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Before Someone Else Decides

Kathleen Rehl | Aug 2, 2026

"You’ve put your finger on an important distinction: saying “I don’t expect you to look after me” is a loving intention, but it isn’t a workable plan by itself. Families need honest conversations about what adult children can realistically provide, especially when they already have responsibilities to their own children. You also make an excellent point about the possible isolation that comes with leaving established relationships to move closer to family. Identifying your fallback housing now is wise. I agree that cognitive decline is harder to plan for; it requires trusted people and safeguards as much as possible. "

- Kathleen Rehl

Beware the CFP Designation?

DavidHLancaster | Aug 3, 2026

Be the first to comment.

Inflation, prices, COLAs, retirement and the last 16 years

R Quinn | Jul 27, 2026

"Actually Congress has been covered by SS since 1993 and they are affected."

- R Quinn

Taking a Loss?

Mark Crothers | Jul 28, 2026

"Mark, Thanks for replying. I like your “opportunity yield“ phrasing much better than my “coin flip” phrasing…thanks for clarifying. Interest-rate direction is definitely a tough nut to crack and none of us know what really is going to happen much like the ups and downs of the equity market. I do have a plan, I’m still trying to determine the thoroughness… so still reading and still learning 🤔. TIPS may find their way in my portfolio yet 😉. The HD community is helping me in that regard."

- Andy Morrison

Subconscious Frugality

Mark Crothers | Jul 31, 2026

"I applaud the cost-effectiveness of the course's double-nine concept! ... One reason I stopped even my rare rounds decades ago was that I had spent too much time searching in vain for the balls I sprayed all over the hilly courses."

- Joe Kiefer

$400,000 Mistake

ArticleBogdan Sheremeta | Aug 1, 2026

BOB MADE A very expensive tax mistake. Doctors told Bob that he only has a year to live… What did Bob do?

He decided to gift a house to his only son before passing away. The house is worth $2,000,000 that he bought back in 1970 for $50,000 in an expensive suburb of California.

The son decided to sell the house and paid about $430,000 in federal taxes.

$430,000 that could have been $0 instead…

How?

When you gift a property to someone, they receive a "carryover basis." It basically means the same price the original owner purchased it for.

The basis of that house was $50,000, so the son had to pay capital gains tax on the difference between the $2 million sale price and the basis, at rates reaching up to 23.8% on the top portion of the gain. But this is where a step-up in basis could come into play.

Assets such as a house or shares held in a brokerage account, when owned inside an estate rather than an irrevocable trust, receive a step-up in basis to their fair market value (FMV) at the time of the decedent's death, per IRC Section 1014. In our case, if Bob held that house in his own name, passed away, and his son received the house, he would've gotten a step-up in basis to the current value, or $2M.

At the time of the sale, if sold for $2M, he would pay $0 in federal taxes, though state tax might still apply. That's about $430,000 of "savings."

"But who cares, Bob is dead anyways?"

While true, many parents still want to make sure their children don't have to pay half a million in taxes. They want their children to enjoy the fruits of their hard labor.

Specifics

The step-up in basis can be a bit nuanced, depending on how the assets are held and titled.

First, the step-up in basis typically adjusts to the market value, unless an election is made to use the value six months after the date of death, subject to certain rules.

The step-up in basis also doesn't apply to assets held in an irrevocable trust , though we will cover some strategies for that later, or to assets held in qualified retirement accounts, such as IRAs and 401(k)s.

In a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), the basis steps up whenever a spouse dies. You will typically need to complete a form to receive this step-up in a brokerage account.

For assets held in joint tenancy, the step-up applies only to the deceased partner's share. For example, Bob and Jenice have a house worth $300,000 with a $50,000 basis. After Bob passes away, Jenice will have a $175,000 basis in the house, calculated as ($300,000 minus $50,000) divided by two, plus $50,000.

There are also two additional things to keep in mind:

1. Living on the right assets

Bob, age 75, has two accounts: a traditional 401(k) worth $500,000 and a brokerage account worth $500,000. Bob's diagnosis isn't good.

