As I sit here typing this afternoon the S&P 500 is trading at 1670, up 14% since the beginning of the year. 27% over the last 12 months. The very definition of a raging Bull Market. Add to this the fact that it has more than doubled since the Spring of 2009.

Whether you are considering investing a new chunk of cash that has come your way or whether to sell and sit on the sidelines for a while, it is times like these that test your core investing principles and beliefs.

Here are some of mine:

• It is impossible to time the market, regardless of all the heavily credentialed gurus on CNBC and the like who claim they can.
• The market is the most powerful wealth-building tool of all time.
• The market always goes up, but it is always a wild and rocky ride on the way.
• Since we can’t predict these swings, we need to toughen up mentally and ride them out.
• I want my money working as hard as possible, as soon as possible.

But for novice investors, it is impossible not to look at the past market swings and think, “If only!”

jlcollinsnh reader Wendy was kind enough to write and ask precisely these questions and express precisely these concerns. Since my guess is that lots of readers are wrestling with the same, for today’s post let’s look at her note and explore it together.

Hi James,

I’ve recently inherited a chunk of money from my dad and knew it was important to start investing. I’m very new to this as I haven’t invested in stocks, bonds, or anything before. I have been researching about investing and stumbled upon Mr. Money Mustache and in turn you.

I’ve learned a lot about what to do before a stock market crash if you’re ALREADY investing, but my big question is…

If I’m am going to start investing for the very first time, is NOW a good time, right before a possible stock market crash?

I have read about us being in a boom and a lot of people seem to think a stock market crash is just around the corner. I know there’s always going to be ups and downs in the market, but I’d like to get off to a good start by growing $60k and contributing about $1000+ per month.

What I fear is that I’m entering at the wrong time. That I’m investing right before a stock market crash and my $60k won’t earn much over a short period. Then, suddenly a crash will happen and I’ll be down to $20k, and then growing from there. I’d rather grow from $60k, than $20k.

My fear had held me off for months, but I feel because I’m holding off I’m losing out. I just want to get off to a good start, not a bad one.

After reading Mr. Money Mustache’s last posting, I thought I should be investing, just more bonds less stocks. So I decided I want to go for a 70/30 portfolio being I’m 30 and with Vanguard as you and MMM have recommended. So last night I opened a VBTLX and put $42k into it and was just going to hold off on stocks and put the stock money into my 1% high-yield savings til after the crash. This morning though I’m having doubts that I jumped in too early and should have waited til after the crash because I still may lose a chunk of money.

If I am doing things right in getting started, should I also be putting that 30% into stocks now too or just hold off til after a crash so I can make the most of that money?

I’m just so fearful since I’m so new to this. Any advice on what steps I should take or change would be greatly appreciated. Thank you in advance for taking the time to look into my situation.

Sincerely,

Wendy

PS:  I’m not wanting to retire at 60. I don’t really have a deadline, I’d just like to retire as soon as I can, but with enough money to enjoy traveling and just work for fun here and there where it’s optional. I’m not sure with my income and savings if that will even be possible, but I’d like to try. So that’s why I want to be smart about how I get started.

Hi Wendy…

Welcome and thanks for the great and timely questions!

We’ll start with your comment, “I’ve learned a lot about what to do before a stock market crash if you’re ALREADY investing…”

It doesn’t matter if you have 60k in cash waiting to invest or if you already have the 60k invested, your concerns and fears regarding a market crash will be the same. So, step one will be to learn to deal with your fear.

Fear is the major theme of your note. Don’t feel bad. It is one of the two major emotions that drive investors, the other being Greed.

Fear is perfectly understandable. Nobody wants to lose money. But, until you master it, fear will be deadly to your wealth. Once you are invested it will cause you to flee in panic for the exits every time the market drops. And drop, repeatedly on it’s relentless march up, it will. The curse of fear is it will drive you to sell in panic when you should be holding. Here’s how you deal with it:

http://jlcollinsnh.com/2012/04/15/stocks-part-1-theres-a-major-market-crash-coming-and-dr-lo-cant-save-you/

The market is volatile. Crashes, pull backs and corrections are all absolutely normal. None are the end of the world. None are even the end of the market’s relentless rise. They are all, each and every one, expected parts of the process.

As that post says, there is a major market crash coming, and another after that. Over the decades you’ll be investing, countless smaller corrections and pull-backs as well. Learning to live with this reality is critical to successful investing over the long-term. And successful investing is by definition, long-term. Anything short-term is by definition savings or speculation.

So, if as that post claims we know a crash is coming, why not wait to invest or if currently invested sell, wait till the fall and then go back in? Simply because we don’t know when. Nobody does.

In your note you say, “I have read about us being in a boom and a lot of people seem to think a stock market crash is just around the corner.”

That’s certainly true, but there are also lots of people who say we are just at the beginning of this boom and we will never see the S&P as low as 1670 again. Every day heavily credentialed experts are predicting a market crash. At the same time, equally credentialed experts are predicting a boom. Who’s right? Beats me. Both are predicting the future and nobody can do that reliably.

So why all the predictions? Simply because booms and busts are exciting! Get it right and your reputation is made! Predicting them equals ratings. Especially if the predictions are extreme. Predict the Dow soaring to 25,000 or crashing to 5,000 and people perk up. There is big money to be made doing this, for the gurus and cable TV shows anyway.

But for serious investors, it is all useless and distracting noise. Unless you pay attention. Then it is positively dangerous to your wealth. And sanity.

History can help, but only on the broadest of scales. You see it in that chart above. The stock market always goes up. There are powerful reasons why. Click on that link you’ll find my post that discusses them and why I can say, with almost absolute certainty, that 20 years out the market will be higher than today. Why with a very high degree of confidence I’d say that 10 years out it will also be higher. Why even 5 years out my bet would be the same.

But this says nothing as to what the next few days, weeks, months or even years will bring.

Here’s the problem. There is simply no way to know where in time we are.

Look again at that chart. Could we be at a moment similar to January 2000 when the market peaked and went on to lose almost half it’s value? Or July 2007 when it did the same? Sure, it is easy to see that pattern.

Or could that pattern have run its course, and now is more like the time the market passed 1000 or 2000 or 3000 or 4000 or 5000? Each level left in the dust not to be seen again. Times when people were every bit as convinced that it was too high and ready for a crash.

Beats me.

But let’s as a mental experiment assume we do know that right now, at 1670, the market is at a top and about to crash.

Maybe a magic genie has told us so.

Clearly we’ll sell (or not buy). But now what? We want the gains only the market can deliver. So we want back in at some point. But when? Is this a 10% pull back? If so, we’ll want to buy at 1500 or so.

But what if it’s a 20% decline, the official definition of a bear market? Then we don’t want to buy until around 1330.

But what if we do that and it turns out this is a Crash!! Damn! Should have waited until 835 or so. Where’s that pesky genie when we really need him?!

The point is, to play this market timing game well even once, you need to be right twice: First you gotta call the high. Then you gotta call the low. The world is filled with sad investors who got the first right and then sat on the sidelines while the market recovered and marched right on past it’s old high.

Market timing is an un-winable game over time. How can I be so sure?

Simple:

The person who could do this would be far richer than Warren Buffett

and twice as lionized.

Nothing, and I mean nothing, would be more profitable than this ability. That’s what makes it so seductive. That’s why gurus constantly claim they can do it, even if only a tiny bit. Nobody can. Not really. Not in any consistently useful way. Believing in Santa Claus is more profitable.

Breeding unicorns is more likely.

But I don’t care. Here’s what I’d care about.

