Many folks, often without realizing it, face momentous decisions each day; decisions that will keep them within the law or decisions that ultimately lead them to further bad decisions that eventually will lead to their downfall.  Many otherwise "good" people have made "bad" decisions because they simply do not take the time to ask themselves if this decision is in keeping with their moral code. Perhaps some make the decision that is just the easiest way to go at the time; maybe they choose not to "rock the boat" at work; perhaps they decide that they will "go along" with a decision they know is wrong just this one time.  Maybe they just do not realize the impact that the decision will ultimately have on their lives.  But nearly every day we face decisions that will affect us long after the decision is made for either better of worse.  Often we cannot know simply because we cannot see the future, but we still we must choose.

I recently had a talk with a young friend of mine struggling with some decisions that will ultimately determine the path that his life will take.  As a youngster, all he ever wanted to do was to fly airplanes.  He is a bright and energetic young man, and through considerable hard work and determination, he found himself hired at a regional airline at the tender age of 21.  In a few short years, oil prices went to $140 a barrel, the financial and credit markets melted down, and a raging recession gripped the land.  Thus he found himself furloughed from his job flying airplanes with his wife expecting their first child; all this before the age of 25.

My young friend is at that age where doors begin closing behind you as you make decisions.  Not all, but some decisions you make at his age will mean that certain opportunities you may now have may never appear again.  Thus it is that he finds himself with his current dilemma.  I mentioned that he is a bright and energetic young man, and that being the case, he did not spend too much time crying about his situation when he lost his flying job, but set about beginning a new career in the financial services industry.  He has been making steady progress and no doubt could eventually be quite successful in this field.  Suddenly he finds he has another opportunity to fly for a living, but if he opts to return to flying he may have to turn his back on his budding career in financial services.  By choosing to fly again, he is facing the fact that he will be away from home a great deal, missing numerous events that his child will be participating in over the years, as well as facing all of the upheavals and tumult that a career in aviation almost guarantees.  So he is facing a very tough decision, one he already knows will likely determine the trajectory of his life.  I shared with him some of my thoughts as I looked back over my flying career and wished him well as he makes his decision.

We also face financial decisions along the way that greatly affect our future.  Do we save this dollar or spend it?  Due to the time value of money and the fact that a dollar saved eventually becomes greater that the original dollar, a dollar saved today eventually becomes more than a dollar.  Of course to save it, we forego the pleasure of spending it today, and the priceless memories we often get from spending a dollar with family or friends.  Do we save for our future, our retirement, our children's education, or do we spend (or borrow) to enjoy life today?  There are often no hard and fast "right" answers.  But there can be a balance.  To arrive at that balance, we have to be brutally honest with ourselves occasionally.  We have to ask ourselves the hard questions and project our spending and our financial lives into the future to see how our spending today will affect those future lives.  We can also observe those around us.  We can note how those who have trod these roads before have managed.  We don't necessarily have to relearn all of the lessons if others have learned them before us.  Experience is often a harsh teacher.  Often it is best to skip the "school of hard knocks" if we possibly can!  But all to often, since the future is unknowable, we simply have to pray for wisdom when facing financial decisions and make the best decision we can with the information at hand.

My wife and I have made many, many spending or saving decisions over the years.  The results of these decisions are even now still evolving.  Some things, such as how much we spent or saved, we could control.  Others, like the general economy, what politicians did to affect it, and general market conditions, we could not.  Thus it is left to us to educate ourselves as best we can, control what we can, and trust the Good Lord with the rest.  At least, that is how we have always faced that aspect of our lives.

I am now facing some fairly big decisions that I know will affect the rest of my life as I contemplate my retirement from flying.  Thus I am reading everything I can find about that stage of life.  I am trying to learn from the experiences of others.  I am just about ready to hang up my flying suit, but I am not ready to check out and play golf five days a week.  Now mind you there is nothing wrong with playing golf and taking it easy in retirement, it is just not the way I envision my retirement. Oh I want to play plenty of golf, but I also want to feel as if I am still making a contribution; that I am still doing something worthwhile for others.  I guess I just want to still feel needed somewhere, somehow.  So, that is why I am doing as much as I can to prepare for this next stage of my life. Whether I eventually become a teacher of some sort, a writer, a financial advisor, or a greeter at Wal-Mart, I am determined to become something else worthwhile.  I guess you can say I am still working on becoming who I am to be.

So, whether we intend it or not, we are all still becoming who we are.  Each day we make decisions that determine that outcome.  Even as I work this out in my life, I wish you well as you become who you are; I hope it is who you want to be!

