I LEARNED A LOT about finance and life from my uncle. He was an early investment advisor and published a book on wealth management. Even though he was not a registered investment advisor or a Certified Financial Planner, our family proudly extolled his ideas when I was growing up. My family first introduced me to my uncle’s doctrines when I was a child of five or six. I had been given a small piggybank to store my life’s savings. We soon added a couple of mason jars because I had begun collecting wheat pennies with my small allowance. Production of wheat pennies had ended three years earlier, in 1958, which led me to think they would become collectibles. I even favored older pennies since they might provide greater long-term value. Little did I know that as many as a billion pennies had been minted each year. My Depression-era parents were quite supportive of my slowly filling penny jars. Along this savings journey, they also introduced my uncle’s advice through both everyday practice and some preaching. I vividly remember wanting a Yogi Bear gun, hat, holster and badge set, which was on display at our local five-and-dime. Every time we left the store, I begged my parents to buy it. They initially said a simple “no,” and I let it pass. In those days, my family couldn’t afford much of anything on a whim. One day, my parents relented and agreed that I would be allowed to buy the set, but said I would have to pay the 99 cents from my coin jars. The 99 cents represented perhaps 20% of my life’s savings. I threw a hissy fit as only a young child can. “Not with my own money!” I screamed. I passed on the set, and we never did buy it. This story has been repeated so often it’s now part of family lore. My parents used the same tactic many times. For example, I remember regularly wanting a 10-cent ice cream cone from the daily summer runs of the Good Humor truck—but again didn’t bite when my parents insisted that I part with some of my own money. Some time after the Yogi Bear incident, my parents talked to me about the concept that “a penny saved is a penny earned.” They were happy that I didn’t spend my savings on an unneeded toy since, in their view, I had many other things to play with. They also introduced me to the story of our famous “uncle.” You see, my uncle was Uncle Ben—of Ben Franklin fame. He was indeed a relative, though by marriage, so I’m not a direct blood descendant. Still, my Philadelphia-based family regularly discussed Ben’s history and touted his words of wisdom. Uncle Ben was a founding father and inventor of the lightning rod, bifocals and the Franklin stove, which produced more heat with less smoke. As a teen, I read biographies about him, and he was my go-to subject for history and science papers. More important, Uncle Ben was a prolific writer who promoted simple, positive philosophical principles about finance and life. In 1758, he wrote one of the earliest books on personal finance called The Way to Wealth. This short booklet was an essay compiling 25 years of maxims from his Poor Richard’s Almanack. [xyz-ihs snippet="Mobile-Subscribe"] As a lifelong penny-pincher, I have followed his mantra that a penny saved is a penny earned. Actually, Uncle Ben’s original 1737 words were “A penny saved is two pence clear,” which he revised in 1758 to "A penny saved is a penny got,” closer to today’s modified version of his quotation. Franklin was by no means perfect, especially when judged by today’s standards. Still, Uncle Ben left a legacy of proverbs that are as relevant today as they were when he coined them more than 250 years ago. Many of his more than 700 maxims are familiar and still widely quoted. Here are 16 that are among Uncle Ben’s best: “The way to wealth…depends chiefly on two words, industry and frugality: that is, waste neither time nor money, but make the best use of both.” “Money is of a prolific generating nature. Money can beget money, and its offspring can beget more.” "Beware of little expenses. A small leak will sink a great ship." “When you run in debt, you give to another power over your liberty.” “If you would be wealthy, think of saving as well as of getting.” “Money has never made man happy, nor will it, there is nothing in its nature to produce happiness. The more of it one has, the more one wants.” “An investment in knowledge always pays the best interest.” “Lost time is never found again.” "By failing to prepare, you are preparing to fail." "Do not squander time, for that is the stuff life is made of." “Stick to it steadily, and you will see great effects.” “There are no gains without pains.” “Haste makes waste.” “Diligence is the mother of good luck.” "Have you somewhat to do tomorrow, do it today." “In this world nothing can be said to be certain, except death and taxes.” John Yeigh is an author, speaker, coach, youth sports advocate and businessman with more than 30 years of publishing experience in the sports, finance and scientific fields. His book "Win the Youth Sports Game" was published in 2021. John retired in 2017 from the oil industry, where he negotiated financial details for multi-billion-dollar international projects. Check out his earlier articles. [xyz-ihs snippet="Donate"]

