cash reserves

What Is Social Security Telling Us?
photo shows a fan of $20 bills with a rubberbanded roll of $1 bills on top of it

We’re taking a swig of some big news, fresh from the Social Security Administration.

They’ve announced that the COLA—the Cost-of-Living Adjustment—for 2022 will be 5.9%. Payments for January 2022 will be increased by that amount.

Who doesn’t like getting a raise? But let’s think about how we earned this one.

Our cost of living has been rising. Inflation is running at levels we have not seen in decades. And the laws governing Social Security benefits call for annual adjustments to help offset the rise in the cost of living. In other words, our expenses have been rising for some time, and this “raise” will help us get back some of the purchasing power we have lost.

Inflation has other ramifications, too. Sometimes we assume that financial things with stable values are safe. Savings accounts or certificates of deposit, bonds, and other fixed-income investments generally do offer more stability than long-term equity investments such as common stock.

But perhaps the news from the Social Security Administration is a chance to remember that our cash on-hand pretty much always buys less this year than it did last year—because of the cost of living. If we make 1% interest while prices rise 5%, we are going backward in purchasing power over time.

When there was little inflation, our cash cushions did not cost us a lot. We love the sensation of having the money we need, readily at hand. Funds for emergencies or opportunities are always good to have.

But the purchasing power of excess cash laying around is melting away, day by day. It might pay to consider whether more should be committed to long-term investments.

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

Investing includes risks, including fluctuating prices and loss of principal.

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What Is Social Security Telling Us? – 228Main.com Presents: The Best of Leibman Financial Services

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What a Nice Problem to Have!
photo shows a pile of small American cash bills

Money isn’t just money. This is one the unspoken understandings that drives our work at 228 Main.

(Green paper folding money is actually pretty gross, when you think about it. We exchange germ-ridden linen for goods and services? It’s weird.)

For many people we know, money represents work. It’s sweat and time and livelihood.

For some, money means travel, through time and chapters of our lives.

It’s supporting children and parents and ourselves and our communities.

It moves around among us and makes new things.

However, money can be a top stressor for many Americans. We’d like to offer a little reframe: money can be a wonderful problem to have.

In recent months, fresh flows of cash have been springing up in many households as the pandemic kept us less mobile and less active. Others have discovered more flexibility after paying down debt across the last year. And those stimulus checks arrived whether we needed them or not!

We’ve been hearing from some of you about those big financial questions of life, too, as some are wondering about whether a financial legacy takes the form of an inheritance for later or gifts splashed around to children or loved ones now.

Generational wealth is a powerful tool and privilege. It also highlights the tensions we feel around money: what is the utility of money, in our lives? What can it get us and others? What can it do for us and other?

How do you best use your money? There isn’t one answer—and we certainly aren’t here to tell you your answer—but oh my, what a nice problem to have!

Clients, may your wealth bring you only the best of dilemmas. We’ll be here to try to help you along your way.

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Play the audio version of this post below:

What a Nice Problem to Have! – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

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.

The Meaning of Money

canstockphoto48284911

Is money the root of all evil? Or is it what makes the world go ‘round? What IS the meaning of money?

Most of us receive most of the money we will ever make in exchange for our efforts. Our labor, our knowledge, our skills may be sold to employers if we are workers. They may be sold to customers or clients if we are in business. For this reason, in large part, money is the residue of the sweat we make while providing value to others.

What could be more noble than this symbol of being worthwhile to the rest of society?

In this framework, a 401(k) balance at retirement may be the end result of a lifetime of effort. An inheritance might represent two or more lifetimes of hard work. What could be more worthy of our best efforts to preserve and extend it?

While its sources are of interest, the uses of money have come into sharp focus for me recently. For the most part, my material needs are few. But money has become a vital factor in securing the health and welfare of loved ones.

The recent severe weather has resulted in hardship, pain, suffering and sometimes death for those who could not avoid its effects, or afford backup systems to meet special health needs. Oxygen concentrators require electricity, which sometimes fails. Refrigeration is needed for some kinds of life-sustaining medicine. Mobility is required to avoid some dangerous situations. All of this takes money.

When the power failed, we had a backup generator. When the storm threatened, we could leave the area. When the oxygen concentrator failed, we had another source. All of these things take money. And we had it.

Cathy’s care for children and work in the corporate world produced some of it. My efforts to help people with their plans and investing made some of it. Being good stewards of the amounts we were able to save provided some of it. The money came from worthy efforts, and it does important and worthy things for us.

Is money (or more properly, the love of money) the root of all evil? I don’t think so. It may be the evidence of lives of service and thrift. Luck? Certainly good fortune plays a role. And ill fortune surely plays a role in some people not having much of the stuff. We each must come to our own understanding of the meaning of money. This is mine.

Clients, if you would like to talk about this or any other pertinent topic, please email us or call.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing involves risks including possible loss of principal.