Jonathan Clements's Blog, page 211

That Losing Feeling

LOSS AVERSION IS ONE of the most powerful behavioral-finance phenomena. It���s often defined as ���losses loom larger than gains.��� It���s been said that the psychological pain from a loss is about twice as powerful as the pleasure from an equivalent gain.

Boy, am I feeling that right now. This year���s market losses have many of us concerned. But this year is different for my wife and me. This is our first year with no consistent earned income. My wife retired last August, which meant she earned a significant salary for much of 2021. I had some modest consulting income last year, and we also had my pension. That easily covered our annual expenses and paid for a large portion of some home improvements.

This year, however, it���s just my pension, a little consulting income and whatever we decide to withdraw from savings. We could turn on one or both of our Social Security retirement benefits. But we still haven���t reached our full Social Security retirement age. I���ll be 65 in September. My full Social Security retirement age is 66 and six months. My wife just turned 64, and her full retirement age is 66 and eight months.

In any case, we���re planning to delay claiming until we���re age 70, so we maximize our Social Security benefits. In the meantime, we���ll need to use savings to make up the shortfall between my pension and our expenses. My wife is healthy and has a family history of significant longevity. There���s been a lot of heart and lung disease in my family. But they were all heavy smokers, and I���ve never smoked. I���m hoping that, and a commitment to healthy living, will give me many more years.

We set up our portfolio with cash and short-term bonds to handle the withdrawals for the next five years. But when I look at the rest of our investments, I see our Vanguard Total Bond Market Index Fund (symbol: VBTLX) is down 9.3% year-to-date. On top of that, we all know what inflation is doing to our monthly bills.

Inflation scares me. A recent article in The New York Times included a personal inflation calculator. I was somewhat dismayed to see that our personal rate was 10%. The main causes: We bought a new car, typically drive more than 150 miles per week, dine out at restaurants a few times a month, and plan some travel this year.

I���m sure my current loss aversion is just my emotional side reacting to this year���s market turmoil. My rational brain tells me to chill. I Googled ���how to deal with loss aversion.��� The first response I found told me to be grateful. I have plenty to be grateful for.

The second most frequent response I found was to look carefully at what really could go wrong, and see how that would impact you. We built a strong margin of safety into our retirement plan, and we have options if we ever needed to scale back our lifestyle. Finally, the value of our Jersey Shore home has risen about 75% in the past 2�� years. I think we���ll be okay.

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Following My Muse

WHEN I WAS A YOUNG boy, my grandmother kept telling me, ���You must go into the family warehouse business.��� She was a product of the Great Depression. To her, this well-established business represented security. Many people would crave an offer of financial stability and a career roadmap. But I hated the feeling that my life path was being dictated by my family.

Maybe my financial journey was complicated by two competing influences���my father and my mother. My businessman father, who had gone into his own father���s warehouse business, made life choices based on their financial return. He had enjoyed going to college in California, but succumbed to family pressure and returned to Youngstown, Ohio, to join the warehouse business.

Meanwhile, my cosmopolitan mother, who grew up in Manhattan, had a more expansive worldview. She valued ideas and diverse experiences, and encouraged me to find my own voice and remain curious. Perhaps influenced by my mother, I wondered how intellectually stimulating it would be to run a warehouse in northern Ohio.

During my high school years, our struggling steel-mill town saw its main industry start to collapse. It never recovered. Even though our family enjoyed a comfortable lifestyle in a leafy suburb, the region was marked by poverty. My family���s home was worth $100,000 in 1970. If you simply adjusted for inflation, the house should be worth more than $725,000 today. Instead, it���s currently valued at less than $150,000. Working in the family business would have meant living in this declining community.

Getting educated. While attending Vassar College in New York���s Hudson Valley, I became intrigued by psychology. My college advisor suggested I pursue a doctorate in clinical psychology, but that sounded too narrow to me. Instead, I was more interested in social psychology and the influence of group dynamics. My favorite economics professor stressed that human emotions can distort financial choices. It was the beginning of a lifelong interest.

Even though I felt pressured to go into the family business after graduation, I delayed any career decision. I half-heartedly took the Graduate Management Admission Test and applied to business schools, even though I had no real-world business experience.

I was fortunate that my parents had paid for my undergraduate education. But I knew I���d have to foot the bill for graduate school. That���s why I chose the MBA program at the University of California at Los Angeles, where tuition was lower than at top-rated private schools.

While attending UCLA, I concentrated on strategic marketing, while also working as a teacher���s assistant for two organizational behavior classes. I was still unsure about pursuing a business career and considered becoming a fulltime academic. Despite more than 300 business recruiters coming to campus, I graduated without signing up for a single job interview. The only definitive career decision I made during the two-year program was to reject going into the family business.

Not pursuing job interviews and seemingly forgetting about my pending MBA debt was out of character. I wanted to be financially responsible. Yet I felt so stressed and ambivalent about working for any business, I became stuck. At age 24, younger than most of my MBA classmates and with no significant work experience, I needed to find a sense of purpose. I was convinced things would fall into place once something got me excited.

