MY FINANCIAL PLAN OF A LIFETIME!

 
My most fun and popular post of the year.
I get the chance to write about a lot of subjects with my newsletter. Of all the things I write about in any given year, covering my financial review is the most fun. It’s time to do that again for 2022.
 
What are you going to see?
First, I’ll cover some disclaimers. Secondly, I will tell you about the most positive aspects of my 2022 financial results. Then I’ll close with my actual investment results for the year which certainly were not very good. Some might say terrible but I’ll just stick with “not very good”.
 

I live by two financial principles.
I am in my 21st year of retirement. Although that time period has flown by I have never had a better 21 years of living ever. I tried to stick with two financial principles, which seemed to have served me well.

First, I never earned a single dime of work income in those 21 years. Secondly, Carol and I have traveled the world, visiting nearly 100 countries, with my own personal anthem being “spend like a drunken sailor”. I might mention this is not Carol’s anthem. However, we each have our own areas of expertise and she lets me do the financial planning and travel schedule!
 
As you read along, and certainly from the above paragraph, you might be thinking to yourself “Randy does not seem like the normal retiree that I am familiar with. Sam, my neighbor down the street went back to work to keep himself busy when he retired. Sally stays pretty close to home since she retired. Most people I know are very conservative with their spending once they retire. No, Randy doesn’t sound like a typical retiree”.

Yes, Sam and Sally might be afraid to spend any money in retirement. Most people retire…and die with too much money rather than too little money. A friend sent me this article regarding many people’s behavior when they retire. What they mention in this story is very close to what I am recommending NOT to do in this post. Check it out.

Playing it safe during retirement…or just plain scared?

 

As Joe Friday always said (Google the reference if needed) “Just the facts, ma’am.”
You can count on a couple of things when you read my 2021/2022 financial review. Everything I share will be factual, and in most cases numerical. You will see that I don’t mind sharing information that you will have a very difficult time finding anywhere else in terms of directness. I don’t mind sharing that information because in most cases, I have never met you and you have never met me. I know some people don’t want any information about them shared personally in a public space. When I hear that particular philosophy, I think to myself, “The world doesn’t have enough criminals to commit all of the crimes some are expecting to be committed”.
 

I won’t try to tell anyone how they should think about what I am sharing. At the same time, I hope that no one thinks that I am bragging about my financial outcomes. I follow the advice of Dizzy Dean, Google THAT reference if you’re not familiar. Dizzy used to say on the ABC game of the week every Saturday “It ain’t braggin’ if you did it”. That’s about as simple as I could possibly put it. Everything I’m going to tell you about today is something I’ve already done.
 
I will tell you that I get the biggest kick out of people telling me that I can’t do something like getting a mortgage or I can’t do this or that with buying a new car, as an example. I listen to them and I think to myself, “But gosh, I’ve already done what you just told me, I couldn’t do”!
 
Search and reapply. That really works.
If after reading this, you get an idea that you might be able to use in your own personal financial life, I think that would be grand. If you’re close to my age, most of these ideas are WAY too late for you to implement. I do get quite a few messages from people who tell me they shared the strategies that I have used my entire life with their friends, their children, or their grandchildren. Children and grandchildren typically have time on their side. Time might be the most important financial asset that anyone can have.
 

Most laid-back? Really? Me?
I have been told by several people from all walks of life that I am just about the “most laid-back guy they know”. I take that as a compliment because I might just BE the most laid-back guy they know.
 
As you will come to see this year’s financial results were very much below average. Would I have liked them to have been better? Of course. What is my reaction to the far less than superb results of my fiscal year 2021/2022? Not a problem. I’ll take my RMD in December and not think about it again for another year.
 
Why October 11?
My financial fiscal year ends on October 11, every year. Why October 11? Well, if I told you, you would simply nod your head in agreement and say “that makes some sense”. So, let’s just go with October 11, as the date for the end of my fiscal year, which has been the date for 20 years now.
 

