Jonathan Clements's Blog, page 75

Favoring Fiber

IN AN EARLIER ARTICLE, I detailed how Charter Communications wasn’t so much my internet provider as my extortionist. I thought I’d dealt with it all in an equitable manner. But then, exactly two years after our relationship began, Spectrum abruptly increased the price it charged for internet access by 67%, from $29.99 a month to $49.99. I guess we didn’t have a relationship so much as a contract.

While I didn’t take too kindly to that, after a while—with a Zen-like grace—I accepted it, not so much because I thought it was fair, but because no one else in Kansas City could provide a lower price. All that changed immediately after I returned from a road trip to Cleveland, where I saw an old friend and witnessed the eclipse.

Besides the finances, the only thing in the Flack household that I’m in charge of is the mail. My wife, much like many millennials, thinks mail is from a bygone era of civil political discourse, cursive writing and the landline. If asked about the mail, she replies, “If it’s that important, someone would text me.” Therefore, it is my job to inspect the mailbox each day and place any pertinent correspondence on her desk, and then remind her about it a few days later.

While I was eagerly reviewing all the mail that had built up while I was away, I noticed a postcard from Google Fiber, mentioning that for $30 a month it would provide 100 megabits per second (mbs) of internet connectivity.

Of course, I’d heard of Google Fiber, mostly due to numerous previous mailings and especially a commercial that had played ad nauseam. In it, a man speaks glowingly of how Google Fiber takes playing video games to the next level. I remember thinking that, while fast download speeds could be useful, here was a grown man admitting to playing video games.

Still, this new dirt-cheap Google offer was a game changer, and it didn’t hurt that it came with “FREE high quality Google wifi equipment,” which was far smaller and far sexier than what Spectrum provided.

First, though, I thought maybe I could get the best of both worlds—Google’s $30 pricing without having to go through the hassle of changing providers. So, I called Spectrum and politely asked, “I just received an offer from Google Fiber for $30 a month. Can you beat it so I don’t have to face the hassle of changing providers?”

The Spectrum rep responded, “That sound’s rough.” Though A.J. was a ray of sunshine, and after we joked a little about the internet, its importance and its pricing, she told me there was nothing she could do. She also oddly mentioned, “You need to do what’s best for your family,” which made me wonder if I was changing internet providers or sending my wayward son to military school.

I decided not to take a verbal no for an answer, and went online to chat with Ren about my Google offer. She wasn’t as fun as A.J. and brusquely mentioned that Spectrum provides 500 mbs vs. Google’s 100. I replied that I only needed 100 mbs, as I was a grown man who didn’t play video games. She then asked me what streaming service I used. I replied that I only used Sling Orange with the Turner Classic Movies (TCM) upgrade for a total of $46 a month.

Then she mentioned that she could provide a Spectrum package that included the internet and 150-plus channels for $86 a month. I thought about asking if it included TCM and if she could check her math as my cost to watch TCM via Google would be $10 less, or $76 a month ($30 + $46). Instead, I typed “thank you” and ended the chat by clicking on the “x.”

The next step was to confirm how much internet I needed. Was 100 mbs enough? Internet speed, unlike money and good looks, is only useful up to a point, so I used a calculator from Consumer Reports to determine that I needed exactly 69 mbs.

I subsequently signed up for Google Fiber. The online process was quite seamless, though there was an issue finding the fiber jack that Google had thoughtfully installed before I purchased my home. Google mentioned that if I couldn’t find it, it would send a technician out tomorrow, to which I immediately thought, “I’m obviously not dealing with Spectrum.” I asked the rep to hold off and then asked my wife, who took me by the hand to the jack’s location in the garage.

I set it up so that I’d have a week of overlap between activating Google Fiber and firing Spectrum, as I still had concerns whether 100 mbs would be enough (it was) and whether the jack’s location in the garage of a three-story townhouse was an issue (it wasn’t).

By the way, do you know anybody who’s interested in a gently used Spectrum modem and wi-fi router?

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

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Go Big Early

I VIVIDLY REMEMBER my father explaining how small sums of money could grow exponentially. Using the example of a penny that doubled every day for a month, he showed how it could grow to more than $10 million. Indeed, as Albert Einstein didn’t say, “The most powerful force in the universe is compound interest.”

Many authors tout the benefits of saving beginning at a young age. Radio personality Dave Ramsey and his daughter Rachel Cruze, for example, compare two individuals. One starts saving early and puts aside a modest sum annually for eight years, and then stops. The other begins eight years after the first, investing the same modest amount for 35 additional years. The first person comes out ahead.

Admittedly, their eye-popping conclusion depends on an absurdly high 12% constant rate of return. No investment can guarantee double-digit growth rates year after year. Certificates of deposit and some bonds might offer consistent returns, but rates tend to be relatively low. The stock market can deliver much higher returns, but not with any predictability.

That brings me to our twins. They graduated from college in 2016. I figured this was a good time to take advantage of their youth and start them on the path to wealth. I talked to them about compounding, and how powerful it can be when combined with early and consistent savings.

The idea was to have them amass a relatively small amount in tax-deferred accounts prior to age 30. As I explained it, they could “go big early” and then ease up on the gas. This wasn’t a free pass to skip investing once they reached their initial goal. Rather, the idea was to set aside a basic sum to fund their life many decades later. They liked the concept.