The future foretold. While many of my fellow business school classmates took the summer off before starting their new jobs, I devoted that time to regrouping. I found temporary work to pay bills, swam and biked to clear my head, and spent time in the library exploring career ideas. Within a month, I was inspired by reading Alvin Toffler's futuristic book The Third Wave , which argued that the developed world was moving from an industrial age to an information age. He predicted that the information and entertainment world would become decentralized, and new cable services would lead to a social transformation. My interest was piqued.

I attended cable industry conferences that summer and diligently studied future trends. I targeted a specific company, Continental Cablevision, known for its high-quality and innovative management team.��Thanks to the knowledge and insights I���d picked up through my research, my interview at the Boston headquarters went well and, in the fall, I was offered the position of director of corporate marketing.

My new bosses gave me a fair amount of autonomy. The work offered variety and the growing company granted flexibility. The CEO and co-founder, a brilliant and successful Harvard Business School graduate who went on to become a billionaire, shared his philosophy with me. He hired bright people and gave them leeway, which he hoped they could handle.

I was grateful that no one tried to make me fit the corporate mold and that the company encouraged creativity. I had market research and customer service responsibilities. I also designed and taught company workshops that encouraged employees to buy into new corporate initiatives.

From a purely financial perspective, I knew I should stay with this thriving private firm, which would eventually be bought out for mega-bucks. After four interesting years, however, my academic itch had only gotten stronger. To the surprise of company management, I informed them of my plans to go to graduate school at Harvard to study organizational behavior. My boss wanted me to stay, and offered me a generous raise as an inducement.

Instead, I left on good terms to focus on my academic interests. The missed financial opportunities���leaving before Continental Cablevision���s eventual buyout���mattered less to me than the chance to be more intellectually stimulated. Having the opportunity to study with world-famous professors felt liberating. I used personal savings from my corporate job to pay for the one-year master���s degree program. My plan: Find a decent paying job with a company shortly after graduation.

Some life-changing advice. The lesson that made the biggest impression on me���and which changed my life���resulted from a paper I wrote for an instructor whose own book recommended using certain organizational techniques to create a strong company culture. In my critique,��I praised the book���s insights. But under each section, I added comments from my own perspective. I explained that I personally would feel too constricted working for an organization that used his techniques.

He wrote on my paper, ���Great Insights, you SHOULD DEFINITELY work for yourself!��� This shocked me. I invited the professor to lunch and he graciously accepted.��He explained that in class I appeared comfortable when presenting my point of view. Working for myself would require marketing ability, which he felt wouldn���t be a problem for me.

I was a bit intimidated by the professor���s suggestion. My financial goals had evolved as I turned age 30, and now included owning a home and supporting a future family. I had concerns that being self-employed came with some financial risk, such as not qualifying for a mortgage due to unsteady cash flow. Still, the idea of working for myself got me excited, and I began to envision what services I could offer my network of contacts.

My transition to self-employment went smoothly, thanks to my connections at Continental Cablevision. Right after graduation, my old employer���plus other managers who had left to work for other firms in the same field���hired me for numerous consulting projects. Working on a variety of marketing and organizational projects proved stimulating and financially rewarding. Had I not been lucky enough to have worked for an industry leader like Continental, which was respected by other firms, breaking in as a business consultant would have been more difficult. Within a few years, the steady consulting earnings allowed me to qualify for a mortgage to purchase my first home.

Most of my consulting projects involved marketing research and strategy, but my background in organizational behavior and teaching also allowed me to offer instructional workshops.��Many managers find thick reports full of analysis boring. I tried to make my research and strategic reports come alive, and to encourage managers to reexamine their assumptions.

Rather than simply presenting research findings, the workshops I led encouraged managers to challenge their current plans. What research findings concerned them? Where was their firm most vulnerable? How would they attack their firm if they were a competitor? No challenge to accepted beliefs was considered off-limits. As one executive commented, ���The sessions were exhilarating by allowing us to let go of assumptions, and terrifying to see how unprepared we were in key competitive areas.���



Complementing my consulting work, I taught strategic marketing part-time as an adjunct lecturer at a Northeastern University Graduate School of Management evening program. But what I found most enjoyable was instructing older adults in a community college program.

Financial necessity had forced the best of these students to get fulltime jobs right after high school. If they hadn���t been economically constrained, they would have thrived in college. Now, heading back to school later in life, they were passionate and driven. I volunteered to review some students��� business plans, which were often impressive. Several went on to run their own successful companies.

Over time, the entertainment and telecommunication industry consolidated.��Many of my consulting clients became business whales gobbling up smaller companies. My little fish clients, which were often the most innovative, felt an imperative to sell out. I found myself secretly rooting for the underdogs to stay independent.

The accidental planner. This new business environment felt confining and forced me to reassess my consulting career. Around the same time, I was asked to sort out the financial mess created by my parents��� late-in-life divorce.

