Things Poor People Will Never Understand

Earlier this month, I saw an interesting headline reading "11 Things Poor People Will Never Understand About The World" that I expected to be a fascinating read, expecting it to twist the known habits that financially grounded individuals make that we have read thousands of times. Unfortunately, the majority of that article focused on the secret world of the rich, e.g. concierge services, renting celebrities, opting in or out of Forbes' wealthiest lists, without touching much (if at all) on where the financially illiterate population fail.

It inspired me to think of a few examples on my own that would more accurately live up to the headline.

*Know Thyself*

It is a cliché, but I watched a video from How Money Works on YouTube that concluded with a message about the importance of understanding your capabilities, your capacity and your limitations when it comes to professional and personal success. This aspect of "know thyself" is often ignored, especially in a social media world of generalized information perpetuating hustle culture and the power of positive thinking. It recaptured my common saying that "personal finance is personal." Yes, there are common grounds and a couple truisms (such as the more money you save and/or the more money you make equals the more money you will have).

For all the good that the power of positivity has brought certain people, there are cautionary tales severed from the mantra where people took on too much or set out to do the truly impossible. No amount of confidence will allow humans to fly. Likewise, all the logistics pointing to epic failures like Fyrefest, WeWork, Theranos or (most recently) OceanGate are insurmountable for that whole "fake it 'til you make it" ideology.

Individually, when an unprepared or incapable person seeks a life of wealth as the driver and enters a school of medicine to be a surgeon, that person is more likely to fall far short of their plan and end up deeply indebted in school loans. Comparatively, an average student who kept pace with the median income throughout a career and followed the recommended 15% savings into a basic index fund could end up in a better place, simply because they understood their own limitations without having to learn it through expensive lessons.

*Life is NOT Short*

This one harkens back to the 1999 film Magnolia where the wealthy but dying Earl Partridge (played by Jason Robards) lamented these words to his estranged son, Frank T.J. Mackey (portrayed by Tom Cruise). Time is a neutralizing currency, where everyone is entitled to the same 24 hours a day, irrespective of their wealth (or lack thereof), their age, or their individual traits. 

My generation was hounded with "Life is short" so heavily that I feel many received the wrong message. If life were short, then it would be much easier to endure discomfort when the promise of resting in peace is right around the corner. But "life is short" is too simple to be a truism. There are some people living every day as if it were their last who become exhausted and defeated. It would be like training for a marathon by learning to sprint. Life is not as short as this overused cliché may have promised some people, and those people need to prepare properly for life as a marathon.

*Sacrificing > Suffering*

Piggybacking off the prior message, not all discomfort is endured the same. There is a big difference between sacrificing and suffering. To borrow from Dave Ramsey, "Adults devise a plan and follow it; children do what feels good." That planning can be the difference between making sacrifices to build a better life and suffering through life's challenges. The quintessential book on this topic for many could be the 2002 classic "A Purpose-Driven Life" by Rick Warren.

This message was taught to most children in my generation through ants and a grasshopper. Ants spent their sunny days stockpiling necessities for a rainy day whereas the grasshopper capre diemed the day, spending the time doing what felt good. When the seasons changed, the sacrifices that the ants had made bypassed the suffering that the grasshopper endured. 

*Status Quo is NOT Static*

Personally, this one has driven me crazy when I hear my financially instable friends make plans that only resolves their current struggles. One of my favorite 1995 films was The Last Supper where the antagonist (at least, an antagonist to the main characters, but they were not the stereotypical protagonists) empathized with the struggles of the main characters by simply relating, "Life gets harder every day." I do not know where this message was lost on others, but so many people fail to realize the reality of emergencies or that struggles are inevitable. That whole "Why Do Bad Things Happen to Good People?" query is another thing that drives me crazy personally. As humans being, how is anyone too good for bad things? 

Alas, I love to say "Life only gets easier when you try harder." For the uninitiated, they might misunderstand that advise as personal slander. Like a guilty man disputing his weapon of choice in court. It is not to say that those without an easy life have not tried hard nor that life improves with a little more effort. My words were construed to be understood that life will only get easier when you constantly put forth more effort than life is hard.

*All Plans Require Maintenance*

Admittedly, this one could have been tied into the non-static status quo above, but I felt the reality that all plans requiring maintenance is an overlooked lesson worthy of a separate entry. This message could be a chorus at every business school. Business schools teach students a large array of metrics to monitor the evolution of plans and how to keep them from falling off the rails, even if it requires redirecting the plans to "stake where the puck will be." Those lessons also apply to life with very little modification.

While the whole Dave Ramsey mantra of adults making plans is undoubtedly true, the unspoken understanding about plans is that they rarely pan out as initially envisioned. Plans consistently require modifications, renewed strategies and other testing. Just as the status quo will always change, planning to restore the status quo is only a temporary fix. Eventually (and probably sooner than later), the status quo will be disrupted again. By planning to maintain status quo, you are limiting your room for growth. Financial success is grounded in growth. Just as we invest our excess savings to grow, we as people must find time for plans to grow professionally and personally, lest time passes us by.

*Waiting to Next Year Is an Insurmountable Financial Mistake*

I used to work in the call centers of a financial service provider overseeing employee retirement plans. A big part of our job was to explain these accounts to the participants, so they taught us exactly what to do with these accounts. Even still, an embarrassing number of employees did not invest in the company's employee retirement plan (myself included for many months). Despite this, I managed to explain to active participants how to invest. I had one memorable caller who asked me a common question, "when is the best time to invest." I am still proud of myself with my response, "Now. The best time to invest is always now. No one will ever know the ideal time to start investing, so it is more important to just start now so that you are already investing when the ideal time to invest occurs." 

When I teach Junior Achievement to high school seniors, one of the ideas in relation to investing that I reiterate is "if you wait until next year to start investing, you will never be as rich as you would be if you started today." This notion is the basis of compounding, which I describe as "the one exception to the rule that if it seems to good to be true, it is."

*Ignore your wealth*

I was thinking about this idea very recently. One of the secrets to my personal success was not a strategic forethought, but I only discovered its benefits as an afterthought. I surrounded myself with "starving artist" types, and the amount of money it saved me is incalculable. As life advice, this message would fail. No one should select their social circle by hanging out with poor people intentionality. In my case, I was drawn to the artist-type and lifestyle. Hanging out with local musicians and working with a local wrestling troupe were how I spent my late-20s and 30s. It was what I wanted to do and where I wanted to be. That said, the fact that my friends could not afford extravagant outings became a huge financial benefit for me. Ironically, most of the time I would spend the least at dinner, even though I unquestionably had the highest means within the group. In essence, we think of the "starving artist" as one who do not earn enough to afford big meals, but really, spending more than enough to keep you nourished is a spending choice, not a matter of income.

The message that could be useful advice here is to separate your wealth from your active accounts. I remember reading an article online from CNN or Newsweek after the Enron collapse of firsthand accounts of people who lost everything in its wake. The couple whose mistakes were apparent to all but them were the pair who said, "We did everything right. We only invested what we could afford to lose, and we made sure it was in a separate account." Whew, good for them! "But once we had accumulated a large sum, we started living a lifestyle that reflected it." To quote Charlie Brown, "AUGH!!" The ideas of only investing what you can afford to lose and living a lifestyle that reflect your wealth are mutually exclusive; you cannot have it both ways! 

