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The original financial sin: “Don’t worry, Eve, we’ll charge the fruit to a credit card and figure out how to pay the bill when it arrives.”

Should You Sell?

WHEN STOCKS slump, experts are often quick to advise investors to sit tight or, better still, buy more. But that won’t be the right advice for everybody.
Christine Benz, Morningstar’s director of personal finance and one of my favorite financial writers, recently penned an article listing five questions to ask yourself if you’re pondering whether to reduce your stock exposure during a bear market. I figured I’d work through the five questions—and see what I could learn about my own finances.

Read more »

Under Pressure

ON APRIL 14, 1988, Captain Paul Rinn was the commanding officer of the USS Samuel B. Roberts when it struck a mine in the Persian Gulf. The resulting explosion tore a 21-foot hole in the side of the frigate. Almost immediately, the ship began taking on water and multiple fires broke out.
Naval protocol for this situation was clear: Put out the fires first, then worry about patching the hull. But after just a few minutes of firefighting,

Read more »

Facts of Life

THE PLOT, THE SCRIPT and the characters may have changed. But we’ve seen this movie before.
The current stock market swoon strikes many folks as unprecedented: It’s the frantic financial sideshow to a devastating global tragedy—one that’s seen 1.1 million people fall ill and 60,000 die, with every expectation that the numbers will be many multiples worse before the COVID-19 pandemic is over.
Yet, on closer inspection, 2020’s bear market doesn’t seem so different from earlier market declines.

Read more »

Stepping Up

COVID-19 HAS HIT all of us. Small business owners, especially those with families to support, face great financial risk. Ditto for contract workers and others with little job security. Even those with relatively steady nine-to-five white collar jobs have good reason to be nervous.
Meanwhile, those nearing retirement might need to put their plans on hold. Millennials like me, though we lived through 2008, have more financial responsibility this time around—and sense the gravity of COVID-19 and its consequences.

Read more »

Shore Thing

AFTER A SHORT but rough tender ride, we’re now off the Zaandam and on the Rotterdam, where we are once again quarantined in our cabin, thankfully still with a balcony. We are through the Panama Canal and now near Cuba. Our three-and-a-half week “mystery” cruise is—we hope—drawing to a close.
On March 30, Colombia refused to allow a plane to land on one of its islands near us. The plane carried medical supplies for the Zaandam.

Read more »

March’s Hits

THERE WAS ONLY one thing that readers were interested in last month—and pretty much only one thing that we wrote about: the coronavirus and its impact on our finances. But which of HumbleDollar’s articles were most popular with readers? Here are the top seven:

When the financial markets give you lemons, make lemonade: James McGlynn spots four opportunities amid the decline in share prices and bond yields.
What’s driving stocks lower? It’s all about the disruption to supply and demand in the real economy,

Read more »

Money Guide

Fat Tails

EXTREME EVENTS happen more frequently than we imagine—including in the financial world. Think about recent decades. We had the stunning stock market rally of the late 1990s and the subsequent stunning decline, especially among technology stocks. We had the housing mania that peaked in mid-2006 and the grueling bust that followed. We had the financial crisis of 2008. We had 2020's pandemic. In his 2007 book The Black Swan, Nassim Nicholas Taleb highlighted how the supposedly improbable occurs with surprising frequency—and yet folks are shocked every time. Such extreme events suggest that, instead of market returns being normally distributed, with most years seeing middling performance, the tails of this humped-back distribution curve tend to be fat because of the surprising number of extreme events, hence the term “fat tails.” This can be seen as evidence of market inefficiency: Far from being rational, investors tend to be a little manic, becoming both overly exuberant and excessively pessimistic in response to economic and political developments. For those looking to time the market, this might make their venture seem more promising. But fat-tail events might also be viewed as another reason for humility. Few people forecasted the extreme events that we have seen in recent decades. Given that these extreme events seem to be relatively commonplace, we should probably avoid making overly large bets on any one investment, so we don’t miss out on the next surprising market surge or run the risk of seeing our portfolio hurt by the next unforeseen disaster. Next: Stock Picking Previous: Market Timing
Read more »

Manifesto

NO. 6: OUR FINANCIAL life involves endless tradeoffs. We usually have a good idea of what our dollars are buying us. But to be good stewards of our wealth, we should also ponder what we’re giving up.

Truths

NO. 30: TO MAKE money, investors must overcome the triple threat of costs, taxes and inflation. Suppose your investments climb 6% over the next year. If your advisor charges 1% and you buy funds that charge 1%, you’ll be left with 4%. If you lose a quarter of your gain to taxes, that 4% becomes 3%. What if inflation is 3%? Your effective gain is zero.

Act

CREATE A WISH LIST. Want more happiness from your dollars? Write down the major purchases you’d like to make in the years ahead—perhaps a car, vacation or kitchen remodeling. Regularly revise the list, keeping only items you’re still enthused about. Result: You’ll make wiser spending decisions—and enjoy a long period of pleasurable anticipation.

