Jonathan Clements's Blog, page 358

Terms of the Trade

CONSUMER economics and media literacy have evolved to become important fields of study, analyzing the way consumers make decisions���and how those decisions can be nudged. Here are 20 of the tricks and techniques used by marketers and others:

Aspirational buying. When consumers are encouraged to live like those they admire, even if they can���t afford it.

Bandwagon appeal. The psychological nudge to do���or consume���something because others are doing it. Also known as FOMO, or fear of missing out.

Bundling.��The practice of offering multiple, usually related, goods and services at a lower price than if each item were purchased separately. This is great if you���ll use the entire bundle, but a waste of resources and money if you don���t.

Dog whistle.��An indirect or implied message meant to communicate with a particular group, often placed within a broader, more general message, thus allowing the messenger to deny meaning it. It can also reinforce a ���you���re an insider��� sense of affiliation. Saying something is only for ���the right people��� can make us want to be one of those ���right people.”

Eye candy.��Visual images that are superficially attractive and entertaining but are unnecessary or unrelated to the subject at hand, such as flashing lights and attractive spokespeople.

False statistics. Using graphs, charts or statistics that sound precise���yet even the four out of five dentists who preferred Trident gum can find these numbers suspect.

Feedback loop. A phenomenon whereby the media, reporting a purported ���hot��� trend, inspires consumers to follow the trend. This seemingly confirms the initial report.

Flattery. A technique where the potential consumer is complimented as part of the sales pitch. “Because you’re worth it.” ��“Don’t you deserve the best?” Such phrases induce consumers to feel good about the product, making them more likely to buy.

Freemium. Giving away a base-level product for free, but then offering paid upgrades and enhancements once the buyer is hooked. A common practice in gaming.

Hasty generalization. A conclusion drawn from insufficient evidence, such as ascribing the characteristic of a few members of a group to all of the group���s members. It also includes proof by anecdotal evidence. ���I once knew a guy from Florida who lost weight by eating only alligator meat, so it must work.���

Hedging.��Subtly limiting or equivocating a claim, so as to reduce the guarantee or assertion made in the claim. ���Studies indicate there may absolutely be a connection between hedging and people slipping on soap.���

Hyperbole.��Exaggerated claims or statements used as a tool of promotion, but not as a statement of fact. It���s only false advertising if a ���reasonable person��� would believe facts are being stated.

Juxtaposition.��Placing items, whether physical objects, pictures or statements, side by side to invite comparison. ���I���m not saying it works. I���m just putting these pictures of before and after in front of you, and I���ll let you decide.���

Nostalgia.��Invoking simpler, better times can make us want a particular product, even if we don���t remember what those times were really like.

Panache.��Having a style or manner, usually indicating superior socio-economic status. Can be done by an affectation, such as giving American ice cream an exotic Dutch name, or spelling colour or theatre in the English way. Also called posing.

Poisoning the well.��One side introduces negative facts or perceptions about the other side, putting the other side at an immediate disadvantage. ���Only an idiot would buy���.��� ��It can include the ad hominem fallacy, where a messenger doesn���t address the substantive differences, but attacks a competitor���s or opponent���s motives or credentials.

Plain folks. Having people just like you speak on behalf of a product, except���unlike you���they���re getting paid. ��

Stacking.��Skewing experiments, data or the presentation of data in a way that helps market a good or service. One allergy pill claimed it was the only one clinically proven effective. The fine print noted it was the only pill tested in the clinical trial.

Testimonial. Having a false expert���like a famous person or a guy who isn���t a doctor but plays one on TV���advocate for a product. A popular NFL quarterback was everywhere on Dallas TV as the ���official spokesperson��� for a brick company.

Truthiness. A term coined by Stephen Colbert, it���s when the appeal is made to our ���gut,��� no matter what the actual data says. ���Everyone knows���.��� It���s based on confirmation bias, our tendency to accept or reject data based on whether it supports or refutes beliefs we already hold.

Jim Wasserman is a former business litigation attorney who taught��economics and humanities for 20 years. His previous articles include When in Rome,��Bundle of Joy��and��Getting Played. Jim���s three-book series on teaching behavioral economics and media literacy,���� Media, Marketing, and Me , ��is ��being published in 2019.��Jim lives in Granada, Spain, with his wife and fellow HumbleDollar contributor, Jiab. Together, they write a blog on retirement, finance and living abroad at�� YourThirdLife.com.

