“IF YOU DON’T MIND, I have a question for you,” wrote a former colleague. “Should folks be getting out of the stock market? This Trump bump seems like such a crazy bubble.”
Lots of folks are asking this question. How to respond? I fall back on three key points.
First, I believe U.S. stocks are expensive, while foreign stocks are cheap. But that doesn’t tell you anything about short-term performance and only a modest amount about long-run results.
WHEN I DIVORCED a few years ago, I found myself needing a crash course in financial management. My first task: Understanding where my money went—and figuring out where I could cut back.
Today, I create a budget each month. I don’t use any type of program or app—I prefer paper and pen. At the top of a page, I write down my take-home pay. I use take-home pay, rather than my $5,500 monthly gross income,
WE’RE A NATION divided, two camps clinging fervently to their own unshakeable beliefs and baffled at the nonsense that the other camp accepts as truth.
Yes, you guessed it: We’re talking about money management. Let’s call the two camps the Sharks and the Jets. What divides them? Here are seven fault lines:
1. Get Rich vs. Meet Goals. The Jets have one overriding goal—they want to make heaps of money—and they’ll hop any investment train that can get them there.
WHERE DOES A TEEN turn for advice on money? I went to my late father. My conversations with him are burned into my memory like software on a computer.
“Do what you love and make it pay.” “Give your all enthusiastically.” “You can get whatever you want if you are willing to work for it.” “What you make is important, but what you do with what you make matters more.”
When I was 15,
JEALOUSY IS a terrible thing—and often unjustified. Our apparently self-assured coworker may be racked by self-doubt. Our rich neighbor may be far less happy than we imagine. And those institutional investors, who can buy all kinds of exotic investments that we can only lust after, may be clocking returns that are notably unimpressive.
This last thought was driven home by Ben Carlson’s short, engaging new book, Organizational Alpha: How to Add Value in Institutional Asset Management.
THE FEDERAL TAX code now contains over 10 million words, so it’s no surprise that most Americans score an “F” when it comes to understanding taxes. A few years ago, I would also have flunked.
But following my divorce, I knew I needed to educate myself on financial topics. While I could tell you how much I took home each month, I didn’t have a clue how much I paid in taxes, much less what my marginal tax rate was.
MANY EMPLOYEES deliberately have too much income tax withheld from their paycheck, so they receive a fat refund each spring. Federal refunds averaged $2,850 per income-tax return in 2014, the latest year for which data is available.
This is completely irrational and entirely sensible.
It’s irrational, because we’re making an interest-free loan to Uncle Sam. Why not have the correct amount of tax withheld, and then take a sliver of each paycheck and pop it in a high-yield savings account,
LIKE MOST PARENTS, my wife and I spent time and money building a happy and balanced childhood for our four children. That encompassed things like vacations, cub scouts, church, music, and youth soccer and baseball. But it also included trying to pass along values like hard work, thrift, generosity and education. We never hesitated to speak about our finances around the dinner table, although we only shared specific numbers when the kids got older.
I’VE LIVED IN BIG cities for the past six years—Cairo most recently and St. Louis before that. During that time, I’ve enjoyed inexpensive public transportation and nearby groceries. I never felt the need to buy a car, and it never made sense. But since moving to New Haven five months ago, my calculations have changed.
For the first time since high school, I’m back in the ‘burbs. I can walk or bike to class and to friends’
LIKE ALMOST everybody else, my wife and I faced large health care cost increases this year. It wasn’t all from changes in our health insurance. We’re getting up there in years. We go to the doctor more often. Not all hospital charges are covered by Medicare or our health insurance. And there are some costs that aren’t covered at all–namely dental, ear and eye problems.
We’re fortunate: We can afford the cost growth. Many of our acquaintances can’t.
IN EARLY 2005, when Hannah was age 16 and Henry was 12, I took them out to a local diner and told them exactly how much financial help I’d provide. I would make sure they graduated college debt-free. I would seed a retirement account with $25,000 and a house-down-payment fund with $20,000. On top of that, I’d give them $5,000 upon graduation, plus another $5,000 toward the cost of a wedding or at age 30,
WHEN I BOUGHT my small rowhouse in Philly, I was swept up by the idea of homeownership. Like many of those I talked with at the time, owning meant no more wasting money on rent, plus it was a great no-risk investment.
Six years later, whenever I hear that friends are considering buying, I’m more cautious and often advise holding off—or at least peeling back the onion, so they’re aware that buying a home is rife with tradeoffs and not obviously “the right thing” to do.
A CLIENT WAS in our offices the other day, grilling one of my fellow financial advisors about some investments in his diversified retirement portfolio. He just couldn’t understand why we’d keep certain securities that hadn’t recently performed well. He kept citing “stuff I read” and “all the experts” as the basis for his concerns.
I wasn’t part of the conversation. But here are three points I would have made:
1. Those experts don’t know a thing about you or your situation.
AS MY WIFE AND I attain a certain age, financial questions are taking an unprecedented top spot in our conversations. Gazing into one another’s eyes over Cabernet Sauvignon at our local inn, we as often coo about jobs, savings, taxes and car payments as about romance.
This New Year’s Eve, we cooed about hopes, regrets, fears—and a college bill.
We began saving for our two kids’ educations when they were very young. But with one of us working fulltime and the other only halftime,
FORGET YOUR political persuasions. Forget health care, terrorism, Roe vs. Wade, the environment, education, women’s rights and voting rights. Instead, focus solely on the economy and markets. Should a Trump presidency affect how you manage your money?
No doubt about it, there’s a temptation to act—and I’ll admit to three modest portfolio changes. In recent months, I’ve invested more in funds that own gold stocks, inflation-indexed Treasurys and foreign stocks, especially emerging markets. But none of these would count as a major portfolio change,