Jonathan Clements's Blog, page 100

He Sold Staples

IN SPRING 1984, WHEN I was age 32, we purchased a little ranch house in need of tender loving care. That’s why I found myself in a musty crawlspace, removing clutter and installing vapor barriers.

I heard a booming voice from above. It wasn’t God telling me I should run for president. Instead, it was my new neighbor Ken. I came to the surface, dusted myself off and went inside the house.

Standing there was a 47-year-old, six-foot two-inch bald guy with a jet-black beard, holding a whiskey and coke in each hand, one for him and one for his new neighbor. I’m sure it was five o’clock somewhere. To say that Ken was gregarious would be an understatement.

We covered all the normal topics that new neighbors would. Ken was excited to learn I sold his favorite brand of beer. Initially, I wasn’t terribly impressed by Ken’s line of work. He sold staples. Still, we became fast friends.

Ken’s life story turned out to be one of rags to riches, and then back to rags. In the end, he was still able to find happiness. But I’m getting ahead of myself.

You can imagine that, with his outgoing personality, Ken was a good sales rep, and his territory expanded exponentially. But then the staples manufacturer carved up his route, which cut into Ken’s commission and prompted him to quit.

That was when Ken and his friend Bob, who’d been his auto mechanic, opened up a business together—selling staples. Understand that these were industrial staples, along with staple guns, air compressors, nails, nail guns and other industrial supplies. Ken did the selling and Bob ran the shop. They survived a lawsuit from Ken’s former employer, and each enjoyed a comfortable six-figure income.

Ken initially reminded me of a Millionaire Next Door. His house was of a modest size and his car was a small hunk of Detroit steel. But I think success eventually went to his head.

Ken built an addition that doubled the size of his house, which had previously been no bigger than mine. The huge master bedroom had a hot tub in the middle of the room. The new family room opened onto a large deck and a custom designed pool. We had some insanely fun parties around that pool. Neighbors were always welcome.

Ken’s compact station wagon was traded for a beautiful full-size van that had undergone a custom conversion, while his wife’s daily drive was a Corvette. Ken was generous. Lending money to friends and family in need was pretty common, and not much was ever repaid. Ken’s wife had been previously married, and he spent thousands trying to help his wife’s daughter from her first marriage.

In 1994, at age 57, Ken sold his share of the business, and moved to his favorite city and frequent vacation spot, Las Vegas. I took time off work and drove their big moving truck to the new city. Ken and his spouse had a home built with a great view of the strip. They had the house professionally decorated, and installed a swimming pool that looked like it was right out of the pages of Better Homes & Gardens. They paid cash.

I needn’t tell HumbleDollar readers that retiring at age 57 often isn’t a good idea. Ken had invested the remaining business-sale proceeds in just one fund, Fidelity Magellan. This was a case of not knowing what you don’t know. Not only was his nest egg not diversified, but also Magellan’s glory days were coming to an end. Ken had also inherited a good chunk of a biotech company’s stock from his father.

Things were beginning to unravel. Ken’s attempt at starting a new business never struck lightning, like the staple business had. He also made some bad decisions, such as investing in speculative movie productions. He turned over the biotech stock to a stock broker, who then used it for some investment scheme that didn’t pan out. Ken and his wife decided their house wasn’t big enough, so they sold it at a loss and built a much larger home. Next came marital problems, and divorce took half of what was left. The second house was sold, again at a loss.

Ken liked younger women. His ex-wife was 17 years his junior, and the new women now entering his life were even younger. For a guy Ken’s age, these young ladies were an expensive habit. Soon, Ken was out of money, living solely on Social Security.

I often visited Ken and became concerned about his state of mind. Then something good finally happened. Ken had a wife before the one he’d just divorced. Ruthann was his high school sweetheart, and they’d married right after graduation. Ken’s little brother Guy had kept in contact with Ruthann, and put her and Ken in contact with one another.

Ruthann lived in Florida. She owned a mobile home and the lot it sat on. They visited each other a few times and things went well. Ken had given up drinking, along with younger women, and was truly a different man.

Ken soon packed up and moved to Florida. I first met Ruthann on the phone, when I called Ken on his birthday. I instantly realized that Ruthann had the same dynamic personality as Ken, but without any of Ken’s past vices. I would speak with Ken often and visit them every few years, and I’ve never seen a happier couple. Sadly, Ruthann died suddenly in 2018. Ken would tell everyone that the 10 years they spent reunited were the best of his life.

Ken died from prostate cancer last month at age 86. His wish was to be cremated, without any sort of memorial service. I traveled down to Florida with his brother Guy, who’s also a good friend of mine. Ken’s ex-wife Cathy and son Derek flew in from Las Vegas. The four of us, and a handful of Ken’s friends from the trailer park, met up a few times at the local coffee shop where Ken used to go every day. We shared stories about Ken, including my first ever encounter with the man.

Ken’s mobile home was overstuffed with things he or Ruthann had collected over the years, mostly things of little value. We managed to find family scrapbooks, and even his and Guy’s mother’s Bible, as well as photos of friends, including many of me and my first wife. Guy, Cathy, Derek and I each came away with some mementoes.

