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Excessive optimism is the curse of the young—and undue pessimism is the affliction of the old.

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The Nerf Gun Incident: Sunk Costs, Suppressing Fire and the Glassblower

"Chrissy’s brother, and her nephew, are only a few years apart in age. They practically grew up as brothers, they reciprocate by buying goofy presents for each other at the family Christmas gift exchanges. Several years ago, one of them purchased a pair of nerf guns. A gunfight erupted inside the  house, it was fun until someone literally nearly had an eye poked out.  I know the point of the post wasn’t about nerf guns, but I couldn’t resist telling the story. The only other thing I have to add is that Chrissy sure likes Suzie’s style, and would love to see a photo of the carnage caused by the battle. "
- Dan Smith
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The Rent is Too Damn High!

"R Quinn, I understand how your son must feel not keeping all he charges as I felt similarly when I used to work for ExxonMobil. There was commuter costs (gas, insurance, tires, a new transmission, etc.), taxes (fed, state, SS, Medicare, etc.), health and dental, clothing (suits, shoes, dry cleaning, etc.). One reason I think some customers have no idea about what makes up the prices is that contractors make zero effort informing them. Most of the quotes I have received over the years are verbal, with a few being a price listed in a text or on a nearly blank pdf. If contractors can't be bothered to include a sentence or two describing the job, why should I be bothered to try an understand how much it will cost them? Regarding the equation, I think it would behoove all involved to realize that there are three sides to it: pay the rent, DIY, don't do anything."
- mflack
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GLP1 Access for Only a $50 Copay?

"Great news, Dave. We have been paying cash for Wegovy. Thanks."
- Dan Smith
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Writing a Book in Retirement: The Good, the Hard, and the Surprisingly Meaningful

"I was a freelance travel writer for about the last 20 years of my career and eventually co-authored a book with an acquaintance who had a lot of publishing experience. Through his contacts, we received a contract from a university press and were paid an advance for our royalties, which we earned through our book sales plus more. The university’s publishing staff was large and we benefitted from their editor, cover artist, promotional team, and so on. It all took a couple of years, but it was a kick for our book to be in the Library of Congress and we won an award. After the pandemic came and went, I decided I was ready to retire."
- Chris G
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Starting Up – Part 2

"I've been really lucky going back into an employee role. The business owner had a headache, a relatively small part of the business that was giving him disproportionately large problems. So he has given me almost full autonomy, happy to leave me be as long as his problems go away! The more difficult aspect was actually finding a job. At 52, in a rural area, with an eclectic mix of roles on my resume, I didn't appear to be a very attractive employee proposition. It was pretty humbling to feel like I almost had to start from scratch, and it certainly makes me appreciate my current role."
- greg_j_tomamichel
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Help for divorcing daughter

"The lawyer seems VERY PROBLEMATIC. A good lawyer acts as an advocate for his/her client. Your daughter needs better representation."
- Marilyn Lavin
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Money and Me by Jonathan Clements

"Thank you. I just pre-ordered the book, which I know will be exceptional. I will now order copies for each of my adult children. I read, religiously, Jonathan's columns in the WSJ for years and followed him from there. He has helped, and is missed, by so many."
- Randy Eakin
Read more »

Dickie and his magic beans

"On the other hand, there are significant differences (taste, texture, appearance, etc.) between various apple varieties, and the same holds true for most fruits and vegetables. Why should coffee beans be any different? (Hint, there are significant differences - soil conditions, bean variety, etc.) Certain brands sole-source different blends with beans from growers with specific locations, soil, climate, coffee bean variety, etc. It's worth spending some time investigating what there is to offer. Did you know there are several hundred different types of bananas?"
- mllange
Read more »

Direct Indexing Anyone?

"This 2023 article by Allan Roth summarizes direct indexing’s pro and cons better than most. His conclusion?

"Direct indexing is generally not as good as buying broad ultra-low-cost index funds. That said, it could be beneficial in certain circumstances: 

·      You want to donate to charity in a few years so you can harvest the tax loss and then donate the appreciated securities to the charity, thereby never paying taxes on the appreciation. 