Together, we set a goal of saving $3,750 a year in an IRA. As an incentive, my wife and I promised to contribute half that amount, meaning they’d need to save roughly $150 a month to reach the annual goal. If all went according to plan, they would have socked away $30,000 by the time they turned age 30 seven years later.

They’d then leave those savings to grow for 35 additional years. Two rules were implicit: The amount set aside was untouchable and dividends must be reinvested.

To get an idea of the power of compounded savings, I had them plug numbers into an S&P 500 return calculator, looking at some random 35-year periods. They were astonished at the final numbers.

For instance, the 35-year period ended March 2024 had an annualized total return of 10.19%, similar to the S&P 500’s average annual 10.26% return since the index’s 1957 inception. A $30,000 initial investment would have grown to a final portfolio value of $900,000. This figure isn’t adjusted for inflation, and it includes reinvested dividends.

I then discussed the income this portfolio might generate for their 65-year-old selves, assuming a 4% withdrawal rate. They’d have some $36,000 a year to begin retirement—not all that high, but certainly nothing to sneeze at. The amount represented $6,000 more per year than the entire initial investment.

A lightbulb went off in their heads. What if they continued to save after the initial seven-year saving period? A mere $200 per month, or $2,400 per year, through the 35 years to age 65 would goose results to over $1.54 million, giving them an initial retirement income of just north of $61,600 per year. What if they invested $500 a month? That would become more than $2.5 million dollars, providing over $100,000 per year.

Before they got too excited, I noted that projected outcomes weren’t guaranteed. Looking at all 35-year stretches, the S&P 500 has produced an average annual return of 6.6% after inflation. Still, there were no 35-year periods when the S&P 500 lost money.

The twins agreed to try the concept. We sat down together each year to make their contributions and to discuss the investment plan. Initially, they invested in SPDR S&P 500 ETF Trust (symbol: SPY).

This past March, they turned 30 years old. During the initial time, their accounts benefited from a strong annualized return of more than 13%. The positive early growth solidified their decision to stick with the plan.

There were tweaks along the way. For example, my daughter started medical school and had no income to contribute in two of the first four years. She made additional contributions when she began her residency. The twins decided to slightly broaden their portfolios by purchasing Vanguard Total Stock Market ETF (VTI) and Invesco’s technology-heavy Nasdaq-100 ETF (QQQ). They switched to Roth IRAs to take advantage of their lower income tax brackets. Recently, they’ve started saving the maximum allowable IRA contribution.

As Einstein also didn’t say, "Compound interest is the eighth wonder of the world. He who understands it, earns it.” The combination of starting early, saving regularly and compounding is indeed remarkably powerful—and you don’t have to be a genius to benefit.

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

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Shouting Out

AS WE GET OLDER, some of us have less patience and complain more. Maybe it’s because we’re frustrated. Many everyday activities become more difficult to perform as we age. As a 73-year-old, I probably have a shorter fuse when dealing with life’s daily hassles.

My friend Bill might also fall into the cranky category. He was complaining about how terrible customer service has become since the pandemic. “Prices keep rising, but we keep getting less in return,” he ranted. “We get less service before, during and after we purchase something.”

Bill pointed out that he tried to get help with his YouTube TV, but he couldn’t phone someone. He had to use the service's online chat, which made it more difficult for him to solve his problem.

Maybe he’s right that shoddy service has become the norm. I thought about how it took more than an hour to talk to a customer service representative at an airline. But then a few things happened that made me realize there are plenty of good, well-trained employees trying to make our lives easier and more enjoyable.

Like many other retirees, I have a daily routine. I wake up early every morning and go for a long walk. After breakfast, I like to read the newspaper on my iPhone.

One morning, I was trying to read The Washington Post, but I was unable to access the articles. Instead, I got a message saying I had to subscribe to the newspaper. I became frustrated because I’ve been a subscriber for years. I tried to log into the site, but I found I was already logged in.

I gave the paper a call, with the intention of giving some employee a piece of my mind. A woman answered. I told her what happened and threatened to cancel my subscription. The more I talked, the more frustrated I got.

In a calm and soothing voice, she apologized for my trouble. She said she’d transfer me to a technician, who would help solve my problem. About 30 seconds later, she said again, in a calm voice, that a technician would be with me when he’d finished with another customer. She made that announcement one more time before I was connected. That human touch made me feel like the Post really valued me as a customer.

The technician came on the line. He said, “Dennis, I hear you have a problem accessing the articles online.” He also spoke in a polite and understanding voice. He asked what device I was using to read the Post.

He said I needed to clear the cached data on my iPhone. Cached data is information stored on your device after you visit a website. He walked me through the steps to make sure I knew how to do it. He waited to make sure I had no problem reading the newspaper. He then asked me politely if I needed any additional help.

When I hung up the phone, I was truly impressed by the great service. From the time I called, it took The Washington Post’s customer support team a matter of minutes to solve my problem.

The next day, after breakfast, I went to Walmart to buy Apple EarPods for my wife’s iPhone. The salesperson started to process my purchase and told me to push the “no” button when it popped up on the screen. I said to myself, “What’s he talking about, pushing the ‘no’ button?”