THE POSITIVES OF 2021/2022
I think of myself as a conservative investor. That’s if anyone investing their entire retirement savings in stocks and bonds can be considered conservative.
 

Market timing is worse than being a communist.
I am NOT a Market timer. I subscribe to the elements of investing as espoused by William Bernstein (above). In a nutshell, he wrote a book about 20 years ago, “The Intelligent Asset Allocator”. The main point I got from reading that book was that the secret to successful investing was to be broadly diversified in low or no-cost stock and bond mutual funds. Don’t try to guess when the markets are going to go up or when the markets are going to go down. Just ride it out in your low-cost and well-diversified portfolio. This strategy will win the day for you.
 
I know some folks who tell me they are not market-timers. Then they play a hunch and take a “market timing” approach. Then they continue to tell me they are not market-timers. They are still my friends.
 
Not for me but it might be for you.
I have never employed the services of a financial planner to manage any of my money. I didn’t need to because I could invest in my eleven Vanguard mutual funds that covered both the diversification and the low-cost methods recommended by Bernstein.
 
On the other hand, for people who really don’t understand investing all that well, I don’t see a problem going with a financial advisor. I don’t fix my own cavities. I visit a dentist, a very good dentist. Right, Dr. Lamming? If you need help, get the help. I’m just a firm believer that by the time you add a financial planner’s expense to the equation that the financial planner can’t beat the market by enough to justify their fees. Of course, that comes from a person who already understands what it takes to invest in a well-diversified low-cost portfolio. If you want to hire a professional on a fee-only basis for special work go for it. Just don’t pay a fixed percentage to have someone manage your entire portfolio when they are not on the hook for any guaranteed performance.
 
What’s my plan? Match the market!
It should be noted that I am not trying to beat the market. I am only trying to match the market. By “buying the market” I am pretty much guaranteed to match the market.
 

The biggest win of 2021/2022 by a wide margin?
I would say our biggest win of 2021/2022 came about a year ago. We refinanced our mortgage. It is difficult, no make that nearly impossible, to pick market tops and bottoms. If I happen to pick the top or the bottom, I consider myself more lucky than good.
 
I am a strong believer that older people, you pick the age, who have a reasonable percentage of their assets tied up in home equity should have a home mortgage. They need to take that money from home equity, which is earning zero and invest it at a higher rate, or at a minimum enjoy it in the fourth quarter of their life.
 

For some of you/us, it’s the fourth quarter baby!
If you are 60 years of age or older, you are likely entering the fourth quarter of your life. I know some folks think they will live to be one hundred. Good luck with that. The odds are strongly against that even if your Aunt Grovetta did live to be 102.
 
I don’t know if you are a sports fan. I will simply put it this way. If you are the coach, and you ARE the coach of your own financial life, your strategy should be different in the fourth quarter of the game, compared to the first quarter of the game. Make sense?
 
Interest-only rocks!
If you’re going to have a mortgage, I strongly recommend you get an interest-only mortgage. With an interest-only mortgage, you do not put any of your monthly payments towards the principal. That’s a fantastic idea!
 
I know. Somebody told you 50 years ago that it would be a great idea to have a mortgage-burning party someday. That’s bad for two reasons. A fire could be dangerous. That would be bad. Having a lot of your money tied up in home equity might be more dangerous than having your house burn down during the mortgage burning party!
 
Why? For gosh sake why?
Why would you want to take money that you are presumably investing, and move it from an investment account into a principal and interest mortgage loan that only adds to your home equity? It’s a proven fact that your home’s value has nothing whatsoever to do with whether the house has a mortgage on the property or not. Why move money from an investment position to put those funds into home equity via a principal and interest home loan when your home equity money earns zero?
 
Some people hear me saying “get a mortgage” and come back with “I’ve got a home equity loan”. The drawback to a HELOC is the interest rate is rarely fixed. In a rising interest rate environment (like now!) a HELOC could get very expensive and make you not want to use it. A cash-out refinance allows you to get a fixed interest rate. There’s a big difference.
 

