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Inflation is the enemy of investors—and the friend of borrowers.

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Summer Relief

LIVING IN THE PACIFIC Northwest, my favorite time of year is summer. I love the extra daylight and relief from the nagging rain. In recent years, there’s been an additional reason to look forward to summer: I get to see my paycheck again.
Some background: A few years ago, in an online investment forum, another participant—I’ll call him Dave—gave me a tip for early retirement. He suggested that I practice living off my investment portfolio even while working.

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Personal Touch

I’M 69 YEARS OLD and so have spent most of my life dealing with people—and businesses—in person. That said, I’ve loved and greatly benefited from the internet revolution and appreciate its marvels in a way that only a person who lived in the “before” period can. I’ve been thinking a lot about this recently, and about how important it is—or isn’t—to have face-to-face relationships with the people I do business with.
For many years,

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Save First

IT’S A TOPIC WHERE I always seem to be in the minority. The controversy: Should you save first and then spend what remains—or, instead, prepare a budget which then determines how much you can “afford” to save?

Budgets are scary and stressful. Go ahead, make a budget if you like. But if you conclude that you can’t afford to save, there’s no progress in that.

A Northwestern Mutual survey found that 49% of U.S.

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Submerging Markets

JULY WAS ANOTHER positive month for U.S. stocks, which gained 1.7%. But overseas markets were down 1.4%, with emerging markets faring even worse, tumbling 5.9%.
Last week, the Chinese government clamped down on its education and technology industries, sparking a sharp selloff. The return of Vanguard FTSE Emerging Markets ETF (symbol: VWO), which is 40% Chinese stocks, briefly turned negative for the year, while U.S. stocks continue to sport year-to-date gains of more than 15%.

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Looking Further

IN MID-MARCH 2020, a friend and I were anxiously discussing the financial ramifications of the evolving pandemic. I posited the following question to him: Suppose the stock exchanges announced that they’d be shutting down for six months, starting the day after tomorrow. What do you think would happen to the stock market on its final trading day before closing?
Answering my own rhetorical question, I said it wouldn’t surprise me if markets paradoxically staged a huge rally—upward of 20%—the day before shutting down.

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Cold Comfort

IT HAD BEEN A WHILE since we’d last shopped for a refrigerator. There was a time when such an appliance merely kept things cold and, for me, fancy meant the fridge could deliver crushed ice for my iced tea.
But today, there are all kinds of features. French-door style. Sub-area climate controls. The big new thing: see-through doors so you can choose without staring into an open fridge—a favorite pastime of my youth on hot Texas days.

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Latest Articles

Whither Inflation?

THE RAGING DEBATE of 2021 is whether the inflation we’ve been experiencing this year will be transitory or more permanent. The Federal Reserve’s official stance is that the spike in inflation is a perfect storm of pent-up demand, supply-chain disruptions and year-over-year comparisons that are “inflated” relative to 2020’s pandemic-induced deflation, and eventually will revert to more normal levels.
Recent hotter than expected inflation data—including the consumer price index (CPI), producer price index (PPI),

Read more »

July’s Hits

IT WAS A BUSY JULY here at HumbleDollar. We revamped the homepage and launched our new blog featuring shorter pieces. But what about our regular, somewhat longer articles? Here were last month’s seven most popular:

Want to reduce the risk that a cyber-thief empties your financial accounts? David Powell offers a five-step protection plan.
What estate planning missteps should you strive mightily to avoid? Drawing on decades of experience,

Read more »

Wedding Gift

ON THE SURFACE, Social Security seems straightforward: During our working years, we pay into the system. Then, when we’re older, the government sends a check every month for life.
But scratch the surface and you’ll find that Social Security offers a number of additional benefits. Among them: a benefit for spouses. This can be highly valuable, but the rules around it are complex and very specific. Consider, for example, the late talk show host Johnny Carson.

Read more »

Go to Extremes

IT’S RISKY TO LAY down hard-and-fast rules for money management because, for every rule, there will almost inevitably be exceptions.
Still, as they say, “nothing ventured, nothing gained.” Below you’ll find 18 rules. Want to quibble? Hey, that’s why HumbleDollar allows readers to comment on articles.
1. Minimize cash. With short-term interest rates so low, keeping money in savings accounts and money market funds seems especially grim right now. But the truth is,

Read more »

Harder for Some

IS SUCCESS WITHIN reach for anybody willing to work hard? We like to think of the U.S. as a meritocracy with a one-to-one correlation between effort and achievement. It’s a notion that allows us to feel that we’re in control of our destiny and that we’ve fully earned the success we enjoy.
But in truth, there are many factors that continue to tilt the playing field one way or another. Socioeconomic status, race and gender still sway the game.