The idea of "stealth wealth" has permeated the personal finance landscape so well that it now has that alliterate rhythmic reference. It is the notion that the most efficient way to have your money work hard for you is to leave that money alone to continue working. Micromanagers have a bad wrap in the workplace. Apply those criticisms to how you manage your finance. Hire the most efficient employees and just get out of their way. Invest in great investment vehicles, and just let them take you where you planned to go.

The Full Motley - 3Q, 2023

We are halfway through the third quarter of 2023, so it was time for another quarterly rebalance of my old 401(k) account. There has been a distinctly recurring trend of moving less than 1% of this account balance each time. Therefore, I was somewhat surprised to see more than 2% of my account balance was moving during this quarterly rebalance. Predictably, it was moving money from both of my equity funds (index and active) into the other three funds. Less predictably though, the active Domestic Equity fund had risen more than the Domestic Equity Index fund. More than half of the amount moving went into my International Equity Index fund, with about 40% of the amount moving going to my Domestic Bond Index fund, and about 10% of the remainder went into my International Bond Index fund.

As indictive of this transaction, the past quarter has been very good for domestic equities. Unfortunately, the drivers have been limited to a few of the same (notorious at this point) blue chip tech stocks, such as AAPL and NVDA. As an analyst, one problem I have found in rebalancing as frequently as every quarter is that it resets the playing field each quarter, so if a strong run were continuing, it can minimize the tailwind or shorten the runway. On the other hand, if the forthcoming quarter saw a reversal (in keeping with the "buy again on Labor day" limerick), then this exchange would remove money from the strong assets before they hit a headwind.

As an investor, I am agnostic toward these analyses. The most important thing is that I funded the account when I had the opportunity, and with a gentle maintenance, I have fostered its substantial growth over the past decade and I still have more than a decade left to continue fostering more growth.

The Full Motley -- 2Q, 2023

I passed through another quarterly rebalance, and although I submitted the rebalance, I failed to post a blog entry about it. No matter, it was as uneventful as most of the others have been lately (although, I was surprised to see the slant toward International Equity this quarter).

Instead of another rebalance discussion though, I wanted to share this brief article I saw today that I felt reworded tired principles in a new wisdom.

Money Expert Jaspreet Singh Says ‘Becoming Wealthy Is Surprisingly Simple’ — Here’s Why

by Cameron Diiorio

What’s the one piece of money advice you wish everyone would follow and why?

The one piece of money advice I wish everyone would follow is: make yourself rich before you make everyone else around you rich. When you go out and wear Lululemon pants with your Gucci belt and Apple AirPods — you look rich, but the people who are actually getting rich are Lululemon, Gucci, and Apple (not to mention their shareholders, too). The person who isn’t getting rich is you. I want you to flip it around. Make yourself rich first by using your money to buy investments. Then, go out and buy all the Lululemon, Gucci, and Apple you want when you can afford it.

What’s the most important thing to do to build wealth?

Becoming wealthy is surprisingly simple. That doesn’t mean it is easy, it’s actually really tough, but there are only three steps. First, you have to spend less than what you make. Second, you have to work to earn more money. And third, you have to invest the money you don’t spend. Starting with step one, if you spend all of your money, you will never have a chance to become wealthy. This is where most Americans fail. Most Americans work to buy nice things like fast cars, nice vacations, and luxury clothes. But if you spend all your money, you will never become wealthy. Then, you have to work to earn more money. Regardless of how cheap you are, there will always be a limit to how many expenses you can cut. But there’s no limit to how much money you can earn. That means you have more upside by learning how to make more money. YouTube has made this financial education much more accessible, and it’s free! Finally, you have to invest the money. Just like how you can’t get rich by spending all your money. You also won’t become wealthy by saving all your money. You have to invest your money if you want to become wealthy. Where do you invest? Stocks, rental properties, businesses, and your own education. While this can sound very daunting, the good news is you can start investing with less than $100. You just have to get started!

What’s your best tip for fighting the impacts of inflation?

High inflation disproportionately benefits asset owners and it hurts consumers. In other words, inflation makes investors richer and it makes regular people poorer. So, what can you do? Own investments. Diversification doesn’t hurt either. For example, 2% of my investment portfolio is physical gold. When you have high inflation, the value of the dollar falls, causing the price of gold to go up. But, of course, always do your own due diligence before you make an investment and consult a licensed financial advisor.

What’s the biggest mistake people make when it comes to money, and what should they do instead?

The biggest money mistake people make is not doing anything. Time is our most valuable asset [and] wealth takes time to build. If you don’t start, you will never see any of the success — while your time gets sucked away. Get started. Experience is the best teacher and you can’t get experience until you start.

The Full Motley -- 1Q, 2023

 Putting the past behind us can lead to a bright future. More importantly though is learning a lesson from the past to add to the proverbial toolbox to bring into the future. These live-and-learn lessons apply to finance as much as any other regard of life.

We are midway through the first quarter of 2023, where all experts expect a bounce back from the ~20% of 2022. By all accounts, that is how things have gone for the first six weeks of the new year. Ideally, this will continue (probably not in a straight line, although even the recent past year has been anything BUT a straight line).

As usual, some sectors will recover more quickly than others. Hence the benefit of rebalancing. I submitted my quarterly rebalance for Friday, I moved just less than 1% of the overall account balance, and it all came from a single fund: Total International Stock Index Fund. Based on this information alone, we know that the international equity sector has outperformed domestic equities, domestic bonds and international bonds significantly over the past three months. 

Unfortunately, this information means very little for the future. Next quarter, I might find myself moving money back into the international equity fund, or more could come out of it. The important thing is that it is relatively overvalued compared to my other sectors, so "buy low; sell high" logic supports the idea of selling some from the top to bring into the lagging sectors. This strategy works best when broadly invested across a few sectors and/or index funds because any of these four sectors are equally likely to out- or underperform in a given quarter.

The Full Motley -- 4Q, 2022

Oh my, where did the time go? I guess there are two ways to answer that question. Having missed the third quarter update, even though I submitted a quarterly rebalancing transaction as usual, I wondered whether I was too busy or too disheartened to scribe a blog entry at that time.

Truly, there is no time like now! 

On the one hand, even though the market is cyclical and bear markets are inevitable, each is brought upon through a unique set of circumstances. Not one bear market has started because an alarm rang out and signaled for everyone to start selling (although, a solid counter-argument could be made for that being the start of the Dotcom crash with that alarm being Y2K not ending the world, as so many cynics insisted was possible). Whatever balance of circumstances that sent the markets down, weighted heavily by the Fintech sector and cryptocurrency market, which appropriately are taking the brunt of this bear market, it was due time given the strength of the bull market(s) from 2009 through the end of last year.

On the other hand, there is no time like now because this bear market has been long enough and strong enough to signal the last-chance to buy at these prices. Whether this opportunity extends another year or two, when bear markets surrender, the resulting whiplash propels markets to new heights without looking back to the prior bear market. This year, the 52-week low of the Dow Jones is 28,660. In February 2009, it was 6500. If you had purchased shares of an index fund in February 2009, they would be valued 4-1/3 times higher at the worst point of this year.

Truly, there is no time like now. Is that a blessing or a curse? It all depends on how you look at it (and what you do with it).

As for my rebalance, I found it surprising that my best-performing fund in the past three months (which included the trough of September) was by far the actively-managed equity fund! Active fund managers swear that superior returns are found in actively managed funds (go figure!) but I have rarely found that to be true. But I will give credit when credit is due and note that this past quarter was a great example of times where actively managed funds can significantly outperform passively managed funds.

