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All Change Please

Blogging is supposed to be fun, and chores are not. I'm making some changes to rescuing blogging from being a chore, and help find my happy.
I recently spent a week in Cuba. It was awesome, thanks for asking! ;-)

Do you want to know a secret? The guilty pleasure I enjoyed the most while I was there?

Mohitos? No.

Cigars? No.

Riding around in a brightly coloured 1950s Chevy? No.

The truth is it was being somewhere that didn’t have internet access.

Escaping the internet is liberating.

Taking a break from the internet gave me a bit of distance to reflect on the relative value of the internet related activities I had been in the habit of performing. That proved to be enlightening.

I enjoy writing posts on this blog, I even missed it a little while I was away.

However I was starting to find following a strict Monday, Wednesday, Friday publishing schedule was become a bit of a chore. Blogging is supposed to be fun, and chores aren’t, so I’m giving away trying to publish to a schedule.

Scarcity of good

I had recently started cheating a bit on the 3 posts a week schedule, by publishing a weekly round-up of interesting articles and posts I had read and bookmarked throughout the week.

The idea behind this originally was it gave me a chance to give an ‘attaboy/girl (blatantly stealing the idea from Monevator’s Saturday posts) to authors who had recently written something worth sharing, which I thought was a noble (if lazy) goal. Unfortunately the last couple of weeks I really struggled to find 7 genuinely good posts containing one of:

  • a thorough analysis (e.g. like EarlyRetirementNow’s 4% rule series)
  • a thorough explanation of a concept that makes it more than worth the reader’s time to digest (e.g. PoF’s articulation of the relative differences between tax paid and tax deferred savings)
  • a genuinely original idea (e.g. the Mad Fientist’s Roth conversion ladder or JLCollins' stock series)
  • a captivating, well written story (e.g. many of Miss Mazuma’s posts)
To quantify the extent of this problem, when I returned from the holiday my Feedly proclaimed I had 253 posts queued up to read. After spending a couple of commutes wading through them all I had bookmarked a total of 4, one of which one turned out to be rehashing another author’s earlier work (without giving credit). That is a hell of a lot of noise, and I guess it illustrates why the personal finance blogging space is referred to as an echo chamber.

Maybe I’m just fussy, or set the bar too high, or just generally disagreeable... but whatever the reason consistently recommending 7 articles worth reading a week was proving to be challenging. Therefore I’m not doing that any more either.

Imaginary friends on the internet

Another thing I didn’t miss even a little bit was social media. From a pure ego point of view it is nice to have the number of Twitter followers or Facebook likes increasing rather than decreasing. However if none of them are leaving comments, or clicking on adverts, then do these metrics really mean anything?

I didn’t miss thinking about “engagement” or “SEO” or thinking up click-bait article titles or any of that other meaningless bollocks that bloggers frequently fall into the trap of focussing on. Given that I’m not trying to sell an "info product", and spruiking the shiniest new affiliate paying product isn’t my thing, then I’m unlikely to get rich from blogging. Therefore all that stuff is largely an unproductive time suck for me.

So what?

So going forward I figure that if I’ve got something worthwhile to say then I’ll write a post, but if I don’t then I should just shut up rather than adding to the vast multitudes of uninspired “me too” personal finance articles that clog up the internet and waste the time of anybody who happens to stumble upon them.

Stop wasting time doing things you don't enjoy
Stop wasting time doing things you don't enjoy

Inconsistencies and a cashless society

Ever wondered how to make it into the top earnings quartile? In Cuba the answer is to work as a maid at a tourist resort hotel.
I recently spent a sun filled week holidaying in Cuba. The temperature was perfect swimming weather, in the high twenties degrees Celsius.

Cuba proved to be a fascinating, frustrating and fun place for a veritable multitude of reasons.

According to Forbes the average Cuban earns the equivalent of USD$25 per month. The Miami Herald provides a bit more detail, breaking earnings down into proportions of the population by income band.