Then some folks are died in the wool “We don’t want no stinkin’ mortgage” fans. Far be it from me to try to change that point of view. I don’t think I could. Those people just need to understand that the entire value of their home is “home equity” and is out of reach to them and earning nothing.
 
I don’t work for money.
In late 2021 I didn’t have any work income to help me get a mortgage. I did have about 30 grand in Social Security income. I also had my RMD that I am required to take every year from my IRA. How does a fella get a real big loan with a low-interest mortgage rate without any history of income?
 

All money flows to the sea.
We are fortunate to have made the decision to move to the beach about 20 years ago. At the time, my realtor told me “All money flows to the sea”. What he was saying is that when people can they try to move closer and closer to the water. There’s only so much coastline. With people wanting to move closer and closer to the water that’s going to make properties near the water more valuable. Some people in Florida might be rethinking this strategy.
 

I loved my mother.
Growing up, my mother (that’s her on the left when I was just four months old…yes our family was into Fords!) had some unusual sayings. When she wanted to know how I was going to pay for something she might commonly ask “Are you going to pay for that with your good looks?” Was that a compliment? Another one of her famous lines was “You’re cruisin’ for a bruisin’”. For the life of me, I can never remember my mother ever spanking me or using any form of corporal punishment, so I would just smile when she made that comment!
 
Oops! I fear I may have digressed. Although interest rates are rising faster than an Elon Musk propelled rocket during the past year, interest rates only recently were at near all-time lows.
 
It was time to step up and pull the trigger.
I recognized that it was time to lock in a low-interest rate for our home loan. We already had an interest-only loan at 3.1% for 10 years with about seven years or so remaining on the term. Typically, interest-only loans are only offered for a maximum of 10 years. If I could get a longer-term on an interest-only loan, I would certainly do it.

 
usc sucks!
I’m going to guess that I have refinanced our mortgages and gotten new mortgages on homes or rental properties around 15-20 times in my life. I will also tell you that I have never met any of our mortgage brokers in advance of getting these loans or even during the loan process. I have only ever met one of my mortgage brokers and that was at a football game. I learned he was a usc fan. Being a UCLA fan, I never did another loan with him.
 
I could tell you that I marched down to the office of my local bank manager and filled out the paperwork for an interest-only loan, but that wouldn’t be true. What exactly did I do?
 
I searched around online. I contacted our current mortgage loan holder and asked if they could give me a better rate. They couldn’t. Then I got a little help from our son, J.J., who was also getting a new home loan. I ended up going with a combination of Charles Schwab working with Rocket Mortgage to get a smoking hot deal.
 

Big is better, right?
So exactly how big of a loan could a guy get who was getting $30,000 in Social Security income and had an IRA RMD? Maybe you’re thinking of a $100,000 loan or a $300,000 loan? That wasn’t going to quite do it for the financial plan I had in mind.
 
By the time the dust had settled the folks over at Rocket Mortgage had agreed to give me a first mortgage for $2,558,000. The check read “Two million five hundred fifty-eight thousand and no/100”. The interest-only rate for 10 years would be 2.25%. Two point two fiver percent! If you look up “smoking hot deal” in your online dictionary, you’ll see a picture of me holding my loan document.
 
Why did they give me such a large loan when my income was so small? Did they misplace a decimal? Did the provocative strip club photos of the loan officer that I had influence the decision on the loan amount? I guess you would have to ask them. They made the decision. I cashed the check before they could change their minds.

Before we go further maybe I could answer my own question. Why did they give me such a big loan when my income was so small? Did we inherit some money? Nope, Carol and I both come from very poor backgrounds. Did we win the lottery? No, we don’t play. We did have a very high credit rating because somewhere along the line we learned that paying your bills on time is a very good thing. Do you think maybe nearly 20 years of successful investing in our retirement portfolio convinced the bank to part with more than two and one-half million dollars? I do!
 