The warehouse business ownership split up after their divorce. My parents had owned half the company, which was divided between them. My older cousin���who managed the warehouse���owned the other half. My parents wanted someone they could trust on the company board. They asked me to join it to represent my mother���s interests and to assist my aging father. I wasn���t at all pleased by their urgent request, but I felt obligated to help. The warehouse business, which I had long ago rejected, still haunted me.

Participating in a family business sounds appealing to many people. But in this case, the relationship dynamics made everything more difficult. Upon joining the contentious board, I found out the building roofs and infrastructure needed substantial updating. Obtaining major bank loans for these unbudgeted capital expenditures, and redirecting management���s focus, became a time-consuming imperative. I wanted to disengage from this quagmire and have the company, or at least my parents��� shares, sold, so I could concentrate on my fulltime career. But there was no existing provision for buying out an owner���s stake, so everything became a difficult internal negotiation.

Meanwhile, after my parents��� legal separation, my mother hired a broker who constantly churned her bond account, while charging high trading commissions. When I challenged this slick employee from a well-known financial firm, he claimed to have unique market-timing insights. Outraged, I compared his performance to Vanguard Group���s intermediate-term bond index fund. I found he underperformed this benchmark by more than 10 percentage points a year. It became apparent why older people���and others���need a financial advisor they could trust. The self-serving hype of many financial providers motivated me to become a more educated investor.

My background in research statistics proved useful as I reviewed evidence-based studies. Nobel Prize-winner Harry Markowitz explained the value of portfolio diversification. John Bogle, the founder of shareholder-owned Vanguard, stressed the value of low-cost index investing. Eugene Fama, the renowned portfolio theorist, demonstrated how small-cap and value stocks could enhance performance.

The investing books that I found compelling highlighted why investors had great difficulty beating the market. I became a do-it-yourself investor, relying on well-diversified, low-cost U.S. and international stock index funds. I had slight tilts toward value and small-cap stocks, and I also invested in quality short-term bonds to limit volatility. To these, I added a few speculative stocks picked using my knowledge of information and entertainment companies.

Creating a low-cost diversified portfolio didn���t seem too difficult. What proved more challenging was managing my own emotions and ego. Keeping up with current events and the latest market trends may have helped in my consulting work. But the financial markets were too complex to forecast, and overconfidence when investing can be treacherous.

I nevertheless found myself predicting where the market might be heading. It was all too easy to find confirming articles or have discussions that reinforced my opinions. Fortunately, I heeded the warnings of experts who criticized market-timing. Obeying John Bogle���s maxim to ���stay the course������rather than act on market forecasts���saved me lots of money.

Advising families and other individuals about their personal finances seemed like a career possibility. I enrolled in Boston University���s financial planning evening program, while continuing to consult during the day.��I had concerns about business models that depended on commission-based brokerage fees and insurance sales. That led me to embrace a fee-only financial advisory model that followed the fiduciary rule���clients��� interests come first.

A fork in the road. My background in strategic planning and psychology seemed well suited to financial planning. Yet I questioned whether it made financial sense for me to give up a solid 20-year consulting practice. Perhaps I should keep consulting and gradually add personal finance clients?

Then, unexpectedly, a longtime consulting client offered me a chance to dive in. This wealthy entrepreneur had worked in the cable, entertainment and search engine businesses. By age 50, he was set for life and had been able to provide his children with substantial trust funds.

He offered to jumpstart my financial management career by providing me the opportunity to oversee these trust accounts.��He made a stipulation, however, that I must stop all business consulting. He insisted personal investing and financial planning would require my full attention. I contacted other prospective clients and found a receptive audience. Since I no longer found consulting especially satisfying, I agreed to focus on my new career.

What bothered me most about the financial services industry was its emphasis on generating investment buys and sells. I wanted a practice that instead cultivated long-term relationships. Would a potential client be a good fit over time, regardless of her financial value to my practice? Rather than maximizing my advising income stream, like my traditional father might have suggested, I favored my mother���s orientation toward quality connections with people.

As an advisor, two behavioral finance insights have proven invaluable. The first revolves around loss aversion. Studies show that people feel the loss of money much more severely than an equivalent gain. I suggest to some clients that they may want to temper their aggressive investing approach. What, I often ask, about the potential impact of substantial losses on their lifestyle? Might they sell in a panic during tough times?

My second insight is that many clients��� career choices have a big effect on both their finances and life satisfaction. Maintaining the status quo���staying in one place rather than considering career options���can prove limiting. This, of course, is a lesson I���ve learned myself. The path ahead can seem murky and changing course is often difficult. Professional and family commitments may weigh you down for an extended time. In my case, my father passed away three years ago. Last year, my cousin���s son bought out my mother���s and stepmother���s warehouse shares. Finally, after reluctantly sitting on the board of the family business for two decades, I was free.

At this point in my journey, at age 66, I continue to enjoy working with clients and teaching, but I���ve expanded my approach. Now, I teach personal finance courses at adult education centers for senior citizens, while also guiding medical school residents at Boston-area teaching hospitals. I write blog posts and articles that cover financial behavior and planning topics.

