Practical Financial Management Tips to Survive the Pandemic

Enjoy this guest post from David of NeighborhoodWeek.org! A quick Google search tells me that places like Auckland and Yunnan Province (in China) are still experiencing lockdowns for COVID. So, unfortunately, this advice is still timely.

Take it away, David:

 

Image via Burst

Practical Financial Management Tips

to Survive the Pandemic

No one needs to tell you that we’re living in uncertain times. Along with the health implications of the COVID-19 pandemic, countless Americans are experiencing changes in their income. While each family’s situation is unique, you can take some general steps to help you make it through the pandemic on a solid financial footing.

The Froogal Stoodent shares some tips to consider for your situation.

The Best-Performing Asset Classes

 The Best-Performing Asset Classes

If you’re like me, you’re wondering what the best investments are.

It’s easy to find a lot of opinion, but not a whole lot of hard facts.

Articles abound on websites like Forbes, CNBC, and even Morningstar—but they ended up confusing me. They compare only a couple asset classes, and they frequently refer to different timeframes. For example, they look at the past 10 years for the S&P 500, the past 7 years for value stocks, and the past 13 years for growth stocks.

How am I supposed to make sense of that gibberish? I’m not looking for a load of blather; I want facts! Comparable, unbiased, non-cherry-picked facts. Is that really so hard?

Apparently, it is!...

I’ve had to do a lot of research to find some reliable numbers that can be compared. I got a great start with Paul Merriman’s excellent website, especially this set of charts [PDF].

While Merriman’s data was very helpful, I wanted data on more asset classes than the ones provided on that set of charts. I want all the asset classes!

How else are you supposed to make an informed decision?...

Links for August 2021

Free books from financial educator Paul Merriman and his co-author Richard Buck: http://paulmerriman.com/freebooks/
    Note that this now includes their latest from 2020, We're Talking Millions: 12 Simple Ways to Supercharge Your Retirement. Generous indeed! And I should take the opportunity to plug my interview with Mr. Merriman.

A candid assessment of owning real-estate vs. index funds, from an investor in Singapore: https://www.firepathlion.com/buy-property-to-rent-out-or-invest-in-index-funds/

Apparently, the market's last 3 years have been crazier than we realized: https://www.mindfullyinvesting.com/three-years-of-investing-insanity/

Learn from this mistake: https://www.mouthymoney.co.uk/saving/how-my-father-lost-his-life-savings-by-making-one-fatal-investment-mistake/

Abigail Disney pulls back the curtain on how the ultra-wealthy think: https://www.theatlantic.com/ideas/archive/2021/06/abigail-disney-rich-protect-dynastic-wealth-propublica-tax/619212/

A 10-year performance record is still basically random: https://www.evidenceinvestor.com/a-ten-year-record-is-random-noise/

A great review of historical data on stocks vs. bonds: https://www.mindfullyinvesting.com/articles/6-what-to-invest-in/6-1-historical-returns-and-risks/

"Endless desire is one of the pitfalls of human nature, and one of the first things you need to cure if you want to get ahead more quickly."
-Mr. Money Mustache, in the Foreword to the revised and updated 2018 edition of Vicki Robin and Joe Dominguez's classic Your Money Or Your Life

Dr. North and Dr. South – A Case Study on Wealth

Dr. North and Dr. South – A Case Study on Wealth

As many observers have noted, Americans tend to confuse income with wealth. If you have a high income, that makes you wealthy, right?

Let’s ask this another way: if you earn $500,000 a year, you’re rich, right?

Not necessarily, no. Even with such a high salary, if you spend $500,000 or more per year, you’re not rich. You’re broke.

Enter the story of Dr. North and Dr. South.

When Stocks Didn’t Perform

When Stocks Didn’t Perform

Remember that time bonds beat stocks over a 50-year period?

Of course not. Nobody who remembers that time is alive today.

But remember it or not, it happened. And as George Santayana famously observed, “Those who cannot remember the past are condemned to repeat it.”

Way back then, the long-term performance of stocks was absolutely dreadful. Over this 50-year stretch, stocks compounded at less than 1% per year!

Clearly, I must be cherry-picking! I must have selected an especially bad period that ends during the Great Depression, right?

Wrong.

