So right. The first time my now wife and I lived together - summer 1985 - neither of us had anything. Poor, poor, poor. That summer I was studying and had only part-time teaching gigs. Every single night, we quite literally emptied our pockets of all bills and change and budgeted exactly what we would spend it on the next day. Many years and some extremely big salaries later, we no longer empty our pockets nightly. But we still have a weekly ritual -- every Saturday without fail - of truing up everything we have and everything we've spent. Is it necessary? No. we spend so much less than any safe withdrawal rate that it isn't a problem. But it is a ritual that is meaningful to us and that keeps us from getting financially sloppy, and it is one that I'm sure we will keep as long as we can still see the computer screen.
What an extraordinary column; what an extraordinary life. Thanks for the brutal honesty. Congratulations on persevering and thriving despite so many twists and turns. I am truly moved and awash with admiration … as well as filled with sorrow that you and your loved ones had to endure such pain and tragedy.
As Yogi Berra said, “It's tough to make predictions, especially about the future.” I graduated from college at the height of "Japan is #1", "Japan is the future" etc. But I majored in Chinese—along with a bunch of other literature lovers, tofu eaters, and tai chi practisers! Those in the Japanese program, including close friends, went off to high-paying jobs in finance and law and business – their future seemed set and ours as Chinese majors seemed fragile. But then Japan went into decline, China began its ascendancy and the tables turned! Partly because of supply and demand, my cohort of Chinese majors really, really prospered. Then, of course, "smart" parents started sending their kindergarteners to Chinese lessons. By the time I was a senior manager hiring, I was spoiled for choice from the graduating cohort, and didn't have to pay a lot! The future belongs to those who love to learn, who are serial specialists, who are flexible, and who have a bit of luck! College major has very, very little to do with it. And trying to game the future never works.
I agree .... up to a point. There are problems with high dividend stocks, too:
dividends are paid out of the assets of the company so there's hit or drag on the share price as the dividend is paid. So don't do a dividend strategy if you also want a growth strategy. (that's why high growth companies rarely pay dividends in their early years - they are focussed on growing the company and the share price). If you are indifferent to the actual share price growth, then this doesn't matter.
more seriously, YOU pay taxes on the dividends as they are paid out, even if you're reinvesting. So your tax bill may rise even if your cash on hand does not
finally, high dividend stocks also have extra volatility built in - if the company or the economy hits a bump, the dividend is a tempting thing for the board to cut to save costs without a deeper cut into staff or product. That has an immediate hit on the value of the stock (and on your income if you're not reinvesting but instead relying on the dividend stream for your living)
That said, I too like having dividends as a big piece of my strategy. Almost without my heavy steering dividends (pre-tax) would cover 68% of my spending this year. Post-tax (see point 2) a fair bit less!
Comments:
So right. The first time my now wife and I lived together - summer 1985 - neither of us had anything. Poor, poor, poor. That summer I was studying and had only part-time teaching gigs. Every single night, we quite literally emptied our pockets of all bills and change and budgeted exactly what we would spend it on the next day. Many years and some extremely big salaries later, we no longer empty our pockets nightly. But we still have a weekly ritual -- every Saturday without fail - of truing up everything we have and everything we've spent. Is it necessary? No. we spend so much less than any safe withdrawal rate that it isn't a problem. But it is a ritual that is meaningful to us and that keeps us from getting financially sloppy, and it is one that I'm sure we will keep as long as we can still see the computer screen.
Post: Horse Then Cart
Link to comment from February 14, 2024
What an extraordinary column; what an extraordinary life. Thanks for the brutal honesty. Congratulations on persevering and thriving despite so many twists and turns. I am truly moved and awash with admiration … as well as filled with sorrow that you and your loved ones had to endure such pain and tragedy.
Post: Stock Therapy
Link to comment from April 12, 2023
As Yogi Berra said, “It's tough to make predictions, especially about the future.” I graduated from college at the height of "Japan is #1", "Japan is the future" etc. But I majored in Chinese—along with a bunch of other literature lovers, tofu eaters, and tai chi practisers! Those in the Japanese program, including close friends, went off to high-paying jobs in finance and law and business – their future seemed set and ours as Chinese majors seemed fragile. But then Japan went into decline, China began its ascendancy and the tables turned! Partly because of supply and demand, my cohort of Chinese majors really, really prospered. Then, of course, "smart" parents started sending their kindergarteners to Chinese lessons. By the time I was a senior manager hiring, I was spoiled for choice from the graduating cohort, and didn't have to pay a lot! The future belongs to those who love to learn, who are serial specialists, who are flexible, and who have a bit of luck! College major has very, very little to do with it. And trying to game the future never works.
Post: College Conundrum
Link to comment from March 8, 2023
I agree .... up to a point. There are problems with high dividend stocks, too:
- dividends are paid out of the assets of the company so there's hit or drag on the share price as the dividend is paid. So don't do a dividend strategy if you also want a growth strategy. (that's why high growth companies rarely pay dividends in their early years - they are focussed on growing the company and the share price). If you are indifferent to the actual share price growth, then this doesn't matter.
- more seriously, YOU pay taxes on the dividends as they are paid out, even if you're reinvesting. So your tax bill may rise even if your cash on hand does not
- finally, high dividend stocks also have extra volatility built in - if the company or the economy hits a bump, the dividend is a tempting thing for the board to cut to save costs without a deeper cut into staff or product. That has an immediate hit on the value of the stock (and on your income if you're not reinvesting but instead relying on the dividend stream for your living)
That said, I too like having dividends as a big piece of my strategy. Almost without my heavy steering dividends (pre-tax) would cover 68% of my spending this year. Post-tax (see point 2) a fair bit less!Post: Watching Them Grow
Link to comment from December 10, 2022