From a tax-planning perspective, it might make a lot more sense to withdraw, say, $50,000 a year from the 401(k) to live on, $20,000 of which would be required minimum distributions (RMDs), and pass down the brokerage account to his beneficiaries.

This is because the brokerage account likely has a lot of gains. Bob bought many stocks in his 30s and 40s that could be stepped up now. But a more in-depth analysis might be needed if Bob has a lot of income and is in a high marginal tax bracket.

2. Selling the right lots

Say Bob has a $500,000 brokerage account. Some of the stock purchases have a low basis, meaning a lot of capital gains, and some have a high basis, meaning fewer capital gains.

It's best to sell the high-basis stocks, which come with a lower capital gains tax, and pass down the low-basis stocks to the beneficiaries.

Planning matters. These mistakes can cost thousands of dollars in unnecessary taxes. As always, make sure to consult a licensed CPA or estate attorney with your unique circumstances.

Bogdan Sheremeta is a licensed CPA based in Illinois with experience at Deloitte and a Fortune 200 multinational.

Social Security

ArticleAdam M. Grossman | Aug 1, 2026

AT FIRST GLANCE, Social Security appears straightforward. During our working years, we pay into it, and in retirement, it sends us a monthly check, guaranteed for life. Unfortunately, it isn’t always so simple. Below are five aspects of the system that are frequently misunderstood. Benefits estimates. Look at a Social Security statement, and an easy-to-read chart provides estimates of the benefits available at various ages. The heading above the chart reads, “Personalized Monthly Retirement Benefit Estimates Depending on the Age You Start.” That seems clear. But there’s a caveat that can make the chart misleading. Off to the side, there’s a further explanation that reads: “These personalized estimates are based on your earnings to date and assume you continue to earn [your most recently reported salary] per year until you start your benefits.” The numbers shown, in other words, are not guaranteed. Why would the statements be presented this way? It’s because the Social Security Administration can’t predict when any given person will stop working, so for simplicity of presentation, it assumes that someone will continue working and continue earning the same income each year into the future and will then retire and immediately claim benefits. For most people, this isn’t how it works out, but Social Security has no way to know what each person will choose. That’s why benefits statements shouldn’t be taken at face value. How can you forecast your actual benefit? Fortunately, Social Security’s website provides a calculator that allows custom calculations based on actual retirement expectations. Continuing to work. Some people worry that there would be a negative impact if they chose to continue working after claiming Social Security. This concern isn’t totally unfounded. It’s known as the Social Security earnings test, but there are some details to be aware of. First, the earnings test doesn’t apply after a worker reaches Full Retirement Age. And second, to the extent that benefits are reduced in the years before FRA, Social Security will add back those amounts to future checks. So working while on Social Security shouldn’t be viewed as so problematic. Maximum benefit. All things being equal, Social Security retirement benefits increase with each year that you wait, up until age 70. This is broadly understood. The problem, though, is that oftentimes people view it almost as a rule to wait until 70, but that isn’t always the best choice. For married couples, especially where one spouse has accumulated a larger benefit, there are two reasons why one spouse might claim earlier than 70. The first relates to what’s known as the spousal benefit. This is a feature that originated in the days when more families had just one working spouse, and it provides a benefit to spouses who haven’t worked the requisite 10 years to earn a benefit. In general, the spousal benefit is equal to half of the higher-earning spouse’s benefit at their Full Retirement Age (FRA), which is now age 67 for most people. The only requirement is that the lower-earning spouse can’t start benefits until the higher-earning spouse has started his or her own benefit. The spousal benefit is terrific, but a commonly misunderstood limitation is that—unlike a worker’s own benefit—it doesn’t continue to increase each year until age 70. It hits a maximum at the spouse’s FRA. For that reason, it’s important for a spouse to not delay beyond that point. Even when both spouses have accrued their own benefits, it often makes sense for the spouse with the smaller benefit to claim somewhat earlier than 70. To understand why, we need to look at it from the perspective of the higher earning spouse’s benefit. Because that benefit would also be available to the lower-earning spouse in the form of a survivor’s benefit (discussed further below), that larger benefit will be available to either spouse as long as either is living. The smaller benefit, on the other hand, has value only while both spouses are living. And while it’s unfortunate to say, that is statistically less likely. For that reason, I generally recommend that the lower-earning spouse claim at, or around, Full Retirement Age. When to claim. In most conversations about Social Security, people tend to talk about claiming decisions in round numbers—claiming at 67 or 68, for example. The reality, though, is that you can claim at any time between ages 62 and 70. You don’t need to wait for your birthday, and the benefit simply increases by a bit for each month that you wait. I find this helpful because it allows flexibility in how we think about claiming. Not sure whether to start at 67 or 68? You can easily split the difference. Survivor benefits. To understand how the survivor benefit works, imagine a married couple, Joe and Jane. Joe’s benefit is $5,000 per month, and Jane’s is $4,000. Now suppose that Joe passes away. At that point, Jane wouldn’t be able to claim the combined total of $9,000. However, she could claim a survivor’s benefit that would increase her monthly check from $4,000 to $5,000, matching what Joe was receiving. That’s the simplest case, but the survivor benefit decision is often more complicated because it also depends on the age of the survivor. Survivor benefits can be claimed as early as age 60, and that can be helpful in certain situations, but there’s also a penalty for claiming too early. Benefits can be reduced by nearly 30%. In other words, and importantly, Jane wouldn’t automatically be entitled to $5,000 just because that was what Joe was receiving. When would Jane be able to claim the full $5,000? For this determination, Social Security uses a yardstick known as the Full Retirement Age for Survivors. This isn’t exactly the same as the standard FRA, but it’s close. (Social Security provides a calculator to look it up.) What might this look like in practice? Suppose Jane were a year shy of the FRA for survivors at the time that Joe died. In this case, Jane would have a choice. She could claim her survivor’s benefit at that time, but her total check would come out to somewhat less than $5,000. Fortunately, Social Security doesn’t automatically turn on survivor benefits when a spouse dies, thus providing survivors more control. In Jane’s case, she might continue with her own benefit of $4,000 per month for one more year. Then, once she became eligible for 100% of the survivor’s benefit, she could claim the full $1,000 to reach $5,000. 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.

