Jonathan Clements's Blog, page 159

Offsetting the Pain

IT’S ONE THING TO talk to folks about the power of saving regularly. It’s much more profound to see it in action. I was reminded just how powerful saving can be during two recent meetings with financial-planning clients. In both cases, we looked back at 2022 and calculated how much the clients had saved.

In the first case, the clients had saved diligently throughout the year. They increased their 401(k) and 403(b) contributions, they opened and funded 529 plans, and they socked all additional savings into their high-yield savings account.

During our meeting, they told me they felt like they could have done better. Once we did the math, however, we saw that they actually increased their financial assets by 25% over the course of the year.

The second set of clients have always been big savers. One of their priorities for last year was to build up more savings outside of their retirement accounts and 529 plans. I had them set up a monthly automatic transfer into a taxable investment account. We chose an appropriate fund based on their goals, and they now automatically buy shares of that fund each month. Later in the year, we also started using a money market fund for their emergency cash.

This couple has grown so accustomed to saving in their taxable account that they routinely stick extra money there whenever they have it. All in, they saved more than $50,000 into that account in 2022.

Because of their excellent saving habits, both sets of clients have been able to keep their financial plans on track despite a dreadful year for stocks and bonds. As the markets recover, they’ll be rewarded handsomely for their diligence.

Saving money is easy in theory—and much more difficult in practice. For every success story I’ve heard, I’ve witnessed other instances where someone says, “I know I should save more. I really need to get on that.” Often, that line ends up being repeated every few months without any progress being made.

Let’s face it: Setting a goal or having the intention to save money won’t cut it. It’s like exercising. You can intend to exercise, but you won’t see any results unless you actually do it. I’ve been trying to lose the same five pounds for years.

It’s important to make saving a priority if you want to do it successfully. One common mistake I see: People try to save whatever is left over at the end of each month. The trouble with this approach is that, before we reach month’s end, there are endless additional items we can spend our extra cash on.

The best way to stack the savings odds in our favor is by deciding on a monthly amount and making as much of our savings as possible automatic. Many people have the bulk of their wealth in their workplace retirement accounts or their home equity. That’s not because those are necessarily fantastic savings vehicles, but because those savings happen without having to make an active choice. The 401(k) contributions get taken out of our paycheck by our employer before we even see the money, and the home equity gets built up when we pay our mortgage.

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Fork in the Road

IT HAS BEEN THREE months since we closed on the sale of our home and drove away from the storage unit that contains everything we couldn’t donate, sell, give away or take with us. It was a big decision to have no fixed abode, and we feel great about it.

We’re about to move our rambling lifestyle across the pond to spend some time in the U.K. and continental Europe, and we have no return date in mind. That means our “living out of four suitcases” way of life is going to get real. No more four suitcases plus a couple of boxes, a shopping bag of extra shoes, and one of my 14 kettlebells in various nooks and crannies in the car. Keep in mind that the suitcases have a wardrobe for all four seasons, everything from shorts to synthetic down.

The kettlebell will be hard to leave but would also be hard to take along. I expect to struggle quietly with that decision for the next couple of months, but will spare folks that deliberation. I’ll focus on a different one that more readers can relate to: What to do with our car?

We have a 2008 Lexus SUV that we’ve owned since 2011, know very well and are happy with. Our four wheeled friend “Rex” had one owner before us who was as diligent about preventive maintenance as we’ve been. Rex is about to mark 140,000 miles and our mechanic estimates has many miles left to go. Yes, we’d like to have some of the comfort and safety features that come with newer models, but we’re in no rush to change cars.

Last year, when we went to Europe for three months at a time, it was easy to simply store the car in our garage. We’d fill the fluids, overfill the tires, disconnect the battery and, as they say, “Bob’s your uncle.” This time, our options are complicated not only by having no garage, but also by not knowing how long we’ll be gone.

An online estimate from CarMax says it’ll give us $5,000. Is that what it’s worth? No, that’s what we could easily and conveniently get for it, dropping it off on the way to Dulles International Airport. A better estimate of market value is what similar vehicles are going for, which some internet research tells me is around $10,000. No, that’s not based on Blue Book values, which I’m told are unreliable these days.

We found a good storage service that will keep the car covered and drive Rex within its compound, as well as run the heating and AC and cycle the power windows, for (gulp) $240 a month, with storage set at a four-month minimum. The service also has a more basic option that involves simply starting the car and letting it idle for 20 minutes each month for $180. But if it’s worth storing at all, it’s worth storing properly. Assuming we’re gone for a year, that’s at least $2,160, or more likely $2,880.

Unless an employer is reimbursing the cost, I suspect few people would spend that sort of money to store a $10,000 vehicle unless the car’s a rarity. Rex’s sentimental value probably shouldn’t move the needle much. Indeed, if we knew we wouldn’t return for a year, we’d just sell. The thing is, we don’t know. We may come back to the U.S. in a few months for whatever reason, and it would sure be nice to just fly in and pick up good ol’ Rex. What about renting a car instead? The cost for a month would be roughly what it might cost us to store Rex for a year.