·      You currently have large taxable long-term gains at the 23.8% marginal federal tax rate (20% +3.8% investment income tax) but soon will be in a lower rate. 

·      You are in a high tax bracket but have a very short life expectancy and the kids will soon inherit the money with a step-up basis."


Roth ended with this: "Direct indexing is good. It’s just generally not as good as owning broad ETFs." 


Thanks to all who responded. Please update here if you use direct indexing and learn something worth sharing. 

"
- ostrichtacossaturn7593
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Benefits Young Adults Should Look at Before Taking a Job

"This benefit is a sleeper, but important. A young adult's greatest attribute is their human capital - which they can put to good use for decades. Therefore, its critical to protect that human capital. And the best way to do that is with long term disability coverage. So young adults need to make sure they have that coverage. Because if they get injured and can't work, that may be the end of their human capital - and the beginning of a very tough life."
- js
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First Job, Lasting Impact

"It just popped in my head so I calculated it. 🤑"
- R Quinn
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The Nerf Gun Incident: Sunk Costs, Suppressing Fire and the Glassblower

"Chrissy’s brother, and her nephew, are only a few years apart in age. They practically grew up as brothers, they reciprocate by buying goofy presents for each other at the family Christmas gift exchanges. Several years ago, one of them purchased a pair of nerf guns. A gunfight erupted inside the  house, it was fun until someone literally nearly had an eye poked out.  I know the point of the post wasn’t about nerf guns, but I couldn’t resist telling the story. The only other thing I have to add is that Chrissy sure likes Suzie’s style, and would love to see a photo of the carnage caused by the battle. "
- Dan Smith
Read more »

The Rent is Too Damn High!

"R Quinn, I understand how your son must feel not keeping all he charges as I felt similarly when I used to work for ExxonMobil. There was commuter costs (gas, insurance, tires, a new transmission, etc.), taxes (fed, state, SS, Medicare, etc.), health and dental, clothing (suits, shoes, dry cleaning, etc.). One reason I think some customers have no idea about what makes up the prices is that contractors make zero effort informing them. Most of the quotes I have received over the years are verbal, with a few being a price listed in a text or on a nearly blank pdf. If contractors can't be bothered to include a sentence or two describing the job, why should I be bothered to try an understand how much it will cost them? Regarding the equation, I think it would behoove all involved to realize that there are three sides to it: pay the rent, DIY, don't do anything."
- mflack
Read more »

GLP1 Access for Only a $50 Copay?

"Great news, Dave. We have been paying cash for Wegovy. Thanks."
- Dan Smith
Read more »

Writing a Book in Retirement: The Good, the Hard, and the Surprisingly Meaningful

"I was a freelance travel writer for about the last 20 years of my career and eventually co-authored a book with an acquaintance who had a lot of publishing experience. Through his contacts, we received a contract from a university press and were paid an advance for our royalties, which we earned through our book sales plus more. The university’s publishing staff was large and we benefitted from their editor, cover artist, promotional team, and so on. It all took a couple of years, but it was a kick for our book to be in the Library of Congress and we won an award. After the pandemic came and went, I decided I was ready to retire."
- Chris G
Read more »

Starting Up – Part 2

"I've been really lucky going back into an employee role. The business owner had a headache, a relatively small part of the business that was giving him disproportionately large problems. So he has given me almost full autonomy, happy to leave me be as long as his problems go away! The more difficult aspect was actually finding a job. At 52, in a rural area, with an eclectic mix of roles on my resume, I didn't appear to be a very attractive employee proposition. It was pretty humbling to feel like I almost had to start from scratch, and it certainly makes me appreciate my current role."
- greg_j_tomamichel
Read more »

Help for divorcing daughter

"The lawyer seems VERY PROBLEMATIC. A good lawyer acts as an advocate for his/her client. Your daughter needs better representation."
- Marilyn Lavin
Read more »

Money and Me by Jonathan Clements

"Thank you. I just pre-ordered the book, which I know will be exceptional. I will now order copies for each of my adult children. I read, religiously, Jonathan's columns in the WSJ for years and followed him from there. He has helped, and is missed, by so many."
- Randy Eakin
Read more »