Cuban Average Monthly Earnings 2015

Even factoring in the fact that everyone is eligible for free university tuition and free health care, it still doesn’t amount to a whole lot of money.

At the moment Cuba maintains not one but two currencies, one for tourists (the Convertible Peso) and another for locals (the Peso). The tourist currency is at parity with the US Dollar, and valued at 24x the local currency.

This creates some interesting relative valuation scenarios.

If you though taxi fares were expensive, you were correct!

A taxi ride from the Havana airport to the Varadero tourist precinct costs a fixed price equivalent of USD$120, the equivalent of nearly 5 months average Cuban wages.

Havana Airport to Varadero

A single night’s accommodation in a Cuban equivalent of a 4 star all-inclusive resort costs in the vicinity of USD$240, or nearly 10 months average wages.

A typical package holiday runs for 7 nights, so when you throw in the return taxi journey to/from the airport you would be spending over 6 years average Cuban wages!

How about some tourist clich├ęs… a fancy Montecristo cigar and a bottle of Havana Club rum? That will cost you what the guy serving you earns in a fortnight.

Montecristo cigar and a bottle of Havana Club rum

How to get rich by... cleaning toilets?

Next consider the lot in life of a maid working in that fancy resort. Officially she earns that USD$25 a monthly wage.

As a hotel guest, if you want your room stocked up with bottled water and toilet paper, then you’d better leave her a tip. After talking to some of the other hotel guests, the going rate was about USD$1 per day… except for the couple of tight assed Australians who didn’t tip and subsequently found themselves caught short when the perils of chancing the buffet breakfast tray of scrambled eggs paid them a visit!

Each shift the maid cleaned 18 rooms. If 75% of the rooms were occupied by tipping guests then she would comfortably earn more than 10x her official wages in tips, easily putting her into the top quartile of Cuban income earners.

The most useful features of a smart phone don't require data

Another thing I found interesting was mobile phone penetration. Cubans were first able to legally use mobile phones in 2008. Less than 10 years later they were everywhere. Most people were using vintage Nokia handsets, my guess is Cuba is one of the places that old handset you traded in may have ended up.

That said many of the tourist facing locals I encountered, such as the taxi drivers and maids, were using 2-3 year old iPhones and Samsung Galaxy handsets. When I asked about this several mentioned that Canadian tourist had given the handsets in lieu of a tip, explaining that apparently many Canadian calling plans include a replacement handset each year so tourists sometimes bring the old handsets with them to save some money when tipping a tour guide for example.

I was surprised to hear the attraction of these newer generation handsets was primarily (apart from snob value) the physical features built into the handsets such as the camera, music player and torch. Prohibitive data usage charges meant the ubiquitous mobile data driven services like email, internet and Facebook were too expensive to use.

Embraced the cashless society ideal? Good luck with that!

The thing I struggled most with in Cuba was the need to pay cash for absolutely everything. In Europe we’ve gotten so used to paying for things with a tap of our debit/credit cards or phones, to the extent that in some countries shops are no longer obligated to accept cash payments. For example in Sweden less than 2% of financial transactions are performed using cash.

So what?

In Cuba card payment facilities are both rare and unreliable, any visitors would be wise to learn from my mistakes and bring sufficient cash to cover all their expected outgoings with them… including paying for accommodation, tours, and everything else that advertises that (in theory) they accept card payments.

Financial independence through apathy

Lars Kroijer does a great job arguing the case for adopting a low fee, passive index tracking investment approach in this series of short videos.

This half hour long series of videos does a great job at outlining the case for adopting a low fee, passive index tracking investment approach.

The series was put together by Lars Kroijer, a former hedge fund manager turned author.

Kroijer basically tells the audience they’ve got little chance of reliably picking winners either through direct stock investing, or choosing outperforming fund managers. Rather than setting yourself up for disappointment, or paying high annual fees to funding a nice lifestyle for your hedge fund’s manager, put your money into low cost tracker funds instead and then leave it alone.

Sound advice.