Photo credit: Pixabay, artist Geralt

Links for July 2021

 Links for July 2021

Wealthy Accountant for President! His tax plan does make a lot of sense: https://wealthyaccountant.com/2018/09/17/my-tax-plan-if-i-were-president/

Why be frugal? Here's a cogent answer: https://theescapeartist.me/2021/06/09/the-purpose-of-frugality-is-to-get-your-stake-money-together/

I recently ran across a very interesting idea: adjusting your 'net worth' to account for whether the market is overvalued or undervalued: https://www.themoneycommando.com/introducing-the-money-commando-true-wealth-index/ 

• Counterpoint: Many knowledgeable folks argue that historical P/E ratios are not necessarily going to hold in the future (see https://thereformedbroker.com/2014/01/12/leaving-cape-town/ or, if you prefer a lot of statistics and number-crunching in a podcast format, check out this link: https://rationalreminder.ca/podcast/146)

A priceless lesson from a savvy veteran investor: https://www.marketwatch.com/story/is-bitcoin-the-best-place-for-your-money-11622683768?mod=paul-a-merriman

Worried about the future of Social Security? It's not as bad as you think: https://www.cbpp.org/research/social-security/what-the-2020-trustees-report-shows-about-social-security

Why do so many people feel like they aren't well-off? Morgan Housel tackles that question: https://www.collaborativefund.com/blog/goalpost/

Are you saving too aggressively? In this interview, Gwen of fireymillennials.com concluded that she should ease off the figurative gas pedal a bit: https://apnews.com/article/lifestyle-business-d96513c8c01a24cb80d935335333ce30?fbclid=IwAR1vnGyRHrdPjMIJ28Aj-TtOCBkxVUlavd34cx6TJDO1n4_NfsJWJOBCKdE

Learn more about Herbert Wertheim, billionaire optometrist, inventor, and investor, who had dyslexia and did poorly in school: https://www.forbes.com/sites/maddieberg/2019/02/19/the-greatest-investor-youve-never-heard-of-an-optometrist-who-beat-the-odds-to-become-a-billionaire/
      Hat tip to David at filledwithmoney.com for letting me know about this man's inspiring tale!

There's a janitor who became a millionaire! https://filledwithmoney.com/millionaire-janitor/

Investors, prepare to be disappointed: https://theirrelevantinvestor.com/2021/06/26/investors-prepare-to-be-disappointed/

What kind of returns should we expect in the future? Mindfully Investing just saved me a lot of research on this topic: https://www.mindfullyinvesting.com/articles/6-what-to-invest-in/6-2-expected-future-returns-and-risks/

Larry Swedroe advises that we think about investing as probabilities, not certainties: https://www.evidenceinvestor.com/is-it-really-stocks-for-the-long-run/

Blinded By Greed

Blinded By Greed?

Lately, I’ve been doing some research on the astounding returns of various investment classes over the decades.

• The S&P 500: How does a 9.92% annual return since 1928 sound?

• REITs: 9.77% per year since 1972.

• Large-cap value: Even better, at 11.13% annually since 1928!

• Small-cap value: An astonishing 13.15% annual return since 1928!!!

An extra 3% per year results in twice as much money at the end of 25 years! So keep that in mind when you compare the long-term returns of the various asset classes.

But these are long-term averages across some very different market and regulatory conditions. The fly in the ointment is that these conditions may very well be changed in the future, and returns might be lower than they have been in the past.

Links for June 2021

Links for June 2021

Morgan Housel writes at Collaborative Fund. He's always insightful, and I enjoy reading his work! The short stories herein all have valuable lessons for all of us: https://www.collaborativefund.com/blog/a-few-short-stories/

• My favorite line? At the end of the story about the blind woman: "Every goal you dream about has a downside that’s easy to overlook." Wise words!

