Easy Change

Blogging WealthTrack: Christine Benz (Retire Early? Or not?)

2022-01-15T10:05:00.002-08:00

This morning I've watched an interesting video on Consuelo Mack: WealthTrack. Here, Consuelo's guest, a longtime contributor, Christine Benz, a personal finance expert from Morningstar joined Consuelo for a discussion on issues related to retirement, in particular in the current market environments. This conversation is even more interesting against the backdrop of The Great Resignation.

I found Christine's advice to be particularly interesting on a couple of fronts. Her advice in dealing with talking about retirement in general, in particular for people who are in the process of thinking about retiring early gave me pause. She is considering the traditional advice of a 4 percent withdrawal rate to be dangerous and indeed, actually concerning. According to the recent research she cites, a 3% withdrawal rate is a better option.

Even more than the four percent rule, I think that her comments on annuities are particularly interesting. While annuities have been given a bad name, she has certainly brought some interesting considerations around them in the current environment. In particular, Christine indicates that Annuities provide an excellent opportunity to benefit from the pooled longevity risk to achieve a higher than average return relative to fixed assets, but that inflation is a real risk, especially in the current environment.

She does an excellent job to discuss some of the options for handling a portfolio through the current macroeconomic storm we're facing. I'd encourage you to watch to get some ideas you might apply to your own situation.

Consuelo indicates that early retirement might be something that the viewer might want to reconsider. Given the lack of a steady paycheck, increasing uncertainty around inflation numbers and the loss of a large amount of capital at the beginning of a longer-than-usual retirement, this doesn't seem like a bad idea at all in terms of personal finance advice.

As usual, I am a fan of WealthTrack and I recommend you check out the episode from this week here: Christine Benz - Consuelo Mack: WealthTrack

More Money Into Ibonds

2022-01-03T11:29:00.001-08:00

At this point, it seems like a well-known strategy for handling inflation: ibonds. While there was not much press about this, it is in fact something that I did late last year in order to capitalize on the fact that this interest rate was bound for up to 10000 dollars as part of my allotment for 2021. Then now that we're in the new year, I have moved another 10000 into the account.

All of this can be done easily at http://treasurydirect.gov if you're willing to give up the fact that the money is locked up, that the interest rates to be paid will be somewhat lower than you could earn in the market, and you're able to ensure that you're not needing the money for the near future.

For me personally, I find that this is a great way to lock up about 25% of my emergency (safe) money instead of putting it into a High Yield Savings account. This interest rate changes every six months, but even if it is much lower, I think that we're going to be in much better shape than if we just left it in the bank. And unless we're concerned that the government will default on these (I'm not), then I think we're more-or-less in the clear.

So, for now, that is what I've done. And I think that I'm lucky to be in the situation that I'm in where I can afford to leave thousands of dollars 'locked up'. It's a crazy luxury that I'd never have imagined being able to do as a kid.

Diversifying, but no the Market is not going to Crash

2021-10-01T05:20:00.003-07:00

There are a number of items in the news lately that give investors a large amount of concern. There is a looming debt ceiling issue in the United States that continues to be an issue as it does not seem like it is going to be resolved in the near term. However, from the news I've seen it seems like the consensus view is that the ceiling will be raised, eventually.

The second issue is that there is a non trivial amount of debt that has been issued by the Federal Reserve. Even if you believe/support Modern Monetary Theory, the amount of money that has been issued is huge. Close to 120 Billion Dollars per month has been injected into the US Economy. The tapering of these purchases is looking like it will start happening, but it is definitely challenging to know the exact timing.

The Infrastructure Spending bill total is at 1 Trillion dollars at this point. And the news is that the house of representatives is voting on it this week.

So, with all of that news in the background I've done several things with my money in order to be more diversified. Initially, I thought that it might make sense to put a little bit into crypto. According to Marketwatch in May, bitcoin is not highly correlated with stock prices, with a correlation around .3 depending on how which market instrument you use. However, the challenge I see with this article is that we don't know what the timeframe was for the analysis. I believe, that as time goes on, with the information like what I've mentioned, I believe that crypto will continue to become more mainstream and as a result, it will be more correlated.

So, besides crypto, I've also looked at other options to diversify besides stocks. This includes non-traded instruments, crypto, etc. While I continue to believe in stocks, I am also believing that the market is saturated and the macro impacts are the bigger risk compared to risks within individual companies. We'll see if it turns out ok. And what I think is really funny is that despite dipping my toes into these things, I just checked and it is less than a quarter of a percent of my net worth. So, clearly not risky.

Real Estate Update

2021-09-11T06:54:00.003-07:00

It has been a while since I talked about my experience in real estate and with the craziness of covid, it seemed like a decent time to talk about this. I have spent some time thinking about this given that I live in a high cost of living part of the United States. What this means in short is that it generally costs me more than average folks to pay for my basic expenses like housing, food and healthcare. While I am fortunate in that I have a degree that pays well, I'm not so naive to think that is the end of the story.

What makes sense for me at this stage for my life is different than what seemed reasonable in my 20s. Now, by the zillow zestimate, I have about 40% equity in my home after a little more than 3 years. Looking back briefly, it has been an interesting ride. I bought the property with about 20% down about 4 years ago. Then, I spent about 10k on repairs/painting etc. Next, I went to pay off ahead of schedule, often sending in principle payments of several hundred dollars every few months and pre-paying some of the payments.

Refinancing followed not long thereafter when I decided that it made sense to make sure that I had the best situation given the way the economy looked pre-covid. Fast forward another couple of years and I had continued paying ahead and done some minor renovations.

The question for many people in this kind of situation is whether or not to payoff the mortgage. And I think that is something that people really need to be thinking about and consider for their long-term security. For me, I am diversifying by looking at other kinds of investing opportunities besides just the stock market and my home. I think that is really important to make sure that I am not over exposed either in the marker or in my home. I'll talk more in future posts about this, but for now, I am looking at crowd-funded investments as well as different government sponsored options and crypto. Anything like this that has the ability to preserve some purchasing power is important as both an inflation hedge and a general diversifier.

My Call Options Experience explained Simply

2021-08-21T15:11:00.002-07:00

So in my previous post, I detailed that I had started to experiment with Options Trading. None of this is advice, but just a description of my experience and thinking. I think that this was an interesting part of my experience in the past year because I didn't previously understand the appeal of some of the more complicated parts of the financial system despite being interested in it for a very long time.

In the past few months, I've begun to take additional opportunities when I can with the shares that I own free and clear via covered calls. I've heard about this option more and I encourage people to read about it more if they are interested. However, this strategy works well for me. In my case, I own a large number of shares in my trading account of certain stocks or ETFs.

It is my intention to buy more if we ever see a market drop. That said, I certainly don't intend to sell. Even in a crazy, 80% style drop like the great depression. I'm holding to zero. It's an extreme point of view. But for what I am going to describe, that is the standpoint where I think it makes sense.

