“The chief value of money lies in the fact that one lives in a world in which it is overestimated.”
– H. L. Mencken
The internet can be a source of reliable news and information, but there is no arguing that the cybernet is also filled with “Clickbait” from advertisers hoping to push products or simply secure a few cents a lead, hundreds of times a day. And when it comes to clicks, fear and panic reigns.
Lately, it seems that there is much fear and panic being created around the dollar. Is the end near, and should you liquidate your assets and buy gold? While we don’t claim to have a crystal ball, we’ll explore these concerns today with a fresh viewpoint.
Is the Dollar Collapsing?
First, let’s get “the bad news” out of the way. Financially speaking, there actually IS a LOT to be concerned about these days:
“Do not save what is left after spending, but spend what is left after saving.”
The Sage of Saving
Warren Buffet is one of the world’s richest men, and is seen as one of the greatest long-term investors of our time. But a key secret to his ability to amass great wealth gets much less attention than his savvy purchases of businesses and assets through Berkshire Hathaway.
Many investors and business owners have earned great fortunes, but have spent them almost as quickly. Buffet is famous for frugality, understanding that saving more is the first step to enjoying the fruits of compound interest. To him, each dollar is a seed that he can plant, knowing it will multiply into many more dollars over time.
“You’ve got to get the fundamentals down, because otherwise the fancy stuff is not going to work.”
– Randy Pausch, The Last Lecture
“It’s time to hedge!” said a popular financial author a few of weeks ago as the stock market plunged then started a violent roller-coaster ride. But is hedging really the best strategy?
Let’s look at exactly what hedging implies. According to Investopedia.com, the definition of “Hedge” is, “Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract.”
A popular phrase is our culture is “hedging your bets” to protect yourself from loss, in case you place a losing bet. You’re betting on two or more horses in case your favorite doesn’t perform as you hope. Dictionary.com expands, “Lessen one’s chance of loss by counterbalancing it with other bets, investments, or the like.”
“You have to do your own growing no matter how tall your grandfather was.”
― Abraham Lincoln
A few weeks ago, the story of a 22-year-old college student who had blown through her college fund too early, blaming her parents for her own poor financial decisions, caused a commotion on the internet. The college senior detailed her financial woes on an Atlanta FM-radio show whose wisecracking hosts derided her.
As Fox news reported, “This college student deserves an “F” in accounting after she blew through a $90,000 college fund on expensive clothes and a trip to Europe and now has no way to pay for her senior year, a predicament she blames on her parents.”
“Chase your passion, not your pension.”
– Denis Waitley
Although variations on the pension plan have been with us since the formation of the United States, there is a very good chance they will go the way of the carrier pigeon and the dodo. While not completely extinct yet, it is clear that we can no longer rely on the pensions of yesterday to provide for our future needs.
What can we learn from the rise and fall of pension plans, and where can we go from here to put control back on our side?
The Ascent of the Pension Plan
The first government pensions came about to help fund disabled soldiers and widows of the Revolutionary War. When a husband passed away, it was difficult for women to remarry, as it was for them to become landowners or acquire gainful employment. The U.S. government began issuing limited pensions (often in the form of land or animals, not cash) to protect disabled veterans and war widows in the late 1700’s from destitute poverty.
“The only sure thing about luck is that it will change.”
– Bret Harte, American author and poet
It’s been a wild, wild ride the last week. Stock markets around the world plunged on Monday, August 24, beginning with an 8.5% percent drop in China’s benchmark Shanghai Composite index. Stock markets in Japan, South Korea, and Australia followed China down. That sparked selloffs in European markets and a dramatic, historic 1,000 point dive of the Dow, with a partial comeback by the closing bell. The S & P 500 Index fell by nearly 4 percent on Monday, following sizeable losses last week.
China’s Shanghai Index continues to drift downward, meanwhile, U.S. stocks rallied yesterday, August 26th and the Dow gained more 600 points in a single day, the biggest one-day increase since 2011. U.S. stocks have continued to climb since (with substantial daily ups and downs), yet remain nearly 6% down from one month ago.
This is a guest post from Kate Phillips of Total Wealth. Kate helps us write and edit this blog.
How a Whopper of a Financial Mistake Became a Blessing in Disguise
Last week, we published a post from Dan Sullivan of Strategic Coach, “What You Can Learn from Failure.” As I read it, it started me thinking about all that I have learned from failure, and particularly my financial failures.
We often think of money as a game that we win by earning, saving and investing successfully. So what happens when we lose it all?
Money is a great teacher, and we can gain lasting value from ALL of our experiences with money. I’ve had a lot of financial wins in my life, but it’s my losses that have brought the deepest learning. This is a story about just one such event.