I HAVE NEVER BROKEN a New Year’s resolution—because, until this year, I’ve never made one. But now that I’m retired, with time on my hands, I figure my wife and I ought to challenge ourselves with 10 financial resolutions for 2020: We’ll continually monitor routine spending with the goal of reducing or eliminating at least half-a-dozen expenses this year. That’s one every two months. Phone companies, internet providers and insurers, be warned: Here we come. We already have the first expense reduction in the bag. We finally decided to eliminate the daily newspaper. We increasingly read the news online, so we’re probably a few years late to this particular party. Given today’s euphoric stock market, we’ll reconsider our portfolio weightings and perhaps rebalance our stock-heavy position. A pundit saying “back up the truck” and “there is no risk” makes me wonder whether markets might be close to a top. We will update our wills. They were written when our adult children were kids. We no longer need to name guardians. Separately, our payable-on-death accounts and tax-deferred accounts could be better organized. If you haven’t updated your will in five or 10 years, it's probably due for an update. I’ll consider the impact of the SECURE Act, including the increase in the starting age for required minimum distributions (RMDs) from age 70½ to 72 and the end of the so-called stretch IRA, replaced by the need for most beneficiaries to empty inherited retirement accounts within 10 years. One implication: We’ll now have 18 more months to convert traditional IRAs to Roths before our taxable income gets a boost from RMDs. My wife and I will revisit our decision to delay claiming Social Security. Perhaps as a halfway measure, we’ll start one of the two payments. Although we’re fairly apolitical, we will follow 2020’s political developments closely. If one of the more business-unfriendly candidates gains traction, we’ll again consider reducing our overweight position in stocks. We both turn age 65 in 2020, so we’ll need to sign up for Medicare well ahead of our birthdays. We have our adult children on our supplemental health insurance, so we’ll need to figure out what to do with that coverage. We still have several small positions in relatively high-cost mutual funds held in tax-deferred accounts. We’re committed to getting rid of these funds, despite the annoying administrative headaches. I vow to spend more time educating my two children, ages 19 and 25, on financial issues. Happily, they already appear to be climbing the financial knowledge ladder. Now, if I could just get them to read HumbleDollar every day. Although we’re conservative, buy-and-hold investors who are mainly invested in index funds, I still follow the markets daily. Since I don’t trade frequently, watching makes no difference. My final resolution: Ignore the markets at least one day a week. 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 Death and Taxes, Take a Break and 7,000 Days. [xyz-ihs snippet="Donate"]

EMPLOYEES WHO accumulate significant company stock can end up with a problem, though not necessarily a bad one: concentrated stock holdings. When these employees retire, their challenge is to sell those shares in a way that maximizes their value—taking into account the share price, dividends and taxes. One strategy: Utilize covered calls. Selling a concentrated stock position can take many years because of tax considerations or restrictions on selling. For example, if appreciated shares are held in a regular taxable account, you might want to cap annual sales to limit your adjusted gross income and hence the tax rate you pay. If the shares are held in an IRA or 401(k), they can be sold without any immediate tax consequences—but, before doing so, you’d want to check whether you can make use of the net unrealized appreciation strategy. I’m no options expert. But I and several of my friends have utilized covered calls to enhance income without taking great risk. Let’s say you have 10,000 company shares that you would like to divest over a 10-year period. That means you intend to sell 1,000 shares per year. In this case, you have at least 1,000 shares on which you can comfortably sell covered calls, knowing you wouldn’t be bothered if the shares were called away. My first recommendation: Learn the basics of covered calls. When you sell a call, the buyer purchases the right to buy the stock in the future at a specified share (or “strike”) price. In return, you—the seller—receive extra income in the form of a call premium. Covered means that