Put simply, if I have 100 shares of stock ABC, and it is priced at 50 bucks, you might be willing to buy the right to get those shares at a higher price in the future, say 55 bucks within the next 30 days. What does this mean? It would be valuable for you if you managed money and you were believing that the stock would be going down. Why? Well, if your primary bet was that ABC sucked and it would tank, then you might be shorting it. In that case, you borrowed the stock and sold it at 50. You're betting it goes down, say to 45 and you can buy it back cheap and pocket the difference, 5 bucks a share.

What happens for sophisticated traders though, is that they sometimes see value in having insurance. In the scenario above, on ABC, they might want to minimize the downside. What if instead of going down as the other person thinks? Instead ABC spikes to 60. Now that person is hosed. They get called and have to pay 60 bucks a share, losing 10 bucks on each share.

Here's where the call comes in: They're sophisticated and know that sometimes things happen that are not as expected. So, they buy a call at 55. That means, in the bad case where it goes to 60, they still owe the difference, but they can recoup some of that by getting the shares from me at 55 instead of 60. A five dollar discount. Not bad right?

This is a great form of insurance for the other guy, but I'm giving something up here. Now, as a result of this, I lose all of the upside over 55 bucks. Why? Well, now he has the option to buy from me at this fixed price. So, for that option, I'm charging. Maybe 50 cents a share, maybe 2 bucks, or anything in between. Depending on the timeframe, the volatility of the stock and other factors, there is a market for these options.

What I like about this strategy though is simple: I'm not selling. And if you end up getting the stock from me at a higher price (we're selling calls that I have the shares for), then I still made some money: the fee of the option and the difference between the 50 and 55 in the example above. So, for options trading, I like this a fair bit. Of course, if the option is exercised, I'll sell my shares at that profit and I'm fine with it.

It's not the crazy you-only-live-once betting. Its just a few bucks usually. But, on a recurring basis, this can add up and I'm happy to get "paid to wait" while the stocks keep moving around while I have no intention of selling. If you're interested in options, I recommend you review educational materials, my broker provided some good information. It can really help make more sense of it. Have fun!

First Options Trades

2021-04-01T05:13:00.000-07:00

In all the time that I have been investing in the stock market, both as an individual investor and as a future retiree, I've never invested in stock options. However, in the world of stimulus checks, these have become more and more popular and even more so in the world of meme stocks like Gamestop GME.

What is an Option

In my brokerage account I had to first ask for permission to trade options. Presumably, this was to ensure that I had enough money and I understood that there were risks that were not clearly understood to the average stock market investor. Indeed, in some cases your losses could be severe -- much more severe than in the case that you actually bought a stock.

Put simply, a put option is a bet the price of a stock will go down. A call option is a bet the price will rise. On a stock that is at 100, you could buy a put at a strike price of 90. That means, you're betting that the price will drop below 90 dollars, and the put option gives you the right to sell the stock at 90. So, if the stock drops to 80, the option means that you can sell the stock back to the owner at a price lower than it is trading for. That is, 10 bucks.

A call option is the same process in reverse.

For options, there is something called an option chain.

An option chain is a series of dates and call/put options for strike prices around which the stock is currently trading. Depending on the volatility, the strike prices may be 1 or more dollars apart. What is nice about this is that you're able to select a variety of dates and strike prices to suit what you expect that the stock will do.

My Experience

While all of this sounds good on paper, it is definitely riskier than buying the underlying stock. If I buy a stock for 100 bucks, especially if I think it is a good stock, the losses are typically some percentage of the value. Whereas for options, if they are not exercised, they expire worthless. The loss is 100 percent. Also, whereas most stock trades can be made at low or zero cost, options trades still charge a fee on my broker.

So, this month I bought two cheap options contracts for a few dollars, really just to get the experience. However, they both expired worthless.

In short, for the average investor, I really don't recommend options. They might be great for traders and people who have really strong convictions about the stock in question, but for average investors, even if you feel like something is going to positively or negatively impact a stock, the timing is difficult. And, the amount is also difficult. With options, you have to be right on everything AND you have to make sure that the trade actually makes money if everything falls correctly.

Since options cost something, the cost of the option might be more than you'd make if everything fell the way you expect.

I found investopedia to be a great resource when learning more about options.

Are ETFs going to replace Mutual Funds

2021-03-13T08:54:00.001-08:00

In recent weeks my circumstances have changed with my retirement account and the bulk of my retirement savings is in a self-directed rollover IRA. I am able now to look and invest more broadly. This has caused me to be more and more interested in mutual fund alternatives like ETFs.

ETFs are Exchange-Traded Funds which are a newer investment vehicle that are traded on the open market during the day with most mainstream brokerages and you're able to know the going price during the day instead of waiting for the close of market to have the mutual funds be priced. Also, whereas traditional mutual funds often have a fee in order to get in, many of the ETFs have no load and also very low expenses.

Impact to the Market

I've followed Consuelo Mack WealthTrack for some time. This week's guest is a longtime expert in the industry and while he previously has favored mutual funds, in particular index funds, he now believes that their days are numbered.

Indeed, Morningstar reports that mutual fund flows fell in 2020. So, it is reasonable to assume this trend will continue. Cathie Wood who runs the ARKK and many other ETFs is on record as saying she is very happy with the ETF wrapper.

Flows' Impact

Given the distinctions I've outlined above, there's certainly some impact that is worth considering when it comes to flows. Flows are the movement in or out of an investment. So, in some cases, when the flows are large, in particular flows that are in the middle of the day it can be more challenging to adjust. These kinds of impacts are often cited around events like the 2010 Flash Crash.

However, these kinds of issues, according to WealthTrack's guest this week are less of a risk today. Personally, it makes sense to me that more participants in these markets with apps like Robinhood and Webull, despite the challenging public opinion, are good for overall markets. It can allow more participants and ETFs over mutual funds seem to also fit that narrative. More ability to invest cheaply, avoiding fund minimums seems like a win for the individual.

2021 Investing Themes Presented by iShares/Blackrock

2021-02-25T14:36:00.001-08:00

I attended an interesting presentations given by IShares/Blackrock with the goal of showing how to use their ETF products to capitalize on investing themes for 2021:

Gargi Pal Chaudhuri - Head of iShares Markets & Investments Strategy

Dorothy Lariviere - iShares Product Consultant

iShares (by BlackRock) - 2021 Outlook: New President, COVID-19, and Policy

I found that this presentation was quite interesting. The presenters included two women which was a pleasure to see and they were quite intelligent and well-spoken. I don't advocate for any particular investment or forecast, but I thought that the summary was interesting and if you want to review the particular symbols they mention as ways to act on these themes, they are included at the end.

US GDP Forecasts Above 6% for 2021

This presentation included a forecast that perhaps is not too shocking, but a positive report that GDP looks to be positive and a substantial number. The drivers for this include the ongoing fiscal and monetary policy along with progress on the covid vaccines. Indeed, the fiscal policy is close to ~25% of GDP.