There’s the middle ground of leaving the car with a friend or family member, but that comes with complexity of its own. How is it insured? How is it cared for? Anyone we can think of would still have it parked on the street. How easily can we get it back when we need it? Depending on the circumstances of where we need to be and how quickly, we might still find ourselves needing a rental.

It’s been a week since I drafted this article and we’re still no closer to a decision. Flights are booked. One way or another, a decision’s got to be made.

Michael Perry is a former career Army officer and external affairs executive for a Fortune 100 company. In addition to personal finance and investing, his interests include reading, traveling, being outdoors, strength training and coaching, and cocktails. Check out his earlier articles.

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Lodging Complaints

PRESIDENT BIDEN’S State of the Union speech this month touched a nerve when he mentioned “junk fees.” Talking about hotel costs, he said, “Those fees can cost you up to $90 a night at hotels that aren’t even resorts.”

I was reminded of the first time we were hit with a resort fee. It was at a Marriott hotel in New York City. A bicycle was part of the “resort” package. I don’t know about you, but I couldn’t see myself—as a tourist—riding a bicycle down Fifth Avenue.

To make matters worse, wi-fi was also a part of the fee. Really? That’s included in our hotel loyalty program, Marriott Bonvoy Platinum Elite Membership. So now we’re paying for something we get for free?

A newsletter from The Points Guy came to my rescue. It recently ran an article about Marriott’s fees and how they can be avoided. It’s right in the hotel’s terms and conditions, which can be found at the bottom of Marriott’s website. This is something we all check, right?

The internet access terms and conditions are in section 1.3. c.ii, which states, “Participating properties with mandatory resort charges, which include internet access, will provide a replacement benefit, to be determined at each participating property’s discretion.”

Translation: Marriott locations that participate in the loyalty program aren’t supposed to charge for something you’re entitled to get for free. They can waive the resort fee or offer you a freebie, such as a $25 daily credit for food and drink.

The article warned not to expect the hotel to roll over and play dead. It found some properties were very forthcoming and even comped the entire resort fee. Other properties acted like they were being nickeled and dimed. The best course of action is to contact Marriott Bonvoy by phone and make arrangements for the phone rep to coordinate with the property, so the issue can be handled before you arrive.

That brings me to another recent, irritating experience. Earlier this month, we wanted to change a hotel reservation. The reservation is for a two-week stay at the Hampton Inn, a part of the Hilton chain. We wanted to cancel the first two or three nights to stay with friends nearby. The cancellation was within corporate policy.

When I called, I was told that not only would I have to cancel the entire reservation, but also the room we’d chosen would then be unavailable upon rebooking, and we would be paying $150 more per night for a lesser room for the remaining time.

My husband suggested we cancel days from the end of our stay instead. It’s a good thing we checked the fine print on the reservation. It warned that if we planned to depart early, the price would be subject to change.

In my conversation with Hilton Hotels, I mentioned our disappointment with this cancellation policy. It’s been two weeks, and I assume Hilton doesn’t plan to respond. It would seem the hotel has adopted the playbook used by cable companies—ignore the customer.

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No Simple Stories

I'VE OFTEN COMPARED the stock market to a Rorschach test. Depending on your perspective, what’s happening can look very different. But even in a market full of Rorschach tests, one company’s stock stands out: Tesla. Some people see it as a world-class company that’s changing the world. Others see it as a company led by an erratic genius that one day will inevitably fade—like MySpace or Polaroid.

Recently, a blogger named Alex Voigt wrote that Tesla’s head start in electric vehicles “will soon make Toyota look like what it is—a loser.” He then added for emphasis: “Dead man walking.”

Is Voigt right or wrong? As the world’s largest car maker, Toyota today is hardly a dead man walking. But the future is an open question. As an investor, how might you think about this debate? While I don’t get involved in picking individual stocks, there are useful lessons here for investors.

To an outside observer, Toyota might seem hopelessly out of step. While Tesla now produces more than a million electric vehicles (EVs) a year, and is growing at 40% annually, Toyota produces barely any. That seeming reluctance comes from the top. As recently as December, Toyota’s CEO, Akio Toyoda, reiterated his longstanding skepticism of EVs. He said a “silent majority” aren’t ready for fully electric vehicles. That stands in contrast not only to Tesla, but also to many of Toyota’s other competitors, including Volkswagen, Ford and GM, which are aggressively pursuing an electric future.

Is it possible that Toyota is, in fact, so out of step—or is there another way to understand this? Steven Spear is an operations expert at MIT who spent years in Japan and wrote his dissertation on Toyota. In Spear’s view, the debate shouldn’t be framed simply as a competition between Tesla and Toyota, or even as a battle between electric vehicles and conventional or hybrid cars. While in theory all car companies are in competition with one another, the reality is that they have different missions.