Read more »

Saving Smarter

VANGUARD GROUP released its latest How America Saves report last month. The survey details the behavior of participants in Vanguard-managed 401(k) and similar retirement plans.
Wall Street likes to depict everyday investors as fools. But the Vanguard report paints a very different picture: Employees are getting smarter. They’re saving more, trading less and aren’t so inclined to take big positions in their employer’s stock.
As I flipped through the numbers and charts with a cup of coffee on a recent Saturday morning,

Read more »

Voices

What Voices questions would you ask?

"What is a kind way to leave your financial advisor when he has done little wrong, but you want to do the investing yourself to save money?"
- Tom Matera
Read more »

Should U.S. investors own foreign bonds?

"If you own a foreign car you bought a depreciating currency hedged asset, certainly an A rated or better foreign bond is no worse."
- Liarspoltergeist
Read more »

If you want long-run growth, is there an alternative to stocks?

"Certainly, but many assets/activities will require more work to manage risk and generate returns. Look no further than real estate. You can make a great income and build a property portfolio, but you either have to manage it yourself or outsource that (at a big cost). Another avenue is owning your own business - that has huge growth potential but once again, it comes at the cost of time and effort. In the end, owning bits and pieces of thousands of global companies is the best path to long-term wealth with little effort. The cost is being able to stomach the inevitable 50% drawdowns and needing cash at precisely the wrong times. Having the right risk management strategy is critical!"
- Mike Zaccardi
Read more »

Money Guide

Wash-Sale Rule

IF YOU OWN A STOCK in a taxable account that falls in value, you can take some of the sting out of that loss by selling your shares, realizing a capital loss and then using that loss to reduce your annual tax bill. A good idea? Problem is, selling means giving up any chance of making back the loss. Many folks aren’t keen to do that, so they often look to buy back the shares. But if they do that too quickly, they can invalidate the tax loss. At issue here is the wash-sale rule. If you buy the same or a substantially identical security within 30 days before or after you sold the losing stock, you aren’t allowed to claim the tax loss. The rules for what is allowable and what isn’t are a matter of debate. Still, let’s say you sell a stock and soon after buy options that give you exposure to the same shares. That would count as a wash sale and invalidate the loss. That doesn’t mean the loss can’t ever be used. Instead, the earlier invalidated loss is added to the cost basis of the new security you bought. To make use of that loss, you will have to wait until you sell the new security, assuming you do so without violating the wash-sale rule. Next: Munis vs. Taxables Previous: Tax-Loss Harvesting
Read more »

Manifesto

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.

Truths

NO. 105: IN INEFFICIENT markets—such as those for microcap stocks and emerging market companies—skilled investors have a better shot at earning market-beating returns. But after investment costs, most investors will still lag behind the market averages and the shortfall will often be large, because the cost of active management is so high.

Act

SET A FLOOR for financial pain. Suppose you have $400,000 saved. What’s the minimum amount below which you never want your portfolio to fall? Let’s say it’s $300,000, or $100,000 less. Divide that $100,000 by 0.35 and you get $286,000. That’s the maximum you should have in stocks. Why 0.35? In a bear market, the average loss is 35%.

Think

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?

Second Look

Retirement

To Roth or Not?

SHOULD YOU CONVERT your traditional IRA to a Roth IRA? Below, you’ll find five questions to help you decide. If you answer “yes” to the first three questions, you’re a good candidate for a Roth conversion. If you answer “yes” to all five questions, you’re an outstanding candidate.
Question No. 1: Are you taxed at lower rates today than you will be in future?
Roth conversions make sense if your federal and state tax rates today are below what they’ll likely be when you have to take required minimum distributions (RMDs) from your traditional IRA.