Fly/Drive Safely

10 November 2009

First we need to understand that a viable financial plan is never set in stone.  Much about life cannot really be planned, especially our financial lives that often depend not only on the general economy, but also on the whimsical turns that fate occasionally throws our way.  Thus plans have to be flexible and allow for the unexpected, both the good and not so good. So, when we speak of a financial plan, we are really talking about a map that depicts a road we hope to take but also realize that there may be some detours from time to time.  So, with that proviso, let's take a look at the various areas that a good financial plan will cover.

A personal, or family financial plan will cover six basic areas:

1) Budgeting

2) Insurance

3) Taxes

4) Investments

5) Retirement Planning

6) Estate Planning

Budgeting comes first because until a family has an understanding of where their money is going, and how much can reasonably be expected to be left after their fixed expenses each month, they don't really know what they can, or cannot do with their money.  So, they must first determine how much money comes in each month, what their fixed expenses are, and then determine where their discretionary money is going.  This will give them a pretty good idea of what their cash flow looks like and, in the process, reveal what kind of options they may have for the rest of their financial plan. Until this step is taken, the rest of the financial planning process is on hold.

As I mentioned in a previous article, every good financial plan begins with a discussion about insurance.  Just some of the topics to be covered here will include home, auto, life, disability, loss of license (for us pilots), and long term care.  If you are a small business owner you know that many other areas from liability to key man insurance may also come into play.  Insurance may also be a factor in planning how a family business may transfer from one generation to the next.  Insurance products can be complex, but they can also be flexible and fill many needs.  A good insurance agent is worth his commission.

Tax planning has become more and more important as our tax code has become more complex.  The complexity of the US tax code should be an embarrassment to every elected federal official.  We live under a tax code with which neither the Secretary of the Treasury nor the Chairman of the House Ways and Means Committee that writes the tax laws were able to legally comply.  But until our Congress comes to it senses and moves to simplify our tax code, we have to live with it as it is.  Due in part to its complexity, it offers those who do a bit of planning the opportunity to minimize their tax bills.  This touches every other aspect of our financial plan.  How we invest our money, buy insurance, and prepare for our retirement impact our tax bills.  How we are paid at work and withdraw money from our retirement accounts affect our tax bills.  And ultimately, how we prepare to pass on our estates affects our tax bills.  Being aware of the impact of taxes and planning to minimize them where appropriate, can have a very significant impact on one's net worth if done over a lifetime.  So you see, tax planning is a very important part of any financial plan, and with the complexity of today's tax code, the help of a qualified tax specialist is usually needed.

Personal investing and retirement planning actually go hand in hand because the primary reason many of us struggle with investing is the aim to prepare for our eventual retirement.  Thus, once we have a reasonable emergency fund (six months expenses) in place in a stable account such as a bank savings account or money market fund with a large reputable mutual fund company, we can begin our investment/retirement savings plan in earnest.  If our cash flow permits only contributing to a 401k at work, then the simple answer is that is what we should do.  If we have extra funds after fully funding our 401k up to the point where we capture any matching funds from our employer, we can then look to diversify our investments in other accounts, a Roth IRA first and foremost, followed by traditional IRAs.  If funds are then still available, we can invest in taxable accounts such as CDs, individual stocks, or well diversified equity mutual funds.  As our investable funds grow, we should look to diversify further with investments in commodities, real estate, international equities, and bonds.  Again, a great many mutual funds and exchange traded funds are suitable vehicles for these types of investments.  We should always look for funds with the lowest expenses for expenses will figure prominently in our investment success over the course of an investing lifetime. Thus, non-managed, low fee index funds are suggested by many reputable investment gurus.  We also need to be aware of and carefully plan how our investments are allocated between equities, cash, and bonds.  Generally speaking the younger a person is, the greater will be his allocation to equities.  An individual in his 20s or 30s will probably have up to 80% of his portfolio in domestic or foreign equities.  As one nears retirement age, his allocation should become more conservative and favor more cash and bonds.  At retirement I believe that one's portfolio should hold no more than 50% equities.  This is a complex issue, and is being debated in many financial circles.  Much relies on the individual investor's risk tolerance, and there is no "right" answer for everyone.  Again, a good financial counsellor can help the individual find his "right" answer.

Finally, we come to estate planning, perhaps the most complicated financial planning issue and the one with which the average investor has the least experience.  The estate tax is currently being debated in Congress and is doubtless going to change over the course of the next few years.  I believe that the estate tax will be increasing as Congress looks to finance our huge and growing federal deficit, and this is a tax that primarily affects those families with more assets and who can ostensibly better afford it.  Nevertheless, many families will still be able to minimize this tax bite with a bit of prior planning with the help of an estate attorney.  There are a number of trusts and other vehicles that a family can use, if, and a big IF, they plan ahead.  These steps must be taken will before the death of the estate holder.  The mistake that many have made is to wait too long to make estate plans (note famous Nashvillian Steve McNair.)  Regardless of their financial picture, everyone should have a will for a variety of good reasons.  Likewise, every young family should have plans in place to insure that their children are cared for as they would choose if something were to happen to the parents.  No estate is as precious as children; thus their future should not be left to chance.

