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Well Rewarded

AS JULY BEGAN, there was happy news for Chase Freedom Visa cardholders like me: One of the categories for 5% rewards this quarter is grocery stores. We spend a lot on groceries, which means I’ll get a nice cash reward from Chase.
I’m a big believer in credit card cash rewards for two reasons. First, of course, there’s the reward money. The second reason is psychological: Credit card companies are notorious for the outrageous interest and fees they exact from anyone who doesn’t pay off every nickel every month,

Read more »

Unnecessary Breaks

IT’S SOCIETY’S responsibility to provide for those in need. “Need” is the key word here. It bothers me that so many resources are directed to those of us who made it to old age.

Although there are many low-income seniors, the generalization that we’re all income-challenged is a fallacy. According to the Congressional Research Service, “The poverty rate for individuals aged 65 and older historically was higher than the rates for adults aged 18-64 and children under the age of 18,

Read more »

Picking the Fruit

LAST MONTH, the Federal Reserve released the results of its latest stress tests of major financial institutions. As an investor in Wells Fargo, I took special interest in the Fed’s findings. Why? If Wells Fargo passed the Fed’s stress test, it would be allowed to raise its dividend, which currently stands at a paltry 10 cents a share, amounting to a dividend yield of just 0.9%.
I’m fully aware that my obsession with stock dividends is less than rational.

Read more »

Getting Short

WE JUST LAUNCHED our newest feature: A blog that’ll be updated two or three times a day with new posts that typically run some 300 words. These posts will, I hope, complement the site’s longer articles, which we’ll continue to publish, though perhaps less frequently.
Why introduce a blog? It’ll allow HumbleDollar to be more timely. It’ll be a way to tackle topics that don’t require full-length articles. And it’ll be another opportunity to highlight the financial philosophy that drives much of what we write—and what makes HumbleDollar different from most other financial sites:

We think harping on the stock market’s daily action is foolish and that the forecasts of Wall Street’s chattering class aren’t just worthless,

Read more »

Keeping My Cool

MY 2007 HONDA CR-V’s air conditioning system started having issues about three years ago. I took it to a shop where they added refrigerant and declared the problem fixed. A year later, the AC stopped working again so I took it to a different mechanic, who declared the problem solved after adding refrigerant and replacing a relay. Several months later, I was once again driving around in a car at ambient temperatures. Because I spent much of the summer of 2020 working from home,

Read more »

Eating My Veggies

THIRTY YEARS AGO, I took a course on sales and entrepreneurship. We had to buy a few books, subscribe to The Economist and The New York Times, and buy an HP 12C calculator. This was not your usual sales class. I felt like I was piloting the space shuttle as I learned how to use that HP calculator.
I’ll never forget the first time the instructor had us calculate how much money we’d need when we retired.

Read more »

Latest Articles

Not a Law of Nature

THE 4% RULE IS ONE of the best-known ideas in personal finance. But is it really a rule? And does it apply to you?

Let’s start at the beginning. The father of the 4% rule is a financial planner named William Bengen. Back in the early 1990s, he became frustrated with the prevailing rules of thumb for retirement planning. He found them too informal and set out to develop a more rigorous approach. The question he sought to answer: What percentage of a portfolio could a retiree safely withdraw each year?

Read more »

Retire to Paradise?

I RECENTLY WROTE about how my wife and I downsized to our beach home. It had long been a dream of ours and we’re thrilled it came about. Right after the move, we climbed on a plane and experienced another common dream of retirees—living in an exotic tropical paradise.
We visited our son, daughter-in-law, grandson and their Boston terrier in Nosara, Costa Rica. Nosara is a beautiful village and resort area carved out of the jungle on Nicoya Peninsula,

Read more »

Leaving the Country

ARE THERE TIMES when a near 100% international stock allocation makes sense? I believe there are—and that today is just such a moment.
Never in my life have I had such a low allocation to U.S. stocks. My overall portfolio is 60% stocks and 40% bonds. But the stock portion is comprised of just 15% U.S., with the remainder held in international stocks, split evenly between emerging and developed markets.
I realize that’s unorthodox.

Read more »

Playground Taunts

IF YOU WANT TO SEE your fellow citizens at their least appealing, look no further than online discussion forums. All too often, they’re a repugnant cesspool of anger, bullying and boastfulness. The comments posted on HumbleDollar are typically fairly civil, though even they occasionally veer toward the unnecessary nastiness that’s rampant everywhere else.
But here’s what these virulent commenters miss: Their postings reveal far more about themselves than about the subject they’re opining upon.