“Toyota’s brand,” Spear says, “has been affordable reliability for mid-market customers… for a reasonable price, you get your pick of formats suited to your needs that’ll run forever if you take reasonable care of them.”

That explains why Toyota has appeared lukewarm on EVs so far. “EVs are not yet a mid-market product,” Spear says, “not until charging is more convenient by speed and accessibility.” Instead, EVs “are primarily a premium product” for high-income consumers with the resources and flexibility to manage around an EV’s limitations, including long charge times.

In other words, it’s not that Toyota is behaving like an ostrich with its head in the ground. The company knows what it’s doing, and it’s simply doing something different. For that reason, it’s wrong to view the car market simplistically as a zero-sum game between Toyota and Tesla, or between any two companies or technologies. Toyota doesn’t have to fail for Tesla to succeed.

First lesson for investors: Be careful of simple stories. Things are rarely binary, so it’s important not to go too far out on a limb with any investment viewpoint.

Another lens through which to view this question: the innovator’s dilemma framework. Developed by the late Harvard professor Clayton Christensen, this theory explains why great companies sometimes fail. When innovative companies become overly wedded to the products that drove their initial success, they sometimes stop innovating. When that happens, they become vulnerable to upstart competitors.

BlackBerry offers a recent example. It dominated the smartphone market for a time, but its CEO underestimated the iPhone, confident that users wouldn’t want to type on touch screens. Result? BlackBerry’s market share fell to zero.

On the surface, Toyota might look like it’s making the same mistake. In the late 1990s, Toyota invented hybrid technology and, since then, has sold tens of millions of hybrid cars and trucks. Maybe Toyota is in denial of electric vehicles because it has—and continues to—enjoy so much success with hybrids.

This sounds logical, and Christensen’s theory might support it. But there are two problems with this conclusion. First, as articulated by Steven Spear, it may be that there’s room for more than one technology in the car market. In addition, it may be that Toyota has its own playbook and its own timeline. Of note: A few weeks back, Toyota made the surprise announcement that Akio Toyoda, the EV skeptic, would be retiring. In his place will be Koji Sato, an engineer who currently leads the company’s Lexus division. Not coincidentally, Lexus has developed one of the company’s only EVs.

In making the announcement, Akio Toyoda acknowledged that he may be out of step with his posture toward EVs. He referred to himself as “old fashioned” and said he had reached his “limits” leading the company his family founded.

That said, he seems to be warming to EVs. A video shows Toyoda riding in a prototype Lexus EV with Sato. At the beginning, Toyoda looks a little unhappy and makes some critical comments. But when he hits the accelerator and the car takes off, he lets out a hoot. In that moment, it seems, Toyoda became an EV convert. “I’m seeing a whole new side of this car now,” he says.

Second lesson for investors: The innovator’s dilemma is a real phenomenon, but it’s not an inevitability. Smart leaders like Akio Toyoda can change—and change quickly.

Another reality for investors is that business competition is often more nuanced than it appears. So far, I’ve focused only on the most well-known players. But there’s a much broader universe than Toyota, Tesla and the other names we know. Last week, for example, Berkshire Hathaway’s Charlie Munger described the success of BYD, a Chinese EV maker in which Berkshire’s a shareholder: “BYD is so much ahead of Tesla in China... it’s almost ridiculous.”

Third lesson for investors: Beware of what psychologists refer to as “availability bias.” In drawing investment conclusions, be sure to look beyond the data that’s most readily available. Today, BYD cars might not be on our radar in the U.S., but that could change.

Back in the 1990s, political scientist Francis Fukuyama coined the term “the end of history.” His argument: In the post-Cold War era, the evolution of political systems would reach a sort of end point, with no further evolution beyond that. In the years since, the world has witnessed further evolution, and Fukuyama has backed off from his theory. There’s no such thing as an end point, and that also applies to investing.

Fourth lesson for investors: All investments will ebb and flow. Depending on the time period chosen, one investment or another might be outperforming. But that can all change tomorrow. Whether it’s because of a new CEO or a new technology or a change in corporate culture, companies—and their stocks—often move in ways that are impossible to predict.

The Toyota vs. Tesla debate is a microcosm that illustrates this reality. It helps reinforce why investors’ best bet, in my view, is to sidestep these questions entirely by simply owning both Tesla and Toyota—and all of their competitors—via a diversified portfolio of index funds.

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 Twitter @AdamMGrossman and check out his earlier articles.

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This Is Only a Test

I RECENTLY READ AN article in Barron’s that inadvertently revealed two more reasons investing in broad-based index funds is the only sensible course of action.

