after the Kerner Report, we face the same old, same old. Our institutions are made of people; they reflect us; their failings are our failings. Fifty years from now, our progress will be measured by how much potential might be unlocked instead of untapped for how many people. Our actions in business and in life can make a difference, can have an impact – as people dealing with people, united in our humanity.

Clients, if you would like to talk about this or anything else, please email us or call.