(… before it’s too late)

In early 1991 my interest was piqued by a newspaper column penned by Humberto Cruz. It was a new column that began running weekly titled “The Savings Game”.

Mr. Cruz planned to retire a millionaire in spite of a very ordinary middle class income. It sounded audacious until I delved further into his commonsense advice. Cruz and Georgina (who he would later marry) were immigrants, having escaped Fidel Castro’s Cuba as teenagers in 1960 with their parents.**

Fast forward to December of 2010 and Humberto signed off on his 1,028^th edition of “The Savings Game”, he and his wife retiring having amassed a net worth of over 2 million dollars. In 2019 they were enjoying a Holland America Cruise around the world.

I read Mr. Cruz’s column religiously. It is impossible for me to recount every piece of advice that he gave over the decades that he wrote, but there are some fundamentals supplemented by other knowledge that I acquired over the years that may serve to bring comfortable financial security to our children, grandchildren… and perhaps yours as well.

In Humberto Cruz’s last article he offered the following:

“Over the course of 1,028 weekly columns… I have emphasized basic principles for financial success. They all entail personal responsibility:

• • Spend less than you make.
  • Save and invest the difference wisely for the goals most important to you.
  • Identify those goals clearly. Calculate how much you have to save, and the investment returns you need so you don’t take more risks than necessary.
  • Never forget that money is only a tool. True happiness comes from commitment and relationships, not material wealth.

All this is very simple but not necessarily easy to accomplish.”

Humberto Cruz. December 27, 2010

Over the years I also subscribed to the magazine, “Better Investing”. It provided advice and tools for the average investor. Nothing exotic, just identify sound companies with long term stable histories of growth and invest in those companies only selling when there was a sound financial reason. BI counseled that it was folly to try and time the market. Investing is not gambling. Invest in what you understand and understand why you invest. Invest for the long haul. A basic tenant was that a well selected portfolio of 5 stocks will typically have one loser, 3 average performers, and one overachiever. And that it is not unreasonable to set 15% as an average annual growth goal.

If one chooses not to be an active investor and “merely” invests in a mutual fund that tracks the Standard and Poor’s 500 index the average annual rate of return from 1950 to 2020 (roughly my lifetime) was 12.96%.

Moreover, index funds as are available from brokerage firms such as Fidelity Investments and Vanguard, offer “no-load” funds (there is no upfront cost to invest), and the annual expense ratio (fees) can be very low, two tenths of a percent (.02%) or less. (Caveat: No actual investment advice is intended here, UNDERSTAND and INVESTIGATE before you INVEST!!)    

It is reputed that Albert Einstein once said, “Compound interest is the Eighth Wonder of the World”. To this he reportedly added, “…He who understands it, earns it… he who doesn’t, pays it.”

One may calculate how many years it takes for a sum of money to double based upon the compound interest rate. It is a simple formula; Divide 72 by the interest rate, the result is the answer in years. Applying this bit of information to the average annual growth of the stock market (S&P 500) from 1950 to 2020: 72 ÷ 12.96 = 5.5.

In other words, over those 70 years money in an investment that tracked the S&P 500 doubled every 5.5 years. Put in more concrete terms:

Imagine that a 15 year old made a single investment of $1,000 and “let it ride” in an IRA (Roth or standard) until she was 65 years old. The money would double 10 times over the course of those 50 years. Simplifying this example to a “double” every 5 year: $1,000 at age 15 becomes $2,000 at age 20, $4,000 at 25, $8,000 at 30, $16,000 at 35, $32,000 at 40, $64,000 at 45, $128,000 at 50, $256,000 at 55, $512,000 at 60 and finally $1,024,000 at age 65! However, a delay of just 5 years at the start would reduce this portfolio by over half a million dollars.

The lessons are to start taking care of one’s 65 year old self when one is as young as possible. Also, don’t rely upon a single investment deposit, but make a habit of saving. Pay “Uncle Sam” first, then pay your 65 year old future self, and only then address current needs and “wants”. Investment planners often counsel that one should dedicate 15% of after tax income to that long term horizon.

Of course there are no guarantees. The market can swing wildly with years that are up and years that are down. Financial counselors warn to diversify one’s portfolio, include stocks, bonds, CD’s, etc.. My point is that we do our children and grandchildren a service by teaching the habits of saving and frugality at an early age. My oversimplification has ignored the basics that as one approaches retirement one’s investments should become increasingly more conservative. I do however want to make another few points:

Do not save so obsessively that one sacrifices enjoying reasonable current rewards from the fruits of one’s labors. Saving for near-term goals is also important for mental health and personal satisfaction.