Dickie and his magic beans

"On the other hand, there are significant differences (taste, texture, appearance, etc.) between various apple varieties, and the same holds true for most fruits and vegetables. Why should coffee beans be any different? (Hint, there are significant differences - soil conditions, bean variety, etc.) Certain brands sole-source different blends with beans from growers with specific locations, soil, climate, coffee bean variety, etc. It's worth spending some time investigating what there is to offer. Did you know there are several hundred different types of bananas?"
- mllange
Read more »

Free Newsletter

Get Educated

Manifesto

NO. 58: IF WE HAVE a long time horizon, we should aim to be owners—by buying our cars, our home and a diversified stock portfolio. The latter will make us part owners of companies large and small.

Truths

NO. 51: ANNUAL FUND expenses are the biggest driver of differences in fund performance. A stock-fund manager may get lucky and post big gains, despite a hefty expense ratio. But that’s rare with bond and money-market funds: Investors should favor the lowest-cost funds, because they invariably dominate each category’s list of top five-year performers.

think

RISK TOLERANCE. Objectively, we may be able to take a lot of investment risk because we have a secure job and a long time horizon. But before we invest heavily in stocks, we should consider our personal tolerance for risk. This isn’t easy because it changes with the market: We grow braver as stock prices climb—and fearful when the market falls.

humans

NO. 13: WE'RE GIVEN to inertia. Even if our financial situation is bad, we fear any change will make it even worse—and we’ll end up racked with regret. Such fear can leave us holding bum investments we should have ditched years ago. Still, inertia isn’t all bad. It takes effort to sign up for the 401(k). But once we have, we tend to stick with it, thanks to inertia.

Two-minute checkup

Manifesto

NO. 58: IF WE HAVE a long time horizon, we should aim to be owners—by buying our cars, our home and a diversified stock portfolio. The latter will make us part owners of companies large and small.

Spotlight: College

Falling Short

I SERVED ON a scholarship committee for a local foundation. We offered awards to college students entering their sophomore year. Our coordinator had the unhappy job of explaining to some students and parents that, even though their students had a full freshman schedule and passed all their classes, they didn’t actually have sophomore standing. How can this be? The answer is remediation.
Almost 24% of entering college freshmen at Ohio universities required remediation in English or math and 6% needed both.

Read more »

Getting a later start: college vs. retirement, a growing conundrum

Our oldest child is age 55, – three children ages 14 and 12 (twins),
our second is age 54 – three children ages 14, 13 and 10,
our third age 51 – three children 18,17 and 13,
and our fourth age 50 – two children ages 20 and 17
All ages are rounded.
Look at these ages and what comes to mind, college, retirement? Pretty sure not retirement any time soon. This is what I ponder when I read about FIRE or even early retirement before age 60.

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A Real Education

WE’RE A SINGLE-INCOME family with five children, so the prospect of paying for college for all our kids is daunting, to say the least. Yes, our oldest is now in her second year of college. But we still have a long way to go before they’ve all crossed the finish line.
Our kids are ages 19, 17, 12, nine and six. We’ve been homeschooling them since the beginning, with a few brief exceptions, including one daughter in a Department of Defense high school in Korea for a year and another daughter in a private high school for two years.

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Saved by Borrowing

IN HIGH SCHOOL, I worked at a local roller-skating rink to save money for college. I calculated that, if I kept working at the same rate once I was in college, I could make it through my four-year degree without taking on any student loans.
I was determined to make it work.
In my freshman year, my plan started with a budget—and that budget included this simple edict: Spend the least amount possible on everything.

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A+ for Effort

WE HAVE A PROBLEM: We may have saved too much for our daughter’s college education.
My wife and I started contributing aggressively to our daughter’s 529 college savings account as soon as she was born. For the first two years, we invested the full amount of the annual gift-tax exclusion, which was then $14,000. Now, the exclusion is at $16,000, but lately we haven’t been saving as much as we used to. The reason: Our early aggressive saving,

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On Borrowed Time?

THE CONTROVERSY over student loans has caught up with the latest federal government repayment program. That program is known as SAVE, or Saving on A Valuable Education.
SAVE is an income-driven repayment plan, or IDR. It’s the sixth iteration of an IDR plan. Due to the favorable terms and the high estimated price tag, it was recently halted by legal challenges.
IDR plans follow the same general formula to determine the monthly payment on student loan debt.