Warren Buffett's Secret Millionaires Club

Warren Buffett has leant his name to a fun cartoon series aimed at providing some valuable financial education lessons to kids.
Warren Buffett knows a thing or two about making money, saving rather than spending it, and investing it to grow over the long term.

For 40 years his annual letter to Berkshire Hathaway shareholders has been considered "must read" material for investors all around the world.
Warren Buffett's Secret Millionaires Club
Warren Buffett's Secret Millionaires Club
Over a series of fun 5 minute episodes, this children's cartoon series aims to teach kids some valuable financial lessons that they just don't learn in school. It is worth a look, you may learn something.

Spend more than you earn in retirement? Good luck with that!

Retiring at 40 means you're potentially retired for 60+ years. Don't overestimate your investment growth rates once you stop saving & start spending.
My year 9 science teacher once proclaimed that the difference between magic and science was understanding how things worked. Her sentiment was both valid and admirable, even if she (like so many people) allowed herself to believe in “magic” when it was convenient to do so… like the time that the science lab curtains caught on fire at almost exactly the same time that one of her class favourites managed to singe off his eyebrows!

People who write about Financial Independence go on, and on, and on about the “magic” of compound interest. Except it isn’t magic, it is basic math. Unfortunately most of those personal finance writers actually mean compound returns, such as reinvesting dividends, rather than plain old bank interest.

Albert Einstein famously (didn’t) proclaim that compounding was “the most powerful force in the universe”.

Why does this matter?

Well if you examine the price chart of the S&P500 over the last 30 years in Google Finance or Yahoo Finance or many of the other free stock charting services you will be presented with a very impressive price increase of around 800%. That is represented by the green line on the chart below.

However if you had reinvested any dividends paid out by the stocks comprising the S&P500 over that 30 year period than you’d have achieved a total return of around 1600%. That is represented by the blue line on the chart below.

S&P500 30 year price and total return chart
S&P500 30 year price and total return chart
So clearly the compounding “magic” of reinvesting dividends produces significantly higher investment returns.

For those of you who think in numbers rather than pretty pictures consider the S&P500 return calculator outputs below. The box on the left represents the nominal returns, the one on the right represents the real (i.e. after inflation) returns over that same 30 year period.

S&P 500 30 year nominal and real returns
S&P 500 30 year nominal and real returns
Note the price only returns are roughly half the size of the total returns where dividends have been reinvested.

That is interesting up to a point, but why should you care?

Well if you’ve been happily compounding your returns for a while, you will likely have become accustomed to a certain rate that your net worth figures increase. It is easy to become complacent.

Once you escape the daily grind and head towards retirement things are likely to change somewhat.

For a start the amount of your income that came from wages will cease. Chances are pretty good you were saving a certain portion of that income, so those savings will cease too. You were probably investing some of those savings, so the rate at which your pile of investments was growing will slow down as a result.

Next you’re probably going to want to fill that earnings void, a person has got to eat and pay the rent after all! If you don’t fancy diving back into the work force then the logical place to turn for an alternative income stream would be your investments.

Many investors like the idea of living off the income thrown off by their investments. Under this spending any dividend, interest, rent and royalty income is fine providing you don’t touch your capital. The logic here is that your capital can continue to grow, hopefully outpacing inflation, and provide you with an infinitely sustainable income stream for the rest of your days. Once you don’t need it any more then your nearest and dearest get a nice inheritance to help make their own lives a bit more financially comfortable.

The figures above suggest withdrawing rather than reinvesting dividends over the last 30 years would have seen the annualised rate your portfolio grew reduced by roughly one third.

The average nominal dividend yield for the S&P500 over the last 30 years could not be described as spectacular, around 3%. For much of that period the CPI inflation rate has been higher.

S&P 500 30 year Dividend Yield
S&P 500 30 year Dividend Yield
Therefore disciples of the 4% “safe” withdrawal rate cult would expect to see the rate of growth reduce even further, as not only are they effectively drawing out all the earnings their investments threw off but they are also selling down some of the capital.

