The Commies Are Gone, Y'all

If you ever visit Prague, don’t expect them to be happy to see you.

We just spent a week in “The City of a Hundred Spires” last month, and while the Czech Republic has a lot to offer, “service with a smile” isn’t one of them.

Molly’s personality doesn’t allow her to interact with another human being without asking their name and how they’re doing. This usually brightens the day of Target cashiers, post office workers and the guys flipping the stop/slow signs during road construction.

But the Czechs were less than enthused about this line of questioning. She was always met with suspicious looks or blank stares and an awkward pause before they’d mutter, “I’m fine,” and walk away.

On our first day in town, we were assessing lunch options, thinking we’d explore some authentic Czech food. But after perusing the menu at several restaurants, most of which consisted of goulash and mystery meats, we opted for a local burger joint instead. It was called MeetBurger (the burger meetpoint!) and all of the staff was wearing Jack Daniels t-shirts, which made it seem like a place that would be friendly to Americans.

So we walked in. And we stood there. And stood there some more. We weren’t sure if we were supposed to sit down or wait to be seated. I meekly approached the bartender and asked if we should seat ourselves, to which he curtly replied, “You can wait…you can sit.” I wasn’t exactly sure what that meant.

We eventually made our way to a table and sat down, hoping we wouldn’t be scolded. The waitress walked past us at least seven times before even acknowledging our existence, but eventually food was ordered and served. For the record, it was an excellent burger if you ever happen to be in the neighborhood—just be prepared that it’s going to be served with some very spicy fries and definitely no smiles.

My favorite example of Czech hospitality came at the end of our tour of the castle of Archduke Franz Ferdinand. Our tour guide didn’t end the tour with a “thank you for visiting” or “I hope you enjoy your stay in Prague.” She concluded with this:

“And now you will see the main hallway where the tour began. At the end of the hallway is the door. Goodbye.” And she was gone.

Every time I’d mention the Czechs’ dour approach to life to our fellow Americans on the trip, they’d all say the same thing. “Well, it’s a former communist state, you know. People in communist countries are always like that.”

Yes, I’m aware that they were once part of the Eastern Bloc under the thumb of the Soviets, but that ended 30 years ago. Most of the people we interacted with would have been too young to remember that era, if they were even alive then.

But it occurred to me that I see people in my office almost every day who are holding on to something from their past (often the distant past) that affects their financial decisions and behaviors today.

The lady who has nearly a million dollars but still exhibits hoarder tendencies because her father’s bankruptcy when she was young forced her to grow up in poverty and something inside of her makes her think she’ll eventually end up there again.

The guy who got swindled by a financial huckster in the 90s and still can’t fully trust anyone to help him with his money.

The couple that’s been married for 20 years, but still keeps all of their finances completely separate because they both had spouses in previous marriages that couldn’t be trusted with money.

The woman who “doesn’t believe in the stock market” because she saw her brother lose everything in the market many years ago and she’s avoided it ever since.

Issues like this are buried deep in your psyche and aren’t going to be magically cured with one visit to our office. And that’s ok, it’s understandable if you can’t shake some of these mindsets overnight and you need some time to work through them.

But at some point, it’s time to recognize that the commies aren’t in charge anymore. It’s ok to smile.

Warning: Toilet May Explode

A few weeks ago, the City of Durham left a door hanger on our front door alerting us that city crews would be in our neighborhood to perform some preventative maintenance on the sewer mains. They wanted us to know a few things that could potentially impact us:

1) There could be a brief period of sewer odor in the house if you have faulty plumbing.

2) You might hear a gurgling noise in your pipes.

3) Your toilet may experience “a pressure wave that causes the contents of the bowl to be ejected.”

In journalism, that’s called burying the lead. Or if we’re using the industry spelling, “burying the lede.”

If I’m in charge of this memo, I’m definitely leading with point #3.

“Attention Citizen: the contents of your toilet could erupt all over your bathroom. Please read further to learn why.” Much more effective. I’m compelled to keep reading after that.

At the very least, I’d like to see the exploding toilet get top billing ahead of a possible “gurgling in the pipes.”

People sometimes bury the lede in their financial lives too. A few weeks ago, I met with a lady who was married, but came in without her husband. She explained that they keep their finances completely separate and each contribute to a joint checking account to cover household bills.

We discussed when she should start her Social Security, did some tax planning, and assessed a reasonable withdrawal rate on her savings to make sure she didn’t run out of money.

After a 90-minute discussion, she added this: “One more thing I should mention. It’s highly likely that I’ll be moving out and pursuing a divorce within the next few months. Will this have any effect on my plans?”

Why, yes. Yes, it will. That’s a bit of an exploding toilet that probably should have been mentioned well over an hour ago.

Her thinking was that because they keep their finances separate, she could easily just lift herself right out of the relationship and go do her own thing. But just because you’re suddenly single, that doesn’t mean your expenses get cut in half. And now you’re filing a single tax return instead of a joint return, which completely changes your tax bracket. Not to mention the money that will be spent on attorneys to make this divorce happen in the first place.

What’s the lede that you might have buried? Are you ignoring a potential career calamity on the horizon and just hoping it doesn’t materialize? Are you refusing to mention your recent medical diagnosis because you’ve convinced yourself that it won’t affect your future plans (even though deep down you know it will)? Are you telling yourself that the divorce isn’t going to happen?

It works a lot better if you’ll just put the potential exploding toilet on the table first. If the contents of the toilet never get ejected, that’s great. But at least you’ll have a plan if it happens.

What If Everybody Is Wrong?

What if everybody is wrong? About everything.

With the benefit of hindsight, we can now cite plenty of examples from history where the consensus opinion was proven to be wrong.