Think

MARKET PORTFOLIO. This is the investable universe—all securities available for purchase. It consists of four sectors of similar size: U.S. stocks, U.S. bonds, foreign stocks and foreign bonds. This is what all investors own and reflects our collective judgment of what securities are worth. Arguably, if you own a different mix, you’re making a market bet.

Second Look

Retirement

Over Coffee

SITTING IN a coffee shop, I struck up conversation with a middle-aged woman. We were talking about winning the lottery and then, as if one thought naturally followed the other, we got onto the topic of retirement. She mentioned how difficult it was for her and her husband to pay the mortgage and the monthly bills.
“After saving for retirement?”  I interjected.
“We can’t save for retirement,” she responded. “Our plan is to get our mortgage paid off,

Read more »

Family Finance

Death and Taxes

TAX-DEFERRED accounts are great, until they aren’t—when we have to pay taxes on our withdrawals. Millions of Americans have tax-deferred accounts, pundits laud them, companies help fund them, institutions service them and markets help them grow. But when it comes time to empty them, often the only person to guide us is Uncle Sam, who’s patiently awaiting his cut.
Efficiently managing 30 years of retirement withdrawals from a 401(k), 403(b), IRA or other tax-deferred account is just as important as the 40 years of accumulation.

Read more »

Investing

Alphabet Soup

WHEN YOU NEED expertise, you hire an expert. Water leak? Call a plumber. Electrical issue? Call an electrician. But when it’s a financial issue, the choice may not be so clear. Do you go to a CKA, a GFS or maybe a C3DWP? Chances are you haven’t heard of these designations.
I have 10 letters in my name. I also have 10 letters after my name: CPA, CISA and MBA. What do they mean?

Read more »

Lists

Solomon on Money

THE MOST WIDELY read book of all time, the Bible, has a lot to say about money. According to biblical scholars, money and wealth are mentioned more than 2,000 times. Out of the roughly 40 parables Jesus told, nearly half speak of money.
Why does the Bible make such a big deal about money? The answer belongs in a Sunday sermon, not here. Still, I believe there’s a great deal to be learned from what the Bible says about money.

Read more »
Home Call to Action

Mindset

Rewriting the Script

WHAT DO YOU believe about money? I’m talking here about money scripts—subconscious beliefs developed since childhood that influence your financial behavior.
These beliefs have been studied extensively by Ted and Brad Klontz, the father-and-son team who founded the Financial Psychology Institute and authored Mind Over Money. Here are some common money scripts:

“Avoid debt at all costs.”
“Money is the root of all evil.”
“We can always make more money.”

While there’s an element of truth to each,

Read more »

Should You Sell?

WHEN STOCKS slump, experts are often quick to advise investors to sit tight or, better still, buy more. But that won’t be the right advice for everybody.
Christine Benz, Morningstar’s director of personal finance and one of my favorite financial writers, recently penned an article listing five questions to ask yourself if you’re pondering whether to reduce your stock exposure during a bear market. I figured I’d work through the five questions—and see what I could learn about my own finances.

Read more »

Under Pressure

ON APRIL 14, 1988, Captain Paul Rinn was the commanding officer of the USS Samuel B. Roberts when it struck a mine in the Persian Gulf. The resulting explosion tore a 21-foot hole in the side of the frigate. Almost immediately, the ship began taking on water and multiple fires broke out.
Naval protocol for this situation was clear: Put out the fires first, then worry about patching the hull. But after just a few minutes of firefighting,

Read more »

Facts of Life

THE PLOT, THE SCRIPT and the characters may have changed. But we’ve seen this movie before.
The current stock market swoon strikes many folks as unprecedented: It’s the frantic financial sideshow to a devastating global tragedy—one that’s seen 1.1 million people fall ill and 60,000 die, with every expectation that the numbers will be many multiples worse before the COVID-19 pandemic is over.
Yet, on closer inspection, 2020’s bear market doesn’t seem so different from earlier market declines.

Read more »

Stepping Up

COVID-19 HAS HIT all of us. Small business owners, especially those with families to support, face great financial risk. Ditto for contract workers and others with little job security. Even those with relatively steady nine-to-five white collar jobs have good reason to be nervous.
Meanwhile, those nearing retirement might need to put their plans on hold. Millennials like me, though we lived through 2008, have more financial responsibility this time around—and sense the gravity of COVID-19 and its consequences.

Read more »

Shore Thing

AFTER A SHORT but rough tender ride, we’re now off the Zaandam and on the Rotterdam, where we are once again quarantined in our cabin, thankfully still with a balcony. We are through the Panama Canal and now near Cuba. Our three-and-a-half week “mystery” cruise is—we hope—drawing to a close.
On March 30, Colombia refused to allow a plane to land on one of its islands near us. The plane carried medical supplies for the Zaandam.