HumbleDollar makes money in three ways: We accept��donations,��run advertisements served up by Google AdSense and participate in��Amazon‘s Associates Program, an affiliate marketing program. If you click on this site’s Amazon links and purchase books or other merchandise, you don’t pay anything extra, but we make a little money.

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No A for Effort

LESS IS MORE when it comes to investing. Less effort. Fewer transactions. Lower costs. Less worry. Lower taxes. Less ego. Less clickbait.

We���re wired to try hard. To do well. Especially if you���ve had some success in your life, and built up some money to invest, you probably got there by working harder than others. Problem is, the same rule doesn���t apply to investing. There is no A for effort. But there is an F for frenetic.

The good news is, there���s a simple way. You can grow wealth by matching the market���with index funds���instead of vainly trying to beat it. Broadly diversified low-cost balanced, asset allocation and target-date funds also can be good choices.

It���s the pursuit of market-beating funds that can do us in, since past outperformance does not predict future outperformance. What will you do when yesterday���s top fund manager lags the market for the ensuing two or three years? Will you agonize, switch to the next hot fund, rinse and repeat?

Just matching the market can be plenty lucrative. While we���re working, most of us will have the opportunity to invest regularly and let our money compound over several decades. Let���s assume you had done just that over the past 30 years. You made an initial $3,000 investment in a tax-deferred account on June 1, 1989, in the Vanguard 500 Index Fund. Then you added $400 a month through May 31, 2019. (In truth, you should try to invest more. This is just an eminently doable example, especially if you have a 401(k) with a company match.)

According to PortfolioVisualizer.com, your money would have compounded at about 9% a year, in line with the historical average for U.S. stocks. Boring you say? What would you say to $717,000? I thought so.

There���s no guarantee that your investments will compound at 9% annually for the next 30 years. But that is close to the long-term average for U.S. stocks.

And what effort does capturing the long-term profit and dividend growth of the overall U.S. market require? Mostly, it requires prodigious patience and faith in the enduring strength of the American economy. Ignoring the naysayers and the doomsayers. Tuning out the siren songs of self-promotional investment gurus.

Finally, it requires the realization that, to get the market���s returns, you have to be in the market. You won���t make money investing when things seem good and getting out when you���re worried.

What is not required for this approach? Daily or up-to-the-minute portfolio monitoring. Expensive financial advisors or newsletter authors who say they can beat the market. Mornings, evenings and even work hours glued to CNBC. Saturdays spent with Barron���s and its lionized fund managers and forecasters. Umpteen magazines, blogs and websites trumpeting the stocks and funds to buy and sell now. (Best ETFs for Brexit!��and Top funds for uncertainty!��are among my favorites.)

Good advice isn���t clickbait. Fewer clicks can result in higher returns and greater peace of mind.

William Ehart is a journalist in the Washington, D.C., area. Bill’s previous article for HumbleDollar was Father Knew Best. 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 .

Do you enjoy articles by Bill and HumbleDollar’s other contributors? Please support our work with a donation.

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Self-Sabotage

OUR EGOS CAN torpedo our investment decisions. Here are four examples, plus some suggestions for how to avoid these pitfalls:

1. Confirmation bias.��People often support their strong financial opinions by only seeking out confirming information. One of my financial-planning clients worried about inflation and its potential impact on his savings. He only read articles that stated inflation and interest rates would soon be going through the roof. But this economic prediction didn���t come to pass. Instead, inflation and interest rates actually went down. Fortunately, he���d agreed to buy a diversified portfolio that didn���t depend on any particular economic forecast.

2. Overconfidence. Many of us like to think of ourselves as above average. The idea of simply matching the performance of the market with passive index mutual funds can seem mundane. Even if we know that index funds have outperformed more than 80% of active funds over 10-year holding periods, we may be convinced of our ability to pick a ���market beater.���

Unfortunately, even active funds with a stellar history can come up short. Famed investor Bill Miller ran the actively managed Legg Mason Value mutual fund, which outperformed the S&P 500-stock index for an amazing 15 years in a row from 1991 to 2005. A Fortune magazine senior editor wrote an article in 2006 calling Miller ���the greatest money manager of our time.��� But in 2008, when the market crashed, his esteemed Legg Mason fund lost almost 18 percentage points more than the overall market. It ended up ranking in the bottom 1% of all U.S. stock funds for a five-year period.

