Spend wildly, trade like crazy and realize gains quickly—and you free up the rest of us to save, index and skimp on taxes.
IN THE VALLEY OF FEAR, Sherlock Holmes searches a moat to shed light on a puzzling murder, only to be surprised by what he finds. Among today’s exchange-traded index fund (ETF) cognoscenti, another moat has become the focus of inquiry.
“Holmes, which moat are you investigating now?”
“Too much chronicling of our little capers, Watson, and not enough reading. It’s the VanEck Morningstar Wide Moat ETF.”
“The who?”
“Shame, shame, Watson, you’re so ill-informed about popular culture.
I DON’T USUALLY FOLLOW the NFL. But this year, I’ve made an exception—because the current season offers a valuable lesson not just for football fans, but also for investors.
Teams devote huge amounts of time, energy and money to determining who’s the best quarterback for their team. Yet, this year, three quarterbacks are leading their teams when most experts, who get paid to evaluate talent, didn’t give them much of a chance.
Brock Purdy leads the San Francisco 49ers.
HOW DID I GET financially to where I am today, 15 years into retirement? It’s a good question—one that’s taken me a lifetime to answer.
I’ve been fortunate in a way that’s nearly impossible for Americans today. I worked for one company for nearly 50 years and I accumulated a traditional pension based on that service. In addition, during my last few years on the job, I was eligible for stock options, restricted stock awards and enhanced bonuses.
I STUDIED MATH AND statistics at university. When I mentioned my academic focus at parties, eyes would glaze over as fellow students looked for a way to extricate themselves from the conversation.
To lighten the mood, I’d say I was studying statistics to learn how to get rich in the stock market. In truth, I had no idea what I was talking about, but it sounded good and would often break the ice. Still,
WHEN MY WIFE AND I got married, she had a credit card with an outstanding balance. Back then, you could write off the interest on your tax return. Still, I hate debt and I paid off her balance. Ever since, she’s continued to maintain a separate credit card because I wanted her to have a credit history, so she could take out a loan on her own if I died. We’ve always paid off her monthly balance in full.
DURING MY FINAL NINE years with the Coast Guard, I was involved in decisions regarding search-and-rescue operations. We were almost always working with imperfect information. For three of those nine years, I was responsible for all missions in one section of the Great Lakes and, in my last year, I made the final decision on when to suspend search-and-rescue operations in an even larger area.
To lower risk, we often assumed the worst, and threw copious operational resources at the situation.
HOW MANY OF OUR adult financial habits are shaped by childhood experiences? My parents, who grew up during the Great Depression, weren’t fans of providing allowances for my sisters and me. My oldest sister, Gail, got no pocket money but remembers being offered a quarter to fill a grocery bag with dandelions pulled from the yard. Lynn, 10 years older than me, received a quarter a week for a short period.
My first allowance was also a quarter a week,
THERE’S AN IRONY IN the world of personal finance: The activity that’s the most entertaining—picking stocks—is also, according to the data, one of the most counterproductive. Meanwhile, making asset allocation decisions is more akin to watching paint dry, and yet—according to the data—that’s one of the most important decisions an investor can make.
Asset allocation refers to the split among your investments—how much you hold in stocks, for example, versus bonds or real estate.
I BELIEVE MANAGING money should be kept as simple as possible. That’s usually the route to lower costs, fewer mistakes and greater financial peace of mind. But, alas, three crucial areas of our financial life defy simplicity: health insurance, taxes and paying for college.
This is hardly an original insight. Folks have complained for decades about the maddening complexity involved with all three. All are ripe for a total revamp, but there’s no sign that’ll happen any time soon.
WHAT CAUGHT THE EYE of visitors to HumbleDollar last month? Below are November’s 10 most popular articles and blog posts, which included three pieces by Dave Gartland and two by Ken Cutler. Also of note: Jeff Actor’s article accounted for roughly a fifth of the site’s total pageviews for November.
“I’ve been known to wash out previously used Ziploc baggies,” allows Jeff Actor. “I justified my frugality on environmental grounds. But when my spouse saw the bags in the dish drainer,
NO. 125: BORROWING early in our adult life can be a rational strategy. It allows us to buy items for which we don’t currently have the cash, including college educations, homes and cars, thereby jumpstarting our financial life. But we should be careful not to overdo it—and we should aim to get all of our debts paid off before we retire and give up our paycheck.
MENTALLY DIVIDE your portfolio into growth, safe and fun money. Growth money should be largely in stock funds. Expect a rough ride. Safe money should be in bonds and cash. Keep enough to give you a sense of security and cover upcoming portfolio withdrawals. Want to speculate? Set up a fun money account—but cap it at 3% of your portfolio.
MORAL HAZARD. When we know someone else will pick up much or all of the financial tab, it’ll often change our behavior. For instance, those with health insurance are quicker to seek medical help, while those with long-term-care insurance are more inclined to enter nursing homes. The downside of this moral hazard: It means insurance costs more.
