Cautiousness Is Costly

After spending Saturday morning exercising, I rallied when the family proposed a hike in Olympia’s Watershed Park, a beautiful 1.4 mile trail in the heart of a dense, fern-filled Pacific Northwest forest.

By the time we began, daylight was fading into dusk. In a steady rainfall we began our clockwise loop. A few minutes later, a young athletic woman materialized in front of us, maybe 18 to 20 years young, hair wet, holding her phone, listening to music. Her warm smile suggested this was a better than average run. Fifteen minutes later, she reappeared. Impressed, I said, “Man, you are really getting after it.” “Yeah,” she acknowledged, smiling even more exuberantly.

The Good Wife, Eldest, Youngest, her, and I all got to our parked cars at the same time. She split before I could thank her.

I would’ve liked to thank her for daring to be different. Or more simply for being daring. A lot of people, scratch that, nearly everyone, would say she was crazy to be running alone, near dusk, in the rain, in a park where a person or two have been accosted previously. By focusing on the one or two tragic episodes over the last 10-20 years, people would forget that in between, thousands of runners have joyously run the 1.4 mile loop unscathed.

Our semi-dark, rain drenched hike was great fun, but based on her radiant smile, I bet her run was even more exhilarating. One she’ll remember fondly.

Close in age to my daughters, I thought to myself, what would I think if I was her dad or if my daughters chose to run alone in Watershed at dusk in a steady rain. I would’ve felt better if she had a friend or dog with her and told me her plan, but I’d much rather her (and them) error on the side of running alone in the elements, than not.

Why? Because when we try eliminating risk from our lives, we’re not really living. We’re most safe when sitting on our sofas, but if we spend too much time on our sofas out of fear of what could go wrong if we venture outside, we forego adventures, new friendships, and positive memories of having successfully taken calculated risks alone or with others.

Calculated risks like running in Watershed in a steady rain, in the almost dark. Negotiating the rolling hills, the wet footing. Celebrating being of healthy mind and spirit. Of overcoming fear. Of being alive.

Thank you for reading some of what I wrote this year. My hope for 2019 is that we live a little (or a lot) less cautiously. Happy New Year or is it New Years?

 

The Thrill of Victory

I shoulda received a gold medal, blue ribbon, or big ass trophy for winning the Byrnes Family Christmas 5k. Even set a course record. Sadly though, there was hardly even any media at the finish, it being a holiday and everything. Except for one week every four years, elite runners in the U.S. never get the attention we should.

To all those dads who run with their daughters for 5 or 10k and finish together and then blanket social media with pictures, that was the plan. Then Youngest and Eldest informed me, that like battery powered toys or something, they can “only run with music”. I planned to run whatever pace they wanted. We were going to bond. Then they showed up to the start sporting Airpods for shitsake.

So we headed out together to the Gull Harbor Rd turn around. At the risk of them getting cocky, I didn’t tell them I was coming off a four week break from a calf injury and that our race was my third rehab run. Not only did I mask my loss of fitness, I broke out my Ironperson hat which, just as I had hoped, intimidated them big time.

We headed out together, me talking over their stupid music. Until the Mile 2 marker which came early on Cushman Rd, a slightly uphill, tricky half mile segment. Tricky because Cocoa, Eddie, and Griffey often need some love. Eldest and I blew past Youngest who had cut the course short and succumbed, mid-race, to petting Cocoa, a black labradoodle in desperate need of a hair cut. At the same time, Eldest informed me she had to turn up her music for the final push, and if “I wanted to go ahead, I could.”

That was the invitation I had been waiting for. I accelerated like a topped off Tesla and went “full gas” as they say in the pro peloton. Sweet separation came as quickly as you can say “Tahtah for now”. Halfway up Cushman I turned to see Eddie and Griffey, told them they were good boys, and promised them I would pet them later.

Right after doing the “U turn” at the end of Cushman Rd I saw the former college swimmer not too far away. Turns out, she can run a little. Time for some Tough Love though, rehab be damn. A right on Indian Rd, another right at the bend, a check of the watch behind Travis’s house, 3 miles. I grab an American flag from an adoring fan on the side of the road and lean in to the finishing tape. Well, I think I did, maybe not, in all honesty my first major running win is a bit of blur. Just like me when at full speed.

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Paragraph to Ponder Plus

For its comedic value. From NBA (National Basketball Association) savant, Zach Lowe:

“It has been a rough month for Chicago fans. The Bulls are a mutinous laughingstock. They have a freaking leadership council, and they are trying to pass it off as a serious thing. Can it craft team legislation? Can someone filibuster? Does it have a cloture rule in case someone filibusters?”

And at the risk of piling on, my favorite Twitter follow:

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And lastly, since lots of people will take time off from work next week, an idea worthy of consideration from my favorite Twitter follow.

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How To Improve Your Finances

Preamble. In what follows I make assumptions that do not hold for many people. Among the most glaring is that my intended audience is gainfully employed and/or they have enough passive income each month to meet basic needs with some left over. Another assumption is that everyone can improve their finances. If I’m wrong about you, I bet you know someone, maybe a young adult child of yours for example, who could use some help building wealth. Consider forwarding this to them if you think it merits it. Thank you.