3. Bruised egos.��While we all make investment mistakes, our battered egos may not want to learn from a bad experience, let alone talk about it. Based on his accountant���s recommendation, my uncle bought into an expensive limited partnership. This partnership purchased a promising commercial site in Fort Lauderdale, Florida, near a proposed convention center. While the building location turned out to be thriving, the master partner proved to be dishonest and my uncle lost his entire investment. I suggested that he share his unfortunate experience with others, so they could learn from it. But my uncle felt his investment decision reflected badly on him, so he refused to discuss it.

4. Overvaluing complexity.��When it comes to investing, there���s an advantage to admitting, ���I don���t understand.��� Enron and Bernie Madoff both had ���magic formulas��� that seemed to generate amazing returns. After they collapsed, it became apparent that even experienced investors didn’t understand them.

Today, expensive alternative��funds offer complex ways to supposedly protect investment portfolios when the stock market tanks. But do they really help anyone, except their highly paid managers? Morningstar recently compared high-cost alternative funds with traditional low-cost bond funds. The Chicago research firm found that plain-vanilla intermediate-term U.S. Treasury bond funds provided the best protection during market downturns.

Struggling to remove your ego from your investment decisions? To get some fresh perspective, ask yourself: How would I advise someone who’s facing the same financial conundrum?

Rand Spero is president of Street Smart Financial, a fee-only financial planning firm in Lexington, Massachusetts. His previous articles were Human Factor,��Why Wait and��Help Yourself. Rand ��has taught personal finance and strategic planning at the Tufts University Osher Institute, Northeastern University’s Graduate School of Management and Massachusetts General Hospital.

Do you enjoy articles by Rand and HumbleDollar’s other contributors? Please support our work with a donation.

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Say No to Mo

A FEW WEEKS back, a reader���let���s call him Karl���challenged me with a question. Why, he asked, don���t I recommend momentum investment strategies?

If you aren���t familiar with the term, momentum strategies seek to buy stocks that have done well in the past, with the hope that they will continue rising, while also selling stocks that have done poorly, with the expectation that they will keep falling.

Karl asked why, in a��recent article, I had dismissed momentum investing as the sort of thing that would turn your portfolio into an ���unpredictable stew,��� even though research has found that it can be profitable. It���s a fair question.

Karl is right that there���s lots of evidence to support momentum strategies. The��most commonly cited��paper��was published in 1993. Since then, many other academics and practitioners have confirmed that it does indeed pay to buy stocks that have been going up and to sell those that have been tumbling. In fact, there���s enough data to conclude that this really isn���t an open question anymore.

Momentum definitely works. And it���s not limited just to stocks. Momentum also works with bonds, commodities and other types of investments. Indeed, it���s a remarkably durable feature of investment markets.��One paper��found evidence of momentum going all the way back to 1801. And yet, despite all this research, I still don���t recommend momentum strategies.

Reason No. 1: Costs.��Momentum trades don���t last forever. In the 1993 paper referenced above, the authors found that the optimal holding period was just six months. If you want to jump on the bandwagon when a stock is going up, you have to move fast. You can���t wait too long to buy���and you also can���t wait too long to sell.

If you do, there���s a high price to pay: After that six-month holding period, momentum tends to reverse and you could end up��worse��off. Because of this need to move fast, momentum strategies are expensive. First, all this trading can leave you with a tax bill. Second, trading itself is expensive. In addition to commissions, there are bid-ask spreads. Finally, because so much work is involved, momentum funds are expensive. Even Vanguard Group, with its reputation for low costs, charges four times more for its��momentum fund��than it does for its standard��S&P 500��index fund.

Reason No. 2: Lack of Predictability.��Like any niche bet, momentum trading will have periods when it shines and periods when it underperforms. But because momentum is such a risky strategy���attempting to jump in and out when a stock is on the move���it runs the risk of severe losses when the market turns abruptly.