How Did You Find Paid Work After Retiring from Your Primary Career?

Jeffrey Chan | Jul 31, 2026

"I’ve done a lot of jobs since my official “retirement “ 15 years ago at age 57 due to a layoff. Fortunately I was fully vested in my union pension. Moved from California to Colorado, got my CDL and drove a gas truck for 6 years. Did a lot of very scenic (and sometimes scary) mountain driving. My wife tired of the cold winters, so we reretired, sold the house, bought a motorhome and started traveling. Found a company that paid us to travel doing gas line surveying across country. Did that for about 4 years and settled down near my oldest son to be near grandkids. To keep from being bored, I drove a school bus for 2 years. Now I only drive for overnight and longer field trips because they pay me for every hour I’m away from home. So it’s been a very gradual transition to fully retired."

- Mike Wyant

Today in Financial History

Harold Tynes | Jul 28, 2026

"The 1971 view is obsolete. There is no need for a computer clerk."

- Cammer Michael

What I Retired To

Andrew Clements | Jul 29, 2026

"Thank you for sharing your story. It sounds as though you truly found your calling in medicine, and there’s no greater compliment than hearing from patients that you made a difference in their lives. I was struck by your comment that it wasn’t the work itself that led you to retire, but everything around it that changed. Sadly, I suspect many professionals have reached that same conclusion. It also sounds as though you’ve carried your love of learning into retirement through your reading, volunteering and staying engaged. I only wish there were an easier way for experienced physicians like you to continue helping others in a volunteer capacity. There is still so much wisdom to share."

