Archive for General Financial Planning

Anything but money: having self worth and control of your life

Used softball ball in Třebíč, Czech Republic.jpgIn his most recent newsletter, former Wall Street Journal columnist Jonathan Clements observes (correctly) that most of us will never be fabulously wealthy, that we should stop feeling bad about that, and that this bizarre cultural belief leads people to be discontent with any achievement, and to chase hucksters who promise self-transformation and lunatic investment schemes. (See the full text here, and consider subscribing—while I don’t agree with him on everything, it’s always worth a read.)

As I read this, I found myself agreeing with many of his points. He’s spot on when he points out that in fact we can’t be anything we want to be—neither he nor I will ever be a star athlete, and despite years of flailing away on various musical instruments, it’s dawned on me that I’m not going to have much of a concert career. He’s correct, in my view, that we should incorporate a dose of realism in our dreams and plans.

But, the entire article left me with a little downbeat of sadness. I think there’s an important diminuendo that has somehow overcome the melody. The main theme of our lives has become (in my lifetime) that your job is all important and determines your identity: your parents focus on that from early childhood (college education resulting in a job); you are encouraged to choose your major based on future employ-ability (and of course, college is the only option); you work instead of raising your own children (and women make less money because, in part, they take more time off for children even when holding down a full-time position). We are evaluated by where we live, what we drive, what schools our children attend, and on, and on.

I recently saw a number of comments that people in first class airline seats should be treated better—not with more perks (legit if you’re paying for them), but in terms of actual respect and politeness—because they paid for it. Human dignity has come to depend on the wealth attached to the person. Rather than encouraging solidarity among we have-nots, it foists the conviction that the only aspiration is to join the moneyed elite (note I did not say talented, or educated, or in any way meritorious outside of wealth). More than one person in this country aspires to arm candy and gold coated toilets.

It wasn’t always like this, and I’m old enough to remember differently. Long ago I wrote an article on the value of church youth groups. I will never forget the Orthodox youth leader who told me that, because of their religious beliefs and dress, many of the kids in his group were mocked and bullied at the public school, but belonging to the synagogue’s youth group gave them identity and a way to achieve success and form friendships. My parents, aunts, uncles, etc. never had careers. For the most part they worked pretty crummy and often unpleasant jobs. But my parents had a happy marriage, my mom and aunts had many friends, and I don’t think they felt inferior (except for a wish to have had a college education in my mother’s case.) They showed me that there are other ways to be happy and feel like you have worth and achievement—and most of these don’t cost much:

  • Amateur sports. My dad and my aunt both played after-work softball; my cousin was the star of his bowling team. You could be somebody, you could be a hero, you could hang out with a group and you actually were out getting some exercise.

 

  • Music and dance. My parents spent weekends square dancing for many years—traveling to other neighborhoods, challenging other groups, hanging out at each other’s houses afterwards. Dad might be loading trucks on the dock during the day, but he was president of the club on weekends.

Many kids attain a high level of expertise in music, then give it up entirely in college and never touch the instrument again, because after all that hard work, they know they can’t “make a living” at it. People who persist are pitied for trying to scrape together a living.  Parents never again show up at a musical performance if their kid isn’t playing.

I’m always charmed by the Hawaiian music traditions, where people get handed an instrument very early, and pick up an awful lot of amateur ability by sitting around together playing and singing with older family members. Before tv and electronics, it used to be like that here—or so my grandmother said.

 

  • Hobbies & crafts. Making something is an achievement, pure and simple. Having a passionate interest in some area or craft gives you groups to join, events to attend, and even the pleasure of being able to make snarky comments about someone less skilled or expert than you. My aunt had less than two years of high school, but she knew how to install a zipper and I’m afraid that part of her pleasure at church on Sundays was evaluating the (lack of) skill of all the other women in too-obviously homemade dresses. Of course, this was when most women still felt they could attempt to sew. But who has time? Where can you learn? And, as a friend once said to me, if you get any more craft-y, they’ll come and take back your University of Chicago degree.