If one is truly wealthy like Warren Buffet or Bill Gates, they can afford accountants and lawyers on full-time retainer to see to their financial planning.  For the rest of us peons, we need to take the time to educate ourselves a bit and/or seek the help of others.  A good, fee-only financial planner, one with whom you feel comfortable, is well worth their fee.  They will ask questions and encourage you to consider issues that you may not even recognize you need to consider.  They can also suggest ways to deal with these various issues.  But however you approach the topic, just remember that someone or something is going to do financial planning for you.  You get to choose who or what.  Make it a good decision.

Fly/Drive Safely

11 October, 2009

Many buyers of life insurance want to insure that their children have the opportunity to attend college if they are no longer around.  College costs continue to rise, and they do present a challenge to young families who may be struggling with other financial  issues.  Last year the average cost to attend a public university in the US was $6,585.  That was 6.4% higher than the prior year.  If we assume that college costs continue to rise at 5% per year, that number becomes $10,726 in ten years.  A college education at a private institution can cost much more, over $25,000 last year.  Thus a family has to plan on having nearly $50,000 on hand to fully finance a four year program at a public university ten years hence.  Of course this assumes that no scholarship or other financial aid monies will be available, and that is not likely to be the case.  Last year over $143 billion dollars of financial aid was available to college students.  Many young families, when assessing where to spend their insurance dollars, may decide that they cannot afford to fully insure college costs, and for many this may be logical.  A logical course may be to allot a portion of their insurance money to college costs and assume that their child will be responsible for a portion as well, especially in light of the amount of financial aid available.  Additionally, a disciplined college savings plan will erode the need for college insurance over time.  So buying life insurance to insure college costs may be a luxury that many cannot afford and may not be required to the degree that some insurance sellers would lead us to believe.

A more important use of life insurance may be to simply replace the income of the insured.  (Long term disability is more of a threat to young families, and disability insurance should also be on their agenda, but that is a discussion for later.)  But again we face the issue of determining just how much insurance will be required.  Many financial pundits use the rule of thumb that says that life insurance should be eight to ten times the amount of the annual salary of the life being insured.  This may be a good starting point, but a more detailed analysis should be pursued.  A number of questions need to be answered before arriving at a logical figure:  Does the surviving spouse have a career and will he/she continue to work?  Will there be child care expenses? How many children are dependent on that income?  Where does the family live and will they continue to live in the current home or apartment?  Are there extended family members available to help?   How many assets are currently available?  How long is the insurance money expected to last?  Can an inheritance be expected at some point in the future?  Etc., etc.  And finally, and most importantly, what will be the spending needs of the surviving family?  An honest, thorough discussion with a really dedicated life insurance agent, one dedicated to serving the needs of his clients, should lead to a logical answer; and that would be an answer that not only fits the needs of the family, but one they can afford.

Every good financial plan begins with a discussion about insurance.  Risks need to be assessed and adequately addressed before the discussion about investments even begins.  Additionally, life insurance should not be viewed as an investment.  Most, if not all, life insurance sold as an investment, makes a lousy investment.  Most young families have no need for whole, or universal life insurance.  Term life insurance has gotten progressivley cheaper over the past few years, and term life insurance provides the most coverage for the fewest dollars, and thus should be the vehicle of choice for most.  Remember, another wonderful characteristic of life insurance is that Uncle Sam does not tax it when the beneficary receives it.  It comes tax free!  Though it is never pleasant to consider one's demise, knowing that one has provided for those dependedent on him/her with sufficient life insurance takes a bit of the sting out of the process.

Fly/Drive Safely

15 September 2009

When this program began its run 1955, a million dollars represented much more spending power then than it does today.  Assuming an average 3.5% inflation, one would need nearly 7 million dollars today to have the purchasing power of that one million in 1955.  Of course a million dollars is still lot of money, but alas it is not what it used to be.  In fact, though not quite a dime a dozen, millionaires are everywhere in the United States today.  About 9% of all individuals in the US have a net worth of one million dollars.  That works out to be about 3 million individuals.  These are individuals whose assets, minus their primary dwelling and various liabilities, equal or exceed one million dollars.

In that long ago world of the 1960's, if an American couple could amass one million dollars for their retirement, they were set for a retirement on easy street.  They did not have to worry about Social Security, Medicare, property tax increases, or boarding fees for their pets as they traveled the world.  A million dollar nest egg put them firmly in the top one percentile of wealth for all retirees.  Not so today! 

