Obituary for Common Sense; unknown author

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Today we mourn the passing of a beloved old friend, Common Sense, who has been with us for many years. No one knows for sure how old he was since his birth records were long ago lost in bureaucratic red tape.

He will be remembered as having cultivated such valuable lessons as knowing when to come in out of the rain, why the early bird gets the worm, why life isn’t always fair, and how, on occasion, maybe it was my fault.

Common Sense lived by simple, sound financial policies (don’t spend more than you earn) and reliable parenting strategies (adults, not children are in charge).

His health began to deteriorate rapidly when well-intentioned but overbearing regulations were set in place. Reports of a six-year-old boy charged with sexual harassment for kissing a classmate; teens suspended from school for using mouthwash after lunch; and a teacher fired for reprimanding an unruly student, only worsened his condition.

Common Sense lost ground when parents attacked teachers for doing the job they themselves failed to do in disciplining their unruly children. It declined even further when schools were required to get parental consent to administer aspirin, sun lotion or a sticky plaster to a student; but could not inform the parents when a student became pregnant and wanted to have an abortion.

Common Sense lost the will to live as the Ten Commandments became contraband; churches became businesses; and criminals received better treatment than their victims. Common Sense took a beating when you couldn’t defend yourself from a burglar in your own home and the burglar can sue you for assault. 

Common Sense finally gave up the will to live, after a woman failed to realize that a steaming cup of coffee was hot. She spilled a little in her lap, and was promptly awarded a huge settlement.

Common Sense was preceded in death by his parents, Truth and Trust; his wife, Discretion; his daughter, Responsibility; and his son, Reason. He is survived by three step brothers; I Know my Rights, Someone Else is to Blame, and I’m a Victim. 

Not many attended his funeral because so few realized he was gone. If you still remember him pass this on. If not, join the majority and do nothing.

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Common sense is a basic ability to perceive, understand, and judge things, which is shared by (“common to”) nearly all people and can reasonably be expected of nearly all people without any need for debate.

Our education system gets a failing grade when it comes financial literacy. Everyone should know some basic money lessons like how to budget, the time value of money, implications of too much debt and how credit works.

Making financial decisions and managing  your investments still requires some common sense. You will be successful if you have some.

 

You need more than money to have a pleasurable retirement

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Having worked as a financial advisor, my main focus in retirement planning was building a sizable nest egg for clients’ to enjoy their golden years. I used to think that the senior who greeted me at Walmart, rang in my groceries or served me coffee needed the extra income in retirement. Did something gone wrong with their retirement plan or did they just fail to save enough to enjoy a life of leisure?

However, I am starting to think that these seniors may also be bored. Imagine, you have been traveling at 100 miles an hour at work and now have come to a dead stop in retirement. No one really prepares you for the shock of getting up in the morning with no place to go. What do you do with all that extra time?

Step One: Avoid the retirement shock, start to plan ahead

There is more to life than your work. Most of your work friends will slowly disappear once you retire. Having a social network outside of your work place is a key to a pleasurable retirement. A common mistake is not developing a balanced lifestyle before you retire. (All work and no play!)

One of my business associate retired at 63 and decided to start to play golf. He join a golf club and found that he didn’t really enjoy playing golf. He hated winning the most honest golfer award. (A prize for the worse score)

Here are a few networking opportunities to make some new friends prior to retirement:

  • Over 55 sports leagues, baseball, basketball, hockey …..
  • Racket, curling and golf clubs
  • Bowling & dart leagues
  • Church groups
  • Alumni groups – high school, college and sport teams
  • Being a scout leader for boys or girls
  • Coaching or being a mentor

If you don’t have any hobbies yet, I suggest that you plan to get some before you retire. Sitting on a beach under an umbrella drinking margaritas sounds great but you will get bored after a while. You may not have the time right now but many schools offer adult learning classes. A friend of mine took a class on how to fix small engines. It is never too late to learn something new and it might just keep your brain from turning to mush.

Step Two: Retirement is a life changing event, prepare to change

Married couples have to adjust to being together 24 /7 which can add stress to your relationship. It’s a good idea for couples to have different hobbies and interests. Spending some time apart makes for more interesting dinner conversations. For example, I like to golf and my wife enjoys genealogy.