According to one paper entitled ���Momentum Has Its Moments,��� momentum strategies declined by 73% over the course of just three months in early 2009, when the stock market suddenly turned positive after months of decline. To hedge this risk, you could find another strategy with a negative correlation to momentum. They do exist, and that might moderate your losses.

But that would mean adding��two��new funds to your portfolio, and you would have the additional question of how to weight them appropriately. And then, of course, you would run the risk of two negatively correlated investments simply canceling each other out. In short, you can have pure momentum, with all the risk it entails, or you could try to manage that risk, but with added complexity and uncertain results.

Bottom line: There’s no question that momentum is a proven strategy. But it���s also expensive and extremely risky. Yes, others might make money with the strategy���sometimes���but that shouldn���t bother you. The purpose of investing, in my view, isn���t to accumulate the absolute greatest number of dollars. Rather, it���s to accumulate the greatest number of dollars, while also meeting your financial goals and sleeping at night.

Adam M. Grossman���s previous articles��include Playing Nice,��Stepping��Out��and�� Math vs. Emotion . Adam is the founder of�� Mayport Wealth Management , a fixed-fee financial planning firm in Boston. He���s an advocate of evidence-based investing and is on a mission to lower the cost of investment advice for consumers. Follow Adam on Twitter�� @AdamMGrossman .

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Tax Rate Debate

I���M PONDERING whether to make my biggest transaction in four years���and it might be the trickiest financial decision I���ve ever made. My quandary: Should I take advantage of today���s low tax rates to convert a big chunk of my traditional IRA to a Roth?

This financial navel-gazing was sparked by an article by John Yeigh, one of HumbleDollar���s contributors. As John pointed out, you can now have a much higher annual income and still avoid the top federal tax brackets, thanks to the tax law passed in late 2017 and which took effect in 2018. That means it���s possible for folks to make a large conversion from a traditional IRA to a Roth and pay taxes at a relatively low rate. ��Remember, you have to pay federal���and possibly state���income taxes on the taxable sum converted to a Roth. To cover the resulting tax bill, you���ll want money set aside in a regular taxable account.

In return for paying those taxes today, you get a handsome reward: Money in a Roth IRA grows tax-free, plus there���s no required minimum distributions once you turn age 70��. Sound appealing? Problem is, the current window of opportunity may slam shut at the end of 2025, when many provisions in 2017���s tax law sunset, and it could close even earlier���depending on what happens in 2020���s election.

To understand what���s at stake, suppose you claim the standard deduction. In 2019, if you���re married filing jointly, you could have total income of up to $345,850 and still remain in the 24% federal tax bracket. Above that level, additional income is taxed at 32%. By contrast, in 2017, before the new tax law took effect, you���d have been taxed at 25% once your total income got above $96,700. This latter figure reflects 2017���s standard deduction, plus two personal exemptions.

What if you���re single? In 2019, you can have total income of up to $172,925 and pay taxes at 24% or less. Contrast that with 2017, when you would have been taxed at 25% on income above $48,350. Meanwhile, if you file taxes as head of household and claim one dependent, you can have total 2019 income of as much as $179,050 and remain in the 24% bracket, versus reaching the 25% tax bracket at $68,250 in total income in 2017.

“I long ago learned that you don���t want to get into the forecasting business���not just when it comes to the financial markets, but also when contemplating future tax rates.”

The bottom line: Unless you already have a huge income, it looks like there���s plenty of room to do a hefty Roth conversion in 2019 and get taxed at 24% or less. That alone, however, isn���t enough to justify a big conversion. Instead, you also need to be reasonably confident you���ll be taxed at a higher rate later on, especially once you reach age 70�� and start taking required minimum distributions from your retirement accounts.

I���m 56��, which means I���m 14 years from that point. If my traditional IRA notches a 4% after-inflation annual return, it���ll balloon 73% over the next 14 years���and I���ll be looking at required minimum distributions of around $95,000, based on the IRS���s uniform lifetime table. (I���m using my portfolio���s potential after-inflation return because, over the 14 years, I presume tax thresholds will continue to rise with inflation.)

Take that $95,000 IRA distribution and add my Social Security benefit, my taxable account���s gains, my wife���s Social Security and her portfolio income, and it looks like we could easily be paying taxes at a 25% marginal federal rate and perhaps more���assuming we return to something that looks like the tax law that applied to 2017 and earlier years.