A one million dollar nest egg is still a pretty good start to a satisfactory retirement.  According to numerous financial studies, retirees should be able to withdraw about 4% of their retirement savings per year, and increase that amount by about 3% each succeeding year (to allow their purchasing power to keep up with a 3% inflation rate) without too much worry that they will outlive their savings.  This assumes a 40 year retirement.  Of course no one can foresee the future, and market years like 2008 can reek havoc on retirement savings withdrawal plans.  But assuming that all of those financial studies that produced that 4% withdrawal figure were valid, that means that in year one of retirement, one million dollars would safely produce $40,000.  There are those who could live quite happily on that amount.  They would also live quite frugally in today's United States.  If that couple is lucky enough to also have a pension from an employer, they might be able to live a bit less frugally.  A company sponsored pension is, regrettably, becoming an endangered creature (unless you have one of those government jobs) and many will not be able to count on that.  But there is always Social Security, isn't there?  Yes, there will probably be some type of social security for the retired for the foreseeable future.  It will likely not be as generous as it has been for past retirees, but it is an extremely popular program, and I assume that eventually our elected representatives will "man up," and make the changes required to insure that it survives in some form.  So couple the social security payment with the 4% one withdraws from their million dollar nest egg, and the retirement years begin looking a bit rosier.  If a couple were to have a pension providing $2,000 per month as well as that social security payment kicking in an extra $2,000 along with their million dollar personal savings, retirement begins to look absolutely balmy!  (This is a depiction of the "three-legged stool" for retirement that we all have heard about for years: personal savings, pension, and social security; though a couple of the legs are getting increasingly wobbly.)  Of course the tax man is still going to come around and take his cut, so you really won't be keeping all of that  $88,000.  Nonetheless, that sum can work nicely for many.

The Millionaire has long since gone out of production; you won't even find it in syndication  (but you can find The Andy Griffin Show where Andy, Opie, Barney, and Aunt Bea can still teach you many worthwhile lessons.) It is unlikely that any of us will be the beneficiary of an anonymous rich man who is interested in seeing just what we will do with a million dollars.  It is even less likely that we will hit the Powerball Jackpot and sail off into the sunset.  But many have discovered that with commitment and enthusiasm, they have been able to save enough for a secure retirement.  Most did not reach the supposedly magical level of one million dollars in their retirement accounts, but they saved enough to meet their retirement needs.  Most who accomplished this worked diligently at it; and of course it was difficult at times.  They saved early and often over a lifetime.  They took advantage of the miracle of compound interest.  And the really nice aspect of this is that compound interest is available and works for anyone, given enough time.  They say that the first million is the hardest; I guess that means that it gets easier after that!

Fly/Drive Safely

18 August 2009

What I tried to do was to pinpoint those characteristics that financially secure retirees share.  I am not referring to the mega-rich.  Their lifestyles have no meaningful lessons for me.  Nor am I referring to those who have inherited their money.  Warren Buffet refers to those folks as members of the "Lucky Sperm" club, and it matters not what characteristics they may have; they offer no lessons for the vast majority.  I am referring to those that Thomas Stanley and William Danko discussed in their book, The Millionaire Next Door. They are the folks who have lived what could be termed ordinary lives but yet arrived at retirement with sufficient assets to enjoy it.  Granted, the definition of "enjoyment" varies widely.  For one couple it may dictate that their nest-egg needs to be three or four million dollars while another couple could enjoy their retirement with less than $300,000 in the kitty.  Much about "enjoyment" is subjective.  Nevertheless, the characteristics in the list below refer to those who have reached retirement with sufficient assets so that they do not expend too much energy worrying that they will outlive their money.  Of course I realize that someone may display all of the traits below for their entire life, and the ill winds of fate can still blow up a catastrophe.  Such is the nature of our lives.  With this list I am speaking in generalities, and that is always a bit dangerous.

Thus, with the above proviso in place, these are some of the things that these fortunate folks have in common:

