How To Deal With Sudden Wealth Syndrome and Manage Newfound Riches

From Recaps Archives

How to Deal With Sudden Wealth Syndrome and Manage Newfound Riches

By Amy Livingston

A lot of people have fantasized about suddenly striking it rich. They imagine that a financial windfall – inheriting a fortune from a distant relative, collecting royalties for a best-selling novel, or even winning the lottery – would make all their dreams come true. They picture themselves traveling the world, lounging on beaches, sipping champagne under blue skies while palm trees wave in the breeze.

But when this dream of sudden wealth actually comes true, it often turns into a nightmare. Instead of feeling happy and carefree, people who get rich quickly tend to become stressed and anxious. Their relationships often suffer too, as the money creates distance between them and the people they were once close to.

Sometimes, the newly wealthy try to comfort themselves by going on a wild spending spree. Unfortunately, this often makes matters worse. If the money isn’t as limitless as they thought, their newfound wealth quickly disappears, leading to even more stress.

These problems are so common that psychologists have given them a name: “sudden wealth syndrome.”

Now, maybe you think that if you came into a fortune, you’d be able to avoid these problems – or at least that you’d love the chance to try. But sudden wealth syndrome can happen to anyone, and it’s important to be aware of the problem. That way, if you ever find yourself with a windfall, you’ll know what symptoms to watch out for and how to head them off.

What Sudden Wealth Syndrome Means

Sudden wealth syndrome can damage your life in several different ways. It can lure you into reckless investments or overspending, which can leave you worse off financially than you were before the windfall. It can also cause mental and emotional stress as you struggle to adjust to your new lifestyle. And finally, it can put a strain on your relationships with others – both old and new. 

Effects on Finances

Ironically, gaining too much wealth too quickly can hurt your finances in the long run. People who acquire large sums of money all at once, rather than building it up over time, often lack the skills needed to manage it wisely. They don’t have a good sense of what things really cost or how much they should expect to pay in taxes. They simply assume they can spend as much as they want – and by the time they realize they’re wrong, they’ve often run through most or even all of their new fortune.

This problem shows up with all different kinds of financial windfalls, including:

Lottery Winnings. A famous 2010 study in the Review of Economics and Statistics looked at nearly 35,000 people who won between $50,000 and $150,000 in the Florida lottery. It found that within five years after their wins, more than 1,900 had filed for bankruptcy. This made the bankruptcy rate for lottery winners in Florida nearly twice as high as regular Florida residents.

Inherited Wealth. A 2012 study in the Journal of Family and Economic Issues found that people who inherit large sums in their twenties, thirties, and forties only save about half the money. They either spend the rest or lose it through poor investments.

Short-Term Income. Even people who earn their riches don’t always know how to put them to good use. A 2015 paper in the American Economic Review looked at NFL players drafted in the late 1990s and early 2000s, who earned more in a six-year career than most people do in a lifetime. It found that 15% of them had filed for bankruptcy within 12 years after retirement. Depending on how you measure, that rate is either close to or much higher than the typical bankruptcy rate for men their age – most of whom earn much less.
 
Effects on Emotions

Even when people know how to handle a windfall financially, they can’t always handle it emotionally. Sudden wealth often brings with it a range of new and unpleasant feelings, such as:

Shock. The newly rich have trouble believing the money is really theirs. Sometimes, they’re afraid to tell anyone about their good fortune because they don’t quite believe it.

Guilt. They feel like they don’t truly deserve the money. Often, they notice that others envy their good fortune, and this makes them feel upset and lonely.

Uncertainty. Instead of feeling empowered by their new wealth, they feel paralyzed. They have trouble making even the smallest decisions about what to do with the money.

Anxiety. They fear their newfound wealth will somehow vanish just as suddenly as it appeared. They often develop what therapist Stephen Goldbart calls “ticker shock” – watching the stock market obsessively to make sure their new fortune isn’t losing value.

Goldbart, who often works with the wealthy, says in an interview with WebMD that the newly rich often face an “identity crisis” – especially if they’re still fairly young. Because they no longer need to work for a living, they feel cut off from their peers in the workforce. They aren’t sure how to see themselves as “retired” when their working lives have hardly begun. By contrast, people who strike it rich in their fifties and sixties often handle it better, partly because it’s seen as normal for people to accumulate wealth as they age.

Effects on Relationships

Just as the newly wealthy begin to feel uncertain about themselves, others in their lives often act differently towards them. Close friends and family members often resent their good fortune and treat them with rudeness or disdain, and the newly wealthy feel lonely and isolated as their old friends pull away.

Meanwhile, other people in their lives start acting more friendly and affectionate than before. Instead of easing the loneliness, this show of affection often makes it worse, because they suspect these people are interested in the money and not in them.