NO. 37: WANT to boost your happiness and that of others? Volunteer, give to charity and make gifts to loved ones. We’re often happier when we spend on others rather than on ourselves.
MANY RETIREES ARE looking for ways to supplement their income. Others would like something interesting to occupy their time and allow them to stay productive and engaged—and, if it brings in a few dollars, all the better.
We’re fortunate to live in the internet age, with the opportunities that it offers. Previously, retirement-income sources consisted mainly of pensions, stocks, bonds, rental real estate and part-time work. Today, there are many other choices, including a few you may not have heard about.
WHEN I WAS AGE SEVEN or eight, I had a glass piggybank where I saved all the small change that came my way. I loved the sight of all this money that I could save or spend as I pleased.
One day, my mom needed to go to the grocery store for some bread and found she didn’t have enough cash. She asked to borrow from my almost-full bank. I gave the money to her,
I WORKED FOR MORE than 30 years in manufacturing, poring over data and paying attention to every detail that would impact production. As a project manager, I was responsible for making sure hardware was delivered on time, with no cost overruns or quality issues.
If we weren’t meeting deadlines or spending too much money, I was required to report these problems to upper management. They would ask me three questions: “What are you going to do about it?
I HAVE DEVOTED MY entire adult life to learning about money. That might sound like cruel-and-unusual punishment, but I’ve mostly enjoyed it. For more than three decades, I’ve spent my days perusing the business pages, reading finance books, scanning academic studies and talking to countless folks about their finances.
Yet, despite this intense financial education, it took me a decade or more to learn many of life’s most important money lessons and, indeed, some key insights have only come to me in recent years.
BUDGETS CAN BE a contentious topic. Some people swear by them. Others argue they’re unnecessary if you easily spend less than you make. No matter which side you take in this debate, I’d advocate budgeting for one item: kindness.
I’ve always enjoyed reading news stories about strangers who left unusually large tips for their waiter. After reading such stories, I’d daydream about where I’d leave large tips if I was that rich. One day,
NO. 37: WANT to boost your happiness and that of others? Volunteer, give to charity and make gifts to loved ones. We’re often happier when we spend on others rather than on ourselves.
MENTALLY DIVIDE your portfolio into growth, safe and fun money. Growth money should be largely in stock funds. Expect a rough ride. Safe money should be in bonds and cash. Keep enough to give you a sense of security and cover upcoming portfolio withdrawals. Want to speculate? Set up a fun money account—but cap it at 3% of your portfolio.
NO. 125: BORROWING early in our adult life can be a rational strategy. It allows us to buy items for which we don’t currently have the cash, including college educations, homes and cars, thereby jumpstarting our financial life. But we should be careful not to overdo it—and we should aim to get all of our debts paid off before we retire and give up our paycheck.
MORAL HAZARD. When we know someone else will pick up much or all of the financial tab, it’ll often change our behavior. For instance, those with health insurance are quicker to seek medical help, while those with long-term-care insurance are more inclined to enter nursing homes. The downside of this moral hazard: It means insurance costs more.
MANY RETIREES ARE looking for ways to supplement their income. Others would like something interesting to occupy their time and allow them to stay productive and engaged—and, if it brings in a few dollars, all the better.
We’re fortunate to live in the internet age, with the opportunities that it offers. Previously, retirement-income sources consisted mainly of pensions, stocks, bonds, rental real estate and part-time work. Today, there are many other choices, including a few you may not have heard about.
WHEN I WAS AGE SEVEN or eight, I had a glass piggybank where I saved all the small change that came my way. I loved the sight of all this money that I could save or spend as I pleased.
One day, my mom needed to go to the grocery store for some bread and found she didn’t have enough cash. She asked to borrow from my almost-full bank. I gave the money to her,
I WORKED FOR MORE than 30 years in manufacturing, poring over data and paying attention to every detail that would impact production. As a project manager, I was responsible for making sure hardware was delivered on time, with no cost overruns or quality issues.
If we weren’t meeting deadlines or spending too much money, I was required to report these problems to upper management. They would ask me three questions: “What are you going to do about it?
I HAVE DEVOTED MY entire adult life to learning about money. That might sound like cruel-and-unusual punishment, but I’ve mostly enjoyed it. For more than three decades, I’ve spent my days perusing the business pages, reading finance books, scanning academic studies and talking to countless folks about their finances.
Yet, despite this intense financial education, it took me a decade or more to learn many of life’s most important money lessons and, indeed, some key insights have only come to me in recent years.
BUDGETS CAN BE a contentious topic. Some people swear by them. Others argue they’re unnecessary if you easily spend less than you make. No matter which side you take in this debate, I’d advocate budgeting for one item: kindness.
I’ve always enjoyed reading news stories about strangers who left unusually large tips for their waiter. After reading such stories, I’d daydream about where I’d leave large tips if I was that rich. One day,
Does it ever make sense to carry a credit card balance?
Who most influenced your financial thinking?
What are the smartest financial moves you’ve ever made?