1. They learned early in their adult lives to live on less than their income.  This is a prerequisite for saving and a prerequisite for a successful retirement.  If at any time they could save only a small portion of their income, they saved what they could; but they saved something.
2. They are thrifty.  Please note that being thrifty does not mean be miserly.  Ben Franklin, one of our country's Founding Fathers, was an early promoter of thriftiness.  Franklin noted that the thrifty "work productively, consume wisely, and save proportionately."  Thrift can be defined as the ethic and practice of the best use of all that we have: our time, our money, our health, all of our resources.  Franklin believed, as do I, that being thrifty allows us to be more generous.  There is much about being thrifty that recommends it.
3. They had a plan.  It probably was not an elaborate plan.  In fact, simple plans are easier to follow.  Their plan may have been as simple as contributing religiously to a 401k.  It may have involved a financial advisor, insurance salesman, or a CPA.  It may not have been a plan that I would consider optimum, but almost any plan is better than no plan.
4. They gained an education about and an understanding of basic financial topics early in their savings program.  They may have turned to professional help or they may have taken the time to read and educate themselves, but they acquired some basic knowlege in some fashion.  This not only helped them choose appropriate savings products, but it also made it less likely that they would overpay for something or fall for some charlartan's pitch.
5. If married, they stayed married.  Divorce reeks havoc on retirement plans unless there is considerable money there prior to the divorce, because, however much it is, it is definitely about to be divided when the couple begins talking divorce talk!
6. They have avoided self-destructive behavior.  They haven't eaten too much, drunk too much, or smoked too much.  Not only do these types of behaviors lead to physical problems that steal the joy from retirement, they lead to medical bills that can destroy retirement savings. 
7. They accurately assess their financial situation during retirement.  They do not want too much.  There are two ways to be "rich."  You can either have more money or want less things.  I watched my parents enjoy a wonderful retirement with a small nest egg, but they did not want too many things.  They were aware of what they could, and could not afford during their retirement years.
8. Finally, for lack of a better word, it does seem that luck plays a part.  Now I do believe the old saw that says "the harder I work, the luckier I get," but often it seems that something else is in play.  Some folks can go frolicking through the mine fields of life for years with nary a scratch while others, working as hard as they can, hit all of the trip wires.  Others just seem to always be in the right place at the right time.  Call it luck, fate, or whatever, it cannot always be easily explained.  The lesson I get from this observation is that we need to work hard and plan well, and then be ready to roll with life's punches.  We need to try to control those things which we can, and not worry too much about those things which we cannot.  As my Dad would say about doing our best, "That's all a mule can do!"

The definition of a successful retirement varies widely.  Some intend to never fully retire in the traditional sense.  I will probably go crazy and drag all of those around me with me if I ever truly retire in the traditional sense.  But most of us are looking forward to the day when we pursue those other things we have been dreaming and scheming about for so long as we fly airplanes, pursue the next sale, or head to the office or school room each day.  That is what I was contemplating as I compiled this list.  What characteristics should we strive to have in order to reach the point where we can pursue some of our other dreams.  Someone said that to be successful all one need do is observe those who are already successful and then do what they did.  Sounds logical to me.

Fly/Drive Safely

4 August 2009

If you find yourself in the enviable position of knowing that you will eventually have a taxable estate, there are a number of things that you can do to mitigate the effects of that pesky federal (there is also a state estate tax in Tennessee) estate tax.  One important aspect of the federal estate tax is that a person can transfer ANY amount to his/her spouse tax-free.  At the death of the second-to-die spouse however, the federal government comes calling for its portion.  The services of a good estate attorney, and the use of various trusts, can prove useful in minimizing and delaying the taxing of one's estate.  Eventually though, Uncle Sam is expecting to get his share.  The only way to ultimately avoid or minimize estate taxes is to minimize the estate.  This means transferring ownership of portions of your estate while you are still among the living; i. e., you  need to give some of it away!  

In 2009 the IRS allows individuals to give away up to $13,000 tax free each year.  One can give away more, but giving away more than $13,000 triggers the requirement to file form 709, the federal gift tax reporting form.  Each and everyone of us has a lifetime exemption of $1,000,000 that we can give away tax free.  Once we pass this threshold, we have to pay gift tax, which is taxed at the same rate as estates.  Now the good news is that that $13,000 per person per year does not impact your lifetime exclusion of $1,000,000.  It is only when one gives more than $13,000 to one person that the lifetime exclusion is reduced by a like amount.  For example, a husband and his wife could each give $13,000 to their son and daughter-in-law, as well as their two grandchildren ( a total of $104,000) tax free and with no impact on their $1,000,000 lifetime gift tax exclusion.  They could do this year after year, as long as the tax laws are not changed to disallow it.  Of course, this also has the effect of lowering the giftors' estate, and ultimately transferring more to those whom they would prefer to have their estate, rather than to the federal government.

There is also a way of transferring a closely held family business prior to death that will greatly lower estate taxes.  Granted, there are some provisions in the tax code that mitigate the effects of estate taxes on closely held (family owned) businesses and farms.  The taxing gurus have recognized that onerous estate taxes can literally spell doom for family businesses or family farms, where much of the wealth is tied up in land.  Thus, there are provisions in the tax code, that if applied properly, mitigates some of the tax problems.  But a better way may be to form a family limited partnership, and take advantage of the yearly gift exclusion amount.  It works something like this:

An owner (or owners) of a business transfers the business (or property) to a limited partnership.  The initial owner becomes the general partner and retains full managerial control of the business, as well as the liability associated with the business.  The limited partnership will then value the business and issue an appropriate number of shares (which will likely be non-voting shares) in the business.  This is accomplished with the help of an attorney and an accountant who are familiar with this aspect of the tax code.  (One wants to make sure all of the t's are crossed and the i's are dotted when doing this.)  Over the course of the next few years, the original owner will take advantage of the gift tax exclusion amount and transfer an amount of stock to his heirs that equals the exclusion amount in value.  This allows the original owner to continue to control the company and draw a salary while transferring a significant portion of the ownership to his heirs over the course of a few years.  Of course, the big thing it accomplishes is that it transfers value from his estate before it is taxable, and it allows the owner to see that his business ends up with those that he would prefer to have it prior to his death.  This has been challenged by the IRS in court, and when set up properly, has always withstood the challenge.

