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What It Cost

Ken Cutler

MY DAD’S FINANCIAL ledgers were key sources of information for my article yesterday about my parents’ retirement journey. In these binders, my father kept track of a wide variety of financial information, all entered in his impeccable handwriting.

I have no doubt Dad would have loved Excel spreadsheets as much as I do, had they been available earlier in his life. When he was in his 80s, he purchased his first personal computer and was able to perform some rudimentary tasks. But by that stage in his life, getting the computer to do what he wanted was often a hassle.

I shared some of the nuggets I gleaned from his ledgers in yesterday’s article. Here are other items I found interesting:

Electricity costs. In 1960, the total electricity bill for my parents’ home was $100.62. Using an inflation calculator, that would correspond to $1,038.87 today. In 1985, the electricity bill was $720.41, equal to $2,040.06 in today’s dollars. The real cost had almost doubled in 25 years.

Heating costs. My parents’ house was heated using oil. In 1960, the heating bill was $198, or $2,038.21 adjusted for inflation. How about 1985? The heating bill that year was $1,200.56, which would be $3,399.75 today. Yikes. For our similarly sized house, which uses natural gas, annual heating expenses have never reached $900.

Real estate taxes. In 1960, the property taxes on my parents’ home came to $510.35. By 1985, they were $2,488.10. After accounting for inflation, their real estate taxes had increased 34% over 25 years. I expected the increase to be even larger, since rising real estate taxes were given as one reason my parents relocated from Moorestown, New Jersey, to Lancaster, Pennsylvania, in 1987. Still, the 1987 move did bring big savings: The tax bill on their Lancaster home was only about half of what they paid on the Moorestown house.

Phone costs. In 1985, telephone expenses were recorded as $713.87, corresponding to $2,021.54 today. Seeing that makes me feel a little better about the cost of our family’s phone plan, which is in the same ballpark but includes much more functionality and flexibility. And unlike my parents in 1985, we have no need to limit long distance calls to control expenses.

Overall household costs. In 1985, the total annual cost of operating my parents’ household was recorded as $5,559.32. This included real estate taxes, water, sewer, phone, insurance, heating oil and electricity. Note that food and vehicle expenses are not included in that amount. In today’s dollars, that would be $15,742.90. Surprisingly, when I compare that sum to our family’s corresponding expenses last year, the totals are within a few percentage points of each other.

Portfolio diversification. The ledgers contain investment records dating back to the 1950s. Living most of his life in an era before mutual funds became popular, Dad’s investment portfolio consisted of individual stocks and bonds.

I found his portfolio to be astonishingly undiversified, with 75% of his stock holdings concentrated in communications companies such as AT&T, Lucent, Verizon and Bell South. The other 25% included General Motors, Delphi Automotive and a couple of utilities. The idea of purchasing foreign stocks probably never crossed his mind.

Dad’s primary objective for his stock portfolio was probably to increase his day-to-day cash flow. Almost all of his long-term stocks holdings paid a healthy dividend. Portfolio growth was likely only a secondary consideration.

In Dad’s day, there was no such thing as buying stock with a click of a mouse. He had to go through—and pay—a broker to make his purchases. I’m sure advice from his broker influenced his portfolio’s composition. Strategies that seem second nature to me, such as portfolio diversification, buying index funds and minimizing fees, simply weren’t in vogue during his era.

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