- Andrew Clements

Value of Waiting

ArticleDennis Friedman | Feb 7, 2026

I WAS THINKING ABOUT Jonathan the other day on my morning walk, which happens more often than you might think. It’s hard not to think about him when you have HumbleDollar coasters in your living room and a HumbleDollar shopping bag in your car that you use for groceries. My wife confiscated the HumbleDollar cup I had been using for my morning tea, and it now has a new home in our bathroom holding her toothbrush and toothpaste. There’s even an apron somewhere in the house that Jonathan once sent to all the writers. Ever since I started writing for HumbleDollar in 2017, Jonathan has influenced my retirement. I now own the Vanguard Total World Stock Index Fund (symbol: VT) in my investment portfolio because of his recommendation. He liked it for its “broad global diversification in one low-cost fund that covers virtually all publicly traded companies worldwide.” It struck me as a good way to simplify our holdings. I didn’t just borrow some of Jonathan’s investment ideas; I also borrowed some of his words he used when editing my articles. I began peppering my writing with words like fret, upshot, and folks. He once told me, “While your grammar is occasionally a bit dodgy, you have a great ear for language.” I was too embarrassed to ask him what he meant by a “great ear for language.” When I retired, I never imagined that writing for HumbleDollar would become such a big part of my retirement, and I’m grateful to Jonathan for that. I also didn’t think my retirement would be so fluid. I pictured something far more stable: remaining single, living in a one-bedroom condo, and fending for myself. My life now is different. I’m married and live in a three-bedroom home in another city. One of the biggest changes, however, has nothing to do with geography. It has to do with money—specifically, how financial decisions change when there are two people instead of one. I learned that lesson early in our marriage. We got married in August 2020. That December, I woke up one morning and saw blood in my urine. I went to an urologist who ran a series of tests, but it took about a month to determine the cause. During that time, I decided to consolidate our remaining investment holdings to make things easier for Rachel to manage in case something happened to me. Most of our money was already at Vanguard, except for a 401(k) from my former employer that was invested in a stable value fund. It still held a significant balance. Without much hesitation, I moved it into a bond fund at Vanguard. Not too long afterward, the bond market nosedived. The fund performed poorly—especially compared to the stable value fund the money had been in. The upshot: I panicked—and paid for it. It wasn’t a good time to make a financial decision while I was under stress. Some of the worst money moves happen when emotions are running high—selling stocks at the bottom of a bear market or rushing to act after an unexpected windfall. More often than not, it’s better to wait until you’re clearheaded before making a decision. At the time, I was also fretting about whether Rachel would qualify for my Social Security benefit, which is much larger than hers. You have to be married for at least nine months. I found myself counting off the days. Another financial decision became more complicated simply because we were now a couple: what to do with the three properties we owned—my condo, Rachel’s house, and the house I had inherited. Neither of us wanted to be landlords at this stage of our lives. We were excited about getting married and starting a new life together. I decided to sell my condo during the pandemic, which wasn’t easy. Rather than wait, I accepted an offer of $380,000—$43,000 below the asking price. Rachel decided to wait and rent out her house for two years. She didn’t get caught up in the excitement or rush into selling. As it turned out, that patience paid off. When the for-sale sign finally went up, I would stop by the house to water the yard and rake the falling leaves. One day, a real estate agent and his client were there looking at the property. They kept asking me whether the price listed on the brochure was correct. Rachel’s agent had intentionally priced the house at the lower end of the range in hopes of creating a bidding war. I told them they would have to talk to my wife and her agent because it wasn’t my house. The agent asked how long we had been married. When I told him two years, he nodded and said, “I get it. She wanted to wait until she was sure about the marriage before selling the house.” Rachel laughed when I told her what he said. She wasn’t waiting to see if the marriage would work. She waited because selling a house is a major financial decision, and she didn’t see any reason to rush it. Two years later, the timing turned out to be just right. The market had improved and the strategy worked exactly as planned. There were multiple offers, and the final sale price was well above what it would have been earlier. At the time my wife sold her house, Zillow’s estimated price of my condo was $484,000—$104,000 more than I received. I don’t really know why I was in such a rush to sell. Maybe it had something to do with the pandemic, my mother’s recent death, my sister and brother-in-law moving out of state, or the stress of renovating our new house. It was an emotional time for me, and I was probably searching for some stability in my life. What I’ve learned—both from Jonathan and from being married—is that good financial decisions usually come from patience, not urgency. When I feel anxious or pressured to act, I’m more likely to make a mistake. When I slow down, think things through, and listen—especially to my wife—the outcome is usually better. Managing money well isn’t about always making the right move. It’s about avoiding the wrong ones—and knowing when to wait. 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 check out his earlier articles.