He was warning me about the attempt to sell me an extended warranty on the EarPods. The item cost $19.88 and the insurance would have cost me an additional $3. He thought it was a bad deal. I agree. I don’t like this type of insurance, either. He didn’t have to do that. But he wanted to make sure his customers didn’t fall into the trap of purchasing insurance that didn’t make sense.

A few days later, my wife and I went to Santa Barbara. My friend told me to try a restaurant called Opal. “They have great food and you won’t regret it,” he said. He was right. The food was excellent, but what impressed us even more was the service.

We had a waitress assigned to our table. But occasionally, two other people would come over to our table to make sure everything was okay. The service we received made us feel special. It was a memorable experience not just because of the great food, but also the great service.

Dealing with the public isn’t an easy job, especially after the pandemic, when many businesses still find themselves short-handed. We should all be a little more understanding about the service we receive. It can be a thankless job when the only time you hear from customers is when something isn’t right.

What I’ve learned over the years is that good customer service is like gold. It can add real value to the product you’re purchasing. That’s why I’d like to give a shoutout to the folks who helped me at The Washington Post, Walmart, and Opal Restaurant & Bar.

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. Follow Dennis on X @DMFrie and on Threads, and check out his earlier articles.

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Many Unhappy Returns

I WAS INSPIRED BY Rick Connor and other HumbleDollar contributors to sign up for the AARP’s volunteer-run Tax-Aide program. After completing 48 hours of training at a local college and passing the required tests, I volunteered two days a week at two different senior centers. I completed my first tax season in April.




Two clients, with whom I spent extra time, stood out. The first was a widow in her late 60s whose husband had always handled their finances. She had an account with a large brokerage firm. There were lots of transactions that generated lots of losses, which were on top of the large capital-loss carryforwards she already had.




I tried to coach her on questions to ask her advisor, but she was afraid to call the advisor because she could never understand what he said. I asked if she had adult children who could participate in a call, but she had none. Being new, I was giving the advisor the benefit of the doubt. The more experienced volunteer who reviewed my work was more blunt: The advisor was taking advantage of her.




In fact, her capital losses were so large, she could have offset them against ordinary income and hit the $3,000 annual maximum for the next 30 years. For me, it was eye-opening—a lesson about the dangers of leaving an advisor-managed portfolio to a spouse with little financial understanding. I wondered if the advisor, who had been selected by the deceased husband, had been churning the account before the husband died, or if he only started after.




The second client was a woman in her mid-60s, never married and who was planning to retire in 2024. She had a good job and a sizable 403(b) balance. She asked how to prepare for next year's taxes, given that her work would end and her pension would start in July. It became apparent that she didn’t understand her options for delaying Social Security, and the risks and benefits of doing so.




This second client was good with numbers. She just didn't know where to turn for help. I did some tax estimating for her and sent her to Fidelity Investments, her 403(b) provider, with a list of questions. I suspect she’ll come out okay, but I was struck by her lack of understanding of her own finances, even though she was clearly capable.




I tackled both cases while volunteering at the Tax-Aide program run out of a senior center in an affluent neighborhood. But I found working at the other location more satisfying. There, I was helping folks truly in need.




There was a couple in their mid-80s living only on Social Security. How do they manage? And then there was the couple who cashed out their entire six-figure retirement account from a former employer, without understanding the tax consequences. It was early in retirement, and they were facing the biggest tax bill of their life.




There was the polite, articulate 20-something man who needed me to do his 2022 and 2023 taxes. He worked four jobs in 2022 and four different jobs in 2023, one of which was as an independent contractor for DoorDash. His occupation was “driver.” He picked up work where he could to support himself and his young daughter. His income was $36,000, and he was hustling to keep things together. He ended up with a big refund due to the Earned Income Tax Credit, something I had no prior experience with. Fortunately, the software calculated it for me.




Several clients came up short on their withholding and had to set up payment plans with the IRS. They were surprised and upset, not realizing how a change in their work or retirement would impact their taxes.




One couple in their 80s with minimal retirement income was due a small refund. I asked if they wanted it direct deposited. They said not to worry; the IRS was going to keep it because they owed money from prior years. They were nice, cheerful people. We joked about the football teams represented on their tattered sweatshirts. I couldn’t help but feel for them.




Among those who owed money, a significant number refused to use direct debit to pay the IRS because they didn't trust the government with their bank information. One prim and proper 93-year-old lady told me she didn't want to pay money so those “jackasses in Washington” could travel all over at her expense.




Few clients itemized their deductions. The exceptions were those with large out-of-pocket medical bills. One woman had medical expenses totaling $30,000. She told me she’d had cancer, but had been cured after months of treatment. She’d asked the doctor to repeat that to her—she couldn’t believe she was cured after all she’d been through. It was a lot of money, she said, but worth it. Here was a place where the tax code helped her by taking on a small part of her financial burden.




Time and again, clients brought in receipts for itemization that were nowhere close to the standard deduction. I learned by listening to another volunteer how to explain that the government had actually done something good by raising the standard deduction. They hadn’t “taken away” the ability to deduct, but rather had greatly reduced their taxes by increasing the standard deduction, and also greatly simplified tax preparation.