Since I remain curious about other people���s financial quests, I started a podcast series called ���Financial Crossroads��� that explores how people handle career and lifestyle transitions. My goal is to interview a range of people willing to share what���s worked for them. A surprising bonus: My 93-year-old mother listens to���and comments on���my episodes.

What about my own journey? Managing my human capital hasn���t meant making the most money possible, but I have earned a comfortable living. When I think about the people I admire most, it���s those who feel they have enough and who enjoy giving back.��I remind myself that success and failure have never been totally in my control. My goal: Follow my passion���and be grateful when things happen to go my way.

Rand Spero is president of Street Smart Financial, a fee-only financial planning firm. He provides comprehensive financial services to help clients organize, increase and protect their assets through life transitions. Rand teaches personal finance and strategic planning classes at universities in the Boston area, and also hosts the podcast series Financial Crossroads. Check out his earlier articles.

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Hard to Follow

"BUY LOW, SELL HIGH." This is probably the most famous investment adage. It sounds so simple and commonsensical���a sure path to success. Like so many investing truisms, however, following it is easier said than done.

For one thing, how do we really know when we���re buying low? When it comes to a pair of jeans or a laptop computer, we have a good sense of value. When they go on sale, we snap them up without hesitation.

It isn���t as clear with stocks. The intrinsic value of a stock depends on its earnings and dividend payments extending far into the future. Almost by definition, we can���t know these with any certainty. The price the market assigns to future earnings is in constant flux depending on prevailing interest rates and the vagaries of animal spirits.

Suppose for a moment that stocks did come with price tags indicating their intrinsic value. What would be the result? Trading would grind to a near halt. After all, who would sell a stock for less than its true value or buy one for more?

The lack of clarity around what constitutes a high or low price is what drives markets. As thousands of investors cast their votes daily, with every trade that they make, it���s assumed that stock prices will converge around their intrinsic value. That, at least, is the notion behind the Efficient Market Hypothesis. Prices, it���s believed, reflect the wisdom of the crowd.

But crowds can sometimes behave more like herds, subject to stampedes of collective optimism or pessimism. These are reinforced by our natural attraction to compelling narratives, stories that help us make sense of reality. We���re also creatures of momentum, expecting the future to mirror the recent past.

These forces are powerful and can conspire to drive stock prices far above or below their intrinsic value. Consider Zoom Video Communications (symbol: ZM), a software company. In fall 2020, Zoom���s market capitalization exceeded that of Exxon Mobil (XOM). That���s despite Exxon���s 12 billion barrels of proven oil reserves, as well as its vast array of other tangible and intangible assets.

Fast forward 18 months. Today, the market cap of Zoom is less than one-tenth that of Exxon. With the benefit of hindsight, it���s easy to say that selling Zoom and buying Exxon was a no-brainer. But it���s never that easy.

By fall 2020, Exxon stock had fallen more than 60% in six years, leaving long-term shareholders licking their wounds. With a pandemic raging, the outlook for energy companies was bleak, with crude oil prices at a two-decade low. The last thing most investors wanted to do was buy a stock that had inflicted so much pain.

On the other hand, investors in Zoom were enjoying enormous returns. The stock had risen ninefold in less than two years. Its narrative was equally compelling: Everyone would be working from home in the future. In this brave new world, Zoom would be one of the prime beneficiaries. As with most narratives, there was a good deal of truth to the story. Why in the world would investors sell such a promising stock that had treated them so well?

Problem is, investing that���s based on narratives and past performance���while ignoring price���is the bane of investors. In 2020, Zoom stock was priced for perfection, while Exxon was left for dead. Buying low and selling high sounds so easy. In practice, it never is.

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Driving a Bargain

"NEVER BORROW MONEY to buy a depreciating asset." This personal finance tip is often used to dissuade folks from taking out car loans. But does a car really leave folks poorer?




When we value an asset, it���s typically thought of as its dollar value on a balance sheet. The monetary value of my car might indeed decline, and quickly at that, but it has far more usefulness than my personal balance sheet shows. When I consider my car���s true value, I think of how much it improves my life.




I made a major change in 2018, moving from Philadelphia to Scottsdale, Arizona. I landed with two suitcases, a backpack and my cat. I had a job starting in three weeks in the heart of Old Town Scottsdale���a pricey area.




In Philadelphia, I���d never needed a car. There���s great public transportation and I could get almost anywhere by walking or taking the train. If you���ve ever been to Phoenix and its surrounding suburbs, it���s a different story. It sprawls in every direction and lacks decent public transportation.




As a young professional 2,000 miles from home, I needed to travel this big expanse. I also wanted to do some exploring in the West, so I took out a loan to buy a new car.




I don���t imagine I���ll ever recoup the money I paid for the vehicle. In fact, I suspect that my car will always be asking me for more money���for maintenance and repairs���even after I���ve paid off the loan. That���s fine. My expectations are set on this because I see so much additional value in owning a car.




Monetary benefits. Old Town Scottsdale���s rents are at least 20% higher than some surrounding areas. I can live less expensively nearby as long as I can handle a 10- to 15-minute commute.




