Tom Welsh

MARCH MADNESS IS upon us, with millions of sports fans rooting for their favorite college or university basketball team. For your team to win, all other teams in the tournament must lose—a zero-sum game. We accept this as part of the sport.
What’s that got to do with finance? Household economics can be a similar win-lose tournament. But it’s a zero-sum game that’s rarely acknowledged.
Relative purchasing power. In the U.S., we have some 130 million households that collectively possess roughly $150 trillion in wealth.

WE GET EXCITED WHEN our investments go up in price and disappointed when they fall. This is the logical “holder’s view” of a change in our immediate wealth. Some may feel the urge to buy more of the winners and sell any losers.
But there’s also an alternative way to view changing market prices: the “investor’s view.”
Consider that an investment’s price rise often indicates you’re taking a pay cut. Yes, you now have more money invested in that position,

WE RECEIVE A LOT of criticism over our adult life, most of which we ignore. Are we being defensive and stubborn—or is something else going on?
Criticism implies we should change our behavior in some way, but sometimes that change comes with costs that outweigh the benefits. Consider the three main forms of criticism:
Manipulative criticism. This is perhaps the most prevalent form of criticism. The goal is to promote a change in our behavior,

MANY OF US HAVE much of our wealth in stocks and bonds—and that raises some nagging questions. How safe is this money? What do I own that I can really count on? If I’m retired, how much of this portfolio can I afford to spend in the year ahead? These concerns grow when markets seem high.
How can we get some perspective on these questions? We might try calculating our “spendable net worth.” What’s that?

MONEY MARKET FUNDS and other cash investments are paying interest rates close to zero. This is at a time of turmoil in society and in the economy. This is at a time when both stock and bond markets are at high prices. It seems like we have to choose between collecting very low yields on cash or buying investments with far greater risk.
An alternative to these extremes: How about a “short-term barbell” to hold money you don’t currently want to invest or don’t yet need to spend?

WE GO THROUGH phases in our financial life, just as we do in our biological life. There seem to be a least five financial phases that adults pass through, each with their own priorities, risks, opportunities and tradeoffs.
Here’s how I would think about those five phases:
1. Party Time (ages 25 to 30)
Yes, you’re starting a career, and you want to get ahead and make money. But in all likelihood,

OUR WEALTH IS usually measured by net worth, which is total assets minus all debt. But there’s an alternative measure—which is to assign our wealth to the purposes it serves. What purposes? Two come to mind: physical and social.
Let’s start with physical wealth. We’re talking here about a family’s ability to maintain basic physical comforts, such as enjoying decent food, a comfortable home, a reliable car and access to good health care.
You don’t have to be rich to afford these.