You mention that you are 30 years old. You have some 60 or 70 investing years ahead. I’d look at that chart and note that 60 years ago, around 1953, the Dow was trading at 250. Today it is 15,424. That’s thru 60 years of financial disasters, just like the ones sure to come during the next 60 years.

Or just consider the last 20 years and the S&P 500 index. In April 1993 it was around 450. Today, 1670. And that includes 2000-2009, one of the all time worst stretches in market history and a crash second only to the Great Depression.

It is in this the magic lies. The stock market’s wealth building power over time is nothing short of breathtaking.

But so is the ride along the way. Whether you invest today and it happens tomorrow, or sometime in the future, I can also guarantee you that your wealth will be cut in half more than once over those 60 years. You’ll suffer many more smaller setbacks as well. It is never fun but it is the process, and the price you and everybody else must pay to enjoy the benefits.

So really, the question you are asking is not “Should I invest in stocks now?” Rather it is, should you invest in stocks at all?

Until you can come to terms with the harsh facts above, the answer is no. Until you can be absolutely certain you can watch your wealth get cut in half and still stay the course, the answer is no. Until you read this complete stock series and understand and are comfortable with the risks that come with the rewards you seek, the answer is no.

In the end, only you can decide.

But, fortunately, investing doesn’t have to be an all or nothing proposition. If you are willing to give up some performance, there are ways to smooth out the ride a bit. It is done with asset allocation.

I describe mine here and again here. In keeping with the premise of this blog, it is the soul of simplicity. Just three funds and some cash on hand:

50% Stocks.  VTSAX (Vanguard Total Stock Market Index Fund)  Our core holding for all the reasons we’ve discussed.

25%  Real Estate.  VGSLX  (Vanguard REIT Index Fund) and the equity in your home if you own one.  REITs (Real Estate Investment Trusts) invest in real estate.  They provide an inflation hedge and dividend income.  But during periods of deflation real estate prices plummet.

REITS are the Ying to our Bonds’ Yang.

20%  Bonds.  VBTLX (Vanguard Total Bond Market Index Fund) Bonds provide income, tend to smooth out the rough ride of stocks and are a deflation hedge.  But during times of inflation and/or rising interest rates they get hammered.

5%  Cash.   Cash is always good to have in hand. Cash is also king during times of deflation.  The more prices drop, the more your cash can buy.  But idle cash doesn’t have much earning potential and when prices rise (inflation) its value steadily erodes.

Now, since you indicated you plan to hold a large percent in bonds, let’s talk a bit more about those.

Typically, the “safer” you want your portfolio to be the greater the percentage of bonds you would hold. My guess is this is why you are thinking of having 70% of yours in them.

But bonds are not without risk. In fact, of the investments I hold the one that I view as most risky right now is the bond fund. To fully understand why, you need to understand bonds a bit. Reading Part VII will help.

But basically the reason is that bond yields are at record lows. Getting there has given them a great run. But from here it is far more likely rates will rise than fall. When that happens, bond prices will drop. Rate increases could happen fast and hard. If it does, bond prices will fall fast and hard too.

Holding you bonds in VBTLX will help. The fund holds multiple bonds across multiple maturities. That will cushion the blow and it is why this is the bond fund I recommend. But make no mistake, it will still take a hit.

So knowing that, why do I still hold them? For the same reason I hold stocks knowing that a crash will come again — I can’t know the “when,” but meanwhile they provide the benefits described above.

If you want to hold 70% bonds, as you indicated, be aware of the risks that entails.

If by now you are tearing at your hair and screaming, “Fine, I’ll just put the cash in my mattress!” (Or bank account paying virtually nothing in interest), more bad news. Doing so will, short of a deflationary depression, almost assuredly guarantee a loss. (Cash is great to have in depressions) In 20 years inflation will have seriously eroded the buying power of your 60k even if the face amount remains the same.

Mmm. Remember the 20 years spanning 1993 until today? The one with all the disasters, crashes and wars? The one that took the market from 450 to 1670?

The point is: There is no such thing as a risk free investment. Having money means having risk. You only get to choose what kind.

What kind should you choose? Well now, that depends on your time horizon and goals. Let’s look at yours:

“I’d just like to retire as soon as I can, but with enough money to enjoy traveling and just work for fun here and there where it’s optional. I’m not sure with my income and savings if that will even be possible, but I’d like to try.”

That’s a wonderful goal and in fact closely mirrors my own when I first started. If you are serious and are willing to pay the price in nail-biting sleepless nights along the way, here (finally!) is my specific advice:

• Read the Stock Series on this blog.
• Read it again.
• Once you are absolutely clear on the wild ride stock investing entails, decide if you have the stomach for it.
• If, and only if, you are absolutely certain you can master your fear and will ride out the plunges and not panic….
• Put your 60k into VTSAX.
• Or into VBIAX. This holds 60% stocks and 40% bonds for a less gut wrenching ride. But you’ll still have to hang on and not sell in a panic.
• Add to this every month the $1000+ you indicated you are able to. More if you can.
• Completely forget about the market’s ups and downs.
• Or celebrate the downs as the buying opportunities they are for your monthly investments.
• When this grows to 25-times your annual expenses, you have reached Financial Independence. (This is the same as being able to live off 4% of your total stash)
• At this point, shift some of your assets to Bonds (unless of course you already have them in VBIAX) and REITs. This will smooth the ride even as it lowers your performance. A trade you now want to make.
• Start living on this 4%.
• Now you can consider whether you want to continue working.
• If you keep working, while living on your 4% pour 100% of your pay into your investments. This will help dramatically expand your net worth.
• Along with it, the dollar amount 4% represents will also grow.
• With this dollar expansion of your 4%, feel free to expand your life style.

Oh, and keep us posted on your progress!

Sincerely,

jlcollinsnh

Addendum I:

OK. Having read this post you know market timing is a fool’s errand and short-term market predictions are pure silliness. Right?

That doesn’t mean they are not fun. With the full understanding that any accuracy on my part (or anybody else’s) is pure luck, here’s my call for 2013 and those of a few others in the comments.

Addendum II:

In referencing the market’s performance in this post, you may have noticed I jump between using the Dow and the S&P as the indexes. I prefer the S&P because it is broader and therefore a bit more precise. But the Dow goes back further in history and is more useful (and what is available) for the long view. If you overlay their charts over time, they track together with remarkable consistency, making them for our purposes, indistinguishable.

The lobby of Hotel Pariz, Prague

For the jlcollinsnh family, so far 2013 has been a very good year.

The house is finally sold, freeing up some capital. The stock market has been on a tear. Our daughter had her milestone 21st birthday April 1st.

Unfortunately, for that last, she’s in Rennes, France and we are in New Hampshire.

While we missed the actual day, later that month we did have the chance to meet up with her for a week in Prague. With all we have to celebrate, we decided to add a little luxury to this trip. The fact that we had only a week — usually we are stretching our travel dollars over a month or more — and because Prague is one of the least expensive cities in Europe, this seemed the time.

If, like we were, you are ever looking to splurge on a trip and you need a recommendation on places to do that in the great cities of Europe, my good friend, world traveler and fellow motor-biker, Barry, is your man.

Until he retired a few years back, Barry had a business bringing people from around the world to the great Universities of Europe during their off seasons. They’d come for a series of lectures given by the finest professors (who were of course also in their off-season) of the featured college, fine dining and luxury touring. A bit like a grander version of our own planned Chautauqua.

On his recommendation we stayed at the Hotel Pariz and a fine choice it was. This gorgeous old-world style hotel is in an elegant old building right in the old town center.