Inflation Expectations are around 2-2.5%

Hawkish fed watchers may be concerned, but the presenters were not overly concerned with the increase in the 10 year treasury rates (up around 1.5% as of my writing this). According to the presenters there are variety of factors driving this including:

Bottlenecks within supply chains
Pent-Up demand as stores and the economy open back up
Commodity price increases

Put simply, the presenter is not concerned with inflation or rising rates that are modest (she mentioned about 25 bps from here) with the idea that it is important that the amount of growth is part of the amount of increase in real economic activity.

Ongoing Themes Strong

The ongoing theme of transition from brick-and-mortar continues. The ongoing theme of the fed being accommodative is expected to continue for quite some time. And the theme of globalization is expected to continue. This led to the most interesting recommendation from my perspective in the presentation, the recommendation to consider Emerging Markets, in particular because global growth and commodity price upswing should help in that area.

Personally, I had rebalanced and found that one area I moved into was Emerging Markets. Of course there's danger that this is just confirmation bias, but I found that the information was interesting. If you want to see the information I saved from the slides, shoot me a message.

Tickers Mentioned in the Presentation

MCHI: IShares MSCI China ETF

IEMG: iShares Core MSCI Emerging Markets ETF
EMXC: iShares MSCI Emerging Markets ex China ETF

XT: iShares Exponential Technologies ETF
IDNA: iShares Genomics Immunology and Healthcare ETF

FALN: iShares Fallen Angels USD Bond ETF
USHY: iShares Broad USD High Yield Corporate Bond ETF

If you are a Fidelity client, keep an eye out for these kinds of presentations which is where I caught this one. This one was great. I've seen others offered by Vanguard as well and I was pleasantly surprised.

Are we recovering? I'm watching the Unemployment Rate

2021-02-21T10:15:00.005-08:00

Are we recovering?

"Optimists point to the rapid decline in the unemployment rate after the first wave of the pandemic—from nearly 15% in April to 6.7% in November— as a reason for a speedy recovery. Pessimists' go-to statistic is the high and rising rate of the long-term unemployed, those who have been out of work for more than six months. It has risen from 0.7% of the labour force in February to 2.5% today." -From The Economist - Jan 2, 2021 (America's Jobs Market. Speed Limits)

The article recounts the fact that many people who are long-term unemployed have indicated that they are only temporarily laid off, while history and shows that over time, many of these jobs may not come back.

Many people have dropped off the rolls altogether and are no longer looking for work. According to Jason Furman and Wilson Powell III of Harvard University, the real unemployment rate is 8.5%.

Within the sectors of knowledge work, there has been a dramatic overnight shift to large numbers of jobs being "from anywhere". Millennials, not wanting to miss out, have traveled to friends and family along with a number of others to take advantage of this opportunity to travel with minimal impact or wasted vacation time.

How many people are available?

According to the Bureau of Labor Statistics, the percentage of civilians who are part of the workforce has declined 2 percentage points in the past year from 63% in Jan 2020 to 61% in Jan 2021. Put simply, there's more people by about a million, but fewer people working. (see https://www.bls.gov/news.release/pdf/empsit.pdf )

Unemployment is likely to remain an issue into the future, even if companies can report strong earnings and the United States is able to report strong GDP. In other words, we may have unemployment and underemployment even if the economy looks good on paper. In the BLS graph shown above, it shows a long period of low unemployment, in the 4% range whereas now it seems to be around 6%. If that is combined with the information mentioned by Furman and Powell, it could be still higher, maybe 7 or 8%. That's anywhere from a 50-100% increase in unemployment. That is a very serious impact.

Higher unemployment will likely stifle pay increases. And furthermore, it will reduce ability for people to easily move around.

With the collapse of city microcosms, gig jobs, restaurants and other services that were parts of normal working life have taken a serious hit. Also, durable goods like cars are not so critical if people are working from home and use cars less frequently. Combined with the decrease in travel, it is not clear if that will continue to be the case.

Unemployment Target

I think that unemployment will be a strong indicator of how sustainable the recovery is. I care about that much more than PE ratios, GDPs, etc. If unemployment rate declines continue into 2021 and we once again approach a 4% unemployment, I will feel much more comfortable that we've seen our way through the worst of this.

Am I really diversified?

2021-02-17T09:37:00.001-08:00

In the book A Random Walk Down Wall Street author Burton Malkiel argues that the stock market is, as the title suggests, a random walk. In the book, which is cited and echoed by famous industry titans like Jack Bogle of Vanguard fame, it:

1. Makes little sense to think that you can beat the market. Indeed, on average you'll lose money when picking stocks.

2. In looking at when to invest and cash out of stocks, if you try to time the market you'll inevitably do worse.

This advice really stuck with me and I still believe this to be the case. But in the current environment, as many smart people do, I do find myself asking myself if it is different this time. Much of this is due to the performance of "broad market" indices.

Diversification is the idea that by spreading your investment over many companies, you lower the volatility. You might have less upside, but you also have less downside risk. In the end, you're hoping the market as a whole does well, more than any individual stock.

I echo the sentiments of many people who think that the market seems to be disconnected with reality. In the midst of the pandemic, indices like The Dow Jones Industrial Average had phenomenal results even while the market was shut down and we believed that there were no viable vaccines. The market plunge in March 2020 did not last long. And that run up has continued.

Indeed when considering the constituents of the S+P 500, more than 15 percent is in just three companies.

So, if you believe the advice of titans, what does that mean about owning index funds that are based off of highly concentrated indices? In a world of high volatility where dramatic swings have such an impact on the constituents of market cap weighted indices, I think it is worth considering whether or not you are truly diversified if your goal of diversification is to take a slightly lower return as an exchange for less downside risk.

Personally, I have several mutual funds, but when I compared them, there was a high degree of overlap in their top holdings. While I believe the advice of titans, I don't know that all mutual funds are truly providing the diversification that I thought I was getting. I did my rebalancing with this in mind and chose funds that met similar goals for my long term investing plan and adjusted during my rebalance to those funds to reduce the overall exposure to these large S+P names.

Bulls will say that these stocks will do exceedingly well into the future, enough to justify these high ratios. I wouldn't bet against them, but for me, having a large chunk of my investments in companies that are so tightly linked feels riskier than I'd like. Couple that with the high ratios, and I was happy to rebalance.

Will Robots and Artificial Intelligence make lives better?

2021-02-06T06:43:00.000-08:00

The Economist writes on January 16, 2021 that "the pandemic has ushered more robots into factories, warehouses and back offices." and that "they are here to stay."

The article cites information surveyed from a variety of manufacturers and shows that the increase is marked for these firms' increase in digital consumer interaction and collaboration along with Artificial Intelligence and automation. So, in short, what does that mean for society and how will that impact investing into the future?

Society continues to find new and innovative ways to make our lives better with technology. The amazon effect on retail has translated into the destruction of brick and mortar. Many people are happier with this setup. For advocates of online shopping, they are spending less time doing these errands and more time on hobbies, with family, or able to do other things that they feel are a better use of their time.