They gave me a low interest rate…and a wad full of cash.
In addition to getting those most favorable loan terms, they let me take out $300,000 in home equity as part of that loan amount. The $300,000 came in the form of cash. I wouldn’t want it any other way. As they say, cash is king. I can now go down to Walmart anytime I want and buy that really deluxe toaster that I’ve had my eye on. I could even buy two of those toasters…but then who needs two toasters?
 
I think of myself as a conservative investor who is trying only to match the market. I think by hitting a bunch of singles ongoingly I will win the financial race. The mortgage refinance result was not a single. It was not a home run. It was a grand slam home run in the bottom of the ninth in the seventh game of the World Series! However, if I had not stepped into the batter’s box, I never would have hit that grand slam home run.
 
Will I ever refinance again? Could I ever beat a rate of 2.25%? Probably not. However, EVERY time I refinance, I think I can’t get a better deal…and I always have. In the future “getting a better deal” might not mean getting a lower rate. It might mean getting a longer term. Let’s say I had three years to go on my current 10-year loan at 2.25% and could get a loan for 3.5% for another ten years. That might be a good deal. We’ll cross that bridge if and when we come to it.
 

Inflation is a positive? It can be.
The second biggest positive outcome of 2022 was inflation. Say what? Yes, I often come to exactly the opposite conclusion when I encounter a result than my more worrisome friends do. I guess that’s how I can’t shake that “most laid-back guy, I know” label.
 
Inflation, in the right amounts, can be your friend. My home’s value went up partially because of inflation. That netted us a $300,000 cash payout.
 
Our Social Security checks went up 5.9% for the year. Those SS amounts are expected to go up around 9% in the coming year. Our government I bonds, limited to only $20,000 a year for both Carol and me, pay nearly 10%. There can be lots of positives with inflation.
 

Spending like a drunken sailor is a helluva motto, isn’t it?
By the time you read this: I will have traveled to Europe five separate times this year. Why do that? Well, if you’re going to “spend like a drunken sailor”, you have to do that kind of stuff. Plus, it’s a lot of fun. Plus, we’re in the fourth quarter of our lives. What would others be waiting for? Overtime?
 
I continue to travel the world. Since March 2020 I have traveled away from home 373 nights. That’s either laid-back, crazy, or both. As I travel, I see that inflation is a big headline everywhere. Inflation is not unique to the United States. High gasoline prices are not unique to the United States. This analysis might cause a person or two to unsubscribe from my newsletter. I get a kick out of the people who seem to think that the United States is the only country in the world suffering from inflation and high gas prices. It is certainly not.
 

What do I take with me everywhere I go? Our household budget.
One of the basic tenants of my financial plan, since I was a very young man, is having a household budget. I have a system in place that accounts for every penny that we spend. My budget puts those pennies and dollars into 16 household budget expense categories.
 
It takes one or two hours every month to keep my system updated. I don’t necessarily think of that as work. It’s just a method of understanding the “pulse” of our financial situation.
 
I can take each one of those expense categories, and inflate them or deflate them into the future as needed to project what our expenses will be until “the end of the fourth quarter”. See what I did there?
 
I do the same thing with our income sources. Those income sources are pretty much limited to our Required Minimum Distribution (RMD) and our Social Security income. Like I say, we don’t earn much.
 

What do I think about having to take an RMD?
Just a comment about RMDs from our IRAs. Some people really lose their shit over this. Me? Nope. I don’t think much about the RMD other than making sure that I take it every year. I have a pretty simple policy in life as regards RMDs and about one million other things. If I can’t change the outcome, I don’t worry about it.
 
Sometimes, when people tell me stuff, I smile internally. I think to myself, “That’s a pretty stupid or uninformed comment”. Maybe you do the same? Sometimes I don’t just smile internally, but I actually express this sentiment. Most of the time I regret doing that. Sometimes I have a hard time not saying what I believe. It’s a personal problem.
 