Treasury Inflation Protected Securities (TIPS) are a Generational Bargain Right Now

Howard Schwartz | Jul 27, 2026

"Bill, thanks - great info as usual. Best, Rick"

- Rick Connor

Before Someone Else Decides

Kathleen Rehl | Aug 2, 2026

- Kathleen Rehl

Beware the CFP Designation?

DavidHLancaster | Aug 3, 2026

Be the first to comment.

Inflation, prices, COLAs, retirement and the last 16 years

R Quinn | Jul 27, 2026

"Actually Congress has been covered by SS since 1993 and they are affected."

- R Quinn

Taking a Loss?

Mark Crothers | Jul 28, 2026

- Andy Morrison

Subconscious Frugality

Mark Crothers | Jul 31, 2026

- Joe Kiefer

$400,000 Mistake

ArticleBogdan Sheremeta | Aug 1, 2026

BOB MADE A very expensive tax mistake. Doctors told Bob that he only has a year to live… What did Bob do?

He decided to gift a house to his only son before passing away. The house is worth $2,000,000 that he bought back in 1970 for $50,000 in an expensive suburb of California.

The son decided to sell the house and paid about $430,000 in federal taxes.

$430,000 that could have been $0 instead…

How?

When you gift a property to someone, they receive a "carryover basis." It basically means the same price the original owner purchased it for.

At the time of the sale, if sold for $2M, he would pay $0 in federal taxes, though state tax might still apply. That's about $430,000 of "savings."

"But who cares, Bob is dead anyways?"

While true, many parents still want to make sure their children don't have to pay half a million in taxes. They want their children to enjoy the fruits of their hard labor.

Specifics

The step-up in basis can be a bit nuanced, depending on how the assets are held and titled.

First, the step-up in basis typically adjusts to the market value, unless an election is made to use the value six months after the date of death, subject to certain rules.

There are also two additional things to keep in mind:

1. Living on the right assets

Bob, age 75, has two accounts: a traditional 401(k) worth $500,000 and a brokerage account worth $500,000. Bob's diagnosis isn't good.

2. Selling the right lots

Say Bob has a $500,000 brokerage account. Some of the stock purchases have a low basis, meaning a lot of capital gains, and some have a high basis, meaning fewer capital gains.

It's best to sell the high-basis stocks, which come with a lower capital gains tax, and pass down the low-basis stocks to the beneficiaries.

Planning matters. These mistakes can cost thousands of dollars in unnecessary taxes. As always, make sure to consult a licensed CPA or estate attorney with your unique circumstances.

Bogdan Sheremeta is a licensed CPA based in Illinois with experience at Deloitte and a Fortune 200 multinational.

Social Security

ArticleAdam M. Grossman | Aug 1, 2026

How Did You Find Paid Work After Retiring from Your Primary Career?

Jeffrey Chan | Jul 31, 2026

- Mike Wyant

Today in Financial History

Harold Tynes | Jul 28, 2026

"The 1971 view is obsolete. There is no need for a computer clerk."

- Cammer Michael

Manifesto

Aug 2, 2026

NO. 21: A HIGH income makes it easier to grow wealthy. But no matter how much we earn, we’ll struggle to amass a healthy nest egg—unless we learn to spend less than we earn.

think

Aug 3, 2026

ANCHORING. Imagine the S&P 500 is up 20% over the past year. You might balk at buying stocks, because you’re anchored on the market’s old level and feel you’re overpaying at current prices. Or imagine your neighbors sold their home two years ago for $300,000. You might be reluctant to accept less for your home, even if property prices have since fallen.

humans

Aug 2, 2026

NO. 30: WE underestimate the power of compounding. Most folks grasp that invested money should grow over time, while carrying credit-card debt can trigger interest charges. But studies suggest we fail to appreciate just how much our money can grow if left to compound—and just how costly our debts can be if we fail to pay them off in short order.

think

Aug 1, 2026

GAMBLER’S FALLACY. When the dice hasn’t come up six for a while, we think a six is more likely. Similarly, if a money manager has previously beaten the averages or a Wall Street strategist has a history of predicting the market’s direction, we assume they’ll continue to make winning calls. But what if it's random, like the dice, and these folks were just lucky?