The article, titled “This ‘Crazy’ Retirement Portfolio Has Just Beaten Wall Street for 50 Years,” touted the “All Asset No Authority” (AANA) portfolio. This “simple portfolio” consists of splitting your money equally among U.S. large-company stocks (S&P 500), U.S. small-company stocks (Russell 2000), developed international stocks (MSCI’s Europe, Australasia and Far East index, or EAFE), gold, commodities, U.S. real-estate investment trusts and 10-year Treasury notes, with the portfolio rebalanced annually.

This brainchild of Doug Ramsey just marked its 50th anniversary. During that time, it’s earned a 9.8% average annual return, which is about 0.5 percentage point a year less than the S&P 500 but 0.7 percentage point more than a standard 60% stock-40% bond portfolio. Its main benefit is it had substantially less volatility, with no “lost decades.”

Sounds great, doesn’t it? Not to me. I have two big issues with AANA.

As I read the article, which also appeared on MarketWatch, the first thing I noticed about the portfolio’s 50-year-old record wasn’t its performance, volatility or catchy name. It’s that I wasn’t sure that Mr. Ramsey was, in fact, that old. After a little research, I determined the article was referring to Doug Ramsey, not the renowned financial radio host Dave Ramsey.

Doug is younger than Dave and, at 56 years old, it would mean that he created AANA when he was in the early years of grade school. All this quickly led me to realize that AANA was manufactured by back testing—data-mining numerous permutations of different asset classes until one was found with superior risk and return numbers.

It reminded me of hedge fund manager Ray Dalio’s All Weather Portfolio. It consists of 40% long-term U.S. bonds, 30% U.S. stocks, 15% intermediate-term U.S. bonds, 7.5% gold and 7.5% commodities, all rebalanced annually. It also had superior historical performance numbers, which have lately been rather underwhelming, averaging about 8% annually since February 2006.

Hey, what if I came up with an All Flack Fund that significantly outperformed the S&P 500 since 1973 and consisted of investing 13% in stocks starting with the letter “F,” 10% in stocks with dividend yields between 2.2% and 3.3%, 17% in AA-rated bonds with a maturity of 6.2 to 8.88 years, 29% palladium and 31% betting on the National League to win the All-Star Game, rebalanced triennially? Would you invest?

Such nonsense is more akin to alchemy than investing.

The second big issue: Barron’s mentions various performance figures for the portfolio and then says, “And it’s done so with way less risk.” The writer adds, “While Wall Street floundered, AANA has earned respectable returns.” And there’s this: “According to Ramsey’s calculations, it has earned an average annual return of 9.8% a year.”

It all sounds so wonderful. But since there is no reference data, there’s no way for me to corroborate any of the performance figures. I guess I could just take Barron’s or Ramsey at their word. But hey, can’t they at least throw me a bone?

I’m reminded of the Beardstown Ladies, who ran what appeared to be a very successful investment club in the 1980s, notching 23.4% average annual returns since inception. They were so successful that they wrote numerous bestselling books and became minor celebrities. It was resounding proof that active investing could beat the market—until a PricewaterhouseCoopers audit revealed that the ladies’ performance was grossly overstated, and their actual results were just a little less than the S&P 500.

Beating the market may not be impossible, but it’s mighty difficult. Investors need to overcome fees, taxes, psychology and some pretty smart people who work 80-hour weeks on Wall Street. And just when you think you’ve found a formula that works, you could discover it might be based on dubious back-testing.

Michael Flack blogs at AfterActionReport.info. He’s a former naval officer and 20-year veteran of the oil and gas industry. Now retired, Mike enjoys traveling, blogging and spreadsheets. Check out his earlier articles.

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The Poor Millionaire

HOW WE SPEND DEPENDS on how we feel about money.

To be sure, we’re supposed to spend according to our financial situation and needs. But life experiences can so badly distort our attitude toward money that our financial decisions end up being ruled by fear and insecurity rather than questions of affordability. Such is the case with an acquaintance—let’s call her Satee—whose money habits are at odds with her financial standing.

Satee grew up in a typical Indian family of four. Her working dad was the family’s primary breadwinner and financial decision-maker. Her homemaker mom put most of her energy into raising their two kids and taking care of the house. In their family, the financial and nonfinancial responsibilities were clearly divided between husband and wife.

When Satee got married, she envisioned becoming a homemaker instead of a moneymaker. She wanted to be a supportive wife, a loving mother and a responsible daughter. Handling money was neither appealing to her nor on her list of responsibilities.

Satee’s husband was professionally successful and financially savvy. They moved to the U.S. and had two children. They bought a house, saved for retirement and set aside money for the kids’ education. Everything was falling into place, just as Satee had hoped, except for one problem: Relationship and trust issues soured their marriage.

Long story short, Satee went through a messy and conflict-ridden divorce that dragged on for months and turned her world upside down. A property settlement was eventually reached, but the bitter memories and fear of uncertainty remained.

