Jonathan Clements's Blog, page 293
April 1, 2021
Meet BraggingBucks
GET TO KNOW OUR NEW website: BraggingBucks.com. Intended as a sister site to HumbleDollar, the new website is designed for those who can’t quite shake that hankering for market-beating returns.
It’s become clear that notions like indexing, diversification and a sense of contentment have limited appeal—and that many folks want more excitement from their financial life. Perhaps an occasional flier on a hot stock. Or playing the commodities market. Or going from all-stocks to all-cash and then back again.
When you’re ready to move beyond the humdrum index funds favored by HumbleDollar, BraggingBucks will be there to help. Tesla. Leveraged exchange-traded funds. Bitcoin. Special purpose acquisition companies (SPACs). Market timing. Tesla. Options writing.
BraggingBucks will cover it all with a team of eager young writers, all of whom have learned the ropes at the Robinhood School of Hard Knocks. Such talent doesn’t come cheap. To ensure the new site can afford to hire the best and brightest, we’ve established partnerships with up-and-coming financial firms eager to promote their stock-picking prowess through sponsored blog posts.
Let’s face it, in today’s fast-paced markets, it isn’t enough to simply look at our portfolios every month or even every week. We can’t simply buy, hold and hope. That’s why the new site will offer these unique features:
Stock of the minute. We’ll generate these recommendations using a proprietary financial model that analyzes momentum, valuations and the potential for our partners to accumulate large stock positions ahead of time, which will then be available for readers to buy.
Hourly market forecasts. Using another proprietary model that incorporates cutting-edge algorithms, artificial intelligence, behavioral insights and laser surgery, we’ll generate forecasts with a frequency never before tried on Wall Street.
Market-beating newsletters. Accompanying the new website will be nine newsletters, all of which will be initially available at no cost. Each newsletter will be focused on one of the nine U.S. style boxes, such as small-cap value, large-cap blend and mid-cap growth. Each month, we’ll email out our recommended stock picks.
We’re all but certain that at least two or three of the newsletters will outpace the S&P 500 over the next year. We’ll then close down the laggards, while charging a modest $199 a year to continue receiving the market-beating newsletters. We’re confident that this strategy will produce the best past performance that money can buy.
We also plan to launch companion mutual funds with 5.5% sales commissions and 2% annual expenses. Both costs will be a tremendous benefit for fund shareholders, because they’ll create an added incentive for us to try really, really hard to beat the market.
What if the mutual funds falter, the newsletters bomb, the market predictions flop and the stock picks prove to be duds, and we’re hit with a raft of investor complaints? We’ll just remind everybody that it’s April Fool’s Day.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier articles.
It’s become clear that notions like indexing, diversification and a sense of contentment have limited appeal—and that many folks want more excitement from their financial life. Perhaps an occasional flier on a hot stock. Or playing the commodities market. Or going from all-stocks to all-cash and then back again.
When you’re ready to move beyond the humdrum index funds favored by HumbleDollar, BraggingBucks will be there to help. Tesla. Leveraged exchange-traded funds. Bitcoin. Special purpose acquisition companies (SPACs). Market timing. Tesla. Options writing.
BraggingBucks will cover it all with a team of eager young writers, all of whom have learned the ropes at the Robinhood School of Hard Knocks. Such talent doesn’t come cheap. To ensure the new site can afford to hire the best and brightest, we’ve established partnerships with up-and-coming financial firms eager to promote their stock-picking prowess through sponsored blog posts.
Let’s face it, in today’s fast-paced markets, it isn’t enough to simply look at our portfolios every month or even every week. We can’t simply buy, hold and hope. That’s why the new site will offer these unique features:
Stock of the minute. We’ll generate these recommendations using a proprietary financial model that analyzes momentum, valuations and the potential for our partners to accumulate large stock positions ahead of time, which will then be available for readers to buy.
Hourly market forecasts. Using another proprietary model that incorporates cutting-edge algorithms, artificial intelligence, behavioral insights and laser surgery, we’ll generate forecasts with a frequency never before tried on Wall Street.
Market-beating newsletters. Accompanying the new website will be nine newsletters, all of which will be initially available at no cost. Each newsletter will be focused on one of the nine U.S. style boxes, such as small-cap value, large-cap blend and mid-cap growth. Each month, we’ll email out our recommended stock picks.
We’re all but certain that at least two or three of the newsletters will outpace the S&P 500 over the next year. We’ll then close down the laggards, while charging a modest $199 a year to continue receiving the market-beating newsletters. We’re confident that this strategy will produce the best past performance that money can buy.
We also plan to launch companion mutual funds with 5.5% sales commissions and 2% annual expenses. Both costs will be a tremendous benefit for fund shareholders, because they’ll create an added incentive for us to try really, really hard to beat the market.
What if the mutual funds falter, the newsletters bomb, the market predictions flop and the stock picks prove to be duds, and we’re hit with a raft of investor complaints? We’ll just remind everybody that it’s April Fool’s Day.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier articles.The post Meet BraggingBucks appeared first on HumbleDollar.
March 31, 2021
Outside the Box
MY FIRST JOB AFTER college was as an officer in the U.S. Navy. I was an engineer on a nuclear-powered submarine, the USS Albuquerque. While I didn’t make the Navy a career, it left one indelible imprint on me: the need to understand how things work.
Before ever setting foot on the Albuquerque, I spent more than a year learning exactly how nuclear power propelled a submarine, everything from how to operate a valve—it isn’t as simple as you think—to how the reactor worked on a sub-atomic level. The point of the training: understanding how it all worked was just as important as how to work it. The reactor wasn’t a mysterious black box that provided power, but rather a force that needed to be continuously studied and eventually mastered.
When I left the Navy for corporate life, the headhunters I used made it clear to me that corporations do not view training and knowledge as favorably as the Navy and, in fact, many companies viewed training as a cost to be avoided.
And they weren’t wrong, as I quickly learned whenever I had an issue with a corporate software program. I would call the IT help desk and inform the folks there of the problem, and generally they provided the correct solution. But when I asked how the issue came about or how to prevent it in the future, I was met with silence. It quickly became clear to me that, while many people understood how to operate various IT systems, few—if any—truly understood how they worked. On the Albuquerque, technical knowledge was a badge of honor to be proudly displayed, but in corporate America it was a sign that you were no longer on the fast track. I said to myself, more than once, “You’re not in the Navy anymore.”
I thought about that recently when I was doing my taxes. I use TurboTax and, while its data entry capabilities and general layout leave much to be desired, the biggest disappointment is that it’s just a $70 black box. You input the numbers from your W-2s, 1099s, K-1s and so on, and TurboTax spits out the size of your refund, if you’re lucky, or amount owed, if you aren’t. If you’ve used TurboTax or one of its competitors, you know these programs provide zero context, analysis or tax training. I think this is done to ensure you keep coming back every year. Problem is, you’re none the wiser about your specific tax situation or how to create a tax game plan for the future.
Prior to the personal computer, you had only two options. You either took your shoebox full of receipts, W-2s and 1099s to your accountant or you got out your pencil, calculator and IRS instructions and got to it. Note that I said pencil. You knew mistakes would be made, but that when it was all done you would be thoroughly familiar with each and every number. I’m not sure if tax regulations have become more complex, but I do know that using pencil, calculator and IRS instructions is no longer an option for most of us. I tried entering all the details from a single K-1 using a pencil… once. Maybe it’s due to the deep state, TurboTax lobbyists or just plain laziness, but now the only two realistic options for ordinary mortals are your computer or your accountant.
If, at this point, you’re content to let TurboTax continue to spit out your tax forms, read no further. But if you’ve always been bothered that TurboTax doesn’t provide at least a modicum of tax analysis, and instead just changes the refund amount like the reels on a slot machine whenever you input another 1099 box number, read on to learn how this TurboTax knowledge vacuum can burn you. Here are two examples:
Foreign tax credit. If you’re married filing jointly and pay more than $600 in foreign tax, your foreign tax credit will be limited. If you’re also retired, it may be drastically limited, as I discovered.
Standard deduction. If you’re employed and think that the standard deduction is the portion of income not subject to tax, you would be correct. What if you’re retired and not earning “wages, salaries, tips, etc.”? You would still be correct—but perhaps missing a golden opportunity.
For those who are married filed jointly, the standard deduction for 2021 is $25,100. If you’re retired and not yet drawing a pension, annuity or Social Security, keeping your ordinary income—including interest, unqualified dividends and short-term capital gains—below this amount may enable you to pay no federal tax.
But here’s the kicker: That can be true even if you have hefty amounts of qualified dividends and long-term capital gains. Suppose you claim the standard deduction in 2021. This year, you could have total income of up to $52,950 if you’re single and $105,900 if you’re married, and you wouldn’t owe any taxes on your long-term capital gains and qualified dividends.
I only realized this after a few years of not quite understanding why the TurboTax refund number did and didn’t change after inputting various categories of income and deductions. It finally took me creating my own tax spreadsheet to fully understand the ramifications—and the huge opportunity it offers retirees. For those of you thinking there are websites with tax calculators I could have used, I will defer to Nassim Nicholas Taleb, who said, “What I learned on my own I still remember.”
TurboTax and its ilk are the perfect black box. They give answers without understanding and facilitate forms without context, all done with a veneer of insight. It has cost me more than a couple of bucks and makes me wonder if maybe I should hire an accountant. But then I wouldn’t even have the pleasure of inputting my tax numbers, removing me from the process even further. Would my new accountant then become a more expensive and shinier black box? And I don’t even want to think about the cost of her inputting all those K-1s.