Money Guide

Manifesto

Aug 2, 2026

NO. 21: A HIGH income makes it easier to grow wealthy. But no matter how much we earn, we’ll struggle to amass a healthy nest egg—unless we learn to spend less than we earn.

Spotlight: Life Events

A Bit More Humble

Edmund Marsh | Apr 18, 2026

I LOVE TO PLAN. My wife, Sharon, often catches me nestled in my chair, gazing out a window at a distant object as my mind wanders even farther afield. My musings become scribbles on a scrap of paper, destined for discussion with Sharon at length over coffee and long walks. Eventually, we hammer out the settled strategies we think will best bring us happiness in adventures ranging from our next hike to the next few decades of life.

Turned Upside Down

Jonathan Clements | Oct 5, 2024

FOUR MONTHS AGO, I was told I might have just a year to live. It’s been a whirlwind ever since.
I’ve been inundated with messages from acquaintances and readers, gone to countless medical appointments, my diagnosis has received a surprising amount of media attention, I’ve been hustling to organize my financial affairs, and Elaine and I have taken two trips.
Where do things stand today? Here’s what’s been going on.
Medical update. After three radiation treatments to zap the 10 cancerous lesions on my brain and an intense opening round of infusion sessions,

Lesson Five From Taking Care of a 102 yo in Her Last Year of Life- Politics and the News Has the Potential to Ruin Relationships

David Lancaster | Apr 19, 2025

Hi, my name is David, and I am a newsaholic! There I’ve said it. Admitting you have an addiction is the first step to recovery, right?
All my life I have been addicted to reading the news. I like to be informed about the goings on locally, nationally, and internationally. I think it is a way for me to lower my anxiety. Over the past 8-9 years however things have changed.
What does this have to do with taking care of my mother in law?

Sweet Bird of Youth

Marjorie Kondrack | Mar 7, 2025

Connecting with younger people is like a rejuvenating fountain of life for me. Since many of us are fortunate to have children and grandchildren nearby, we can enjoy being a part of their everyday life, allowing us to share a special bond with them.
But some of us are restricted by the confines of chronology, and cut off from interaction with younger people. Small wonder that so many seniors retire to college towns. Being around younger people reminds me how thrilling it was when I was young—when the future was bright,

Don’t Discount Luck

mytimetotravel | Jul 23, 2025

Ben Carlson’s column today is titled “The Ovarian Lottery”. Where and when you were born has a whole lot to do with how your life turns out. You could be capable of becoming a great artist, but if you were born female for most of human history you wouldn’t be able to reach your potential. Born a serf in medieval Europe? You were going to stay a serf. Sure, hard work helps, but if your particular talent isn’t in demand,

Did the Era You Grew Up In Influence Your Financial Plan?

Mark Crothers | Aug 6, 2025

Does the larger societal era from your childhood influence your financial outlook as an adult and beyond into retirement? This question came to mind while I was responding to a comment by bbbobbins on an article I’d posted to The Humble Dollar forum.
For example, my childhood was set against the immediate backdrop of social and civil unrest in my local community in Ireland. This was compounded by the overarching global tension of superpower rivalry during the Cold War,

What Went Right

Sanjib Saha | Feb 23, 2021

I SPEND WAY TOO much time analyzing what went wrong and how to do better. Instead, I should probably focus more on what went right and how to do it again. This tip came from a close friend, when I told him about my money mistakes. My friend’s logic? Despite my missteps, I must have done a few things right to offset the damage. He had a good point. There are three things I did that paved my path to financial freedom. The rest simply fell into place. These are not silver bullets and I’m not swearing to their universal usefulness. But they were powerful enough to save my day. 1. Protect my human capital. After earning my undergraduate degree, I started as a software engineer at a midsized company. I soon learned that a career in software development wasn’t about a fixed set of knowledge and expertise. Thanks to rapid technological change, skills can quickly become obsolete, as my first supervisor told me repeatedly. I’m forever grateful to him. For better or worse, I never had big career ambitions. Folks like me run the risk of getting too comfortable in their job. But thanks to my first supervisor’s insistence on the need for continuous learning, I was able to safeguard my employability and ensure rising income throughout my career. 2. Watch my cashflow. My mother was the family accountant. Each month, my father would give her a fixed amount to cover all household expenses. She handled all spending and noted each purchase in a journal. She’d periodically balance the books and, when things didn’t add up, she’d spend hours spotting the discrepancies. I adopted the same technique. On payday, I’d go to the bank and withdraw a fixed amount of cash. Like my mother, I used a cashbox to keep the…