Amazon continues to forge ahead with its use of technology, using robotics and artificial intelligence to improve the entire supply chain. However, if the article is to be believed, they are at the beginning and this trend will continue into the future. Some would be concerned that Amazon has destroyed jobs with the use of robots, but at the very least, there is some evidence that is not the case. Amazon Employee Growth shows that amazon is continuing to add employees within the firm. Indeed the jobs to build, maintain, and innovate such complex systems are undoubtedly higher skill jobs than packing boxes. This trend is exciting for the future.

Tesla, another high flying stock is producing large returns while showing that there continues to be lots of room for growth. Artificial Intelligence is often conflated with the concept of big data. And the two are certainly linked. That is, often sophisticated systems require large data sets in order to derive meaningful insights. For that reason, Tesla is far ahead of the curve, with many more millions of miles of data to feed their models than any other competitor. This data itself is an asset. If properly used, it could result in successful self-driving cars.

As exciting as all of these developments are, the question that remains is whether or not they are making things better. In a world after covid, will enough people be driving enough hours that this time recaptured represents a real benefit to society? Similarly, will the green technologies push the boundaries of what we're able to achieve to improve our overall well being. Obviously, investment gains do not always translate into overall well being.

As I consider companies that have real prospects of fundamentally changing their business models and deriving true exponential growth as a result of these technologies, I remain excited and optimistic about what these types of changes can mean for our quality of life over the longer term. But more important than the investment returns, to me, would be seeing a real translation of these things into improvements on important societal issues like income inequality, health care, climate and education. If we're smart, we'll be able to harness these forces to improve key areas in our society for all and in the end, produce a valuable result.

Ideas to Consider for Tax Time 2020

2021-01-31T14:23:00.001-08:00

Reflecting Back.

Tax time always is a chance for me to look back after the business of the holidays is behind me. I had a few thoughts that I figured I would jot down as I wrap up the end of this year. In short, the amount of time seems somewhat compressed. I'm surprised that when we get to March, it will be a full year of the pandemic life. Living at home, working at home, with minimal options for socialization and the like.

Mental Health seems to be taking a real hit for many people, perhaps unsurprisingly in the wake of the pandemic, all while thousands of people continue to be dying. All of that serves as a stark reminder of how lucky those of us are that are blogging about money and personal finance who have not been harshly touched by this event.

Taxes are important, but having some gratitude and reflection on the good things that have happened this year can be a good aspect of the process too.

Documents On Time

All that said, the tax documents arrived early this year and I find that doing the taxes is a nice distraction, even if it is something perhaps that other people should be doing for me so that I don't "miss out" on money.

For me, there is something comforting about doing it myself. Like many other things, I think that it is a good exercise. The rules and regulations are designed to be simple enough to follow and anyone with good intentions and a high school diploma should be able to figure it out with any of the software that is out there.

The big step is making sure that you have all of the documents you need on time. Any accounts you have that generated interest or investment gains should be sending you information. Any jobs should have receipts. A document for your health insurance and any previous refunds might be coming as well from your state. Make sure you have everything you need before you start and if you don't have it by the deadline, reach out early.

Tips For Easier Filing

All of this goes to provide some basic tips that help me each year to make this an easy process:

1. Save your receipts throughout the year. If you think they are scattered, before you try to do the taxes, just invest some time in assembling all of the paperwork without any goal of doing the taxes. Job 1 is just to get the paperwork together.

2. Review your year in some detail. Did you have major life events? A birth. A death? Did you perhaps change jobs or move? Someone in your family go to college or graduate? All of these kinds of events can have an impact on your taxes. If there is any paperwork related to it, get that together.

3. Use a professional or at least a software program if you have anything complicated. When I was in college I was a simple case of a 1040-EZ. Sure for that, do it yourself by hand. Otherwise, I think it is a very reasonable investment to use an online tool or professional, even if you think that you can do it better yourself.

4. Get your paperwork together and file for your reimbursements from HSA and other programs that have deadlines! Don't miss out on those benefits!

What Changed For Me This Year

On personal note I feel that the pandemic made things a bit strange. On the plus side I canceled my use of the tax advantaged deduction of my transit because it was not something that I was using. On the downside, I didn't have as many medical expenses as was expected since anything of that nature which was not absolutely necessary was deferred and many of the copays were canceled.

As usual, I received a mortgage interest deduction and this was helpful but otherwise, the taxes were fairly normal for me and the things that were different probably only amounted to a few hundred dollars.

Blogging Wealthtrack: Christine Benz from Morningstar comes clean with retirees

2021-01-17T11:20:00.002-08:00

There's a big series of controversies these days with covid. And politics has not been a simple matter to stay out of. Many people have had enough.

Benz puts all of this aside quite nicely in this video with Consuelo Mack this week. The full video here but I will highlight a few interesting points that I think are worth considering.

Starting with the numbers, Benz notes that there are 20.6 million job losses and a 14.7 million US unemployment rate. So, there continues to be real impact to large numbers of people in the economy. And the pandemic rages on: 20.7 million US covid cases.

When it comes to investment choices, Consuelo continues to bring up There Is No Alternative. More than a catchy acronym, the idea that people are searching for yield is a concept that might be driving stocks to ever higher prices. Benz dodges this well, and generally does a good job of providing advice which is applicable regardless of what your investments are in.

One key departure from this is a mention of total return. I won't say much more about this because Benz didn't mention specific product, but did mention it was the "way to go."

On a more traditional note, she mentioned some items that may already be familiar strategies:

1. Trimming appreciated assets for income
2. Also consider using HSA as a savings tool, in particular for tax advantages.
3. Paying down fixed rate debt for things like a mortgage if it beats the returns expected in your investments, especially if you don't need the liquidity

Over the longer term, Benz believes that retirees should be conservative with their withdrawal rates in light of potential lower returns in the future. She mentions of course the classic issue of sequence of return risk which highlights the impact of retirees seeing a major stock market crash right after their retirement.

WealthTrack has been a favorite show of mine for several years now and although I feel it has taken a more direct bent toward advertising, Consuelo continues to bring on thoughtful and interesting guests and has done a nice job of transitioning from public funding to sponsored series. This video of the interview with Benz was a nice opportunity to revisit some considerations for retirees.

Are we Inflating to a 2021 Recovery ?

2021-01-02T11:29:00.005-08:00

The Economist, dated Dec 12-18, 2020, has a cover story, "Will Inflation Return ?". The question is not if, but when. According to the article, three arguments for increased inflation include the following:

1. Pent up demand

2. Aging societies which reduce the number of overall workers

3. Complacent politicians, who are happy to spent more, even if it goes over 2% inflation targets in order to satisfy liabilities, specifically mentioning those related to health care for an aging population, see point 2 above.

I find the article a competent summary, to be sure. And the question to me is not whether there will be inflation. There will be. The question I am having for myself is twofold:

1. When will it show up?

2. How will it show up?

I find that this, along with many other macro-level items are some of the most interesting aspects of finance for me. While they are tough to bet on individually, that is exactly what I am going to discuss here.

Regarding when it will show up, this seems to be strongly related to how much you believe in reason number 1. Personally, I don't think that there is all that much demand for durable goods, food, consumables etc. Instead, I think that the pent up demand is for things that people have not been able to do: travel and eating out.