Smiling.
I smile when I hear a government statistic broadcast to the general public saying that our inflation rate is 9% or whatever. Somebody’s inflation rate might be 9% but mine certainly isn’t anything close to that.
 

Ready for some numbers?
How do I come to that conclusion? Well, let’s think about it this way. Our house payment and my car payment account for 31 percent of our total household budget. Those two expenses are fixed. They won’t increase for years. The inflation rate for our home mortgage and car payment is zero.
 
We don’t have any electrical expenses because of solar. That expense, which would normally be $6,000 a year without solar, has no inflation factor. I own an electric car (Tesla Model X) so I have no fuel expenses. I received free lifetime supercharging when I bought the car and do all of my electrical charging at a supercharger. There are no car maintenance expenses other than tires and windshield wiper blades so there is very little chance any auto expenses will be impacted by inflation.
 
Another big expense for us would be real estate taxes. Our real estate taxes are 9% of our total expense budget. In California real estate taxes can only increase by a maximum of 2% a year by law. That’s Proposition 13 for you.
 
How does this compare to your situation?
Below is some information that you might find interesting as you compare it to your own situation. The listings below will show you first the expense category within our household budget. Secondly, you will see what percent of expenses each one of these categories accounts for out of our total expenses. Finally, you will see the inflation rate that either is an actual number or a projected inflation number on my part. I have used an inflation rate of 10% a year for every category where I don’t already know the number. Take a look.
 
Home mortgage – 21%/0%

Real estate taxes – 9%/2%

Electric – 0%/0%

Phone – 1%/10%

Water/Trash – 1%/10%

Insurance – 5%/5% (half of our insurance expense is fixed)

Gas heat – 0%/10% (the 0% is rounded)

Federal income taxes – 6%/0%

State income taxes – 3%/0%

Credit cards/checks – 18%/10% (this is a category where every expense that doesn’t fit somewhere else falls in “credit cards/checks”)

Vacation/Entertainment – 21%/0% We spend a lot on vacation and entertainment! I have used 0% for inflation here. We could easily cut down on my 373 nights of travel since Covid by 10% and not even notice it if V/E inflation was a real factor in our lives.

Home improvement – 2%/10%

Medical – 2%/10%

Randy’s car payment – 7%/0% (fixed for four more years)

Carol’s car payment – 0%/0%
 

2.9%. Yep. Just 2.9%.
When you consider each expense category’s weighted contribution to the total and the projected inflation rate of each category, if any, our overall inflation rate is capped at 2.9%.
 
It doesn’t matter if the country’s “stated” inflation rate is 10% or 15% or 20% our rate is pretty much capped at 2.9% for years. With the Federal Reserve raising interest rates so rapidly inflation will not be a problem for long.
 

Trust me. It would be a good idea to know this number.
Do you know your personal inflation rate? If you do and it’s anything like mine then you will also be smiling internally when the evening news screams “inflation”!
 
As I look back on the positives from a financial perspective in 2022 our home mortgage strategy and knowing our personal inflation rate, make for a calming effect. At the same time, others can only see troubled financial waters.
 
 
THE NEGATIVES OF 2021/2022
For the first 19 years of our financial retirement financial plan, we earned an annualized rate of return of 9.2%.
 
The only down year we had in those 19 years was during the financial crisis of 2008/2009. That year my portfolio lost 24.6%.
 
The next time someone says the likelihood of something happening is about as likely as a worldwide pandemic, listen up.
Who could’ve predicted a financial crisis like we had in 2008/2009? A financial crisis was about as likely to happen as a global pandemic, right?
 
Well, as you know, we did have a global pandemic. Outside of the very drastic and sorrowful death count from the pandemic, the financial impact was more than significant as well on my investment results this year.
 