I found the work stressful. I made mistakes that were caught by reviewers and, in turn, I caught mistakes in reviews I conducted of more experienced preparers. Even for “simple” returns, there were enough quirks to keep everyone on their toes. A woman brought in pension statements written entirely in Japanese. The initial preparer inadvertently put in 2022’s income instead of 2023’s, which was lower. I made the correction and teased him that my Japanese was better than his.




My favorite way to lighten the tension with returning clients, who’d clearly been married for many years, was to ask if anything had changed over the past year. Do you have a new address? New phone number? New spouse? That got a chuckle, and the wife would say, “Not that I know of.” The husband would acknowledge that he was lucky she kept him another year. They would then usually tell me how long they’d been married.




The tax system’s complexity for these mostly low-income people just overwhelms them. Even if they have simple returns, they turn to AARP because they’re intimidated. As they sat and watched me input numbers, I could feel their stress as they awaited the verdict. There was great relief when they heard the result they’d expected and great anxiety if I delivered bad news.




After a refresher course, I’ll be back next February.




Howard Rohleder, a former chief executive of a community hospital, retired early after more than 30 years in hospital administration. In retirement, he enjoys serving on several nonprofit boards, exploring walking paths with his wife Susan, and visiting their six grandchildren. A little-known fact: In May 1994, Howard was featured—along with five others—on the cover of Kiplinger’s Personal Finance for an article titled “Secrets of My Investment Success.” Check out his previous articles.

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Facing the Truth

WHAT WAS MY DAD thinking when he asked me to help him and my mom with their finances? Did he expect me to give him money? Maybe.

Up until that moment, my dad handled the family finances. Both he and Mom were retired, though my mom still worked occasionally as an adjunct professor. My mom assumed things were okay, though I had my suspicions.

One day, I saw a credit card bill that showed a large outstanding balance, and only the minimum payment made. I didn’t ask my dad about this, but I was concerned. I didn’t want to confront my parents about the state of their finances. Experts say that children must be respectful and sensitive when asking about their parents’ financial affairs. I am respectful—sensitive, not so much. I brushed off my sense that things were awry and moved on.

Still, I’d been waiting for the day when my father would ask for help. My first step was to create a summary of my parents’ financial life. I gathered details on their income, mortgage and car, as well as bank and credit card statements, and tax returns for the past two years. I pulled their credit reports to ensure that I had everything. Finally, I drew up income and balance sheet statements for my parents, which I shared with both of them. Then I left their townhome and didn’t return for a week. I wanted to give them a chance to digest and discuss what I had gathered and presented.

When I returned, I asked if they had questions. They looked lost, without any spirit. I reassured them that, now that we all knew their truth, we could come up with solutions. The burden would be on all of us, not just on my dad.

I suggested filing for personal bankruptcy. My mom’s retirement benefit included legal representation, so off we went to see an attorney. He took our case, and miraculously found the best-case scenario. Due to their age, income level and household size, my parents' unsecured debt—mostly credit cards—was discharged, meaning it didn’t have to be paid back.

My mom felt guilty. Most immigrants come to America to better themselves, not to declare bankruptcy. She believed she’d failed. I told her that many individuals and corporations declare bankruptcy. I pointed out that Chrysler went bankrupt, and yet the government bailed the company out so it could continue making cars. She quietly, reluctantly nodded her head.

After the dust settled, my parents never used a credit card again. They relied only on cash, personal checks and one debit card. My mom and I became more involved in managing their finances. And my dad? He retired from being the family accountant. He spent his time driving my mom to her various part-time jobs, while also picking up my son and treating him after school to burgers, pizza, fried chicken and Korean barbecue.

It has been 14 years since the bankruptcy and eight years since my dad died. I reflect on how much courage it took for my dad to confess that they had serious financial problems. It surely was difficult for him to ask his youngest son for help. I think my biggest asset during that time was staying calm. I didn’t yell, scream or blame. I didn’t ask how or why it happened. I immediately went into acceptance and then problem-solving mode. I think this was a relief to my parents. They didn’t have to explain their nightmare.

I’ve shared my own family’s financials with my wife and son. For validation and to learn of ideas that I may have missed, I’ve also shared our financials with a Vanguard Group personal advisor, as well as two other independent financial advisors. But for now, I still manage my family’s finances. Perhaps I’ll ask for help one day. Hopefully, it will be during a time of plenty rather than famine.

Venicio Navarro was born in the Philippines but grew up among the cornfields of Illinois, somehow surviving the heavy-metal rock music of his teenage years. He jumped into retirement and currently spends his time being a tourist, golfing and working on his health. Venicio's previous article was Living My Beliefs.

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Beyond Our Grasp

MY TAX RETURN IS too complicated by far, and yours probably is, too. I lose hours looking up figures online, then toggling over to TurboTax to enter them in different boxes. It doesn’t help that I tend to pile, rather than file, important financial papers.

I take the job in stages because it’s so boring. I’ve also learned not to file early because late-arriving mail can upset my math. It happened again this year, when I got a letter informing me that I needed to report a forgiven debt as income.

When I finally submit my tax return, I cross my fingers that I’ve got it right. Some years, I’ve gotten a letter from the IRS informing me that I owe more money. Other years, a letter says the government owes me—once, incredibly, $5,000. This year, I got my expected refund from the U.S. Treasury.  