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.
Before ever setting foot on the Albuquerque, I spent more than a year learning exactly how nuclear power propelled a submarine, everything from how to operate a valve—it isn’t as simple as you think—to how the reactor worked on a sub-atomic level. The point of the training: understanding how it all worked was just as important as how to work it. The reactor wasn’t a mysterious black box that provided power, but rather a force that needed to be continuously studied and eventually mastered.
When I left the Navy for corporate life, the headhunters I used made it clear to me that corporations do not view training and knowledge as favorably as the Navy and, in fact, many companies viewed training as a cost to be avoided.
And they weren’t wrong, as I quickly learned whenever I had an issue with a corporate software program. I would call the IT help desk and inform the folks there of the problem, and generally they provided the correct solution. But when I asked how the issue came about or how to prevent it in the future, I was met with silence. It quickly became clear to me that, while many people understood how to operate various IT systems, few—if any—truly understood how they worked. On the Albuquerque, technical knowledge was a badge of honor to be proudly displayed, but in corporate America it was a sign that you were no longer on the fast track. I said to myself, more than once, “You’re not in the Navy anymore.”
I thought about that recently when I was doing my taxes. I use TurboTax and, while its data entry capabilities and general layout leave much to be desired, the biggest disappointment is that it’s just a $70 black box. You input the numbers from your W-2s, 1099s, K-1s and so on, and TurboTax spits out the size of your refund, if you’re lucky, or amount owed, if you aren’t. If you’ve used TurboTax or one of its competitors, you know these programs provide zero context, analysis or tax training. I think this is done to ensure you keep coming back every year. Problem is, you’re none the wiser about your specific tax situation or how to create a tax game plan for the future.
Prior to the personal computer, you had only two options. You either took your shoebox full of receipts, W-2s and 1099s to your accountant or you got out your pencil, calculator and IRS instructions and got to it. Note that I said pencil. You knew mistakes would be made, but that when it was all done you would be thoroughly familiar with each and every number. I’m not sure if tax regulations have become more complex, but I do know that using pencil, calculator and IRS instructions is no longer an option for most of us. I tried entering all the details from a single K-1 using a pencil… once. Maybe it’s due to the deep state, TurboTax lobbyists or just plain laziness, but now the only two realistic options for ordinary mortals are your computer or your accountant.
If, at this point, you’re content to let TurboTax continue to spit out your tax forms, read no further. But if you’ve always been bothered that TurboTax doesn’t provide at least a modicum of tax analysis, and instead just changes the refund amount like the reels on a slot machine whenever you input another 1099 box number, read on to learn how this TurboTax knowledge vacuum can burn you. Here are two examples:
Foreign tax credit. If you’re married filing jointly and pay more than $600 in foreign tax, your foreign tax credit will be limited. If you’re also retired, it may be drastically limited, as I discovered.
Standard deduction. If you’re employed and think that the standard deduction is the portion of income not subject to tax, you would be correct. What if you’re retired and not earning “wages, salaries, tips, etc.”? You would still be correct—but perhaps missing a golden opportunity.
For those who are married filed jointly, the standard deduction for 2021 is $25,100. If you’re retired and not yet drawing a pension, annuity or Social Security, keeping your ordinary income—including interest, unqualified dividends and short-term capital gains—below this amount may enable you to pay no federal tax.
But here’s the kicker: That can be true even if you have hefty amounts of qualified dividends and long-term capital gains. Suppose you claim the standard deduction in 2021. This year, you could have total income of up to $52,950 if you’re single and $105,900 if you’re married, and you wouldn’t owe any taxes on your long-term capital gains and qualified dividends.
I only realized this after a few years of not quite understanding why the TurboTax refund number did and didn’t change after inputting various categories of income and deductions. It finally took me creating my own tax spreadsheet to fully understand the ramifications—and the huge opportunity it offers retirees. For those of you thinking there are websites with tax calculators I could have used, I will defer to Nassim Nicholas Taleb, who said, “What I learned on my own I still remember.”
TurboTax and its ilk are the perfect black box. They give answers without understanding and facilitate forms without context, all done with a veneer of insight. It has cost me more than a couple of bucks and makes me wonder if maybe I should hire an accountant. But then I wouldn’t even have the pleasure of inputting my tax numbers, removing me from the process even further. Would my new accountant then become a more expensive and shinier black box? And I don’t even want to think about the cost of her inputting all those K-1s.
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.The post Outside the Box appeared first on HumbleDollar.
March 30, 2021
Staying Safe
FOLKS FORGET passwords every day, an inconvenience that can usually be quickly fixed—but not always.
In January, The New York Times wrote about a German programmer living in San Francisco. A decade ago, he had been paid 7,002 bitcoins for making a video explaining how cryptocurrencies work. He stored them in a digital wallet on a hard drive and wrote the password on a piece of paper, which he has since lost. After 10 failed attempts, the password will encrypt itself, making the wallet impossible to access. Eight attempts have failed so far. With bitcoin trading at some $57,000 each, his lost password could cost him $400 million.
We live in an increasingly digital world driven by electronic account access and necessitating a ballooning number of passwords. How should we manage our online life? We know about the danger of using weak passwords, or memorizing one random password and using it for everything, or not changing passwords often enough. Each of these approaches puts us at risk, financially and otherwise.
Enter the password manager. My wife used one at work. After learning one of our teenagers was using passwords that would make a cybersecurity expert shudder, she insisted the family adopt one, too. She chose LastPass, but there are also other good options. I went along half-heartedly, if only to set a good example for our kids.
But for a while, I also continued to store the same usernames and passwords in a password-protected Microsoft Word document. Twelve months later, it struck me: Using the password manager was far easier and more efficient.
How so? Password managers make it easy to generate a random password for each account. Utilizing this feature can prevent password-reuse attacks, where attackers steal user emails and passwords, and then use them to break into other accounts that use the same username and password. Password managers also track websites with which you have accounts, making it easy to identify and close unused accounts, thus reducing your online exposure.
When you sign up for a password manager, you’ll need to create a master password. Your master password encrypts the contents of your password vault, so you should use something complex. No, 12345678 need not apply. You can also set up two-factor authorization via text or email or, alternatively, by authenticating your fingerprints with your phone. Password managers aren’t immune to security bugs, but they represent a huge improvement.
A password manager effectively exchanges many passwords for one master password, which underscores the importance of that master password. It’s the key to your digital life. What if you lose or forget it? Each password manager will have its unique recovery process. But the best approach is to find a way to keep your master password secure and yet easily accessible to you.
A friend utilizes a password manager for his accounts, but he was uncomfortable documenting his master password in the file containing his estate planning documents. His solution: He noted half of his master password in the file and gave the other half to a trusted family member. When he dies, the law firm and the family member will come together, providing the executor with the master password needed to access his financial accounts.
Phil Kernen, CFA, is a portfolio manager and partner with
Mitchell Capital
, a financial planning and investment management firm in Leawood, Kansas. When he's not working, Phil enjoys spending time with his family and friends, reading, hiking and riding his bike. You can connect with Phil via
LinkedIn
. His previous articles were We're All Active and What? Spend It?
In January, The New York Times wrote about a German programmer living in San Francisco. A decade ago, he had been paid 7,002 bitcoins for making a video explaining how cryptocurrencies work. He stored them in a digital wallet on a hard drive and wrote the password on a piece of paper, which he has since lost. After 10 failed attempts, the password will encrypt itself, making the wallet impossible to access. Eight attempts have failed so far. With bitcoin trading at some $57,000 each, his lost password could cost him $400 million.
We live in an increasingly digital world driven by electronic account access and necessitating a ballooning number of passwords. How should we manage our online life? We know about the danger of using weak passwords, or memorizing one random password and using it for everything, or not changing passwords often enough. Each of these approaches puts us at risk, financially and otherwise.
Enter the password manager. My wife used one at work. After learning one of our teenagers was using passwords that would make a cybersecurity expert shudder, she insisted the family adopt one, too. She chose LastPass, but there are also other good options. I went along half-heartedly, if only to set a good example for our kids.
But for a while, I also continued to store the same usernames and passwords in a password-protected Microsoft Word document. Twelve months later, it struck me: Using the password manager was far easier and more efficient.
How so? Password managers make it easy to generate a random password for each account. Utilizing this feature can prevent password-reuse attacks, where attackers steal user emails and passwords, and then use them to break into other accounts that use the same username and password. Password managers also track websites with which you have accounts, making it easy to identify and close unused accounts, thus reducing your online exposure.
When you sign up for a password manager, you’ll need to create a master password. Your master password encrypts the contents of your password vault, so you should use something complex. No, 12345678 need not apply. You can also set up two-factor authorization via text or email or, alternatively, by authenticating your fingerprints with your phone. Password managers aren’t immune to security bugs, but they represent a huge improvement.
A password manager effectively exchanges many passwords for one master password, which underscores the importance of that master password. It’s the key to your digital life. What if you lose or forget it? Each password manager will have its unique recovery process. But the best approach is to find a way to keep your master password secure and yet easily accessible to you.
A friend utilizes a password manager for his accounts, but he was uncomfortable documenting his master password in the file containing his estate planning documents. His solution: He noted half of his master password in the file and gave the other half to a trusted family member. When he dies, the law firm and the family member will come together, providing the executor with the master password needed to access his financial accounts.