Read more »

Family Finance

Don’t Fall for It

IN EVERY CRISIS, good people do great things and bad people, well, they do some really, really bad things. This article is about protecting yourself from the bad people. Never in my career have I seen so many scams in motion all at once.
Crooks tend to step up their game at times of crisis: Stress, change and misinformation make for the perfect backdrop, as they try to separate you from your money. Here’s a rundown of six current scams,

Read more »

Investing

Pouring Cold Water

SOMETIMES WE DON’T give kids enough credit. Last week, my first-grader reminded me of this fact. On a trip to CVS, he was looking through the drink cooler, when he asked, “What’s Smartwater?” Before I could answer, he started with his own commentary. Seeing the price tag—which was more than double that of the regular water next to it—he wondered, “Why’s it smart? It’s just water. Is it really going to make me smart?”
This made me realize something: As consumers,

Read more »

Lists

Got to Believe

I CAN ALREADY hear the groans. “Oh brother, here we go again with another of those religious wackos. I’m glad I don’t have to worry about all of that faith-based nonsense. My finances have nothing to do with faith.”
Really?
How about the guy spending his last dollar on a lottery ticket at the corner market? Or the victims of Bernie Madoff? Or the 65-year-old Enron employee fully invested in company stock in summer 2001?

Read more »
Home Call to Action

Mindset

Never Mind

WHEN IT COMES to your financial life, should you care what other people think?
I’ve always found this a tricky question. On the one hand, it’s easy to fall into the trap of keeping up with the Joneses. If you care too much about what other people think, life can become very expensive—and that can be detrimental to your financial health.
On the other hand, it’s also natural to want to be accepted by one’s peers.

Read more »

Latest Articles

Whither Inflation?

THE RAGING DEBATE of 2021 is whether the inflation we’ve been experiencing this year will be transitory or more permanent. The Federal Reserve’s official stance is that the spike in inflation is a perfect storm of pent-up demand, supply-chain disruptions and year-over-year comparisons that are “inflated” relative to 2020’s pandemic-induced deflation, and eventually will revert to more normal levels.
Recent hotter than expected inflation data—including the consumer price index (CPI), producer price index (PPI),

Read more »

July’s Hits

IT WAS A BUSY JULY here at HumbleDollar. We revamped the homepage and launched our new blog featuring shorter pieces. But what about our regular, somewhat longer articles? Here were last month’s seven most popular:

Want to reduce the risk that a cyber-thief empties your financial accounts? David Powell offers a five-step protection plan.
What estate planning missteps should you strive mightily to avoid? Drawing on decades of experience,

Read more »

Wedding Gift

ON THE SURFACE, Social Security seems straightforward: During our working years, we pay into the system. Then, when we’re older, the government sends a check every month for life.
But scratch the surface and you’ll find that Social Security offers a number of additional benefits. Among them: a benefit for spouses. This can be highly valuable, but the rules around it are complex and very specific. Consider, for example, the late talk show host Johnny Carson.

Read more »

Go to Extremes

IT’S RISKY TO LAY down hard-and-fast rules for money management because, for every rule, there will almost inevitably be exceptions.
Still, as they say, “nothing ventured, nothing gained.” Below you’ll find 18 rules. Want to quibble? Hey, that’s why HumbleDollar allows readers to comment on articles.
1. Minimize cash. With short-term interest rates so low, keeping money in savings accounts and money market funds seems especially grim right now. But the truth is,

Read more »

Harder for Some

IS SUCCESS WITHIN reach for anybody willing to work hard? We like to think of the U.S. as a meritocracy with a one-to-one correlation between effort and achievement. It’s a notion that allows us to feel that we’re in control of our destiny and that we’ve fully earned the success we enjoy.
But in truth, there are many factors that continue to tilt the playing field one way or another. Socioeconomic status, race and gender still sway the game.

Read more »

Saving Smarter

VANGUARD GROUP released its latest How America Saves report last month. The survey details the behavior of participants in Vanguard-managed 401(k) and similar retirement plans.
Wall Street likes to depict everyday investors as fools. But the Vanguard report paints a very different picture: Employees are getting smarter. They’re saving more, trading less and aren’t so inclined to take big positions in their employer’s stock.
As I flipped through the numbers and charts with a cup of coffee on a recent Saturday morning,

Read more »

Free Newsletter

Voices

Which life decisions shouldn’t involve financial considerations?

"Having children. For every other reason, kids are worth it except from an financial POV."
- Edwin Belen
Read more »

What’s your favorite financial quote?