Folks pursuing the FIRE dream tend to save hard, live (somewhat) frugally, and throw all their surplus funds into investments. If the market gods smile then those investments grow, and money makes money.

However once the flow of money reverses, trickling out of the investments to support the investor’s cost of living during in their retirement years, then expect that rate of that growth to slow considerably.

Aren't you just stating the bleeding obvious?

Yes. Yes I am.

When you think about it somebody achieving FIRE got there by spending less than they earned, and investing the difference. Pretty simple right?

After retirement however many of these same people seem to think that rule no longer applies, as they then intend to spend (dividends + capital draw down) more than they earn (dividends alone).

They seem to forget that a 4% rule "success" was deemed to still have at least $1 left at the end of a 30 year historical period. That is a whole world of difference from still having the bulk of their capital in tact to sustain them through the next 30+ years potential of their retirement.

So what?

Someone retiring at age 40 could quite conceivably live until they were 100, they should be aiming for their wealth to sustain them at least that long.

It is easy to take for granted an annualised growth rate experienced while the investor is regularly chipping in with savings, but any post-retirement forecasting should be using a lot more conservative view of what would be considered normal from that point forward.

Wednesday Wordsmiths: 2017-02-08

To help you mentally escape your commuter hell, here is the week’s collection of great reads from around the web.
Escape to your happy place with Wednesday Wordsmiths
A soul-destroying commute can suck the joy out of life.

Sardined on an overcrowded commuter train, gridlocked on the road to nowhere, or riding the bus while attempting to ignore that crazy old lady talking to her groceries… you are as far as can be from your “happy place”.

To help you mentally escape your commuter hell, here is this week’s collection of great reads from around the web.

Do you really own your home? Not if you’re a leaseholder

Merryn Somerset Webb writes about a troubling trend in the UK's new build housing developments, where unwary house purchasers are getting screwed by buying leasehold properties with high ongoing service charges and ground rents.

Where does it all go?

The Escape Artist describes how it is much easier to save money than make it, and hands out some tough love to help stem the financial bleeding.

Find the Balance: Pay Down Your Debt & Still Have a Life

Allea Grummert provides some great advice about the need to pace yourself towards your financial goals. Go too hard, live like a hermit, and risk burning out.

Stock Markets and the Rule of Law

Joshua M. Brown observes that one of there has long been a premium priced into US stock valuations that originates from confidence in the robustness and reliability of the US legal system. Given the current unpredictable political landscape he explores what happens to stock prices if this confidence wanes.

The Bridge to Financial Independence

The Finance Zombie looks at strategies to fund gap between early retirement and reaching the (increasing) traditional retirement age.

Why I never build capital growth into my plans

The man with great content, but hosted on the world's slowest website, Rob Dix discusses why he does not factor capital growth into his real estate plans, stating "hope is not a strategy". A somewhat controversial piece, given cash flow will pay for your groceries but capital growth is what will make you wealthy. Good advice, that unfortunately that calls into question my usage of lottery tickets to fund retirement funding.

Degree programs and high salaries: How much do you love money?

Steve weighs up the pros and cons of incurring student debt studying something you love, versus studying something that will open the doors to a high earning career and shorten the path to Financial Independence.

So what?

If you've finished all those and you still haven't reached the end of your commute then you really need to rethink your priorities! In case you missed it, here is one final recommendation for this week: Smoothing the ride through retirement.

The dubious value of stuff

What is the actual value of your material possessions? How many of them would you replace if lost or damaged? Budget a 15% portion of this annually.
We all choose to surround ourselves with stuff.

Minimialists strive for a little, hoarders strive for a lot.

We need a certain amount of possessions to be comfortable, however that quantity turns out to be surprisingly small.

Nobody would argue that homeless people do it pretty hard. Yet backpackers have the time of their lives, carrying all their possessions in a back pack for often extended periods of time.

There was a maxim in the Jockey Club youth hostel, located high on Hong Kong's Mt Davis, that you only needed two sets of clothes: “one to wash, and one to wear”.