They imagine these people are hoping their newly wealthy friend will choose to lend money to family and friends, handing it out to anyone who asks. The newly wealthy tend to pull away from these “friends” as well and feel even more isolated as a result.

In many cases, their own behavior is part of the problem, as well. Their new wealth gives them the freedom to enjoy travel and other luxuries that some friends can’t. If they decide to take off for a week in the Bahamas, most people they know won’t be able to drop everything and tag along – even if their wealthy friend is picking up the tab.

Sometimes, the newly rich try to fill the hole in their lives by forming new friendships with people who share their lifestyle. But even with other wealthy people, it can be difficult to tell if these friendships are genuine or opportunistic.

How to Deal With Sudden Wealth

The above makes it sound like striking it rich could be the worst thing to happen to someone, rather than the best. But it doesn’t have to be. When you are aware of the signs and symptoms of sudden wealth syndrome, you can take steps to protect yourself. You can also learn how to handle your new wealth so it adds to your life, rather than detracts from it.

Protect Your Wealth

The first thing you need to know when you come into a large sum of money is how to protect that money so you don’t lose it all. Here’s what experts recommend:

Keep It Quiet. Financial planner Robert Pagliarini, writing for Forbes, says that when it comes to sudden wealth, “the fewer people who know the better.” By keeping your good fortune a secret, you can avoid the pressure from swarms of people – friends, businesses, and charities – seeking a piece of it. You can also avoid being bombarded with financial advice, which, even if it’s well-intentioned, isn’t necessarily welcome.

Avoid Hasty Decisions. Don’t rush into any decisions about how you’ll spend or invest your new wealth. Avoid making any promises – financial or otherwise – until you know exactly how much you have and how much you can afford to spend.

Financial expert Susan Bradley, author of “Sudden Money: Managing a Financial Windfall,” recommends spending your first few weeks, or even months, as a wealthy person in a “decision-free zone.” This gives you time to process your feelings about your situation before you to decide to act.

Figure Out What You Have. Before you can start putting your money to use, you need to work out how much you really have. This isn’t always obvious at the outset. For instance, as this CNN article explains, a New York City resident who wins a $1.5 billion lottery jackpot and chooses to take the money as a lump sum will actually end up with only $577 million after taxes.

Similarly, if you’ve inherited money, you’ll need to read the exact terms of the will and find out what form the money comes in and what limits there are on how you can use it. So, before you spend a dime, go through all the legal papers tied to your cash windfall, fine print and all. Highlight any terms you don’t understand and look them up, taking care to use only reliable sources.

Set Goals. Once you know how much money you have, start figuring out what you want to do with it. Think about both short-term and long-term goals. You can break these down into four areas: lifestyle, family, future, and charitable donations. This exercise will help you figure out how to spend your windfall wisely.

Hire an Advisor. Once you know what your specific goals are, you can work out how much money you need to put towards each one. This is where a professional advisor can be a big help. A qualified financial advisor can help you figure out how much you can afford to spend each year so your money will last.

They can also steer you towards sensible investments to make the most of your money. To find a financial advisor, start by asking for referrals from friends, family, and professionals you trust, such as a family accountant. Then take the time to vet all the candidates, looking into their background, philosophy, references, and fees. Don’t rush this step; having a financial advisor you can trust is well worth the wait.

Keep Your Guard Up. A financial advisor can also help you in another way: by protecting you from requests for handouts. Refusing to lend money to friends and family can be awkward, but it’s easier when you can say, “I can’t make any loans without checking with my advisor.”

Your advisor can also handle other types of money-seekers, from charities looking for aid to people trying to squeeze money out of you via threats or frivolous lawsuits. You can tell all these people to send their requests to your advisor, which will help shield you from constant pressure.

Control Your Access to the Cash. There’s one more person you need to protect your wealth from: yourself. If you know you won’t be able to resist blowing through your money, then it’s best to stash it away where you can’t get at it easily. For instance, you could use some of the money to buy a house with cash, put some into college savings funds for your kids, and sequester some in retirement funds.

Get Used to Your New Wealth. Finally, take some time to adjust to your new position. Don’t start thinking of yourself as a rich person and spending willy-nilly, or you probably won’t stay rich for long.

Instead, get used to the new income level you’ve worked out with your financial advisor and do some experimenting to see how much it can buy. If you’re really itching to spend some of the money, experts suggest allowing yourself one clearly defined splurge, such as a vacation or a new car.

Enjoy that one luxury and get it out of your system, then settle down and live sensibly on your new income.