you, as the seller, own the shares on which you’re selling the calls and hence you’ll have no trouble delivering the stock, if the call option is exercised. Want to learn more? The Options Industry Council, Investopedia and many brokerage firm websites are all potential resources. Selling call options generates extra income. The disadvantage is that upside profits are capped at the strike price and further price appreciation is forfeited to the buyer. Since markets go up over the long term—often in big jumps—call options fundamentally limit upside stock returns. Sellers of covered calls also suffer any share price decline, marginally offset by the call premium. These disadvantages are hugely diminished for anyone stuck with large numbers of company shares. You have the downside risk, no matter what you do. You want to sell some shares anyway—and preferably when the stock price is headed up. Lastly, even if you give up upside price appreciation on a few calls, you still retain upside on your larger block of remaining shares. By selling a covered call, you either pocket some extra income when the share price doesn’t rise or you sell shares at a higher price, plus you receive the call premium. Either outcome should be favorable. My next recommendation: Play around with an options calculator to get a sense for the returns you might capture with covered calls. Calculators provide the returns on two scenarios—the stock being called away or the call option expiring unexercised—and take into account the time value of money, dividends and commissions. You’ll probably need to sign some waivers with your brokerage firm before you’re allowed to trade options. Since covered calls are a relatively conservative trading approach, the financial requirements are less rigorous than full-blown options trading. The final step: Dive into the deep end and sell one or two calls. Each call is for 100 shares. If you intend to sell 1,000 shares this year, you can “play” with up to 10 covered calls with little risk of a horrible outcome. Here, based on my experience, are eight pointers: I sell a minimum of two calls—representing 200 shares—so commissions are reasonable. More would be better if it fits your holdings. I never sell groups of calls on the same day. I diversify call timing and strike prices, just like I diversify my portfolio. I tend to sell calls that expire a few months out. The longer the term, the higher the call premium is. This tactic also allows me to sell calls several times during the year, assuming the earlier calls expire unexercised. Call values depend on expiration date, share price and type of stock. I tend to sell calls that have a value equal to at least 1% of the stock’s price and with a strike price 3% or more above the stock’s current price. While many options sell for pennies, which can double or halve in a nanosecond, such options are for traders, not conservative investors trying to squeeze out extra income. Options prices are far more volatile than share prices. I’ve found calls are best sold when the stock price has been trending up. When the share price has been declining, I simply wait. Leveraging large blocks of shares to capture some incremental income seems to work best with lower volatility blue-chip stocks. It may be more challenging if you hold higher volatility shares. When I reach my target for share sales for the year, I stop selling covered calls, unless the call premiums are particularly high. The downside: If I sell additional covered calls and they’re exercised, I increase my tax bill—and I may have to cut back on other strategies, such as converting part of my traditional IRA to a Roth. You might sell longer-term covered calls on next year's planned stock sales. I've already sold a couple of 2020s. These longer-term calls provide decent premiums, even if the strike price is well above the current share price. There's a risk buyers will exercise the options early if the stock price skyrockets, leaving you with more taxable gains this year than you planned. But early exercise is unusual, because holding the options gives the buyer more potential upside than owning the underlying stock. 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 Nothing to Chance, Hers, His and Ours and Unloaded. [xyz-ihs snippet="Donate"]