Bad Habits That Prevent Saving

Six bad financial habits that are keeping you from saving money

https://www.msn.com/en-us/money/personalfinance/6-bad-financial-habits-that-are-keeping-you-from-saving-money/ss-BB1fwp1Q

by Deb Hipp

1.You don’t have a plan

If your strategy for building emergency savings is “Whenever I have extra money, I’ll deposit it in my savings account,” it is no wonder that your emergency savings has never exceeded a few hundred bucks. Plenty of people do not have enough money to pay monthly bills right now, let alone extra funds they do not know what to do with.

If you want to build emergency savings, it is time to make a plan to regularly deposit money in savings each month. Set an achievable savings goal – $1,000, for example – as the initial amount you would like to reach. Do not make your initial savings goal so ambitious you get frustrated along the way. You can always adjust once you meet your first goal.

2. You have no budget

Without a clear idea of where your money is going, you will not get far when it comes to designating a monthly amount for emergency savings. Creating a budget may seem intimidating, but you will be pleasantly surprised at how easy – and even fun – creating a monthly budget can be with all the online tools out there.

For example, you may want to use one of the many budgeting apps available to create a budget and track where your money goes. For example, Mint is a free budgeting app that also links to your bank and credit card accounts to track spending.

3. You are not taking advantage of automatic payroll deductions

Just think how painless it would be to deposit money into an emergency savings if you did not have to do it yourself. Chances are, you would barely miss $50, $100 (or even more if you can afford it) from each paycheck.

If you have not signed up with your employer for automatic withdrawals into your savings account, do it now. You will reach your savings goal much faster.

4. Dining out too much

We all enjoy the convenience of takeout or a night at a restaurant but if you dine out several times a week, you are probably blowing through anywhere between $400 to $1,000 a month, depending on how fancy or frequent you like your dining experience.

Try going on a dining-out fast for a month while cooking at home and deposit the money you would have spent going out to eat in emergency savings instead. At the end of the month, you may be so impressed with how much you saved that cutting back on dining out becomes a regular habit.

5. Paying fees

You may not pay attention to all those ATM fees, cash advance fees and maybe occasional credit card late fees, but they add up fast. If you need to withdraw cash, visit the ATM at your bank to avoid a fee. As for cash advances, it is a good idea to avoid those altogether, since those transactions carry an array of fees and higher interest rates than regular credit card purchases.

6. Hanging out with big spenders

If you are running around with people who love to charge meals at expensive restaurants, get cash advances from ATMs and bounce from club to club every night, you are going to spend a fortune right along with them.

No one is saying you have to ditch your good-time friends. But while trying to save money, it is a good idea to cut back on the time you spend on entertainment and dining out and sock that money away in emergency savings instead.

One more, from me: You spend too much time “escaping” from life

Most people have therapeutic escapes, which most often show themselves as our hobbies. Many hobbies are rather expensive, but even those that lack up-front costs rear their ugly head in the form of lost time. If you spend 2-3 hours a day or more on a hobby, whether it is sports, gaming, shopping, social media, etc., do not be surprised when you do not advance beyond your status quo. These lost hours add up into lost opportunities and lost money. The solution is the same as others on the list: make a plan, budget your time. Every 15 minutes is 1% of our day, so plan thoughtfully.

The Full Motley -- 2Q, 2022

You put $1,000 into an index fund, but ... what does that even mean? 

Conventional wisdom says that you should never invest in something you do not understand. The problem is that advice leaves most people with nowhere to start. I prefer to start now, then "learn by doing" to understand my investment. With that advice in mind, let us take a deeper look into investing in an S&P 500 index fund.

In this case, we put $1,000 into an index fund at the start of the year. Today, we only have $900. Did we make the wrong choice? Did we pick the wrong fund? Did we invest at the wrong time? Or, is this all a scam? 

First, it is important to understand what happened to our money. We put $1,000 into an index fund. At that point, the index fund was valued at $50 per share. This $50 is its "net asset value" (NAV), which technically means the weighted value of all the stocks in the mutual fund on that day's closing, but effectively, it is the price per share of the mutual fund. Therefore, when we put in $1,000, we bought 20 shares of the index fund (i.e., $1,000 / $50 per share = 20 shares). 

In this example, the index is down 10% so far this year. Accordingly, the NAV of the index fund falls to $45. Now, the value of our 20 shares is only $900. Overall, our investment is down $100, because the index is down 10%. The index closes anew every weekday (excluding holidays) and the NAV is calculated every day after the index closes. 

Because the S&P 500 index will replace failing companies with more promising companies over time, the index is setting itself up for better success in the long run. Accordingly, the NAV of our index fund will rise over time. Periodically, our index fund will also distribute dividiends and capital gains (always be sure to have those reinvested in your fund!) so if the fund paid a dividend of $2.25 per share, then we would gain another share (i.e., $2.25 x 20 = $45 = NAV of index fund). 

Let us jump a bit ahead: the economy suddenly has had a strong turnaround, pushing the index (and our index fund's NAV) much higher. Our index fund's NAV is now $60, and we have 21 shares (20 from our $1000, plus 1 share from reinvested dividends). Without our doing anything else after opening & funding the account with $1,000, our investment is now worth $1,260. Over time, these $260 gains can double, triple, or increase tenfold. Obviously, it varies based on the number of shares you own. 

Now, have you ever heard someone say “I lost all my money in the stock market,” so ... what does that even mean? 

In short, it can mean a few things – but it would not mean they put $1,000 into an S&P 500 index fund and lost all of it. If the person is not simply embellishing, then they might mean that they lost all of their gains above their initial investment as the stock market dropped. That can happen. It most likely will happen when you start investing. It happened to me between starting in 2003 and the “Great Recession” in 2008-09. Thankfully, I spent 2006-07 with regret for not putting more money into the market in 2003, so when the Great Recession happened, I saw it as buying shares at yesteryear’s prices today. That is a rare opportunity, and as such, it is long gone now. But today, the market is falling from its 2021 peaks, and it couple drop below what it was through most of 2020. The market’s initial reaction to the global pandemic in mid-March 2020 was a major depression (somewhat different than the type of major depression many people experienced at that same time) so I doubt that the current trends will match the lows of 2020. 

Regardless, this decline in the market is an ideal time to begin investing. Putting $1,000 in right now will buy more shares than $1,000 would have bought at the end of last year. As the NAV increases and the fund reinvests its dividends, the value of the investment will increase exponentially.

Signs You're Living Beyond Your Means

15 Alarming Signs That You're Living Beyond Your Means
https://www.msn.com/en-us/money/personalfinance/15-alarming-signs-that-you-re-living-beyond-your-means/ss-AAVR2f1

by Larissa Runkle

Believing that the gambler’s fallacy is not a fallacy

Living above your means is a classic money mistake that is all too easy to fall into. Whether you are spending more than your budget allows, or you are not setting enough aside to pay for the essential bills, it is hard to see exactly where the problem began once you finally notice it.

These harmful money habits tend to sneak up, which is why we have created this list of 15 signs you are living above your means — complete with our best advice for getting back on track and protecting your finances. Worried you might be setting yourself up for some bad financial surprises? Keep reading to find out.

You are only making minimum payments on credit cards

One sure sign you are living above your means is only being able to afford to make minimum payments on your credit cards. Racking up credit card debt is never a good thing, but especially if you are doing it at a rate that makes catching up impossible. Although the occasional big purchase on your credit cards is fine, if you find yourself constantly buying things that take months to pay off, it is probably a good idea to slow down and reel in your budget.