That said, I believe there are two countervailing forces to this pent up demand.

That is, for those who want to eat out, they cannot have a do-over on meals eaten in 2020. Those meals are gone, that opportunity to make the revenue on restaurant dining is lost for waitstaff, bartenders and the like. So, is there going to be more demand in 2021 than 2020 for dining? Perhaps. Let's assume that people are all vaccinated (both doses) by end of March 2021. That leaves 9 months to do more dining out. Will there be more, yes. How much more? My instinct is that people will likely only increase modestly, perhaps 10-20% for a couple of reasons:

1. There's still a good deal of unemployment and uncertainty in the economy.

2. People will not be able to eat out more than that even if they want to. People still have kids. It is still expensive. And moreover, people will still have to endure waits, reservations and other things that reduce the incentive to dine out -- like the desire to throw and spend money on parties.

3. Many restaurants will simply not be open again (replacement restaurants) until 2022.

Similar logic follows for travel, but that will have a rebound that is even less drastic than dining.

But, will everyone be vaccinated early enough for that to matter? That is, do I expect people to have gotten their shots before June 2021 so we're back to 'normal'? No. I think that we're likely to be close to Summer's end before everyone who wants a vaccination has gotten one. And that means, we'll likely be living a masked life for more than another 6 months.

Inflation based on pent up demand requires us to be comfortable to dine out, go out to entertainment venues without masks, and live more-or-less normally. That will not be the case early enough in 2021 to spark inflation based on demand.

What about policy-based inflation? The article does an excellent job discussing this and how the inflation shown continues to be shielded/used by governments issuing short term debt. The conclusion of the article recommends against this since inflation could be so damaging to governments who are more sensitive than ever.

This risk is something to be more concerned with. And with the increase in the money supply, it seems like this could have spillover effects. Asset inflation, where stocks, homes and other expensive assets become more expensive than they would be otherwise seems like a real concern, especially if you are poor and do not hold assets at this point. Personally, I continue to watch and wait, but regardless, I'm hopeful that the real crisis is over, and we can get back to personal finance best practices in 2021.

Three Ideas For Dealing With the Rest of 2020

2020-08-01T10:03:00.001-07:00

Three next thoughts. As part of the process of going through Covid, and coping with the economic slowdown, I am having three thoughts that are driving my financial decisions that I thought I would share: Nothing that people are doing to live and be happy will go away permanently. The implications for this are pretty big. That means, people will continue to eat, sleep, breathe, exercise, have sex, have children, build businesses and homes, and travel.

Just sit back and think about that for a minute. With all of the doom and gloom that is in the news about the virus, people have begun to feel deeply depressed. I think we may see things that will irrevocably change our way of life in the western world. This may change our way of choosing to live, partially due to regulations, and partially due to preferences.

But I feel confident there will also be a true reversion to the mean. (When is the question.) Sitting in August, I already see it. And so I think that there is a real opportunity here for us to decide that the stock market may in fact be reflecting that reality that people will continue to behave and do things that make them happy once their basic needs are met.

The mental health issues are real; the impact for people who are on the margins is real. While I am confident in the ability of the world to bounce back, I don't think that it will be anytime soon. So, for those of us who are fortunate enough to be able to have extra money, keep going out. Keep patronizing your stores and restaurants (take out works!). And tip. extra. If you can afford it, now is not the time to be stingy. Consider helping those who need it in your community. No one deserved this. Certainly people could have prepared better, but now, let's all pull together.

Finally, be brave with respect to political divisions. Acknowledge differences openly and then choose to ignore them, with kindness, and move on. This will require an incredible amount of strength for us to get through as a society. And we're already doing it. Avoid extended political fights, favoring instead to focus on things that we can all agree on: we don't want people to die. We want to get back to something similar to normal as quickly/safely as possible. And we want to learn what we can from this tragic situation. Focusing on these things will probably help us all come together more -- and that's what we really need in order to get through this.

Turning Over a new leaf

2016-12-07T19:47:00.000-08:00

I have been struck over the past month how many things have really begun to come together recently in my life. I went through a rather difficult period for about 18 months and now things are feeling somewhat better. I thought that in this post I would discuss a little bit about the relationship between your health (both emotional and physical) and your financial situation. For me, there is undoubtedly a relationship between these two things.

After my divorce, I found that I was really struggling with a variety of different issues. I had to move multiple times, I was suddenly single, and also was older (much older) than I was when I first 'dated' in college. I am not terribly novel in terms of the story but my story might give someone some help, so I think it is worth sharing.

It can be helpful to have a measurement of the different aspects so that I can describe them. The measurements will surely be different for you, but I find the following measurements helpful:
For financial health, I will use my net worth.
For physical health, I will use my endurance and my daily activity.
For emotional health, I will use the number of times I feel overwhelmed either by anxiety or sad feelings.

Prior to divorce, my net worth exceeded 250K, my physical health was good, I was able to comfortably run a 5k, went to the gym 3-5x weekly and felt overwhelmed perhaps 1x month for about 1-3 hours.

After my divorce, my net worth decreased to about 200K, my physical health based on the same measurement decreased to about 2x/week for exercise and I frequently felt overwhelmed, perhaps 1x per week, especially in the past year as I began to live with someone new.

Turning the Corner

I began therapy immediately during the difficult time. I tried that for many months, resisting the idea that I might need a medication to help me get more stable and able to handle the situation. With the help of the therapy and the support of new friends, I found myself able to be stronger, slowly.

And while I was able to begin to deal with the discomfort of divorce, I also began to reexamine my values. I continued to value love, but I also examined my other values and really thought about what mattered to me. And I worked more and more to live out my values and took real steps to live more simply--something I had felt strongly about for years.

I practice a version of Inbox Zero at work. I eliminated my car. I pared down my personal possessions by about 50% and all of that was helpful and created more space for me to consider and really focus on what was important. And strangely, as I write this, I realize that eliminating all of these other things really created more anxiety in me in some way because there were fewer and fewer distractions.

As my life became simpler, I still was becoming more anxious and I struggled to understand it. Over time, I even became comfortable with the idea of taking medication to assist with my anxiety.

This was a real turning point for me as I was open and honest with those around me about this problem I found that many people had taken these kinds of medications. Besides the help of the medication, the openness in my relationships as a result of this was a real boon.

As that improved, I found myself able to attack and succeed in a new job and also be able to grow my net worth. Now, at over 100K of liquid assets I am truly considering what to do next. As a renter for the past 2+ years since my divorce I am not building any equity and the timing of this is right around the election. Combine that with interest rates going up and I am personally concerned that at this point, we're going to see enough of an increase that home ownership will become more and more difficult in the future, especially in the part of the country where I live.

Once I began to clean house with my job, I moved on to my new relationship. I have continued to work on the relationship and honor my needs and strength, but more than anything, to express my truth as best I can, without regret or apologies. The therapy provides an incredible sense of calm for me. I am definitely able to manage stress and anxiety better with the medication than without it.