To be sure, I could reduce the tax hit somewhat by spending maybe a third of my IRA in my 60s. But even then, it looks like my wife and I would still be in the 25% tax bracket once we���re in our 70s���again, assuming we revert to something like the old tax law.

The question: Should I do a big Roth conversion this year and perhaps in the years that follow, paying federal income taxes at 24% or less, so that���14 years from now���we could potentially avoid paying taxes at 25% or more. A big conversion today, and hence less taxable income later, may also result in lower Medicare premiums. What about my Social Security benefit? That, alas, will almost certainly be taxable.

As I weigh all of this, there are so many unknowns. Maybe we won���t revert to something that looks like the old tax law. Maybe we���ll cut federal income taxes and instead adopt a national sales tax, which would make income-tax-free withdrawals from a Roth less valuable. Maybe Congress, in its infinite wisdom, will decide to tax Roth accounts.

I long ago learned that you don���t want to get into the forecasting business���not just when it comes to the financial markets, but also when contemplating future tax rates. At this juncture, all we can say with any certainty is that 2017���s individual income tax rates will return in 2026, unless Congress acts.

So if I don���t want to forecast, how do I decide whether to take advantage of today���s low federal tax rates? As always, the trick is to eschew predictions and focus on managing risk. Because none of us can be sure what will happen to tax rates, my inclination is to hedge my bets and convert maybe $50,000 to a Roth this year and perhaps a similar sum in the years that follow.

But I might convert far more���if the stock market plunges. That���ll allow me to convert a larger percentage of my traditional IRA to a Roth, while still paying the same amount in taxes. My fondest wish: The stock market nosedives, I convert, the market comes roaring back���and the entire gain is tax-free.

Follow Jonathan on Twitter�� @ClementsMoney ��and on Facebook .��His most recent articles include That’s Enough,��June’s Hits, Third Rail and Get Happy . Jonathan’s ��latest books:��From Here to��Financial��Happiness��and How to Think About Money.

HumbleDollar makes money in three ways: We accept��donations,��run advertisements served up by Google AdSense and participate in��Amazon‘s Associates Program, an affiliate marketing program. If you click on this site’s Amazon links and purchase books or other merchandise, you don’t pay anything extra, but we make a little money.

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Cutting Corners

THE EARLY retirement movement has many naysayers and outright haters. My husband Jim and I can sympathize: We sometimes get strong pushback when we share our strategies for living frugally.

���That seems like a lot of work,��� some people respond. ���It sounds like you don���t have much fun,��� others say. Some even accuse us of lying.

I readily admit it takes effort to be frugal. But then again, it takes work and sacrifice to exercise regularly, stick to a diet and get an education. Ditto for anything else worth achieving.

What about the ���no fun��� comments? I���d say that���s a misconception. We choose to live frugally, but that hasn���t meant depriving ourselves. Rather, we choose to spend on the things that matter most to us. Here are five ways we cut corners:

1. Entertainment.��Early on, we subscribed to Netflix and satellite TV. For satellite, we switched between DirecTV and Dish, depending on the promotion. But over the years, it became more and more expensive after the promo period ended, and we could no longer justify paying $80 to $100 a month to watch a few channels. We definitely didn���t need 200-plus channels, so we cancelled the satellite TV but kept Netflix.

We also used alternatives to the movie theater, like Blockbuster and Redbox, so we could rent newly released DVDs. In addition, we���d stream movies at home, sometimes with vigorous debates and multiple votes over what to watch.

2. Recreation. Many people forget that our tax dollars already pay for entertainment���in the form of public parks and libraries.

We always played tennis at the public courts. Not only was it free, but also we got the sense of community that comes with seeing the neighbors walk their dog, youth teams practicing soccer, or families holding a birthday party or a cookout.

We borrowed books, books on tape and movies from the library. One summer, the boys wanted to watch as many movies from the library as possible. They picked movies they thought interesting, working alphabetically through the library���s collection. By the end of the summer, we only got as far as H.

The boys also participated in summer reading programs at the library when they were younger. The library had a display case where young people could put up an exhibit. The boys were thrilled to set up their collection of action figures for all to see.

3. Shopping. I always bought baby clothes at garage sales and thrift stores. I saw no reason to pay full price for clothes that would fit for just a few weeks. In fact, at thrift stores, the baby clothes were frequently brand new, with the tags still attached.