Satee took a while to accept her new role as head of a household with two school-age children. To get through the rough patch, she turned to the local community for emotional support. She met my wife through a mutual friend and quickly formed a bond with her.

A few years later, she connected with my wife again. This time, she seemed happy and settled. She had some money questions and my wife asked me to help. Satee and I chatted a few times, going over some financial basics. She was keen to learn more.

Satee focused a lot on ad hoc, short-term money decisions. She had no clear long-term financial picture. Instead, she was consumed with keeping a tight lid on her spending. Her modest lifestyle left no room for indulgences or even small niceties.

I couldn’t tell if the scrimping and excessive penny-pinching were out of necessity or insecurity. Her financial situation didn’t seem so dire. She owned a paid-off single-family house in a good neighborhood, had a decent job with a six-figure salary, and the kids had fully funded education accounts.

On my insistence, Satee figured out her actual annual expenses for the past few years. It took her a lot of time to come up with the numbers—not because she was unwilling or shirking, but because her finances were overly complicated with multiple accounts. It was no wonder she lacked a clear picture of where she stood financially.

With some help and handholding, Satee finally managed to get the numbers. Her actual spending in each of the past three years turned out to be far smaller than the number she’d fabricated in her head. I wasn’t too surprised. She behaved financially as if she was in poverty, and I knew that wasn’t the case.

Evidently, Satee was underspending and over-saving. The next question I asked: Did she need to save so much? To answer that, she needed to take stock of all her financial assets. Once again, this simple step took longer than it would for most people.

As with her spending accounts, Satee had too many financial accounts, including savings accounts with several local banks and credit unions, high-yield money-market accounts and certificates of deposits with various online banks, a couple of brokerage accounts, retirement accounts from current and past employers, and so on.

Once she located all her financial accounts and reestablished online access, she gave me a call. I asked Satee to go through each account and enter the balance on a spreadsheet—a step she’d never done before. I then asked her to add the numbers up.

At first, Satee didn’t believe the result. Per the spreadsheet, she was already a millionaire in her early 40s, without including her home equity, kids’ education funds and other assets. She double-checked each account. She was hoping to get a different answer, but the numbers didn’t lie. It was clear she didn’t need to save so aggressively.

Will the revelation change anything? Will Satee allow herself and her family occasional splurges? Or will she continue to let money rule her life and continue to get worked up about every unexpected expense, no matter how small?

I certainly hope Satee strikes a better balance between spending and saving, but I wouldn’t bet money on it. Her profound financial insecurity took root during the years of emotional turmoil and uncertainty that followed her marriage’s collapse. It will likely take more than a household balance sheet to overcome her fear of spending.

Sanjib Saha is a software engineer by profession, but he's now transitioning to early retirement. Self-taught in investments, he passed the Series 65 licensing exam as a non-industry candidate. Sanjib is passionate about raising financial literacy and enjoys helping others with their finances. Check out his earlier articles.

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Clements’s Favorites

I'VE PENNED MORE THAN 450 articles for HumbleDollar, so picking 10 favorites could have been a laborious task—if I’d bothered to look back through all the articles I’ve written.

But instead, I took an easier route, simply listing the articles that I could most easily recall. What made these articles memorable? Some were quite personal, while others broached ideas that I continue to grapple with to this day.

Really Useful Engine (Dec. 14, 2016). While HumbleDollar was launched on Dec. 31, 2016, the site's initial articles came from an earlier website where I blogged occasionally. This was one of those articles. It grew out of a lunch with my friend Dave, and I believe he was the one who mentioned Thomas the Tank Engine. The topic of intrinsic vs. extrinsic motivation is one I still frequently think about.
Signal Failure (Nov. 9, 2019). From the time I started learning about investing in the mid-1980s, I was told to pay attention to valuations—and yet, in the decades since, valuations have screamed "stay away from stocks." This was my attempt to explain what's been going on.
Second Childhood (Jan. 27, 2018). The term "second childhood" is how I describe the past nine years, since I last had a fulltime job. It's been a period during which I've tried countless new things and worked harder than ever before.
15 Ways to Happy (July 11, 2020). For me, happiness research has been an abiding interest for almost two decades, and I've written countless articles on the topic for HumbleDollar. This one offers a summary of 15 key insights I've garnered from the research.
The Tipping Point (March 10, 2018). The initial years as a saver can be discouraging. But if you keep at it for a dozen years, you'll hit a tipping point—and astonishing things start to happen.
Great to Gone (Feb. 1, 2020). This piece begins with the story of my great-great-grandfather, who was one of Britain's richest men at the time of his death.
Measure for Measure (Aug. 12, 2017). When we think about our portfolio's riskiness, we need to factor in what's often our most valuable asset—our human capital. But how? My suggestion: Think about the savings we'll add in the years ahead as part of our portfolio's cash holdings.
Meet BraggingBucks (April 1, 2021). In the British media, there's a long tradition of April Fools' Day jokes, such as the famous TV segment on spaghetti trees. This was my attempt to help the tradition cross the Atlantic.
Timely Tale (Dec. 2, 2017). Financial success may hinge on the details, but it also requires us to see the big picture. This article offers a way to think about our lifetime financial journey.
A Man Possessed (Dec. 25, 2021). In this short article that I published on Christmas Day, I describe five of my most treasured possessions—all of which have almost no value for others.