Phil Kernen, CFA, is a portfolio manager and partner with
Mitchell Capital
, a financial planning and investment management firm in Leawood, Kansas. When he's not working, Phil enjoys spending time with his family and friends, reading, hiking and riding his bike. You can connect with Phil via
LinkedIn
. His previous articles were We're All Active and What? Spend It?The post Staying Safe appeared first on HumbleDollar.
March 29, 2021
Taking on Tenants
IN MY EARLY 30s, I was a typical blue-collar worker. The only way I invested was through my employer’s 401(k) plan. But I was a good saver, putting 25% of my income into the plan, which was the maximum allowed, plus I got a generous company match of 8%. Still, I was on the lookout for ways to increase my savings and my investment returns. That was early 2006.
I read a variety of books to further my personal finance knowledge. But it was the biography of my bodybuilding hero, Arnold Schwarzenegger, that ultimately convinced me to take the plunge and become a landlord. Though his big checks from Hollywood didn’t hurt, Schwarzenegger made his first fortune in real estate. It all began with a multifamily building in the Los Angeles area. He lived in one of the units, while renting out the other seven apartments.
I decided that could work for me as well. I was living in a three-bedroom house as a single guy. I didn’t need all the space. I had bought the house because my parents and coworkers all said buying a home was a great investment. Instead, it hampered my ability to save and invest more aggressively.
Each month’s $900 mortgage payment devoured almost half the after-tax income from the chemical plant where I worked. After making my car payment, and paying for utilities, groceries, cable and other bills, I was left with a few hundred dollars to spare each month. I began searching for a multifamily apartment building where I could essentially live for free, with the rental income covering all costs. I could then use that $900 to save and invest.
The first property I looked at was a triplex. I could certainly see myself living in the one of the two-bedroom units or even the efficiency. A negative was all the units were occupied, so my first job as a landlord would be to give one family notice that they had to move. In addition, I hadn’t expected the property taxes to be so high. My cash flow projections didn’t factor that in. I soon learned that Iowa has very high commercial property taxes and anything more than a duplex was considered commercial. I was outbid for the property by a seasoned investor who knew to move quickly with a fair bid, while I was trying to lowball the price.
The lessons kept coming. I looked at a fourplex in a small town near work. At one time, I had actually lived in one of the units, so I was familiar with the property, which was a bonus. Inside information in real estate is often available in way it never would be when investing in individual stocks.
My offer of $145,000 was accepted. At the time, two of the units were vacant and another tenant was moving out. I was concerned about having four empty units and encouraged the current owner to rent the units if, before the closing, she was contacted by potential tenants.
That was a mistake. The owner was selling because she was struggling to find good tenants who paid on time and took care of the units. When I closed, one of the two tenants was clearly going to be a problem. During the walkthrough, the unit was a mess, and the tenants already weren’t paying their rent.
I moved into one of the apartments and, within two months, had to evict the tenants next door. It was an expensive lesson, in part because I had to hire an attorney. After that, I learned the state’s legal process for evicting tenants, including what I could and couldn’t do. The other tenant didn’t work out in the long run, either. It was clear, after I moved in, that I would have been better off buying a completely vacant apartment building.
In the years since, that initial investment has delivered priceless lessons in cash flow, loan terms, property management and more. It set the stage for me to continue buying rental properties. But thereafter, I focused on single-family homes. I also began searching for a good property manager.
After the initial fourplex purchase, which I owned from 2008 to 2014, I purchased and still own eight single-family homes. I began to buy homes as opposed to apartments because they were readily available during the foreclosure crisis. I’ve also realized that, when it’s time to sell, you have more potential buyers with single-family homes, plus buyers planning to occupy a property themselves will often pay more than an investor.
I plan to use the cash flow from the properties to supplement my retirement income and perhaps fund part of my children’s college costs. I also hope to sell a house or two to reduce some of the mortgage debt I took on. Carrying a high debt load didn’t much bother me 10 years ago. But as I’ve grown older, and as I prepare for my two children to go to college within the next decade, I’d prefer to have the properties paid off.
Juan Fourneau’s goal is to retire at age 55. When he isn’t at his manufacturing job, he enjoys reading about personal finance and investing. Juan, who is married with two children, can still be seen in the ring on the independent professional wrestling circuit. He wrestles as a Mexican
Luchador
under the name
Latin Thunder
. Follow him on Twitter
@LatinThunder1
.
I read a variety of books to further my personal finance knowledge. But it was the biography of my bodybuilding hero, Arnold Schwarzenegger, that ultimately convinced me to take the plunge and become a landlord. Though his big checks from Hollywood didn’t hurt, Schwarzenegger made his first fortune in real estate. It all began with a multifamily building in the Los Angeles area. He lived in one of the units, while renting out the other seven apartments.
I decided that could work for me as well. I was living in a three-bedroom house as a single guy. I didn’t need all the space. I had bought the house because my parents and coworkers all said buying a home was a great investment. Instead, it hampered my ability to save and invest more aggressively.
Each month’s $900 mortgage payment devoured almost half the after-tax income from the chemical plant where I worked. After making my car payment, and paying for utilities, groceries, cable and other bills, I was left with a few hundred dollars to spare each month. I began searching for a multifamily apartment building where I could essentially live for free, with the rental income covering all costs. I could then use that $900 to save and invest.
The first property I looked at was a triplex. I could certainly see myself living in the one of the two-bedroom units or even the efficiency. A negative was all the units were occupied, so my first job as a landlord would be to give one family notice that they had to move. In addition, I hadn’t expected the property taxes to be so high. My cash flow projections didn’t factor that in. I soon learned that Iowa has very high commercial property taxes and anything more than a duplex was considered commercial. I was outbid for the property by a seasoned investor who knew to move quickly with a fair bid, while I was trying to lowball the price.
The lessons kept coming. I looked at a fourplex in a small town near work. At one time, I had actually lived in one of the units, so I was familiar with the property, which was a bonus. Inside information in real estate is often available in way it never would be when investing in individual stocks.
My offer of $145,000 was accepted. At the time, two of the units were vacant and another tenant was moving out. I was concerned about having four empty units and encouraged the current owner to rent the units if, before the closing, she was contacted by potential tenants.
That was a mistake. The owner was selling because she was struggling to find good tenants who paid on time and took care of the units. When I closed, one of the two tenants was clearly going to be a problem. During the walkthrough, the unit was a mess, and the tenants already weren’t paying their rent.
I moved into one of the apartments and, within two months, had to evict the tenants next door. It was an expensive lesson, in part because I had to hire an attorney. After that, I learned the state’s legal process for evicting tenants, including what I could and couldn’t do. The other tenant didn’t work out in the long run, either. It was clear, after I moved in, that I would have been better off buying a completely vacant apartment building.
In the years since, that initial investment has delivered priceless lessons in cash flow, loan terms, property management and more. It set the stage for me to continue buying rental properties. But thereafter, I focused on single-family homes. I also began searching for a good property manager.
After the initial fourplex purchase, which I owned from 2008 to 2014, I purchased and still own eight single-family homes. I began to buy homes as opposed to apartments because they were readily available during the foreclosure crisis. I’ve also realized that, when it’s time to sell, you have more potential buyers with single-family homes, plus buyers planning to occupy a property themselves will often pay more than an investor.
I plan to use the cash flow from the properties to supplement my retirement income and perhaps fund part of my children’s college costs. I also hope to sell a house or two to reduce some of the mortgage debt I took on. Carrying a high debt load didn’t much bother me 10 years ago. But as I’ve grown older, and as I prepare for my two children to go to college within the next decade, I’d prefer to have the properties paid off.
Juan Fourneau’s goal is to retire at age 55. When he isn’t at his manufacturing job, he enjoys reading about personal finance and investing. Juan, who is married with two children, can still be seen in the ring on the independent professional wrestling circuit. He wrestles as a Mexican
Luchador
under the name
Latin Thunder
. Follow him on Twitter
@LatinThunder1
.The post Taking on Tenants appeared first on HumbleDollar.
March 28, 2021
Showing the Way
WHEN I WAS GROWING up, one family in the neighborhood lived differently from all the others. In their garage was a Rolls-Royce. When each of the sons turned 16, a new BMW showed up in the driveway. Because it was so out of the ordinary, it caught my attention. It caught everyone’s attention.
Looking back, this is what I find interesting: This kind of privileged upbringing looked like a guaranteed recipe for demotivating their children. But that isn’t what happened. Both sons today are productive and successful. One holds a PhD. The other founded a real estate firm.
Maybe they’re the exception—or maybe this tells you that there’s more to successful parenting than meets the eye. It is, of course, hard to generalize. But there is research on this topic. In my work, I’ve observed a number of common themes in raising motivated, productive children. Here are the five that seem most important:
1. Priorities. Warren Buffett has said he wanted to give his kids “enough money so that they would feel they could do anything, but not so much that they could do nothing.” To be sure, Buffett is in a different category from most people, but this illustrates an important principle: The best place to start is by making your priorities explicit.
The default assumption in the world of estate planning is that everyone wants to leave as much as they can to their children and to minimize the bite from estate taxes. For many families—maybe most—that’s the objective. But before you adopt this default mindset—and before you walk into an estate planner’s office—it’s important to think this through. Is it your goal to leave your children every dollar you can, or do you want to help them only with specific goals, such as buying a home? Do you have philanthropic goals? How complicated are you willing to make your financial life to minimize estate taxes? Do you want to encumber your children with trust structures after you’re gone?