Protect Yourself Emotionally

Taking it slow with your newfound wealth can help you financially, as well as emotionally. It lets you process your feelings about your new situation, instead of trying to adjust to a new identity overnight.

The time you spend in the “decision-free zone” will ease you through the shock of suddenly being wealthy. It will allow you to get over your uncertainty and figure out how to invest your money in ways that fit in with your goals and values. This, in turn, will help relieve you of the anxiety about possibly losing your wealth and convince you that you really do deserve to have it.

However, many people need a little more help getting over the emotional stress of going from rags to riches overnight. Bradley says most people dealing with sudden wealth syndrome should consult a therapist. It’s much easier to get through this transition with the help of a professional than to do it all on your own. After all, you can certainly afford it.

Protect Your Relationships

Protecting your new wealth is paramount, but protecting your relationships with others is important too. Experts say one of the biggest mistakes newly wealthy people make is to retreat from the people who were once close to them. Often, they do this because they’ve become insecure and suspicious, fearing that everyone around them is only after their money. Whatever the reason, this behavior only leads to loneliness.

To avoid this problem, experts advise that you make the effort to stay close with your friends. Continue to take part in the same activities you’ve always enjoyed with them, whether that’s a weekly yoga class or a poker night. Holding on to established friendships will help you stay grounded, and having an active social life will cut down on your stress level.

It’s also important to avoid pushing friends away by accident. When you’re suddenly wealthy, it’s easy to get carried away with spending behaviors that your friends can’t easily keep up with. If you suggest replacing that casual poker game with a trip to Monte Carlo, you’ll probably end up leaving your friends behind. So, make a point of remembering their financial limits when you get together.

Finally, remember that while you don’t have to give money to everyone who asks for it, it’s a nice gesture to share the wealth in ways of your choosing.

For instance, flight-attendant-turned-entrepreneur Sandy Stein shares in a BBC interview about how she took one of her best friends from her airline days on a polar bear expedition. Gestures like this – treating your friends to a trip or a social outing – are a way to show your true friends that you still care about them.
 
Final Word

One of the biggest problems for people with sudden wealth syndrome is that they don’t get much sympathy from others. To a person who’s still struggling along on minimum wage, it’s hard to imagine that a neighbor who just won the lottery could actually be having a difficult time dealing with the change. Many newly rich people don’t dare talk to their friends and family about the problem, because they think it makes them seem obnoxious.

If you’ve just come into money, one of the most important things you can do for yourself is to acknowledge that it is stressful, and it’s okay to need help to process it. When you understand that gaining money is a real source of financial stress, it becomes easier to deal with it like you would any other kind of stress.

Talk with friends, get some exercise, and, if necessary, see a therapist – and don’t feel embarrassed about doing so. Being stressed out about a financial gain is no more shameful than being stressed out about a financial hardship.

Do you know anyone who’s suffered from stress due to sudden wealth?

https://www.moneycrashers.com/deal-manage-sudden-wealth-syndrome/

Is $10,000 A Lot of Money? What You Need To Know

Is $10,000 A Lot of Money? What You Need To Know

As you begin building your net worth and reaching new financial goals, you may set your eyes on reaching $10,000.

Is $10,000 A Lot of Money? It’s a pretty big milestone to hit, especially if you are starting fresh in your financial journey.

The first time I had $10k saved, I had to refresh my bank screen a few times because it didn’t seem real. After all, prior to that goal I typically never had more than $1,000 saved at a time!

And although this is a nice sum of money after you reach this milestone and the excitement wears off a bit, you may stop to wonder a few questions:

Is $10,000 a lot of money? How far will this amount take me? What should I do with this amount of cash?

Is $10,000 A Lot of Money?

Having $10k saved is a commendable milestone but overall it is not typically considered to be a lot of money. For a majority of Americans today, this amount may only cover 3-6 months of living expenses pending their lifestyle and where they live. It seems to fall into the category of “having a lot of money” that you’ll want to have $100k+.

Overall, it’s hard to say an exact number of what constitutes a lot of money as everyone has different personal money mindsets, living expenses, and how you budget your income.

Is $10,000 in Savings Good?

Now don’t get discouraged by the previous section where we’ve basically established that $10,000 is not exactly a lot of money. It’s certainly an awesome achievement, especially when you consider that the Federal Reserve reported that 39% of Americans don’t have enough money on hand to cover a $400 emergency.

So remember, when you hit this $10k savings goal take the time to celebrate and feel good about your efforts. It can be a long journey of work on your personal finances!

So, is $10,000 in Savings Good?