Read more »

Too Generous Yet Not

I JUST REVIEWED my Social Security earnings record. It brings back memories. For instance, it shows I earned $105 in 1959 when I was age 16 and working after school in the city library for 75 cents an hour. I’ve paid Social Security taxes every year since, though in 2020 they were based on earnings of just $2,333 and I was counted as self-employed. That darn blogging money.

Here’s something to put matters in perspective: Over 64 years,

Read more »

Qualifying for Care

A NEIGHBOR WAS recently telling me about the increasing amount of care he and his wife have to provide to his 90-year-old mother-in-law, and the challenges and expenses he expects in the near future.
I was able to offer some advice—because this is an area where my wife and I have significant experience. Together, we took care of her parents and mine, both medically and financially. If this is something you’re experiencing, or may soon,

Read more »

Voices

What are your top financial worries?

"LTC. This has taken too much thinking and analysis from me. I’m only 51 but want to set things so I don’t have to worry about them later. I guess I’m lucky that this is one of the last things to sort through before calling it quits from a career standpoint."
- Edwin Belen
Read more »

What would you happily buy even if it were twice the price?

"First off, it'd be so hard for me to keep buying anything if it were twice the price. I'm awful when it comes to anchoring to an initial price! A quality used car might fit the list. I have purchased pre-owned vehicles off Craigslist a few times, and all have been good experiences. My target buy price is about $5k. If I could have high confidence the 'new car' would last me 10+ years with safety and minimal non-routine maintenance, I might do it. Of course, I want to pay the market price and no higher :) Another good one is the cost of an additional AAA membership when there is an existing family plan. It's very affordable with good benefits."
- Mike Zaccardi
Read more »

What should investors do about possible higher interest rates?

"Fixed-income investors should be excited! Didn't expect to read that, did you? Of course bond prices fall when rates rise, all else equal, but with a bond fund, new higher-yielding holdings slowly replace lower-yielding maturing bonds. Wouldn't it be great to have an environment 10+ years down the line when you can invest in an aggregate bond fund and earn a positive real yield of perhaps 2-3% like the good ole days? If you periodically invest in bonds now, maybe you will stand to benefit in that scenario. Coming back down to the reality of today, bond investors have to step out on the risk spectrum in search of decent yields. Emerging market bonds, US high yield debt, floating-rate bonds--all are popular options. You can also invest in Series I bonds or even Series EE bonds that have virtually no risk. High dividend stocks and closed-end funds (which use leverage to really juice the yield) may seem like decent options, but a year's worth of dividends can be wiped away after a couple days' trading."
- Mike Zaccardi
Read more »

Money Guide

Risk and Reward

TO EARN HIGH returns, we need to take high risk. This is the fundamental tradeoff that every investor has to wrestle with: Are we willing to run the risk of large short-term losses in the hope of clocking superior performance? That tradeoff is more complicated than many investors realize. For starters, we aren’t talking here about crazy risk, such as betting everything on one or two stocks. That’s as likely to leave us penniless as make us a mint. Instead, we’re talking about the risk associated with broadly diversified portfolios that might include hundreds of different stocks and bonds. How are we measuring the risk of these broadly diversified portfolios? Traditionally, experts have relied on volatility. A stock portfolio is more volatile than a bond portfolio, so—if investors are to be enticed to hold stocks—they need to be reasonably confident they’ll earn more than with bonds. In recent decades, some experts have argued that volatility alone doesn’t fully capture risk. For instance, value stocks are less volatile than growth stocks, but they’ve delivered superior long-run returns. Why? Value stocks often have weaker fundamentals than growth stocks and hence there’s a greater risk of bankruptcy, so perhaps owners of value stocks are compensated for taking that risk. Even if we take high risk—by investing heavily in stocks or investing heavily in value stocks—we may not get compensated for the risk we’re taking, even if we hang on for a mighty long time. U.S. stocks barely broke even over the decade through 2009. Japanese stocks are still far below their 1989 peak. While the range of possible returns is large with stocks, it’s much narrower with bonds and even more so with cash investments. If we’re unlucky with stocks, we could get cash-like returns and perhaps worse. But even if we’re extremely lucky with our cash investments, it’s almost inconceivable that we’ll get returns that approach the historical long-run return from stocks. With publicly traded stocks and bonds, and with cash investments, we typically have some sense of the risk involved. It's much harder with investments for which daily pricing isn't available, such as real estate, timber, many hedge funds, venture capital investments and syndicated bank loans. A fundamental rule: If an investment holds out the prospect of high returns, there must be high risk—even if that risk isn't immediately apparent. Next: Opportunity Cost Previous: Be an Owner Article: Risky Business
Read more »

Manifesto

NO. 73: WE SHOULD be alert to things we think we know—which managers or stocks will shine, which way markets are headed—that, in truth, are unknowable and yet may poison our decisions.