There are no right or wrong answers to these questions. What’s most important is to think through the questions so you can put a plan in place that serves your objectives.
2. Guidance. In her book Raised Healthy, Wealthy & Wise , wealth planner Coventry Edwards-Pitt stresses this point: Even in families where children don’t need to work for a living, people are happiest when they do have direction in their career. This might seem like an obvious point, but it’s often harder for wealthy families than it is for others. Wealthy parents need to be more intentional in guiding their children and in letting them know their expectations.
Setting expectations early, in fact, is key. Don't wait until college or later to let children know that they can't rely on the “Bank of Mom and Dad” to support them.
To be clear, this doesn’t mean that you can’t ever help your children. What’s critical, though, is that they get on a defined path—and then stick with it long enough to achieve traction. As Edwards-Pitt points out, the concept of happiness is misunderstood. What matters most is direction and purpose. According to the research, a sense of purpose leads to “overall well-being and life satisfaction, improves mental and physical health, increases resiliency and self-esteem and decreases the likelihood of suffering depression.”
3. Modeling. In Boston, where I live, there’s the stereotype of the wealthy family that drives old cars, intentionally wears tattered clothing and turns the heat down to 65 in the winter. Sometimes, I think, they take this conspicuous frugality too far. But as a parenting technique, some amount of intentional frugality can be useful. That's because children won't always do as their parents say, but they will do as they see their parents do. Modeling some thrifty behavior helps communicate values to your children in a way they might not accept if you simply lectured them.
Does this mean you have to live like a church mouse to communicate values to your children? Not at all. It just means that, at least in a few ways that are obvious, you make choices that children notice. That way, even if you don’t say it, they’ll absorb important values.
4. Teaching. Some things can be modeled, but parents need to go out of their way to teach certain financial concepts. Unfortunately, money is a taboo subject for many people. But if you’re comfortable doing so, I see value in helping children understand the basics of a budget. Let them know what it takes to run a household.
Even if you aren’t willing to share the specifics of your own finances, I recommend getting involved in your children’s finances. When they start to earn money for themselves—even if it’s just from babysitting—help them think about allocating the proceeds. Teach them about the major categories: spending, giving, saving and, of course, taxes. Help them open their first investment account—ideally a Roth IRA. But don’t do it for them. Instead, teach them how to do it.
5. Communicating. One of the challenges for children in wealthy families is that they’re often kept in the dark. Consider, for example, a middle-aged child who has been receiving cash gifts annually from her elderly parents. One logical conclusion might be that her parents are very wealthy and that she stands to receive a significant inheritance. But another, equally logical conclusion might be that her parents used to be wealthy, but because of their generous gifts over the years there won’t be much left at the end. Both are reasonable conclusions and I’ve seen both scenarios unfold.
As a parent, you might not feel any obligation to communicate to your children the details of what they should expect down the road. But if you’re the child on the other end of this, it can be detrimental both financially and emotionally to have no idea. For better or worse, wealth does create some unique obligations and I believe this is one of them. Clear communication helps everyone plan accordingly.
Ultimately, parenting requires a delicate threading of the needle. Push too hard and kids will rebel. But push too little and, as Buffett feared, they might end up directionless. Taken together, I believe the above five principles can help improve the odds for both parents and children.
Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. In his series of free e-books, he advocates an evidence-based approach to personal finance. Follow Adam on Twitter @AdamMGrossman and check out his earlier articles.
Looking back, this is what I find interesting: This kind of privileged upbringing looked like a guaranteed recipe for demotivating their children. But that isn’t what happened. Both sons today are productive and successful. One holds a PhD. The other founded a real estate firm.
Maybe they’re the exception—or maybe this tells you that there’s more to successful parenting than meets the eye. It is, of course, hard to generalize. But there is research on this topic. In my work, I’ve observed a number of common themes in raising motivated, productive children. Here are the five that seem most important:
1. Priorities. Warren Buffett has said he wanted to give his kids “enough money so that they would feel they could do anything, but not so much that they could do nothing.” To be sure, Buffett is in a different category from most people, but this illustrates an important principle: The best place to start is by making your priorities explicit.
The default assumption in the world of estate planning is that everyone wants to leave as much as they can to their children and to minimize the bite from estate taxes. For many families—maybe most—that’s the objective. But before you adopt this default mindset—and before you walk into an estate planner’s office—it’s important to think this through. Is it your goal to leave your children every dollar you can, or do you want to help them only with specific goals, such as buying a home? Do you have philanthropic goals? How complicated are you willing to make your financial life to minimize estate taxes? Do you want to encumber your children with trust structures after you’re gone?
There are no right or wrong answers to these questions. What’s most important is to think through the questions so you can put a plan in place that serves your objectives.
2. Guidance. In her book Raised Healthy, Wealthy & Wise , wealth planner Coventry Edwards-Pitt stresses this point: Even in families where children don’t need to work for a living, people are happiest when they do have direction in their career. This might seem like an obvious point, but it’s often harder for wealthy families than it is for others. Wealthy parents need to be more intentional in guiding their children and in letting them know their expectations.
Setting expectations early, in fact, is key. Don't wait until college or later to let children know that they can't rely on the “Bank of Mom and Dad” to support them.
To be clear, this doesn’t mean that you can’t ever help your children. What’s critical, though, is that they get on a defined path—and then stick with it long enough to achieve traction. As Edwards-Pitt points out, the concept of happiness is misunderstood. What matters most is direction and purpose. According to the research, a sense of purpose leads to “overall well-being and life satisfaction, improves mental and physical health, increases resiliency and self-esteem and decreases the likelihood of suffering depression.”
3. Modeling. In Boston, where I live, there’s the stereotype of the wealthy family that drives old cars, intentionally wears tattered clothing and turns the heat down to 65 in the winter. Sometimes, I think, they take this conspicuous frugality too far. But as a parenting technique, some amount of intentional frugality can be useful. That's because children won't always do as their parents say, but they will do as they see their parents do. Modeling some thrifty behavior helps communicate values to your children in a way they might not accept if you simply lectured them.
Does this mean you have to live like a church mouse to communicate values to your children? Not at all. It just means that, at least in a few ways that are obvious, you make choices that children notice. That way, even if you don’t say it, they’ll absorb important values.
4. Teaching. Some things can be modeled, but parents need to go out of their way to teach certain financial concepts. Unfortunately, money is a taboo subject for many people. But if you’re comfortable doing so, I see value in helping children understand the basics of a budget. Let them know what it takes to run a household.
Even if you aren’t willing to share the specifics of your own finances, I recommend getting involved in your children’s finances. When they start to earn money for themselves—even if it’s just from babysitting—help them think about allocating the proceeds. Teach them about the major categories: spending, giving, saving and, of course, taxes. Help them open their first investment account—ideally a Roth IRA. But don’t do it for them. Instead, teach them how to do it.
5. Communicating. One of the challenges for children in wealthy families is that they’re often kept in the dark. Consider, for example, a middle-aged child who has been receiving cash gifts annually from her elderly parents. One logical conclusion might be that her parents are very wealthy and that she stands to receive a significant inheritance. But another, equally logical conclusion might be that her parents used to be wealthy, but because of their generous gifts over the years there won’t be much left at the end. Both are reasonable conclusions and I’ve seen both scenarios unfold.
As a parent, you might not feel any obligation to communicate to your children the details of what they should expect down the road. But if you’re the child on the other end of this, it can be detrimental both financially and emotionally to have no idea. For better or worse, wealth does create some unique obligations and I believe this is one of them. Clear communication helps everyone plan accordingly.
Ultimately, parenting requires a delicate threading of the needle. Push too hard and kids will rebel. But push too little and, as Buffett feared, they might end up directionless. Taken together, I believe the above five principles can help improve the odds for both parents and children.
Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. In his series of free e-books, he advocates an evidence-based approach to personal finance. Follow Adam on Twitter @AdamMGrossman and check out his earlier articles.The post Showing the Way appeared first on HumbleDollar.
March 27, 2021
A Less Risky Life
MANY FOLKS ARE do-it-yourselfers when it comes to home improvement projects. On that score, I have no skills, so I end up paying others. In fact, in high school, I was so anxious to avoid metal shop and woodshop that I opted for typing and four semesters of bookkeeping.
It’s a different story when it comes to my finances. Yes, I use an accountant to file my taxes. But helped by both a degree in finance and the Chartered Financial Analyst designation, I handle other money issues myself. Indeed, during my career, I kept my money in the mutual funds I managed, rather than paying someone else to handle my investments.
I left the investment field six years ago, at age 55, and began my retirement planning journey. To understand my choices better, I earned a Retirement Income Certified Professional designation, as well as obtaining life and health insurance licenses. I came to realize that—as a retiree—I needed to protect myself against four major risks: tax increases, a surprisingly long life, rising interest rates and potentially huge long-term-care expenses.
1. Tax increases. During my high-income years, I funded a 401(k) plan, which meant I deferred taxes on the income involved. Now, with my income lower, I have the chance to “undefer” this income.
When I left my investment job six years ago, I rolled my 401(k) into an IRA. Each year since, I’ve converted part of that IRA to a Roth IRA, where the money now grows tax-free. In effect, I’ve prepaid a big chunk of my retirement tax bill and protected that money against future tax increases.