To continue reading, please go to the original article here:

https://investedwallet.com/is-10000-a-lot-of-money/

There Are 7 Money Personality Types

There Are 7 Money Personality Types, says psychology expert—how to tell which one you are (and the pitfalls of each)

Published Wed, Apr 28 2021 Ken Honda, Contributor

We often stress about the importance of financial literacy, such as gaining a strong understanding of how money works and having the resources to make informed decisions.

But when it comes to establishing financial health, one thing most people fail to consider is their money personality type — or their approach and emotional responses to money.

We each have our own beliefs and emotions about money, and they are mostly shaped by our individual life experiences (e.g., passed down from our parents or influenced by our current situations).

In my 10-plus years of researching the psychology of money and happiness, I’ve found that there are seven distinct money personality types. Typically, we fall into a combination of many types, and not just one

Identifying which types you fall under, and understanding the pitfalls of each, can significantly improve your relationship with money. It can help you do things like spend less on impulse purchases, be better about budgeting, invest wisely and ensure a nice nest egg for retirement.

1. The Compulsive Saver

Signs you might be a Compulsive Saver:

You put away money endlessly, sometimes with no actual end goal in mind.

You believe saving money is the only way to feel more secure in life.

You’re very frugal. (Friends will often come to you for advice on which phone company is the cheapest, which point cards are worth it, or when to buy plane tickets at the lowest price.)

Pitfalls: Some Compulsive Savers are so afraid of losing money that they go their entire lives without spending any of what they worked so hard to save. For example, they might choose to skip out on hobbies or activities that could bring them happiness and purpose.

Money advice: It’s all about moderation; learn to find a balance between saving money and enjoying life. Think about where you see yourself in the future and how you can use your savings to get there.

To continue reading, please go to the original article here:

https://www.cnbc.com/2021/04/28/7-money-personality-types-and-the-pitfalls-of-each.html

The Power of Financial Habits

The Power of Financial Habits

Samantha Lamas   Feb 10, 2021

Adopting mental shortcuts can help you stick to a budget.

Many financial decisions force us to balance what we want now against what’s better for us in the long term. In this classic want/should conflict, a “want” is something that grants immediate pleasure, while a “should” is something that offers benefits much later--such as healthy retirement savings.

We all know we should be doing things like saving for retirement, paying off our debt, or monitoring our spending, but these "shoulds" are hard to put into practice. Why? Because we are human. We aren’t made to think 30 years from now, even though we should be doing so.   With that in mind, how can we get ourselves to accomplish our "shoulds"? One way is to develop healthy financial habits.

Don’t Underestimate the Power of a Good Financial Habit

Our mind is constantly using mental shortcuts to make decisions, some of which come from our habits. Many of us don’t even notice our own habits because they’ve become something we do automatically. These simple habits make our lives easier by helping us combat the multitude of decisions we make daily. For example, most of us brush our teeth every morning. Instead of waking up each morning and pondering whether to brush our teeth, our habit makes the decision for us. Not only is this one fewer decision we must make, but it also may lead to better dental hygiene.

Similarly, developing the right financial habits may help make decisions easier and improve our overall financial well-being. Many people think that building a habit is all about repetition, but a few other factors must be considered:

1) The difficulty of the behavior

2) The context of the decision

3) The immediate reward associated with the behavior

Keep Your Financial Habits Simple

When it comes to building a habit, the more complex the desired behavior is, the harder it can be. For our finances, using a simple but effective rule of thumb can be a solution.

In our recent research, we began sifting through the many rules of thumb in the media to identify the rules that financially well-off people tend to use. Rules like "Always pay debt in full when possible," "Save up for big purchases," and "Have an emergency fund (to cover three to six months of expenses)" seemed to float to the top. That said, choosing a rule of thumb to follow must be a personalized decision. Try choosing a rule that fits into your lifestyle and can help you reach your financial goals.

To continue reading, please go to the original article here:

https://www.morningstar.com/articles/1022305/the-power-of-financial-habits

How to Apologize: The 6 Elements of a Good Apology

How to Apologize: The 6 Steps of the Perfect Apology

By Matt Berical

The perfect apology consists of six distinct components. Master them and learn how to repair mistakes before they turn into conflicts.

 “Love means never having to say you’re sorry.” Is there any more worthless a platitude? When you’re in a relationship, especially for any significant period of time, you are going to have to say sorry for something. But do you know how to apologize effectively? There are different grades of apology: There’s the “Oh, sorry,” apology you cast off when you just want someone off your back. There’s the blunt “I’m sorry, okay?” when you sort of mean it (but not really).

We all do those — and there’s a time and place for it — but being on a receiving end of a non-apology apology sucks. When you really, truly need to apologize for something you’ve done, something that has wronged or insulted or hurt your partner, you need to understand the components of a true apology.

So what makes for a good apology?