So, what has really caused worldwide inflation?
I see the pandemic’s impact on the world economies as a very simple equation. When the pandemic began, everyone stopped doing just about everything. That meant the demand for many company’s products and services went to near zero.
 
During that time companies struggled to downsize their business operations. They reduced the headcount. They closed factories and refineries, took airplanes out of service, and more. Consumer demand dropped literally overnight. However, it took big companies much longer to reduce their operations to meet nearly zero consumer demand in many cases.

 
Vaccines to the rescue…sort of.
Then along came Covid vaccines. What a fantastic development and done in such a short time. Vaccines were a good thing, right? Most people thought so. At the time of your first jab was anyone saying, “These vaccines are going to cause worldwide inflation?” I didn’t hear any of that talk.
 
After being vaccinated people felt more comfortable. They started doing things and seeing things and buying things. The problem was that the companies who offered these now-in-demand products and services couldn’t bring their businesses back fast enough to meet this almost immediate demand.
 

Supply and demand.
We now faced surging demand and no supply. Inflation is a result of supply and demand. If demand is normal, and supply is extremely limited, you get inflation. If supply is normal, and demand is much greater than expected, you get inflation.
 
When you get inflation, perceived or real, the government will almost always begin to raise interest rates. By raising interest rates, they will choke off demand until demand matches supply and inflation is abated.
 
Please don’t take what I am saying out of context. Some people try to do that you know.
Please don’t get me wrong. Some things that everyone needs have increased in price a good deal. However, with proper preparation, the effects of inflation can be largely mitigated.
 
Wouldn’t you know it? I have come up with my own personal strategy to minimize inflation, or minimize the high price of things, even in a non-inflationary world.
 

I probably should have copyrighted this phrase.
I call my strategy “Randy’s Five Rules to Fight Inflation”. It’s a pretty catchy title, isn’t it? Here are those rules.
 
These inflation-fighting “rules” can be used when there is inflation or any product or service that you find to be too expensive. I’ve used these all my life. I don’t notice the effects of inflation one bit.
 
 
Randy’s 5 rules to fight inflation
 
 

1. Find a substitute for the inflated product or service

2. Use less of the inflated product or service

3. Stop/postpone using the inflated product or service

4. Get the product or service for free (ex. using frequent flyer/hotel stay points) or at a steep discount (ex. McDonald’s app)

5. When the first four steps don’t work re-invest the savings of steps 1-4 that DID work with other products/services when you must pay the price of an inflated in price product or service

 
I essentially use one of these five rules with just about every inflation-challenged expense category that I can.
 
Using the five rules.
As this is written in October 2022 regular gasoline at my nearest gas station at home in San Clemente is selling for $6.39 a gallon. That’s high even for California. However, I have an electric car. I haven’t paid for fuel in the two years and nine months that I’ve owned that car. Using rule #1.

By the way, I am sending this message to you today from Berlin, Germany. We have a diesel-powered rental car. I’ve seen diesel fuel selling for $9.50 U.S. per gallon in Germany. An average selling price for gasoline in the U.S. of $3.75/gallon is a bargain even though we don’t get free health care!
 
Energy costs are high and increasing all the time. Electricity costs in California are pretty much the highest anywhere in the United States. Our cost per kilowatt hour ranges anywhere from $.40-$.50 an hour and sometimes more. Our electric bill every month is zero. We have 38 solar panels sitting on a roof and I’ve been generating $6,000 a year in free cash for the past five years. Using rule #4.
 

I’m going to guess that the price of bread has gone up since “inflation” began. I don’t buy bread in a grocery store so I don’t really know if a loaf of bread costs a dollar or four dollars or whatever. At least I DO know that grocery stores use scanners! I also remember that when I was a kid we would wait for a sale on white bread and buy it for a dime a loaf. Then I would eat an entire loaf in a single night as a gangly teenager. I also know that every time we went to Maui, a loaf of bread seemed to cost much more than it should have and that was before our current inflation happened.
 