 

  • Fix-it ability. My uncle spent his life as an injection molder. But he could work on anyone’s car, hang and tape drywall, re-plumb a bathroom and hook up a fuse box. (He had also been Illinois state chess champion in high school, and although he couldn’t read a note he played a mean piano by ear.) I don’t think he had much scope for achievement in his job, but my family admired him greatly—because, in our little group, Harold could do EVERYTHING. As far as I know, he was entirely self-taught. His job may have regarded him as an automaton, but in his “real” life he had agency: control and recognized ability.

 

  • Activism. My grandfather was a union man at the height of the struggle for fair wages and improved safety in the mines. He was somebody in his union, even if his employers thought he was ignorant and his life expendable. His co-workers admired him and he inspired them.

 

I think about money mostly all day, every day. I know it’s important. But what I’m adding on to Clement’s ideas is a plea that we find self-worth and recognition in ways that don’t depend solely on money. In fact, everything I’ve listed above doesn’t depend at all on a college education, or income, of even luck. And that’s a change in societal values that I’d like to see—and one we can seize for ourselves.

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Retirement Accounts: keeping the advice sane and safe

When my daughter and I were at the Women’s March, I saw a number of signs saying I can’t believe I’m still protesting this sh*t (and they didn’t have an asterisk). I feel that way too, and I also feel that way concerning the fiduciary rule for retirement accounts. In fact, I can’t believe we’ve EVER needed to discuss this. The fiduciary rule was set to go into effect on April 10th of this year, but the so-called current administration has issued an executive order on February 3 delaying the order until—who knows?

What’s fiduciary?

The fiduciary rule is simply a requirement that your financial advisor–fee-only, fee-based, hourly fee, commissioned, or maybe roboadvisor (although that’s not quite clear)—be legally obligated to act in your best interest. How on earth is this even controversial? You’re paying for advice one way or the other and the advisor is allowed to act in their own best interests? And keep in mind that this fiduciary rule only applies to retirement accounts. Even so, the brokerage industry has fought it tooth and nail. They claim this rule will squeeze out the little investor who won’t be able to get advice. Give me a break—there’s plenty of fee-only advisors, many hourly, and (shudder) you can get some advice from the robos. At least they won’t skin you alive.

For eons now the SEC has been debating whether and how to employ the fiduciary standard for other investment accounts, and it looks like they’ll now be dithering until your children age into dental implants. Most people believe that any advisor they see is acting in the clients’ interest. Most people are wrong. So let’s take it from the top, yet again.

Difference between best interest and appropriate

Investment sales people (brokerages, bank investment departments, stock mongers, whatever) are only obligated to peddle something to you that’s appropriate for you, and boy, is that broadly defined. So, if it’s appropriate for you to be invested in the S&P 500, you can bet that you will be in the S&P fund that pays the highest commission to the broker, or that the brokerage pitches. I have never yet seen a broker-designed portfolio that included low-cost or no-load mutual funds, because even if those are in your best interests, they’re not in the broker’s best interest because they aren’t going to make any money from those funds.

How to get skinned alive

It can be even worse, depending on what you’ve blurted out to your broker. Before I ever became a financial advisor, my dad used a broker to invest his retirement savings. He adored T., who called him every few days—more than I did, as my dad liked to point out. He had told T. how he needed safety, but how he also wanted the most income possible. Dad had no idea that these were mutually contradictory statements. BTW, if you don’t know why, call me and I’ll explain. Since T. the broker had two options here, guess which one he took? The one that made T. the most money, which was selling my dad a whole raft of junk bonds—high income—which mostly went belly up, losing my 90-something father around $300,000 if my calculations were correct when I finally looked at what was going on in 2007. T. eventually exited the brokerage firm and dad was upset not because he’d lost so much money, but because T. didn’t call anymore; I have a sneaky suspicion it had nothing to do with ethics, sadly. My guess is he didn’t make his quota.