Household chores can be a thorny issue. Sharing or dividing these tasks will depend on your individual skill levels. My wife does most of the cooking but I will do most of grocery shopping and together we maintain the lawn & gardens. I recommend scheduling your household chores to be done during a weekday, save your nights and weekends for socializing.

Avoid becoming a couch potato, it is a sure way to shorten your retirement years. A regular exercise program should be part of your everyday routine. You don’t have to go to the gym and lift weights to stay fit. There are many simple ways to keep active; walking, cycling and swimming, just to name a few. If you have a partner, find something that you both enjoy doing, having someone to workout with can help you get off the couch.

Step Three: Take on new challenges

Learn to play a musical instrument, speak a second language or better yet give back to the community. There are many fine organizations that are in desperate need for volunteers. You have a wealth of experience, professional expertise and invaluable personal wisdom that shouldn’t go to waste. You have a lot to offer, find things that you are passionate about.

In my case, playing football was a strong positive influence in my life. In honor of all my football coaches, I spent six wonderful years coaching kid’s football.

When people ask me what I do all day, I tell them; “I am so busy in retirement that I was surprised I found the time to work”! Remember, variety is the spice of life.

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What should an investor do about Brexit?

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Many of the worst investment mistakes I’ve seen have originated from an overreaction to the unknown. We have all witnessed substantial global upheaval in the past. Many of us have had a window seat to watch how Wall Street responds to uncertainty and turmoil. The financial markets don’t like uncertainty. Why? Because it’s extremely difficult to try to predict the future.

For instance, what will happen to all of the trade deals that are in place? What impact would this have on corporate profits? What about the bond markets, or the debt that is tied to the European Central Bank? Long term, will other EU countries follow Britain’s example? The list of questions goes on and on.

Far too many money managers placed huge bets on Brits staying within the EU. They all have egg on their faces. Now there is a rush to exit these positions causing market volatility. Their repositioning responses will not been good for your portfolio.

It has always been my philosophy that slow and steady wins the day. So what should you be doing to protect your life savings from the Brexit vote to leave? Actually, you probably shouldn’t be doing much at all. If you are properly diversified with limited exposure to any one country, you should probably sit tight for now.

Here is a four-point strategy to help investors:

  1. Don’t react by selling anything. To be sure, there will be some fear in the European markets, but this would not be a good time to react to that fear. This is an emotional component of behavioral finance, and history has shown that those investors who sell in the midst of a crisis usually end up doing so at the wrong time. They wind up selling low and buying high.
  2. Look for buying opportunities. The best time to purchase things on sale is when nobody else wants them. There may be some tremendous opportunities to purchase distressed assets, because many investors have given into fear and are running scared.
  3. Analyze how much of your portfolio is at risk. Most investors don’t have all of their portfolio in risky assets. Figure out how much of your portfolio is actually tied to risky areas and how much is reasonably safe. Odds are, if you are a well-diversified investor, you don’t have a high percentage of your portfolio tied to the European financial markets.
  4. Relax! We’ve experienced changes before, and sure enough, we will see more changes in the future. Most cannot be predicted. While changes of this magnitude can be worrisome, I urge you to fight through your fear.

Simply put, a well-diversified portfolio should protect you from most of the worst aspects of any volatility we may experience.

Why not go crazy and spend some money, you’re earned it?

devil & Angel

After working for decades, my retirement plan will finally allow me to enjoy life with few worries. It is so tempting to buy that luxury car, travel to some exotic destinations or remodel our home. Why not spend the money, I earned it and people say that can’t take it with you.

On the other hand, the financial meltdown of 2008-09 was scary, it reminds me that unexpected events could disrupt our travel plans and lifestyle choices. Life has thrown me a number of surprised curve balls over time so I remain cautious.

Surprise Curve Ball No. 1: Ailing parents

The Canadian Alzheimer society estimates that one out of five Canadians provide some form of care to seniors with long-term health problems. What if your parents need nursing or assisted living care and they don’t have the money to pay for it. Unfortunately, elder care is not cheap and costs vary depending upon where you live. (Surprise, my elderly mother has been diagnosed with early stages of dementia.)

