Problems with Simple Financial Planning

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monkey

My previous post demonstrated how a young guy named Rich got out of school, worked 40 years and saved enough to retire with an income equal to his final year salary from actually working.  The key assumptions I discussed were that he would need to save 21% of his income for all 40 years and get a modest salary increase every year.  What I did not discuss was the probability that he would be able to earn a steady 8% rate-of-return (ROR) on his 401k year in and year out.

 I should note that his discussion is for your entertainment and designed to get you thinking about the future.  Implementation of any concepts described should be reviewed with a professional financial planner beforehand.

 As any student of personal finance, you should readily ascertain, the actual ROR you earn may jump around considerably.  I’ve been an active investor for over thirty years and I have had years with double digit gains and years with double digit losses.  On balance, I am far ahead for having been in the market of stocks and bonds since the early ‘80s. Continue reading →

Saving For Retirement – an example

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save-money1

As a CPA and a former financial advisor, it seems people are always asking me one of two questions: 1) how much should I be saving and 2) what do you think my number is?  My usual answer is 15 to 20 percent and more than you think!  The people asking the questions are usually looking for free advice and, after I give them the advice they seek, I add the simple disclaimer, “It’s worth every penny you paid.”  All kidding aside, the financial discussions on this blog are to entertain and to get you thinking.  When it comes time that you actually want to take action you should meet face to face with a qualified advisor, who should take the time to understand your individual situation. Continue reading →

The Hat

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hat

With summer’s end, come the merchandise sales at the lake.  Over the weekend I purchased a ball cap that I had my eye on for some time.  That morning the $19.95 hat was in a large bin of hats offered for $5.00.  As the young woman at the counter is checking us out she tells my wife Sue, “That will be $8.33.”  Sue says, “That seems kind of high”, to which the sales clerk replies, “Well there’s sales tax”.

Mildly amused up to this point, I jump into the conversation. “ Do you agree the hat is five dollars?”  “Yes”, she replies.  “Is the Idaho sales tax rate still 6%?”  Again, “Yes.”  “Well then, the tax would be thirty cents and the total is $5.30.”  At this point she presents us with a printed receipt and says, “But it says $8.33!”  I offer, “Maybe if you tell it that the hat is $5.00 it will print the correct receipt.”  She says, “Okay, I can override the price”.  Me, “Really, they let you do that?”  Oh my.  Continue reading →

Paper Boy? Why?

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paperboy

Think back to when you were a kid in elementary school and there was something you really wanted. You might have asked for it on your birthday, had it on your list to Santa or some other special occasion. It could have been a special trip, an activity or a thing you were just dying to have. For me it was a Schwinn Varsity Sport ten speed bicycle.  The year was 1967, I was 12, and had just moved across the country from Washington DC to Spokane Washington the previous summer. I wanted that bike more than anything. The bike was about $75 and I had no money and no real means to earn money. These days, Baby Boom parents would have bought their son the bike just for having made the move with the family. Not so my dad. As a Navy Commander and combat pilot he expected discipline in his troops and his children. No amount of pleading, begging or similar tactics would sway the Commander. His only suggestion was that I find a way to earn some money. Continue reading →

Hot Water Fund

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hot water heater
You’ve heard I’m sure the old adage that ‘absence makes the heart grow fonder’?  I gained a new appreciation for the phrase Sunday when our hot water tank gave up the fight.  In the summer you might be able to get along for a few days without hot water.  Not in Idaho.  Not in the winter.   I managed to find a plumber Sunday willing to commit to getting the job done Monday.  He hedged at first, but I wasn’t messing around and told him the job was his if he could come in the morning, otherwise I would have to go somewhere else.  He caved, showed up at 9 and was on the way to his next job by 11 or so. Continue reading →

Social Security – the coming debate

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Now that fewer than 50% of the population is actually paying federal income taxes and well over 50% are receiving entitlements in one form or another, it won’t be long until the receivers of entitlements figure out they can vote themselves more of the money pot.  Take for example social security (SS).  Already there are two active debates; 1) should the wealthy pay the SS tax on all income rather than the current cap just north of 100 grand and 2) should the wealthy collect a SS check in retirement.  Regarding the first point, I have no problem with taxing all income or even raising the rate a bit, so long as it all gets applied to making the program solvent.  Point 2 however is a dangerous step onto a very slippery slope. Continue reading →

Molly

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1997-Mercury-Mountaineer
We first met her on a crisp Colorado fall day in 1999, around the time when golf clubs are being stored for the winter and skis are being readied for the season.  From the moment we met, there was never a doubt we would be taking her home that afternoon.  And it wasn’t long until she found her place in our family.  It has been over fourteen years and our girls are now in their twenties, yet the memories of them with Molly when they were younger are still fresh.  When she first joined our lives, the girls were in second and fifth grade.  That first Christmas we purchased a permit to go into the forest to a cut a tree.  And of course Molly went with us.  I still smile when I see the pictures we took with the girls and Molly next to our fresh cut tree.  She has accompanied us on countless ski trips, softball tournaments and birthday parties.  She even spent a semester with my younger daughter at the University of Colorado!  Later in life Molly visited a number of western states with us, with the family’s favorite being trips to the shores of Priest Lake in northern Idaho.  Continue reading →