Ken didn’t even want an obituary published. Still, it just occurred to me that this is as close to one as it gets: Ken S. left this life on Dec. 4, 2023. Ken loved family, friends and life itself. Ken sold staples—lots of staples.

For 30 years, Dan Smith was a driver-salesman and local union representative, before building a successful income-tax practice in Toledo, Ohio. He retired in 2022. Dan has two beautiful daughters, two loving sons-in-law and seven grandchildren. He and Chris, the love of his life, have been together for two great decades and counting. Dan's previous articles were Taxing Our Brains and Beer to Taxes.

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Back to the Future

I WRAPPED UP MY first HumbleDollar article by declaring that I’m no investment expert. I still stand by that statement.

But I also maintain that this insight is a strength, not a weakness. Recognizing my limitations allows me to settle on an investment strategy that gives me a better shot of arriving at my retirement goal, with less likelihood of a detour along the way.

My wife Sharon and I hold most of our retirement savings at Vanguard Group. The bulk of our money is in traditional and Roth IRAs, along with a much smaller taxable account. We also have a growing stash of retirement money in our current employer’s 403(b) plan. Our approach to investing is fairly simple, but was once even simpler—and eventually will be again.

Past. Sharon and I started saving for retirement a little later than many folks. To make up for lost time, we’ve each steadily devoted a sizable chunk of our earnings to our employer-sponsored retirement plans, as well as to Roth IRAs. We began with no true investment plan. Instead, we chose funds haphazardly after a cursory glance at the offerings. We also bought some real estate, and I had an eye on buying more, to add some rental income to our plan. Eventually, though, we learned that indexing was the true route to wealth for us, and sharpened our focus in that direction.

Accordingly, we took action to reshape our hodgepodge portfolio by moving money from actively managed Roth IRAs to index funds at Vanguard. There, we invested in a simple three-fund mix consisting of total U.S. and total international stock market index funds, plus a bond index fund. Meanwhile, our employer’s 401(k) didn’t include a total market fund, but we achieved a reasonable level of diversification with the Fidelity Investments index funds on offer.

Shortly afterward, we learned about factor investing, which led us to flesh out our bare-bones portfolio with a tilt toward value and small-company stocks. We also added a real estate investment trust fund.

A few years later, our former employer was bought out by our present employer. Our jobs stayed the same, but a new signature appeared on our paychecks. Along with that new name came a new retirement plan, a 403(b), with new investment offerings. Most were low-cost Vanguard index funds, but the two international choices were both active funds with distastefully higher fees.

The plan, however, recognized the value of Vanguard Total World Stock Index Fund (symbol: VTWAX), serving it up soon after the fund’s launch. We moved most of our 403(b) money into that fund, but still kept a couple of fingers in value and small stocks. We chose to contribute to the Roth version of the 403(b) soon after it became available.

Sharon and I intended to build a diversified mix of index funds, covering a number of different asset classes and trying to capture a little extra performance with judicious rebalancing. Our interest in investing was high, and we had plenty of energy to follow through on our investment plan.

Present. As often happens, life smiled at our naiveté, shaking up our settled plans. Sharon and I gradually acquired responsibility for the financial affairs of several family members, as well as a small nonprofit organization.

Our money management duties grew from tending to our own investments to overseeing more than 50 financial accounts for individuals, family trusts and the nonprofit, including handling banking and tax returns. Though none was individually complex, in aggregate the load was a lot to bear, and we needed some relief.

In summer 2020, we took a step toward simplifying our financial life by rolling our traditional 401(k)s at Fidelity, along with our Roth IRAs, to IRAs at Vanguard. These joined our Roth IRAs already at Vanguard. We shrank the number of logins required to track our accounts, though we didn’t make the investment management much easier.

Future. The real problem, however, isn’t overseeing our relatively simple investment plan. Rather, it’s the time and neurons required to handle our expanded list of chores, financial and otherwise.

We’re thinking about how to unwind this web of entanglements, which may eventually be too complex for our aging minds. Some tasks, such as caring for older relatives, are out of our control, but the normal course of life will eventually bring them to an end. Others, like work and church responsibilities, require a little planning for a painless extraction.

By contrast, our own expanded list of funds seems like an easy target. A return to a simpler fund allocation is just a few computer keystrokes away. But I’m turtle-slow to change course, and was stymied about how to begin. HumbleDollar’s editor supplied the obvious answer a few weeks ago, a suggestion consistent with other good advice for making any big money move. A five-year plan to shift back to a skinny mix of two or three funds seems like a good path to head down.

Where does that path lead? Back to where I started. I’ll once again remind myself that I’m a half-expert on a couple of topics, like physical therapy and gardening, but investing doesn't make the list. I’ll also once again embrace the attribute that attracted me to indexing in the first place—the ability to buy a piece of virtually every company worth owning, even though they're packaged with many that aren’t. But since I don’t know how to pick this year’s best deals, I purchase the whole store. This humble simplicity will, I suspect, serve us well.

Ed Marsh is a physical therapist who lives and works in a small community near Atlanta. He likes to spend time with his church, with his family and in his garden thinking about retirement. His favorite question to ask a young person is, "Are you saving for retirement?" Check out Ed's earlier articles.