In my area, estimates for a private room in a nursing home is around $50,000 per year and you need to apply two years in advance just to get in. An alternative would be to hire a live in caregiver if your parents own their own home. I am not a big fan of using a reverse mortgage to pay for a caregiver but all options should be investigated.

Another option that may lessen the financial impact on your retirement nest egg is to determine if it makes more sense for you to become the caregiver. One of my friends, will an ailing mother-in-law, used an agency to hire a full-time live in caregiver from aboard. Since his children had moved out, he had two spare bedrooms, one for care giver and the other for his mother-in-law. He was lucky that all his wife’s siblings agreed to share the extra costs.

 

Surprise Curve Ball No. 2: An adult child falls on hard times.

There are a variety of reasons why a child may need some financial aid. Most common are marriage breakdown, job loss, poor saving habits or bad decision-making. There is a disturbing trend for adult children to move back in with their parents. The media refers to them as Boomerang kids.”

Parents always want to help their children out of trouble. It helps to know how much money you can afford to give before it wreaks havoc on your retirement plans. Before making any decisions, determine how long you can provide any financial assistance and make it clear to the child up front that your financial aid can only last for a certain period of time. If they move back in, give them a moving out date. (Both my adult children have solid careers and stable marriages, so far so good!)

The risk of joining the sandwich generation is increasing

The new reality is low-interest rates over the past decade and talk of negative rates in the future could escalate the number of seniors requiring financial aid from their children due to illness. Your parents are living longer, 1 in 3 seniors are dying from Alzheimer’s and Dementia. Your children are getting married much later and are deeper in debt.

I recently emailed a follow blogger if he was planning to apply for social security at 62?  His answer: Still working, my youngest will be in college”

Sometimes you just have to be aware what is happening within your extended family. Here are two posts that could be of help.

Talk to your Elderly Parents about Money

Bank of Mom & Dad, Cutting the Purse Strings

Don’t be troubled if you have to put a limited on financial aid to your family. It’s okay to look after yourself first.

Prince dying without a will should be a wakeup call

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Matt Kent | WireImage | Getty Images

I was shock that Prince who worked so hard to have complete control of his name and music, died without a will. Some estimates place the value of his estate at 300 million, not including his vault full of unpunished work. More than 50% of his estate will go to paying taxes. Millions will go to pay lawyer fees just to settle his estate.

I am by no means an expert in estate planning but leaving 50% of your life’s work to the IRS is just plain dumb. That money, for example, could have been transferred tax free into a charitable foundation supporting young musicians, song writers or music students.

“A survey from RocketLawyer.com, a legal services web site, back in March 2012 found that 50% of Americans with children do not have a will. Even more alarming, 41% of baby boomers (age 55-64) don’t have one. The top three reasons cited by survey respondents for not having a will: procrastination, a belief that they don’t need one and cost.”

Without a will, your estate will be divided according to where you live

  • In Ohio, if you are married and you have a child from a previous relationship and you die without a will, your spouse inherits the first $20,000 of your intestate property, plus one-half of the balance of the estate. The child gets the other half.
  • In Georgia, a spouse and descendants equally share the intestate property, but the spouse’s share may not be less than one-third.
  • In Florida, if you are legally married, your spouse inherits all the assets with none going to the children (or descendants).
  • In Tennessee, when one spouse dies without a will, the surviving spouse is entitled to at least one third of the estate, and the surviving children split the rest.
  • In Texas if you are unmarried and have children, all your property will pass to them, even if you are living with someone.

Now, deciding who will get your things after you die is one of life’s more uncomfortable tasks. I have to admit that I never had a will until my wife and I had children. The main incentive in getting a will was to name guardians for our two young children in case we both died. As teenagers, it used to freak them out, when we traveled without them and said “the will is in the safe”. The saying turned out to be our good luck charm since we always came back in one piece.

The cost of getting a will is cheap compared to the fees that governments charge a family member to be appointed the administrator of your estate. For example, where I live, the current government fee is $2,500 including having to doing a lot of paperwork. Letting the government decide who should to appointed guardians of your children is also scary. 