Truths

NO. 89: HOUSES don’t appreciate much. Over the long haul, home prices have climbed just one percentage point a year faster than inflation—and much of that gain would have been offset by maintenance costs, property taxes and homeowner’s insurance. Instead, the big gain comes from the rent or, if you live in the house yourself, the imputed rent.

Act

ACCESS FINANCIAL accounts from a dedicated device. Online thieves could load malware onto your computer, which then captures usernames and passwords for your financial accounts. To protect yourself, buy a low-cost notebook computer or other device to check your financial accounts—and never use it to read emails or visit other sites.

Think

RETURN COMPONENTS. If the stock market’s dividend yield is 2% and earnings per share grow 4%, the investment return would be 6% a year. This is a decent guide to long-run returns. But short-run results could stray far from 6%, depending on the speculative return—changes in how investors value corporate profits, as reflected in price-earnings ratios.

Second Look

Retirement

My Social Security

SOCIAL SECURITY is a crucial source of income for many retirees. But unfortunately, there’s also much confusion, because the ways benefits are calculated sure isn’t simple.
Want to learn more? To get started, I’d suggest heading to the Social Security Administration’s website and creating a free “my Social Security” account. For those currently receiving benefits, the website allows you to:

Verify your benefit payment amount
Get a replacement Social Security card
Get a replacement Medicare card
Change your address and phone number
Start or change direct deposit of your benefit payment
Get a replacement SSA-1099 or SSA-1042S for tax purposes

If you aren’t currently receiving benefits,

Read more »

Family Finance

Cost of Living

I TUTOR MY 10-year-old niece once a week in math and science. After the study sessions, we often talk about other things—mostly kid stuff. Recently, her treasured piggybank got a nice boost on her birthday and we discussed what she might do with the money.
That’s when my niece asked, “How much money will I need when I grow up?” I guess she was trying to figure out if she did indeed have to study hard and get a job—or whether her current savings would be enough.

Read more »

Investing

Keep On Keepin’ On

A NATIVE CHICAGOAN, I bailed out and am now a Southerner. Or at least a Florida Man. So I attend church each Sunday. If you attend church in the south, you will inevitably hear someone respond to a “how are ya?” with “well, I just keep on keepin’ on.”
With all the fanfare about this bull market, and especially large-cap technology stocks, it can be tough to keep on keepin’ on and stick to your long-term plan.

Read more »

Lists

Grossman’s Eleven

I AM AMAZED OUR schools don’t require kids to learn three important life skills: the basics of nutrition, a thing or two about parenting, and how to handle money. I’m no expert on nutrition and my parenting is a work in progress. But I do have a background in personal finance: When folks ask me what to read to deepen their financial knowledge, I have a ready list of titles.
Recently, however, someone asked me for a more advanced list—a “201”

Read more »
Home Call to Action

Mindset

Choosing Our Future

WHEN FOLKS HAVE financial questions, they go hunting for the right answer. But what if there’s no right answer to be found?
To be sure, in retrospect, the correct answer is often crystal clear. Looking back at 2018, we should have owned growth stocks until September and then gone to 100% cash. If our home didn’t burn down and our health was good, we shouldn’t have bothered with homeowner’s and health insurance. If we kept our job and survived the year,

Read more »

Latest Articles

Not a Law of Nature

THE 4% RULE IS ONE of the best-known ideas in personal finance. But is it really a rule? And does it apply to you?

Let’s start at the beginning. The father of the 4% rule is a financial planner named William Bengen. Back in the early 1990s, he became frustrated with the prevailing rules of thumb for retirement planning. He found them too informal and set out to develop a more rigorous approach. The question he sought to answer: What percentage of a portfolio could a retiree safely withdraw each year?

Read more »

Retire to Paradise?

