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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.
Nextdoor.com is full of grumbling about soaring taxes. It annoys me because, as a ratio of property value, taxes have gone down, at least where we are where a property tax cap law has been mostly honored.
But college costs have gone crazy. It used to be that between summer jobs and jobs during school, state schools were affordable. Kids could do it on their own. Not anymore.
You are absolutely right about college costs. My son attended the same college I did, 35 years later. The costs had increased at least 1300%. In my day, the co-op students were routinely paying for all their expenses (and a car to boot) with their job earnings.
That’s me! I was a coop student and by my junior year I had my own car, and was paying my way through college. I had savings, too.
Speaking of inflation adjusted costs over time, I just had to look….this is from an Aug 2022 data source I just saw on college tuitions…
Using data from the nonprofit College Board last year, My eLearning found that the average cost of going to a private college — including tuition, fees, books, and room and board — went from $2,930 per year in 1971 to $51,690 in 2021. If it had tracked inflation over the last 50 years, that private college cost annual cost would have been $19,600/yr in 2021 instead of $51,690 in 2021.
Checking on mutual fund fees would be a fun experience with the numbers heading in the other direction over the last 50 years!!!!….thanks to John Bogle and many others!!!
Yup, college costs are out of control for a variety of reasons. See my post above. Things that have changed: food is exponentially better, there are about 10 times as many administrators, and funding sources have shifted. Also, more classes are now taught by non-tenured instructors rather than professors at many places. You would think that would keep costs down, but in reality the savings are used to fund bureaucratic bloat, IMHO.
Ken–Enjoyed the article….particularly some of the energy numbers (I’ll admit to having a soft spot for the energy business!). Here’s another interesting piece of energy data to add to the list. Avg US gasoline prices in 1970 were $0.36/gal (Boy, those were the days!). If it kept up with inflation, gasoline today would be $2.88/gal. Here in the midwest gasoline is about $3.15/gal. So gasoline prices at the pump have increased only slightly higher than inflation the last +50 years….and if the Middle East/Russia ever settle down, I’ll bet prices will again be less than $2.88 (at least, in the midwest). I wonder how college/university tuitions, government spending, McDonald’s hamburgers, etc. would look like today, if they had only kept up with inflation since 1970?!! I can still remember a 15 cent McDonalds hamburger in he 60s!!
What an interesting article. It was a walk through time, and because I am 73 years old, I can really identity with the numbers.
My childhood was somewhat different than the times you describe, because I was an Army Brat, growing up in Germany. My father was a senior NCO, SGM, and eventually retired in 1974 as the CSM of US Army Special Forces. (He was the #1 Enlisted Green Beret.). I never knew we weren’t wealthy, until I went to 10th grade in the US, where my classmates drove their own cars to school. My family never had 2 cars, until 1975 when my dad bought a used car for himself. (Red Ford Fairlane 500…it was a great car.)
In 1965, he bought our first family home, when I was 14 going on 15. My mother lived in that home until she passed in 2010. My wife and I lived there from 2010 – 2018, when we sold the home. It was purchased in 1965 for @$24,000 and sold in a down Market in 2018, for $190,000.
As far as a retirement portfolio, my mom’s wealth consisted of US Savings Bonds. My folks never owned mutual finds or stocks and bonds. When My mom passed, she had 4 CDs, worth @$16,000. She lived comfortably on her SS and my dad’s Army Retirement.
Thanks again for the walk down memory lane.
Thanks, Kevin–and thanks for sharing your parents’ story.
I find this thought-provoking:
“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.”
I haven’t aimed for dividends but wonder if there’s a page to be taken from your father’s book now that we’re retired. Yes, dividend paying stocks are less tax efficient than those that don’t pay them. But if in retirement, and living largely from the portfolio, who cares? If I’m going to selling assets for cash flow anyway, why not semi-automate it in the form of dividends and remove the need for some decision making? Of course there would still be some total market indexes and some portfolio growth.
Thanks for the interesting article.
Qualified dividends are actually very useful for retirees. You only pay 15% Federal income tax up to $200K/$250K, and even over you only pay 18.3% unless you’re really rich. This is the key to tax efficiency for retirees with incomes in the $150K-$500K range.
Yep. And I believe qualified dividends have a 0% federal income tax rate for singles with taxable income below $44K and married couples below $89K (assuming they’re in a taxable account).
That makes sense. Unfortunately there would be significant capital gains involved in transitioning the portfolio from one tax efficient in accumulation to one tax efficient in decumulation, not to mention reversing this later when RMDs start and we’d want to minimize the income in taxable accounts.
Thanks, Ken, for this article. Casting economics in a family context provides for lots of insight.
One factor that has surely factored into household expenditures over time is the global supply chain. Imagine the cost of household items today had we continued to rely on US-manufacturing. As one of the last of the dinosaurs trying to “buy American” into the 1990’s, I can vouch that it would have been more expensive. As a nation, we would have probably purchased fewer goods.
Ken, my father-in-law was a man much like your father. They were responsible men—proud of the manner in which they conducted the family’s finances and recorded transactions fastidiously.
Although you might think his portfolio wasn’t diversified, it was probably typical of the average conservative investor of his era.
With regard to international stocks, the feeling was that when “America sneezed, the rest of the world got the flu”.
Thanks for commenting, Marjorie. I agree, it was a completely different era and I certainly don’t judge his investment habits by the standards of our time.
Ken, having all this memorabilia must be a great source of pride to you.
Marjorie, it certainly presents another downsizing dilemma down the road. I have two large containers of family documents and photos. Some, like my father’s WW II records, are beginning to disintegrate. And there are a lot of photos of people I can’t identify. The documents did allow me to get acquainted with the life of a grandfather I never knew.
Interesting. And how has supply and demand effected the unit prices of energy? Better insulated homes, high efficiency furnaces, led light bulbs and etc. have surely helped control costs. I know cars weren’t part of your study, but how much would we be paying for a gallon of gas today if our vehicles still got 12 miles per gallon?
Interesting thoughts. I may have to scour the ledgers again to see if vehicle costs are captured. I know my dad seemed to change cars every 3 or 4 years as they weren’t as reliable back then and he did a lot of driving.
Ken, thanks for another interesting article. I share your enjoyment of perusing through old family documents, especially financial ones. My mother-in-law kept a ledger with monthly expenses throughout the first 50 years or so of marriage. She would add comments or milestones, like the birth of a child or grandchild. She also had a box with 50 years of tax returns, form their first year of marriage. I looked through them one afternoon after she died. It felt like a socio-economic study of the rise of the middle-class in America, in how a nurse and a truck driver could work, save, see their salaries grow, raise 5 kids, own a home, and become solidly middle-class.
My favorite document was my father-in-laws 1943 tax return, when he took over as primary bread winner for the family at 16, while three older brothers went off to war. It’s still one of my favorite articles.
https://humbledollar.com/2019/08/quiet-heroism/
Rick, I just read your article. What a great story. Thanks for sharing the link.
When we look back on spending I often wonder how much of the increases we see over the years are the result of higher prices or the result of our changed lifestyle- more use of electricity for example, more services from local government and schools, thus higher property taxes, more appliances in the home, even the average size house and family vehicle has grown over the years.
Excellent point Dick. And Jonathan addressed this recently when he wrote that spending for most of us over the long term does not merely increase with inflation, but rather with growth in GDP which is about 1.5% higher than inflation. What Bernstein and others call the “hedonic treadmill”.
Dick, these are really good points. I think we get more vehicle per dollar these days due to reliability and technology improvements. But lots of people favor higher end cars and trucks, so some of that advantage is masked.