Work to achieve a shared financial partnership with your spouse. Talk about money and goals. Engage in shared decision making. Money disputes destroy more marriages than infidelity.  

Don’t “react to the market”. This only encourages impulsive actions. I recall a friend years ago sharing that when the market took a sudden and precipitous downturn, more than 25% in a short period of time, he transferred his retirement account holdings from a stock mutual fund into a cash investment. He not only missed the market growth that followed which would have erased the loss but also the surge into a memorable stock market rally. He got “hit” twice, losing on the downturn and impulsively “choosing” to miss out on the rally.

Don’t pay too much attention to one’s portfolio balance. Train yourself to look at monthly and quarterly statements as if the bottom line is only a presentation of “numbers on a piece of paper”. As a portfolio grows seeing a swing in value of tens of thousands of dollars can feed panic or (just as bad), unwarranted exuberance. Panic can result in impulsive decisions as detailed  above, and the exuberance can cause one to (falsely) believe one has the expertise to “time” or “out-think the market” with consequences that can be equally disastrous.

Finally, convince yourself that the savings are not yours to spend, yet. With the success that disciplined saving achieves there will come a point where the account can deliver a shiny new car (or some other current “want”) that has become an obsession. Succumbing to the urge one will not only pay the price of the car, but the price of losing financial security later in life.

So, what brought all of these thought together and drove me to write this post? One of our children asked if there was information about investing that I could recommend for her to share with her children. Christine and I went online and bought copies of the book, “Investing for Kids” (by Redling and Tom, available on Amazon) for each family, along with a one year subscription to Better Investing Magazine. We gifted those items to each family for Valentine’s Day.

In presenting these we engaged the 9 grandchildren who with the exception of a 3 year old are all between the ages of 11 and 13 in a discussion. We shared our thoughts about money, saving, investing, and the future. It was a pleasant surprise that they paused television, put aside the electronics, and were interested, attentive, and engaged. It bodes well for their financial future and our peace of mind.

Peace Everyone. Pete

PS. A reality check. My “editor” (that would be my wife, Christine) asked me to consider the results if there were regular savings over 50 years without the 15 year old having an initial $1,000 deposit. What would the result be if the deposits were much smaller but made consistently over time?

     Here are just 2 scenarios that involve $100 per month (less than a pack of cigarettes or a Starbuck’s caffe latte a day) invested over those same 50 years:

1. $100 per month over 50 years beginning at age 15 with interest growth at 12.96% (remember, the average growth of the S&P 500 from 1950 to 2020) grows to $4,312,833.00 at age 65! That’s over 4 million dollars!
2. $100 per month over 50 years beginning at age 15 with a more conservative 9% annual rate of return still results in $1,025,254.00 at age 65. Over one million dollars.

It is human nature is forego saving for the distant future. After all, the challenge of today is what we face. Mine is an effort to express that today may offer us the best or only opportunities and tools with which to provide for the welfare and security of the 65 year old we will one day become. -Pete

**Note: In 1960 when Mr. Cruz arrived as a teenager in the United States he spoke only Spanish. His family settled here in Kansas City Missouri where he attended Westport High School. In his December 10, 2010 column he expressed gratitude for teachers John Ploesser, Inez Pletcher and Thomas Sickling, each of whom he believed contributed to his adjustment and future success.

     The only miracle attributed to Jesus Christ that appears in all four Gospels is that of the “Loaves and Fishes”. Simply recounted, Christ had been preaching to a multitude of followers. His disciples became concerned that in the lateness of the day they did not have the means to feed thousands of people. The disciples urged Christ to send the crowd away to fend for themselves. Instead, Christ instructed the disciples to have the throng seat themselves in smaller groups. Obtaining a few loaves and fish from a passing boy, Jesus publicly broke the bread and fish, instructing his disciples to distribute the few pieces among the people for them to eat. When the thousands had finished eating the leftovers filled many baskets… an amount vastly beyond what had first been distributed.

     Years ago I heard a sermon that provided an alternate take upon the “Miracle of the Loaves and Fishes”: The homilist reflected that in the time of Christ it was customary for people to carry food with them when away from their homes. “Rations” in case they should find themselves hungry without the means to find food. He suggested that Christ’s public act of sharing the little that he had brought the people to draw upon the food that many had with them, in turn sharing within their groups. The minister then concluded his sermon by suggested that perhaps the loaves and fish did not “miraculously” multiply. Instead he offered the question: Is it not a greater miracle that one act of charity can infect acts of charity in others?

     The COVID pandemic has profoundly impacted people the world over. Not only through illness and death, but by the impact upon economies resulting in rampant unemployment and people becoming unable to meet their basic needs of food and shelter.