Adjoining the hotel is the Sarah Bernhardt Restaurant. This Sarah Bernhardt being the “Divine Sarah,” the French stage and early film star and “the most famous actress the world has ever known.” At least in the late 1800s and early 1900s when she was setting the world’s heart aflutter.

Her connection to Prague is the Czech artist Alfons Mucha who created many of the famous posters promoting her and the productions in which she stared.  Heres’ one:

Back here in the 21st century USA, a person’s 21st birthday is a bit of a milestone. Among other things, it marks the legal drinking age. That in mind, part of our plan for this trip was to take our daughter out to dinner for a belated birthday celebration featuring some fine dining and to maybe share our first legal bottle of wine together. So I was on the hunt for just the right place.

Like the hotel itself, the Sarah Bernhardt Restaurant is dripping in old world elegance. One look was enough to confirm the setting was just right. But that, of course,  is only part of the program.

Poking around the restaurant and its menu I noticed they offered a six-course Tasting Menu with wine pairings. I’m a sucker for good food and a believer in letting the chef serve what the chef thinks best.

And I’m a sucker for good wines but, short of red with meat/white with fish, lacking in the knowledge and skill for effective pairings. I’m more than willing to place this too in more capable hands.

In short, I’m a sucker for letting those who know better do it.

After considering some alternatives, one fine afternoon I stopped by and made a reservation for 8 pm the coming Friday evening. It was then I got the first hint this would be a special evening.

The maitre d’ didn’t just scribble our names in his little reservation book. Rather, he gave me a tour of the dining room suggesting which tables we might best like to be set for us. I chose one by the window.

Our dining room that night

While the Tasting Menu first caught my eye, faced with an intriguing selection of entrees and appetizers we are nothing if not thorough in our menu due diligence. But in the end, as I suspected it would, the tasting menu got the nod. If you’ve clicked on the link it is not hard to see why.

In addition to letting the chef choose what he considers his best, it also leads us to try things we might not ordinarily choose. Especially the wine pairings.

As I mentioned above, in this I claim no skill. But I know what I like. Still, like everyone, the range of what I like is limited to the range of my experience. And since the range of food and wine pairings is virtually unlimited it pays to have an open mind and palate. Let me offer two examples:

I don’t care for sweet wines and the Cypres de Climens 2007 served with our second course is as sweet a wine as I’ve ever encountered. My first sip gave me pause. Yet, paired with the duck foie gras as it was, nothing could have been more perfect.

Jawbone Canyon Road in the Mojave Desert

I do like dry white wine, but my first sip of the third course Riesling, late harvest 2010, Mikulov, Reisten Valtice made the Mohave Desert seem a tropical rainforest in comparison. Paired with the zander, it’s the obvious choice.

I know of at least three oenophiles who read this blog and I sincerely hope they’ll each weigh in with their thoughts on these and the other wines we enjoyed that evening.

Let me just add that the Chateau Camensac, Grand Cru Classe 1999, perfectly matched to our main course, was as good a wine as has ever passed my lips. And, thanks to a career that entailed rather extensive business entertaining and more than a few oenophile friends and skilled sommeliers, I’ve downed some pretty primo swill in my time.

That same career and its attendant expense account also has gotten me a seat in more than a few of the most highly rated restaurants of their day. I’ll say now, this meal easily ranks in the top five. In fact, the only reason I don’t place it firmly in the #1 spot is that I’m not sure my memory can still do justice to the other contenders.

My daughter has no such problem. Somewhere about three-quarters of the way thru, she sat back and said, “This is the best meal of my life.”

I said, “When you are 80 you very well might still be saying the same thing.”

But a beautiful setting, exquisite food and exceptional wines are only three of the pillars needed. Service is the fourth, and in many instances the one most likely to fall short.

• A great restaurant isn’t going to open its doors until the room is perfect.
• Great wines are as close as a great supplier and a fine cellar.
• A great chef will let nothing out of the kitchen that falls short of the standards that built his reputation.

But most often if there is going to be a weak link, the table service is it. It is here I have a couple of pet peeves. Well, OK, many more than a couple but I’ll only bore you with these few basics every server should know and every diner should expect:

• Serve everybody’s course at the same time. And, no, saying “Opps the kitchen got this out faster than I expected!” doesn’t make it better.
• Don’t remove anybody’s plate until everybody has finished the course. And, yes, I know waiting is less convenient for you.
• Don’t bring out a new course until your diners have finished the one before. And, no, saying “Opps the kitchen got this out faster than I expected!” doesn’t make it better.
• Learn what the placement of silverware on the diner’s plate means. And, no, saying “Opps I thought you were done.” doesn’t make it better.

If you are going to presume to open a premium restaurant and presume to charge premium prices, for pity’s sake take a moment to train your serving staff. And, yes, this includes the bus boys.

Ok, I feel better now.

But not as good as I felt that evening watching our two master waiters ply their craft. Like any great art, Richard and Pavel were a joy to behold. So impressed was I, at one point I beckoned them over so they could hear me say to my daughter:

“For the rest of your life remember these guys. Tonight they have set the bar against which you can measure all future dining experiences.”

Yes, I was well into the wines when I presumed to do this. But I stand by the statement in the cold light of day and after a few weeks to consider it. They were that good.

As if this all were not enough, with the bill came complimentary tickets to:

Alfons Mucha Museum

Just about this time last year, Mr. Money Mustache kindly invited me to present a guest post on his wildly popular site. In it I make the point that, for me, it has never been about “retirement.” It has been about having F-you Money and the freedom it brings. It is about having options.

Throughout this blog I urge you to save 50%+ of your income and to invest it in simple, low-cost index funds. Doing so buys you the most valuable thing money can access: Your financial freedom. But achieving this is just the beginning of a much richer life. As your money continues to grow along with it a whole new world of options and indulgences opens up.

In this interview The Mad Fientist explores with Paula a concept she express so well: The point of choosing to shepherd your money wisely is not deprivation. It is so you can, as her blog is so well titled, Afford Anything. Not everything maybe, but anything.

Being able to travel to Prague for a week to meet my daughter and to enjoy with her an exceptional meal with some exceptional wines is one of the indulgences that gives me great personal pleasure. In this post is another.

Your choices likely are different. Maybe you’ll share some in the comments?

Addendum:

Speaking of indulgences, this week I am visiting Cleveland and in the process checking off #7 in my plan for 2013.

Last night, in fact, was the much-anticipated dinner with The League of Extraordinary Gentlemen. With the exception of one 47-year-old naif, they are all geezers like me. Not a single one retired, but each with their own F-You Money. This they have accumulated mainly in the operating and sometimes sale of the various businesses they have launched.

My pal Dennis both hosts and organizes this evening of fine dining, excellent wines and wide-ranging conversation.  My thanks go out to him for it. We meet at a rustic fishing club tucked in countryside somewhere east of the city. Rumor has it that we are each hooded before being driven to this secret location. This is, of course, nonsense I can neither confirm nor deny.

Holding the event at this private club of his has two advantages for me:

1.  I am unable to pay.
2. For me to reciprocate, Dennis has to travel to NH and track me down. And that provides another evening of good food, fine wines and interesting conversation.

So get yourself back out here, Dennis. My turn to buy. Same goes for you other guys!

painting by  Sergey Gusev

April has long held some significant dates for me. My wife’s birthday is April 9th. My daughter’s is April 1st. How I was hoping she’d also be born on the 9th so I’d have only one date to remember.

April 15th is Tax Day here in the USA. And now I have April 8th: The day our house finally sold. What a relief. What a saga.