Meanwhile, Jim often shopped for his vintage neckties, while the boys had fun looking for the funniest and funkiest T-shirts or gifts. One Christmas, we all agreed to exchange thrift store gifts���which turned out to be everything from tacky Hawaiian shirts to a cow-colored chocolate milk glass that came with a whirling blade to keep the drink mixed.

4. Food. We ate at home as much as possible, eating out only occasionally. Eating at home kept the focus on the family, with the food as an enhancer. When I discovered Groupon, the family often joked that where we ate depended on what offers I found.

Dallas���where we lived until our semi-retirement���is a diverse city, with a blend of Chinese, Indian, Vietnamese, Ethiopian, Korean and Thai cultures, and that means great food can be had. We learned that restaurants located inside ethnic grocery stores were often good and typically more authentic, though you paid a price in d��cor. We also frequented the local Thai temple for its Sunday market, where we could find Thai street food at cheap prices.

We not only ate excellent food at modest prices, but also we exposed the boys to different cultures and customs. We learned to eat Ethiopian food by hand, and discovered the difference between south and north Indian cuisine, while paying far less than the prices at popular Americanized ���ethnic��� restaurants.

5. Travel. We saved money when travelling abroad by taking advantage of geographical arbitrage. We went where U.S. dollars gave us the most value, places like Thailand, Vietnam, Cambodia, Guatemala and Malaysia. We even used layovers in cities like Paris, Seoul, Dubai and Amsterdam to get a quick taste of these places, often inspiring us to come back for longer visits.

When we travel today, we still don���t stay in four-star hotels, but opt for Airbnb or cheaper hostels���and, no, these places aren���t bug-infested. Low-cost hotels, pensions and inns give us a taste of local life and extra dollars for exploring.

We find out from locals where they eat and shop. In Vietnam, we went to a non-tourist area and stumbled on a restaurant packed with locals, where our family thoroughly enjoyed spicy frog legs. In Georgetown, Malaysia, we found a restaurant famous among locals that specialized in chicken with rice at $1.50 per plate. It was so good, we went back the next day.

When we traveled, we did so only if we knew we could pay off the cost in full. It meant we used Jim���s extra earnings from teaching summer school and any bonus pay I received. It also meant we came away from these trips with great memories���but not great credit card debt.

Last year, at age 53, Jiab Wasserman left her job as a financial analyst at a large bank. She’s now semi-retired. Her previous articles include Fast Forward,��Living for Less��and��Courting Success . ��Jiab and her husband Jim, who also writes for HumbleDollar, currently live in Granada, Spain. They blog about downshifting, personal finance and other aspects of retirement���as well as about their experience relocating to another country���at�� YourThirdLife.com .

Do you enjoy articles by Jiab and HumbleDollar’s other writers? Please support our work with a donation.

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That’s Enough

WE STRIVE constantly for more: A bigger paycheck. A loftier job title. A larger home. A more luxurious car. New electronic toys. Higher investment returns.

Make no mistake: There can be great pleasure in this striving���but we may not be so happy with the results. Indeed, on this holiday that celebrates America���s independence, let me put in a plug for a most un-American concept: How about settling for enough���and perhaps even opting for less? Here are three reasons:

1. Pursuing more leaves us running in place.��It���s the hedonic treadmill: We���re sure the next pay raise, bigger house and new car will make us happier. But all too quickly, we adapt to these material improvements in our lives, we���re back to feeling dissatisfied and we���re hankering after something else.

2. Possessions become a burden. We don���t just adapt to the bigger house and the new car. We may come to view these possessions as a mixed blessing���and perhaps even regret their purchase���as the car becomes unreliable and as we deal with all the household upkeep. If our goal is long-term happiness, maybe we should look to spend less today, so we have a larger pile of savings���and more financial freedom in the future.

3. Chasing returns leads to less.��This is where the pursuit of investment performance parallels the pursuit of happiness. Sometimes, less is more. If we eschew broad market index funds, and instead try for higher returns by picking individual stocks or investing with hotshot money managers, we increase risk���and we���re highly likely to hurt our returns, as the investment costs involved drag down performance.