Last year was an exceptional bad year for going to funerals of family and friends. It was very sad that five out of six were under the age of 60! I know of at least one who died without a will, leaving a big mess for the grieving family to clean up. Do your family a favour, make a will, don’t leave them a bill to clean up your financial affairs.

 

 

Some money saving tips for cruises

My wife and I just returned from a 10 day Caribbean cruise. It was only our third cruise but it was the first time that we booked an inside cabin. Not only did we save money but the darken cabin made our sleep time more restful. We didn’t miss having a baloney as there were plenty of places on the ship to sit and enjoy the view. (Pack a night-light for your night-time bathroom visits)

Avoid specialty restaurants

Most cruise lines have expensive cover charges for fine dining at their Italian, seafood and steakhouses. It doesn’t make economic sense to book a package but look for deals on embarkation nights. You may get a 2 for 1 deal or a free bottle of wine if the restaurants are not busy.

Don’t automatically buy a beverage package

Most people won’t keep up the drinking pace needed to break even on these packages. These packages range in price from $8.00 per day for sodas to $55 per day for alcohol. Read the fine print, there could be some surprising restrictions such as per-meal or per-day caps and most are not transferable.

It’s often cheaper to buy a bottle of wine than a few glasses but what do you do if you don’t finish the bottle? Cruise ship waiters can mark the bottle with your room number and save it for another night or you can bring it back to cabin.

Go on your own on shore

Many people save money by booking independent shore excursions and sightseeing tours. It is important to have cell service at the port of call in case of problems like traffic jams or vehicle breakdowns which could cause you to miss the ship’s departure time. The main advantage to booking the cruise line’s own tours is that, ideally, the ship will stand behind its quality, and if the tour runs late, the ship will wait.

Seek spa deals by choosing your time wisely

Most of the time prices for onboard spa treatments rival what you would pay at luxury resorts on land. There are exceptional deals that could save you as much as 30% by booking your treatment on embarkation and port days. Plus sometimes, the spa will offer a discount near the end of your cruise.

Steer clear of photo galleries

Many ships employ their own onboard photographers. You can purchase official pictures of your family embarking, eating, dancing and all dressed up for formal night for $20 to $30 per 8-by-10 inch image. Ask your fellow passengers to take some pictures for you using your own camera or cell phone.

Avoid onboard internet

Internet access and Wi-Fi are the more expensive amenities at sea and prices range from 55 to 75 cents per minute. Satellite internet onboard is very slow and it could cost you as much as $7.00 just to read and respond to one email. Can’t live without internet, many ships will offer extra-minute specials if you sign up on day one. (Our cruise line offered 40 free minutes)

Laundry, pressing & dry cleaning

Cruise lines will gladly do laundry for you with prices starting at around $2.50 per item. Instead use the self-service laundry facilities which will only cost you around $5.00 per load. They usually feature an iron and ironing board in addition to washer and dryer. You could also pack a steamer to get rid of wrinkles or hang them in the bathroom when you have a shower.

Tips to enhance your dining experience

We always pick opening seating for our main dining room. It allows us the flexibility to spend more time in port, catch an onboard show or activity. We usually go for shared seating which allows for more interesting dinner conversations and the opportunity to make new friends.

In addition, you are not limited to one appetizer, entrée and desert in the main dining room. You can order two entrees or three desserts if you choose. You can also order appetizer-sized portions of entrees as starters or order a few appetizers for your main meal. It’s a great way to try new foods you’re not sure you’ll like (escargot, anyone?).

Don’t miss the last formal night which offers some specialty dishes like Lobster or Beef Wellington. You don’t need a tuxedo or fancy evening gown to enjoy formal night. However, men do need to pack a jacket & tie and for women a skirt & blouse or cocktail dress will do just fine.

How to Make Volatility Your Friend

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This article was written by Joshua M. Brown

I am on vacation.

Here are two doors you can walk through:

Door number one – you spend 15 years putting $1000 into an investment every month, with the possibility of seeing that investment get cut in half twice.