What's wrong with America? Philip K. Howard has a compelling and logical answer: https://www.city-journal.org/america-needs-new-approach-to-regulation

3D printing in 1989?! Yep: https://www.youtube.com/watch?v=NpRDuJ5YgoQ

Just recently discovered Lyn Alden, and she could have had a high-paying career doing investing research for a big corporate bank! I'm glad she didn't:
https://www.lynalden.com/international-stocks/ and https://www.lynalden.com/contrarian-investing/

Glad I'm not alone in thinking Lyn Alden's research is top-notch: https://www.undervalued-shares.com/weekly-dispatches/blogs-to-watch-part-1-lyn-alden/

Interesting information on the average American household budget: https://www.valuepenguin.com/average-household-budget

Another good illustration of why your personal home is NOT an investment: https://freddysmidlap.com/2020/01/10/paid-off-your-house-congratulations-you-still-have-to-pay-to-live-there/
    Along similar lines: http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/ and https://froogalstoodent.blogspot.com/2018/04/want-to-be-rich-dont-buy-house.html

Great insight into why you should always take advice with a grain of salt, even if it's from someone who is successful: https://alawyerandhermoney.com/financial-advice-is-wrong/

An interesting look at investing during an abrupt market downturn: https://www.brewingfire.com/how-im-investing-the-crisis-part-i/ and https://www.brewingfire.com/how-im-investing-the-crisis-part-ii/

Excellent advice on how to get a raise, from someone who's been in a position to know: https://steveark.com/2020/10/02/so-you-want-a-raise/

Your Guide to Getting a Mortgage as an At-Home Entrepreneur

Your Guide to Getting a Mortgage as an At-Home Entrepreneur

Picture credit: Unsplash

Guest post

Buying a home is a big step, and it can be even more intimidating when you’re self-employed.

But don’t let the prospect of homebuying dampen your entrepreneurial spirit! There are many paths toward homeownership, even if it involves a bit more effort for those who are self-employed.

Links for May 2021

Links for May 2021

Holy cow, this is in the running for the best macroeconomic analysis I've ever seen! https://www.lynalden.com/fraying-petrodollar-system/

An engineering argument for Universal Basic Income: https://www.scottsantens.com/engineering-argument-for-unconditional-universal-basic-income-ubi-fault-tolerance-graceful-failure-redundancy

A tragic personal story to illustrate the three sides of risk: https://www.collaborativefund.com/blog/the-three-sides-of-risk/

The Battle of the Bubbles, from the always-on-point Ben Carlson. Whoo, some of the speculation mentioned herein puts recent bubbles to shame! https://awealthofcommonsense.com/2020/07/the-battle-of-the-bubbles/

A thought-provoking piece about education: https://americancompass.org/the-commons/our-educational-colonialism/

A timeless point about humility and success. Since the original post gives me a "404 not found" error message, here's a version from the Web Archive: http://web.archive.org/web/20200109002010/https://www.collaborativefund.com/blog/getting-rich-vs-staying-rich/

History isn't exact, as any decent historian would tell you: https://awealthofcommonsense.com/2019/07/why-history-get-stuff-wrong-all-the-time/

This great piece draws attention to how Wall Street's incentives fail investors: https://netinterest.substack.com/p/zuckermans-curse-and-the-economics

Similar in nature, and similarly insightful: https://netinterest.substack.com/p/financing-the-american-home

Here's why you don't need alpha (that is, outperformance compared to the market) unless you're a professional money manager who's responsible for billions of dollars: https://ofdollarsanddata.com/you-dont-need-alpha/

Ben Carlson is always observant and always insightful: https://awealthofcommonsense.com/2020/08/what-happened-to-the-middle-class/
     *However, I'd argue with Stephen Rose's income-based classification of rich/poor/middle-class, as described in the footnote. As noted in the bestseller The Millionaire Next Door, there are plenty of wealthy people who have a moderate income, because they're frugal and they wisely invest the money they save.
     But that's the way Americans tend to look at wealth, including the IRS: you're rich (or not) based on your income, rather than on your net worth.

Now this is interesting! Meet the man who twice tried to sell the Eiffel Tower: https://awealthofcommonsense.com/2020/01/the-man-who-tried-to-sell-the-eiffel-tower-twice/

Great lessons about personal finance: https://www.collaborativefund.com/blog/PF/

An interesting insider's look at the ultra-wealthy, basically the top 1% of the top 1%: https://whorulesamerica.ucsc.edu/power/investment_manager.html

Could you live without money? This fascinating fellow did just that, for about 15 years: https://www.becomingminimalist.com/the-man-who-quit-money-an-interview-with-daniel-suelo/

Hat-tip to Of Dollars and Data for pointing me to some of this top-notch work: https://ofdollarsanddata.com/my-favorite-investment-writing-of-2020/