A couple of weeks back I was sharing this tale with my pal, The Mad Fientist. He owns a house and, like the smart financial guy he is, he is thinking in advance about how to unload it when the time comes. Unless you plan to die in yours, you should too. It’s never cheap and it is not always easy.

Looking at our Settlement Statement, it cost us $21,000/5.68% to get out of the place, mostly the real estate commission followed by various taxes and fees assessed by the folks with a hand in the transaction. Of course, this doesn’t include the $5,500 we spent staging the place. Oh, and it cost the buyers over 15k to get into it.

That’s over $40,000 in transaction costs.

Lots of folks make money when a house changes hands. Just not you. This ain’t buying or selling no Index Fund.

But if the cost of selling is daunting, at least the process is tedious and unpleasant. You’re going to have to…

 …kiss a lot of frogs and…

• get the place spotless.
• keep the place spotless.
• understand you are no longer living in your home. You are now living in a museum version of your home.
• be ready to scramble to get it put together and ready to show at a moment’s notice.
• understand every time it is going to have to be perfect. You never know which showing is THE showing.
• accept an endless parade of strangers tramping thru the place. Nothing like coming home after a showing to find some potential ‘buyer’ took a crap in your master bedroom toilet. If they flush, by no means a guarantee, you’ll still be able to tell by the stink.
• be ready for the Feedback. That is, the constant parade of people telling you what’s wrong with your house.
• accept uncertainty. There is absolutely no guarantee that all this effort and grief will get you free. It took us two years.

We first started trying to sell in the spring of 2011. In late March we listed it at $434,900, knowing that was an aggressively high price. My thinking was this would give us room to come down substantially in the negotiations, the idea being that buyers like to feel they got a great deal. I know I do.

Of course, this felt low to us. At the peak, houses like ours were selling at 550k+.

Now, I’m rational enough to know that was then and this was now and then matters now not even a tiny bit. Still, we are all also emotional beings subject to what the psychologists call “anchoring.” And my anchor was way up there at 550k. So in my head I’d already come down over 100 grand. Such are the fevered imaginings of the anchored seller.

Buyers, of course, were having none of it.

We had a steady stream of showings, but nary a nibble. By now we knew the market was continuing to fall and we needed to catch up. May 1st we lowered the price to $415,000 in what we thought was an aggressive step. It was, but not aggressive enough. The months and the showings ground painfully on. Nothing.

Finally, we pulled it off the market and headed to South America for the summer. Some things are more important than unloading the house and by now we are now counting our blessings that selling for us is optional.

Upon our return, and after assessing our options, we re-listed it in September with the heartbreakingly low price of $389,000. Showings trickled in, but no offers. In December we pulled it again.

More reassessment and analysis. We were getting a few showings, but no interest. Clearly we needed to take this process to the next level. We came up with a three-step plan:

1. Staging. If you unfamiliar with this process, as we were, here’s the deal.  Professionals come in, in our case two very artistic women, and proceed to very nicely explain to you what hideous taste you have and how they can make the place appeal to today’s demanding, hip and stylish buyers.  Which, clearly, you are not.  The most disturbing thing is, they are correct. Two weeks and $5500 later it is done and, oh my.  The place really does look spectacular.
2. A new realtor. After spending all this money, We wanted a fresh approach and to be sure the marketing was top-notch. We found Blanche (not her real name). The brochure she produced and the pictures she had taken were souvenir quality. (I, in fact, still have one as a souvenir.)
3. And, of course, a new and still lower price: $359,900.

Staging, excitement, a new realtor, slick marketing, 359,900. I figured it would sell in a week. So sure in fact was I, I put down a non-refundable deposit on an apartment.

Showings blossom, but still no offers. The weeks drag on. We lower the price to $355,000. Blanche gets discouraged. Each conversation now begins with her litany of what is wrong with the house and why this is not her fault. What in my world we call CYA (cover your ass) mode.  The listing expires. We head back to South America for the summer.

Returning to New Hampshire it is now the Fall of 2012 and we are burned out on this house selling business. Or, more accurately, this house showing business.

We’re now down a cool 80 grand from where we started. Except for the first, each time we went with the lowest price suggested by any of the realtors we interviewed, looking for a quick sale. But we’ve not been able to get ahead of the falling prices. We decide to forget about it for a while. Maybe revisit the idea in the Fall of 2013.

But time heals wounds quickly and by December we are already talking about taking another run at it. We really are done with the hassles homeownership and ready to move on. For our remaining time in NH we want to be in the city, renting and walkable.

By late January we are once again interviewing realtors. When Blanche took the listing the year before she boldly said: “If I can’t get this sold, you shouldn’t hire me again.” We take her at her word.

This time we notice something different. Realtors are now no longer recommending a specific price, but rather a range. It occurs to me that recommending a price to home sellers is a tricky business. Too low and you don’t get the listing. Too high and the place doesn’t sell. Or it takes months to sell, which is not in the realtor’s best interest. Better to move it and move on to the next.

Ann (her real name) impresses us the most and her suggested range is from 340k to 355k. We go with $339,900.

We’re now down a cool 95 grand from where we started.

My thinking is that we’ve been chasing a falling market and the time has come to get under it. At this level I’m pretty sure we are and, I’m hoping, if by too much we’ll attract multiple bids.

Once again we spit-shine the joint and on Thursday February 14th, Valentine’s Day, it goes on the market. By Sunday we will have had over 45 showings and two offers. What a zoo. If I’d had any idea, I’d have left town for the weekend.

The first offer comes in Saturday morning and it is for 330k. At this point, I figure the house is sold. We are 10k apart and after the negotiation dances will likely land at what I guess to be the buyer’s real price of 335k. Not what I want, but what I can accept. They want a response by Sunday.

By Saturday afternoon we get word that a second offer is coming. The day has had wall-to-wall showings. We go to bed feeling pretty good about things.

Sunday morning I open an email sent from Ann late the night before. It reads:

“Attached is the second offer. Let me know what you think.”  Mmm. What fresh disappointment is this? I open the attachment and go right to the price line:

$355,000.

I sip my coffee. I look again. Still:

$355,000.

I start reading, looking for the ugly contingencies. There aren’t any. I look again at the price:

$355,000.

I figure I better print this out. I do. There, in ink and on paper:

$355,000

I call Ann. What do you think? she says.

I think, I say, I’d like to know if bidder #1 would like to up their offer.

Evidently the way this works is that active bidders who have been outbid are contacted. They are told there is a higher bid and they are asked to put forth their “final and best” offer. But what is interesting, and what I don’t entirely understand, is they are not told how much the higher bid is. So they have no way of knowing where the bar is.

In our case the bar is now $15,000 over the asking price, 25k more than their original offer. Probably far more than they’d step up to from their starting 330k, even if they knew. Not knowing, they come back with 337k. An aggressive bump in their minds I’m sure, but bidding blind they never really have a chance. It seems unfair.

Sunday evening we accept the $355,000.

Over the next few weeks, as is often the case, we get to know our buyers a bit. They are a very nice young couple with two little girls right around the same age our daughter was when we bought the place. He’s taken a job that is moving them from Philadelphia. She grew up in our little town, and her parents still live here. So she’s coming home and the kids and grandparents will have far more time together. No wonder they are excited.

“The One”

They knew our house was “the one” the moment they saw it. She loved it for all the same reasons I did back in the day:

It’s in a kid-friendly neighborhood, but the house is set back and on a hill. The woods and wetlands are behind and the pond is the view from the front. Community with privacy, except for the wildlife that comes to visit.

So the old place is passing in to good and appreciative hands. It surprises me, but turns out this crusty old financial geek likes knowing that. Who’d-a guessed?