You have to mean it, sure. But, per Roy Lewicki, professor emeritus of management and human resources at Ohio State University’s Fisher College of Business, there’s a narrative structure that every good apology should follow. An expert on negotiation, Lewicki spent years researching what makes an apology. Like any narrative, he realized, it must stick to a certain structure. As such, he’s broken it down the perfect apology into six components.

Understanding these six steps will allow you craft an apology that really, truly means something. It sounds a little complex, but Lewicki explains that, when followed properly, these six steps are not only very simple, but also quite effective. We asked Lewicki to break down each one and explain how and why they work so well.

How to Apologize: The 6 Elements of a Good Apology

1. Expression of Regret

To start, you simply must tell the other person that you’re sorry for what you did. It’s important that you get this part right, because it will set the tone for everything that follows. Tone is crucial. If you sound insincere, sarcastic, or at all annoyed, then whatever else you have to say will ring hollow.

“What this does from the speaker’s point of view is try to express how sorry they are for the offense,” Lewicki explains. “This is where tone can make a difference. You can say, ‘I’m really genuinely sorry,’ and communicate some emotionality in that. Or you can be sarcastic and say, ‘I’m sorry, did I offend you?’ and totally diminish the content of your apology.”

2. Explanation of What Went Wrong

To continue reading, please go to the original article here:

https://www.fatherly.com/love-money/how-to-apologize-the-6-steps-of-the-perfect-apology/

Does F.I.R.E. Prevent Divorces?

Does F.I.R.E. Prevent Divorces?

By FIRECracker  April 26, 2021

The F.I.R.E. movement, which stands for Financial Independence, Retire Early.

In my last post about not losing yourself in retirement, reader Steve posted an interesting question in the comments:

“Any thoughts on the FIRE couples that get divorced? One would think that not having money issues (the #1 stressor for married people) and achieving a monumental goal together would strengthen that bond, but apparently there is more to it.”   –Steve

This got me thinking. If money, which is the #1 reason why couples break up, is no longer an issue, why are FIRE couples still getting divorced?

Now, I’m no relationship expert and this is me taking a wild stab at it, so feel free to take it with a grain of salt. Having seen some friends and family get divorced for reasons other than money, I’ve noticed that marital problems don’t just drop on a couple by surprise and then explode their marriage like a grenade. Instead, they pile on gradually like a gentle snowfall. And because it sneaks up on you, you don’t realize until it’s too late that you’re trapped in a blizzard, praying you won’t die a horrible frostbitten death.

I’m not sure how I stumbled on this, but marriage counsellors recognize something called the “Four horsemen of the marriage apocalypse.” These are patterns they see over and over again in seemingly predict marriages that are destined to fail. Intrigued, I started reading up on them and realized, yup, in pretty much every divorce I’ve witnessed, the patterns they describe are eerily familiar.

Curious? Well, here they are…

HORSEMAN #1: CRITICISM

No relationship is perfect, and we’ve all playfully criticized our spouses from time to time. In fact, “taking the piss” and mocking your spouse just shows how much you love them. For example, Wanderer loves it when I make fun of his weak, little girl arms (Wanderer is glaring at me for some reason as I write this). And I love it when he laughs at me for not being able to figure out how to unlock a door.

But when that criticism happens on a daily basis with the intention to hurt the other person, it’s a sign that a relationship could bite it. And when I say criticism, I don’t mean complaints, which are related to actions, like “you didn’t do the dishes!” or “you forgot to take out the trash again!” I mean, nasty, soul-destroying insults that stab you like a steak knife straight through the heart.

Eg. “You’re so lazy! All your friends are more successful than you and all you do is bum around the house.”

Eg. “You’re so selfish! You never think about anyone else but you!”

If your spouse is bombarding you with more criticism than an overbearing tiger mother, this is one of the first signs that your marriage is in trouble.

HORSEMAN #2: CONTEMPT

To continue reading, please go to the original article here:

https://www.millennial-revolution.com/freedom/does-fire-prevent-divorces/

7 Common Money Arguments in Marriage

7 Common Money Arguments in Marriage — And How to Tackle Them Together

By Jeremy Brown Apr 20 2021, 5:31 PM

From misaligned financial visions to lack of follow through on previously set financial goals, these money arguments are very common.

Arguments about money are about more than money. In every heated discussion about overspending, mismanagement, bills being ignored, issues of envy, guilt, shame, fear loom large. Financial therapists and counsellors understand this, which is why, in addition to helping with brass taxes financial decisions, they also look at the emotions behind money arguments. This better helps individuals and couples gain a better sense of the complex mechanisms at work so they can make better decisions and have fewer arguments.