This is the final installment in a series devoted to the favorite articles and blog posts penned by HumbleDollar’s most prolific writers. The earlier installments were from  Dennis Friedman ,  Mike Zaccardi ,  Kristine Hayes ,  Adam Grossman , Rick Connor  and Dick Quinn.

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When Bubbles Burst

ABOUT HALF THE RENTALS that my wife and I own were foreclosures we bought around the time of the Great Recession. In fact, I closed on the first one on my wedding day—a fact my wife isn’t anxious to let me forget.

In 2000, a family had bought the house for $70,000. In 2006, JPMorgan Chase foreclosed on the house. In 2007, the bank unloaded the property for $93,000 to the Department of Housing and Urban Development (HUD), which had guaranteed the mortgage. I bought the place in 2007 for $50,000. I overpaid. It was the start of a tidal wave of foreclosures that would hit my hometown and the rest of the country.

The pattern I saw with my first foreclosure was one I’d see again several times over the next eight years. A family would buy a home in the early to mid-2000s as interest rates dropped and property prices rose. They got a mortgage backed by a government agency. Next, a new loan was secured for more than the original purchase price, or home equity was borrowed to pay for renovations and improvements.

Then the economy slowed and eventually hit a brick wall. The family would lose the home and the government would get the property back. The place would sit on the market for months, maybe a year. A local investor or landlord would pick it up for a fraction of the price that the family had paid.

October 2010 was Lucas Street, another foreclosure. In January 2007, a couple bought it for $72,000. The Federal Home Loan Mortgage Corporation foreclosed on it during summer 2010. I bought it in October for $35,000.

The front of the house was a striking stone structure that increased its curb appeal. When I had to cut the stone to make a window a legal egress, as required by city code, I found out how expensive it was to have a contractor cut the rock. During 2014’s freezing Iowa winter, the tenants left for a week’s vacation. When they returned, they found the main piping to the house frozen. The bill was $8,000. That was painful.

Next was West 4th Street, two houses down from my childhood home. The owners bought it in 2006 for $92,500. It was foreclosed in December 2011. The federal government was on the hook for $102,500. I got it for $43,000 in 2012. It was a two-bedroom home. We added a third bedroom by carving out part of the dining room.

In August 2021, the tenant moved out. It was a sellers’ market, so I was eager to get the property listed. But the home needed a new roof over the garage and some renovations. My property manager handled the repairs, but struggled to find reliable workers. The work dragged on. The price of lumber and other building materials had skyrocketed during the pandemic.

My property manager handed me the keys days after I had surgery to remove my tonsils. I wouldn’t be in any shape to do any labor for a week. Thanksgiving was approaching. The place still needed a fresh coat of paint and some minor cleanup, which I was going to handle. The house finally went on the market near Christmas.

Despite the challenges, we sold the home in February 2022 for $80,000. I felt we left $10,000 on the table because we weren’t able to put the exact same house on the market the summer before. The sale validated a lesson I’d quickly learned about homes: They aren’t liquid. At any time during the trading day, you can check a stock’s price on Yahoo Finance. When you like the quote, you hit "sell." Done. Homes don’t work that way.

The last bargain we got during the Great Financial Crisis was the house on Spruce Street. It was purchased in 2004 for $69,500. At the end of 2009, HUD foreclosed on the property. It was a small one-bedroom house. I almost didn’t look at it for that reason. Finally, after work one day, I asked to see it. Though it was small, it had a roomy basement and two bathrooms. A part of the dining room could again be potentially converted into another bedroom. Unlike the other homes I bought, it was more modern, built in 1954.

The bank had cut me off the year before. It felt my leverage levels were approaching the danger zone, so I got a coworker—who was a diligent saver—to lend me the money. She didn’t like risk and never borrowed money, but her low risk tolerance meant she was stuck with low returns. My attorney wrote up a contract under which I’d pay a 10% annual interest rate to my investor on a three-year loan.

She was a friend and a nice lady. But she let me know that, if I quit making payments, she wouldn’t hesitate to take the property. I was able to buy the home for $20,000. We upgraded the electrical system to a 200-amp service. After plowing $5,000 into it, we were able to rent it out.

One thing that stuck with me during those dark financial times was seeing homes just sit. It almost didn’t matter what the price was. There were far more sellers and foreclosures than buyers. Credit had seized up. One of the biggest local employers was laying off folks. Overtime was cut at other factories, so many people who relied on that to make their house payments were struggling.