I strongly suspect those tax increases are on their way. The federal government has spent massive sums to soften the pandemic’s financial blow. The huge taxable amounts in tax-deferred IRAs will, I believe, be a prime target. I also suspect that today’s low capital gains rates will come under attack. Both Social Security and Medicare already penalize recipients who have a high taxable income, and there may be more of that to come. On top of that, tax rates are scheduled to increase in 2026, when many provisions in 2017’s tax law sunset.
2. Living long. Even with the Roth conversions, I was left with a substantial sum in my traditional, tax-deferred IRA. I decided to use some of that money to fund two accounts that’ll boost my guaranteed lifetime income, thus hedging the risk that I live far longer than average.
Even though neither of my parents lived to their 80s, I’m banking on a long retirement. My hope: By exercising, eating healthily and not smoking, I’ll live longer than average, plus the data show that those with higher incomes are more likely to live to a ripe old age.
I was intrigued by the concept of longevity insurance, particularly so-called QLACs, or Qualified Longevity Annuity Contracts. A QLAC can be funded using IRA money, with the annuity’s payment start date set as late as age 85. You can use up to 25% of your IRA to fund QLACs, but with the total sum invested currently capped at $135,000. I funded three QLACs with payments starting at ages 76, 80 and 85.
I also used my traditional IRA to fund a “period certain” annuity. This annuity will pay me monthly income from age 62 through 69. I view it as my Social Security “bridge.” The annuity will pay me income while I delay claiming Social Security from age 62 to 70. At age 70, the period certain annuity stops paying income and I’ll file for Social Security benefits, at which point my benefit will be 76% larger in inflation-adjusted terms than it would have been if I’d filed at 62.
3. Rising interest rates. Once I’m retired, I want a more balanced portfolio, with less in stocks and more allocated to bonds. Problem is, interest rates are very low and seem poised to rise. If I reduce risk by holding bonds with short maturities, I’ll earn very little. If I go for bonds with longer maturities, yields aren’t much better, plus these bonds could decline sharply if rates rise.
My solution: Overfund a whole life “cash value” insurance policy. After six years of overfunding the cash value, my policy’s cash value is now projected to yield 3.5%. The beauty of cash value is that, as rates rise, the yield rises but the account value doesn’t decline—which would be the case with bonds.
In addition, if I don’t withdraw more than I paid in premiums, my withdrawals will be tax-free. I’m the first to admit that, if your goal is the maximum death benefit, term insurance is a far better bet. But if you’re looking for a bond substitute, cash value life insurance can be a good choice if you have the money available to overfund the policy—and if your policy offers that option.
4. Long-term-care costs. When I bought my cash value policy, I attempted to add a long-term-care (LTC) rider that would allow me to use my death benefit to pay LTC expenses. I’m still mobile—I play pickleball four days a week—but my insurance company still denied me coverage because of some past surgeries.
Fortunately, I was able to purchase hybrid LTC insurance from a different insurance company. That policy has locked-in premiums and should cover much or all of any LTC costs I incur. Having my LTC expenses covered removes one of retirement’s biggest financial uncertainties. For now, I’m also still funding a health savings account, arguably the most tax-favored account available. I can take tax-free withdrawals from the account to pay my annual LTC insurance premiums and my Medicare premiums.
Why didn’t I opt instead to pay any LTC costs out of pocket? I might have—if the only insurance choice was a traditional LTC policy where premiums can potentially rise sharply over time. But instead, I bought one of the new hybrid policies, where escalating premiums aren’t a risk. I also like the idea of prepaying potential LTC costs so, if I need assistance, I won’t delay getting help because I’m deterred by the expense involved.
Putting together the various pieces of my retirement puzzle, I feel I’ve created a plan where risk is minimized. This might seem like an odd goal, given that I spent much of my career coping with stock market risk. But as I head into retirement, my attitude has changed.
I spent decades measuring my investment performance on a daily, monthly and quarterly basis versus both competitors and market indexes. That can be exhausting emotionally. In 2008, during the financial market meltdown, my most positive workday was spent at a movie theater watching a double feature. In retirement, I want to travel overseas and play pickleball most mornings when I’m home—and I want to do these things without worrying about the stock market’s daily spasms.
Latest Articles
HERE ARE THE SIX other articles published by HumbleDollar this week:
What does it take to save 30% of your income? Dick Quinn asked that question of today's mega-savers—and came away with a list of nine key factors.
In late 2019 and early 2020, Ben Rodriguez sold stock funds to pay off his mortgage. He looked like a market-timing genius—until he didn't.
Tempted to buy gold? Rick Moberg lists nine key issues to consider, everything from lousy long-run returns to unfavorable taxation to the difficulty calculating a fair value.
"Bonds play a critical role in diversifying a portfolio that’s made up mostly of stocks," writes Bill Ehart. "It’s just that investors are going to have a rockier road, because their bond funds are primed for more volatility."
Planning a post-pandemic spending spree? So is Dennis Friedman—but, even though he's retired, he's not worried about running out of money.
The Shiller P/E is at its second highest level ever. Nervous? "On a relative basis, stocks aren’t expensive—because bonds are expensive, too," argues Adam Grossman.
James McGlynn, CFA, RICP, is chief executive of
Next Quarter Century LLC
in Fort Worth, Texas, a firm focused on helping clients make smarter decisions about long-term-care insurance, Social Security and other retirement planning issues. He was a mutual fund manager for 30 years. James is the author of
Retirement Planning Tips for Baby Boomers
. Check out his earlier articles.
It’s a different story when it comes to my finances. Yes, I use an accountant to file my taxes. But helped by both a degree in finance and the Chartered Financial Analyst designation, I handle other money issues myself. Indeed, during my career, I kept my money in the mutual funds I managed, rather than paying someone else to handle my investments.
I left the investment field six years ago, at age 55, and began my retirement planning journey. To understand my choices better, I earned a Retirement Income Certified Professional designation, as well as obtaining life and health insurance licenses. I came to realize that—as a retiree—I needed to protect myself against four major risks: tax increases, a surprisingly long life, rising interest rates and potentially huge long-term-care expenses.
1. Tax increases. During my high-income years, I funded a 401(k) plan, which meant I deferred taxes on the income involved. Now, with my income lower, I have the chance to “undefer” this income.
When I left my investment job six years ago, I rolled my 401(k) into an IRA. Each year since, I’ve converted part of that IRA to a Roth IRA, where the money now grows tax-free. In effect, I’ve prepaid a big chunk of my retirement tax bill and protected that money against future tax increases.
I strongly suspect those tax increases are on their way. The federal government has spent massive sums to soften the pandemic’s financial blow. The huge taxable amounts in tax-deferred IRAs will, I believe, be a prime target. I also suspect that today’s low capital gains rates will come under attack. Both Social Security and Medicare already penalize recipients who have a high taxable income, and there may be more of that to come. On top of that, tax rates are scheduled to increase in 2026, when many provisions in 2017’s tax law sunset.
2. Living long. Even with the Roth conversions, I was left with a substantial sum in my traditional, tax-deferred IRA. I decided to use some of that money to fund two accounts that’ll boost my guaranteed lifetime income, thus hedging the risk that I live far longer than average.
Even though neither of my parents lived to their 80s, I’m banking on a long retirement. My hope: By exercising, eating healthily and not smoking, I’ll live longer than average, plus the data show that those with higher incomes are more likely to live to a ripe old age.
I was intrigued by the concept of longevity insurance, particularly so-called QLACs, or Qualified Longevity Annuity Contracts. A QLAC can be funded using IRA money, with the annuity’s payment start date set as late as age 85. You can use up to 25% of your IRA to fund QLACs, but with the total sum invested currently capped at $135,000. I funded three QLACs with payments starting at ages 76, 80 and 85.
I also used my traditional IRA to fund a “period certain” annuity. This annuity will pay me monthly income from age 62 through 69. I view it as my Social Security “bridge.” The annuity will pay me income while I delay claiming Social Security from age 62 to 70. At age 70, the period certain annuity stops paying income and I’ll file for Social Security benefits, at which point my benefit will be 76% larger in inflation-adjusted terms than it would have been if I’d filed at 62.
3. Rising interest rates. Once I’m retired, I want a more balanced portfolio, with less in stocks and more allocated to bonds. Problem is, interest rates are very low and seem poised to rise. If I reduce risk by holding bonds with short maturities, I’ll earn very little. If I go for bonds with longer maturities, yields aren’t much better, plus these bonds could decline sharply if rates rise.
My solution: Overfund a whole life “cash value” insurance policy. After six years of overfunding the cash value, my policy’s cash value is now projected to yield 3.5%. The beauty of cash value is that, as rates rise, the yield rises but the account value doesn’t decline—which would be the case with bonds.
In addition, if I don’t withdraw more than I paid in premiums, my withdrawals will be tax-free. I’m the first to admit that, if your goal is the maximum death benefit, term insurance is a far better bet. But if you’re looking for a bond substitute, cash value life insurance can be a good choice if you have the money available to overfund the policy—and if your policy offers that option.
4. Long-term-care costs. When I bought my cash value policy, I attempted to add a long-term-care (LTC) rider that would allow me to use my death benefit to pay LTC expenses. I’m still mobile—I play pickleball four days a week—but my insurance company still denied me coverage because of some past surgeries.