Changing My Mindset

Sanjib Saha | Oct 13, 2023

WHETHER MONEY BUYS happiness is a matter of debate, but a recent incident reinforced my conviction that financial security does indeed help. The incident would’ve caused me considerable distress a few years ago, when I was earning more but was still dependent on my fulltime job’s paycheck. My newfound financial security, however, transformed the situation into a truly memorable experience. My wife, Bonny, and I both enjoy attending Indian music and dance performances. We make it a point to see the live shows put on by local groups and, if the ticket prices are reasonable, also those featuring artists visiting from India. This year, Bonny was keen to see a dance-drama performance by a touring group from India. Although the show was scheduled for July, Bonny wasted no time securing two tickets when reservations opened in March. I got the sense that the tickets came with a hefty price tag. As the date drew nearer, Bonny’s excitement built. On the day of the event, she repeatedly urged me to hurry up and get ready, with the half-joking threat to leave me behind if I delayed any further. Both of us got dressed up and were about to head out when Bonny received a text message. It was from a friend who’d purchased tickets in the same row as us. She was curious if we changed our seats because she couldn’t spot us in the theater. Bonny responded with a touch of impatience, assuring her that we’d be there shortly. Her friend called within minutes to say the show had just finished. Bonny was perplexed, while I hastily jumped to the conclusion that she must have misremembered the showtime. Bonny, however, was adamant that she had purchased tickets for a 7 p.m. performance, and the screenshots of the tickets saved on…

Goodbye DIY

Sanjib Saha | Feb 3, 2022

I GREW UP IN INDIA. There, it’s quite common to have outside help for household chores. Most middle-class families hire someone to help with washing, dishes and cleaning. Affluent households typically have a cook, driver and housekeeper. After coming to the U.S., I noticed that most households weren’t dependent on domestic help, thanks to appliances like a dishwasher, vacuum cleaner and washer-dryer. A few coworkers went as far as building their own cabinets and decks, painting their homes and changing the oil in the car. This do-it-yourself culture resonated with me for three reasons. First, I valued independence—the ability to do things at my own pace, rather than waiting on someone else. Second, the idea of working equally hard at work and at home gave me a kick. Third, it appealed to my sense of frugality. I wanted to be like my DIY coworkers. But it was wishful thinking on my part. I tried various home maintenance jobs that required no special tools or expertise. But I didn’t especially enjoy fixing toilets, repairing garage doors, blowing leaves or mowing lawns. These mundane tasks felt increasingly burdensome. Still, the idea of getting outside help was at odds with my values. I’d no longer be the independent, hardworking and frugal person I perceived myself to be. But in truth, I was being stupid and stingy. If I could afford it, why not pay someone to do these unexciting chores? Reluctantly, I availed myself of yardwork and housecleaning services, but I still resisted offloading anything else. That changed when I cut back the number of hours I worked. How did a smaller paycheck motivate me to spend more for domestic help? My reasoning was simple. With my part-time job, I was effectively paying back a prorated percentage of my fulltime salary to my…