I RECENTLY WROTE about how my wife and I downsized to our beach home. It had long been a dream of ours and we’re thrilled it came about. Right after the move, we climbed on a plane and experienced another common dream of retirees—living in an exotic tropical paradise.
We visited our son, daughter-in-law, grandson and their Boston terrier in Nosara, Costa Rica. Nosara is a beautiful village and resort area carved out of the jungle on Nicoya Peninsula,

Read more »

Leaving the Country

ARE THERE TIMES when a near 100% international stock allocation makes sense? I believe there are—and that today is just such a moment.
Never in my life have I had such a low allocation to U.S. stocks. My overall portfolio is 60% stocks and 40% bonds. But the stock portion is comprised of just 15% U.S., with the remainder held in international stocks, split evenly between emerging and developed markets.
I realize that’s unorthodox.

Read more »

Playground Taunts

IF YOU WANT TO SEE your fellow citizens at their least appealing, look no further than online discussion forums. All too often, they’re a repugnant cesspool of anger, bullying and boastfulness. The comments posted on HumbleDollar are typically fairly civil, though even they occasionally veer toward the unnecessary nastiness that’s rampant everywhere else.
But here’s what these virulent commenters miss: Their postings reveal far more about themselves than about the subject they’re opining upon.

Read more »

Too Generous Yet Not

I JUST REVIEWED my Social Security earnings record. It brings back memories. For instance, it shows I earned $105 in 1959 when I was age 16 and working after school in the city library for 75 cents an hour. I’ve paid Social Security taxes every year since, though in 2020 they were based on earnings of just $2,333 and I was counted as self-employed. That darn blogging money.

Here’s something to put matters in perspective: Over 64 years,

Read more »

Qualifying for Care

A NEIGHBOR WAS recently telling me about the increasing amount of care he and his wife have to provide to his 90-year-old mother-in-law, and the challenges and expenses he expects in the near future.
I was able to offer some advice—because this is an area where my wife and I have significant experience. Together, we took care of her parents and mine, both medically and financially. If this is something you’re experiencing, or may soon,

Read more »

Free Newsletter

Voices

Should investors own alternative investments?

"Alternative assets are suited for investors with stable income streams in excess of the alternative asset loss limits."
- Liarspoltergeist
Read more »

Is term life insurance always better than cash value?

"My own personal experience is that it helps to diversify term and permanent life insurance. My wife and I bought term insurance primarily when we had large mortgage debts that we wanted to cover. A 20 year level term policy was perfect to cover our mortgage debt. We bought some permanent whole life policies that were paid off when we reached retirement (age 65) because we no longer wanted the insurance bills in retirement. These started as term insurance policies that we converted to permanent insurance about age 50, because life insurance is tax free and we wanted to leave money for any potential estate taxes. The best policies we bought were variable universal life indexed to the Vanguard S&P 500 stock index. We bought these when we were young enough to get a very low cost of insurance, but most of the monthly premium goes to an S&P 500 index fund, which has compounded significantly over the decades. Part of our rational was we could always take a policy loan against those compounded earnings if we ever needed emergency funds. We still contribute a small amount per month (around $100) but the compound earnings from the S&P 500 index fund are a large multiple of that."
- Bob Wilmes
Read more »

What would you happily buy even if it were twice the price?

"First off, it'd be so hard for me to keep buying anything if it were twice the price. I'm awful when it comes to anchoring to an initial price! A quality used car might fit the list. I have purchased pre-owned vehicles off Craigslist a few times, and all have been good experiences. My target buy price is about $5k. If I could have high confidence the 'new car' would last me 10+ years with safety and minimal non-routine maintenance, I might do it. Of course, I want to pay the market price and no higher :) Another good one is the cost of an additional AAA membership when there is an existing family plan. It's very affordable with good benefits."
- Mike Zaccardi
Read more »
Home Call to Action

Manifesto

NO. 73: WE SHOULD be alert to things we think we know—which managers or stocks will shine, which way markets are headed—that, in truth, are unknowable and yet may poison our decisions.

Act

ACCESS FINANCIAL accounts from a dedicated device. Online thieves could load malware onto your computer, which then captures usernames and passwords for your financial accounts. To protect yourself, buy a low-cost notebook computer or other device to check your financial accounts—and never use it to read emails or visit other sites.

Truths

NO. 89: HOUSES don’t appreciate much. Over the long haul, home prices have climbed just one percentage point a year faster than inflation—and much of that gain would have been offset by maintenance costs, property taxes and homeowner’s insurance. Instead, the big gain comes from the rent or, if you live in the house yourself, the imputed rent.

Think

RETURN COMPONENTS. If the stock market’s dividend yield is 2% and earnings per share grow 4%, the investment return would be 6% a year. This is a decent guide to long-run returns. But short-run results could stray far from 6%, depending on the speculative return—changes in how investors value corporate profits, as reflected in price-earnings ratios.