More than anything the lesson that I have learned again in my life is simple: look out for yourself. No one else is going to do it for you. So, I am now looking to buy a house for myself in a neighborhood that seems both nice and is also accessible for me financially without wasting and ruining my entire life plan. What would you do at this point with the money in an uncertain environment? I have my 401k in the market so I don't want to take risk there; buying a place to live and working to pay it off quickly seems like a no brainer.

I'm Going to Grad School

2016-11-18T05:25:00.000-08:00

I'm going to Grad School! For me, in my mid-thirties was the last time I would have expected to be doing this. After over 8 years at my job, I realized that I needed to learn new technologies and also revamp my skills. One might ask why not use Coursera or some other free tools to learn new skills (and I will talk about those in a separate post). In particular there are three items that I am trying to address with grad school:

1. Name Recognition/Degree
Currently I hold a Bachelor's Degree of Computer Science. Unfortunately, the school I went to is a well regarded liberal arts university where only BA degrees are offered. In my field, many people want to see a BS. And I personally understand why the difference matters. My education certainly had plenty of theory and programming, but being a liberal arts degree (a double major with a foreign language), I feel strongly that this puts me head and shoulders above many people who are poor communicators in IT, but behind those with a degree from a well known university or those with a more technical degree in Engineering or a other types of BS degrees.

2. Networking
Unfortunately due to the amount of time that I have spent in my current role, my network has somewhat shrunk. And while I can certainly do better in reaching out and staying in touch with people as they move on, I wanted to largely make sure that I am working to do a better job by building some camaraderie with people I am in a class with etc.

3. Skills and Competition
Obviously, when you start to consider the amount of time that many of us will work, it stretches into multiple decades. I have no idea how long I will actually live, but I certainly believe that there is a huge amount of time left in front of me. And if I continue to work in the field of IT for the remainder of my life (I do), then it makes sense to go back to school to get a sense of what new grads are learning.

But why now?

Over the past few months I have recently transitioned in my company to a new role. And in this role I realized that the demand would be much higher on several skill sets that I continued to lack. In particular in the previous role I worked largely on ETL processes (which for those who are not in the IT field, stands for Extract, Transform, and Load). In short, ETL deals with processes that move data around in files and databases converting it from one format to another.

In the new role, it is clear that my responsibilities will be both broader and deeper and that now is a real opportunity for us to develop not just interesting technology solutions, but also have a greater influence on the way things are done in the future. And for this, I am extremely excited because it is an opportunity to do more with technology and also within the corporate culture. Both are things I am tremendously passionate about. So, the first step is to build and accumulate not just the political capital but also the technical skills necessary to be able to make inroads.

But what about the money?

Lastly I would be utterly remiss if I didn't talk about the money at all as that is the focus on this. Since my career is my greatest asset I owe it to myself to continue to make it viable for the future in terms of both earnings and also in terms of competition. That is the first goal of grad school but the second goal is whether or not it will increase my earnings. And I can say that in expectation, I do not expect to earn more in the next 5-10 years because of the degree. However, the additional insurance it provides for the future and also the potential to reach higher levels of management within IT is high. And I am excited to be able to have that credential on my resume.

Fortunately, that credential will not cost me a bundle compared to paying it through other means. I have a firm that provides a tuition reimbursement annually up to a dollar amount. If things go as I expect, I will end up spending about 20K to get a Masters degree and it will take about 2 years. For me, this is incredibly valuable and while I agree that the 20K could be invested etc to make a higher return, the likelihood of that 75-125K being enough to cover my expenses for the additional years where it will be more difficult for me to find work, seems unlikely. So in some sense, the degree is an insurance policy against aging.

All Cash Month

2016-10-30T07:51:00.001-07:00

Go all cash. It is not a revolutionary idea. Don't wait for something amazing and new in terms of an idea in Personal Finance. It's just cash. That's what I am thinking about as I head into this Month. Sitting now on the 5th, I was considering whether or not I should just go all cash for a month. But let me start with my motivation:

I feel like I spend a lot of money. I mean A LOT. More than I should. Perhaps more than anyone should. And that makes me wonder if perhaps the credit card and my personal good fortune to have a good salary really has kept me entirely insulated from how expensive everything is and what my spending habits are. Again, not revolutionary, but this morning it really hit me for some reason.

After I completed this exercise, I found two key takeaways:
1. I spend entirely too much money on coffee out. For me that was a response to spending so much time at my desk at work. I needed an 'excuse' to get outside. Near my office, there is 'cheap' coffee with a reward program that gets me a coffee for about 1.35 per cup with the discount/loyalty program but even with that discount, the cost of 2-3 coffees per day adds up.

2. I found that I was a little bit more restrained when it came to purchases. It hurts to spend cash, not so much to spend on credit cards. This has been written about before, but in this example, I really felt it. In general now, I am spending between 1000-2000 per month for the dining out and other types of expenses. It is crazy!

As a result I have made a few changes which I am hoping will help me curb my spending somewhat on these 'avoidable' items. It is certainly something I should do to make my money last and do a better job saving.

Comparative Compromise, Coping with Change

2016-01-07T06:00:00.000-08:00

Comparative Compromise, Coping with Change

This is the last article in a series of short posts about reflections on divorce. While I would not wish this on anyone for a variety of reasons, not the least of which is the financial impact that such an event can have, I certainly feel excited to be working through this process and wanted to take just a few moments to share some of the insights that have really affected me.

One of the biggest skills that you need to cultivate as part of the divorce process is being comfortable with change an uncertainty. While this is a financial blog, there are several items that I found very helpful in this manner and these have had immense benefits for my entire life, not just my finances.

The Untethered Soul - By Michael Singer
Living Beautifully with Change and Uncertainty by Pema Chodron

Besides these books I also found three additional pieces of advice are extremely helpful:
1. Go easy on yourself. In a word: compassion. With all of the crazy that happens during the divorce it is very tempting to place blame and to also become a captive to these negative feelings. Feel your feelings and don't beat yourself up over how you feel. Feel them and express them appropriately.

2. Stick with your friends. Sometimes there can be an immense impact on your family during a divorce. It can be easy to continue to isolate. Resist this temptation. Work to reconnect and rekindle friendships. You will undoubtedly have days when you can really use friends around you. Avoid the temptation to spend all of your energy hunting for the next person and instead pour some of that energy into friendships which should stand the test of time. Friends will be less judgmental and often more accepting of the ups and downs of life than your family is.

3. Care for your health. While it is somewhat strange, it is important to note that your health is something that, like time, is precious and is difficult to salvage if it is wasted. So, if you have not handled your health previously, start now. Go to the gym. Go to the doctor. Start cooking and eating healthy food, in reasonable amounts! All of this will continue to improve your outlook and also your body so that you will be able to tackle all that the divorce process throws at you.

All of this is to say that you shouldn't give up on yourself! Find out ways to motivate yourself and then just move on and tackle those difficult challenges. All of this will be easier with your health in good shape, friends at your side, and a compassionate attitude. '

For me, in the rear view mirror, the divorce is just a detour in my life journey. And I wouldn't change my journey now for the world because I have learned so much about myself and how strong I truly am.