Money Misconceptions

Sanjib Saha | Jan 11, 2024

AS I'VE TRIED TO HELP folks understand financial issues, I’ve come across numerous money misconceptions. I wasn’t surprised—because, before I learned better, I too misunderstood some of these issues. Here are the top eight misconceptions I’ve encountered: Misconception No. 8: Consumer prices drop when inflation falls. Inflation measures the pace of price increases. Declining inflation simply means that prices aren’t rising as fast, but they’re still going up, albeit at a slower rate. Furthermore, the effect of inflation remains, with prices stuck at higher levels. Inflation is calculated based on price fluctuations for a variety of goods and services. While specific items might slip in price, a positive inflation number—even if it’s smaller than before—still signifies an overall upward trend in prices, rather than a reversal to lower costs. Misconception No. 7: Investing requires professional help. Investing can seem intimidating to beginners, leading many to conclude that professional guidance is the only way to go. But technological advances and a wealth of free educational resources, including HumbleDollar’s money guide, have transformed the landscape. Unlike years ago, today’s investors have access to user-friendly investment platforms and simple, evidence-based strategies like target-date funds and index funds, eliminating the need to rely on professional money managers and stock brokers. Indeed, arguably, investing has become as straightforward as everyday tasks like grocery shopping. Moreover, after learning the basics and gaining confidence, managing investments—especially low-cost diversified investment products—requires surprisingly little time and effort, and there’s no need for extensive knowledge of the financial markets or the economy. There’s nothing wrong with using an advisory service when the cost is reasonable and conflicts of interest are minimized. But doing so is no longer the only way to achieve your investment goals. Misconception No. 6: Buying a home is always financially better than renting. Homeownership carries numerous…

Behind Closed Doors

Sanjib Saha | Dec 3, 2020

IF YOU OWN AN actively managed mutual fund, you expect the fund’s managers to buy and sell stocks and bonds as they see fit—and yet all that trading isn’t necessarily driven by their investment decisions. Why not? Imagine the fund has had a few years of underperformance. That might prompt impatient investors to take their money elsewhere. This exodus can create headaches for the shareholders who still have faith in the fund. How so? When shares are redeemed, the fund has to pay departing investors their share of the fund’s assets. The fund would have some money set aside for this purpose. That cash, alas, can drag down a fund’s performance in rising markets. What if there isn’t enough standby cash to cover large outflows? Unless a fund can transfer assets in-kind to departing shareholders—a rare occurrence—it’s required to sell part of its holdings to raise cash. That’s where the trouble starts. First, a fund’s own selling can further drive down the price of a stock or bond it’s looking to unload, hurting the fund’s return. This selling also generates trading costs, taking a bite out of the fund’s performance. To make matters worse, selling appreciated assets can cause the fund to realize capital gains, leading to big tax bills. Who foots that tax bill? Not those who jumped ship. Instead, it’s the investors who hung tough. Sound bad? Given a choice, I wouldn’t want the destiny of my funds to be controlled by the actions of my fellow investors. That’s why I became intrigued by a possible alternative, closed-end funds, or CEFs. A CEF is an actively managed fund that can be bought and sold in the secondary market, just like the shares of any publicly traded company. At its initial public offering (IPO), a closed-end fund raises money by selling a fixed…

It’ll Cost You

Sanjib Saha | Oct 15, 2019

IT’S IRONIC THAT WE often shortchange retirement savings during the first half of our working lives, because that’s when we can buy future retirement dollars at a huge discount—thanks to investment compounding. How can we hammer home this point? My proposal: We should adopt a simple mental math rule that allows us to weigh today’s spending against future retirement dollars. That brings me to my ”6 to 2 times 200” rule. The rule covers five age groups: early 20s, late 20s, early 30s, late 30s and early 40s. The first part of the rule—the “6 to 2” part—gives the compounding factor for each age group. For instance, the compounding factor is six times if you’re in your early 20s, five times if you’re in your late 20s, and so on. As you grow older and enter the next age group, the compounding factor drops by one. What does all this mean? Each $1 spent by folks in their early 20s means at least $6 less in retirement spending. Similarly, $1 spent in your early 40s means at least $2 less in retirement. Admittedly, the rule is only an approximation. Still, with any luck, it’ll help us to pause before spending. For instance, it will make a 27-year-old realize that switching to that shiny new $1,000 iPhone could cost as much as $5,000 in retirement spending. Is it worth effectively spending $5,000 on a new phone? Our 27-year-old may still decide to switch to the new iPhone. After all, we all make bad spending decisions and we usually get away with it, provided the bad decisions aren’t too frequent or too costly. Instead, the real damage often comes from recurring expenses—the monthly magazine that no one reads, the extra property taxes for the bigger-than-needed house and countless similar items. This is where…

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