My car also provides me access to a larger pool of jobs. On top of that, I have reliable transportation, which makes me a more dependable employee. Finally, in this gig economy, a car opens up opportunities for self-employment, a side gig or temporary income during a gap in employment. This could come from signing on with services like Uber, DoorDash and Instacart.




Emotional benefits. My car is truly liberating. It can buy me time by making travel more convenient. It allows me to live where I want and gain happiness through new experiences outside of my neighborhood. The ability to go anywhere at any time is hugely appealing.




If it takes a loan to realize these benefits, I���m willing to bear that cost. I think most Americans would agree with me. Even when you���ve decided that a car is worth buying, however, another financial argument breaks out. It���s about whether it���s better to buy a new car or a used one.






This is where I find the biggest ridicule from finance influencers. They advise never to buy a new car, and especially never to buy a new car with a loan. That���s because the moment you drive a new car off the dealer lot, it takes a big hit, thanks to depreciation.




Perhaps, in an ideal world, we���d all buy a good used car with cash. But that option isn���t available to many people. Moreover, even if you can afford to pay cash, there can be a good reason to buck the conventional wisdom. The benefit I���ve received from buying a new car can be summarized in one word: reliability.




A new car brings me peace of mind, knowing it���s unlikely I���ll be waiting on the side of the road for AAA. I don���t have to leave an extra hour early for work in case my car doesn���t get me there. I also knew I���d be traveling along dirt roads and across state lines to do some exploring, so reliability was nonnegotiable with my car purchase.




A new car works out well for me on another level. I���m not a car guy. I lack the understanding of how to take care of one. The new car warranty typically covers the scheduled service for the first few years. I���m happy to pay more to get that responsibility off my plate.




My goal has never been to turn around and sell my car for a decent sum when I���m done using it. Instead, I want to pull out all the value I can along the way. I���ll increase both my life experiences and my financial wealth through its use���and not by selling it at the end.

Logan Murray is a solo��financial advisor. His company�� Pocket Project ��offers��subscription-based financial planning services to young professionals. For more financial insights, read Logan���s�� blog ,��connect with him on�� LinkedIn ��and check out��his earlier articles.

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A La Carte

I REMOVED THE YOKE of cable TV several years ago. Thanks to today's streaming channels, I have endless options���and I'm still saving money.

If you thought cable offered an overflowing abundance of choices, buy a Roku or other streaming device. You could stay glued to the screen 24/7 and never see anything twice, probably for years.

A Roku device, available for as little as $24, will give you access to more than 200 channels, including the well-known streaming channels such as Netflix, Hulu and HBO Max. Some of the 200 channels charge monthly fees, but many are free.

Indeed, buried treasure can be found in the more obscure channels, such as Fawesome, an odd blend of ���free��� and ���awesome.��� Here you will find the original The Saint television series starring Roger Moore before he became James Bond. Also check out Tubi, which provides access to live news, in addition to long forgotten TV shows and old movies. Hulu lets you access other established cable channels, such as A&E and Lifetime.

Many of the ���free��� channels have commercials. Remember them? It���s a small price to pay to relive childhood memories of watching the absurd but often hilarious 1960s sitcom Green Acres, available on Pluto. More cerebral choices can be found throughout the Roku world, including a plethora of documentaries and foreign language films.

But the best part of this post-cable world is that I���m paying about $30 less per month than before, even with seven subscribed channels that offer first-run theatrical films such as King Richard on HBO Max and widely celebrated new series such as Ozark on Netflix. Another advantage is that I can pause channels at my discretion, which was impossible when I was tied to the cable company. Here's what I currently pay���with some prices the result of short-term specials:

Netflix $15.49
YouTube $11.99 (no commercials)
HBO Max $11.99
Hulu $6.99��(with commercials)
Prime $14.99 (also free shipping with Amazon)
PBS Documentaries $3.99 (added to Prime)
Criterion Channel $10.99

Several streaming services are available as add-ons to other channels. For example, you can get Showtime through Hulu for $3.99 a month for four months. Bargains can be found everywhere, but it requires investigation and effort. Still, it's better than being hostage to a cable bill that only ever went up.

Retirement affords me the time to catch up on programs I could never watch while working and being an active parent. For example, PBS Documentaries, offered through Prime, provides access to all the Ken Burns documentaries, and also episodes of Finding Your Roots. I was able to binge watch Downton Abbey on Netflix.

The Criterion Channel might be the least known of my choices, but it���s a treasure trove of classic and foreign films. If you miss the art house theater long gone in your urban village, this is the place to visit.

And not everything costs extra. Check out some of the best free channels on Roku. You���ll never get bored.

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The Krone Stops Here

I LIKE TO KEEP my wallet organized. It���s a bit obsessive. All my bills must face the same direction and be upright, with the 20s in the back and singles in front. I���m thinking that means something. Turns out an organized wallet is indeed a thing.

I also save my change. All those little coins add up. To what purpose? Before we travel, I take the coins to the bank and then add the proceeds to our spending money. Once, they added $700 to the pot.