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Stay Positive

WE ALL HAVE BAD DAYS. But for some folks, it seems every day is a bad one. No matter how good things seem to be, they’ll focus on the one bad thing. Think about the negative thoughts that you have:

Are they helpful?
Are they true?
Does the bad in your life outweigh the good?
Has negative thinking become a habit?
Do others really need to know about all the bad things in your life?
Why do others see the situation more positively and what enables them to think that way?
What could you do to think more positively?

These thoughts were prompted by the recent death of Charlie Munger. He and Warren Buffett were friends and partners for decades. The Wall Street Journal’s Jason Zweig wrote that Munger “possessed what philosophers call epistemic humility: a profound sense of how little anyone can know and how important it is to open and change your mind.”

In a 2019 interview with CNBCs Becky Quick, when asked about the secret to a long and happy life, Munger answered: “It’s so simple…. You don’t have a lot of envy. You don’t have a lot of resentment. You don’t overspend your income. You stay cheerful in spite of your troubles. You deal with reliable people and you do what you’re supposed to do. And all these simple rules work so well to make your life better.”

In the interview, he advocated “staying cheerful… because it’s a wise thing to do. Is that so hard? And can you be cheerful when you’re absolutely mired in deep hatred and resentment? Of course, you can’t. So why would you take it on?”

Nevertheless, many folks do take on hatred and resentment. Nothing pleases them more than bringing others down to their level. Misery, it seems, loves company.

Negative people are known for their lack of humor and morose mentality. Their mantra is that nothing is so bad that it can’t get worse. Cheerfulness is not in their mindset. At the extreme, they have an unrivaled capacity to extract unhappiness from any situation, even a cheerful one.

I’ll grant you that it’s difficult to remain cheerful in light of sickness and ongoing serious health problems. I’m no stranger to these, so all naysayers take note. Only a fool is happy all the time. That doesn’t mean we should inflict our problems and negativity on others.

We’ve all had terrible things happen to us. Is it necessary to reveal the grim details of our bad experiences to the world? Are we making a point or are we just trying to garner sympathy?

As Munger noted in his CNBC interview, people “come into this world… pre-made.” Unfortunately, you’ll seldom—and perhaps never—encounter a negative person who you can convert from bitter and mean-spirited to benevolent and generous. The upshot: We would all do well to avoid negative people.

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Our Estate Plan B

WHEN WE UPDATED our wills last year, my wife and I attempted to cover every imaginable scenario, including the future state of our children’s marriages, grandchildren, step-grandchildren and the like. Still, we and our lawyer missed one outlier scenario: What if our whole family was wiped out simultaneously? Think airplane or car crash.

This risk crossed my mind when our small family took a flight together for a recent vacation. Our core family is just six people: us and our two children, plus one child’s spouse and the other’s significant other. Because our tight-knit family spends plenty of time together, a catastrophic event could impact all of us.    

Since we’d all be gone, you might ask, “Why even worry about your estate?” One concern is our multitude of distant relatives who could potentially raise a fuss. We’re not close to our cousins and feel no obligation to leave them a windfall. With no heirs, our estate would become “intestate,” with state law deciding its distribution—which is what happens with the two-thirds of the population who don’t have a will.

We’d prefer that our estate help people of our choosing, rather than going to our cousins’ or the state’s coffers. But who? This provides the same vexing philanthropic challenge as many billionaires have, but on a far smaller scale.

Our charitable giving has primarily been to local community organizations which may not be equipped to make good use of a large donation in one tranche. National charities can handle any size bequest, but some large charities seem burdened by administrative bloat. The everything-must-go scenario demanded further research.

Ultimately, we chose four charities: a trusted community organization from our previous Maryland residence that we’ve supported for decades, a new-to-us community foundation here in New Hampshire, a national forest foundation aligned with our hiking interests, and our college alma mater.

This diversification ensures we’d have a positive impact across multiple causes. Limiting to four charities also helps the third-party executor keep the time involved—and hence the cost—in check. At least we now have a plan, even if we feel a bit of remorse about all the worthy charities we passed over.

Both the New Hampshire foundation and our college make it easy to establish endowed funds. These endowed funds then enable grants in perpetuity, and we directed these grants toward regions, community needs and scholarship areas of personal interest. Likewise, we targeted the forestry bequest toward conservation and environmental support for any of our Virginia to New Hampshire favorites. That said, we were careful not to over-prescribe, because we know our causes’ needs may change.

Our law firm quickly updated our wills by adding these charities as contingent beneficiaries, should we no longer have any heirs. Our lawyer indicated most wills don’t include this extra contingency coverage, but that multi-layered contingencies are more common with trusts. Still, such contingencies might be a good idea for readers with a small circle of beneficiaries, as well as shorter lists of possible executors or trustees. Adding the contingency clause would have been cost-free if we’d requested it when we drew up our wills, rather than adding the wording later.

In all this, choosing the charities was the tough part. Still, there was a silver lining: We’ve identified a new community charity for future giving, including for qualified charitable distributions and charitable gift annuity purchases once we’re in our 70s.