It is certainly pleasant to have accumulated enough assets that one anticipates having a taxable estate, but it is true that a larger estate brings with it more concerns.  It also brings with it the need for more planning.  One can still enjoy what they have, while helping others (be they family members or various deserving charities) and take steps to lessen the effects of the federal estate tax.  Give some of it away while you're still alive; see how much fun that can be!

Fly/Drive Safely

4 July, 2009

Dad was not given to having long, "how you doing" types of discussions with me; that was the role my mother played.  Undoubtedly he relied on the experiences that he had had with his father, and that simply was not my grandfather's style either.  Because of this, I did not feel very close to my dad while I was a child.  In fact, I did not particularly care to be alone with my father at that age.  If I was with him when he was around his friends, I was pretty much expected to be seen and not heard.  That was the way children were expected to act at that time and place, and I did not especially appreciate that attitude.  He wasn't given to small talk with children and did not seem to know how to relate to small children especially well.  He just did not know how to "play" with a child.  Thus, I preferred to let him do his thing and I would do mine.

Dad never tried to be my "buddy;" that was a role best left to my friends.  He was, however, determined to be my dad.  As such he was there to correct me when he thought that was what I needed; he was there to challenge me to do my best, whatever pursuit I was undertaking; and he was there to point out right from wrong.  According to him, some things were wrong yesterday, they were wrong today, and they would still be wrong tomorrow.  He was there to be the dad, but we did share many happy times together through the years hunting, fishing, or playing catch, but I never mistook him for a buddy.  Buddies would overlook your faults and mistakes; dads did not.

Dad did provide a wonderful example and taught me many things by his actions.  He showed me what it meant to be a reliable friend and neighbor.  Many times I saw him leave the house after a hard day's work in the field to go to a neighbor's home to help with some need.  He personified reliable.  He demonstrated over and over how to sacrifice for your family, and he showed me what it meant to have faith in a higher power.  He demonstrated that there was honor in hard work, and he demonstrated what it meant to give an honest day's work for a day's pay.  He insisted that I too honor this principle as I grew older and began to have summer jobs.  He showed me that some things were not worth a fight, and that others were.  He believed that sometimes you folded your cards and walked away, and knowing when to do so was very important.  He also demonstrated that grumbling was generally a loosing game; you often simply had to play the hand that you were dealt.  And, very importantly, he taught me the importance of frugality and saving for the future.  One of the worst things he could say about someone was that "he must spend every cent he makes."  Over and over he stressed the importance of saving.  He was a child of the depression and this experience left its mark on him, and thus on me. 

As I grew older, we grew closer.  I suppose we began to understand one another a bit better.  I grew to appreciate that he had been the best father he could be with the talents he had, and he began to understand that I had grown up in a totally different generation.  We came to the point where we could sit and talk with one another and enjoy it.  I came to realize that he really had a wonderful sense of humor, and he proved to be a wonderful grandfather for mine and my sister's children.  Somewhere along the line he learned to talk with little children.  And as he grew older he took pains to insure that I understood that he was proud of the adults that my sister and I had become.  Though I had felt distant from my father for much of my early life, I felt quite close with him for the last several years of his life.  We never agreed on everything, but we were close; we both knew the love of a dad and his son.

 Dad was a physically strong man well into his later years.  He could walk me down hunting when he was eighty, and could do a day's work in his huge garden as well.  He had a wonderful retirement.  He seemed to enjoy life more and more as he aged.  I remember remarking once that I hoped that I would at some point enjoy retirement as much as he did.  He could easily spend an entire day tinkering around the farm and garden, going from one little project to the next.  He and my mom were extremely close; they practically defined the word "devoted," and this surely contributed to their success in retirement.  But then cancer took one of his eyes when he was about eighty; and then it returned and took his life at eighty-three.  