The Great Financial Crisis was the scariest time I’ve lived through. It seemed like the rules were no longer working. Your home didn’t always go up in price. If you wanted to sell, slashing the price didn’t matter because there just weren’t many buyers. People were selling nice pickup trucks for cash. They needed to keep the lights on and pay for groceries. They had lost their job and it wasn’t easy to find another one. Pain and fear were everywhere.

Reading about challenging economic times in a book is one thing. Seeing the aftermath of a bubble with my own eyes—and the wreckage it left behind—was another thing entirely. I hope to never see a depression. The Great Recession was enough for me. I’m thankful my family didn’t have to suffer the way so many other families did.

Juan Fourneau’s goal is to retire at age 55. When he isn't at his manufacturing job, he enjoys reading and writing about personal finance, investing and other interests. Juan, who is married with two children, retired from the ring after wrestling on the independent circuit for more than 25 years. He wrestled as a Mexican Luchador under the name Latin Thunder . Follow Juan on Twitter @LatinThunder1, visit his website and check out his previous articles.

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Where Value Ends

I RECENTLY HAD a revelation about my adult children: When it comes to money, they’re a lot like me—and that’s both a good thing and a bad thing.




I had this revelation while dining with my 25-year-old son at a sports bar over the New Year’s holiday. The food was marginal—it was a sports bar, after all—but the plates came loaded with food. What’s more, the prices were quite reasonable, especially compared to those in Philadelphia and Washington, D.C., where Liam spends the bulk of his time these days. 




All of this made him quite happy. He has, he told me, three criteria for what constitutes value while eating out. The quantity of food comes first. Second is whether the cost is reasonable. The quality of the cuisine comes last on his list. 




In other words, he could get outstanding food, but it would fail his value test if he didn’t get enough of it. His meal would really be a loser, value wise, if that superb-but-stingy dish also cost too much.




Now, let it be said that Liam is currently a law student and has no money. It could be that his criteria will change when he’s a bigshot lawyer earning lots of money, and can afford the best chefs and restaurants in the land.




But I doubt financial success will change his mindset. Why? Because he’s my son, and his frugal, value-based way of looking at money happens to come from me.




I’ve always been conservative about finances. It’s something I learned early on from my thrifty parents, who never made much money but were somehow able to make ends meet for a hungry family of eight. 




Through my folks, I learned the importance of working hard, living simply and below your means, paying the bills on time, being exceedingly careful about debt, and socking away every dollar you can for a time when you might need it. While these time-honored principles will never land me on a list of the world’s richest people, I have been able to achieve a modicum of financial independence here in my early 60s.




All that’s good, I think. And I’m happy to say that my financial conservatism has been passed onto my three adult sons, who are quite responsible with their finances. 




But there’s a point where frugality and penny-pinching become excessive, and I fear I’ve spent too many years of my adult life in that realm. It’s the part of me that has hesitated to take a fancy vacation because it will set me back $5,000. Or passing on a chance to have a prime rib dinner at a three-star Michelin restaurant and opting instead for a BYOB hole-in-the-wall because it will save me a hundred bucks.




I know where our familial tendency toward excessive thriftiness comes from. Parsimony is in our blood, passed down over the generations through the Scottish lineage on my father’s side. We Kerrs do not like spending money, and we hate wasting it even more. Maximizing the value we get from our hard-earned dollars is all-important to a Scot, a mission to which we devote every ounce of our analytical minds.






I saw this with my father, who was forever bargaining with people while making purchases, as if all the world was an auction and he the sole bidder. He threw nothing away, no matter how old and obsolete it was, on the remote chance it could come in handy in the future. He was determined to squeeze every ounce of value from the things he paid for. I remember sitting in the car as he pumped gas and seeing him lift the hose at the end to get every last drop into the tank. 




I don’t go that far with my gas, and I’m also not a hoarder, preferring to keep my surroundings simple and free of clutter. Still, now that I’m older, I realize that for too many years I’ve focused too much on shaving costs and saving money over seeking experiences. 




I mean, what good is money if we don’t spend it on all the wonderful things this world has to offer? Life is short and a slavish pursuit of value can turn a pleasant walk down Easy Street into a bleak stop at the dollar store.




Alas, I’m seeing some of these same tendencies with my kids. I once witnessed another of my sons calculate the per-square-inch cost of various pizza options on the menu to figure out which offered the best value for money spent. I remember thinking at the time, “At what point does seeking value move from common sense to madness?”




Like Scrooge after his nighttime visits by the ghosts, I’m determined to change my ways in whatever years I have left. I have a long "challenge list” filled with both fun experiences and educational activities, and I’ve committed to pulling out my wallet to make those things come true. In March, for instance, I’m splurging on a two-bedroom beachfront condo in St. Pete Beach for Rachael and the kids, even though March is spring break time in Florida and ghastly expensive.