It doesn’t always go so smoothly. In 2020, when Janet Yellen was nominated to be secretary of the treasury, which oversees the IRS, a part of the vetting process was to check her tax returns for accuracy. It turned out this painstakingly well-prepared Harvard economics professor and former Federal Reserve chair had done her taxes wrong—for years.

She’d reported her husband’s book royalties on a tax form called “rents, royalties, and partnerships.” That sounds logical, but book royalties should be reported on Schedule C, which is income from a sole proprietorship or profession.

A similar thing happened to Timothy Geithner when he was nominated to be treasury secretary in 2008. Auditors found that he’d neglected to pay more than $34,000 in Social Security and Medicare “FICA” taxes while working for the International Monetary Fund. IMF employees don’t owe FICA taxes unless they’re U.S. citizens, as Geithner was. They must make the payments on their own because the IMF doesn’t automatically withhold FICA taxes from pay.

Geithner missed this fine print when he prepared and filed his own tax returns in 2001 and 2002. Then, the accountant who prepared his returns for 2003 and 2004 told him he didn’t owe FICA taxes as an IMF employee. Plausible perhaps, but wrong.

What does it say when the presumptive treasury secretary can’t file his or her tax return correctly? Perhaps our tax filing system has become too complex for human comprehension.

About 80% of the annual government paperwork burden on citizens is the result of the Department of the Treasury and IRS requirements, according to Cass Sunstein, a Harvard law professor who has tried to cut this workload. In his book Simpler, Sunstein reports some successes, such as the 1040EZ for simple tax returns and the ability to file taxes electronically. Yet Sunstein says not much more can be done without a thorough rewrite of our bloated tax code.

How did we get such a convoluted mess? It’s not the fault of the IRS, which is just the referee in a bizarre game. In his book A Fine Mess, author T.R. Reid concludes that the U.S. government made a fateful error by retaining its old system of business taxation when it added the personal income tax in 1913.

Before then, the government mainly taxed business activity—things such as tariffs on imported goods and excise taxes on alcohol or tobacco. The income tax was supposed to soak the rich only, but expanded as the U.S. needed the revenue to fight two world wars.

Like a poorly built home addition, there are gaps and cracks that tax experts exploit. Economic activity can be classified in many ways and taxed at different rates. A small business owner may file as an individual, a corporation or a partnership. Experts can suggest which path leads to the lowest tax.

Then there’s a legion of tax loopholes added to promote social change. To encourage homeownership, for example, those who itemize can deduct up to $10,000 in mortgage interest. To lower energy use, there are new tax credits for those who install more efficient heaters and coolers or windows and doors.

Ever wonder why there are so many big pickups on the road? Special tax rules allowed business owners to frontload vehicle depreciation, creating a loophole so large you could drive a Ford F-350 pickup through it. That tax break might undo the good from buying more energy-efficient appliances.

Simplifying the tax code would require us to wave goodbye to many well-loved tax breaks. When the tax code last got an overhaul in 2017, it started with a promise that we could file our taxes on one side of a postcard. That didn’t happen, but we did get lower taxes on income and estates.

Which leads to a bigger problem with our current system. Despite all its complexity, and all the frantic activity, our current tax system doesn’t collect as much as is spent by the government. Not even close.

Besides that, though, the system’s perfect, and there’s no need to change a thing.

Greg Spears is HumbleDollar's deputy editor. Earlier in his career, he worked as a reporter for the Knight Ridder Washington Bureau and Kiplinger’s Personal Finance magazine. After leaving journalism, Greg spent 23 years as a senior editor at Vanguard Group on the 401(k) side, where he implored people to save more for retirement. He currently teaches behavioral economics at St. Joseph’s University in Philadelphia as an adjunct professor. The subject helps shed light on why so many Americans save less than they might. Greg is also a Certified Financial Planner certificate holder. Check out his earlier articles.

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Paid in Full

SPENDING ISN’T something I like to do. It doesn’t bring me lasting joy. I prefer just to buy what I need.

For many folks, spending involves borrowing. If spending is your thing, incurring interest charges on credit card debt and car loans probably isn’t a big deal. But to me, borrowing to buy something means I’m overspending. If I can’t afford to pay cash, I shouldn’t buy it.

Borrowing has been the downfall of many. Spending is a onetime event—unless you borrow to spend, in which case your spending has a long tail attached to it. I think people get used to borrowing. The interest charge is just the cost of doing business—in this case, the cost of buying something we can’t afford.

When all goes well, the monthly interest charges just get attached to the monthly bills we have to pay. But if our income drops or we lose our job, those monthly expenses can become nightmares.

For the worker who has always had a job and believes that the job will always be there, spending with borrowed money is comfortable and doable. You’ve always had a salary and you probably believe you’ll always have a salary, so why change?

My experience has been different. As I’ve mentioned in earlier articles, I lost my job 10 times during my working life. While this was bad, it also made me good at finding a new job. I came to understand what I needed to do to make myself more attractive to the insurance companies that might employ me, such as earning my Chartered Property Casualty Underwriter designation. This involved taking 10 written exams, each three hours in duration, over a five-year period.