I was fortunate that I got to spend at least every other weekend with him during the last year of his life, and he continued to teach me important lessons during that last year.  He taught me what faith can mean at such a time; he taught me how to bear pain and indignity at such a time; and as my sister observed, he taught us how to die.  It was a painful lesson for me; by the time he left us I loved him dearly and appreciated him more than at any time of my life.  By then he had given me so much through the years.  He gave me a motor bike when I was about thirteen after I had hounded him for months, explaining over and over what a wonderful addition it would be for our entire family; and he gave me a spanking new car when I graduated from high school (much to my amazement)  He had given us gifts of money for many Christmases; and then when I was grown and had separated from the Air Force, he helped us buy a house with his rather meager nest egg and then spent days helping me with various projects around that house.  But I suppose of all the things he gave me and of all of the lessons he taught me, the lessons he taught me the last year of his life will be the ones that will stay with me the longest.  We had more than one heart-to-heart during that year, and I came to fully appreciate the man that he was.  I was indeed blessed to have such a father.  So, heres to you Dad, Happy Father's Day; we love you still!

Fly/Drive Safely

10 June 2009

During a previous economic downturn a good friend of mine whose business was struggling said that the only thing he knew to do was to do what had worked before.  Of course he did not mean that he would not be alert to new and better ways of doing business.  I am sure that any successful businessman is always looking for better ways of conducting his business.  What he meant was that when times get tough, he first looks at what has worked in the past, considering the proviso that "past results are no guarantee of future outcomes."  What he meant was that he was going to beat the bushes even harder and try to drum up some business as he had always done.  Perhaps this is an attitude we should consider.

We need to be especially wary of anyone who says that this time things are "different."  Already I have read a number of analysts who opine that the "buy and hold" strategy is dead.  Of course, that strategy does look questionable in light of the losses buy and hold investors have experienced over the last year.  If your perspective extends for only a year or two, I can understand your concern.  However, most investors perspective extends for more that a couple of years.  Market timing is a difficult and nearly impossible technique to pull off successfully for any extended period.  I have long recognized that I am not gifted enough to attempt that technique.  When I hear my friends brag about how they have jumped in and out of the market successfully, I envy them but am still leery of believing that they will be any more successful over the long run than the individual who maintains a well diversified portfolio and stays the course.  Faithfully contributing to a well diversified investment plan over a number of years, and taking advantage of the benefits of "dollar-cast averaging" has proven to be successful for many investors.  So, if you are one of the very few who can successfully time the market, more power to you.  For the vast majority of us who are less gifted, we are left with an approach that is much more basic, and one the has proven itself over the last hundred years.

This is not to say that one should not arrange their portfolio to take advantage of current interest rates and economic conditions.  This is where periodic portfolio adjustments can be beneficial.  If you are years from retirement, most of your portfolio (perhaps 80%) should be in low-cost, fairly conservative mutual funds. (See my previous article "Okay,So Here's the Deal")  If you are saving for a goal that is much nearer, say within five years, you should keep that money in much more conservative vehicles such as savings accounts, money market mutual funds, or short term bond funds.  If you cannot stand any risk, then you should probably have that money in CDs.

So here is what I am doing now.  I am sticking to my asset allocation plan.  I am re-balancing my little number on a semi-yearly basis, and I have allocated a bit more of my retirement fund contributions to bonds and cash.  I am following my friends advice and trying to do what has worked for the past hundred years.  And I am hoping that our federal government and the current administration does not mess things up too bad for us retirees.  They had better tread lightly and think about the future a bit more than they have so far; they need to remember that capitalism is what has made this country great.  I think that it will work for the future as well.

Fly/Drive Safely

30 May 2009

We arrived Saturday morning after flying much of the night from Philadelphia.  Stephanie had a seat in coach, but due to the flight being full, I got to sit on the jumpseat in the cockpit with the flight crew.  That was alright as the captain was a good friend of mine, and we got to visit and renew our friendship for six and a half hours.  After a quick afternoon nap, we hit the streets of Dublin for a quick look-around, and later met the crew for dinner in a local pub.  After dinner we went to a local hotel where we got to enjoy a legitimate Irish combo and an Irish dancing group.  The next day we spent touring Dublin on the local on and off bus tour.  St. Patrick's cathedral, where Jonathan Swift the great British satirist  is buried, and the Guinness brewery were on the tour.  We found Dublin to be more interesting than we thought, and really quite lovely, although we really did not like the Guinness!

Monday morning bright and early we sat out in our rental car, GPS firmly affixed to the window, for the west coast.  Before we cleared the Dublin city limits, the GPS failed, and it is nothing short of miraculous that we found our way around Ireland.  The good Lord for sure, and perhaps the ghost of St. Patrick, as well as all of the guardian angels were watching over us as I drove the narrow roads of Ireland.  I was honked at only once, and made the mistake of driving on the right side of the road only once, and then only until I saw the oncoming traffic!   Along the way we visited the Cliffs of Moher (a must see on Ireland's west coast), Bunratty Castle, the beautiful village of Killarney where we visited the Muckross House and gardens, and Kilkenny Castle.  We flew home on Sunday morning, eight days after our arrival, but we could have easily spent another week touring the Emerald Isle. 

