All Noise No Signal - Investing made simple. The information on this website is for educational purposes only. It is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Past performance is no guarantee of future results.

Closed for vacation

Entrepreneurship is not for everyone. It is about taking risks and loads of responsibility. The risk taking comes with the job because the entrepreneur will swim himself daily in a sea of uncertainty, investing his entire capital (financial and human) and working hard to get the best return he can on that capital. Likewise, responsibility is gigantic. Family, employees, customers, suppliers, communities, state – all depend (at various degrees) on the decisions he makes.

All long-lasting small business entrepreneurs that I know share one thing in common: plain, old fashioned, highly unsexy hard work. They only rest in that day of the week that doesn’t end with an “y”. Their family weekends are rare and short. Their nights are haunted by bank mortgages, rents and IRS officers. Addressing their clients’ needs is their mantra.

Therefore, rarely (if ever) did I see the sign “Closed” during workweek on a small business door, let alone a “Closed for vacation” sign. Last week I saw two of them. This made me think of easy money and moral hazard (when somebody has an incentive to take risks without taking the responsibility). Obviously, it could also mean that it is August and it’s the holiday season in Confusion Land.

September 10, 2019

Don’t wait until the important becomes urgent

There are two kinds of problems: the urgent and the important. The urgent is not important, and the important is never urgent – Eisenhower Principle. Planning your retirement is important, though it may not seem urgent.

There are simple tricks that can help you cope with the retirement dilemma. Mathematically speaking, your retirement financial well-being is a function of (A) years of retirement, (B) savings accumulated and (C) annual spending needs after you retire. Thus, in order to have the life you want, you can either do (A) reduce your retirement period or (B) increase your savings; (C) reducing future spending is not an option because convincing people to spend less in the future is just mean and simply futile for at least half of the global population (and I’m not referring to the lower income half).

(A) comes more natural. If you’re a smoker, congrats, that’s 5 years shed of your retirement life for which you will not have to save money for. Also, if you are used to sipping 3-5 glasses of wine to cheer up your every day, erase another 2 years. Is walking to your car the only time when you get physical? That’s worth 3 years. Total years of life lost – 10 years. But worry not – this comes only at a 50% probability. There is also the other 50% – where you will get sick but still be alive for those 10 surplus years.

(B) is more complicated. It implies that you have monthly automatic deductions from your income directed to a retirement account. Start as early as possible.

August 8, 2019August 8, 2019

What’s my retirement number?

Until 100 years ago, retirement was a utopian future. Average life expectancy worldwide when you got born was around 35. Antibiotics &vaccines increased it to 50 by 1960. However, planning for retirement was not keeping our grandparents up at night yet. Fast-forward to 2017, thanks to the advance in public health and industrialization the average life expectancy worldwide reached a whopping 72 (range is 50 to 89).

In this corner of the planet, let’s call it Confusion Land, average life expectancy at birth is 75 (right in the middle of the list) and the lucky John who reaches 65 (and gets to retire) can expect to live on for up to 15 more years, give or take. So that’s your start number: 15 – the number of retired years. If you’re a woman, you will retire 3 years earlier and also, by choice of natural selection, you will live 5 years longer than your Adam.

By rule of thumb, you can determine how long you will probably live by simply taking the oldest relative alive that you know and add 5 more years. No, it’s not me being optimistic; it’s about the further public health advance ahead that will increase your life expectancy going forward. By 2040, average John born in Confusion Land is expected to roam on this planet until he’s 82.

So now, if you’re lucky like me and you contemplate to the possibility to pass the 100 hurdle (thank you, great-grandmother!), that means almost 35 years to be spent in retirement. I have barely been around for the same amount of time, so that really helps one put things into perspective.

The experts say that 30 is the right number – it’s the safe assumption to prepare for retirement in the 21^st century. Trust the experts. They use complicated models to calculate the common sense. If you can’t remember 30, just think about the number of years it takes you to pay off your mortgage. Apparently, 30 is some sort of mantic number in finance.

August 1, 2019August 8, 2019