John Yeigh is an author, coach and youth sports advocate. His book “Win the Youth Sports Game” was published in 2021. John retired in 2017 from the oil industry, where he negotiated financial details for multi-billion-dollar international projects. Check out his earlier articles.

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Seeking Answers

I LEARNED OF MY brother’s death by Googling his name. I always wondered whether his family would let me know if he was ill or had died. After Google led me to his obituary, I had my answer.

My brother and I were co-executors and co-beneficiaries of my mother’s estate. From the start, we couldn’t agree on how to settle her affairs. I wanted to sell everything and divide by two, but he wanted to hold off selling my mother’s house.

Why? My mother passed away in 2007, when home prices were down sharply, and my brother thought we should wait for the real estate market to recover. But there was another reason my brother didn’t want to sell: He, his wife and one of his adult sons were living in the place.

Thus began a difficult estate settlement. In 2021, the house was finally sold and the proceeds divided, but we still hadn’t finished settling the estate when my brother died the following year.

The disagreement over the estate caused a rift between my brother and me. In the years before his death, the only information I received came from his lawyer and the mortgage company. Not being notified of my brother’s deteriorating health or his death didn’t surprise me, but it did bother me.

I believe in divine intervention. I’ve recently felt spurred to seek out information about how my brother died. My parents both had heart conditions. I assumed my brother and I would suffer the same fate, but I wanted to know for sure.

I guessed the location where my brother likely died, and requested a death certificate from two local townships. I lucked out, and one of the towns sent along his death certificate. It didn’t show a heart condition as my brother’s cause of death. Still, I wanted to know more.

My brother had two sons, my nephews. One carried a gun. The other carried a Bible. I decided to try and find the one who carried a Bible. I Googled my Bible-carrying nephew and figured I’d show up at his door. My wife, who has a ton more social etiquette than I do, suggested I write to him and wait for a reply. I rejected that approach because, if I never got a reply, I wouldn’t know any more than I already did.

I identified a possible address using Google, and then used MapQuest to get directions. I printed out the directions, since I don’t have a GPS in my car, and began the two-plus hour drive to where my nephew might be.

I found the place. My nephew’s neighbor stopped me and asked what I wanted. I told him who I was looking for, and he pointed me to my nephew’s house. I knocked on the door, not knowing what to expect. I heard a dog barking but no one answered the door. I didn’t want to give up easily, so I tried two more times.

Finally, from the other side of the door, I heard, “Oh my God, Uncle Dave.” My nephew opened the door, gave me a big hug and invited me in.

My 56-year-old nephew might be best described as a hippy. His super-straight ponytail reaches his belt. He has a wife, three children and three grandkids. He’s been working for the same company for 20 years, laying down flooring, so he’s doing well considering he dropped out of high school. Drugs and a negative attitude contributed to his decision to quit school.  After high school, he married, accepted Jesus into his life and completed his GED.

Over lunch, he described his problem with attention deficit disorder, which made school difficult for him. We discussed cars, science and religion. He demonstrated a vast knowledge of different subjects, but nothing of great depth.

When I was growing up, my parents emphasized the value of education. But while I earned a college degree, my parents never did, and nor did my brother. Would a college education have benefited my nephew? I doubt it. Further education wouldn’t have helped him with his job of laying down floors, but it likely would have left him with debt.

We can all use our learning time and our dollars to understand all kinds of subjects. That’s fine once we’re retired. But if we still need to earn a living, focusing our learning in a way that’ll benefit us financially will lead to a more comfortable lifestyle.

My brother and his son both chose non-traditional paths to acquiring knowledge. Unfortunately, that path didn’t lead them to a wealthy life. Yes, it could result in great cocktail party conversations. But such conversations don’t pay the bills.

David Gartland was born and raised on Long Island, New York, and has lived in central New Jersey since 1987. He earned a bachelor’s degree in math from the State University of New York at Cortland and holds various professional insurance designations. Dave’s property and casualty insurance career with different companies lasted 42 years. He’s been married 36 years, and has a son with special needs. Dave has identified three areas of interest that he focuses on to enjoy retirement: exploring, learning and accomplishing. Pursuing any one of these leads to contentment. Check out Dave's earlier articles.

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Dropping China?

WITH 2024’S ELECTION underway, many folks are asking, do politics affect investment markets? On that score, there’s good news: The data say markets in the U.S. have delivered good—and roughly equal—results under both Democrats and Republicans.

But that doesn’t mean politics never has an impact. Look outside the U.S., and you’ll see that a country’s political structure can have enormous implications. To the extent that your portfolio is diversified internationally, it’s important to keep an eye on developments elsewhere. At the top of the list: China, which is now the world’s second-largest economy.

For years, China was attractive to investors because of its rapid economic growth. But things have changed in recent years. Between 2021 and 2023, the MSCI China Index lost more than 18% a year, while the S&P 500 gained 10% annually. Over the past 10 years, the Chinese market has returned just 0.9% a year, while the U.S. has climbed 12%. What’s driving these disparate results—and should investors expect more of the same?

