transportation

That Sinking Feeling… or a Sinking Fund?
photo shows a jar full of coins, a stack of cash, and a small card that says "PLAN"

Have you ever been faced with a large expense for which you were unprepared?  

I have. It gave me a sinking feeling. 

Sinking itself isn’t always a bad thing. The term “sinking fund” originally referred to a dedicated reserve a corporation would set up to repay a debt, contributing funds on a regular basis to build up the needed amount.  

Many individuals have adapted the idea to manage their personal finances: having a sinking fund may help us avoid that sinking feeling. 

This idea came in handy as I recently set out to see how well the sources for my retirement income were matching up with my expenses. My home has a new roof, won’t need another for many years. My vehicles are fairly new; they won’t need to be replaced for years, either. 

But the fact is, someday I will need to pay for a new roof. I will need to replace a car. Furniture and appliances wear out. More predictable but “lumpy” expenses happen, too, like property taxes and planned travel. 

If my budget fails to account for these items, my budget is not really covering all of my living expenses, is it? The answer is a sinking fund, as in these examples. 

  • Home maintenance. If I sink $200 for repairs and such into a sinking fund every month, I would have $12,000 every five years. That should cover a new roof ten or fifteen years from now… or deductibles on storm damage… or a chance to repaint when needed. Likewise, $100 monthly should cover whatever appliances or furniture need replacing: that’s $12,000 over ten years. 
  • Transportation. Piling $350 monthly toward vehicle replacement ought to pile up to enough to buy a car when needed, years down the road. 
  • Annual needs. By adding in one-twelfth of my property taxes and one-twelfth of the annual travel budget each month, my sinking fund should be able to handle most anticipated lumpy expenses, in general. 

I don’t know when the dryer will need replacing—or what else might break!—but I should have the funds to meet the need. And in any of these scenarios, if the balance gets way ahead of likely expenses, I could always pare back the monthly deposit, direct that money elsewhere as I see fit. 

There are different ways to do sinking funds. I set up a monthly automatic transfer into my LPL Financial brokerage account, where the funds will go into an insured cash account until needed. If you would like to set up a sinking fund for your lumpy expenses, email us or call. 

Want content like this in your inbox each week? Leave your email here. 

Play the audio version of this post below:

Sinking Feeling or Sinking Fund? – 228Main.com Presents: The Best of Leibman Financial Services

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

In the News: Supply Chains and Yoyos
photo shows a silver yoyo and its string

There has been a lot of talk in the news lately about problems with the supply chain. Fuel shortages, power shortages, microchip shortages, transportation shortages—these days, it seems like there is just not enough to go around.

Listening to dire predictions about how much worse things will get, it is easy to get nervous for the future.

We have been here before, though. Remember the early days of the pandemic? Bare grocery shelves and toilet paper panics. Or the early days of the recovery? Home values shooting up and hardware stores adjusting lumber prices multiple times per day.

For one item after another, we have watched supplies dry up to a trickle—and then come flooding back. Once the initial supply crunch is resolved, quite often other, smaller shortages eventually come back. And eventually go away.

The global pandemic has done a lot to expose the weakness of our supply chains. Sometimes, it seems each one is less like a chain and more like a yoyo spinning up and down, up and down. Maybe the disruptions get a little slower each time, and eventually they will come to rest.

But none of it is new. Commodities have always been cyclical. We hear about chip shortages and gas shortages, but these things happen with some regularity. The disruption of the past year and a half has just sped things up. In the past 30 years, oil has dipped below $40 a barrel at least five times and has peaked above $80 a barrel at least five times.

It is difficult to get too hot and bothered about oil being $80 a barrel when within the last decade it spent multiple years well above $100 a barrel.

What eventually cures our shortages is always the same thing: as long as it is possible to make a buck doing something worth doing, there will be people stepping up to fill that need. When gas supplies are low, oil companies drill new wells. When chip supplies are low, chipmakers build new fabrication plants. When transportation capacity is low, logistics companies buy new trucks. There is a lot of money to be made selling gas and microchips and shipping when things are tight.

New supply does not come online overnight. It can take a long time for supplies to ramp up to meet demand. And by the time they do, the yoyo has so much momentum that it usually overshoots the mark and keeps going the other way. A drought turns into a flood, slowly, but still faster than most people would expect. Supplies dry up again as prices come down and production becomes less profitable. High prices plant the seeds for low prices, which plant the seeds of high prices again.

We have been around this story before—and around, and around, and around again. Clients, if you need to go around it with us, just give us a call.

Want content like this in your inbox each week? Leave your email here.

Play the audio version of this post below:

In the News: Supply Chains and Yoyos – 228Main.com Presents: The Best of Leibman Financial Services

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

Sinking Feeling or Sinking Fund?
photo shows a jar full of coins, a stack of cash, and a small card that says "PLAN"

Have you ever been faced with a large expense for which you were unprepared?  