Read more »

Spotlight: Southworth

Choose Both

IT WAS A WARM MAY night in 1977. I was 19 years old and the manager of a fast-food restaurant. I was also in the middle of a five-year addiction to compulsive gambling that would eventually lead me to the brink of spiritual and financial bankruptcy. It was about 10:30 p.m. and I was cleaning up the store after closing. I was planning on going to the racetrack to catch the last race when I was done. I was emptying the soft drink system when I turned around and saw two men in ski masks pointing guns at me. I burst out laughing—I thought it was a joke. When they ordered me to get down on the floor and crawl over to the safe, I knew they were deadly serious. One of the men ordered me to empty the safe and put all the money in his bag. As I nervously loaded hundreds of dollars in coins into the bag, I noticed out of the corner of my eye that there was a paper cup sitting on my desk stuffed with about $400 in cash. The thought popped into my head that maybe he wouldn’t notice it and I could take it with me to the racetrack that night. After I cleaned out the safe, he asked me, “Is that all the money?” As I tried not to look at the money on the desk, I replied, “Yeah, that’s all the money.” He put the gun to my head and said again, “Is that all the money?” I stuttered, “Uh, there’s some more up there on the desk.” Maybe his gun wasn’t loaded or maybe he was too nervous to realize that I had tried to pull something over on him. Instead of shooting me, he and his partner tied…
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Living With Insecurity

HOW DO YOU STAY centered when markets plunge and volatility is off the charts? One of the ways I cope is by pulling out a wonderful financial book to reread. In 1951, Alan Watts wrote The Wisdom of Insecurity: A Message for an Age of Anxiety. But his message is as timely today as it was then. “There is a feeling that we live in a time of unusual insecurity…. Human beings appear to be happy just so long as they have a future to which they can look forward—whether it be a ‘good time’ tomorrow or an everlasting life beyond the grave.” Needless to say, there isn’t a chapter about stocks, mutual funds or financial planning in the entire book. Watts was an American Buddhist teacher who encouraged people to do everything to be aware and conscious of the present moment and not spend so much time planning for a future that never truly materializes, at least in the way we think it will. Given the trillions of dollars we spend on “security” in this country—financial, internet, home and homeland, to name a few—we don’t seem to do a good job of living in the insecure todays and tomorrows that are part of life. Planning and preparing aren’t bad things, of course. But what happens when the things we put our faith in start to break down? I preached a sermon in January 2009 titled The Wisdom of Financial Insecurity. I reflected on the financial bloodbath we’d experienced in 2008. My retirement portfolio dropped 36% and, despite making regular contributions for the previous five years, it was worth less than it had been at the end of 2003. My wife was also in the midst of her second bout with breast cancer. I needed some reminders that, when the…
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Return on Spending

WHEN I STARTED MY sales and marketing career, one of the first mantras I learned was, “You have to spend money to make money.” Salespeople like me would always be asking the company to spend more—on commissions, product development and support. The bean counters, as we called them, would always respond by telling us how tight the budget was and how we needed to cut expenses. Especially those expenses they didn’t think we needed, such as business travel and client lunches. When my roles changed over the years and I became responsible for the operations side of organizations, I came to appreciate more fully the plusses and minuses of spending money to make money. While I never overran an organizational budget in the three decades that I was responsible for them, I’ve also never fully left my sales self behind. When I led nonprofits, I often found myself trying to convince others that, to make money, we needed to spend money—on fundraising. But you don’t always have to spend money to make money. In fact, when investing, just the opposite is usually true. As mutual fund and exchange-traded fund expenses have plummeted, performance has improved. In investing, you get what you don’t pay for. What about spending money for expert advice on taxes, retirement planning and estate planning? That may indeed lead to more money—but not always. My computer knows that I’m interested in retirement and finances. I’m reminded of that because of the many brokerage firm, investment and get-rich-quick advertisements I see every day. These organizations clearly believe they need to spend money to make money—for themselves, not me—and, given the size of some of these organizations, they’re right. But before I click on these advertisements, I try to remember another famous mantra: A fool and his money are soon…
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Treasured Trash