Door number two – you spend 15 years putting $1000 into an investment every month, with the same annual performance of what’s behind door number one, but no drawdowns.

Which would you choose?

On the surface, you’d choose door number two. Of course you would, who wouldn’t?

But it’s the wrong choice. The trick here is to remember that you’re adding to the investment at a rate of $1000 per month. That’s when you realize that door number one, with its twin 50% crashes, is the better option.

It’s the harder choice to live with, of course, but that’s what the money’s for. Had you done this over the disappointing period for stock returns between 2000-2014, you would have lots of money to show for your troubles. Much more money than had you chosen the steadier option.

Eric Nelson at Servo Wealth explains how this is possible, by looking at an investor who chose to buy $1000 worth of the S&P 500 each month over the 15-year period versus the investor who chose to buy the more stable Vanguard Short Term Bond Index.

Despite only saving $180,000 cumulatively, your total ending portfolio value was $352,202—twice as much as you saved—for a rate of return on your contributions of +8.5% per year!     How can this be?  The S&P 500 only averaged +4.1%.  But not all of your savings averaged 4%.  Some money went in after 2001 and 2002 and 2008 and 2011 when shares were extremely depressed and subsequently earned returns of +12%, +15% and +20% or more…

We can see the opposite effect when we observe the outcome of dollar-cost-averaging the same amount into the low-risk bond fund.  Remember, it had the same annual compound return over the 15-year period.  But the amount of accumulated wealth was only $228,294, almost $130,000 less than what you netted from the S&P 500.

Josh here – The magical part is that the two investment choices both did around 4.1% annually on average. But by taking advantage of the short-term declines – systematically (which is the key) – investors can learn to embrace the volatility that ends up punishing some, but rewarding others with higher than average returns.

Conditioning yourself to love drawdowns is not easy – and the more money you have at risk, the harder it is. Younger people with 401(k) plans and newer brokerage accounts can use the power of DCA (dollar cost-averaging) – this is one critical advantage they have over their parents and grandparents. If they take advantage of it, the magic of compounding doesn’t take very long to appear.

Don’t flee from volatility, understand how it helps you and make it your friend.

joshuambrown

He is a New York City-based financial advisor at Ritholtz Wealth Management. He helps people invest and manages portfolios for them. You can also find him on CNBC’s “Fast Money” show.

In my humble opinion, you can even get more bang for your monthly investment plan by putting your money to work on days that the stock market is down 1.5% or more.

Disclaimer – Past performance is not a guarantee of future results. This content is provided for informational purposes only! It is not to be viewed as a recommendation or endorsement of any particular security, products, or services. 

 

 

My 100th Post: If Money doesn’t buy Happiness, than you are spending it Wrong

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I wouldn’t have worked as a financial advisor or be writing a financial blog if I didn’t believe that most people have a happiness number.  Your happiness number will be adjusted over time based on changes in your lifestyle choices.

You don’t need a degree in psychology to recognize that happiness is a state of mind. I have to admit that after a modest level of income, there isn’t really any evidence to suggest that people’s happiness increases with their wealth.  Money is not going to turn an unhappy life into a happy one. Some people are unhappy no matter how much money they have. However, I have also seen where spending money that you don’t have can turn a happy life into an unhappy one. Whether you are loving life or hating it, I do believe that it could really depend opon how you are spending your money!

“I’ve been rich and I’ve been poor. Rich is better.” This insightful bit of personal financial wisdom has been credited to entertainer Sophie Tucker, comedian Joe E. Lewis, comedienne Fanny Brice, actress Mae West and many others.

Some tips on buying some happiness:

Tip 1 – Buy experiences instead of things

Who we are as individuals is the sum of our experiences not the sum of our possessions. The joy of buying something new tends to deteriorate over time but creating memories last a lifetime. Sharing those experiences with family or friends can make you even happier.

Tip 2 – Many small pleasures might be better than a few big ones

Will you be happier saving money for a big-ticket item like a luxury car or indulging in small things like going to a spa or out to dinner with friends. You may be surprised at how many small pleasures can add up to a happier lifestyle.