Primarily at issue has been a set of policies initiated by Xi Jinping’s government in 2020. In November of that year, Chinese authorities halted the planned initial public offering (IPO) of Ant Group at the last minute. Ant is a financial technology company controlled by entrepreneur Jack Ma. By way of background, Ma was also the founder of Alibaba and is probably the country’s best-known business figure.

Why did Beijing squash Ant’s IPO? While there was no official word, most observers believe it was in response to comments Ma had made in the month prior to the planned offering. Ma had criticized China’s banking system, saying it had a “pawn shop mentality,” and also criticized government regulators. In the words of one China analyst, “He apparently crossed the invisible red line for what can be said and done in Xi Jinping’s China.”

Soon after, Ma was forced to give up voting control of Ant Group, and the company was fined nearly $1 billion. The government also punished Ma’s Alibaba with a $2.5 billion fine. Both of these enforcement actions were seen as arbitrary. But perhaps the story’s most disturbing aspect was that Ma then disappeared from view for several months, raising questions about his well-being.

Ma later reappeared, but with a lower profile. According to a colleague, he was “doing very, very well” and had taken up painting. It was an extremely odd turn of events for someone who had at one point been China’s wealthiest person. If this had been an isolated incident, perhaps it could have been explained away, but the government’s actions against Ma were just the beginning.

Beijing broadened its campaign to target other powerful companies. Since then, many more firms—mostly in technology—have been fined or sanctioned and, as a result, seen their stocks drop. Tencent and JD.com have seen their shares drop by half.

Despite the negative impact on investment markets, Xi’s government shows no sign of slowing its efforts to weaken powerful companies. In fact, just last week, the planned IPO of online retailer Shein hit the rocks when Chinese regulators announced a “security review.” This was reminiscent of the move Beijing took against Didi Global in 2021. Didi, which runs a ride-hailing app similar to Uber, had just completed an IPO on the New York Stock Exchange when the government opened an investigation. The charges were varied and vague. But in the end, it was forced to delist, punishing both the company and its shareholders.

In addition to the negative effect of these moves on share prices, second-order effects have now started to occur. International investors are showing a growing wariness toward China, as evidenced by last year’s drop off in foreign direct investment (FDI). FDI dropped to $15 billion in 2023, down sharply from $180 billion the year before. Prior to that, FDI in China had been above $150 billion every year for more than a decade.

Because of Beijing’s penchant for punishing its most successful companies, observers are now asking whether Chinese stocks are worth purchasing at any price. Desmond Shum is the author of Red Roulette and knows China well. In a recent online post, he asked, “How should China companies be priced? How much discount should be priced in? Erratic behaviors of CCP [Chinese Communist Party] since Xi and growing geopolitical risks make China uninvestable.”

At the same time that these policies have caused share prices to crater, authorities have taken steps to try to prop up prices. Since the fall, regulators have been providing “window guidance” to institutional investors in China, the effect of which has been to prevent them from selling stocks. But this heavy-handedness has only created new distortions in the market.

As one Shanghai-based investor explained, window guidance “creates delayed selling pressure, but it’s not like you can postpone that forever. Market sentiment will eventually dictate performance.” In other words, this window guidance has created an additional problem: Share prices now sit on an even shakier foundation.

Investors have come to distrust the Chinese government both in what it does and in what it says. Indeed, even basic economic data aren’t viewed as reliable. In 2023, according to Beijing, GDP grew 5.2%. But many view this as an essentially made-up number. Research firm Rhodium Group estimates that growth was below 3%. One well-informed investor I spoke with called the government’s 5.2% “a joke.”

Further challenging its economy, China is now contending with a demographic problem. Decades of efforts to slow its population growth have had unintended consequences. In 2023, fewer babies were born than in 2016, the year China abolished its one-child policy. The fertility rate is now close to 1, far below the 2.1 that’s required for a population to remain level. And unlike the U.S., China receives virtually no benefit from immigration.

This trend is a problem for investors because population growth is a key contributor to economic growth. In simple terms, a growing population provides a greater number of customers for businesses to sell to. And more workers also help drive economic activity. An aging population, on the other hand, slows an economy and places greater burdens on public finances.

Warren Buffett often says that there are no called strikes in investing. This is a baseball term meaning that investors are never compelled to take any particular action. They have the luxury of waiting for another opportunity. Because of all the challenges described here, my advice in recent years has been to simply steer clear of any investment in China. If you want emerging markets exposure, look to a fund that excludes China, such as the innovative Freedom 100 Emerging Markets ETF (symbol: FRDM).

Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X (Twitter) @AdamMGrossman and check out his earlier articles.

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Our Money Pit

CALCULATING THE RETURN from homeownership typically involves some mix of delusion and dubious math—and that’s never truer than when it comes to remodeling projects. On the numbers alone, it’s all but impossible to justify a major renovation. Trust me, I’ve tried.

We just finished a project that proved so expensive that, if I revealed the cost, my reputation for frugality would be in tatters. The cost was comfortably—or perhaps uncomfortably—into six figures. What if we sold our Philadelphia townhome tomorrow? I figure we might recoup half of what we just spent.

Many will claim they fare far better. These folks look at what they paid for their home and what their home is worth many years later, and boast that the increase was due to their fabulous home improvements. What about the general increase in local property prices during this period? That gets conveniently forgotten.