You are using your credit card to pay for vacation

Speaking of using your credit card to pay for impossibly large purchases, using it to cover your vacation costs without paying it off is another sure sign you are living above your means. Because most vacations will cost far above any paycheck, paying for them using a credit card is a dangerous gamble that could cost you dearly in interest payments.

Instead, consider setting aside a small amount of money in a savings account each month. The best savings accounts offer a higher-than-average annual percentage yield, which can help you earn a little extra in interest. By making regular small deposits, you will be able to watch your travel fund grow into something that can easily finance your next dream destination.

Your savings account is not growing

Another sure sign you might be overspending is when your savings starts to stagnate. Making regular deposits into your various savings accounts is important, not only for the peace of mind it brings, but also in the event that you need to tap into your savings to cover an unexpected cost. Instead of constantly shopping for all your latest wishlist items, consider redirecting some of that spending to make sure you’re saving up enough to be financially secure.

You have stopped your retirement contributions

Unfortunately, it is all too common to start neglecting your retirement funds whenever money is tight. But unless you plan on working the rest of your life, planning for retirement should be at the top of your list when it comes to how you allocate your income. One thing that can be helpful for getting back on track is coming up with a budget. Budgeting does not mean depriving yourself of everything, but rather finding a smarter way of spending that still allows for reaching your financial goals.

You are living paycheck to paycheck

Nobody likes living paycheck to paycheck, and yet we have all been there at least once. Barely scraping by on your expenses between paychecks is a sure sign you are living above your means, and that you should consider revising where your money is going and how quickly. Skip the drama of not knowing whether you will be able to pay for your essentials by trying out a simple envelope budgeting method — a classic style of budgeting that ensures your most important expenses get paid for first.

Your money is gone, but you do not know where

Another stressful money situation to be in (and a clear sign of overspending) is when your checking account seems to continuously turn up lower than you expected — as in, the money has been spent but you do not know how. One way to get around this is by using a budgeting app such as Clarity or Truebill. This app will not only help you keep track of where your money goes, but also offer helpful tips for cutting expenses and saving more toward the things that matter.

Your debt balance remains the same

As with your various savings accounts, when your debt balances stay the same for too long, it is a sure sign you are living above your means. Because unpaid debts are likely costing you in accumulated interest, delaying your payments is never a good idea. Rather than avoiding your debts, try to put a cap on how much debt you are accumulating, then make a plan to start paying them back little by little each month. There are different approaches you can take to get out of debt, including the debt avalanche and debt snowball methods.

Making your monthly payments is a struggle

Bills, loans, mortgages — all of these things demand monthly payments, and if you have recently started falling behind, it could be time to rethink how your income is being spent. One solution is the Mvelopes app. Much like the envelope budgeting method mentioned above, this system of saving has you put aside enough money to cover your major expenses immediately after getting paid — that way, you never have to worry about being able to afford your monthly bills again.

You are seriously considering a high-interest loan

High-interest loans like payday loans are a risky financial move for anyone, but especially if you are already struggling to make ends meet. Rather than jumping right in and signing on the first loan you are offered, take a minute to consider your options. Ask yourself why you need to take out a loan in the first place, and if there is an alternative to the funds you need. For instance, choosing one of the best side hustles could be a good option if you have room in your schedule. Revisiting your budget will also likely be important if you find yourself in this position.

You are buying things you cannot afford to pay for upfront

Much like maxing out your credit card balance every month, buying things you cannot afford to pay for is bad news when it comes to the health of your finances. For some, buying things out of budget might be a necessity. If that is the case, try and find a way to regularly set aside some of your income to pay for those things. If it is just a matter of splurging on expensive wishlist items, just remember: there is no way anything you buy will make you as happy as a well-earned sense of financial security.

You justify unnecessary spending

Another story so many of us tell ourselves is that we really need this new phone or that new thing for the house or a nice new dress to be happy — when, in fact, we really do not. Retail therapy (and the addictive spending behavior that comes with it) is a real problem, and it all starts with justifying unnecessary spending. Rather than continuing to come up with reasons to buy things, try and switch your mindset to start a savings habit. For this, it helps to come up with some clear financial goals and have a way to regularly track your progress. When you do so, you can change the question from “why do I need this?” to “would I rather have this or that important thing I am saving up for?”

You are avoiding your bills

Although they might seem like they are hiding in that big pile of mail, the fact is that your bills are not going anywhere, and avoiding them will only make things worse. Instead of pretending they do not exist, come up with a plan to conquer your bills. This might include things like renegotiating the monthly cost of your bills, or even coming up with a simple solution for lowering those bills. Whatever it is, start taking baby steps toward paying them off — we promise, the peace of mind will be worth the expense.

You are receiving collection calls

When things go unpaid, the collection agencies start calling. This is a sure sign not only that you are living above your means, but also that you may need to rethink how to manage your money. The first step here is to figure out what the collection agencies are calling about, and if you can afford to pay it back straight away. If not, you may need to negotiate something called a collection agency payment plan. Either way, do not waste any time ignoring these calls, especially because the damage of unpaid debts could far outweigh the cost of repaying them.

Your credit score has taken a hit

After several months of taking on debt or neglecting to pay your bills on time, you can expect to see your credit score to take a pretty big hit. Again, do not underestimate the power of a good credit score, as this number often determines your buying or borrowing power when it comes to things like big purchases (a home or car), loans, and even new credit cards. Take the time to find out why your credit score has dropped, then take the necessary steps to fix it. This could be as simple as getting a handle on your budget and ensuring you make your monthly payments on time, or as complicated as working with a credit repair company. The right option for you will depend on your financial situation.

You are losing sleep over money

Whether it is the stress of unpaid bills or just living paycheck to paycheck, your financial health will often affect your physical well-being as well. Although we often take the time to address our personal self-care, we easily forget about the importance of financial self-care. Fortunately, you have the power to change that. Take a hard look at your finances so you can pinpoint where the problems are. Then get on a path to fixing them, and make a promise to yourself to practice better financial self-care.

The bottom line

Living beyond your means is an all too common problem, and whenever you find yourself in this situation, it is important to do the work to fix it. Although a few weeks or months might pass without issue, overspending will always catch up in the form of neglected savings accounts and unpaid debts. Do not let yourself become a victim of overspending. Instead, work on setting a budget you can reliably stick to — one that allows for paying your bills, working toward your financial goals, and still splurging every once in a while on the fun stuff.

BOOK REVIEW: "The Secrets of a Millionaire Mind" (2005)

For a long time, I have been planning to read financial books and share my favorite takeaways, like I had a couple months ago for "Everyday Millionaires." Unfortunately, a plan without action is just a want, so I was determined to make it move beyond a want. In order for more books to review, I visited Goodwill last December and purchased two books. The well-known "Rich Dad; Poor Dad" (Robert Kiyosaki) and the relative unknown "The Secret's to a Millionaire Mind" by the relatively unknown T. Harv Eker.

There are lots of deterrents to this book, primarily its resemblance to a high-pressure sales pitch for upsells, but at face value and just beyond, there was a wealth of knowledge beyond the standard "Think & Grow Rich" fare. It focused more on why we think the way we do than why we do what we do, and truly that distinction is a critical difference in all-around wealth than appreciated. It is one reason why so many lottery winners can win big but still outspend their gains.

The first part of the book introduces a "Wealth Principle" (or "Money Blueprint") formula that reads as "T --> F --> A = R" and it means "Thoughts lead to feelings; Feelings lead to actions; Actions equal Results." Ultimately, we do what we feel more than what we think.