WHEN PEOPLE DISCUSS financial matters or take the “A Year to Live” class that I lead, there’s a common refrain: They don’t want to be a burden to their loved ones. They’re concerned about having enough money to take care of themselves when they’re older. But even if we have plenty of money, we can still end up being a burden. How so? Our kids and other loved ones don’t want the stuff we’ve gathered over the years. I was reminded of this recently when talking with some older friends about downsizing. For some, getting rid of beloved books, albums and paper records is like saying goodbye to long-held friendships. When we moved four years ago, we gave away more than 10 boxes of books. We still have too many. I always ask people in my class what their five most precious possessions are, and what they plan to do with them when they’re gone. The good news: People typically hold memories much tighter than material things. The bad news: They usually have no idea who, if anyone, will want the material objects they love. I’ve seen this up close. I was challenged and fortunate to take care of my dad when he went into home hospice care. The six weeks he thought he’d live turned into one year. I spent much of the year dealing with stuff that he and his late wife had accumulated. She was a collector, and had so many teddy bears and dolls that it was hard to get rid of them all. When my dad died, I was grateful that the company that bought his mobile home promised to dispose of any items that remained. I have no idea where they donated the furniture and boxes of china I left behind, but I was relieved…
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My Confession

I HAVE READ THAT confession is good for the soul. I suspect it’s also good for our financial health—or, at least, I hope so. I have a confession to make as a usually loyal fan, regular reader and occasional contributor to HumbleDollar. I’ve read less than a dozen of the site’s articles in 2022, and I’ve checked my portfolio just as infrequently. This is a new practice for me. I share it somewhat reluctantly because it may or may not be healthy. When I was a regularly practicing minister, it was rare when someone came to me to spill their darkest secrets. My religious tradition doesn’t require regular confession. When I counseled people in financial trouble, one of the first tasks I gave them was to write down everything they earn, spend, owe and own. In every case, I found that sharing honestly was not only good for the soul, but also for just about everything else in their life. Secrets and darkness often destroy; openness and sunlight give life. As I reflect on why I’ve disengaged from finances this year, I realize I’ve learned some good things—and some not-so-good things. I hope you’ll find a truth or two for yourself in my confession. Bad news isn’t fun and I avoid it. In years when the financial markets decline, I often stop looking at my portfolio. I do the opposite when the market is booming. Then I may check and recheck my balances multiple times a day. The bad news is that frequent checking sometimes led me to act impulsively. I’d sometimes sell low or buy during what I thought was a dip. I wish I was more like Warren Buffett, who famously advised, “Be fearful when others are greedy, and greedy when others are fearful.” Most of the time,…
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Santa Claus Rally

THERE ARE FEW certainties in life, but December always brings a few. Our neighbors will decorate their houses with bright lights, our mailbox will be stuffed with letters asking for charitable donations and the financial pundits will speculate whether there’ll be a Santa Claus rally this year. If you’re a regular reader of HumbleDollar, you know that a Santa Claus rally has the potential to fill our portfolios with extra dollars via higher stock and mutual fund prices. But the Santa Claus rally I want to share has been much more valuable to me than a few extra percentage points added to my net worth. I was in my early 20s and slowly putting my life back together after bankrupting myself with my compulsive gambling addiction. As the holidays came around, I began feeling lonely and even more depressed than usual. I had lost my money, my girlfriend and most of my self-esteem. A friend suggested I spend Thanksgiving delivering meals to seniors who couldn’t get out of the house. For at least one day, I forgot myself and felt good because of the smiles and joy my deliveries had brought. The Christmas season was going to be even harder. I’m the kind of guy who watches all the holiday movies and cartoons and can’t get enough of the spirit of giving. I decided to leverage my Thanksgiving learnings. I went to the costume shop and bought the most expensive Santa suit I could find. If I had a financial advisor back then, she would have warned against adding the equivalent of a week’s pay to my credit card debt. But more than 35 years later, I can say it was one of the best purchases I ever made. I soon became a volunteer in the Santa Claus helper patrol.…
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