The other, more important habit I learned was to save and not borrow. Losing a job with no outstanding debt and money in the bank makes for a smoother transition to your next employer. Otherwise, you’ll take whatever job comes along because you need to pay your debts. My financial caution meant I could be more discriminating about who I’d work for and at what salary.

There have been times in my life when I did borrow. The first time was when I bought my 1987 Honda. I worked for a company that was relocating from New York City to New Jersey. It offered a relocation package, including paying the interest on a $10,000 car loan, so I took advantage. I also took out a mortgage to buy a condo as part of this same relocation package.

I ended up voluntarily leaving that company for a new job, so I had to pay the car loan myself. When I sold my condo to buy my current house, I got 15% less than my purchase price. Fortunately, this loss took place during another relocation package, and the company paid me the difference between what the condo cost me and what I ended up selling it for.

After that experience, I decided I was going to be mortgage-free as quickly as possible. In 1990, when I bought the house, interest rates were high. When mortgage rates dropped, I refinanced the loan. I didn’t borrow more than the outstanding balance—something many people did, and which led to some folks losing their homes during the 2008 financial crisis.

After the refinancing, I kept paying the same monthly amount as before, so I paid down the principal balance even faster. I refinanced twice more, but each time stuck to my strategy of paying the same monthly sum that was required on the initial loan. The result was I paid off our 30-year mortgage in 15 years, ensuring we could stay where we lived, regardless of my employment status.

Since paying off our home loan, we’ve never taken out another mortgage. We pay cash for our cars and we pay our credit card bills in full each month. Paying everything in full might not make for a glamorous life. But I can tell you from experience, it’s far less stressful.

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

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Should We Worry?

BACK IN 2021, Keith Gill wasn’t well known. A video game enthusiast, he liked to spend time in his basement, day-trading and making videos. But with his online persona, Roaring Kitty, Gill drew a following that reached into the millions. He used that platform to direct attention to the shares of video game retailer GameStop, which was nearing insolvency. 




Gill’s videos drew enough attention in 2021 to cause a “short squeeze” in GameStop shares. The result: At least one hedge fund, Melvin Capital, lost billions and shut down. Since Gill was on the other side of these trades, he netted millions for himself. But then, as quickly as he’d appeared, Gill dropped off the radar.




In recent months, however, Gill has emerged from hibernation. Picking up where he left off, Gill renewed his pitch for GameStop shares, causing the stock to jump 340% during one 10-day stretch in May.




For many, Gill’s reemergence—and his ability to move markets—are a worrying sign. Veteran investor Jeremy Grantham has argued that “crazy behavior” like this is a reliable indicator of market risk.




GameStop isn’t the only such data point. Bitcoin recently arose from a multi-year slump to hit a new all-time high. Other so-called meme stocks, including movie theater operator AMC, have also seen their share prices leap in ways that seem irrational. More mature stocks have moved higher as well. The price-to-earnings (P/E) ratio of the S&P 500 index is nearing 21—quite a bit above its 40-year average of 16.




Putting these data points together, many investors are starting to ask: Should we worry?




One answer to this question—and the answer I’d normally offer—is that making market forecasts is so difficult that it’s best to simply stay the course and avoid trading in an attempt to beat the market. As the late Jack Bogle used to say, “Don’t do something. Just stand there.” I agree, but it’s also worth taking a closer look at a key question: Why is forecasting so difficult?




Consider today’s market and what we know about it. For starters, we know that the P/E ratio is above average. We also know that unemployment is low and that inflation has been coming down. We know that interest rates are at 15-year highs but that there’s the expectation they’ll soon drop.




We know all these things as they stand today. The problem is, we don’t know where they’re going next. We don’t know how a long list of other unknowns will turn out—including multiple wars and a presidential election in less than six months. Those are what we might call the “known unknowns,” and they’re just part of the story.




Oftentimes, the real drivers of the market are the unknown unknowns—events that aren’t on our radar right now. Think back five years. While scientists understood the risk of a pandemic, ordinary people weren’t focused on it at all. That’s a big part of why COVID impacted markets so quickly and so severely. Events that appear out of nowhere tend to have the most significant impact on the market. But everyday investors have no idea when—or if—these risks will appear. 




To put it another way, the market indicators that we see today represent just a sliver of what will actually happen in the future. And the rest of the picture—what the future will actually look like—may turn out better, worse or about the same as our best guess right now. 




This would make forecasting hard enough. Still, it’s just part of the equation—because any data that we do have is still subject to interpretation. Whether it’s a quantitative measure like a P/E ratio or a qualitative assessment like Grantham’s “craziness” indicator, market information is, to a great degree, in the eye of the beholder. How we receive financial information is a function of each individual’s mindset. In simple terms, each of us could be plotted on a spectrum. At one end would be those whose reaction to most crises is to say, “This too shall pass.” At the other end would be those who panic with each new crisis.




Where we each fall on this spectrum is, in turn, a function of several other factors. To some degree, it’s innate; some are simply more fearful than others. Our posture toward risk is also affected by our experiences—first as children, watching our parents, and then as adults, managing our own finances. And we’re affected by how much we know about a particular topic. The result: Any two people can see the same set of data and arrive at very different conclusions.