This lesson is not only reinforced by repetition, but also by actions. Readers must accept it to get anything out of the book. So much of the book was written to drive cynics insane, intentionally or not. If you let your thoughts stop you from getting anything out of the book, it is to your own detriment in the long run.

I had mixed feelings throughout, especially the pro-MLM rhetoric, but I found the book to be an excellent thought experiment (plus, the target audience is for entrepreneurs, many of whom have the potential to become billionaires, which is not me).

Here are 39 of his Wealth Principles discussed in the book:

1. "When the subconscious mind must choose between deeply rooted emotions and logic, emotions will almost always win" (p. 22)

2. "If your motivation for acquiring money or success comes from a non-supportive root such as fear, rage or the need to 'prove' yourself, your money will never bring you happiness." (p. 31)

3. "The only way to permanently change the temperature in the room is to reset the thermostat. In the same way, the only way to change your level of financial success 'permanently' is to reset your financial thermostat." (p. 44)

4. "Consciousness is observing your thoughts and actions so that you can live from true choice in the present moment rather than being run by programming from the past." (p. 45)

5. "You can choose to think in ways that will support you in your happiness and success, instead of ways that don't." (p. 51)

6. "Money is extremely important in the areas in which it works, and extremely unimportant in the areas in which it does not." (p. 57)

7. "When you are complaining, you become a living, breathing 'crap magnet'." (pg.58)

8. "There is no such thing as a really rich victim!" (pg. 60)

9. "If your goal is t o be comfortable, chances are you will never get rich. But if your goal is to be rich, chances are you'll end up mighty comfortable." (p. 64)

10. "The number one reason most people don't get what they want is that they do not now wat they want." (p. 68)

11. "If you are not fully, totally, and truly committed to creating wealth, chances are you won't." (pg. 70)

12. "The Law of Income: You will be paid in direct proportion to the value you deliver according to the marketplace." (pg. 73)

13. "Bless that which you want." (Huna philosophy) (pg. 94)

14. "Leaders earn a heck of a lot more money than followers!" (pg. 104)

15. "The secret to success is not to try to avoid or get rid of or shrink from your problems; the secret is to grow yourself so that you are bigger than any problem." (pg. 107)

16. "If you have a big problem in your life, all that means is that you are being a small person!" (pg. 108)

17. "If you say you are worth, you are. If you say you are not worthy, you are not. Either way you will live into your story." (pg. 113)

18. "If a hundred-foot oak tree had the mind of a human, it would only grow to be 10-feet tall!" (pg. 114)

19. "For every giver, there must be a receiver, and for every receiver, there must be a giver." (pg. 116)

20. "Money will only make you more of what you already are." (pg. 119)

21. "How you do anything is how you do everything." (pg. 121)

22. "There is nothing wrong with getting a steady paycheck, unless it interferes with your ability to earn what you are worth. There's the rub, it usually does." (pg. 123)

23. "Never place a ceiling on your income." (pg. 125)

24. "Rich people believe 'you can have your cake and eat it too.' Middle-class people believe 'cake is too rich, so I'll only have a little piece.' Poor people don't believe they deserve cake, so they order a doughnut, focus on the hole and wonder why they have 'nothing'." (pg. 134)

25. "The true measure of wealth is net worth, not working income." (pg. 138)

26. "Where attention goes, energy flows and results show." (pg. 143)

27. "Until you show you can handle what you've got, you won't get any more!" (pg. 147)

28. "The habit of managing your money is more important than the amount." (pg. 147)

29. "Either you control money, or it will control you." (pg. 153)

30. "Rich people see every dollar as a seed that can be planted and earn a hundred more dollars, which can then be replanted to earn a thousand more dollars." (pg. 165)

31. "Action is the 'bridge' between the inner world and the outer world." (pg. 167)

32. "A true warrior can tame the cobra of fear." (pg. 167)

33. "It is not necessary to try and get rid of fear in order to succeed." (pg. 168)

34. "If you are only willing to do what is easy, life will be hard. But when you are willing to do what is hard, life will be easy." (pg. 169)

35. "The only time you are actually growing is when you are uncomfortable." (pg. 171)

36. "Training and managing your own mind is the most important skill you could ever own, in terms of happiness and success." (pg. 174)

37. "You can be right or you can be rich, but you cannot be both." (pg. 180)

38. "Every master was once a disaster." (pg. 182)

39. "To get paid the best, you must be the best." (pg. 185)

Thankfully, the book is not just soundbites, even if his writing (and speaking) often comes off that way. There were far more perils of wisdom splattered throughout the book, and I share a few of those below (but, admittedly, if I re-read his book, then I would likely have a significantly different set of takeaways):

"Wanting alone is useless. Have you noticed that wanting doesn't necessarily lead to having? Notice also that wanting without having leads to more wanting. Wanting becomes habitual and leads only to itself, creating a perfect circle that goes exactly nowhere." (pg. 65)

"Research shows that the happiest people are those who use their natural talents to the utmost. Part of your mission in life then must be to share your gifts and value with as many people as possible. That means being willing to play big." (pg. 75)

"Poor people expect to fail. They lack confidence in themselves and in their abilities. Poor people believe that should things not work out, it would be catastrophic. And because they constantly see obstacles, they are usually unwilling to take a risk. No risk, no reward (...) Although poor people claim to be preparing for an opportunity, what they're usually doing is stalling." (pg. 79)

"One of the reasons rich people are bigger than their problems (is) they don't focus on the problem; they focus on their goal (...) Either you are whining about the problem or you are working on the solution." (pg. 109) --> End goal: complaining?

"Don't wait to (invest), (invest) and then wait." (pg. 163)

"The more comfortable you 'have to be,' the fewer risks you will be willing to take, the fewer opportunities you will be willing to take, the fewer people you will meet, and the fewer new strategies you will learn." (pg. 171)

--> I note herein that the interesting caveat is that money is power, so quite often you will find that, once you have a lot of money, you can make yourself right -- but then, you might stop growing.

-"Becoming rich isn't as much about getting rich financially, as about whom you have to become, in character and mind, to get rich. I want to share a secret with you that few people know: the fastest way to get rich and stay rich is to work on developing yourself." (pg. 183)

-"The goal of creating wealth is not primarily to have a lot of money, the goal of creating wealth is to help you grow yourself into the best person you can possibly be." (pg. 184)

The Full Motley -- 1Q, 2022

For 13 years now, I have been sharing my thoughts on personal finance, growing accordingly. Rebalancing my old 401(k) quarterly has kept me actively. I have seen many trends come and go, relying most heavily on indexing to increase my wealth. And it has. At my next quarterly update, I will have been with my current employer for as long as I was with this previous employer. I look forward to sharing the differences between those accounts at that time.

For now, we have seen another early retreat in the first quarter of a year. These declines have not been rare in recent years. Has it become a trend? I would be wary to insist that is the case, largely because of how many times I have seen trends reverse as soon as they are identified, not to mention the disruption to conventional wisdoms. Regardless, the two biggest moves in my account this quarter saw me pull money from Total International Stock Index Fund and direct most of it into the Total Bond Market Index Fund. The other movement from the actively managed equity fund to the passively managed equity index fund and international bond index fund was significantly less than those major moves.

Thankfully, I was fully prepared to make moves in the market during this quarter having seen it happen enough times in the recent past. These moves will continue to pay dividends in the coming years. As an old saying (that I recently heard) goes, "do not wait to invest; invest and then wait."