“For many people, the thought of entering financial coaching or money counseling means something is or has gone wrong,” says AJ Bishop, Chief Executive Officer and the Founder of My Wealth Conscious Coach. “Sure, they understand and know they have a disconnect around money, but it’s not an unworkable topic.

Hello, World!

Therefore, good, hardworking, reasonable people attempt to resolve the “I-can-do-it-all-by-myself” items and avoid the major topics and financial issues that do create conflict, tension, and sometimes fights about money.’

Financial counsellors and therapists see a lot of the same arguments over and over again. They’re also keenly able to help couples identify the various larger issues at play and help them end the arguments once and for all. Here, then, are a few of the more common money arguments in marriage they see — and some ways to prevent them from cropping up again and again.

The Money Argument: Your Financial Visions are Misaligned

Very often couples who struggle financially are not on the same page when it comes to their overall vision. They have different priorities on what is important, spending-wise, or different ideas on how to spend money.

This can create problems right from the start that can only grow worse over time. One person wants to go on a lavish vacation, while the other wants to save to buy a house. Over time, each person comes to resent the other, thinking that they’re either cheap or that they spend too much.

The Solution: Couples need to sit down separately and map out their own financial visions and then do the same thing together. And, if you’ve done that already, do it again and often. “Priorities, goals and objectives change regularly,” Bishop says. “Don’t make assumptions that you’re heading in the same direction because you had the conversation that one time.”

The Money Argument: There’s no follow-through on financial goals

To continue reading, please go to the original article here:

https://www.fatherly.com/love-money/money-arguments-in-marriage/

<

p>Hello, World!

3 Important Lessons I Learned from Collecting Baseball Cards

3 Important Lessons I Learned from Collecting Baseball Cards

MAY 10, 2021

A few weeks ago my dad asked me to list a few baseball cards on eBay. The cards were 2001 rookie cards of Ichiro Suzuki and Albert Pujols. To my surprise, each card sold for several hundred dollars really fast. Listing those cards brought back old memories of collecting baseball cards as a kid. This post goes over three important life lessons I’ve taken into adulthood from my time collecting baseball cards.

My Saturday nights as a pre-teen were often spent swapping baseball cards with friends. My best friend lived three houses up the street and was my main trading partner. We’d often have sleep-overs filled with wrestling videos, video games, and an all-out baseball card exchange.

Yes, I was (and still am) a huge nerd.

Professional Skills Learned from Collecting Baseball Cards

While going through my old collection, I came across the crown jewel of most baseball card collections from the early 90s. A Ken Griffey Jr. 1989 Upper Deck rookie card. First of all, it makes me feel super old that Ken Griffey Jr. has been retired for more than 10 years (and let’s be honest, he’s pretty much been retired since 2000 when he left Seattle).

Even though most of the cards in what’s left of my collection are worthless, it got me thinking about all of the lessons I learned from collecting baseball cards as a youngster.

Collecting cards taught me how to negotiate with friends and vendors at a young age. It also taught me how to make what seemed at the time like tough and sometimes emotional decisions. As silly as it sounds, I used to get very attached to cards in my collection. Last but not least, it helped to estimate the future value of an asset.

Even my decision to major in finance was in some ways driven by collecting baseball cards. My mom used to say, “You should be a stock broker, it’s like trading baseball cards only with stocks!” While this didn’t make much sense at the time, I can see the connection now. Baseball cards are an asset with a present value based on a variety of different factors. The goal is to predict the future value of the asset to maximize return.

Below are a few of the lessons I learned from collecting baseball cards as a kid.

Negotiation Skills

To continue reading, please go to the original article here:

https://www.financialpilgrimage.com/heres-what-i-learned-from-collecting-baseball-cards/?utm_source=rss&utm_medium=rss&utm_campaign=heres-what-i-learned-from-collecting-baseball-cards

Sleeping with Cash

Sleeping with Cash

Andrew Forsythe    May 6, 2021

HERE AT HUMBLEDOLLAR and in many other places, this point has been made: The best investment portfolio isn’t the one that’s theoretically or empirically superior. Rather, it’s the one that lets you sleep at night.  What I’ve found, as far as my portfolio goes, is that the necessary prerequisite for a good night’s sleep is one thing above all else: an oversized cash reserve. By that, I mean a cash hoard that can handle not only the most likely contingencies, but also unexpected ones—and then some.

I typically keep enough cash to finance our normal expenditures for at least six years. In fact, with the current bubbly stock market, I’m above that level. To back that up, I also have a decent allocation to bond funds, consisting mostly of an intermediate-term municipal fund in a taxable account and total bond market index funds in retirement accounts.