Dating with Data, Digging for Gold

2016-01-04T14:47:00.000-08:00

Dating with Data, Digging for Gold

This article is part of a series on divorce which describes my experiences as part of going through a divorce. In short, I found that the dating world had changed somewhat by the time I returned to it as a result of my divorce. Now, the internet has changed dating, changed it even more than when I had originally met my spouse on America Online almost 20 years ago.

Now the internet bustles with all sorts of applications for smart phones related to dating. Many of them are related and part of larger conglomerates at this point. I wanted to take this post really to just give my own personal impressions of dating as a result of this experience. I personally used an app called OKCupid which I found to be very good and helpful.

Here are the things I liked:
1. It provided pictures and some opportunity to give a description.
2. It did not require for other people to know I was looking at their profile.
3. It allowed me to be able to answer questions about myself so that potential matches would know if we were similar enough.

Here are the things I disliked:
1. There was not much in the way of proofing/checking people.
2. It was difficult to be certain if people were being honest using that medium.
3. Many of the personality questions were similar/repeated.

Here are some tips if you want it to turn into a long-term relationship:
1. Tell the truth. If in doubt, just omit it; do not lie.
2. Don't use a ridiculous picture or one that is not within the past 24 months. If you don't have a good picture, get a friend to help you take one.
3. Spend some time talking to the person; see if you like them BEFORE you go an meet them.
4. Wait to have physical contact; go slow. Let the desire burn a little for you both. In this world of instant gratification, it is a good exercise to show some restraint.

These were things that worked for me. Online dating is fun and exciting; and there is a lot of opportunity to have either a long-term relationship OR a casual fling. Just make sure you know what you want and are honest with your dating partner about it and you'll have a great time.

Living Apart, Living Large

2015-11-30T09:00:00.000-08:00

This is a post in a series on divorce. The list of divorce topics is here. Understanding this process can be incredibly difficult, I felt compelle to share some of what I have gone through and learned personally. If you'd like to read the first post, click the link above.

Once the assets have been divided, it is then time to start living a separate life. For me this meant dealing with a series of issues around money, time, and space. This post talks a little bit about the money aspect of the separation/initial divorce period...this IS a finance-focused blog after all! In the next post, Reclaiming Life, Restarting Goals, I will discuss more about the other aspects, time and space, but for this post, I am focused solely on the money aspect and the impact that living separately has on someone in this situation.

Personally, I was fortunate while I divorced to have a good job and to be able to afford my own apartment and living expenses. While this may seem good at first, this inevitably had a reverse effect in my experience. I have long followed suze orman and I enjoyed sometimes how she told people that they were buying things they don't need to impress people they don't like etc. Well, I like myself and now that I was no longer in a relationship, I didn't have to check my purchases with anyone else. I could buy whatever pleased me whenever I wanted.

The next step was to move out and pick a place to live. I know of some people who end up purchasing expensive digs after the breakup because they want to show how much better their life is now. Personally, I didn't do that right away. I first started with a room in a shared apartment and became a roommate again. This was cheap but the apartment wasn't clean or as well kept as I would like. Separately, it was a problem for me to feel comfortable so I moved out.

My next diggs were better but definitely more expensive. In addition I had to purchase all of the items for the new place and get used to paying for all of that out of my own paycheck. Not cheap. That included the following:
1. Living Room furniture
2. Desk/Chair
3. Carpets/Lamps
4. Silverware/Dishes/Pots
5. All new food/linens/staples

Nearly everything that I had purchased over the next 6 months were things that I had already during my marriage and had to replace because I didn't take them. I left everything. While this is not horrible because I was able to get what I wanted, it was extremely expensive, costing about 6K before I was finished. While I needed these things, they were primarily to ensure that I didn't feel crummy while I was dating.
Looking back at this period in my life, I certainly understand why I did what I did. And I am sure it is a common reaction to the situation of divorce. The challenge I'd make to anyone going through this process though is to make a budget as follows:

1. Decide what items you need in the next 6 months and how much you expect to spend
2. Take that budget and cut it in half. Repeat this process until you've bought what you need. You will likely find you need far less than you thought.

As for me, I gave most of that stuff away less than a year later when I moved. Do you want to waste that much money?

Reclaiming Life, Restarting Goals

2015-11-18T15:16:00.000-08:00

Reclaiming Life, Restarting Goals is the title I chose for this post, one in a series of posts about coping with the aspects of divorce. Originally I wanted to write these posts because this is mostly a blog about my finances but I also realize that largely this is a blog about life.

Reclaiming Life is something that is hard to imagine, but it is an absolutely necessary step if your divorce was tragic and had a profound impact on you. I'd imagine that this is true for most people, but it is worth noting that I am speaking only from my personal experience.

Reclaiming is from the verb to reclaim:

re·claim

rəˈklām/

verb

verb: reclaim; 3rd person present: reclaims; past tense: reclaimed; past participle: reclaimed; gerund or present participle: reclaiming

1.
retrieve or recover (something previously lost, given, or paid); obtain the return of.

"he returned three years later to reclaim his title as director of advertising"

synonyms: get back, recoup, claim back, recover, regain, retrieve

"traveling expenses can be reclaimed"
redeem (someone) from a state of vice; reform.

"societies for reclaiming beggars and prostitutes"

synonyms: save, rescue, redeem;

reform

"Henrietta had reclaimed him from a life of despair"

archaic

tame or civilize (an animal or person).
2.

bring (waste land or land formerly under water) under cultivation.

"little money is available to reclaim and cultivate the desert"

And so, it is not just the first definition, but also the second definition that makes sense here. Life truly has to be recovered after divorce. Indeed I'd argue that without this step, you cannot proceed in any effective way, emotionally, spiritually, financially or physically. It is essential.

Recovering in this sense to me simply means that you are back to living. Living involves making choices, taking risks, having a good time, and being present in the current experiences and emotions of your existence. In short, being active rather than passive. Recovery in this sense isn't easy and there are a number of things available to you.
1. Friends, Family, existing support systems can help you recover your life. Not everyone is fortunate enough to have those things however, so for them, I'd focus on other options below.
2. Church/Synagogue/Temple etc where you can meet with fellow believers of your faith and perhaps deepen your connection with a higher power. For me, Church was where I feel I recovered the most. It slowed me down. It got me thinking about others besides myself which helped me really notice where I was. And most of all it gave me some structure and ability to get comfortable with who I am again.
3. Therapist and/or Support groups. These like anything can be complex and expensive or simple and cheap. Don't short change yourself on professional help, but at the same time be smart about your choices.

After recovery, you can begin the second aspect which is to bring your life to cultivation which is what the idea of goals really means. What do you want to accomplish with your life. I find that these are difficult in a way that I wouldn't have expected. It can be so consuming and difficult to recover from a trauma, that you forget to make plans for the future.

My advice about this second aspect of cultivation of goals, restating goals is:

Start with restating them and writing it down.
Do not worry about when/how these will get met or if at all. Just practice writing and having goals.
Don't wait too long to start.
Once you are comfortable with the idea of having goals, get serious and pick one or two small goals to set and work toward. This is a great way to start this habit.

