The Abundance Conundrum

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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.

Special Relativity

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A friend wrote to me recently about the two kinds of time. The time that gallops onward in an undistinguished blur, versus the time that resolves itself into perfect crystal moments that stretch on to forever. Haven’t we all had those kind of peak moments?

We seem more prone to the ‘undistinguished blur’ sort of time as the years go by, and routines get set. Perhaps breaking the routine, new experiences, are what sets those forever moments apart.

My friend concluded that if there is a secret to keeping time in a bottle, it must involve moving forward – a special kind of special relativity. This notion has some interesting aspects, including one that bears on our work for you, I believe.

Many financially independent retirees have noted that they spent much time when younger worrying about having enough money in later years. Then, when they get there, they discover that money is abundant, compared to time, which is finite.

If we spend our working years on a treadmill of accumulating a fortune for enjoyment way down the road, perhaps we live life in a routine, in which time is an undistinguished blur. This shortens the subjective experience of our lives.

Alternatively, we can work to understand and perhaps moderate what “enough” means, and balance living in the moment against our longer-term objectives. Would this leave us open to more new experiences, new ways of thinking and being, and that sense of moving forward that might bring about more of those ‘forever’ moments?

Hey, I don’t know either. But I’m in favor of more special moments, and less undistinguished routine. Clients, if you would like to talk about this or anything else, please email us or call.

The High Cost of Low Interest

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Savers might remember the 1990’s with great fondness. For most of the decade, money earned 4 to 6% in bank certificates and other safe and liquid forms. Even in the first decade of this millenium, at times there were interest rates above zero on deposits.

After the financial crisis that began in 2008, interest rates plunged. The Federal Reserve adopted a Zero Interest Rate Policy (ZIRP) in an attempt to spur economic activity. Some foreign central banks even went to NIRP, a negative interest rate policy. For most of the time since then, short term rates in the US have been close to zero. (Federal Reserve Bank St Louis)

After a tentative, brief return to rates above zero, the economic disruption caused by the coronavirus has slammed rates back to near nothing. Rates may stay lower for longer. Savers and investors are affected.

• The difference beween 5% and zero on $100,000 in the bank is about $400 in monthly income. Savers used to enjoy cash income on their balances, income that could make a difference.
• In order to get income returns on money, people face volatility in market values or greater risk of loss or reduced access to funds.
• The competition for income-producing investments creates market distortions, which may increase risk.
• Artificial stimulus for goods or services could result in lower growth later, when monetary conditions return to normal.

Against those challenges, low interest rates appear to benefit one group of people: borrowers. Many people have been able to refinance home mortgages to rates lower than they might have imagined years ago. But even this silver lining has a cloud around it: low mortgage rates may have increased home prices.

Bottom line, as with all of the challenges in life, the key is to make the most of it. We work to understand alternatives and strive to sort out how to balance the needs for income, and growth, and preservation of purchasing power. Finding the opportunity in the challenge is our goal.

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

The More Things Change

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“Plus ça change, plus c’est la même chose.”
Jean-Baptiste Alphonse Karr wrote those words in 1849, which we know by the translation “the more things change, the more they stay the same.”

We are reminded of this epigram when we hear about the wide and sweeping changes that are supposedly with us forever now, in the aftermath of the pandemic. You do not need to go very far to find predictions that our daily lives will be changed forever. No more large-venue events like sports or concerts, restaurant dining becoming a rarity, central offices a thing of the past, airline travel shriveling.

The truth is, we humans are social beings. The biggest pandemic of modern times, the 1918 influenza, killed 50 million people worldwide, more than any war in history. Then as now, infection could mean death. And it was followed by the Roaring Twenties, notable for its gatherings and parties. Two or four years from now, we are likely to be attending as many group events as we were seven, fourteen or twenty-one years ago.

A home office teammate moved to a beautiful, larger living space shortly before concern about the coronavirus became widespread. I posed the question: was it possible to work from home? Their answer was, it was possible, but not desireable. The interaction with colleagues, the ease of finding the right expertise to help with a question, shared meals, the serendipitous exposure to unexpected ideas: those positives are hard to replicate working from home.

We humans are adaptable. We can do this lockdown thing, stay in touch with video calls, work from home effectively, get by without restaurant dining and parties and conferences. In other words, make the best of it. But we also tend to believe that current conditions will persist, and sometimes have trouble picturing a change.

Yes, there will be changes. But the more things change, the more they stay the same. Our humanity is not going away. We crave connection. We believe the enduring features of human nature will manifest themselves as soon as they are able.

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