If you received a cash gift, would you be offended if the bills weren���t brand new? Not me. Still, I���m sent to the bank to get new 50s around the holidays. My wife insists new bills are essential for gifts. Apparently, she���s not alone. They���re hard to get. The bank teller says they run out quickly. As for me, donations of old, crumbled bills in any denomination are welcome.

Money has been with us a long time and, for just as long, we���ve been losing it and hiding it���and apparently forgetting it.

The Mesopotamian��shekel was the first known form of currency. That was nearly 5,000 years ago. The Hoxne Hoard is the biggest collection of late Roman gold and silver coins discovered in Britain, as well as the largest collection of coins of the fourth and fifth centuries found anywhere. It contained 14,865 Roman��gold, silver and bronze coins. For any number of reasons, burying money seemed the thing to do. I watch old Time Team shows on YouTube. Medieval coins are a common archeological find, many with pictures of the king of the day.

My father had a collection of Indian Head pennies. Today, that collection would be worth a small fortune. Sadly, as a child, my sister used most of them in a gumball machine.

The world has 164 national currencies. But thanks to the euro, travel today in Europe is less confusing���usually. Scandinavia has its own way with money. You cannot use the euro or Danish krone when paying in Sweden. It uses the krona, which is not to be confused with the krone. I once took the train from Copenhagen, Denmark, to Malmo, Sweden. I went to buy the return trip ticket with a Danish krone and it took 10 minutes for my American way of thinking to grasp the difference. I didn���t have any other money, and ended up paying a premium to use my krone.

Money around the world has different colors, shapes and sizes. Some of the coins have holes in the middle. I find myself not taking foreign cash seriously. It doesn���t feel like I���m spending real money. I���m sure I���ve occasionally paid too much as a result, especially when some foreign coin is worth more than a U.S. dollar.

Does a pound sound like money? How about a ruble? And that���s not counting slang���quid, smacker, buck. Australia is especially colorful. Can you say lobster, which is $20 in Australian slang, or pineapple, which is $50?

It���s not only foreign money that can be confusing. Recently, I tried to spend a U.S. gold-colored dollar coin. The clerk didn���t want to take it. Maybe it���s a good thing I didn���t try a $2 bill.

How would you like to be the person who decides whose picture is on the money? The U.K. has it easy. It���s mostly the Queen, though even there a statesman and author have snuck in. The U.S. used to stick mostly with presidents. Even some of those have fallen out of favor and several have disappeared because the denominations with their likeness were eliminated. I���ll never see Woodrow Wilson on the $100,000 bill. Having your picture on U.S. currency is a risky goal. You have to be dead.

Sometimes, our affection for money escapes logic. In fiscal year 2021, the cost to make, administer and distribute the penny was 2.1 cents, while the cost for the nickel was 8.52 cents.

Hard cash, it seems, may be on its way out. What do they call it? Cryptocurrency? That���s any form of currency that exists digitally or virtually, and uses cryptography to secure transactions. It���s Greek to me. No size, shape or color. What fun is that? What���s next, virtual gift giving?

Not wanting to be left behind, I bought $10 of bitcoin in my PayPal account. The last time I looked, it was worth $9.13. I should learn not to invest in something I don���t understand. Last year, some kind of a partnership lost me $25,000.

Richard Quinn blogs at QuinnsCommentary.net. Before retiring in 2010, Dick was a compensation and benefits executive.��Follow him on Twitter��@QuinnsComments��and check out his earlier��articles.

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Agency Problem

MOST PEOPLE THINK that selling real estate is the flip side of buying. But in most cases, selling is a very different enchilada, and that should drive who you hire as a REALTOR�����and, yes, that is the preferred style.

Buyers face an almost infinite list of potential properties to purchase. Initially, almost every house is a possibility. As the buyer and agent review the buyer���s requirements, the list is whittled down until the dream home is found.

The buyer relies on the agent���s knowledge of school districts, neighborhoods, streets, commutes, property taxes and so on. The agent���s knowledge of all the real estate available is vital to the buyer making an informed purchase.

This process requires a certain amount of togetherness, as both buyer and agent review the ever-changing list of requirements, while driving around in a luxury SUV, touring houses, drinking coffee and talking on the phone.

The importance of getting along cannot be overstated. Buying your dream house using an agent you don���t like is at best problematic and at worst the fifth circle of hell. There���s no point in hiring an agent���even one with the negotiating skill of Chester Karrass and the local knowledge of Gladys Kravitz���if you just can���t stand him or her.

Selling real estate is very different. Instead of an almost infinite number of homes under consideration, there���s only one. Sellers only care about the agent���s knowledge of one school district, one neighborhood, one street, one property tax bill. If sellers determine that the best person to sell their home is a little bit of a jerk, who cares? The amount of time they���ll spend together will be limited���especially if the agent is any good.