In the end, the best way to restart your life is to have something to live for and to live towards. If you can manage it, start small with your goals and then build them up until they are bigger and take time and real, concrete steps to complete. Accomplishing a mix of small and larger goals is a great way to feel good about yourself and get some distance from the pain of divorce.

Making the Decision and Having the talk

2015-11-13T17:43:00.000-08:00

When it comes to making the decision to divorce, unless there is some overarching circumstance, I view it as a mistake to do it rashly. In order to make the decision, dealing with the feelings and emotions involved first made the most sense. Often when things get changed in our lives it is because we have become fed up with the current state in some way or shape. In this case, there is a feeling that the time for Divorce has come.

Deal with your Feelings and Emotions first, noticing that there may be some distinction here. For me my emotions are concrete: Happy, Sad, Complacent, and perhaps fearful. Feelings are a bit more nebulous. I might feel trapped. I might feel subservient. I might feel powerful. None of these are truly emotions, but they are intangible, and somewhat subjective. For me, once I felt unhappy in the situation, I tried on various occasions to deal with why I had these unhappy feelings.

The feelings, more than the emotions were the primary driver of the change. More than anything, you should try to be clear about the feelings you have that are a direct result of something being wrong in the marriage. Use your gut to help you figure out if those feelings are temporary or if they are lasting. Then write it down and wait for some period of time before acting further.

Once you have your feelings in place, you can try to understand what the cause is. Perhaps you feel less important because your spouse is spending more time/energy on something else. Perhaps you feel less loved because of how you are treated/talked to. Perhaps you feel less connected since you don't spend so much time together raising the kids. Whatever the feelings are, they have reasons. Figure them out and write them down. It is good for you to have it be concrete. This will aid you when you have the talk.

Writing down reasons you want to get divorced makes the process real. Don't leave that lying around, but make sure to carry it and review it. Perhaps a day, perhaps a week. Take some time and sit with the idea that you might not be with this person anymore. Do not act rashly, but then reach out to one or two trusted friends and discuss how you've felt over lunch or over coffee. Nothing heavy. You do not want to over burden your friends so they don't feel blindsided. Some friends will feel dual loyalty. You should consider that early on.

After discussing with your friends, discuss with your family. Undoubtedly, they will be impacted by the process and if you've gone far enough that you are still certain, it is time to get them in the loop. Some people would caution against this, but for me, I think it is essential. You will need these family members to help you when you are dealing with your emotions and pain.

Once all of this is done, you are ready to have the talk. If you expect it to be particularly emotional, I recommend engaging a spiritual mentor (a priest or a rabbi if you are religious or perhaps a social worker or therapist). If you feel confident you can proceed alone, consider aspects of your safety and then ensure you have an immediate exit plan should things get ugly. Write down all of the details of the conversation once it is complete as this may be important.

Finally, consider the tenor of the conversation so far in the marriage and consider whether you want to proceed with getting a lawyer or a mediator before the conversation. None of what I describe here is legal advice, but only advice I can give based on my own personal experience.

Evening out the inequalities, Separating the assets
Moving out One Year Later
Living Apart, Living Large
Reclaiming Life, Restarting Goals
Dating with Data, Digging for Gold
Comparative Compromise, Coping with Change

Blogging Wealthtrack - BOTSFORD: RETIREMENT INCOME FOCUS September 25, 2015

2015-10-04T08:07:00.000-07:00

Wealthtrack remains one of the most fascinating and enjoyable shows out there for financial topics. Consuelo Mack continues to host this show with a variety of guests ranging from the practical experts on retirement like Erin Botsford and Mary Beth Franklin to more bookish and technical guests like Donald Yacktman and Cliff Asness who have 'been there, done that' with respect to investing large sums of money for their clients.

This week was interesting because for one of the few times I've seen on the show Consuelo took a personal turn with her guest, Erin Botsford. She described a scenario when Erin was young where she was involved in an accident and was subsequently involved in a lawsuit as a result of a death in the accident. Being very young at the time, this sounded like a terribly challenging event for Erin (it was made clear that she was not at fault during the episode).

This tragic story turned to news you can use: get umbrella insurance for your house and your car(s). In the case of Erin, the insurance amount recommended is 2 million OVER your total net worth. What is interesting from my perspective is that Erin views this kind of insurance as your primary protection in the event of this horrible kind of tragedy so that if you are involved in this kind of an event, you don't lose all of your money.

The wrap up advice was equally interesting -- to focus on guaranteed income for your long term, known needs in retirement, things like good annuity products instead of volatile stock investments etc.

Both of these turned out to be interesting pieces of advice and I know I have some homework now to start investigating into Umbrella insurance and also for options that might work as a plan for a guaranteed retirement income.

Evening out the inequalities, Separating the assets

2015-08-09T06:20:00.000-07:00

This is the third post in a series of posts about divorce, covering a variety of topics and including a series of advice which in hindsight seems obvious, but before going through the process, seems very essential.

In deciding what the best way to even the equalities out, I found that I needed to decide first where my feelings were about the other person. In my case, the soon-to-be ex still held a place in my heart, something which has undoubtedly diminished over time. But at the moment in time when the decisions of divorce are taking place it is impossible to know the future. So, I would strongly recommend that you consider your feelings toward this other person and other people affected.

Separately, you should examine any morals or principles that you have to honor when you are going through the process. For me, I shared everything, I literally wanted to give my whole life to someone else. And that was something that I cannot even begin to explain in words, so this moral idea seemed no big shock to me; because it was an additional layer of treating others the way I want to be treated. I always knew that I needed to treat others better than I was being treated; this was how I thought about the world.

Once you have a grasp of your morals, principles, and feelings, you can really begin to go through the process of evaluating assets. For me this was quite simple: all assets are either owned already OR are some future income stream (like income expected from working). In court, frequently people talk about spousal support/alimony/etc and I find that this is something that is painful and difficult. I didn't want to be involved in anything that left a tether between me and my ex. For you to move on emotionally, separation and space are important catalysts along with time for emotions and issues to be ironed out.

In my case, I divided the assets we had by value and understood what was the most valuable for each of us. Considering the likely lifestyle going forward, it became easy to manage the process around dividing the existing assets. Some people have large amounts of equity in real estate. These kinds of situations are very difficult because they often require the sale of the real estate to free up the capital. In my case I was able to offset retirement account balances against real estate to be able to proceed forward with minimal effort.

In terms of ongoing payments against future income, like Alimony or Spousal support, I would strongly recommend that the money be paid in full up front rather than over time. The biggest factor in this kind of decision is ability to pay, but in the case of up front payments, this avoids creating a debt into the future which is an additional burden to carry from the divorce which is unadvisable in my opinion.

The biggest aspect of the divorce from the legal standpoint is the division of property, but for survival, it can often be emotional health and well-being. To maintain emotional health, it is important to make the asset separtion efficient. Going back and reviewing this multiple times is not usually helpful; a simple spreadsheet will do. And avoiding ongoing payments of any kind is a good option in my experience.