Today we’ll explore some alternatives

In Part VI of this Stock Series, and in other posts on the blog, I recommend three specific mutual funds:

• VTSAX (Vanguard Total Stock Market Index Fund)
• VGSLX (Vanguard REIT Index Fund)
• VBTLX (Vanguard Total Bond Market Index Fund)

These are the funds I own myself. In each case they are the “Admiral Shares” version. As such they have rock bottom expense ratios, but also require a minimum investment of $10,000.

While these “Admiral Shares” versions best fit my needs, they might not fit yours. Perhaps you are just starting out and the 10k minimum is still too steep. Or maybe they are not offered in your 401k plan.

Vanguard is also the only investment company I recommend, or use. But maybe Vanguard itself is hard to access in the country where you live or in the 401k you are offered.

Not to worry. Today we’ll explore some alternatives.

Variations on the Funds

Each of these funds come in other flavors. For example, VTSAX is a Vanguard Total Stock Market Index Fund and that exact same portfolio can be found in five other funds, or what Vanguard calls “classes.” Below I list them with links to Vanguard and followed by their expense ratios and required minimum investment.

The first three are for us individual investors:

• Admiral Shares: VTSAX .05%/$10,000
• Investor Shares: VTSMX .17%/$3000
• an ETF: VTI .05% (ETF=exchange traded fund. You buy ETFs in any amount you want, just like a stock. And, just like a stock, commissions and/or spreads are frequently involved, adding to your costs.)

These next three are “Institutional Shares” and you might find them in your 401k or other employer-sponsored retirement plan:

• VITPX: .02%/$200,000,000
• VITNX: .04%/$100,000,000
• VITSX: .04%/$5,000,000

So, when I recommend VTSAX you can substitute any of these if that’s what is available and/or if one of these others better meets your needs. The important thing is that you are buying the Vanguard Total Stock Market Index Portfolio.

Similar variations can be found for VGSLX (Vanguard REIT Index Fund) and VBTLX (Vanguard Total Bond Market Index Fund). If you click on those links you’ll go to the Vanguard page describing them. At the very top, under the fund name, you’ll find links to the Investor and ETF versions.

Vanguard has a very active institutional business serving 401k programs and the like. If you are curious, this is the link to the list of their institutional funds. (Mmm. Seems this link didn’t hold the list. But if you paste “institutional funds” in the search box it will bring it up.)

What if Vanguard isn’t available in my 401k (or similar) plan?

Even if your tax-advantaged, employer-offered plan doesn’t offer Vanguard you should still participate, certainly at least up to the amount needed to capture any employer match. Once you leave that employer you can easily roll your investments into an IRA with Vanguard.

The good news is that, due to the competitive pressure from Vanguard, nearly every other mutual fund company now offers low-cost index funds. Just like the variations you can find in Vanguard of VTSAX, you can in all probability find a reasonable alternative in your 401k. Here’s what you are looking for:

1. A low-cost Index Fund
2. For tax-advantaged funds you’ll be holding for decades, I prefer a Total Stock Market Index Fund.
3. You can also look for a Total Bond Market Index Fund. Most plans will also offer these.
4. A REIT Index Fund might be harder to find in many plans. If you want real estate in your allocation you can buy VGSLX outside your 401k. Remember, too, you should count any equity you have in your house as part of your RE allocation.
5. Target Retirement Funds are frequently offered in 401k plans and these can be an excellent choice. But look closely at the fees. They are always higher than those for index funds, sometimes by a lot.

For my international readers:

If you live outside the USA, Vanguard and its funds may or may not be available. Vanguard is growing rapidly and now is available in many countries outside the USA.  You can check the list out here:  Vanguard Global

If Vanguard simply is not an option, in your fund search you’ll want to follow the same guidelines as described above for 401k plans.

Also, when I talk about VTSAX or a Total Stock Market Index Fund, both these are indexes that mirror the US stock market. As I explain in my post on International Funds, this is all those of us in the USA really need. But you might find it difficult to access such a USA-centric fund.

No worries. Take a look at a Global Fund like VTWSX. This is an index fund that invests all over the globe. In some ways I like it even better than my beloved VTSAX. In fact the only reason I don’t recommend it instead, is because of it’s relatively steep expense ratio (.35%) and because VTSAX covers international pretty well for the reasons I describe in that International Funds post linked to above.

If you are inclined to go this route, you might consider the lower cost ETF version: VT  Ordinarily, I tend to avoid ETFs (exchange traded funds) because with them you have the possibility of sales commissions and/or spreads to consider. But since the expense ratio on VT is .19%, it is worth exploring. Just be careful what you pay to buy it.

One final caution. Be sure that whatever global fund you choose includes the US market. It is a huge chunk of the world economy and you can’t afford not to own a part of it. Many ‘international” funds, especially those offered by US-based firms like Vanguard, are “ex-US stocks.” The reason is that they are designed to supplement the holdings of investors already in the US market with VTSAX and the like. Makes sense, but likely doesn’t suit your needs as an investor outside the USA.

The Bottom Line:

Since I no longer work or have access to 401k plans (Rats!), my portfolio looks like this:

• VTSAX (Vanguard Total Stock Market Index Fund) 50%
• VGSLX (Vanguard REIT Index Fund) 25%
• VBTLX (Vanguard Total Bond Market Index Fund) 25%

I also hold some cash, about 4% at the moment. I target about 5%. (Yes I know all those add up to 105%. These are targets that vary with market swings.)

If for whatever reason I didn’t have access to those specific funds (or if I had access to the even lower expense ratio Institutional versions) I’d look for the Vanguard variations that delivered the same Vanguard stock, bond and REIT index portfolios.

If for whatever reason I didn’t have access to Vanguard, I’d look for similar low-cost funds from whatever sound investment company was available:

• A Total Stock Market Index Fund for about 50% of my money
• A REIT Index Fund for about 25% of my money
• A Total Bond Market Index Fund for about 25% of my money

And if the future offered me the chance, I’d roll on in to Vanguard when I could.

If you’ve found similar solutions in your 401k, or as an international investor, please share them in the comments. I’d love to hear about them and my guess is so would the other jlcollinsnh readers sorting thru these concerns. Thanks!

Cool, if a bit creepy, Prague street sculpture*

Welcome to my first “on the road” post ever!

Those of you who are regular readers know that, when I travel, I leave the electronics behind. In fact, even if you just read the last post you know this. The reasons are many.

Mostly, I like to travel light. Then, too, when I’m on the road visiting new and interesting places looking at a computer screen holds even less appeal than usual. Plus, if I’m honest, a big part is a reaction to my last job.

In those days I traveled for business quite a bit and, of course, carried a company laptop for the purpose. I always dreaded opening it. My inbox would inevitably be filled with corporate nonsense that inhibited productivity and impinged on customer satisfaction. And that last meant that, all too often, it was also filled with irritate customer complaints. Each more justified than the last and each my responsiblity to smooth over. So my associations with carting a laptop along on my travels are less than comforting.

But here I am, late this evening after a fine day roaming Prague writing this post on my daughter’s machine. She is much more attuned to the technology than I and she takes hers everywhere. I gotta say, it’s kinda nice.

When we bought our Apple a couple of years back, we choose the desktop Mac version with a nice big screen. The idea was that it would best suit our needs until we go more fully full-time mobile a few years down the line. At that point the plan called for selling the Mac and picking up whatever ultra compact but still functional machine they’d have come up with by then.

t

The Astronomical Clock in Prague’s main square*

But using this one here in Prague has got me thinking. My needs on the road are really simple: Email. Internet. Skype. I’ll bet the cheapest laptop out there would handle that and more. In fact a used machine a few generations old should do just fine. Right?