But those are just the internal factors. We are also affected by the wider world and by the opinions of others, especially the media—what’s in the news, as well as the news sources we choose. A key challenge with all of this is that what happens to be in the news, or what’s happened most recently, isn’t necessarily what’s most important or what poses the biggest risk to investors. Rather, what’s in the news is simply a function of what editors choose to emphasize.




I don’t mean to single out journalists. Consumers of financial information play a part, too. In the past, I’ve talked about the concept of “single stories.” Faced with a complicated world, our minds naturally look for shortcuts in understanding things. We simplify stories in our minds so we can develop an opinion on it and move on. But sometimes these single stories are oversimplified.




A related concept is “rational ignorance.” The idea here is that there’s simply too much going on in the world for any one person to understand. There just isn’t enough time. As a result, counterintuitive as it may seem, it’s rational to choose to remain ignorant of certain things and perhaps most things.




The bottom line: As investors, we’re at a distinct disadvantage in guessing how the future will turn out. Not only do we have limited information, but even the information we have is subject to interpretation. Is the reemergence of Keith Gill a warning sign or just a distraction? There’s no way to know.




It’s for these reasons that I believe investors are best served by avoiding forecasting. As I discussed a few weeks ago, even when trends in the data look reliable or when an outcome looks like a foregone conclusion, I believe investors’ best bet is to hedge their bets—to avoid ever being too sure.

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

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The C Word

ON SUNDAY MORNING, May 19, I was enjoying croissants and coffee with Elaine at the kitchen table, while watching the neighborhood sparrows, finches, cardinals and squirrels have their way with the bird feeder. All was right in our little world, except I was a little wobbly when walking—the result, I suspected, of balance issues caused by an ear infection.

It was going to be a busy week, and I figured that it would be smart to get some antibiotics inside me, even if visiting the urgent care clinic on Sunday might be more expensive than contacting my primary care physician on Monday and perhaps having to go in for an appointment.

Long story short, I ended the day in the intensive care unit of a local hospital, where the staff discovered lung cancer that’s metastasized to my brain and a few other spots. This, as you might imagine, has meant a few changes in my life, and there will be more to come.

I have no desire for HumbleDollar to become HumbleDeathWatch. But my prognosis is not good. I've had three brain radiation treatments and I started chemotherapy yesterday, but these steps are merely deferring death and perhaps not for very long. I’ll spare you the gory medical details. But as best I can gather, I may have just a dozen okay months ahead of me.

Weirdly, as of right now, I feel pretty darn good, and perhaps better than most 61-year-olds. Every morning, I’m stretching and lifting for 20 minutes, and then riding a stationary bike for 40 minutes. And in case you’re curious, I was never much of a smoker and last had a cigarette in 1987, when I was age 24. Instead, it seems my lung cancer is the result of a defective gene—one that's rare and without a promising treatment plan.

In future articles, I’ll be writing more about the personal finance and other implications of my diagnosis, which I believe have an intriguing relevance even for those without an incurable disease. I also suspect readers want to know my plans for the site. The Reader’s Digest version: I intend to keep HumbleDollar going, though there'll be some notable changes. But before I get to those changes, here are some initial financial thoughts, which I hope to discuss further in the weeks and months ahead.

Managing money is fraught with uncertainty, but never more so than now. There’s much I don’t know—how long I’ll live, how long I’ll be able to do the work I love, what my medical and other costs will be. Still, on this score, I’m hardly alone. In varying degrees, we all face this sort of uncertainty, and it’s one reason managing money is so fascinating.

Money is intimately bound up with regret. We often berate ourselves for the foolish purchases and investments we make. This one has been a pleasant surprise: Until the past few years, I’ve lived quite frugally, and yet I find myself with almost no regrets about that lifestyle. Yes, if my health allows, I’ll be ticking off some bucket-list items over the year ahead. But mostly what I feel is profound gratitude for the life I’ve had. I’ve had amazing opportunities and wonderful experiences, and that allows me to face the time ahead with surprising equanimity.

The cliché is true: Something like this makes you truly appreciate life. Despite those bucket-list items, I find my greatest joy comes from small, inexpensive daily pleasures: that first cup of coffee, exercise, friends and family, a good meal, writing and editing, smiles from strangers, the sunshine on my face. If we can keep life’s less admirable emotions at bay, the world is a wonderful place.

We can control risk, but we can’t eliminate it. I’ve spent decades managing both financial risk and potential threats to my health. But despite such precautions, sometimes we get blindsided. There have been few cancer occurrences in my family, and it’s never been something I had reason to fear. Chance is a cruel mistress.

It’s toughest on those left behind. I’ll be gone, but Elaine and my family will remain, and they’ll have to navigate the world without me. I so want them to be okay, financially and emotionally, and that’s driving many of the steps I’m now taking.

Generosity suddenly feels so much sweeter. No doubt part of the reason is that I’ll no longer need most of my retirement savings, plus there’s scant reason to acquire new possessions. Perhaps part of me is also more anxious to earn the good opinion of others, while I still have the chance.

But there’s another aspect to this: As I watch friends and family react to my diagnosis, it makes me appreciate that most folks have an inherent goodness and they’re constantly struggling to do the right thing, and a little generosity is a way to acknowledge that.