Despite all the firepower the brokerage industry could muster and all the rending of expensive business suits, the rule at best only applied to retirement accounts, which are presumably needy of more protection because—the only money the little guy has? A potential future burden on government support? Because people who have money in other accounts are sophisticated investors? Where’s my emoticon (dog running in circles) when I need one?

What, me worry?

I just saw an article where it was claimed that, well, not to worry. Since, the article argues, the brokerage industry has already moved toward the fiduciary standard for retirement accounts, they’ll do it anyway. With all due respect, I need that emoticon right away. I’ve noticed that when it comes to fleecing the consumer making the most money possible, or being freed from regulation, the brokerage and banking industry can move with lightning speed to change their policies, whereas when something is designed to protect the consumer, implementation will be as slow as regulators will allow. No regulators, no regulation. And please don’t tell me your broker is a nice guy and wouldn’t do that. I have some inherited very attractive “hi-yield” bond certificates I’d be happy to sell you.

Know what you’re getting

Really, with this new change, you have no hope but yourself (which is actually all you’ve got right now). How do you know you’re getting fiduciary advice? Ask you advisor to sign a statement, or review their registration brochure. Does it specify fiduciary? For all advice? Is there any mention on their website about being a member of SIPC ? (look in the tiniest print on the page, near the bottom)—that’s a broker. Next, look at what kind of investments they’re recommending. Are they no-load mutual funds? If not, why not?

I am a fiduciary. I’ll be happy to detail what investments I’m recommending, why, and exactly how I get paid. They’ll be in your best interests. Accept no less.

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College planning, child-rearing expenses & a novel approach

I put off having a child as long as I could. My own mother made it seem like a lifetime sentence, where you’d have a continuous stream of hard work and never have any time to yourself again. Also, in her assessment, I wouldn’t make a very good mother as I was far too impatient. She sure made it sound like fun.

How we live now

Okay, she was partly right but thank heavens mostly wrong, although you might get some agreement from my daughter on

Sunrise in Botswana

Sunrise in Botswana (Photo credit: Wikipedia)

the assessment of my parenting, depending on when you ask. Nevertheless, my mom was pretty much in tune with our current U.S. culture of child-raising. I know more than one mom with a full time job and more than 200,000 miles on the mommy-mobile. Most parents I see are quite worried about college for the kids, and even more worried about what a top-level admission will mean to their finances. When I see people with infants, we always discuss not only college, but how much tutoring, music lessons, sports activities, and arts training are going to cost. And if the kids are old enough, we’re probably going to talk about a college admissions coach.  In 2009, estimates were that it cost $1.1 million to raise a child through college—and college costs have gone up a lot since then.

It can seem like a rat race from the moment they’re born. However, as I mentioned in my previous post, I’ve been living in an alternate reality every night from 10:30 pm to midnight or so: I’ve been in Botswana. No not really, and I’m not even sure the actual Botswana is as depicted, but in the No. 1 Ladies Detective agency world, children are quite a different matter. In the 2nd book of the series, Tears of the Giraffe, we can experience an entirely different way of being with and rearing children.

Spoiler alert! Stop here if you don’t want to know details on this book!

An alternative life

A little background: Mma Ramotswe is the heroine and chief detective. Her fiancé is Mr. J.L.B. Matekoni, a warm hearted and easily buffaloed owner of a car repair service. He spends significant time doing free work for a friend who runs an orphan farm (which seems to care for many children orphaned by the AIDS epidemic, among other reasons). In one very swift meeting with the head of the orphan farm, Mr. Matekoni finds himself going home with two children, one of whom is in a wheelchair.