This summer the trips we’ll be taking will include lots of quiet, down time. For instance, my in-laws have once again graciously offered us the extended use of their Wisconsin beach house on the shores of Lake Michigan. Beautiful sand beaches lie just outside the door and stretch uninterrupted for miles in both directions. The summer days are long, lazy and warm.

We are also considering a long leisurely train trip across the North American continent.

Both should be perfect for some writing I’d like to get done. Perhaps some progress on the book I’ve mentioned that is in the works. But this means I’ll need a laptop in tow.

Truth is I know so little about this tech stuff it is amazing I can put together and publish these blog posts. But I also know there are any number of jlcollinsnh readers who are experts. So, let me ask:

What would you do?

What is the cheapest, easiest and simplest solution? The solution where if the machine gets lost, stolen or destroyed it is less bother than a mosquito bite? What should a basic machine cost new these days, and which one? Any need to get an Apple to match our Mac or, as I’d guess, does that not matter for my use? Is used the better path or does that just buy less reliability along with more performance I really don’t need? Any votes for dropping this silly idea and continuing to enjoy blissful technology breaks while traveling?

The church that houses the Astronomical Clock*

As for Prague: Having a wonderful time. Wish you were here. Everybody else seems to be.

This is a truly beautiful city but, boy howdy has it been “discovered.” The place is thick with tourists. To a degree I’ve only seen before in Venice, Italy — another drop-dead gorgeous city but so tourist saturated as to be almost like a Disney theme park. And I loath Disney theme parks.

Beautiful city quite filled with people there to look at it.*

Where Venice is an island and thereby isolated, Prague center has the advantage of being surrounded by a real Czech city that bleeds into it, softening the theme park quality. Yesterday we hopped on a random public tram and rode it to the end. Great fun to watch the city change as the blocks went by.

Still, wandering around the old town, you’ll find yourself trying to thread your way thru never-ending clots of tourists bunched up listening to some tour guide prattle on. At least one business man, British by his accent, lost patience and growled at a group to leave a path open for people to pass by. Rude perhaps, but open they did and we took the opportunity to follow him thru. Were I living here, my patience would fray too.

None of this is to suggest we’re not having a wonderful time or that Prague shouldn’t be on your short list if you are so inclined. Our hotel is delightful, the Czech people are friendly and the food is excellent. All of this set in one of the most walkable and picturesque cities in all of Europe. And that’s saying something.

So, by all means visit. I can promise you won’t lack for company.

 Prague Sunset*

*all photos in this post courtesy of Jess Collins

One of 36 seriously cool animal photos

While we won’t be swimming with tigers, we also have a seriously cool Chautauqua coming together this September, including our new mountain location:

Hacienda Cusin.

What might make this interesting to you is this note I just got from Cheryl:

“Hey guys,

We had a couple drop out of the retreat so that opens up two more slots in case you want to mention that on your blog. It was the last couple that signed up and they wrote saying they realized they really should pay down debt rather than spend the money.  They asked if we had a waiting list and could be replaced. We don’t, but I did not have the heart to keep their deposit.

But still rockin’ it with 23!!!

Cheers!

Cheryl”

This is one of the many reasons I’m delighted to have partnered with Cheryl on this venture. So if this sold out before you could act before, a new chance is here. Hope to see you there.

A few weeks back our Sunday newspaper ran an article in their Money & Careers section titled “What’s your financial IQ?” Of course I promptly took it hoping it would be some really silly crap I could then mock in a post here. Alas, it was pretty good. But one question caught my attention:

#10. What is the best way to minimize your losses in your investments when the stock market declines?

1. Be the first to sell everything at the slightest hint of a downturn.
2. Have a diversified portfolio.
3. Don’t buy stocks in the first place.

Clearly the answer they were looking for is #2, and that was the one in their answer key. This is in fact solid advice for investing in stocks. As we’ve discussed here, asset allocation can smooth the ride. But look at the question and its phrasing again. The correct answer to that precise question is actually #3. Clearly not buying stocks is the best way not to have losses in them.

If #2 is the answer they wanted the question should have read:

Assuming you hold stocks as part of your investment portfolio for their strong gains in good times, what is the best way to minimize your losses in your investments when the stock market declines?

 I’m not entirely sure what my point is here. Maybe that precision in language is important. Maybe that when it comes to investment advice be sure you understand the details. Maybe I just enjoyed catching the slip and thought you might too.

Bridges over the Vltava River in Prague

Photo courtesy of travel.nytimes.com

As for us, we’re headed back to Europe this week to spend spring break with our daughter who is studying in France this year. We’ll be meeting her in the beautiful city of Prague, a first for each of us. But not it seems for many of our friends. Since sharing the plan, I’m a bit amazed at how many people we know have traveled to this place. Without exception, they rave about it. This it seems is a city of rare beauty and personality. Who knows? Maybe even home to a jlcollinsnh.com reader or two…

As always with my travels, I leave the phones, computers and other electronics behind. I don’t even take my electric razor. The blog will be on vacation too. See you in a couple of weeks.

Meanwhile, check out a few more cool things I’ve stumbled upon….

What do these two couples have in common?

  they are the same two people

This four minute film, Channel Pipeline, from 1944 describes how the allies provided a reliable flow of fuel to their war machines as they sweept across Europe during World War II. I never knew any of this. I never even thought to wonder about the question. I find it cool on a couple of levels:

• Great story
• Told in that unique 1940s newsreel style
• Fascinating look into 1940s industrial innovation

Tree Spirits

Here’s the theme song from the Good, Bad and the Ugly as performed by the:

 UKULELE ORCHESTRA OF GREAT BRITAIN 

You might want to watch as well as listen. Clearly, these folks are having fun!

Harry A. Franck

Dreamy Loafing in Cuenca Ecuador 1912 and the importance of carrying business cards

Riverboat Travel, back in the day.

Photo courtesy of old-photos.blogspot.com

Finally, before I left for Prague, I took a vicarious tour thru history and the wine country of Southern France with my pal Tom:

A little wine. A little bread. A little cheese. A little sausage. A little sun and little spot in Southern France.

Addendum:

Just after publishing this, I came across this new James Altucher post. If you’ve any doubt at all that creating financial independence is the best and highest use of your money, read it.

Too much stuff!

The snow tires were the first thing to go in, but only because the space was there. My pal David had offered them sanctuary at his place. Kind of him and were they the only things I had, his place is where they’d be. But since I have the locker, now I don’t have to impose on him. Not that he’d mind.

Shortly there after, I moved the first set of boxes over to it. Due to the diligent efforts of Mrs. jlcollinsnh, there is now a new 2nd set stacked and ready to go. I suppose if we’d planned better we could have saved a bunch of effort and had the movers take this stuff directly to the locker. But there’s nothing like having everything in the apartment to decide what can better be elsewhere.

Once what’s going is all there, we’ll take an inventory and decide if it’s really worth the cost of storing. One of my fears is we’ll tuck it away at $60 a month only to revisit it three years and $2160 later and say –What did we keep all this crap for?

For now, I’m thinking of it as the spare room I wish the apartment had and from which we’ll rotate things in and out as needed.

While it took a whole lot of work and a surprising amount of time, our move went remarkably smoothly. The credit goes to ace-mover Roger and his helper, James. They were a pleasure to have around and worked diligently the entire time, a key consideration when you are paying by the hour. Agreeing on an hourly rate always carries the risk of paying for slow foot-dragging work.