Life’s priorities become crystal clear. Even at this late stage, I believe it’s important to have a sense of purpose, both professionally and personally. I can’t do much about the fewer years, and I have no anger about their loss. But I do want the time ahead to be happy, productive and meaningful.

I’ve been moving to further simplify my finances, organize my affairs and make things right with those around me. Underlying this is a desire to control what I can—hardly surprising, given the uncertainty swirling around me—and I’m probably overdoing it.

There’s one aspect of my life over which I have a fair amount of control: HumbleDollar, this little world I created and that all of you, with your comments, articles and support, have helped build. That brings me to my plan for the site. Even before my diagnosis, I had been noodling how to scale back the site in 2025, with a view to having a little more time for travel and such.

I’ve accelerated those plans. Starting next month, my goal is to run four or five new articles each week, rather than the dozen or so that the site publishes today. But that’ll partly hinge on how I react to treatment and how quickly my health deteriorates. Meanwhile, next week, I hope to unveil a new feature that'll allow the site's writers and readers to continue to interact with one another.

One change I’ve already made: I’ve removed the site’s donation feature and cancelled all recurring donations. Many thanks to those of you who have supported HumbleDollar financially over the years. With the site posting fewer articles, I didn’t feel it was right to continue accepting donations.

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

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Invested in My Opinion

AS THE SAYING GOES, “Never ask a barber if it’s time for a haircut.”

This isn’t to suggest that barbers lack integrity. Rather, the point is that—when faced with a question with no definitive answer—business people often offer an answer that reflects their own best interest. For a barber, it’s always a good time for a haircut. The barber is neither wrong nor correct. It’s a judgment call. But the barber is undoubtedly invested in his opinion, and he stands to gain should the questioner act on his advice.

Unlike a trustee, a barber has no fiduciary duty to his customers. He isn’t required to follow an established “standard of care” like a medical doctor treating a patient. The barber is free to give advice that serves his self-interest.

As you may have noticed, the internet is overflowing with folks eager to give advice. There’s a how-to blog, YouTube video, TikTok song and dance, and podcast on everything under the sun.

Need to change the sparkplugs on your 1994 Honda Accord? No problem, the internet has the instructions. Need to make the world’s best cup of coffee? Not a problem. There’s a subreddit devoted to the topic. Want advice on how to make your partner happy between the sheets? Need to cut your own hair? Need money advice? The internet has answers.

The web is a great resource for advice, and it’s democratized knowledge in ways that we could barely have imagined 50 years ago. It’s also a cesspool of misinformation, Ponzi schemers, and a haven for flimflammers of all stripes. It can be difficult to determine which advice is legit and which isn’t.

By “legit,” I mean advice that’s not solely a self-interested sales pitch. It’s widely known that on Wall Street everyone “talks their book.” Those who talk their book are what my academic friends call “thesis-driven.” Like our barber, they’re heavily invested in their own opinion. A thesis-driven argument cherry-picks data to support a specific, predetermined conclusion. By contrast, legit analysis examines all the data available and then formulates a conclusion based on the evidence.

We readers and contributors at HumbleDollar are also invested in our opinions. For example, I’m basically a Boglehead when it comes to investment strategy. Like many HumbleDollar readers, I’m a buy-and-hold long-term investor of globally diversified stock index funds.

So, what if someone asks me today, “Is now a good time to invest in the stock market?” What am I going to say, “no”? Is it not better for me, as a shareholder, if more investors continue to buy stocks instead of, say, gold? If there’s more demand for what I own, it’ll push share prices higher and that’s a good thing, right? Are we indexers also “talking our book”?

Yes, share prices rise as demand increases. But if you’re a truly long-term investor, such price action isn’t necessarily a good thing. As Berkshire Hathaway’s Warren Buffett once asked rhetorically, if you intend to be a net buyer of stocks for the foreseeable future, why do you want their prices to rise? He argued, “Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”

When we buy stocks, we’re ultimately buying a slice of future earnings. Companies distribute a portion of these earnings to shareholders through dividends and share buybacks. They also reinvest a portion of those earnings into their businesses, with an eye to generating even greater earnings in the future. The more we pay for those earnings today, the lower our future returns will be.

In the long run, any increase in share prices ultimately reflects earnings growth. As buy-and-hold owners, we passive index fund investors expect a rate of return equal to the dividend yield at the time of our initial investment plus growth in earnings per share. That’s it. Any return greater than that sum is, as Vanguard Group founder Jack Bogle argued, the product of speculative price movements—and shouldn’t be counted on.

If this thesis is correct, there’s no need to “talk it up” in an effort to bring others into the indexing fold. The argument doesn’t need to win the popular vote, and it doesn’t require investors to “buy the story” for it to succeed.

Through index funds, I’m not investing in speculative short-term bets, where I’m wagering on where share prices may go in the near future. Rather, I’m investing in businesses that generate and increase earnings. It’s a strategy that transcends the latest investment fashions, and instead is built upon long-term earnings growth. Even our hypothetical barber would—I hope—concede that such an investment style is indeed timeless.

Jamie Seckington grew up on the beaches of Southern California listening to punk rock and raging against the machine. Decades later, he now lives a quiet life in north Idaho and reads HumbleDollar regularly. He has learned to appreciate the many ironies that life offers. Check out Jamie's previous articles.

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