If the real estate gods were to appear before buyers and vouchsafe that, if they were to pay 10% more, they���d be assured of buying the perfect home, most would accept the offer. But if the gods appeared before sellers to say that, for 10% less, they���d get the most well-mannered agent, one who���d provide the most fabulous gift baskets and remind everybody of their favorite aunt, sellers would reply ���no, thank you��� or, more likely, ���Are you high?���

Viewing a buyer���s agent and a seller���s agent as two different specimens might at first seem to make real estate transactions more complicated. In fact, it can make selling much more straightforward: Interview as many agents as necessary to find the one who will sell your home for as much money as possible. This may take time, so it���s best to start the selection process well before you plan to sell.

What about selling your house using the agent who helped you buy the place? That reminds me of my wife���s choice of a hairdresser. She continues to use him not because he does such a great job, but because they have become friends. What would he think if he found out she went someplace else?

My advice: Former home buyers who are now sellers should send for the sons-of-bitches. Let���s face it, ���This is no time to go wobbly.���

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Ten Points of Pain

I JUST COMPLETED my fourth year preparing tax returns as part of the federal government���s Volunteer Income Tax Assistance (VITA) program. I���ve seen first-hand how confusing our tax code can be for many taxpayers. Here are the 10 areas of confusion I���ve encountered most often:

1. Income. Anyone looking through a tax return will see multiple definitions of income. There���s total income, adjusted gross income (AGI), modified adjusted gross income, provisional income and taxable income. Each is slightly different and used for a different purpose. AGI is arguably the most well-known; the government uses it to determine eligibility for numerous tax credits.

2. Social Security taxation. Social Security benefits can be taxed if you meet certain income thresholds. For this purpose, your income is calculated by taking your AGI, and adding back any nontaxable interest and one-half of your Social Security benefit. The IRS then uses a formula to determine what percentage of your benefit is included in taxable income. That amount can range from 0% to 85%. I���ve had taxpayers shocked that their benefits are taxed at all, and I���ve had others who were convinced that 85% of their benefits would be��lost to taxes.

3. Refundable vs. nonrefundable tax credits. A tax credit directly reduces your tax bill. But there are two types: A nonrefundable credit can reduce the bill down to zero, while a refundable credit can actually create a tax refund. Refundable tax credits can be especially valuable to low-income taxpayers because it can put money in their pocket.

4. Earned income tax credit. The EITC is a refundable credit designed to help low- to moderate-income taxpayers. Since this is a credit that encourages work, the taxpayer must first have earned income. In 2021, a married couple with three dependent children could earn up to $57,414 and still be eligible for a $6,728 credit. Recent changes have broadened the age range for this credit. Many seniors with modest earnings were elated to see it applied to their 2021 tax return.

5. Premium tax credit. This is a refundable credit designed to help taxpayers who purchase medical coverage through a government health-care insurance marketplace. In most years, a taxpayer���s income must be below 400% of the federal poverty level. The trick, however, is that you qualify for this credit at the beginning of the year based on your estimated annual income. If your actual income exceeds the limit, you might have to pay back part of the credit. I once worked with a self-employed client whose income exceeded the limit. While preparing his return, we showed him that making a deductible IRA contribution would reduce his taxable income enough to stay under the threshold. It���s highly unlikely he would have figured that out on his own.



6. Itemized deductions. Many seniors come to us with stacks of receipts for medical expenses and charitable contributions. They don���t realize that 2017���s tax law made these receipts obsolete for many taxpayers, because their total itemized deductions are less than today���s higher standard deduction.

7. Child tax credit. This credit���the subject of ongoing political negotiation���is designed to relieve the tax burden of parents and guardians. Recent changes have broadened who can qualify and boosted the credit from $400 to $2,000. The phaseout now begins at $150,000 of income for joint filers.

8. Education credits. There are two similar credits that provide tax relief for education expenses: the American Opportunity Tax Credit and the Lifetime Learning Credit. These have subtle differences, so taxpayers must pay careful attention to apply them correctly. I recently prepared an amended return for a college student who hadn���t tallied her education expenses when she filed. She later returned with the proper documentation. Her return changed dramatically: She went from a shortfall of several hundred dollars to a refund of more than $2,000.

9. Tax liability vs. tax refund. One of the most common misconceptions I see concerns the difference between a person���s tax liability and tax refund. Many taxpayers still think of a sizable tax refund as a windfall. In truth, getting a refund or not depends on whether you properly accounted for taxes throughout the year. I���ve had people who were upset that their refund was significantly smaller than the previous year. Even so, it sometimes turns out that their total tax liability was actually lower than it had been the year before. This doesn���t always mollify someone counting on a large refund.

10. Alternative minimum tax. As the name implies, the AMT is an alternative method of calculating someone���s tax liability. It was created to ensure that all taxpayers pay a minimum amount of tax. This parallel tax system uses a different set of rules to arrive at a minimum taxable income and a tentative minimum tax (TMT). The taxpayer then pays the greater of the standard tax liability or the TMT. The system originally targeted wealthier taxpayers, but it sometimes affects taxpayers at lower income levels. Taxpayers who pay AMT for the first time feel like they���ve experienced a nasty surprise.

A primary reason taxpayers get confused is because the rules keep changing. Consider that the legislation passed by Congress in 2017, 2020 and 2021 all included tax-related changes. The trend of never-ending changes seems destined to continue. Major provisions of 2017���s tax law will expire on Dec. 31, 2025���just as many taxpayers are becoming comfortable with them.