In selecting these guys we took a bit of a gamble. Instead of going with a big “name brand” we chose Roger, a very small one-man operation. For extra help he pulls in his step-son and/or a pal or two as needed for the job. James in this case.

The gamble came in that, of course, Roger doesn’t have the reputation of a more established operation or the resources should something go awry. On the other hand, I knew he’d be the guy actually doing the work. He wasn’t just the salesman-face that would then pass the actual labor off to workers I’d not meet until they showed up at the door. I liked being able to take his measure directly. Plus I like the idea of giving my business to a small company right in my community.

Sealing the deal, he first came to my attention having been highly recommended by the consignment shop where we placed some stuff for sale. Oh, and he was a lot less expensive.

The last time I moved was thirteen years ago in 2000.  We had been living in a lovely old century home in Lakewood, OH for the 15 previous years. I had taken a job here in New Hampshire and part of the deal was a relocation package that included the cost of moving. The only effort this took on our part was interviewing a few major inter-state moving companies, selecting one and whistling them in. Well dressed and well spoken fellows came by to explain why their operations were the ones best suited to our needs. Once our selection was made, we never saw them again.

When the time came, three very pleasant women arrived at the door. They did all the packing over a couple of days. Then, early on the appointed moving day, two young guys showed up with the moving van. Over the course of the next eight or nine hours they loaded our house-full of stuff into the van. Since we were moving from one house to another, and since somebody else was paying for it, we moved everything.

Once the house stood empty, I sat quietly on the dinning room window seat remembering the first time we saw the place and the good times we’d enjoyed there. Ordinarily, I’m not a very sentimental fellow. But it was a sad and bitter-sweet moment.

A dark, twisting, sleeting and foggy introduction to New Hampshire.

The drive to our new home took us about ten hours, the last few over the Green Mountains in Vermont and onto Route 101 in New Hampshire come late evening. This is a beautiful road on a sunny day, and I know it very well now. But in February at the time it was dark, twisting and fog shrouded. Sleeting, too.  I was dog tired by the time we reached it and I still remember it as the scariest drive of my life.

The next morning the same two guys arrived with the truck, having driven all night along that same route. If it was tiring for me in the car, it was exhausting to them in that huge moving van. They then spent eight hours or so unloading. Toward the end they were dragging, slow and irritable. No surprise given the lack of sleep and the hours they’d been working.

Why they put themselves thru such an ordeal, I don’t know. My only guess is the company’s policies were arranged in such a fashion as to reward them for it. But for us, good guys though they were, it made for an unpleasant and sloppy end to the move. I’ve been cautious of big company movers since.

So, when the time for this move presented itself, I interviewed one mid-sized mover and the two small outfits the consignment shop had recommended. The mid-sized company sent a rep with fancy forms and policies and promises. Most seemed to best serve their interests, not mine.

The two small companies were represented by the guys who owned them and who would be there doing the work. No fancy forms or policies. Moving’s not rocket science after all. The company protecting its ass is, but not the moving part. Roger got the nod being slightly less expensive, but I was equally impressed with the other consignment-reccommended guy, Jake.

Small, friendly & personal is the way we went.

Back when I was young and moved all the time, I did it with a few pals and paid them in beer. In the last 30 years I’ve moved only four times using professionals. So I’m no expert. But going small this time worked for me.

Had something gone horribly wrong, I might have wished for the bigger company to go after. But the truth is, I think, that even then the way their policies are written you’ve really little recourse. If things go bad it’s going to be ugly, big company or small. You have to hope and trust that the guys doing the actual work are conscientious and careful.

Personally, I think the odds of chosing well are best served in meeting the guys doing the work rather than the salesman representing the company. It’s kinda like having some strong friends with a truck. Only you pay them in cash rather than beer.

All packed up and ready to go

Drawing by Trisharay

Finally, we are homeless. Well almost.

Closing is actually Monday April 8th. Then, at around 4 pm, we will formally trade the house for a nice fat check that will be wired directly to Vanguard. Our money, formally tied up in home equity, will be productive once again.

Since the market is trading at all time highs you might be interested in how and on what time-table I’ll be deploying the cash:

Immediately, and when the dust settles my allocation will still be precisely what it was:

50% VTSAX (stocks)
25% VGSLX (REITS)
25% VFIDX (bonds)

It works this way because I already figured my home equity as part of my real estate allocation.

A common recommendation with a newly received chunk of cash is to “dollar cost average” (DCA) it slowly into the market. The idea is that, should the market tank, you will have spared yourself some pain. That’s fine as far as it goes, but there are other things to consider:

1. The market might also continue to rise, in which case you will have spared yourself some gain.

2. When you DCA you are basically saying the market is too high to invest all at once. In other words, you have strayed into the murky world of market timing. Which, as we’ve discussed before, is a loser’s game.

3. DCAing screws with your allocation strategy. In the beginning you will be holding an outsized allocation of cash. That’s OK if that’s your allocation strategy. But if not, you need to understand that you’ve changed your plan in a deep and fundamental way.

While freeing up cash, this process of becoming homeless has entailed an amazing amount of work. Exercise too. I’ve lost 4 pounds!

Beginning about two weeks ago we started packing, moving boxes around and purging stuff. Then this past week we hit high gear.

Monday, April 1st, we signed our new lease and officially became renters again. We packed up the Forester and brought the first load over with us. Happy April Fools!

Tuesday was the final packing push. Boy howdy — for people who don’t collect anything, who regularly purge their belongings and who just now sold, consigned, donated and trashed a boat load — we’ve got a ton of stuff.

 Addendum: 

Closing yesterday, April 8th, was butter smooth. We are officially home free.

It is striking to me how excited the new owners are to have our house, and how relieved we are to be done with it. Roots v. Wings.

Different stages in life.

We’ve owned houses (2) for the last 28 years. It fit our needs at the time, especially after our daughter was born in ’92. The new owners have two little girls just about the same age ours was when we bought the place in 2000.  Roots.

Now she’s off in college and for us the apartment life beckons again. Wings.

Wild Turkey

painting by Don Balke

This morning the wild turkeys came out of the woods and on to the back lawn for a visit. The last time was in the Fall when they were in the front yard with a small herd of deer, so it’s been a while.

While I am very much looking forward to our move, there are some things about the place I’ll miss. The wild turkeys are high on that list.

But moving we are and the ongoing prep made for a busy weekend around here.

Triumph Scrambler just like mine, although mine is a bit more beaten up.

Sunday I put the battery back in the Triumph and got it fired up for the first time since putting it to bed last November. It started beautifully which pleased me as I had been concerned. By the end of the season it was exhibiting some rough running issues while warming up. Likely carburetion. Then, when I drained the float bowls for storage, the one on the left kept spewing gasoline. So I had to close it up and leave it stored with the fuel in place. Never an ideal situation, even using fuel stabilizer.

My pal Tom has offered to help me sort out and repair whatever issues these turn out to be. That will address point #6a of my plan for 2013: Learn some motorcycle mechanics. I’m particularly glad this is coming together as point #6 – The off-road motorcycle training course - had to be cancelled (or at least postponed) due to time considerations. It had been scheduled for this past weekend, but with everything surrounding the house sale and move the plug had to be pulled. Maybe in the Fall.

Tom is well suited to the task even though he has in his words “never laid a wrench on a Triumph.” A collector and racer of antique bikes, he has laid a wrench on plenty of others. The Triumph might not be old, but it still mostly uses the simpler technology of those bygone days.

Not Tom’s ’48, but close.