His thinking is extremely straightforward—these children would benefit by a home, he can give it to them, and Mma Ramotswe will be happy to have them also—because who isn’t delighted by children, any children? So the kids are bundled into his truck, with wheelchair, and off they go. He does consider that maybe he should have talked about it a bit with Mma Ramotswe, but he’s pretty confident she’ll go along.

Are you gasping at this point? Can you imagine this scene in the U.S.? Me neither. Contrary to my expectations, this is not setting the stage for a big blow-up. In fact, Mma Ramotswe does wish he’d talked to her ahead of time, but sees it as further evidence of what a good man her fiancé is. She does mention that some people have too many children—6 is enough, she says—but since they do have extra bedrooms and do make enough money to feed them,  she’s okay with the sudden transformation into parents.

Parenting transformations

I think the way this sudden parenting is handled is what makes it all so different, and indeed a pleasurable experience:

  • Everyone sits down to dinner every night after school and work. Mma Ramotswe cooks dinner nearly every night anyway (with help from the girl, and Mr. J.L. B. Matekoni at times.) What’s on the table is what Mma Ramotswe likes (with an eye to pleasing Mr. J.L.B. Matekoni). No special meals, no complaints, and plenty of family togetherness. No extra work.
  • School is pretty simple. They walk, and go to the public school. Private schools are mentioned, but in the context of helping kids with problems. At one point the kids experience some bullying, but it’s dealt with very matter-of-factly by helping the kids (in a family discussion) decide how to respond.
  • Entertainment and recreation are simple and center on the family. After dinner, the kids clean up and study (no driving to endless activities). They spend time with each parent, and when the boy starts acting sullen, Mr. J.L.B. Matekoni spends more time with him and takes him to some sporting activities. On weekends, the kids go to visit relatives with one or both parents. Mma Ramotswe remarks how one aunt is extremely long winded, but it’s good for the kids to hear her stories because it teaches them about Botswana and who they are.
  • There’s a huge awareness of the natural world, and one of the favorite recreations is sitting outside listening to sounds, talking with each other, and walking through the garden.
  • When there are behavior problems, the parents are confident that they can be solved by connecting with the kids. Mma Ramotswe also attributes some misbehavior to “kids are like that” and is certain that with time will come wisdom. She has a great ability to laugh things off.
  • Both parents are confident that the kids will find their niche in life. They both value education, and are very impressed by people with college or other advanced training, but there’s no mad rush to channel the kids toward anything specific.
  • Even though Motholeli has a significant handicap, it’s not a cataclysm. She is still regarded as a capable person who can make a contribution, has tasks, and has interests that the family finds ways to involve her participation. No one is ashamed of her, and she’s fully integrated into all activities.

What financial planning lessons do I take from this?

People more than things.  What gives this family pleasure and solid relationships is the emphasis on being together. They have very little interest in acquiring more than is necessary and they are very dedicated to making things last and wringing the last bit of use out of anything. The things they treasure have personal meaning, not monetary value: a photo, a commemorative plate, a teacup, but mainly each other.

Confidence, optimism, and realistic expectations toward life. Without a pre-planned agenda or specific expectations for the children, they are much freer to allow natural talents and preferences to emerge.

Reliance and enjoyment of friends and family. When you keep up with even remote relatives, there are plenty of ways to get help, advice, entry, information, and support when you need it. Mma Ramotswe is also very conscious that she has reciprocal obligations, and hands out time, sometimes money, and effort for her vast network of distant relatives and friends. When, in a later book, an employee asks her to be godmother, she sighs a little knowing that this will require obligations to contribute to school fees, gifts, and all sorts of needs (for the rest of life), but focuses almost immediately on the need of the child and the honor being done to her, and gracefully accepts the offer. She thinks we cannot always choose whose lives will become entangled with our own; these things happen to us, come to us uninvited.

We don’t live in Botswana, but these books are giving me lots of opportunities to think about how to dial down the burners a little bit, to enjoy what we have, and to choose relationships and activities over possessions. Even for a financial planner, it’s not all about money.

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