I’m also determined to use whatever resources I have to make a difference in the world through volunteer activities and charitable giving. I’ve joined the local Rotary Club and have dedicated to giving author proceeds from my recently published book to charity.




Hopefully, all of this will set a different example for my children and maybe even break the familial chain of Kerr parsimoniousness. It seems a father’s work is never done—even after the kids have flown the nest.

James Kerr led global communications, public relations and social media for a number of Fortune 500 technology firms before leaving the corporate world to pursue his passion for writing and storytelling. His debut book, “The Long Walk Home: How I Lost My Job as a Corporate Remora Fish and Rediscovered My Life’s Purpose,” was published in 2022 by Blydyn Square Books. Jim blogs at PeaceableMan.com. Follow him on Twitter @JamesBKerr and check out his previous articles.

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Not Dad’s Retirement

MY FATHER RETIRED from a 35-year teaching career in 2002, when he was 56 years old. He hasn’t worked a day since. For years, his retirement was the primary model for my retirement aspirations—until I realized my path needed to diverge.

Like many dads, he worked a career he tolerated but probably didn’t love. It provided our family with a comfortable lifestyle in the suburbs of a low-cost-of-living city. Teaching enabled him to be ever-present during my youth, with summers off and time to coach my baseball teams. He took his pension and left teaching without hesitation when he reached retirement eligibility.

I missed his retirement celebration because I was halfway through a 14-month backpacking trip that took me to southeast Asia and South America. Upon my return, I was 27 years old, broke, unemployed and living with my parents.

Though my dating prospects were bleak, I had a finance degree and a few years of information technology (IT) experience in my back pocket. I was ready to return to the workforce. Inspired by my dad’s retirement, I set a goal to retire at age 55, one year earlier than he did, so I’d have the flexibility to travel the world again without the time constraints of salaried employment.

After six months of living with Mom and Dad, I landed a government IT consulting position in the Washington D.C. area, for which I was underqualified and overpaid. My salary snowballed. Backpacking the world trained me to live frugally. College finance courses taught me to contribute to my 401(k) and invest monthly surplus dollars into stocks. The foundations were in place to reach my retirement goal.

But one thing became apparent soon after I started my new job. I didn’t like government IT consulting. I worked on massive IT projects with hundreds of workers. My direct contributions rarely influenced outcomes or led to organizational improvements. I was a small fish in Lake Titicaca.

Job satisfaction was elusive. But I was okay with that because I mainly cared about the salary and benefits. The high earnings allowed me to save and invest to reach financial milestones. My IT career was the path of least resistance to early retirement.

A steady job and homeownership gave me the confidence to finally achieve some dating success. I married and started a family. Early retirement to travel the world suddenly became impractical for at least the next 20 years. But the desire to retire at age 55 didn’t go away. In fact, it strengthened because I didn’t enjoy my career and wanted to escape.

Like my dad, I tolerated a career I didn’t love to provide my family with a comfortable lifestyle. But unlike my father, I lived in a high-cost-of-living city, worked summers and had no pension waiting for me after 35 years.

In 2013, I discovered a creative outlet by starting a personal finance and investing blog called Retire Before Dad to share investment strategies, personal finance tips and my progress toward my age 55 retirement goal.

My website became a side business. I enjoyed writing and earning money without filling out a timesheet every day. Writing more than 400 articles helped me discover that my dad’s retirement wasn’t the right model for me. His retirement was the end of his active earning years. But I found earning money through self-employment was more rewarding than a salary, and I expected I’d want to continue earning beyond age 55. My retirement goal was ultimately about attaining freedom and flexibility in my life. I started admiring entrepreneurs and workers who built careers they genuinely loved so much that they didn’t want to retire.

At some point, all the diligent saving and investing over the previous two decades became a large enough financial backstop. Meanwhile, unproductive meetings consumed each working day. Career advancements meant I had to sacrifice more brainpower and control over my time. What I craved was independence, extended time off, more fulfilling work and control over my weekdays.

In late 2022, I left my 20-year government IT consulting career at age 47 to be a fulltime blogger. I'm not aiming to retire at age 55 anymore. I'm as excited as ever to build my business—because I now have greater control over my time and a more gratifying profession.

Blogging is location independent. I can work from anywhere. I control my workday hours. My success depends on the quality of my writing output, not some opaque HR performance metrics.

Retirement is the most logical escape from a tiring career. But many retirement-aged workers still enjoy being productive and earning money. The commutes, meetings, overbearing superiors, corporate annoyances and constraints of fulltime employment make us want to leave.

But retirement may not be the answer. My suggestion: If you’re in a career you don’t love, consider your investments as the foundation for your next life phase. You may not have saved enough to retire outright—but it may be enough to launch a second act.

Craig Stephens writes about personal finance and investing at Retire Before Dad and Access IPOs . Follow him on Twitter @RetireBeforeDad and Facebook .

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