Back in 2017, author William Bernstein was quoted in HumbleDollar saying, “When you’ve won the game, stop playing with money you really need.” That insight struck a chord with me, and it’s one of the reasons I’ve come to value cash.

I’m less interested in getting richer and more interested in guaranteeing that the modest lifestyle that has served my wife and me so well can be maintained for as long as we remain on this planet, regardless of any curveballs thrown our way.

The importance of a good-sized cash reserve was brought home to me over my many years as a criminal defense lawyer. While my early days often involved more dramatic and serious cases, later on my bread-and-butter business was representing basically good, decent people who (or whose kids) made a mistake or two: driving while intoxicated, drug possession and various other weaknesses of the “there but for the grace of God go I” type.

What constantly amazed me was how many of these seemingly middle-class folks, at a time of real urgency, struggled to come up with even a modest down payment for my services. For most garden variety misdemeanors, I had long believed it was reasonable to ask for a $1,000 retainer, with a payment plan for any remaining balance that stretched over several months.

To continue reading, please go to the original article here:

https://humbledollar.com/2021/05/sleeping-with-cash/

Three Reasons Why Inflation Is Rising. Two Of Them Aren’t Going Away

 Three Reasons Why Inflation Is Rising. Two Of Them Aren’t Going Away

Notes From the Field By Simon Black  May 5, 2021  Cancun, Mexico

A remarkable thing happened yesterday that tells you everything you need to know about inflation. In the morning, US Treasury Secretary Janet Yellen stated bluntly that “interest rates will have to rise somewhat to make sure that our economy doesn’t overheat. . .”

For economists, an ‘overheating economy’ means inflation. So she was essentially saying that rates would have to rise to prevent inflation. Yet hours later, she completely reversed herself, saying that interest rates would NOT have to rise because “I don’t think there’s going to be an inflationary problem.”

You don’t need a PhD in economics to smell the BS.

Inflation is not some potential issue down the road. Inflation is already here.

As Warren Buffett told investors only days ago, “We’re seeing very substantial inflation.”

Plenty of companies have already announced price increases to their consumers--

Proctor & Gamble, for instance, announced price hikes across the board on just about everything from diapers to beauty creams.

Hershey’s announced in February that it would be raising prices.

Food giant General Mills complained in February about a “higher inflationary environment” and “input cost pressures” due to rising commodity prices.

Clorox, Shake Shack, Kimberly-Clark, Whirlpool, Hormel, and Woka Kola Coca Cola are among the many companies that have also announced price increases.

And according to Bank of America Global Research, the number of mentions of “inflation” on corporate earnings calls has increased 800% compared to last year.

Inflation is clearly a concern of the largest companies in the world. Investors are worried. Consumers can see it.

And in a rare moment of truth yesterday morning, a politician almost admitted that she was concerned about inflation too.

This is not some wild conspiracy. Inflation is real. It’s happening. Let’s look at three key drivers:

1) Capacity Constraints

Last year the entire world shut down. Businesses and factories everywhere closed, and plenty of companies went out of business.

Many companies who survived took radical steps to conserve cash-- laying off workers, liquidating inventory, and selling equipment.

One critical consequence was that the amount of capacity in the system was greatly reduced.

Here’s an example: I’ve been in Cancun for several weeks, and as you know, this place is a major tourist destination.

Last year when tourism dried up, plenty of companies went out of business. Rental car companies, for example, had practically zero customers. Many went bankrupt. Others survived by selling off most of their vehicles, believing that it would be years before the tourists returned.

But a year later, the tourists are back.

Problem is, there are now very few cars to rent in Cancun, because rental agencies either went bankrupt or liquidated their inventories.

As a result, car rental prices in Cancun have surged; supply is scarce, yet demand is back to normal.

We’re seeing similar effects across the economy. Capacity is limited because of the extreme measures that businesses took last year. And they can’t simply flip a switch and bring capacity back to normal. It takes time.

They’ll have to invest in inventory, hire more staff, etc. Eventually, these supply/demand imbalances will stabilize. But for the foreseeable future, it’s driving prices higher.

This is the type of inflation that politicians and central bankers have been calling “transitory”. In other words, it’s temporary pressure that should subside in the future.

2) COVID lunacy

Hardly anyone talks about this... but just think about all the idiotic rules that people have to follow now.

If you own a retail store in a shopping mall, for example, you have to pay employees to stand at the door ready to hose down every customer who walks inside with hand sanitizer.

And imagine how much money businesses are spending now on PPE… masks, gloves, hand sanitizer, etc. Or companies (airlines, hotels, etc) that now employ legions of workers to chemically scrub every nook and cranny of the premises.