Backpacker maxim: you only needed two sets of clothes: “one to wash, and one to wear”

My boy scout troop leader used to claim that you could get four days out of a pair of underpants: “frontwards, backwards, turn them inside out and repeat.

Strangely neither backpackers nor scout leaders ever seem to be overly troubled by people wanting to sit next to them on public transport. Coincidence? I’ll leave you to decide!

How much is your stuff actually worth to you?

One thing we seldom give much thought to is how much our collection of stuff is worth to us.

By this I don’t mean the priceless memories contained in childhood photo album or items that may retain a certain sentimental value.

Rather I want you to think about the cold hard cash value of all your material possessions.

The only time most of us give this even a passing thought is at the time of year we renew our home contents insurance. The logic behind this insurance is that in the unfortunate event of loss from a burglary or house fire the insurance company will help us get back on our feet. Some policies offer a “new for old” replacement, others pay out a lump sum up the declared value of all your insured possessions.

However I challenge the validity of this number serving as an accurate proxy for the actual total value of all our material goods.

There are two reasons for this:

Firstly many of us picked an arbitrary number when we first took out the insurance, often many years ago. We’ve contentedly paid the renewal on autopilot each year without giving much thought to what the replacement cost of our collection of stuff would actually be. The premiums will have gone up each year, but the total sum insured probably won’t have moved much if at all.

Secondly the truth is we simply wouldn’t elect to replace many of the things we currently own were they to be lost or destroyed.

How can I say this with such certainty? I know from personal experience.

A real life accounting

I have undertaken five, count them five, self-funded international relocations.

Each time this has involved getting a collection of removalists in to provide quotes on what it would cost to pack up, move, and unpack all my material possessions. The quotes inevitably provoke a horror-stricken response, followed by much culling and (mostly unsuccessfully) trying to sell household items on ebay.

The next question the removalists ask is what items need to be insured, and in each case how much should it be insured for.

This is a very enlightening exercise.

It will cost money to retain items and move them to the next country. The larger the item, the more it costs to move, as international moves are charged based on the square footage involved… much like renting a home.

It will cost even more money to insure an item.

international moves are charged based on the square footage involved

Consider your collection of books and DVDs. Would you pay more money to insure them? Probably not. Would you bother to replace them if they were lost or damaged? Probably not. Would you even miss them if they were gone? Probably not.

What about all those boxes of clutter in your garage or attic or basement? I doubt it.

Your slightly secret hoard of expensive shoes that you hid the true cost of from your spouse? Your designer handbags? The drawers full of partially used cosmetics? All those Xbox games? That collection of sporting equipment gathering dust in the cupboard under the stairs... tennis racquets, golf clubs, football boots, and so on?

How about seldom used items from your kitchen, garden shed, or garage? They are handy when you need them, but would you pay more money to ship and insure them someplace else? Unlikely.

Next consider some more controversial items. Your kid’s have a much loved and regularly used collection of Lego. You acquired the collection one £20-100 kit at a time over a series of Christmases and birthdays. However if you check on ebay, second hand Lego is sold for less than £30 per kilogram. So how much is their collection actually worth to you? Probably not enough to bother insuring it.

Your wedding dress? Your high school sporting trophies? That ugly solid wood sideboard you inherited from your grandmother? They may have much sentimental value but very little tangible value, and you wouldn’t bother replacing any of them.

The final list of items you would actually bother insuring during transit is surprisingly small. The replacement values you have specified are what you are asking the insurance company to reimburse you should the boat carrying your possessions sink along the way. The rest of your stuff you are effectively saying you don’t care enough about to worry about replacing it should the need arise.

So what?

There are two lessons here.

Firstly, take note of this number.

Your annual household budget should include a line item to cover a proportion of the replacement cost of these items. Personally I budget for 15% of this amount each year, to cover the inevitable replacement or repair costs for my household contents.

Secondly international moves are traumatic, terribly expensive, and much like a visit to the proctologist… possibly good for you in the long run, but uncomfortable to experience first hand.