Indeed, the often-cited survey by Remodeling finds that most home improvements are money losers—and that assumes you sell your home within a year of completing the project. Wait any longer, and that bathroom remodeling will look increasingly shabby, and the sum you’re likely to recoup will be even less.

Shabby would aptly describe our pre-renovation kitchen. But that wasn’t what spurred our project. Instead, it all began with a vague feeling that the back of the kitchen was awfully dark. Wouldn’t it be great if we had bigger windows, so there’d be more natural light and a better view of the garden? Of such musings are empty bank accounts born.

Before we knew it, we had architectural drawings that envisioned a revamped kitchen, two new bathrooms upstairs and an expanded second bedroom. When the contractor quotes proved unpalatably large, we scaled back the project, so the cost was palatable—just. The revised plan for our home—which is perhaps 120 years old—included a new kitchen, new windows at the back of the house both upstairs and down, and new siding.

You can get some sense of the result from the accompanying before and after photos of the kitchen. Along the way, we learned some lessons old and new:

When you open up walls, you never know what you’ll find. In our case, we discovered there were no load-bearing walls at the back of the house. Yes, you read that right. The back of the house, which was originally a mudroom that had been subsequently incorporated into the main structure, was resting on the beams that run the length of the house. The resulting structural work added two months and 15% to the project’s cost.
You can live happily in 550 square feet. That was the size of the Airbnb that Elaine and I lived in for most of the project’s duration. By the end, our relationship was—I kid you not—better than ever.


You can work from anywhere. After five months in the Airbnb, we had to move out because someone else had booked the place. To get through the next 10 days, before we could move back into the house, we rented another Airbnb in Ocean City, New Jersey, a little over an hour's drive away. We took long walks on the beach and the boardwalk, and in between got a lot of work done. The beach in the off-season is wonderful.
Remodeling creates a mess. This will surprise nobody who’s ever had a home renovated. Dust found its way into every corner of the house, even places that we thought were sealed off. As part of the construction, both the dishwasher and the washing machine were moved, and ended up needing to be repaired. The refrigerator was delivered with a dent in the door. All three appliances have now been fixed.
The expenses don’t end when the contractors leave. Among other things, we’re looking at purchasing a new couch, window treatments and shelving. I also got the coverage on our homeowner’s insurance increased and, because we live a few blocks from a river and there’s this thing called global warming, opted to buy flood insurance as well.

Was it all worth it? As I sit here at the kitchen table, looking out on the garden, and watching the birds and the squirrels attack the bird feeder, the answer is an unequivocal yes. From a consumption perspective, the renovation has been a winner.

But what about from an investment perspective? On that score, it’s awfully hard to justify. No matter what mental gymnastics I try, I can’t cook up a story where this project constitutes a good investment in the strictly financial sense. Still, I take solace in three thoughts:

If I amortize the cost over, say, 15 years, it seems less unreasonable.
Remodeling the kitchen and undertaking the structural work would need to have happened eventually. In fact, the contractor’s lead carpenter offered the comforting thought that, if we hadn’t undertaken the structural work, the back of the house might have collapsed.
While I have no illusions that we’ll recoup the cost of the renovation whenever the house is sold, I do think it’ll make the place easier to sell. I’ve previously owned three homes and two were a struggle to sell, in part because potential buyers were put off by the dated kitchen and bathrooms. Of course, the longer we stay in our current home, the more dated the kitchen will look—and the harder the house will be to sell.

Are these three thoughts solace enough? Perhaps they are—because we’ve lately been musing about the remodeling we didn’t do upstairs.

When is it worth remodeling a home? Offer your thoughts in HumbleDollar's Voices section.

Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X (Twitter) @ClementsMoney and on Facebook, and check out his earlier articles.

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Some Friendly Advice

MY COLLEGE BUDDY Joe really looked forward to retirement. But in the weeks and months following his last day of work, he began to realize he didn’t have a core group of friends with whom to share his newfound freedom. Those he counted as friends were simply friendly workplace acquaintances. And several people who he thought might become deeper friends were still busy working and couldn’t “come out to play.”

So, after retiring two years ago, he briefly returned to work, in part for the social interaction. He also had a better understanding of the need to nurture friendships outside of work and to rethink what retirement meant to him.

The social aspect of retirement is more important than many of us assume. Loneliness is not something we want to face in our later years. Some quiet time is needed, but healthy solitude is not the same as loneliness. As author Arthur C. Brooks notes, “The kind of people who don’t know how to manage social interactions (i.e. friendships) outside of work get lonelier when they retire—and that describes a lot of successful people I know.”

You may discover once you retire that you don’t have many real friends. Instead, you have what Brooks calls “deal friends,” people you’re frequently in touch with during the course of your career, where there’s a professional bond but no deeper connection. These people aren’t part of the friend group you’d call if you were in trouble.

In May 2023, Surgeon General Dr. Vivek Murthy reported that chronic loneliness in the U.S. poses health risks as deadly as smoking up to 15 cigarettes a day, costing the health industry billions of dollars annually. In declaring the latest public health epidemic, Murthy said, “There’s really no substitute for in-person interaction. As we shifted to use technology more and more for our communication, we lost out on a lot of that in-person interaction.”