Fortunately, I was able to purchase hybrid LTC insurance from a different insurance company. That policy has locked-in premiums and should cover much or all of any LTC costs I incur. Having my LTC expenses covered removes one of retirement’s biggest financial uncertainties. For now, I’m also still funding a health savings account, arguably the most tax-favored account available. I can take tax-free withdrawals from the account to pay my annual LTC insurance premiums and my Medicare premiums.
Why didn’t I opt instead to pay any LTC costs out of pocket? I might have—if the only insurance choice was a traditional LTC policy where premiums can potentially rise sharply over time. But instead, I bought one of the new hybrid policies, where escalating premiums aren’t a risk. I also like the idea of prepaying potential LTC costs so, if I need assistance, I won’t delay getting help because I’m deterred by the expense involved.
Putting together the various pieces of my retirement puzzle, I feel I’ve created a plan where risk is minimized. This might seem like an odd goal, given that I spent much of my career coping with stock market risk. But as I head into retirement, my attitude has changed.
I spent decades measuring my investment performance on a daily, monthly and quarterly basis versus both competitors and market indexes. That can be exhausting emotionally. In 2008, during the financial market meltdown, my most positive workday was spent at a movie theater watching a double feature. In retirement, I want to travel overseas and play pickleball most mornings when I’m home—and I want to do these things without worrying about the stock market’s daily spasms.
Latest Articles
HERE ARE THE SIX other articles published by HumbleDollar this week:
What does it take to save 30% of your income? Dick Quinn asked that question of today's mega-savers—and came away with a list of nine key factors.
In late 2019 and early 2020, Ben Rodriguez sold stock funds to pay off his mortgage. He looked like a market-timing genius—until he didn't.
Tempted to buy gold? Rick Moberg lists nine key issues to consider, everything from lousy long-run returns to unfavorable taxation to the difficulty calculating a fair value.
"Bonds play a critical role in diversifying a portfolio that’s made up mostly of stocks," writes Bill Ehart. "It’s just that investors are going to have a rockier road, because their bond funds are primed for more volatility."
Planning a post-pandemic spending spree? So is Dennis Friedman—but, even though he's retired, he's not worried about running out of money.
The Shiller P/E is at its second highest level ever. Nervous? "On a relative basis, stocks aren’t expensive—because bonds are expensive, too," argues Adam Grossman.
James McGlynn, CFA, RICP, is chief executive of
Next Quarter Century LLC
in Fort Worth, Texas, a firm focused on helping clients make smarter decisions about long-term-care insurance, Social Security and other retirement planning issues. He was a mutual fund manager for 30 years. James is the author of
Retirement Planning Tips for Baby Boomers
. Check out his earlier articles.The post A Less Risky Life appeared first on HumbleDollar.
March 26, 2021
Making It Last
MY WIFE AND I usually finish dinner by 6:30 pm. She then heads upstairs, while I stay downstairs until 7:30. You can find me walking around in circles in the living room and dining room during that time. I like to think I’m walking off my meal or regenerating new brain cells. You see, I’ve been reading a book by Sanjay Gupta,
Keep Sharp
, where he points out that moving is good for the brain.
But this is also the time when I think about what’s going on in our lives. What’s been on my mind lately? Some of it has to do with the person upstairs, my wife. She’s waiting patiently for her turn to get her first COVID-19 vaccine shot, while I’ve already received my first shot.
I’m also thinking about how we can get our retirement back on track, now that millions of other Americans are getting vaccinated. Some people say getting vaccinated was a relief or makes them feel safe. For me, I have a feeling of hope for our future, something I haven’t truly felt since the start of the pandemic.
I want to schedule trips to London and New York this year. Spending Christmas in London is something my wife and I have always talked about. Why not do it if it’s safe? This pandemic taught us an important lesson about seizing the moment. I’m not about to let an opportunity pass me by.
Many other Americans are also anxious to get away. I tried to book a room at our favorite hotel for August to celebrate our wedding anniversary. That day was already fully booked. What did I expect, especially after so many Americans stayed close to home last year?
My wife is on board with my newfound exuberance for exploring the world. But I know in the back of her mind she’s thinking, “Can we afford all this?” We spent a ton of money last year on the house, bought a new car and purchased countless other items. She’s probably thinking about what's going to happen to our savings when life returns to normal and there are no constraints on our spending.
I’m confident, however, we aren’t going to outlive our wealth—for five reasons:
1. We’re debt-free. We buy everything with cash or credit cards, and those credit cards are paid off every month.
2. We have low overhead costs, which our retirement income easily covers. That leaves us with plenty of money for discretionary spending.
3. We plan to limit our withdrawals from our IRAs and 401(k) plans to the sum dictated by required minimum distributions (RMDs). When you reach age 72, you’re compelled to withdraw a minimum sum from your retirement accounts each year. Although RMDs are designed so the federal government can recoup the taxes owed on tax-deferred retirement accounts, they also offer retirees a sensible strategy for drawing down a nest egg.
How so? Each year’s RMD is determined by dividing your taxed-deferred retirement account balance as of Dec. 31 by a life expectancy factor. That means that, as you grow older and your life expectancy shortens, you withdraw a larger percentage of your retirement funds each year. Using this strategy can lead to lower spending in the early years of retirement, while increasing spending in your later years when health care costs may be higher. Another safeguard: Your withdrawals change with market movements, because the sum is based on your retirement portfolio’s latest year-end value.
4. We receive a healthy sum from Social Security each month. Our combined benefits, with my benefit claimed at age 70 and my wife’s benefit at her full retirement age, are large enough to support us during periods of market turmoil, which means we can give our portfolio time to rebound from any market hit.
5. Our wealth is protected from lawsuits. We have an umbrella liability insurance policy, which offers additional liability coverage on top of the coverage included in our home and auto policies. Our umbrella policy can also protect us from other civil lawsuits, such as for libel, slander and invasion of privacy.
Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor's degree in history and an MBA. A self-described "humble investor," he likes reading historical novels and about personal finance. Check out his earlier articles and follow him on Twitter @DMFrie.
But this is also the time when I think about what’s going on in our lives. What’s been on my mind lately? Some of it has to do with the person upstairs, my wife. She’s waiting patiently for her turn to get her first COVID-19 vaccine shot, while I’ve already received my first shot.
I’m also thinking about how we can get our retirement back on track, now that millions of other Americans are getting vaccinated. Some people say getting vaccinated was a relief or makes them feel safe. For me, I have a feeling of hope for our future, something I haven’t truly felt since the start of the pandemic.
I want to schedule trips to London and New York this year. Spending Christmas in London is something my wife and I have always talked about. Why not do it if it’s safe? This pandemic taught us an important lesson about seizing the moment. I’m not about to let an opportunity pass me by.
Many other Americans are also anxious to get away. I tried to book a room at our favorite hotel for August to celebrate our wedding anniversary. That day was already fully booked. What did I expect, especially after so many Americans stayed close to home last year?
My wife is on board with my newfound exuberance for exploring the world. But I know in the back of her mind she’s thinking, “Can we afford all this?” We spent a ton of money last year on the house, bought a new car and purchased countless other items. She’s probably thinking about what's going to happen to our savings when life returns to normal and there are no constraints on our spending.
I’m confident, however, we aren’t going to outlive our wealth—for five reasons:
1. We’re debt-free. We buy everything with cash or credit cards, and those credit cards are paid off every month.
2. We have low overhead costs, which our retirement income easily covers. That leaves us with plenty of money for discretionary spending.
3. We plan to limit our withdrawals from our IRAs and 401(k) plans to the sum dictated by required minimum distributions (RMDs). When you reach age 72, you’re compelled to withdraw a minimum sum from your retirement accounts each year. Although RMDs are designed so the federal government can recoup the taxes owed on tax-deferred retirement accounts, they also offer retirees a sensible strategy for drawing down a nest egg.
How so? Each year’s RMD is determined by dividing your taxed-deferred retirement account balance as of Dec. 31 by a life expectancy factor. That means that, as you grow older and your life expectancy shortens, you withdraw a larger percentage of your retirement funds each year. Using this strategy can lead to lower spending in the early years of retirement, while increasing spending in your later years when health care costs may be higher. Another safeguard: Your withdrawals change with market movements, because the sum is based on your retirement portfolio’s latest year-end value.
4. We receive a healthy sum from Social Security each month. Our combined benefits, with my benefit claimed at age 70 and my wife’s benefit at her full retirement age, are large enough to support us during periods of market turmoil, which means we can give our portfolio time to rebound from any market hit.
5. Our wealth is protected from lawsuits. We have an umbrella liability insurance policy, which offers additional liability coverage on top of the coverage included in our home and auto policies. Our umbrella policy can also protect us from other civil lawsuits, such as for libel, slander and invasion of privacy.
Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor's degree in history and an MBA. A self-described "humble investor," he likes reading historical novels and about personal finance. Check out his earlier articles and follow him on Twitter @DMFrie.
The post Making It Last appeared first on HumbleDollar.
March 25, 2021
Rising Risk
IT’S BUYER BEWARE for bond fund investors. Three big risks have snuck up on today’s fund shareholders, which—taken together—mean higher volatility and lower returns.
I discussed these pitfalls with Ben Johnson, director of global exchange-traded fund research at Morningstar, the Chicago investment research firm. “In recent years, the market’s standards have loosened significantly and durations have lengthened,” Johnson told me. “People are generally willing to lend money to less creditworthy borrowers for longer terms…. That likely spells more risk and less return for the foreseeable future.”