Smoothing the ride through retirement

A benefit of working was a regular pay cheque. Retirees can have a lumpy earning profile, so smooth the ride by creating yourself a "pay cheque".
One of the benefits of working for a living is a regular pay cheque.

It might not be as large as we would like. It might not be as reliable as it once was. However knowing that a specific amount would land in your bank account on a specific day certainly made life more predictable.

It was possible to automate bill payments.

It was possible to automate savings.

It was even possible to automate investment purchases, dollar cost averaging into those revered Vanguard low cost index trackers the disciples of FIRE worship.

Then you retire.

You do the victory dance.

Perhaps you have a small celebratory alcoholic beverage. Hell, you don’t have to get up for work tomorrow, why not have several?

Happy days!

Victory Dance

The first day of the rest of your life

You awaken the next morning to the sound of quiet. No more having your blissful sleep shattered by a squawking alarm clock or the inane chatter of talkback radio hosts for you.

You glance at the clock and feel a smug sense of self satisfaction.

You spare a passing thought of all your former co-workers beavering away at work.

Perhaps you even think pityingly about the teeming hordes who had to sardine themselves into their daily dose of public transport commuter hell without you this morning.

It is good to be you.

You glance out the window, and observe absolutely nothing. No activity. No people walking dogs. Nobody mowing lawns. Nothing. The adults are at work. The children at school. It is like one of those post-apocalyptic sci-fi movies where you are the last living human on Earth. You shrug, people were such savages anyway... who needs them?

You shuffle out to the couch in your pyjamas and flip on unemployment television. The dull ache of a caffeine withdrawal headache makes you wonder whether you were actually addicted to that £5 Grande Latte with an extra shot on the way to the train station each morning.

The incessant blathering of Jeremy Kyle and Loose Women cause you to channel surf to reruns of Grand Designs.
Before long you find yourself watching a replay of the 1981 Ashes cricket decider.

You briefly wonder whether what time Wetherspoons opens.

What is it retired people do all day?

Fun and games until somebody loses an eye

A problem presents itself around the time your next pay cheque would normally hit your bank account. Strangely it doesn’t show up.

Oh wait, you’re retired now!

Sorry, I'm retired

So how do you make sure there is going to be sufficient funds to cover all those direct debit bill payments and automated transfers?

Retirement doesn’t automatically result in your bank account magically filling up, the way a lottery win or an inheritance might.

Dividends get paid out at the end of a quarter, or semi-annually, or perhaps not at all if you’ve remained invested in the accumulation versions of your managed funds.

That could be a long time to wait between top ups on your bank account.

Your rental properties kick off rent on a monthly basis… assuming there were no maintenance nightmares or void periods recently.

Bank interest is a figment of your imagination, a fairy tale your grandparents used to tell you about.

In short, the payment schedule from an investment portfolio might make for a bumpy ride.

You could always buy into that American urban myth of 4% “safe” withdrawal rates, and sell down some of your precious hard earned portfolio. But wait, the markets have had a bad week so it isn’t a great time to sell. And isn’t 4% a bit optimistic anyway? What happens if you run out of money.

Santa Claus is a fund manager?

The first couple of weeks of January felt like Christmas to me, with Vanguard and Fidelity and Blackrock and HSBC all doing passable Santa Claus impressions depositing large sums into my investment account.

As each arrived I was mentally checking off my bills for the year: gas, electricity, council tax, insurance, tv license and so on all covered by this wonderful passive income stream.

Then the dividend payments ceased, and I could see money leaving my account but nothing further likely to be deposited until sometime in April.

That made me more than a little uneasy I must admit.

So what?

The way I cured that anxiety about having an empty bank account was to simulate a regular pay cheque for myself.

When investment income arrived I set it aside. I would then periodically transfer a “pay cheque” into my current account. This way I will still felt like I was getting paid. My automated bill payments and so on will continued as before.

It certainly smoothed the ride. All I needed to do was keep a passing eye on the account where the investment income was landing to ensure there would be sufficient funds to cover my pretend pay cheques.