Official start. Ever wonder why don’t more moderate to high earner families have more long-term financial security to show for all their hard work? In part because financial analysts and advisors make things more complex than they have to so that people will hire them to manage their money.

As a result of needless complexity, and the associated pursuit of the perfect portfolio, people loose focus on what matters most when it comes to building wealth over time, that is, how much they make and spend month-to-month. If asked, how much do you spend on average each month, how precise would your answer be?

Not nearly as precise as it would be if you backward mapped your expenses. Backward mapping, in contrast to budgeting, entails spending regularly without much attention to detail, then totaling everything up after the fact, or more specifically, at the end of each month. Think of it as an x-ray of current spending.

My expense spreadsheet has 7 columns and 12 rows. The columns are for 1) our primary credit card; 2-3) secondary credit cards used less often; 4) cash/checks/wired payments; 5) one-time expenses divided by 12 which include property taxes, home/auto/umbrella insurance premiums, and professional tax preparation; and 6) medical and dental insurance premiums; and 7) a column where I write what the largest expense of the month was in order to see the most expensive outlays of the year in-a-glance. The 12 rows are for each month of the year.

How to build in one-time expenses like a car purchase or new roof? If I buy a $36k car and sell a $12k one, at the end of the year I’ll increase the average monthly total for that calendar year by $2k.* Or maybe I’ll increase it $1k for two consecutive years.

We’re super lucky that we don’t have to budget. With backward mapping though, which doesn’t require much time with credit card statements and most other financial records on-line, I can tell you within a couple percent what our annual burn rate or overhead is. That’s half the battle.

Then comes income. Probably the younger you are, the simpler it is to tabulate. In my advanced age, my income spreadsheet has several columns because in addition to my salary, my university contributes to my retirement fund each month, and then there’s monthly interest from cash and bond investments, and quarterly dividends from stock investments. The wider your income spreadsheet the better. I know, I know, I need a “side hustle” column. I feel younger just for having written that.

Same as with expenses, I keep a running total month-by-month. Here I can be even more accurate than with expenses, even to the dollar. As a result of these monthly calculations, in two weeks, it will take me about 15 minutes to solve for “C” knowing “A” is expenses and “B” is income. If my income exceeds my expenses, “C” will be a positive number. If my expenses exceed my income, like for the federal government, “C” will be negative. Whichever it is, I will carry the number forward and keep a running total from year-to-year.

Building wealth depends upon creating savings on a month-by-month basis much more than fretting about what the market is going to do tomorrow and trying to craft the world’s most perfect portfolio. By far the best way to increase your net worth by $1,200 a year is to make sure your income exceeds your expenses by $100 month-after-month. By far the best way to increase your net worth by $12,000 a year is to do everything in your power to make sure your income exceeds your expenses by $1,000 month-after-month. By far the best way to increase your net worth by $120,000 a year is to make sure your income exceeds your expenses by $10,000 month-after-month.

If that’s so obvious, why do people spend way more time studying stock market gyrations than figuring out how to limit their expenses and increase their income?

If you do well and end up with a surplus of $1,200, $12,000, or $120,000 at the end of the year, invest 50% of it in low cost bond index funds and 50% in low cost stock index funds (+/- 25% based upon your age and risk tolerance). And repeat.

Invest knowing that the most credible analysts in the financial sector seem to be in agreement that future returns will likely pale in comparison to historical ones. For example, here’s Vanguard on 2019 and beyond:

“U.S. fixed income returns are most likely to be in the 2.5%–4.5% range, driven by rising policy rates and higher yields across the maturity curve as policy normalizes. This results in a modestly higher outlook compared with last year’s outlook of 1.5%–3.5%—albeit still more muted than the historical precedent of 4.7%. Returns in global equity markets are likely to be about 4.5%–6.5% for U.S.-dollar-based investors. This remains significantly lower than the experience of previous decades and of the postcrisis years, when global equities have risen 12.6% a year since the trough of the market downturn.”

Subtract 2-2.5% for inflation and another percent for taxes and returns may be 1-3% above inflation. And that’s not factoring in people’s tendency to trade too much with the associated costs that brings. Good luck depending upon your investment smarts to grow wealth.

Building wealth depends upon maximizing income and minimizing expenses a little or a lot. Of course, that depends upon more than using my suggested spreadsheets. Most likely, among other things, it depends upon the degree to which you grew up with role models who lived below their means; how specialized your knowledge and skills are; whether you live in a modest neighborhood; and ultimately, your capacity to delay purchases.

Lastly, one thing your financial planner won’t tell you. Personal wealth won’t amount to much if we don’t revive the Common Good. For us to flourish we need a federal government that can pass budgets without threatening to shut down. We need political leadership that young people can aspire to. We need labor unions to protect workers’ interests. We need health care that doesn’t penalize people of limited means or those with preexisting conditions. We need to partner with other countries to reduce greenhouse gases and global poverty.

Absent commitment to those things, wealth will elude us.

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