Let’s count the ways that today’s market is less favorable for bond fund investors:
Higher interest rate risk. Total bond market index funds—the bread-and-butter investment grade option for many investors, as well as a key building block for some balanced, asset allocation and target-date funds—are a lot more vulnerable to rising rates than they used to be. Johnson noted that the duration of Vanguard Total Bond Market Index ETF has jumped to 6.6 years from almost 4.8 years in 2007. Duration is a measure of interest rate risk. That means investors stand to lose nearly 7% for every one percentage point increase in interest rates, versus less than 5% just 14 years ago. That’s 40% greater risk. That said, if interest rates fell, the rewards today would also be greater.
More credit risk. Total bond market funds—which typically track the Bloomberg Barclays U.S. Aggregate Bond Index—carry more credit risk in their corporate bond holdings than they used to. In other words, there’s a greater chance that some of the bonds within the index will default.
Slimmer rewards. The extra yield that these riskier-than-usual investment grade corporate bonds are paying over Treasury bonds is near record lows. “You’re getting paid incrementally less to take on incrementally more risk, which isn’t all that enticing a proposition,” Johnson said. “You have to realize that, especially if you’re opting for indexed exposure to the bond market, you’re telling the market that you’re going to take whatever it is that it'll give to you.”
Despite all that, bonds still play a critical role in diversifying a portfolio that’s made up mostly of stocks or stock funds. They provide “ballast” when stocks are sinking, Johnson said. It’s just that investors in plain-vanilla total bond index funds are going to have a rockier road than they may expect, because their bond funds are primed for more volatility.
Johnson’s words called to mind what my grandfather used to tell my father when my dad was a child and sitting at the dinner table: “You’ll eat it and like it.” Still, unlike Depression-era children, bond fund investors have options. Compared with their counterparts in stock funds, active bond fund managers—those who pick and choose which bonds they think will outperform—have shown greater ability to beat the indexes. That’s because the bond market has certain “structural inefficiencies,” Johnson said.
For instance, many institutions are required to invest only in investment grade bonds. In periods of upheaval, when some borrowers have their ratings cut, that can lead to forced selling. Active managers can scoop up these “fallen angels” and then profit if these bonds return to investment grade status.
Despite paltry yields, Johnson said investors with shorter time horizons—and thus a greater need for bonds that hold their value in a market downdraft—are likely better off in short- or intermediate-term Treasury bond funds. Meanwhile, those with more time before retirement might consider funds with corporate bond exposure.
What not to do: Take your high-quality bond holdings and replace them with high-yield junk bonds or dividend-paying stocks. The extra yield on junk isn’t enough to compensate for their credit risk, while stocks are not bonds, even if they do offer mouth-watering yields.
“I would never suggest investors consider dividend-paying equities, no matter how high quality the names, as a substitute for fixed-income exposure,” Johnson said. “Stocks are stocks, bonds are bonds, and never the two shall cross when it comes to making asset allocation decisions. It’s antithetical to diversification.”
William Ehart is a journalist in the Washington, D.C., area. In his spare time, he enjoys writing for beginning and intermediate investors on why they should invest and how simple it can be, despite all the financial noise. Follow Bill on Twitter @BillEhart and check out his earlier articles.
The post Rising Risk appeared first on HumbleDollar.
March 24, 2021
What It Takes
SAVE 30% OF INCOME? No way.
That’s been my reaction whenever I’ve read about people saving 30% or more. I look back and think about making monthly mortgage payments, raising four children, paying for college and trying to save something to supplement my pension. For my wife and me, a 30% savings rate simply wasn’t possible. Nevertheless, people do it.
To find out more, I asked folks on a Facebook retirement planning group, “How do you save 30%?” The responses boiled down to nine key factors.
Folks who save that much are focused. Many buy into the financial independence/retire early (FIRE) movement, seeking to retire in their 50s or earlier. One commenter quoted Abraham Lincoln: “Discipline is choosing between what you want now and what you want most.”
Live well within your means. That means being frugal, resisting immediate wants, driving a car for 15 years or more, and spending minimal sums on vacations and other luxuries. This may justify the label “cheap,” but these super-savers are sure willing to focus on the future. “Don’t raise spending with pay raises” was mentioned several times.
Avoid debt. This was the most frequently mentioned strategy to help save money—which, of course, goes back to living within one’s means.
Two incomes. It seems being a dual-income household is a big help, and that two can indeed live as cheaply as one. Many mentioned socking away all or a portion of a second income.
No children. It’s estimated that it costs almost $234,000 to raise a child through age 17. Add college and you could be approaching $500,000. Skipping children can sure make saving money easier, but—as for me—I’ll keep the kids.
Side hustles. if you’re motivated, holding down two jobs or working lots of overtime can help you to hit that 30% target.
Live in a low-cost area. But aren't wages also lower in regions with a low cost of living? Apparently not—if you’re transferred there by a large company and keep your salary from your prior location.
Save first. Among the respondents, maxing out their 401(k) was popular. That’s no doubt made possible by employing one of more of the above strategies.
Keep track of spending. I’ve never been into budgeting. Instead, I favor saving first and avoiding credit card debt, and then allowing myself to spend whatever’s left over. Still, I can understand how a close eye on spending can help.
There’s one point missing in the above discussion, and that’s a clear definition of “savings rate.” When someone says they save 30%, I assume they take 30% of their income and put it in a savings or investment account. But is that what everyone means? For example, could it include reinvesting interest and dividends? In my case, I send money to each of my grandchildren’s 529 plans every month. Is that saving? I say “yes,” even though the money isn’t for me.
Some people count employer matching contributions to their 401(k) as savings. That’s of real value, of course, but should it count toward your savings rate? I’m not sure. Another issue raised is whether the savings rate is calculated as a percentage of pre- or post-tax income, and whether that income includes bonuses or overtime pay.
Whatever the true savings figure, it’s clear that mega-savers are disciplined and, most of all, highly motivated. If their strategies are too much for most people, there’s still much to learn from them and to emulate.
I was curious. How much do I save now I’m retired? To do the calculation, I counted the money that goes into our savings accounts each month, the interest and dividends I reinvest (but not capital gains), and the 529 contributions for our grandkids. To my surprise, it adds up to 29% of our total income.
That’s been my reaction whenever I’ve read about people saving 30% or more. I look back and think about making monthly mortgage payments, raising four children, paying for college and trying to save something to supplement my pension. For my wife and me, a 30% savings rate simply wasn’t possible. Nevertheless, people do it.
To find out more, I asked folks on a Facebook retirement planning group, “How do you save 30%?” The responses boiled down to nine key factors.
Folks who save that much are focused. Many buy into the financial independence/retire early (FIRE) movement, seeking to retire in their 50s or earlier. One commenter quoted Abraham Lincoln: “Discipline is choosing between what you want now and what you want most.”
Live well within your means. That means being frugal, resisting immediate wants, driving a car for 15 years or more, and spending minimal sums on vacations and other luxuries. This may justify the label “cheap,” but these super-savers are sure willing to focus on the future. “Don’t raise spending with pay raises” was mentioned several times.
Avoid debt. This was the most frequently mentioned strategy to help save money—which, of course, goes back to living within one’s means.
Two incomes. It seems being a dual-income household is a big help, and that two can indeed live as cheaply as one. Many mentioned socking away all or a portion of a second income.
No children. It’s estimated that it costs almost $234,000 to raise a child through age 17. Add college and you could be approaching $500,000. Skipping children can sure make saving money easier, but—as for me—I’ll keep the kids.
Side hustles. if you’re motivated, holding down two jobs or working lots of overtime can help you to hit that 30% target.
Live in a low-cost area. But aren't wages also lower in regions with a low cost of living? Apparently not—if you’re transferred there by a large company and keep your salary from your prior location.
Save first. Among the respondents, maxing out their 401(k) was popular. That’s no doubt made possible by employing one of more of the above strategies.
Keep track of spending. I’ve never been into budgeting. Instead, I favor saving first and avoiding credit card debt, and then allowing myself to spend whatever’s left over. Still, I can understand how a close eye on spending can help.
There’s one point missing in the above discussion, and that’s a clear definition of “savings rate.” When someone says they save 30%, I assume they take 30% of their income and put it in a savings or investment account. But is that what everyone means? For example, could it include reinvesting interest and dividends? In my case, I send money to each of my grandchildren’s 529 plans every month. Is that saving? I say “yes,” even though the money isn’t for me.
Some people count employer matching contributions to their 401(k) as savings. That’s of real value, of course, but should it count toward your savings rate? I’m not sure. Another issue raised is whether the savings rate is calculated as a percentage of pre- or post-tax income, and whether that income includes bonuses or overtime pay.
Whatever the true savings figure, it’s clear that mega-savers are disciplined and, most of all, highly motivated. If their strategies are too much for most people, there’s still much to learn from them and to emulate.
I was curious. How much do I save now I’m retired? To do the calculation, I counted the money that goes into our savings accounts each month, the interest and dividends I reinvest (but not capital gains), and the 529 contributions for our grandkids. To my surprise, it adds up to 29% of our total income.
Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, he was a compensation and benefits executive. Follow Dick on Twitter @QuinnsComments and check out his earlier articles.
The post What It Takes appeared first on HumbleDollar.