Worst Financial Advice

There is an old saying, which is not applicable to finance, "The road to Hell is paved with good intentions." The adage warns that having good intentions will not automatically synch up with the execution or results. Accordingly, there several piece of financial advice that make me laugh because when applied incorrectly or timed poorly, these nuggets of advice are better left unheard.

1. "Buy low; sell high"

Not all advice is equal

At best, this phrase is a simple answer for “how do you make money in the market?” As advice, it is virtually useless since it gives no meaningful instruction. At worst, the end result is constantly selling your winners to buy perennial losers.

2. "Never invest in something you don't understand"

If you learn by doing (as everyone does), then this advice leaves you nowhere to begin. You cannot understand the market or investments without being in them, which leaves nowhere to start. Even the most successful investors in the world understand how little sense the movement of the stock markets make.

3. "Time is money"

Neither is a renewable nor unlimited resource. There are certainly situations by which “time is money” is a reasonably adequate adage, but it is neither universally true nor good advice. Out of context and in the wrong minds, this phrase creates more confusion than clarity.

4. "Hope is not a strategy"

This can be a snarky response to hearing someone say “Here’s hoping.” Except, hope comes after putting a strategy in place, so this phrase can turn a wannabe soothsayer from a smartass into a dumbass quickly when used abundantly.

5. "If you do what you love, you'll never work a day in your life"

There is a small but important difference between this phrase and "If you love what you do, you'll never work a day in your life." The latter can be great advice for the right people. But the former advice could ensure financial ruin. If you grow up following this advice with poor execution, then it might as well be a cautionary tale, "if you only do what you love, then you'll never work a day in your life," because you are unproductive, selfish &/or immature. As Dave Ramsey (a man who seemingly loves what he does) loves to say, “Adults devise a plan and follow it; children do what feels good.”

The Full Motley -- 4Q, 2021

Welcome to the final stretch of 2021, and the stock markets have been holding strong! In fact, we could break out pinstripe suits and flapper clothes since it almost feels like the start of a new Roaring '20s. Aside from a drop in late-September into early-October, the markets have continued to rise. The dollar amount moving from my Total Stock Market Index Fund into my Total International Stock Market Index Fund this quarter was less than the amount moved in the third quarter.

Any lessons that the market has taught us lately are nothing unique, and they probably could apply generally to life as well. The first one that came to mind compared market returns to happiness. It's funny how we (society) talk of happiness as a destination when it is really just an emotion, the same as our other emotions. It passes, it returns, and we cycle through them all repeatedly. In the market, we say "buy low; sell high," but there is no instruction for what comes next. Selling with nowhere to go is truly poor advice. It is a lot like whatever road to happiness, and learning that the road keeps going through happiness.

I was listening to talk radio this morning, and the broadcasters discussed bubbles. Heavily implying that the market is in another bubble (or is it that they are still saying it?), they said that bubbles emerge out of reasonable and rational thoughts, but they keep growing beyond the reasons and rationale. Many examples exist from AAA-rated mortgage bonds never defaulting (as described in The Big Short) to ESG investing today. The hosts stated how illogical it was that the value of Tesla, Inc. ($TSLA) has exceeded the energy sector combined, considering ZEVs' reliance upon energy.

Lessons from a Kick-Six

Scoring on an unlikely play
will not win the game 

On Sunday, September 26, 2021, Arizona Cardinals (2-0) attempted an ill-fated field goal, which resulted in a rare "Kick Six," where Jacksonville Jaguars (0-2) returned the kick from one endzone to the other. As a result, the game went from 10-10 to 16-10 at the half. 

Another result was that the halftime show aired the play no less than five times, questioning the decision repeatedly. Jaguars were gifted a great opportunity, and they capitalized on it fully. Instead of falling behind three points, they took a six-point lead into the locker room.

Then, there was another half of the game to play, and Arizona Cardinals had a stronger second half, winning 31-19. After all the advantages of that improbable touchdown gave them, Jaguars were only able to notch three more points, which was not nearly enough to win the game. The "Kick Six" still made highlight reels throughout the evening and it was shared across Twitter, but it was not a once-and-done solution to winning the game. In reality, any team expecting to win games with a "Kick Six" will not fare well throughout a full season.

Here is the loosely connected analogy to finance. That "Kick Six" touchdown reminded me of getting a big economic win, such as exposure to cryptocurrency, NFT, $GME or the like. Getting the big lead is only one part. Holding onto it is a different game altogether. Buying into Bitcoin 10 years ago has been spectacular, but NFTs may become nothing more than a beanie baby-esque fad and what happens to $GME remains to be seen early next year as those oversized increases then qualify for long-term capital gains.

More important than a single play, economically or athletically, is the strategy for the full game. Sticking to the strategy is quite often the singular skill that separates winners from losers, if not in sports, then at least for professional careers or in finance.

I warn people who are expecting a large inheritance (or hoping a big lottery win) can provide their financial stability that having money in and of itself does not equate to any money management skills. 

Herein lies the beauty of slowly building wealth. Your knowledge often expands as your wealth does, even if both are abstract concepts. There is an immeasurable benefit to that unity.

BOOK REVIEW: "Everyday Millionaires" (2019)

I have listened to more Ramsey Solutions programming this year than I have throughout the rest of my life combined. As such, I have heard their constant references to the 10,000 millionaire survey that they conducted recently, rattling off numerous statistics repeatedly each week. It made me wonder whether the book "Everyday Millionaires" had more information than the same statistics provided on the show.

Specifically, I was curious whether introverts had an advantage in becoming millionaires. If "being weird" or rejecting the habit of "buying things that you do not really want with money that you do not really have to impress people that you do not really like" were keys to becoming a millionaire, then it seemed as though a disproportionate percent of millionaires might be introverts. To my delight, this answer was in the book and the numbers were very close. Of the 10,000 millionaires that they surveyed, 53% identified as introverts and 47% identified as extroverts (p.90). Granted, I was unable to ascertain whether this distinction aligned with Meyers-Briggs definitions of the terms or if it was self-reported. Regardless, it was interesting to get my answer, and I was surprised that it was so close!

The rest of the book is a quick read, especially for loyal listeners since they have heard most of it already or know where the material is going. Chris Hogan is a natural salesman, so his energy was a bit dialed down by the written word, but his pitch remains the same. There were some questionable promises made, such as paying off the house equates to a life of no more bills and not owing anything to anyone anything ever again (monthly utilities would still be due in a paid-off house, not to mention taxes, which he somewhat preemptively addressed while dismissing the fantasy that "financial freedom" alleviates a person from paying attention to their finances. (p.213-214).