Read more »

March’s Hits

THERE WAS ONLY one thing that readers were interested in last month—and pretty much only one thing that we wrote about: the coronavirus and its impact on our finances. But which of HumbleDollar’s articles were most popular with readers? Here are the top seven:

When the financial markets give you lemons, make lemonade: James McGlynn spots four opportunities amid the decline in share prices and bond yields.
What’s driving stocks lower? It’s all about the disruption to supply and demand in the real economy,

Read more »

Free Newsletter

Home Call to Action

Manifesto

NO. 6: OUR FINANCIAL life involves endless tradeoffs. We usually have a good idea of what our dollars are buying us. But to be good stewards of our wealth, we should also ponder what we’re giving up.

Act

CREATE A WISH LIST. Want more happiness from your dollars? Write down the major purchases you’d like to make in the years ahead—perhaps a car, vacation or kitchen remodeling. Regularly revise the list, keeping only items you’re still enthused about. Result: You’ll make wiser spending decisions—and enjoy a long period of pleasurable anticipation.

Truths

NO. 30: TO MAKE money, investors must overcome the triple threat of costs, taxes and inflation. Suppose your investments climb 6% over the next year. If your advisor charges 1% and you buy funds that charge 1%, you’ll be left with 4%. If you lose a quarter of your gain to taxes, that 4% becomes 3%. What if inflation is 3%? Your effective gain is zero.

Think

MARKET PORTFOLIO. This is the investable universe—all securities available for purchase. It consists of four sectors of similar size: U.S. stocks, U.S. bonds, foreign stocks and foreign bonds. This is what all investors own and reflects our collective judgment of what securities are worth. Arguably, if you own a different mix, you’re making a market bet.

Money Guide

Start Here

Fat Tails

EXTREME EVENTS happen more frequently than we imagine—including in the financial world. Think about recent decades. We had the stunning stock market rally of the late 1990s and the subsequent stunning decline, especially among technology stocks. We had the housing mania that peaked in mid-2006 and the grueling bust that followed. We had the financial crisis of 2008. We had 2020's pandemic. In his 2007 book The Black Swan, Nassim Nicholas Taleb highlighted how the supposedly improbable occurs with surprising frequency—and yet folks are shocked every time. Such extreme events suggest that, instead of market returns being normally distributed, with most years seeing middling performance, the tails of this humped-back distribution curve tend to be fat because of the surprising number of extreme events, hence the term “fat tails.” This can be seen as evidence of market inefficiency: Far from being rational, investors tend to be a little manic, becoming both overly exuberant and excessively pessimistic in response to economic and political developments. For those looking to time the market, this might make their venture seem more promising. But fat-tail events might also be viewed as another reason for humility. Few people forecasted the extreme events that we have seen in recent decades. Given that these extreme events seem to be relatively commonplace, we should probably avoid making overly large bets on any one investment, so we don’t miss out on the next surprising market surge or run the risk of seeing our portfolio hurt by the next unforeseen disaster. Next: Stock Picking Previous: Market Timing
Read more »

Second Look

Retirement

Over Coffee

SITTING IN a coffee shop, I struck up conversation with a middle-aged woman. We were talking about winning the lottery and then, as if one thought naturally followed the other, we got onto the topic of retirement. She mentioned how difficult it was for her and her husband to pay the mortgage and the monthly bills.
“After saving for retirement?”  I interjected.
“We can’t save for retirement,” she responded. “Our plan is to get our mortgage paid off,

Read more »

Family Finance

Death and Taxes

TAX-DEFERRED accounts are great, until they aren’t—when we have to pay taxes on our withdrawals. Millions of Americans have tax-deferred accounts, pundits laud them, companies help fund them, institutions service them and markets help them grow. But when it comes time to empty them, often the only person to guide us is Uncle Sam, who’s patiently awaiting his cut.
Efficiently managing 30 years of retirement withdrawals from a 401(k), 403(b), IRA or other tax-deferred account is just as important as the 40 years of accumulation.

Read more »

Investing

Alphabet Soup

WHEN YOU NEED expertise, you hire an expert. Water leak? Call a plumber. Electrical issue? Call an electrician. But when it’s a financial issue, the choice may not be so clear. Do you go to a CKA, a GFS or maybe a C3DWP? Chances are you haven’t heard of these designations.
I have 10 letters in my name. I also have 10 letters after my name: CPA, CISA and MBA. What do they mean?

Read more »

Lists

Solomon on Money

THE MOST WIDELY read book of all time, the Bible, has a lot to say about money. According to biblical scholars, money and wealth are mentioned more than 2,000 times. Out of the roughly 40 parables Jesus told, nearly half speak of money.
Why does the Bible make such a big deal about money? The answer belongs in a Sunday sermon, not here. Still, I believe there’s a great deal to be learned from what the Bible says about money.

Read more »

Mindset

Rewriting the Script

WHAT DO YOU believe about money? I’m talking here about money scripts—subconscious beliefs developed since childhood that influence your financial behavior.
These beliefs have been studied extensively by Ted and Brad Klontz, the father-and-son team who founded the Financial Psychology Institute and authored Mind Over Money. Here are some common money scripts:

“Avoid debt at all costs.”
“Money is the root of all evil.”
“We can always make more money.”

While there’s an element of truth to each,

Read more »