Dating back to 600 BC, everyone agreed that Earth was the center of the universe until Copernicus proved them wrong in 1543.

Greek, Roman, and Islamic physicians all believed that the body consisted of four “humors” or temperaments—black bile (earth), yellow bile (fire), blood (air), and phlegm (water). It was believed that you only stayed healthy if these four humors were in the correct proportion with one another. If they got out of balance, you’d experience pain or illness. This became consensus in the medical community starting with Hippocrates in 400 BC and remained the foundation of mainstream Western medicine well into the 17th century.

The food pyramid, first published in Sweden in 1974 and introduced by the USDA in 1992, told us the optimal number of servings to consume each day from each of the basic food groups. We now know the pyramid to be a recipe for obesity.

This concept of the consensus being wrong wasn’t lost on Jesus. In Matthew 7:13-14, he said, “Enter through the narrow gate. For wide is the gate and broad is the road that leads to destruction, and many enter through it. But small is the gate and narrow the road that leads to life, and only a few find it.”

So it’s an interesting thought experiment to consider some of the things that are considered to be consensus now and ask, “What if everybody is wrong?”

What if continual advances in technology don’t automate everyone out of a job? What if, instead, technology eventually makes unemployment impossible?

What if CO2 emissions don’t do anything harmful in the long run, but simply make the earth’s climate steadily and slightly warmer, creating a more advantageous environment for life to thrive?

What if tariffs actually work in the long run and trade wars actually are easy to win?

What if Bill Cosby isn’t actually America’s Dad and he’s really just…wait, they’ve already debunked that one.

Who knows how we’ll look back at 2019’s consensus opinions 50 years from now. But I can promise you that the consensus will be wrong on some of them.

This should tell us there’s something that goes on in our brain that makes us absolutely certain that something is true, even if it isn’t. So, what does this have to do with your financial planning? Well…what if you’re wrong? About almost everything? Is it possible that you’ll someday look back on your current assumptions and realize that you were wrong? A few examples:

Assumption: “I don’t want to make any changes with my 401k; it’s done really well for the last few years.”

Reality: What if it’s done really well because the market has been terrific for the last few years, not because you’re an investing genius or because your 401k is a magical account that only gives you a good return?

Assumption: “I want to start my Social Security as early as I can. Who knows how long I’ll live, so I’m better off to get that money sooner, even if it’s a lesser amount, instead of putting it off until a later age and maybe only receiving it for a few years.”

Reality: What if a break-even analysis determines that you don’t have to live as long as you think for the higher monthly amount (started later in life) to work in your favor? There are compelling reasons in some cases to start your Social Security at a younger age, but unless you’re terminally ill, the “who knows how long I’ll live” mindset isn’t one of them.

Assumption: “I can find ways to spend less money once I retire, so I can go ahead and retire now.” 

Reality: What if you actually don’t have that much wiggle room in your monthly budget? What if spending less makes you absolutely miserable because you’re living on such a tight budget? What if you need to spend more in retirement because you want to travel?

Maybe you’re right about most of the things that you accept as obvious truths. But what if you’re wrong about just a few of them? What if you’re wrong about just one big one? Can your plan withstand that mistake, or will we one day look back at you as we now look at 17th century doctors putting leeches on their patients in an attempt to get their four humors back into the proper balance?

"Please Advise"

If you’re trying to create a pleasant ending to an email, you’ll want to steer clear of the phrase, “Please advise.”

In theory, the phrase “please advise” is just a sincere request for advice or guidance. But it seems like it really only gets used when someone wants to be passive aggressive.

Here, I’ll prove it to you. You’ve never gotten an email that sounds like this: “Hi, we’re really excited about the cookout this weekend and wanted to know what kind of food we should bring. Please advise!”

No, the “please advise” emails usually sound more like this: “Hello, we haven’t received payment for invoice #34007 which is now 14 days past due. Please advise.”

In other words, “please advise” is usually a special code used to convey annoyance, frustration, or a sense of “you need to get your act together or you’ll be hearing from our attorney/collections agency/mafia hitman.” But as the person using the phrase, it feels so much nicer to just say “Please advise.”

In the financial world, you’ll also find some special codes to make things sound kinder and gentler. Here’s just a few examples:

“High-Yield Bonds.” This is a special code for “junk bonds.” Now, which investment would you prefer to have in your portfolio—high-yield bonds or junk bonds? There’s certainly a use for junk bonds, but you can see how you’d automatically have a different feeling about them if you only knew them as “high-yield bonds.”

“Tax-Free Income.” At some point, you’ve probably heard commercials on the radio talking about special accounts/investments/strategies to create tax-free income in retirement. It all sounds very intriguing. But in this case, “tax free income” I just a special code for life insurance. They’re trying to sell you a life insurance policy, have you over-fund it for a few years to build up a nice cash value, and then withdraw from the cash value later to create income for yourself. It’s not a scam—it’s a legitimate strategy that works. The only problem is that it’s usually not necessary and sometimes an inefficient way to create that tax-free income for yourself. More often than not, it’s just a way to sell life insurance.

“Market Correction.” It sounds so much less daunting to talk about a “market correction” instead of a “market crash.” But a correction is defined as a decline of 10% or more. That means you could get away with referring to a 25% loss a “correction.” So if you have $500,000 in the market and you experience a 25% decline, that means that you lost $125,000. But you can see how it doesn’t hurt quite as bad emotionally when your stock broker says, “Yes, we had a market correction this quarter.” It makes it sound like something was wrong and the market was just retreating to where it should have been in the first place.

So just understand that people in the financial world are no different than the people in any other industry that want you to buy their stuff. Be aware that special codes like these exist and make sure you fully understand what you’re getting into.

And I can’t help but notice that some of you reading this blog post haven’t yet reached out to us for help. Please advise.