Let’s say a loaf of bread increased from two dollars a loaf to four dollars a loaf doubling in price. What is the impact of a loaf of bread’s price increase relative to what I pay for some of our “normal” household expenses such as our home mortgage? Not much. Using rule #5.
 
Have a plan. Work the plan. Benefit from the plan.
Please understand I am not trying to minimize the impact of higher prices on anyone. What I am preaching is “Have a plan. Work the plan. Benefit from the plan.” I understand that not everyone can figure this out. I’m not trying to be hard-hearted. It’s just that I need to look out for my own family. I’ve taken some time to try to educate our children about money over the years. They all do very well with that. I assume they will help others and I hope I might be helping someone reading this message on the topic. Beyond that, I can only say “Today wasn’t my day to worry about the entire world managing their finances”.
 

O.K. enough already. What was your friggin’ return for the year?
We’re getting to the end of my message. You are probably asking yourself, “OK, Mr. laid-back guy you have danced around the issue. What exactly was your rate of return for your fiscal year 2021/2022?” Excellent question.
 

Our second worst ROI year in 20 years of retirement.
Our financial return on investment (ROI) for our eleven Vanguard stock and mutual funds for our fiscal year ending October 11, 2022, was -18.61%. Not particularly good, correct? Really bad could also describe that result.
 
But still…over twenty years a pretty good result.
This gives us an annualized rate of return for 20 years of investing in retirement of 7.6% percent. That’s a big hit from an annualized ROI of 9.2% after 19 years of investing. I do know this. On Friday, October 11, 2002, 20 years ago, I would have immediately signed on the dotted line to get an annualized rate of return for the next 20 years of 7.6 percent. Today I would sign on the dotted line to get a return of 7.6% for the rest of the time. Unfortunately, I can’t do that. I can only “buy and hold” as I have done for 20 years and expect the market to perform at historical averages.

These are my returns from day one of my retirement stock and bond portfolio. 
 

 
Was the market overvalued five years ago?
About five years ago, people were saying the stock market was overvalued. It might be a good time to get out. That would have been a big mistake…as most market timing ideas are. During the past five years, my returns looked like this:

2021 – 21.3%
2020 – 16.9%
2019 – 8.5%
2018 – 4.3%
2017 – 15.4%
 
Cumulatively, those were outsized returns for a market that might have seemed overvalued five years ago. What did I learn from that? Nobody, certainly including me knows what the market will do tomorrow, the next day, the next year, or the next five years.
 
Don’t be one of these people. Please. Don’t.
I do know this. Folks who got out of the market during or after the financial crisis of 2008/2009 and never got back in are VERY worried today about the cost of a loaf of bread. The life of a market timer is a losing idea. When do you know when to get out and when to get back in? You don’t. You simply have to be in and you will win.
 
I don’t sell on hunches. I don’t buy or sell on guesses, or anybody else’s advice. I simply bought my investments and now hold onto them with the exception of my RMD each year. When I take my RMD the money comes from the best-performing funds. That’s called re-balancing.

The purpose of re-balancing is to sell your winners and buys your losers. That sounds sort of counter-intuitive doesn’t it? If you believe that almost no one can beat the market over time then you know that a stock or mutual fund that HAS beaten the market will likely “revert to the mean”. In most cases that is what happens and that is why re-balancing is such a valuable idea. 
 

People can be downright irrational.
For the life of me, I don’t understand that when the market goes down people’s hair gets on fire and they run out of the building screaming and waving their hands. The general reaction is that they want to sell their investments (at lower prices), and then when the market begins to go up, people want to buy into the market (at higher prices). That strategy is exactly the opposite of what the same person would do on a shopping trip to Walmart. At Walmart when the price goes down, folks want to buy more and when the price goes up, they might want to wait.
 
So, what does “drunken sailor” spending really look like?
How much do we spend every year with the strategy of “spending like a drunken sailor?” Let me put it this way.
 