     As a part of its plan to address these challenges, the United States government has issued relief payments to those identified as in need, $1,800.00 per person thus far, with more expected. The test of need is based upon personal income. Eligibility for the payments has been limited to those earning less than $75,000.00 per year. The income test is efficient but imperfect. Among us are some who are technically eligible for the relief payments but are not food or housing insecure… people fortunate to be less impacted by the pandemic.

     If you count yourself among the fortunate, consider giving some (or all) of any stimulus relief payment you receive to a well vetted charity whose mission is to provide food, shelter or similar support assistance to those in need. Charity Navigator  (www.charitynavigator.org) is one organization that examines charitable giving, rating their transparency and efficiency in delivering the most “bang for the buck”.

In Kansas City two highly regarded charities that target these populations and are particularly skilled at delivering the most impact for each dollar donated are:

Harvesters – The Community Food Network (www.harvesters.org/)

and

Operation Breakthrough (https://operationbreakthrough.org/)

Peace Everyone. Pete

This past week a number of events seem to converge into a single message for me. Early in the week I hosted a video chat with a group of old friends. We came to learn that every one of our families have been touched by COVID-19. Fortunately with no fatalities. My daughter (a nurse) continues her recovery from the struggles of a COVID infection that occurred nearly a month ago. A younger (very athletic) friend had gone silent after indicating that he had become infected. I learned that he had landed in the ICU, struggling for his every breath. He very nearly fell over “the edge“. Thankfully, he is now on the road to recovery and has been transferred to a regular ward. One of his observations was the extreme stress carried upon the shoulders of the hospital staff. The hospital is over capacity with no end in sight.

Also this week I received communications from folks who persistently deny that COVID-19 is real. People who maintain a belief in some grand international conspiracy. I had enough, and on my Facebook account I “unfriended“ them. In my pique I shared these things with my Facebook community without identifying those who had been “unfriended“. I also added, “…did I miss anybody?“. My daughters applauded my actions, understanding how very reluctant I have been over the years to exercise the “unfriend” button. A couple of people took umbrage with my post and asked that they be “unfriended“ as well. Still others found sadness in these personal interactions. For reasons I will explain, I am not one of them.

I originally resisted joining Facebook. However, I found that I could learn more of the day-to-day events in my children and grandchildren’s lives through Facebook than I could in a telephone call or a discussion over coffee. I joined. Soon I had a fairly large Facebook community that showed interest in our family and our travels. In turn I have enjoyed glimpses into the lives of my friends as shared on FB.

Many of my dearest friendships predate Facebook. Many friends do not participate in Social Media. I do not measure friendship by one’s presence or absence in my Facebook community. Facebook is merely a convenient forum for sharing.

I received some private expressions of regret from others at what had transpired between “friends”. I have come to believe that while social media provides a convenient forum for social exchange there is a darker side. We have come to take too seriously being a “friend“ or an “unfriend“ on social media.

Friends often have disparate views in matters of politics, religion, and socioeconomics that do not threaten friendship. However, in the realm of social media those distinctions, especially when extreme, may rendered it inappropriate for there to be participation in one another’s social media communities. We choose who we invite to Thanksgiving dinner. We choose who attends graduations, weddings, and birthday celebrations. We choose who is on our Holiday card list. Most of the time no offense is taken by those who are omitted.

Friendships may be a reflection of our work, our neighborhoods, where we worship, together with when and where we went to school. Social media does not and should not determine our relationships. I merely invite you to consider your own view of Social Media friendship and “unfriendship“.

Peace to Everyone. Please stay Safe, Happy, and most of all Healthy in this Holiday Season. Pete

PS. Speaking of Holiday Cards: Disaster has again befalling me in my best efforts to send out cards! After handwriting and addressing over 500 cards… even including a $10 bill in each one to make up for the past years’ omissions, I placed the cards in the oven. I had thought it would be a harmless way to sterilize them and avoid any risk of virus transmission.

Unfortunately, I became distracted by doing the laundry, washing the dishes, scrubbing the floors and washing the windows. In my neglect the cards and their contents perished.
Oh well, perhaps better luck next year. Pete

This last week my daughter Alexis shared a vignette concerning her 12 year old son Kane and one of his teachers. Before I share it I want to place it in context with two other student-teacher interactions that involved my family in years past:

In 1989 we had moved from our home in central Kansas City to 20 acres located in rural Clay County. The children had been attending an urban parochial school that was very diverse. The early days in their new rural public school setting were an adjustment for both of us our children. Our son Peter and daughter Renee’ which were in the 5^th grade, and Alexis was in 2nd. “Dad, where are the black kids?” was a question that our son posed at the end of his first day in the new school. Most of Peter’s friends in the city were children of color… indeed, in first grade the children had been urged to bring baby pictures to class as part of a contest to see who could most accurately associate the baby pictures with the first grade classmates. Peter wanted a picture that would be a real challenge for his peers. I pointed out to my son that since he was the only Caucasian boy in the class that really wasn’t going to work very well. Proof that we are born “colorblind” until trained otherwise by the adults.