I have. It gave me a sinking feeling. 

Sinking itself isn’t always a bad thing. The term “sinking fund” originally referred to a dedicated reserve a corporation would set up to repay a debt, contributing funds on a regular basis to build up the needed amount.  

Many individuals have adapted the idea to manage their personal finances: having a sinking fund may help us avoid that sinking feeling. 

This idea came in handy as I recently set out to see how well the sources for my retirement income were matching up with my expenses. My home has a new roof, won’t need another for many years. My vehicles are fairly new; they won’t need to be replaced for years, either. 

But the fact is, someday I will need to pay for a new roof. I will need to replace a car. Furniture and appliances wear out. More predictable but “lumpy” expenses happen, too, like property taxes and planned travel. 

If my budget fails to account for these items, my budget is not really covering all of my living expenses, is it? The answer is a sinking fund, as in these examples. 

  • Home maintenance. If I sink $200 for repairs and such into a sinking fund every month, I would have $12,000 every five years. That should cover a new roof ten or fifteen years from now… or deductibles on storm damage… or a chance to repaint when needed. Likewise, $100 monthly should cover whatever appliances or furniture need replacing: that’s $12,000 over ten years. 
  • Transportation. Piling $350 monthly toward vehicle replacement ought to pile up to enough to buy a car when needed, years down the road. 
  • Annual needs. By adding in one-twelfth of my property taxes and one-twelfth of the annual travel budget each month, my sinking fund should be able to handle most anticipated lumpy expenses, in general. 

I don’t know when the dryer will need replacing—or what else might break!—but I should have the funds to meet the need. And in any of these scenarios, if the balance gets way ahead of likely expenses, I could always pare back the monthly deposit, direct that money elsewhere as I see fit. 

There are different ways to do sinking funds. I set up a monthly automatic transfer into my LPL Financial brokerage account, where the funds will go into an insured cash account until needed. If you would like to set up a sinking fund for your lumpy expenses, email us or call. 

Want content like this in your inbox each week? Leave your email here. 

Time and Space, Compressed

© Can Stock Photo / khunaspix

In his memoirs, Civil War general and president Ulysses S. Grant wrote about the first time he rode on a train. (When Grant was a young man, trains were a new technology.) Traveling overland at the unprecedented speed of 15 miles an hour, it seemed to him that time and space had been compressed.

In our age, one might have consecutive meals on opposite coasts. A journey that first took months, then weeks, then days, takes hours in the jet age.

Time is compressed in other ways, here in the 21st century.

• New forms of media let us interact at the speed of light with dozens or thousands of people, for less than the price of a stamp.

• Email and other forms of digital messaging allow communication between people who are never available at the same time. This represents quite a productivity boost over the days of telephone tag.

• Research begins with fingertips on keyboards, virtually everywhere, instead of with trips to the library.

Necessity is the mother of invention, as they say. We had to effectively integrate these technologies into our business with you, and use them to maximum effect over the past few years.

21st century technologies have helped our old-fashioned conversations begin with more common ground, then go deeper into the topics in which you are interested. It seems to me we are closer now than ever before. This makes sense, if we are communicating more than we used to.

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

Traveling by Miracle

© Can Stock Photo Inc. / andyb1126

Next month I will be traveling again, to and from a conference. I’ll be going by miracle.

More specifically, air travel. I’ll fly on planes that cost about $80 million each. The planes are part of an airline company fleet that cost about $19 billion dollars. Of course, planes are useless without airports—and we spend another $19 billion per year on airport capital improvements in this country.

The planes and airports would not do us any good without the people who fly them, load them, change the sparkplugs, and do everything else it takes to run an airline. My airline spends $6 billion on the help each year. (OK, maybe planes do not have sparkplugs, but you get my drift.) Another $4 billion goes for fuel.

I’ll have breakfast in Nebraska and lunch in San Diego. A few days with colleagues and consultants, experts and peers, listening and presenting (a first for me, this year!): a priceless experience. Then back to Nebraska.

If I had to drive or take the train, the travel would take days and days. Instead, I get the use of these billions of invested capital and all those talented people to do the trip in hours instead of days.

All this for a few hundred dollars. It is traveling by miracle. The company that serves me lives in mortal fear that the next company will figure out a way to serve me better for less money, so it is on a perpetual quest to provide even better value for my buck. As a customer, I’m really doing well in this transaction.

If I choose, I can be more than a customer. I could also be a percentage owner of the aircraft maker, the energy company that provides the fuel, and the airline itself. I could lend these companies money by buying their bonds, and collect interest from them.

On my journey, I will probably meet at least one person who complains about the service, or a slight delay, or the crying baby, or the security procedures. But I’ll be counting my blessings that I was born to this place and age, and enjoying the miracles around me.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.