March 23, 2021
Time for Gold?
WITH STOCK PRICES so high and interest rates so low, many folks are thinking about buying gold. Tempted to take the plunge? Ponder these nine issues:
1. No income. Gold pays no interest or dividends. That means gold’s return hinges entirely on its price going up. Gold ownership also means you must forgo the interest and dividends you’d have otherwise earned on alternative investments. Still, with interest rates so low, the opportunity cost of owning gold—at least in terms of lost income—is very low right now.
2. Limited utility. Gold doesn’t have much practical use. According to the World Gold Council, an industry trade group, demand for gold over the past 10 years came from jewelry and technology manufacturers, and from financial customers, such as exchange-traded funds and central banks. Financial customers weighed in at about 50% to 60% of that demand. The upshot: Gold prices depend on these customers buying a product that has no actual utility to them.
3. Valuation is difficult. Gold lacks the fundamentals needed to determine fair value. You can’t discount expected future cash flows, because gold has nothing to discount. Other asset valuation techniques, such as multiples of earnings or revenue, also don’t work. Instead, gold prices fluctuate wildly based on short-term supply and demand factors, including production levels, discoveries of new reserves, central bank actions, and cycles of investor fear and euphoria. In essence, gold’s price is determined by what people are willing to pay for it at any given moment.
4. Lackluster returns. Gold began to trade freely in 1971, when the U.S. went off the gold standard. Returns since then haven’t been attractive compared to stocks. If you invested $1,000 in gold at year-end 1971, it would have grown to about $50,000 by year-end 2020. That same $1,000 invested in the Wilshire 5000 total stock market index would have grown to about $185,000.
Gold skyrocketed in the 1970s due to its liberation from the gold standard and unusual economic conditions, notably rapid inflation. If these events reoccur, gold could be a home run again. If not, it could be a drag on investment performance. Suppose we ignore the 1970s and look only at the past four decades. Over that stretch, a $1,000 investment in the Wilshire 5000 grew to some $73,000, while a $1,000 gold investment grew to about $3,000.
5. Stock market hedge. Gold has been a reasonably good way to diversify a stock portfolio’s risk, because gold prices tend to move independently of stock prices. This has been the case for much of the past 50 years, although not so much over the past five years. While we can’t know for sure, gold will likely continue to be a good stock diversifier, and owners may benefit through reduced overall portfolio volatility and gains from rebalancing. The downside: Despite any performance boost from rebalancing, this hedge usually carries a cost—in the form of lower overall portfolio returns, because of gold’s drag on long-run results.
6. Inflation hedge. Gold has a reputation as an inflation hedge, but reality suggests otherwise. There have been periods since 1971 when gold outpaced inflation, but there have also been long periods when it didn’t. Notably, gold wasn’t up to the task during the 30-year period from 1981 to 2010, when it didn’t keep pace with inflation.
Stocks, inflation-indexed Treasury bonds and natural resources do a better job of protecting against inflation. Stocks have delivered significantly higher returns than gold. Inflation-indexed Treasurys have an income stream that is directly tied to inflation. And natural resource prices are more highly correlated to inflation than gold.
7. Currency hedge. Gold tends to be negatively correlated with the U.S. dollar, which means it rises in value when the dollar weakens. A weaker dollar creates an inflation problem for Americans, because it takes more dollars to buy goods and services from foreign suppliers. Some U.S. investors hedge this risk with gold.
But do you really need to? A prolonged decline in the dollar is unlikely. The dollar is the world’s reserve currency, the U.S. is fundamentally sound and our growth prospects relative to other developed countries are favorable. On top of that, as I noted in point No. 6, there are better ways to hedge inflation.
8. Fear hedge. Gold is undoubtedly an effective hedge when people become fearful or major crises arise. Global banking systems are quite stable under normal circumstances, but can become unstable when political, economic and natural disasters arise. Gold exists outside of these systems, so its price tends to rise during turbulent times and fall when conditions return to normal. You can make money during these cycles, but knowing when to get in and out is awfully difficult.
Some people also believe gold will be a valuable currency in a post-apocalyptic world where banking systems have disappeared altogether. But who knows? Gold will only be worth something if the people who own food, shelter or medicine are willing to exchange them for gold. Owners may be reluctant to make that swap if it jeopardizes their own survival.
9. Unfavorable taxation. Gold is taxed unfavorably when held in taxable accounts. Federal and state governments consider gold to be a “collectible.” At the federal level, long-term capital gains on collectibles are taxed at ordinary income tax rates, but with a cap of 28%. By contrast, long-term gains on traditional investments are taxed at 0%, 15% or 20%, depending on your income level.
Rick Moberg is the retired chief financial officer of a publicly traded software company. He has an MBA in finance, is a CPA and has a passion for personal finance. Rick lives outside of Boston with his wife. Check out his previous articles.
1. No income. Gold pays no interest or dividends. That means gold’s return hinges entirely on its price going up. Gold ownership also means you must forgo the interest and dividends you’d have otherwise earned on alternative investments. Still, with interest rates so low, the opportunity cost of owning gold—at least in terms of lost income—is very low right now.
2. Limited utility. Gold doesn’t have much practical use. According to the World Gold Council, an industry trade group, demand for gold over the past 10 years came from jewelry and technology manufacturers, and from financial customers, such as exchange-traded funds and central banks. Financial customers weighed in at about 50% to 60% of that demand. The upshot: Gold prices depend on these customers buying a product that has no actual utility to them.
3. Valuation is difficult. Gold lacks the fundamentals needed to determine fair value. You can’t discount expected future cash flows, because gold has nothing to discount. Other asset valuation techniques, such as multiples of earnings or revenue, also don’t work. Instead, gold prices fluctuate wildly based on short-term supply and demand factors, including production levels, discoveries of new reserves, central bank actions, and cycles of investor fear and euphoria. In essence, gold’s price is determined by what people are willing to pay for it at any given moment.
4. Lackluster returns. Gold began to trade freely in 1971, when the U.S. went off the gold standard. Returns since then haven’t been attractive compared to stocks. If you invested $1,000 in gold at year-end 1971, it would have grown to about $50,000 by year-end 2020. That same $1,000 invested in the Wilshire 5000 total stock market index would have grown to about $185,000.
Gold skyrocketed in the 1970s due to its liberation from the gold standard and unusual economic conditions, notably rapid inflation. If these events reoccur, gold could be a home run again. If not, it could be a drag on investment performance. Suppose we ignore the 1970s and look only at the past four decades. Over that stretch, a $1,000 investment in the Wilshire 5000 grew to some $73,000, while a $1,000 gold investment grew to about $3,000.
5. Stock market hedge. Gold has been a reasonably good way to diversify a stock portfolio’s risk, because gold prices tend to move independently of stock prices. This has been the case for much of the past 50 years, although not so much over the past five years. While we can’t know for sure, gold will likely continue to be a good stock diversifier, and owners may benefit through reduced overall portfolio volatility and gains from rebalancing. The downside: Despite any performance boost from rebalancing, this hedge usually carries a cost—in the form of lower overall portfolio returns, because of gold’s drag on long-run results.
6. Inflation hedge. Gold has a reputation as an inflation hedge, but reality suggests otherwise. There have been periods since 1971 when gold outpaced inflation, but there have also been long periods when it didn’t. Notably, gold wasn’t up to the task during the 30-year period from 1981 to 2010, when it didn’t keep pace with inflation.
Stocks, inflation-indexed Treasury bonds and natural resources do a better job of protecting against inflation. Stocks have delivered significantly higher returns than gold. Inflation-indexed Treasurys have an income stream that is directly tied to inflation. And natural resource prices are more highly correlated to inflation than gold.
7. Currency hedge. Gold tends to be negatively correlated with the U.S. dollar, which means it rises in value when the dollar weakens. A weaker dollar creates an inflation problem for Americans, because it takes more dollars to buy goods and services from foreign suppliers. Some U.S. investors hedge this risk with gold.
But do you really need to? A prolonged decline in the dollar is unlikely. The dollar is the world’s reserve currency, the U.S. is fundamentally sound and our growth prospects relative to other developed countries are favorable. On top of that, as I noted in point No. 6, there are better ways to hedge inflation.
8. Fear hedge. Gold is undoubtedly an effective hedge when people become fearful or major crises arise. Global banking systems are quite stable under normal circumstances, but can become unstable when political, economic and natural disasters arise. Gold exists outside of these systems, so its price tends to rise during turbulent times and fall when conditions return to normal. You can make money during these cycles, but knowing when to get in and out is awfully difficult.
Some people also believe gold will be a valuable currency in a post-apocalyptic world where banking systems have disappeared altogether. But who knows? Gold will only be worth something if the people who own food, shelter or medicine are willing to exchange them for gold. Owners may be reluctant to make that swap if it jeopardizes their own survival.
9. Unfavorable taxation. Gold is taxed unfavorably when held in taxable accounts. Federal and state governments consider gold to be a “collectible.” At the federal level, long-term capital gains on collectibles are taxed at ordinary income tax rates, but with a cap of 28%. By contrast, long-term gains on traditional investments are taxed at 0%, 15% or 20%, depending on your income level.
Rick Moberg is the retired chief financial officer of a publicly traded software company. He has an MBA in finance, is a CPA and has a passion for personal finance. Rick lives outside of Boston with his wife. Check out his previous articles.The post Time for Gold? appeared first on HumbleDollar.