"In the short run, the market is a narrative machine, but in the long run, it is a narrative-debunking machine. -Barry Ritholtz"
- Mike Zaccardi
Read more »

What do you need for a fulfilling retirement?

"A fulfilling retirement is based on a mix of a few things. Being surrounded by loving family and friends, being in good health, finding your tribe(s), spirituality, having a good attitude and having a source of purpose(s). It's all about finding a good way to satisfy your needs, values and wants. The challenge is that most retirees do not know what they are."
- Mike Drak
Read more »
Home Call to Action

Manifesto

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.

Act

SET A FLOOR for financial pain. Suppose you have $400,000 saved. What’s the minimum amount below which you never want your portfolio to fall? Let’s say it’s $300,000, or $100,000 less. Divide that $100,000 by 0.35 and you get $286,000. That’s the maximum you should have in stocks. Why 0.35? In a bear market, the average loss is 35%.

Truths

NO. 105: IN INEFFICIENT markets—such as those for microcap stocks and emerging market companies—skilled investors have a better shot at earning market-beating returns. But after investment costs, most investors will still lag behind the market averages and the shortfall will often be large, because the cost of active management is so high.

Think

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

Contents

Wash-Sale Rule

IF YOU OWN A STOCK in a taxable account that falls in value, you can take some of the sting out of that loss by selling your shares, realizing a capital loss and then using that loss to reduce your annual tax bill. A good idea? Problem is, selling means giving up any chance of making back the loss. Many folks aren’t keen to do that, so they often look to buy back the shares. But if they do that too quickly, they can invalidate the tax loss. At issue here is the wash-sale rule. If you buy the same or a substantially identical security within 30 days before or after you sold the losing stock, you aren’t allowed to claim the tax loss. The rules for what is allowable and what isn’t are a matter of debate. Still, let’s say you sell a stock and soon after buy options that give you exposure to the same shares. That would count as a wash sale and invalidate the loss. That doesn’t mean the loss can’t ever be used. Instead, the earlier invalidated loss is added to the cost basis of the new security you bought. To make use of that loss, you will have to wait until you sell the new security, assuming you do so without violating the wash-sale rule. Next: Munis vs. Taxables Previous: Tax-Loss Harvesting
Read more »

Second Look

Retirement

To Roth or Not?

SHOULD YOU CONVERT your traditional IRA to a Roth IRA? Below, you’ll find five questions to help you decide. If you answer “yes” to the first three questions, you’re a good candidate for a Roth conversion. If you answer “yes” to all five questions, you’re an outstanding candidate.
Question No. 1: Are you taxed at lower rates today than you will be in future?
Roth conversions make sense if your federal and state tax rates today are below what they’ll likely be when you have to take required minimum distributions (RMDs) from your traditional IRA.

Read more »

Family Finance

Don’t Fall for It

IN EVERY CRISIS, good people do great things and bad people, well, they do some really, really bad things. This article is about protecting yourself from the bad people. Never in my career have I seen so many scams in motion all at once.
Crooks tend to step up their game at times of crisis: Stress, change and misinformation make for the perfect backdrop, as they try to separate you from your money. Here’s a rundown of six current scams,

Read more »

Investing

Pouring Cold Water

SOMETIMES WE DON’T give kids enough credit. Last week, my first-grader reminded me of this fact. On a trip to CVS, he was looking through the drink cooler, when he asked, “What’s Smartwater?” Before I could answer, he started with his own commentary. Seeing the price tag—which was more than double that of the regular water next to it—he wondered, “Why’s it smart? It’s just water. Is it really going to make me smart?”
This made me realize something: As consumers,

Read more »

Lists

Got to Believe

I CAN ALREADY hear the groans. “Oh brother, here we go again with another of those religious wackos. I’m glad I don’t have to worry about all of that faith-based nonsense. My finances have nothing to do with faith.”
Really?
How about the guy spending his last dollar on a lottery ticket at the corner market? Or the victims of Bernie Madoff? Or the 65-year-old Enron employee fully invested in company stock in summer 2001?

Read more »

Mindset

Never Mind

WHEN IT COMES to your financial life, should you care what other people think?
I’ve always found this a tricky question. On the one hand, it’s easy to fall into the trap of keeping up with the Joneses. If you care too much about what other people think, life can become very expensive—and that can be detrimental to your financial health.
On the other hand, it’s also natural to want to be accepted by one’s peers.

Read more »