We can easily live for the next 10 years on our RMD, our Social Security income, and a little bit of a drag from the $300,000 we have in cash from the cash-out refinance. We won’t have to touch the remaining principle of our IRA for a very long time.
 
We’ve taken a bit of the $300,000 windfall and made improvements to our house. We will benefit from those improvements during our next refinance when the appraiser walks through. Heck, they might even let me take more cash out during the next refinance!
 
In the next 10 years, the current decline in the market will simply be a blip on a radar screen that shows a rocket heading toward the northeast. If you live in Boston or New York, please don’t be alarmed by this comment. This is not a Putin prediction. It’s a metaphor regarding a graph showing a stock market climbing, but then I know you knew that!
 
I won’t consider selling any of my investments or moving my investments from stocks and bonds to cash or anything else. I am very satisfied with having a broadly diversified stock and bond portfolio that is managed in such a low-cost environment that few can match.
 

Spend! It’s the gosh-danged fourth quarter.
I am not at all interested in adding to my investments. I am interested in spending some of those investments to enjoy the fourth quarter of our lives. I’m not talking about depleting those investments before the final gun sounds just enjoying the fruits of our labor and long-term investment decisions.
 
I hesitated to add this paragraph. Some folks will tell me “We ALREADY do everything we want so there is absolutely no need to be any smarter with our money management”. That was the strategy I used in high school as regards studying. I didn’t want to put any more effort into the project than I felt was needed. I left a lot on the table thinking that way.
 
I’ll never convince anyone that for them their point of view isn’t valid. I do know this in our circumstances. I don’t want to have any financial limitations put on us, i.e., less travel, fewer material purchases or whatever simply because I left money on the table.
 

I haven’t been hit by a bus yet…but my time and everyone’s time is coming.
So that’s about it. Another year of investing financial results is in the books. That’s 20 years. I am more than satisfied with the simple Excel spreadsheet that I created at age 52. Everything worked out as I had planned. There were no guarantees of that happening, but it worked out. I didn’t get hit by a bus…yet. Don’t worry. Everyone gets hit by the “bus” sooner or later.
 

Money isn’t everything…but it could buy me a boat.
I might also point out, importantly, that this discussion of “money” is not meant to throw any shade on any of the other important aspects of human life. However, this message is not about those subjects. This post is about managing money.
 
I like the country song lyrics from “Buy me a boat”. Check it out.

I ain’t rich, but I damn sure wanna be
Workin’ like a dog all day ain’t workin’ for me
I wish I had a rich uncle that’d kick the bucket
And I was sittin’ on a pile like Warren Buffett
I know everybody says money can’t buy happiness
 
 
But it could buy me a boat
It could buy me a truck to pull it
It could buy me a Yeti 110 iced down with some silver bullets
Yeah, and I know what they say, money can’t buy everything
Well, maybe so
But it could buy me a boat
 
 
They call me redneck, white trash and blue collar
But I could change all that if I had a couple million dollars
I keep hearing that money is the root of all evil
And you can’t fit a camel through the eye of a needle
I’m sure that’s probably true
But it still sounds pretty cool
 
 
‘Cause it could buy me a boat
It could buy me a truck to pull it
It could buy me a Yeti 110 iced down with some silver bullets
Yeah, and I know what they say, money can’t buy everything
Well, maybe so
But it could buy me a boat
 
See ya next year on this topic.
So, until you hear from me a year from now on October 11, 2023, I wish you all the best with your financial lives. Remember, there are not enough criminals in the world to commit all the crimes that some people imagine might be committed. Tesla batteries will not need to be replaced six weeks after buying the car. For every credit, there must be a debit. Always keep a sharp pencil. Money reduces stress. Money can buy you time. Money buys you experiences. Money can allow you to help others. Money can’t buy happiness but it can lead you to it.
 
 
Randy Lewis
Possibly the most laid-back guy you know
San Clemente, California USA