OVER THE PAST FEW weeks, my wife and I did something we hadn’t done in four years: We bought bonds. Specifically, we parked some money in one- to two-year Treasurys paying 4.3% to 4.6%—the highest rates in 15 years. Our portfolio now approaches 5% bonds, and we plan to buy more. We’re waiting to capture higher rates following the expected Federal Reserve rate increases. Bonds represent a seismic shift for us. In early 2020, I even wrote that the 60% stock-40% bond portfolio seemed dead, thanks to near-zero interest rates. But today, bonds are back, and it’s TINA (there is no alternative to stocks) that now appears dead. We recognize that our bonds are losing to inflation in the short term. Still, as retirees, we may be hurt less by inflation because many of our costs are either fixed or in decline, including housing, transportation and education. Also, inflation should eventually come down. In 2021, I also wrote about our use of covered calls on high-dividend stocks as a sort of bond proxy. In today’s bear market, this approach has held up well because the stocks involved haven’t been crushed like technology stocks. In fact, some of these “value” stocks remain near all-time highs, despite the market downturn. Our bond-proxy approach resulted in our portfolio regularly having a stock allocation of more than 90% through much of the 2021 TINA era. This year, we thought it prudent to reduce our stock exposure due to a mix of personal and market changes. We bought a second home in January. This required some stock sales, plus we now need to maintain a larger stash of operating and emergency cash. We have also ramped up our vacation spending after a two-year pandemic hiatus. On top of that, inflation provides another reason for a larger cash cushion, as we strive to make sure we have enough money on hand to cover our expenditures. Concurrent with our house purchase, interest rates started to rise after 21 months of being near zero—ever since the March 2020 pandemic start. In early 2022, the Federal Reserve began ramping up interest rates, Russia invaded Ukraine and inflation was rampant. These developments have all boosted the odds of a recession. As a result, we lowered our portfolio’s stock exposure by some 13 percentage points, so it’s now closer to 80%. Unlike HumbleDollar’s editor, we got there by selling long-term stock holdings on the way down rather than buying in hopes of a rebound. I rationalize this “investment sin” as a lock-in-less gains, limit losses, rebalance and risk-reduction measure. Maybe we should have done more. In the big picture, our small allocation shift from stocks to bonds and cash doesn’t change much, other than to make my wife and me feel slightly more comfortable about our risk exposure. Each 10% move away from stocks probably only impacts near-term wealth by a couple of percent in either direction—depending on good news or bad on issues such as inflation, Ukraine, corporate earnings and interest rates.

THE WILLS, POWERS of attorney and advance directives drawn up for my wife and me were drafted according to the laws of another state—and were badly out-of-date. For example, these various documents included guardianships for our then-young children, with a trust to make gradual payouts until they turned age 35. Both our children have since graduated college, become professionally employed and demonstrated they’re financially responsible. Despite all that, I’m embarrassed to admit that we procrastinated over getting new wills. We’re far from alone. The majority of Americans don’t even have a will. I’d bet a few HumbleDollar readers are likewise in procrastination mode. What was getting in our way? First, there’s the cost and inconvenience of making new wills. Second is the reaffirmation of our mortality, which can be hard to take. Third was the continuing uncertainty over estate taxes. The Biden administration proposed lowering the estate tax exemption and eliminating the step-up in cost basis on inherited assets, though neither idea found much favor with lawmakers. Fourth, we were reasonably certain that we would soon be moving to a new state—New Hampshire—with different estate and end-of-life rules. Finally, both our children were in the midst of major life transitions. One child graduated college in May, while the other will get married this fall. Despite all this uncertainty, we just signed new wills, powers of attorney and advance directives. They’re all legally binding in our new home state of New Hampshire. It took us seven months after our move to get them completed, as unpacking and installing closet hooks took precedence. I feel relieved to have finally replaced our complicated old wills. Not only did we eliminate the costs of administering a no-longer-needed trust, but also we avoided the possibility our estate would be settled in our previous state, which has high estate taxes. Our new wills are purposefully straightforward and without any special nuances. We trust our children. Each has laid claim to just a few trinkets of personal interest—but neither one is interested in our heavy, brown antique furniture. [xyz-ihs snippet="Mobile-Subscribe"] We didn’t include a trust in our new wills. My family is generally anti-trust due to experiences with two previous estates that included them. With one trust, the lawyers seemed to be almost as much a beneficiary as the beneficiaries. A simple question over the telephone sometimes cost us a billable hour, or $250. The