Money Guide

Contents

Risk and Reward

TO EARN HIGH returns, we need to take high risk. This is the fundamental tradeoff that every investor has to wrestle with: Are we willing to run the risk of large short-term losses in the hope of clocking superior performance? That tradeoff is more complicated than many investors realize. For starters, we aren’t talking here about crazy risk, such as betting everything on one or two stocks. That’s as likely to leave us penniless as make us a mint. Instead, we’re talking about the risk associated with broadly diversified portfolios that might include hundreds of different stocks and bonds. How are we measuring the risk of these broadly diversified portfolios? Traditionally, experts have relied on volatility. A stock portfolio is more volatile than a bond portfolio, so—if investors are to be enticed to hold stocks—they need to be reasonably confident they’ll earn more than with bonds. In recent decades, some experts have argued that volatility alone doesn’t fully capture risk. For instance, value stocks are less volatile than growth stocks, but they’ve delivered superior long-run returns. Why? Value stocks often have weaker fundamentals than growth stocks and hence there’s a greater risk of bankruptcy, so perhaps owners of value stocks are compensated for taking that risk. Even if we take high risk—by investing heavily in stocks or investing heavily in value stocks—we may not get compensated for the risk we’re taking, even if we hang on for a mighty long time. U.S. stocks barely broke even over the decade through 2009. Japanese stocks are still far below their 1989 peak. While the range of possible returns is large with stocks, it’s much narrower with bonds and even more so with cash investments. If we’re unlucky with stocks, we could get cash-like returns and perhaps worse. But even if we’re extremely lucky with our cash investments, it’s almost inconceivable that we’ll get returns that approach the historical long-run return from stocks. With publicly traded stocks and bonds, and with cash investments, we typically have some sense of the risk involved. It's much harder with investments for which daily pricing isn't available, such as real estate, timber, many hedge funds, venture capital investments and syndicated bank loans. A fundamental rule: If an investment holds out the prospect of high returns, there must be high risk—even if that risk isn't immediately apparent. Next: Opportunity Cost Previous: Be an Owner Article: Risky Business
Read more »

Second Look

Retirement

My Social Security

SOCIAL SECURITY is a crucial source of income for many retirees. But unfortunately, there’s also much confusion, because the ways benefits are calculated sure isn’t simple.
Want to learn more? To get started, I’d suggest heading to the Social Security Administration’s website and creating a free “my Social Security” account. For those currently receiving benefits, the website allows you to:

Verify your benefit payment amount
Get a replacement Social Security card
Get a replacement Medicare card
Change your address and phone number
Start or change direct deposit of your benefit payment
Get a replacement SSA-1099 or SSA-1042S for tax purposes

If you aren’t currently receiving benefits,

Read more »

Family Finance

Cost of Living

I TUTOR MY 10-year-old niece once a week in math and science. After the study sessions, we often talk about other things—mostly kid stuff. Recently, her treasured piggybank got a nice boost on her birthday and we discussed what she might do with the money.
That’s when my niece asked, “How much money will I need when I grow up?” I guess she was trying to figure out if she did indeed have to study hard and get a job—or whether her current savings would be enough.

Read more »

Investing

Keep On Keepin’ On

A NATIVE CHICAGOAN, I bailed out and am now a Southerner. Or at least a Florida Man. So I attend church each Sunday. If you attend church in the south, you will inevitably hear someone respond to a “how are ya?” with “well, I just keep on keepin’ on.”
With all the fanfare about this bull market, and especially large-cap technology stocks, it can be tough to keep on keepin’ on and stick to your long-term plan.

Read more »

Lists

Grossman’s Eleven

I AM AMAZED OUR schools don’t require kids to learn three important life skills: the basics of nutrition, a thing or two about parenting, and how to handle money. I’m no expert on nutrition and my parenting is a work in progress. But I do have a background in personal finance: When folks ask me what to read to deepen their financial knowledge, I have a ready list of titles.
Recently, however, someone asked me for a more advanced list—a “201”

Read more »

Mindset

Choosing Our Future

WHEN FOLKS HAVE financial questions, they go hunting for the right answer. But what if there’s no right answer to be found?
To be sure, in retrospect, the correct answer is often crystal clear. Looking back at 2018, we should have owned growth stocks until September and then gone to 100% cash. If our home didn’t burn down and our health was good, we shouldn’t have bothered with homeowner’s and health insurance. If we kept our job and survived the year,

Read more »