Regardless, here are 20 of the most interesting quotes or other tidbits that I took away from reading over the past week:

(1) "I'm okay missing out on potential gains that could bring probable pain" (in short, the focus of an investment should be on its probable reward, not potential reward) (p.47)

(2) "If there's one thing I've learned from the millionaires we studied, it is that shortcuts are for suckers. The long road may not get you there as quickly as you ant, but it will get you there" (in short, if you don't work hard for your money, your money won't work hard for you) (p.58)

(3) "I know from experience that more (money) does not equal better (money), if you are not ready for it" (p.79)

(4) "Psychologist Rollo May once said, 'The opposite of courage is not cowardice, it's conformity'." (p.88)

(5) "Some people need to imagine a villain working against them to excuse their own failings or lack of motivation." They cannot (or won't) say, 'it's my fault I'm not winning' so they parrot the same tired old phrases they might have heard from their parents. There's a problem with this fallback position though. You'll never make any progress as long as you're making excuses." (p.89)

(6) There's a difference between "someone saying, "It can't be done" (and) someone saying, "You can't do it." (p.105) 

(7) Don't hide your mistakes, or hide from your mistakes (p.107, paraphrased)

(8) "In fact, 98% of (millionaires) say they actively integrate feedback from other people. Despite their success, they know they always have more to learn, and they look to a supportive network to teach them new things and encourage them along the way." (p.111)  

(9) "Sometimes I didn't need marching orders; I just needed encouragement" (p.112)

(10) "When you plan for obstacles, they don't shake your confidence or interrupt your progress when they happen." (p.114)

(11) "Millionaire-minded people don't let the unknown scare them off. Instead, 94% of the millionaires we studied say they're willing to try difficult (tasks) to get new results." (p.116)

(12) "Understand that a goal is simply a promise you make to yourself." (p.161)

(13) "Work brings a profit, but mere talk leads only to poverty" (Proverbs 14:23) (p.170)

(14) "In total, the ability to work hard gives you an advantage, builds your confidence, allows you to experience gratitude, leads to self-improvement, and makes you intentional in all other areas." (p.175)

(15) "We found that 96% are always trying to learn new things. They want to find new ways to do their jobs better (because) as you get better at your job, you produce greater results." (p.177)

(16) "Millionaires don't find time; they make time." (p.179)

(17) "Consistency requires planning, preparation, patience and passion." (p.192)

(18) (Millionaires) "are simple, humble, happy people who you would never know were millionaires" (p.213)

(19) "It turns out that, once you can afford to buy whatever you want, you may not want to anymore." (p.224)

(20) "When you help someone else," Thomas said, "you forget about your own problems" (p.229)

The Full Motley -- 3Q, 2021

Another update came and went this month, and I forgot to post an update because the movement was quite minimal. The total percentage moved was below 1% of my current account value, but as this account values continues to increase, these small percentages (while relatively insignificant) grow higher and higher in dollar values.

The biggest moves came out of the equity index fund, going into the international equity index fund; the amounts were almost equal. The rest moved a little more from the actively managed equity fund into the bond index fund and international bond index fund.

The most notable takeaway from this move was how, this time, I thought about the fees being charged in my account. Like I had said, only 1% of the account value was moved, but the dollar amount moved was a meaningful amount. I thought back to the not-so-distant past when actively managed mutual funds often charged 2% or 3% as an expense ratio. John C. Bogle had always warned investors to minimize the fees because the variance in performance among managers never justified the dollar value. Over the past 40 years, he was proven right. The investment industry was amid a price war that he essentially started when he passed on, truly a fitting tribute to his life's work.

Failures Gonna Fail

I am in a mentally abusive, love/hate relationship with Twitter. On the one hand, it is a toxic cesspool of negativity, fueled by inaction and targeting intolerance, yet blissfully unaware of its own hypocrisy. On the other hand, it is a fascinating glimpse inside the minds of certain people whose public personas vary greatly. Several years ago, Taxicab Confessions was a popular HBO show for its dirty laundry that people would never air in public otherwise. Similarly, Twitter handles are a guise for people to feel enough anonymity to say the things that they have too much civility (or that they lack the courage) to say publicly.

Tweets are limited in characters (pause to accentuate the pun), so Twitter is not an exchange of deeply formed thinking, yet it can provide insight on the reactionary beliefs of its users. If an excited utterance is admissible as an exception to hearsay, then there is some value to this aspect.

That said, I like to analyze certain arguments to pinpoint the fallacy of them. One discussion that captured my attention recently was revolving around the use of phrase "generational wealth." Numerous tweets use generational wealth to portend the elimination of the middle class. Many others use it to discredit good advice, generally treating difficult and impossible as synonymous terms. Then, it seems as though some people will set themselves on fire to prove no one cares that people are burning.

The first problem with generational wealth is that those with it are discredited by those struggling without it. The bigger problem is that the discussions fail to understand the other side’s perspective. I saw a tweet asking users whether more money would solve all their problems. One response noted that “the only people saying no are people with money.” It was true enough, but the irony is that he sounded as though people with money were not reliable sources. To the answer to the question as stated, the only reliable response would be from people with money.

How I read this meme

I spent way too much time thinking about that juxtaposition, and I came to realize that reliable information (such as first-hand knowledge) was disregarded as comminatory. It occurred to me that people without money are under the misconception that *having* money to throw at a problem fixes the problem. The reality (as people with money have experienced) is that is simply not true.

Almost immediately, I made the connection that the arguments surrounding generational wealth should really focus on generational knowledge instead.

I thought back to my childhood, complaining to my mother about whatever money I wasted on a useless endeavor or how much it would cost to repair a mistake, and she would empathetically reply, “Yup, that was an expensive lesson.” For the most part though, my parents steered me in the right direction the first time. Certainly, I have had some expensive lessons in my life, but there were a lot of experiences, especially in terms of personal finances, that I got right the first time. How? Because the first thing I was told to do was the right way to do it (or at least one that had been proven as reliable).

When I worked at Vanguard, I was instructed to share Vanguard’s investment principles (“We Believes”) with our callers as applicable. I am the type of person that, if I am telling someone else to do it, then I want to know that it works. Hence the short stints in selling Variable Universal Life insurance products or in a MLM pyramid. Sure enough, all of Vanguard's We Believes were reliably sound wisdom.

People can discredit my wealth or success through the same means of opportunity or inheritance, but my response is to question whether they actually think I would have received either if I had not proven myself capable of managing them? The catch is that they do not know my parents or grandparents. I do, and the honest answer is that I would not have.

This response works somewhat better than asking someone how they would spend a fictitious inheritance, because the responses are wildly disjointed from their actual actions a lot of the time. Apparently, they think there is a magical number (just above their reach) at which point responsibility begins. "If I had that much money, then I could manage it easily too."

The Full Motley -- 2Q, 2021

I have noticed that the broad stock market seems especially buoyant lately, and I had assigned it to more people keeping cash on-hand, post-2008, and the increased assets within index investing. But recently I started questioning whether that is enough to make the markets be so resilient. Is there another factor? Does reduced “information asymmetry” deserve credit? With social media sites discussing finance and market movements so openly and so broadly, are we less prone to fear of falling markets? Nowadays, we see so many others celebrating the price reductions when markets fall that it would seem logical that less people succumb to panic selling. Do we have a new collective wisdom? I explained (or opined) to friend yesterday about how collective wisdom can reinforce itself, using the antiquated conventional wisdom, “stocks and bonds are inversely related.” The logic was always sound; stock is ownership and bonds are loans, so when owning stocks is a liability, then it is better to own the debt as an asset. However, that belief in this reasoning drove its results, supplying its own proof in its functionality. Nowadays, we do not see stocks and bonds moving in reverse correlation as much. That might be a hard statement to make for as little downward pressure as stocks have suffered in the past 10 years. To act on this observation, I should revise my allocations to move away from the belief that they are inversely related. However, that change will be employed at another time. For now, I stuck to my established allocations - and once again, not much movement in the market. Sure, tech stocks hit a peak in February 2021 and they started driving downward since that time, but (after years of mild underperformance) value stocks have been moving in the opposite direction, and they currently look like Darlings of the Underground Press (to leverage a song title from The Black Crowes, which is apropos on a blog entitled "Wiser Time" ). Will that favor continue? Highly unlikely.