Tip 3 – Spend on others and not yourself

There is a lot of merit to the saying “it is better to give than receive” The holiday season is just around the corner. Isn’t seeing the reaction of family & friends opening a gift that is thoughtful and unexpected, priceless?

Tip 4 – Rent a dose of happiness

You can enjoy something without having to own it. Rent a cabin hideaway if you enjoy the great outdoors. If you love the thrill of driving a luxury sports car, rent one occasionally or sign up for a weekend racing experience.

Tip 5 – Before you buy think about all the downsides

Often people buy with rosy colored glasses, they only see the good buying points and forget all the shortcomings. For example; some people think that owning a truck and a large trailer would be a great way to see the countryside. What they don’t see is having loud neighbours at camp sites, buzzing insects, traffic jams and vehicle breakdowns. Happiness is often in the small details.

 

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During my career as a financial advisor, I helped many clients find their happiness number. For some it was buying their first home, for others it was seeing their children graduate or get married will little or no debt. In my own case, my happiness number allowed me to retire early and spend more time with family & friends.

I am very fortunate to go south every November to play golf with my buds. We started 13 years ago with a total of 8 golfers, we now have 20 and there is a waiting list to join our group. We have so much fun that one of my house mates made a surprise comment. ” I would have to be on my death bed,  for me to miss this golfing trip” (Money well spent!!!)

When you think about it, money has no real value except that it can be exchanged for goods & services that we need and want. In my humble opinion, the whole purpose of having wealth is to use it as a tool to create a life you desire, enhance the lives of people you care about and hopefully leave a legacy that you are passionate about.

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Sometimes Being Frugal May Not Be Worth It?

Friends of mine invited us to join them on a four-day bus tour to New York City. I wasn’t very keen on accepting their offer; travelling ten hours by bus from Toronto to a hotel in New Jersey and back again wasn’t very appealing. After a little arm twisting from my wife, I decided to take the plunge to go on my first ever long distance bus tour.

Some Positive Points of Touring by Bus

  • Lots of stops to stretch our legs, get some food and use restrooms
  • We watched an interesting documentary on the Statue of Liberty & Elis Island on the trip down
  • Our route was very scenic  through the rolling hills of Pennsylvania and upper New York
  • Discount coupons for shopping in New York City, plus at an outlet mall on our return trip home
  • Really well-organized, lots of information on things to see, handouts on train & subway lines
  • Tour guide provided some fascinating facts at all the different stops (The Wall Street Bull isn’t on Wall St because of permit problems)

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Biggest Negative Was I needed More Time to See the NYC Sights

  • Traveling back & forth from New Jersey to Manhattan wasted 2 hours a day
  • Lots of time waiting for everyone to rejoin the group at the different stops plus getting on and off the bus
  • Spent too much time on sights that I wasn’t interested in and not enough time on other sights
  • 10 hours by bus verses 1.5 hours by plane
  • Great travelling weather but it was cloudy & raining during touring days     : (

There were too many highlights to share in one post so I will only mention two that really moved me. The first was visiting Elis Island because the ship that my mother and I took from Italy stopped there before we boarded a train from New York City to Toronto. Thousands of immigrants made the same journey under much worse conditions.

The second was the One Trade Center Memorial where the names of all the people who died during 9-11 are listed. The two reverse water fountains symbolizes tears. Memorial staff remember victims’ birthdays by placing a single white rose by their names.

Some Travel Tips for NYC

  • Admission tickets to popular sites have to be booked in advance (2 weeks or more)
  • Popular high-profile sites have airport like security checks, give yourself some extra time
  • Manhattan Streets run east-west and Avenues run north-south, impossible to get lost, or so they say
  • Trains & subway lines are relatively safe and easy to use
  • Expect carrying bags & backpacks to be checked even at low profile sites like at St. Patrick’s Cathedral

Now I did save money taking this bus tour but in hindsight, there are so many things to see in New York City.  I think it would have been worth it to spend the extra to fly to New York and stay in a relatively cheap (for Manhattan) hotel. Either way, I highly recommend putting New York City on your bucket list.

Happy Thanksgiving to all my Canadian readers & followers!!!