Stephanie encouraged me to play some golf while there, and on Wednesday, I gladly obliged.  If you play golf in Ireland, it should include at the least the Old Course at Ballybunion.  Set along the coast near the small village of Ballybunion, the course opened for play in 1893, and is perennially ranked in the top twenty courses of the world.  It is one of the two or three most beautiful course I have ever played, and without doubt the most difficult.  It tumbles along, over, and through the huge sand dunes hard by the Atlantic Ocean, and the wiry grass just off of the fairways devours golf balls.  If you can find it off the fairway, you likely still cannot  play it.  In true Irish fashion, I played the first nine holes in the rain. On Thursday, while Steph relaxed at the Ballygarry House in Tralee, I played the Cashen Course, also at Ballybunion.  This is a Robert Trent Jones course opened in 1993, also set along the coast and also lovely.   It must not be as difficult as I scored much better than I did on the old course. We also visited Lahinch, another notable Irish links course, but visit it is all I did.  Ireland has about 40% of the links courses in the world, and I would love to go back and play a few more.

The Irish people love Americans and are very friendly, although one Irishman told me that they weren't really all the friendly; they just want to know your business!  At any rate we met a number of friendly/nosy Irish.  There was Brian who spends half the year as a ferryboat captain in Newport, RI; there was Michael and Geraldine, our hosts in Killarney, who were really hilarious and quite entertaining; and there were Mick, Kiam, and Frank, my Dubliner playing partners at Ballybunion who made me feel one of the group.  Thank you to all of them for making our trip special.

I have always thought that travel to other countries and cultures is important.  It makes us more appreciative of what we have in America; it broadens our perspectives; and it forces us out of our ethnocentic mindset.  It forces us to consider that there are other ways of living, believing, eating, and indeed, of being successful in life.  I loved Ireland, Italy, Germany, Australia, and most of the other places I have been fortunate enough to visit.  I hope to visit more of this big world eventually, but I doubt I'll ever see anywhere that I think is as beautiful as our own United States of America!  Just call me biased in that regard!

Dear Ms. ---------:

In an effort to keep the dictionaries of the English language topical and current, we at the Dictionary Pictorial Selection Committee have recently made a major investment in time and talent to that end.  We have decided that it would be helpful to use an image of a current, or historical figure, to symbolize certain definitions.  We have recently finished an exhaustive study and we are now putting forward our recommendations to the world's English language dictionary publishers.  For example, for the word brave, we are recommending a picture of Alan Shepherd, the first American in space, be used near the definition; for the word intelligent, we are suggesting that a picture of Albert Einstein would be appropriate; for leader, a picture of Ronald Reagan, and so forth.  We know that you will be pleased to learn that you have been chosen to illustrate the word nitwit.  This is a singular honor, and we know that you and your friends will be thrilled.  As you know there are plenty of other nitwits; you were not the only candidate considered.  ---- ----, with his respect and admiration for various dictators and despots, was a strong candidate.  There are any number of other Hollywood celebrities or politicians who could have justly received this award, but at the end of the day, you were our first choice.  Let me explain why.

We decided that for a nitwit to be truly noteworthy, one must have reached and sustained a certain level of nitwitness for a significant period of time.  Furthermore, we looked for the following characteristics:

1.  A true nitwit is almost totally immersed in themselves.  They are not given to introspection, and they are convinced that they are always right.

2.  They usually have grandiose ideas regarding their own intelligence and importance.

3.  They give no thought to the ideas of others.  The very fact that they are someone else's ideas that differ from theirs renders them without merit.

4.  Nitwits do not rely on logic to present their arguments; rather they immediately resort to ridcule, personal attacks, and character assassination.  They do not enjoy debating the merits of an idea.

5.  They are quick to use the words "racist" and "bigot" to counter any political stance contrary to their own.

6.  They take particular offense to anyone who holds "traditional values."  They especially enjoy attacking and belittling those with religious or spiritual views.

7.  Most nitwits have tattoos and other body art (although all with tattoos are obviously not nitwits).

8.  Most nitwits claim expertise in areas about which they know nothing.

Ms. --------, you received out highest ranking in each of the areas mentioned above, and this honor comes with our heartiest congratulations.  Very few can point to such an honor in their lives.  We trust that you will maintain the elevated level of nitwitness you have shown in the past.  But we should warn you that if you should suddenly come to your senses and begin to display what some would call common sense (though it is quite uncommon) we would be obligated to review Mr. ----'s nitwitness, and consider replacing your picture in the dictionary.

Our represenatives will be contacting you shortly to arrange a time for our photographer to meet with you so we can have an appropriate photo for your "dictionary picture."

Have a great day,

Your friends at the Dictionary Pictorial Selection Committee

I have obviously deleted the names from this letter; you can very likely submit any number of names that would fit quite nicely.

Fly/Drive Safely

20 April, 2009