total legal costs to set up and close out this trust approached $40,000 across several years. On top of that, not all the of the deceased’s assets had been transferred to the trust, so settling the estate became a mix of trust and probate procedures anyway. This reinforced my belief that a critical aspect of establishing a trust is to properly transfer in all assets, particularly deeded property, titled property, life insurance, annuities, business interests and personal property. With the second trust, I estimate the trustee reaped almost one-third of the potential inheritance value—as much as $900,000—in management fees and opportunity costs over the 34 years this generation-skipping trust was in force. To make matters worse, changes to the tax code over the years eliminated much of the trust’s intended tax savings. After these experiences, we’re much more afraid of lawyers’ fees, money management fees, operational complexities and tax-law changes than we are of the potential disclosure of our middle-class financial wealth through the public probate process. The cost for our new documents was $600. We used a local New Hampshire law firm that seemed quite reasonable compared to the costs in our previous state. While do-it-yourself online options such as Nolo and LegalZoom are cheaper, we wanted to establish an attorney relationship in our new state for other business reasons. The New Hampshire law firm also provided the added benefits of a notary, witnesses, fire-proof remote storage and the ability to make any future tweaks if required. The whole process took under two hours—one hour of remote work with emails and proofreading, followed by 25 minutes in the lawyer’s office for signing and copying. The federal estate tax laws don’t seem likely to change anytime soon, except that today’s $12 million estate tax exclusion is scheduled to drop to $6.2 million per person at the end of 2025, unless Congress acts first. We hope our new estate documents will suffice for many years to come. But our family structure, financial situation, residency, health and the tax laws could all change—and, if needed, so might our wills. John Yeigh is an author, speaker, coach, youth sports advocate and businessman with more than 30 years of publishing experience in the sports, finance and scientific fields. His book "Win the Youth Sports Game" was published in 2021. John retired in 2017 from the oil industry, where he negotiated financial details for multi-billion-dollar international projects. Check out his earlier articles. [xyz-ihs snippet="Donate"]

MY WIFE AND I JUST finished watching the Netflix documentary Live to 100, which I highly recommend. The four-part series focuses on Dan Buettner’s study of pockets of people around the world who achieve amazing longevity, including many residents who live to age 100 and beyond. The seven longevity locations include Okinawa, Japan; Sardinia, Italy; Ikaria, Greece; Nicoya, Costa Rica; and Loma Linda, California. These locations of long-lived people have been labeled “blue zones” based on the seminal demographic work on Sardinia by Giovanni Mario Pes, Michel Poulain and others. Buettner identified nine characteristics shared by these blue zone residents. He further distilled that list down to four basic practices: Eat well. This consists largely of a plant-based diet consumed in moderation. A little bit of wine is common, but modern processed foods are not. Move naturally. Blue zone residents do plenty of daily walking, plus typically a moderate level of manual labor, and keep it up into old age. In effect, many of these folks don’t retire, but rather undertake light but meaningful work-based physical activity—such as gardening, farming, sewing, cooking, home maintenance—as part of their daily routine. They effectively use it, so they don’t lose it. Maintain a positive outlook. It seems a purpose-driven life delivers both happiness and longevity. Many blue zone residents build leisure activities into their daily lives, giving them a chance to periodically decompress. Most also lead a faith-based life. Connect with others. This includes their spouse, family members and their larger social network.      Interestingly, these blue zone traits mirror the advice of many HumbleDollar contributors: eat healthily, exercise, stay connected for greater happiness, and develop a sense of purpose. How do Buettner’s findings help if you don’t come from a family with notable longevity and you don’t live in one of these blue zones? Buettner and others have found that heredity is not the largest contributor to longevity. Buettner has helped implement well-being transformation programs in several U.S. communities. In every case, these communities have dramatically improved population health and longevity. In other words, we can improve our long-term health by adopting the lifestyle of blue zone residents.