All of this costs money, and the extra costs eventually get passed on to consumers. Most likely, these measures are not going away… which means that COVID is extremely inflationary.

3) Trillions in money printing

This is the big one. The US federal government is hoping to spend a whopping $11 TRILLION this year, between the regular budget, COVID stimulus already passed, and all the new legislation they’re proposing.

And it’s only May.

Obviously Uncle Sam doesn’t have the money. So they have to borrow it.

Their chief remaining lender these days is the Federal Reserve, which first has to ‘print’ money before loaning it to the government.

(The actual process is more modern and complex, but that’s basically what happens in a nutshell.)

The more money the government spends, the more the Fed prints (roughly $4 trillion last year). And as this freshly created money makes its way through the economy, it typically ends up in financial markets, driving asset prices higher.

It’s not a coincidence that the Fed has created record sums of money, and the stock market is simultaneously at a record high. Ditto for real estate, cryptocurrencies, collectibles, etc.

Many commodities are also at record highs. Lumber prices have never been higher. Corn is near its all-time high. Oil prices surged from MINUS $40/barrel last year to $70 today-- a difference of $110.

Higher commodity prices eventually lead to higher consumer prices.

High lumber prices, for example, mean that housing costs increase. Higher corn prices mean higher food prices. Higher fuel prices mean higher transport costs, which increases the price of almost everything.

So as long as the Federal Reserve is printing money and holding rates down to historic lows, these prices will likely keep rising.

Given the US government’s insatiable appetite to borrow money from the Fed, this inflation pressure is NOT going away.

And after what we saw yesterday, it’s clear that the government’s approach will be to ignore or dismiss inflation risks.

To your freedom and prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/three-reasons-why-inflation-is-rising-two-of-them-arent-going-away-32121/

Why Financial Strain Is So Harmful to Your Health

Why Financial Strain Is So Harmful to Your Health

A conversation with Dr. Michael Stein on the toll simply not having enough money takes on your body.

BY DREW MILLARD   March 29, 2021

A 100 bill's face is covered with a mask as a doctor would wear.  Anton Petrus

In an address to the nation earlier this month, President Joe Biden marked the one-year anniversary of the coronavirus pandemic by announcing that all American adults would be eligible for the COVID vaccine by May 1. If we all get vaccinated, he said, “there’s a good chance you, your families, and friends will be able to get together” on the Fourth of July “and have a cookout.” The implication was that we will finally have passed the apex of the virus, and that, slowly but surely, things will once again begin to feel normal again.

Except that’s not how things work, really. We have spent the past year in the throes of a public health crisis which quickly brought with it an economic one to match. Nearly a year after the initial shock of 22 million Americans losing their jobs at the onset of the pandemic, 18.7 million people are still filing for unemployment. This is to say nothing of those who have been without a job for so long that they are no longer technically counted as members of the workforce. While plenty of people are going to emerge from the pandemic in better financial shape than ever, many others have felt the sting of financial precarity in ways that affect their ability to pay for their housing or food. We will be dealing with the economic consequences of the pandemic for years.

To Dr. Michael Stein, a Boston University professor and chair of the school’s Health Law, Policy, and Management department—and who also works as a primary care doctor to low-income patients—America’s issues with physical and financial health are inextricable. “Perhaps poverty should be approached from a public health perspective, as the moral perspective alone has failed us,” he writes in the introduction of his recent book Broke:

Patients Talk about Money with Their Doctor. On the surface, Broke is exactly what it sounds like it would be—a book full of anecdotes, narrated by Stein but told mostly without commentary, about how his patients deal with money. But the format is just a narrative device, really, meant to illustrate Stein’s larger point, which is that when people are poor, their lives are hard in ways that are always unique and frequently unmanageable—to the point where day-to-day survival must take precedent over their long-term goals. It’s his professional obligation, he believes, to talk to his patients about money, help them deal with their financial problems as best he can. “Feeling a bit more in control of their finances, or less out of control," he writes, "allows patients the mental space to make clearer decisions, health decisions included."

Stein says he decided to start the book when a patient told him, “I’m so broke I have to rinse off paper plates.” The image is indelible, and in Broke it is the first thing we hear from his patients, who throughout the pages tell stories of hustling black-market watches to make ends meet, altercations with rapacious landlords, being swindled out of money by their loved ones, and falling through bureaucratic holes in America’s ragged, underfunded, and uncaring social safety net. Together, the vignettes of Broke describe a dizzying array of symptoms to the same sickness whose cure, however simple, is nevertheless out of reach. With more Americans hanging on by a thread than ever before, this is a book worth reading.

To continue reading, please go to the original article here:

https://www.gq.com/story/financial-strain-is-so-harmful-to-your-health-michael-stein