Wednesday Wordsmiths: 2017-02-01

To help you mentally escape your commuter hell, here is the week’s collection of great reads from around the web.
Escape to your happy place with Wednesday Wordsmiths
A soul-destroying commute can suck the joy out of life.

Sardined on an overcrowded commuter train, gridlocked on the road to nowhere, or riding the bus while attempting to ignore that crazy old lady talking to her groceries… you are as far as can be from your “happy place”.

To help you mentally escape your commuter hell, here is this week’s collection of great reads from around the web.

How to Teach Your Kids All the Money Lessons They Won’t Learn in School

Brad Lohnes outlines an interesting framework for educating children about where money comes from and how it can be wisely used.

The All-Cash Plan – How to Get Free & Clear Rental Properties

Chad Carson outlines a conservative approach to utilising real estate investments to build wealth and generate sustainable passive income. It uses a similar approach to the one I outlined in my popular Debt Recycling post, but will be a bit slower achieving the desired goals because it does not involve utilising leverage.

The Weighing Machine

Mr Tako outlines the approaches and personality traits required for successful value investing.

When Do You Finally Feel Rich?

Sam Dogen asks the question at what point do you actually feel rich on the journey towards Financial Independence. Some of the comments at the bottom of the post are fascinating, demonstrating just how differently common terms like "rich" can be interpreted.

What Was Your Money Epiphany?

Derek Olsen asks the audience to describe the moment when they started paying attention to their finances. What was the trigger, and what did they do about it?

Generation Rent

The author of the Sex Health Money Death blog discusses the downsizing decision that faces many retirees seeking to release accumulated equity trapped in the family home in order to sustain their retirement. He weighs up adopting a renter mentality and a follow the sun lifestyle, versus providing his children with an advance on their inheritance at a point in their lives when the money would actually make a meaningful difference. Tough decision that one.

What If You Live To 100?

Fritz pens a thoughtful post examining the risks associated with retirees outliving their retirement funds. This is a realistic problem potentially facing many early retirees. His finishing thought of "be nice to your kids, because you might end up living with them" is sage wisdom indeed!

So what?

If you've finished all those and you still haven't reached the end of your commute then you really need to rethink your priorities! In case you missed it, here is one final recommendation for this week: What financial advice do you wish your parents had given you?

Standing up to bullies

Our elected leaders are behaving like bullies. Their actions have hurtful consequences. The way to stop a bully is to stand up to them. So STAND UP!
Popular personal finance wisdom suggests that if you spend less than you earn, dollar cost average the difference into low cost diversified investments, and adopt a long-term time horizon then all things being equal you’ll finish up with a Hollywood style ending... slay the dragon, rescue the princess, and ride off into the sunset.

The principles behind that advice are sound, and for the most part they don’t care which political party holds government or who holds the reigns as leader. Most of the time that even holds true.

This blog is generally not about politics. However global events over the last twelve months have troubled me increasingly, until today I find myself getting cantankerous enough to go off on a proper “Angry Dad” rant.

Some childhood lessons we know to be true

When I was a kid we were taught to stand up to bullies.

When I was a kid we were taught to stand up to bullies.
My teachers and parents assured us that the only way to stop somebody picking on you was to stand up to them, show them that you wouldn’t stand for it. The argument went that if you make it easier for them to stop bullying you than to keep on doing it, then they would stop picking on you and seek easier pickings elsewhere.

Inevitably following such advice was not without consequences. In fact it was a bruising and attritional endeavour. By definition bullies think themselves to be larger and tougher and meaner than those they prey upon.

Often times they actually are.

When I was 10 years old the class dummy was getting picked on by a bully. This was a friendly kid who lost out in the lottery of life when his mother took heroin while she was pregnant. It wasn’t his fault he was born a bit slower than the rest of us, or that he didn’t choose his parents very well. This kid wasn’t my best friend, in fact it would probably be fair to say I didn’t like him all that much. It didn't matter. What was happening to him was wrong.