Richard Connor is��a semi-retired aerospace engineer with a keen interest in finance. He��enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter��@RConnor609��and check out his earlier articles.

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Bringing Up Baby

EVER SINCE OUR OLDEST was born three years ago, my wife and I have had to confront the cold reality of paying for childcare. We visited four different daycare providers in the Boston area. None was below $2,300 a month. The gap between what we saw as the best and the worst was only $200.

Our monthly childcare outlay���now covering two kids following the birth of our second child last October���is close to $5,000. On top of that, of course, we have formula, diapers, clothes and more.

The reason for high daycare costs isn���t salaries. By most accounts, daycare workers are underpaid. Rather, a major reason is the need for a low child-teacher ratio, which you���ll realize is essential if you���ve spent any time around two-year-olds.

We live in Cambridge, where rents have soared, and yet we pay significantly less per month for our three-bedroom condo than we pay for childcare. We���ve been actively looking to buy a place over the past few years, and we have a down payment set aside that at one time would have been considered adequate.

But with today���s hyper-competitive real estate market, we need to pony up more upfront cash if we���re to buy a home���but that cash has instead been devoured by childcare. I love my kids and I���d rather have them than the $70,000 to $100,000 of additional down payment that we might have socked away over three childless years. Still, when I step back and calculate what childcare has cost us, the sum is staggering.

Perhaps more jarring is that my wife and I are both professionally successful, albeit in the nonprofit education world. I have to remind myself that others are in a far more difficult bind, having to decide whether working makes sense given the cost of childcare. After all, our annual daycare costs are similar to the median U.S. household income. Last fall, I started getting really excited about the prospect of universal pre-K as I imagined what it would mean for our family and, more altruistically, how it might enable society at large to be more productive.

Many parents today face the extreme costs of childcare during the early years and soaring college costs on the backend. If you���re wondering why young adults don���t seem to be in a big hurry to have kids, here���s a hint: Maybe it has something to do with money.

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Better Than Dollars

A FRIEND ASKED ME recently if I got paid for the writing I do. She assumed that I���d be compensated, especially for research articles published in scholarly journals.

���Yes,��� I replied. ���I���m paid generously���in psychic income.���

���What���s psychic income?��� she asked.

I explained. ���Instead of earning a paycheck for my paper, I earn the satisfaction of this well-respected periodical running my article.��� That���s also the way it is for my short stories and poetry that appear in specialty publications.

For me, psychic income is the intangible joy I receive from the writing process. As a retired financial planner, connecting with readers across the country is more important to me than earning a few dollars. The Cambridge Dictionary defines psychic income as the pleasure and satisfaction that people get from doing a job, rather than the money they earn for doing it.

Several years ago, I reaped priceless psychic income from penning my financial guidebook for new widows. As a surviving spouse myself, writing the book helped heal my grief after my prior husband���s death. It also felt good knowing the guidebook assisted thousands of other widows dealing with this difficult transition. Some wrote me heartfelt notes. Authoring the book was a way to honor my spouse���s legacy. That was important to me. I���ve used much of the profit from book sales to support programs assisting widows and their children, which further added to my psychic income.

Folks earn psychic income in many ways. Over the past month, I asked retired friends what activities pay them psychic income. Here are some of their responses:

���I like being a volunteer driver, getting cancer patients to their chemo treatments at the hospital when they���re too sick to make the trip on their own. I try to cheer them up if they want to talk.���
���I love creating my large floral oil paintings and donating them for the annual fundraising auction benefitting my church. It���s fun to paint for this cause, with many people buying my art.���
���I thrive mentoring newbies just starting in our profession. It���s gratifying that they value the advice I can give them in their new careers. One of my mentees still stays in touch with me years after I helped her. Makes me smile.���
���Such a thrill when one of my short stories was included in an anthology. I knew I had arrived as a published author.���
���I enjoyed completing the volunteer museum docent training where I learned so much. Makes me feel useful when I lead tours for elementary school children now.���
���It���s challenging to facilitate my course at the lifelong learning center. Think it makes my brain grow! I love it when participants tell me they learn a lot in my class.���
���Serving on this nonprofit���s board of trustees gives me a chance to know some interesting people who share my focus on working to improve our community.���
���Recently, I set up a small scholarship fund in memory of a favorite teacher who made a tremendous difference in my life. I want to keep his memory alive in the coming years by helping a few deserving students. Just feels the right way to use part of the money I earned before retirement in this way. I���m still following his advice from years ago.���

Whether you���re retired or still working, what do you do that earns you psychic income?

Kathleen M. Rehl is retired following a career in financial planning and an ���encore career��� of speaking and doing research about widows. She authored the award-winning book, Moving Forward on Your Own: A Financial Guidebook for Widows. Kathleen enjoys writing legacy poetry and stories, as well as assisting various nonprofits. You can learn more at www.KathleenRehl.com. Check out Kathleen's earlier articles.

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