If your target age range for retirement is your mid-60s, there’s a better-than-50% chance you’ll live more than 20 to 25 years in retirement. That’s a large window of time either to face loneliness—or to take control and start cultivating deep, valuable friendships.

Start strengthening your social network now by connecting with current friends and family, engaging more frequently in activities you enjoy, and building new and deeper relationships. Here are three ideas to consider:

Combine rituals and friends. Start a weekly coffee group, or golf or card game, or arrange to volunteer with others. There’s no reason you can’t merge activities and people, and have more and better interactions with those you enjoy being around.
Take risks with deeper conversations. Move past the weather, sports and movies. Explore what makes people tick. You may find some folks are uncomfortable with this and move on, and that’s okay. By sharing more of your beliefs, you might forge deeper relationships with others than you thought possible.
Make a move. If you’re considering downsizing or otherwise moving, check out the growing number of 55-plus communities. You’ll likely find people with similar interests to yours—and a wide variety of activities to explore. But be selective: My wife and I looked at several communities before finding one in the Phoenix area that seemed “just right” for us.

If you opt for a phased approach to retirement, winding down your working days gradually rather than suddenly, you should start these practices now and increase them over time.

My friend Joe is now in year two of his second attempt at retirement. This one looks like it’ll take. He’s met some wonderful people by volunteering at an education-based nonprofit. He’s part of a couple of groups that meet weekly to discuss books or just to socialize. And he’s risked exploring deeper topics and sharing more of himself, and has been rewarded with some meaningful friendships.

Dan McDermott is an information technology executive in Minneapolis. He and his wife Sarah split their time between Minnesota and Arizona. They have two grown children. Dan works hard to learn about cryptocurrency from his son and Instagram from his daughter. Going for a long, leisurely run is his precious thinking time. Check out Dan's blog, as well as his earlier articles for HumbleDollar.

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Keeping It Together

WHEN I MENTION THE word “bands” to my friends, most think of the Rolling Stones or Grateful Dead. Among fellow financial nerds, the word can prompt a discussion of rebalancing strategies. What about me? I think about my billfold, which has been to more places and countries than I have.

Many years ago, I spent a week away from home attending a scientific conference. By the meeting’s conclusion, I was exhausted. I had a history of returning from longer trips bearing token gifts for my twins. This time, however, I was simply too tired to shop.

Lucky for me, the conference I was attending was huge. Along with the scientific proceedings, there were more than 50 vendors showcasing their latest products and equipment. Many companies were vying for our attention by giving away swag to promote their products.

At the time, brightly colored, thick silicone wristbands were all the rage, the kind that say things like “Stamp out Philatelists” and “Save the Whales—Collect the Whole Set.” The vendors had jumped on the bandwagon, offering their own versions that promoted products that combated diabetes, heart disease, cancer and even bad breath. I gladly exchanged my e-mail address for bright blue and pink bands to bring home to my twins. Yes, I’m cheap when it comes to gifts. It was certainly more cost effective than purchasing Beanie Babies at the airport kiosk.

The kids loved the gifts. Frugality sometimes reigns supreme.

Coincidentally, my birthday was a week following my return. I awoke to two rug rats jumping on my stomach, singing out of tune and bearing presents. Two handmade cards were accompanied by a small box wrapped using newspaper comics, with the handwritten words “I Luv U Daddio” crudely stenciled on the top.

I opened the package, and was initially confused by the contents. The box contained a set of blue rubber bands with PLU #4060 embossed horizontally. PLU? Isn’t that a grocery code? Aren’t these the bands that bind together vegetables in the store’s fresh produce section?

Then I noticed that the “P” had been altered so that most of its cup was missing, turning the writing into ILU, shorthand for “I Luv U,” which matched the stenciled spelling on the box. Teary-eyed, I slipped the bands around my wrist, trying hard to conceal the discomfort caused by insufficient blood flow to my digits. I winked at my wife. She was doing a great job teaching the kids that not all presents need to cost an arm and a leg.

Alas, I had to wear the bands for days, with the unspoken acceptance that the kids could snap them whenever I wasn’t looking. After three days and multiple welts, I suggested to the twins that I could abandon my wallet and instead repurpose the rubber bands to hold together my cash and credit cards, along with a wallet-sized picture of them. They acquiesced. Indeed, the flexibility of the gift allowed me to carry my library and insurance cards as well.

I never looked back. Immediately, my pocket felt lighter and, within days, I lost that sciatic feeling that runs down your leg after sitting for too long with an oversized wallet creating unforgiving space between bum and chair.

I’ve continued this elastic tradition for more than 20 years, and never returned to using a customary wallet. Indeed, over the decades, I’ve occasionally noticed other men with similar billfolds. For us banded kinfolk, there’s always a wink and a nod, with an understanding that there must be an untold story underlying their money-clipping ways. I also assume there’s a genetic component, since I recently caught my brother using a similar technique to unite his cash and cards.

As for me, I must admit that I scour the grocery produce section in a manner different from most folks. Freshness takes a backseat to the bright bands that clump veggies together. For individuals who have an aversion to vegetables, I noticed that you can order similar bands directly from Amazon.