What���s the alternative to always seeking more? As you flip the burgers on the grill this afternoon or take a swim in the neighbor���s pool, take a moment to be thankful for what you already have and for the good things that lie ahead.

Both gratitude and anticipation can give a big boost to happiness, and neither comes with a price tag. Think about the people in your life, the possessions you own, the savings you’ve amassed and the experiences you���ve enjoyed over the past year, as well all the things you���re looking forward to in the months ahead. Let���s face it, you have a good life���and just pondering that fact can make it even better.

Follow Jonathan on Twitter�� @ClementsMoney ��and on Facebook .��His most recent articles include June’s Hits, Third Rail and Get Happy . Jonathan’s ��latest books:��From Here to��Financial��Happiness��and How to Think About Money.

HumbleDollar makes money in three ways: We accept��donations,��run advertisements served up by Google AdSense and participate in��Amazon‘s Associates Program, an affiliate marketing program. If you click on this site’s Amazon links and purchase books or other merchandise, you don’t pay anything extra, but we make a little money.

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When in Rome

WE DON���T NORMALLY think of classical philosophy as relevant to modern money management. Perhaps it���s the perception that philosophers live humble, financially insecure lives ruminating on ethereal matters. Or, as my businessman father said when he saw I was taking a philosophy course, ���That will make you interesting at parties, but how will you eat with it?���

Meet Marcus Aurelius.

If you aren���t a classics person, Marcus was born to a powerful and rich Roman family, spending the greater part of his life being trained for leadership. He became emperor in 161 A.D., ruling or co-ruling for some 20 years. His legacy from his time as the richest, most powerful man on earth: He���s considered one of the ���five good emperors��� and one of Rome���s greatest leaders. He was also the philosopher emperor, specifically writing about stoicism, which was very popular among Rome���s wealthy and powerful.

Marcus thought there was a natural flow to the universe in which we all operate. One of the keys to a ���good life��� is to recognize that flow and our place in it, specifically identifying which parts we have control over and which we don���t. For the parts that we can���t control, we should ���assent��� and accept them, rather than fruitlessly fighting against them. For Marcus, the happy life comes from leading a virtuous life of right actions, which in turn is derived from using logic and reasoning to decide where best to focus our efforts, so we can positively influence matters.

This might seem like old school commonsense, yet consider some modern dilemmas:

We feel insecure about our worth, so we spend lavishly to impress others���which may or may not work.
Parents feel guilty that they don���t spend enough time with their children, so they buy the kids cars and take them on exotic vacations���only to disappear again from their children���s lives.
We overwork at our jobs���which we may not even like���and then overcompensate by spending on distractions from work, including opiates and other harmful substances and activities.
We���re worried about our spending habits relative to our income and retirement saving needs. But instead of cutting expenses, we go in search of a higher paying job.

In all of these cases, we fail to examine what might be made better by right focus and effort. We refuse to recognize, assent and embrace the problem, instead using our money and power to mask the real issue or fruitlessly try to counterbalance it. It���s spending based on negative emotion rather than reason, focusing on a patch, not the problem. Marcus might say that, if we feel swept along by the river of life, we should stop using our money to try to build a hurried and temporary dam. Instead, we should learn to swim.

Marcus seems to speak to today���s affluent society. We shouldn���t wield our money and power like a broadsword, swinging blindly and in resentment against general unhappiness. Instead, we should use our tools like a rapier, with precision, after having calmly reasoned where we can affect positive change���and accepting that which we can do nothing about. That reasoned action should include using our money and power to help our fellow man, along the way gaining virtue���and hence greater happiness���by addressing community problems where we can make a difference.

Take it from one of the most successful and wealthy emperors in history: Judicious use of our money isn���t just important to a life of contentment and happiness. Rather, it���s imperative.

Jim Wasserman is a former business litigation attorney who taught��economics and humanities for 20 years. His previous articles include Bundle of Joy,��Getting Played��and��The S Word. Jim���s three-book series on teaching behavioral economics and media literacy,���� Media, Marketing, and Me , ��is ��being published in 2019.��Jim lives in Granada, Spain, with his wife and fellow HumbleDollar contributor, Jiab. Together, they write a blog on retirement, finance and living abroad at�� YourThirdLife.com.