The Full Motley -- 1Q, 2021

For those who do not know me personally, my father died 30+ years ago this month. Recently, I saw some of his paperwork at my mom's place that he had written in the final 18 months of his life. It was calculating his pending retirement, which was anticipated within the subsequent five years (assuming he did not keep working longer to increase his monthly stipend, which I have always held he would have). While reflecting on the paperwork, I realized that this was the closest I would ever get to an adult conversation with my father.

My initial takeaway from what I saw in this paperwork was how his calculations would have failed in today's realities, a meticulously planned future that never panned out. At first, I chalked it off as naivety to the stock markets, but after reflecting a bit longer, I realized that my dismissal foolishly undermined his ability to adapt.

One big pet peeve of mine today is how often macroeconomic discussions online that outright ignore reactive behaviors. We saw it at play most recently within the false narrative of $GME, where the stock price of GameStop rose to bankrupt Melvin Capital Management. The pitch was that if $GME rose to $150, it would bankrupt the hedge fund. The folly was that it assumed a hedge fund would sit idly by as its losses mounted.

I hear other online dimwits proclaim that they will never buy ZEVs because there are not enough recharging stations, as if supply-and-demand would not create that reasonably foreseeable shift. I am waiting to see whether fueling stations will become hybrid models offering both refueling and recharging, but a belief that the number of today's recharging stations would remain static lacks any foresight (or hindsight, for that matter as things have changed when changes occur).

At work, I call it the kaleidoscope effect, where making one change causes ripples that might change the big picture, even unexpectedly. While we cannot plan for those changes, we cannot detail a plan past them either. Unfortunately, this is what happens too often from the collective wisdom of the vocal minority online. I even read articles stating what the $15 minimum wage “would” do while describing what it could do (which I expect to benefit the retirement crisis more than poverty rates). Their goals are based on unrealistic ability to prepare a future from a smörgåsbord, freely selecting which changes they want and what details remains the same (not to mention, determining how the world around them accepts the changes without reacting).

While my father's plans for the future were set on a past reality, his ability to adapt to a changing environment would have determined his success. Once consumer interest rates yielded <4% for 10+ years, his planned reliance on dividends would have required adjusting. Setting plans for 30 years is unreasonable. Things change, especially plans.

If things never changed, then rebalancing would be a futile exercise. But they do, so rebalancing is very worthwhile. That was my task today, moving 2% from my active and passive domestic equities to spread across my domestic bonds and international exposure. It was a small percentage (honestly, the dollar amount moving at first made me expect it would be a higher percentage, so it somewhat surprised me to acknowledge how far that account has appreciated in the past couple years) but it reacted to recent changes. Next quarter, it will react to those changes.

Meaningless Millionaires?

Rich & Famous

As I grew up in the '80s, "millionaire" was synonymous with the pinnacle of success! For those who were millionaires, they had inconceivable buying power (especially compared to us "Okie Yokels," which admittedly would be a misnomer for my family as-is since we were upper-middle class). The residual '70s tag team of "rich & famous" was still a mostly-conjoined pairing. While the 21st century has generated countless celebrities who are "famous for being famous," money and fame was a celebrity formula with origins like the-chicken-or-the-egg debate, where it was hard to ascertain which one provided for the other. Among the most notable examples of the time was Donald Trump himself.

As the late-'90s brought upon such pop cultural references of "Who Wants to Be A Millionaire?" and Calloway's "I Wanna Be Rich," that seven-figure threshold started showing signs of accessibility and, for headlines, insouciance. For all intents and purposes, "Lifestyles of the Rich & Famous" spawned an entire network (E!). The term "multi-millionaire" (which had a hat-on-a-hat impact through the mid-'80s) became a noteworthy distinction. Thomas Stanley fully normalized millionaires with his best-selling book, The Millionaire Next Door.

Among today's billionaires

In the past decade, Bruno Mars and/or Travie McCoy made the transition to the next level almost official by dreaming of becoming a "Billionaire." The largest lotteries have started to surpass billion-dollar-jackpots. Forbes reports that there are over 2,000 billionaires in the world today. The media has already started tracking the "race" to becoming the world's first trillionaire (a word only recently recognized by spellcheck). Meanwhile, varying reports estimate that there are 14.6 million to 35 million millionaires in the world today, and that number will only increase as time goes on.

Nowadays, being a millionaire is not the pinnacle of success as it was when I was a kid. Some argue that it has become a relatively meaningless term. Unquestionably, no millionaires are famous for that financial achievement alone. They are no longer considered excessively rich.

That said, becoming a millionaire is still a lofty goal (especially after starting out at $0) for any individual. But, for the youngest Millennials, it is reasonably achievable, even before they turn 40!

Millionaire for Grabs

There are a few recurring benchmarks where your money feels more significant: when you reach a savings goal of $1,000, and again when you hit $2,500, and again when you hit $5,000, then when you reach $10,000. Seemingly, reaching $7,500 instantly sets the mind toward the next marker, instead of marveling at the accomplishment. The process repeats with $25,000, $50,000, $100,000, $250,000, and $500,000, ahead of the still elusive but not exclusive $1,000,000.

Although the inherent prestige of becoming a millionaire is not present, a psychological satisfaction will occur.

My Stock Portfolio

Traditionally, my discussions herein have focused only on my 401(k) at a former employer. In the interest of full disclosure, I have several more investments than those five mutual funds. I have an active 401(k) with my current employer, a Rollover IRA with assets from a prior employer (which coincidentally happens to be my current employer) (it also has a very small past IRA contribution I made one year to shift my tax liability into a refund), a Health Savings Account with my current employer, and a Roth IRA with a brokerage account.

Primarily as a means to further educate myself on the how-to, I have been investing in individual stocks for the past five years. I have 35 active stocks, including one below zero that should close soon (but excluding a couple other inactive stocks that zeroed out). The reason I keep my stock portfolio in my Roth IRA is the tax-advantaged status of the account, so any profits I realize in this account will not be taxed later.

I was curious how my Top 10 holdings would look, if reported the same way mutual funds report theirs, so I mocked up the list below. 

Week-end 10 largest holdings

(75% of total portfolio assets) as of 12/4/2020

1. NVIDIA Corp. $NVDA

2. Tesla Inc. $TSLA

3. Alibaba Group Holding Ltd $BABA

4. Carnival Corp $CCL

5. Visa Inc. $V

6. WP Carey Inc. $WPC

7. Restaurant Brands International Inc. $QSR

8. Slack Technologies Inc. $WORK

9. Stitch Fix Inc. $SFIX

10. World Wrestling Entertainment Inc. $WWE

The brightest red flag is how my Top 10 represents 75% of my total portfolio assets, so the other 25 stocks only average 1% of the total assets each. Not all my Top 10 are huge winners either. Only the top two have >1,000% return. Unfortunately, my initial investments vary among stocks, although the reported Top 10 is strictly a reflection on the current balance. Only seven of my investments have doubled from the original investment, 11 are showing a loss (which excludes a couple stocks that were full losses), and I have pulled my initial investment amount out of four of my current investments (two in the Top 10).

The most meaningful lesson I have learned from investing in individual stocks is the importance of risk/reward scenarios. I am not lamenting my full losses or other losses. I becomes very apparent (especially after creating a spreadsheet of this portfolio) that the risk is limited to 100% while the returns are unlimited. This does not create a risk-free investing scenario, but it shows how huge returns (>1,000%) by one or two investments can exceed the losses in several losers.

To follow up on what I noted as a bright red flag is the poor allocation. If this portfolio were the bulk of my investments, then I would be more concerned about it. As it is, the total portfolio assets represent about 5% of my overall investments, so I am not inclined to manage risks that this top-heavy allocation could present.