This is why my wallets have been to more places than me. Indeed, I always pack an extra band when I travel, in case of miss-snap. My personal ranking of global favorites includes #4080 (asparagus from Peru), #4547 (broccoli florets from China) and #3166 (Lacinato kale from Mexico). Someday, I hope to accompany my billfold on a trip to their homelands.

Jeffrey K. Actor, PhD, was a professor at a major medical school in Houston for more than 25 years, serving as an academic researcher with interests in how immune responses function to fight pathogenic diseases. Jeff’s retirement goals are to write short science fiction stories, volunteer in the community and spend time in his garden. Check out his earlier articles.

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Getting Real

WHEN I STARTED OUT as a mom-and-pop property owner 40 years ago, I was burdened by both my naivete and the shibboleths promoted by the real estate industry.

In particular, I had to overcome two egregious misconceptions: that a well-written lease is the key to successful small-property investing and that aggressively raising rents is the surest way to maximize profits. Adopting an alternative management philosophy has saved me both money and heartache.

Character counts. Few things in life are as overrated as the Los Angeles Lakers, but the rental lease is one of them. Getting that lease is important, sometimes very much so when confronting tenant malfeasance. It sends a clear message: You are legally bound to this commitment. It’s your ace when that rare eviction becomes unavoidable due to excessive damage, flagrant misconduct or nonpayment of rent.

BlackRock, the multinational investment company that’s bought thousands of small income properties for its clients, has its own lawyers. But I’m not inclined to sumo-wrestle a renter over a few beer cans on the front lawn or an occasional late rent payment that would entail a $500-an-hour attorney’s fee.

Indeed, gauging a prospective renter’s character is far more valuable than getting the lease. Character assessment begins with an unbiased recent history of debt repayment, which the credit report provides. A credit score over 670 establishes that, regardless of personal hardship or broader economic downturns, a prospect has fulfilled her financial obligations. It’s eminently more telling than a large bank account or professional pedigree, both barometers of financial capacity rather than actual behavior.

Is the credit score all you look at? No. You have three other checks on character. First, you can ask for a tax return and judge if the figures support a prospective tenant’s self-reported financial wherewithal. Second, you can talk to her current landlord, not just about her payment record, but also about her personal suitability as a renter. Does she sound like a perfectionist who’d never be satisfied with a repair? If so, she’s history. You want a clean and tidy tenant, but not a finicky nuisance. Just make sure you aren't talking to her Uncle Billy.

The third measure of character is tricky because it depends on confidence in your own social intelligence. Let’s say a rental candidate balks at the damage deposit. This person has unwittingly revealed to you that she may be a source of conflict. Is she presumptuous, and makes you feel like you’re the renter and she’s the landlord? Sayonara, my friend.

Here’s where the rubber meets the road. Who would you rather have as a renter—a lessee who discovers bathroom mold and threatens to sue you, or the fellow who calls you to amicably discuss the problem? I encountered this very situation, and I’m forever thankful that I had a tenant who was reasonable.

Taking it slow. That brings us to our second myth—the pervasive contention that pugnaciously raising rents is the Holy Grail of profitable real estate investing. My experience: Just as a person’s character usually trumps a lease, controlling discretionary expenses while methodically increasing rents is the key to profitability.

Many expenditures are out of a landlord’s control, like those involving safety or health, or fundamental life-quality issues like adequate heat and air conditioning. But others, like upgrading the landscaping or installing double-pane windows, are distinctly optional. You can’t ignore the $15,000 new roof, but you can certainly quash that wish for blond kitchen cabinets.

Invariably, the counter to this management philosophy is, “Well, you’ll get a higher rent.” Terrific. How much of a rent increase are you going to get from the next renter in return for kitchen cabinets that cost $3,600 but may not mean much to her? Maybe $50 a month. But let’s be generous and say $100. It’ll take three years to break even on your largesse.

Expenses swing wildly from month to month and year to year. You might be faced with a new heating system in May and removal of a fallen oak tree after a severe December storm. Many major problems, like a cracked sewer pipe, can’t be anticipated and require the owner to set aside a portion of each month’s rent as a maintenance and repair fund.

By contrast, a rental property’s insurance, taxes and utilities trend upward only gradually and, in the case of a fixed mortgage, not at all. The upshot: From month to month, your net income will largely fluctuate with your maintenance and repair costs, which is why you shouldn’t add to those unnecessarily.

Meanwhile, except perhaps in instances of tenant turnover, rents also grind slowly higher. And that’s what you want, because gradual rent increases don’t scare off existing tenants, thus triggering all the expenses involved with finding new occupants and making the property appealing to them.

Give me a choice between an aggressive landlord who authorizes extravagant improvements and demands big rent increases, and one who raises rents responsibly to hang on to good renters while carefully prioritizing repairs, and I’ll take the frugal manager any time.

Steve Abramowitz is a psychologist in Sacramento, California. Earlier in his career, Steve was a university professor, including serving as research director for the psychiatry department at the University of California, Davis. He also ran his own investment advisory firm. Check out Steve's earlier articles.

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