HumbleDollar makes money in three ways: We accept��donations,��run advertisements served up by Google AdSense and participate in��Amazon‘s Associates Program, an affiliate marketing program. If you click on this site’s Amazon links and purchase books or other merchandise, you don’t pay anything extra, but we make a little money.

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Nothing to Chance

MY WIFE AND I take some over-the-top precautions to protect our financial accounts. Why? After 40 years of working, our life���s savings boil down to digits stored on computers. No one anymore holds stock and bond certificates, stuffs money in mattresses or buries gold in the backyard. The integrity of those digits is all important.

Here are our 11 strategies���which go way beyond the normal account and password protection recommendations:

We only deal with major institutions. Several friends have their retirement funds invested through small, boutique wealth advisors. I know of one advisor who operates on his own out of his house. These small advisory firms likely provide great service. But to me, they seem ripe for mischief. Bernie Madoff is just one of many rogue investment advisors who have gone astray with Ponzi schemes or excessive commissions.
We maintain 13 financial accounts split up among eight institutions���unlike many friends, who have consolidated all assets into one huge account. Just like portfolio diversification, we feel institutional diversification lowers risk, by reducing the fallout from a cyberattack or other issues with any single institution, while also marginally broadening our investment choices.
We separate our investment accounts from our daily cash management and banking accounts. Except for occasional cash transfers from two investment accounts, these various accounts aren���t linked. The low interest rates of recent years minimize the penalty for maintaining larger bank cash balances.
For our larger investment accounts, we utilize two-factor authentication, and also must painstakingly locate and input cumbersome passwords for each log in. We almost never save investment account passwords on any device. We don���t use any password manager or other lockable software, and we don���t maintain a spreadsheet with a list of passwords. We also feel ���the cloud��� isn���t our friend when it comes to protecting financial and other information.
Likewise, we don���t use account aggregation services or download financial data to budgeting, tax or other software. Instead, we manually update our gross assets���our balance sheet���and our budget every six months. This ensures our accounts remain segregated and discrete. We also feel semi-annual updates are sufficient to allow us to tweak estimated tax payments and rebalance our investments. Unlike many friends, we don���t spend much time sweating daily, monthly or quarterly changes in the markets or our accounts.
We have some retirement accounts that we never access digitally, so there���s no username and password to be stolen. The investment selections for these accounts are in a set-it-and-forget-it mode.
We never access investment accounts from our phones, a notebook computer or some other portable device. Never, ever. Most friends trade stocks, review balances, move money and complete other financial transactions with ease from their cellphone anywhere in the world. We know our approach is old school. But with a conservative and diversified portfolio, we never feel compelled to take prompt investment action. In an emergency, we could always call our financial institutions.
We only use one device to access the larger accounts, which is locked up when traveling.
Like most folks, we probably do not change passwords frequently enough, especially as our logon routines are so cumbersome. The good news is, we don���t have to sync new passwords on multiple devices.
We regularly download account statements, but these aren���t readily found in the event of a house break-in. Retaining these backups could prove invaluable, should any institution have problems with its own records.
We have advised our kids about the location of our accounts and passwords.

John Yeigh is an engineer with an MBA in finance. He retired in 2017 after 40 years in the oil industry, where he helped negotiate financial details for multi-billion-dollar international projects. ��His previous articles include Hers, His and Ours,��Unloaded��and Getting Schooled.

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June’s Hits

WHAT CAUGHT readers’ attention last month? Here are the seven articles on HumbleDollar that garnered the most page views:

Math vs. Emotion
Not as Advertised
Father Knew Best
Down the Drain
An Old Man’s Gripes
Out on a Lim
Building Wealth

An article from May, Farewell Money, also continued to attract a heap of readers. What about our Saturday morning newsletters? The most widely read was Developing Story.

Follow Jonathan on Twitter�� @ClementsMoney ��and on Facebook .��His most recent articles include Third Rail,��Get Happy��and Where It Goes . Jonathan’s ��latest books:��From Here to��Financial��Happiness��and How to Think About Money.

HumbleDollar makes money in three ways: We accept��donations,��run advertisements served up by Google AdSense and participate in��Amazon‘s Associates Program, an affiliate marketing program. If you click on this site’s Amazon links and purchase books or other merchandise, you don’t pay anything extra, but we make a little money.

The post June’s Hits appeared first on HumbleDollar.