One day this kid was getting picked on by a bully, teased and pushed around. I didn’t think that was fair, and as the kid wasn’t standing up for himself I stepped in to stick up for him.

I wish I could tell you that I scared the bully away through sheer force of will. I wish I could recount a heroic battle in which I kicked the bully’s ass and sent him slinking off to lick his wounds.

Unfortunately I can’t do that, because that isn’t what happened. The bully beat me up, and put me in hospital with my arm broken in 6 places.

It would have been nice if somebody else done it.

It would have been great if my friends had my back when I stepped in.

It would have been unnecessary if the people in authority had done their jobs competently, and make sure we were all safe.

But here is the thing: I was right to stand up to the bully.

Our actions have consequences, and we should be held accountable for them.

Our actions have consequences, and we should be held accountable for them. 
My actions meant that for the rest of my life I have had a slightly crooked arm held together with surgical screws, that aches when the temperature changes quickly.

The kid getting bullied learned that there was an alternative to lying down and taking it, that he was not alone, and what it felt like to have someone in his corner.

My friends felt guilty about what happened, for not standing up for the kid who couldn’t stand up for himself, and for not backing me up against the bully.

A couple of weeks later, when the bully next tried to pick on the class dummy, things went differently. He got his ass kicked by a whole group of boys. He fled the playground in tears that lunchtime, and never returned to the school. He enrolled at a different school after the next school term, too afraid to face the consequences of his own actions.

Our actions have consequences, and we should be held accountable for them.
Our actions have consequences, and we should be held accountable for them.

Our leaders are bullies

In recent times our politicians and so-called “leaders” have really let us all down.

In the United Kingdom craven leaders entrusted a disaffected electorate to make a political decision about the future of the UK’s relationship with Europe. A divisive campaign full of hatred and vitriol and lies was run by both sides of the debate. Impossible dreams were sold to a voting public who were too stupid, too gullible, or too lazy to ensure they made a well informed decision.

The country voted to leave the EU, and those promises quickly vanished.

What happened to the snake oil salesmen who bullied and duped the gormless masses? Were they held accountable? No, they were rewarded with high ranking positions in the government.

In the United States a similarly divisive electoral campaign was recently held, and a bully singularly unqualified and unsuited to hold the position of president ran for the highest office in the land. Was he held accountable for the numerous lies he was caught telling during the campaign? No, he was elected as the leader of the free world.

Just like in the playground of my youth, if we do not stand up to bullies and hold them accountable for the consequences of their actions, they will continue to make our lives a misery.

The actions of bullies hurt people

Already ill-conceived and poorly thought through policies are adversely and unfairly impacting the lives of many.

European academics at many of Britain’s leading tertiary institutions are being told to prepare to go home. These people are validly living and working in the UK, permitted to do so by legislation and visas that have already been issued.

There would be outrage if the residents of Surrey were told to pack up and prepare to leave the United Kingdom in the same way these respected Europeans are being told to.

In the US people holding similarly valid visas and rights to reside are being prevented from returning to their homes and families due to an arbitrary reinterpretation of the existing rules, simply because of their place of birth or choice of religion.

There would be outrage if anyone born north of the Mason-Dixie line were told they could no longer return to the United States because of where they happened to have been born.

And so there should be.

What is happening this week is applying just as arbitrary a set of criteria to discriminate against people who have done nothing wrong. It is one thing to prevent admission of a person who has been tried and convicted of actually committing crime beyond a reasonable doubt. It is quite another to bar their admission based on no evidence or past patterns of behaviour, just because somebody in power believes it sounds popular to say that they might one day do something.

So what?

We must accept our own failings, that we should have stood up earlier and done more to prevent these situations from occurring.

We must hold our elected leaders accountable for the consequences of their actions.

We must take action now to prevent even more of these outrageous and unacceptable behaviours from occurring.

We must stand up to bullies.

What good is financial independence and early retirement if we lose the rights and freedoms required to enjoy them?

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