Peter came home one day excited to begin work on a class assignment. That got our interest, “Peter, excited by homework?!?” I inquired. Grandparent’s Day was approaching, and the teacher asked the students to write about their grandparents. Peter asked his teacher if the story could be fictional. She said yes, without taking into consideration the workings of a boy’s pre-adolescent mind. Peter set to work, skipping afterschool television.

Later, he shared his effort with us. After reading his story, which was about my father (also named Peter) I again asked Peter if he was sure that fictionalizing his grandfather was OK. He assured me that he had cleared it with the teacher. Peter was off to school, excited to turn in his assignment.

A few days later Peter came home from school crestfallen. He handed me a note from his teacher requesting a private parent/teacher conference.

Arriving for the meeting I squeezed into a too small desk and was mentally transported back in time to my own less than endearing experiences as a 5^th grader. The teacher towered over me and placed Peter’s essay on “my” desk. “Have you read this?” It was more an accusation than a question. “Why, yes. It is quite creative.” To which she replied, “WELL, what are you going to do about it Mr. Schloss?” If I recall correctly, my 5^th grade teacher had a habit of calling me “Mr. Schloss” when I was in trouble. Some things never change.

I asked her if she had given Peter permission to write a fictional account of his grandfather. “Yes, BUT NOT THIS!” Again she wanted to know what I was going to do about it. “Nothing” was my reply. He completed the assignment as instructed, and in fact was more excited to do so than I had ever seen him be about homework. No doubt the teacher now considered young Peter to be the acorn that had not fallen very far from me, the tree.

She refused to accept his work and required that he do it over. It fell upon our shoulders to praise our son for his creative effort and to explain that perhaps the teacher just could not appreciate his talent.

Peter wanted to know if he could send his essay to his grandfather. I discouraged this and in light of his teacher’s reaction Peter seemed to better understand that his grandfather would probably not fully appreciate the skill with which he had recounted grandfather’s fictional life as a Nazi war criminal.

Fast forward to 1997. Renee’ was living in France, a year long placement as a high school foreign exchange student. She wrote a letter to her former French teacher in America. As it happened, that teacher was then Alexis’ second year French teacher. In her letter (proudly written in French) Renee’ had shared with the teacher some of the details of her new life and also suggested that perhaps her classmates in France and the teacher’s students could begin exchanging correspondence… becoming class “pen pals”.

We knew about Renee’s letter as she had shared with us her intention to write to the teacher. We did not expect what next occurred. One afternoon Alexis came home from school hopping mad and on the verge of tears. The teacher had read parts of the letter out loud in class, criticizing and correcting Renee’s grammar as she read. She failed to include in her recitation Renee’s class pen-pal suggestion. Now I was mad.

I requested a parent teacher conference. Because of the “heat” of my request, this was arranged to include the school’s principle. I verbally let her have it with “both barrels”. “A great teacher is one who recognizes and seizes upon teaching opportunities that are not found withing the pages of a textbook. You may be a teacher, but your conduct demonstrates that you are one in name only.” The principle sat silent while I continued to dress her down.

Now to my grandson Kane and his 2020 COVID-19 virtual class experience:

  Approaching Thanksgiving, Kane’s class was given the assignment for each student to write an email to someone they are thankful for. Kane’s teacher expected the students would be addressing their words of gratitude to a parent, relative, or friend. He did not expect Kane’s take on the assignment or the initiative that would be required to executed it.

Kane, like most 12 year old boys, loves fast food. For him McDonald’s is the best of the best. It seemed quite natural to him that his “thanks” should be directed to someone responsible for that little bit of culinary joy in his life. Kane’s research resulted in an email that he addressed to the CEO of the McDonald’s Corporation.

Kane’s mother (our daughter Alexis) is the school nurse where Kane is a student. His teacher shared with her his surprise at Kane’s interpretation of the assignment. A week later he shared his shock that Kane had receive a personally written reply from one of McDonald’s executives, thanking Kane for his email which had been circulated among staff. In appreciation for the bit of happiness that Kane’s email brought to McDonald’s, a gift certificate was included.

Kane’s teacher told Alexis that the next email assignment would be for each student to write to a company whose products they appreciate. To Alexis the teacher shared his intention to participate, “Do you think the Fender Guitar Company gives out gift certificates?”

The finest teachers are those who remain willing to be students.

Peace Everyone. Pete