I met Tom while out walking the dog one beautiful summer’s day when he came puttering down my street on his drop-dead gorgeous 1948 Harley panhead. Understand, please, in this context “drop-dead gorgeous” means completely original and un-restored condition. If you know old motorcycles you now have the right mental image. If not, picture a machine with about 75% rust and 25% faded paint. See? Drop-dead gorgeous.

Since Tom is gearing up for the racing season we won’t be able to touch my Triumph until May; timing that, with my move and all, works perfectly for me. In the meantime, he has graciously agreed to let me keep it over at his place. So we spent a couple of hours moving his equipment around to make room.

Basically, Tom’s place has four garages. The 2-car attached to the house is for the cars. Across the drive and to the back are two joined single car garages that are his motorcycle workshop and storage. Down by the road is another where we, perhaps optimistically, put up his tractor and snow blower for the season.

In one of his motorcycle garages, Tom has built a sturdy wooden platform running along one side about 5′ high and 3′ wide. Bikes are stored under it and up top. One of those up top was his 1960s vintage Honda CB 160 racer, and job one was getting it down.

Since the motorcycle lift only goes up about 3.5′ or so, this meant lifting the bike the extra 18″ from the platform down on to it. While balancing ourselves on the lift itself. One wrong slip and you’d have a YouTube worthy scene of us and 300 lbs of racing motorcycle crashing to the concrete floor. Easy job for two, not possible for one.

1960s vintage Aermacchi racer. Again, not Tom’s but close.

Next was reversing the process to place his Aermacchi Sprint racer back up on the shelf. Back in the 1960s, Harley Davidson began importing these single cylinder bikes in response to the highly successful smaller Japanese motorcycles that were suddenly everywhere. It didn’t take long before they were being modified and raced. They still are today.

Once this “heavy lifting” was done, it was just a matter of rolling the other bikes around and sliding my Triumph into place. That, and yakking about motorcycles of course. Other than riding, it’s hard to imagine a better way to spend a couple of Sunday hours.

Now with the motorbike safely tucked away until post-move, I find myself realizing that, in addition to the turkeys, I’ll miss having a garage. The apartment parking is off-street but outside. That’s fine for my 2007 Subaru Forester. It is the right vintage to not have to worry about such things. And the lack of indoor parking will go a long way towards deterring me from the expensive mistake of buying a new car and running afoul of my pal Mr. MM’s buy used mandate.

But the idea of the bike sitting alone and exposed bothers me. It might be, in my mind, the single biggest flaw in this whole apartment plan. There are some nice covers available that do a fine job of keeping out the elements. I’ll pick up one of those and hope it also has enough magic in the fabric to discourage would-be mischief makers. I’d hate to have to shoot one.

Saturday was also a day of moving heavy objects about.

Mrs. jlcollinsnh asked one of her colleagues to come by with his pick ‘em up truck to help haul our dining room set and some other furniture odds and ends over to the consignment shop.

Kurt is a fourth grade teacher at the same elementary school where she is a librarian and if the idea of a male fourth grade teacher puts a certain mental image in your head, keep in mind he is also the head football coach at the local high school. Unlike the football coaches I remember back in the day, Kurt works out with his players. He is about my size, which is to say football player big. He’s lean and very strong. Again, like me. Well, like me some 25 years and 60 pounds ago.

A great guy to help haul heavy stuff around and, as it happens, a great guy all around. So in addition to getting the job done, it looks like maybe I’ve found a new friend. The invitation is out: Once we get settled in he and his wife are due over for my wife’s famous Indian Lamb Curry. I’ll be in charge of opening the wine.

Our Dining Room Set.

For sale now at a consignment store near you. Well, near us anyway.

Why we took the dining set over to the consignment shop is a bit of an unfortunate tale.

Originally the plan was to sell it on Craig’s list as I described at the end of my recent consignment shop post. I had figured that it was worth about same $500 we paid a colleague of mine for it several years ago. But then we had our heads turned and greed infected our hearts.

Our friend Cynthia came over and fell in love with the set. Not that she wanted to buy it, of course. More that it was “just beautiful and easily worth at least $1500. Maybe more like $1800. You don’t want to just give this away!”

Could it be? $1500? $1800? Might we triple our money on this thing? But wait. There is no brand name on it. Still, one of the movers looking it over in giving us an estimate did comment on how well made it is. That’s worth something, right? Certainly $500 is too low! But $1800? $1500? Nah, can’t be. I know, I’ll put it on Craig’s for $1200. That seems where it fits given the other ads currently up.

Craig’s list: Dining set, $1200. No takers.

OK. Stuff has to be low on Craig’s. But the consignment store, with their nice displays and customer flow, should easily get $1200. Let’s see, after they take their 35% I’ll net $780. So if I can sell it on Craig’s for $780 I can save the hassle of carting it over there.

Craig’s list: Dining set, $780. No takers.

Mmmm, I can’t get $780 on Craig’s and time is running out. But surely the shop can get $1000, right? For an $1800 (Oh, how the mind works!) set? That’s $650 in my pocket. $150 more than I originally thought and paid. I can live happily with that.  Over to the shop it goes.

Now, the important thing to remember here is that the consignment shop doesn’t tell you how they’ll price your stuff until they see it. They won’t even tell you if they’ll take it. You bring it. You unload it. They inspect it. And finally, if they take it, you cart it inside and set it up where they tell you. Like I said in that earlier post, a great business model. No cost inventory delivered free right to their door.

Of course, they take it. It is a beautiful set. Then comes the price. It’s not $1800. It’s not $1500. Or $1200 or $1000 or $780.

On the plus side, they know how to price things to sell. Any emotional attachments buyers rightly don’t care about are stripped away. Prices are realistically market driven. In this case: $600. Let’s see. Less 35% = $390.

Yikes. Damn. Oh, well.

Even my own Manifesto has the line:

It’s OK for the other guy to get a deal, too.

In the next few weeks we’ll be going thru the myriad of chores involved: Packing, finding a mover, switching services, dropping our home owner’s insurance, picking up renter’s insurance, selling stuff on Craig’s list. That last is an adventure worthy of its own post. Maybe with the money we raise, we’ll even buy a new mattress.

For only $175,000 this one sounds nice.

The other day a lovely young couple stopped by to pick up a variety of garden tools we are unloading. They were very excited as they just bought their first house. It is, as she described it, a “fixer-upper” and they got it in a short sale. They are happy with the deal and busy shopping garage sales and Craigs list for all the stuff they’ll need.  She can’t wait to put in a garden. They are putting down Roots.

I’ve owned this house we’ve now sold for 13 years. The one before it for 15 years. That’s 28 years of homeownership for a guy who really doesn’t much like owning houses. As houses usually are when you run the numbers, they were lousy investments. But, I’ve no regrets. They served their purpose both as a place to raise our daughter in a great school district and just because we wanted the ownership lifestyle at the time.

Critical to making this work was that in both cases we bought far less house than the world of real estate agents and lenders told us we could. 1/2 to 2/3 less. Given the reaction of these professionals we may have been the only people in human history not to have bought the absolute maximum house we could afford.

Now we are on the verge of returning to the blissful, carefree, unencumbered life of renting. Instantly, we’ll have far more flexibility and far more mobility. We are spreading our Wings.

Roots & Wings.

Many years ago when our daughter was still very young I read, or was told, that good parenting boiled down to giving kids roots and wings. Made sense to me then. Still does.

She’s just a couple of weeks shy of her 21st birthday now and has already traveled to almost as many countries and continents as I. At the moment she is in France completing her junior year of college. While there, and part of the point of going, she’s seen a fair amount of Europe. She’s just back from a weekend in Geneva. At the end of April we’ll head over to spend a week with her in Prague.

Clearly, we’ve done well on the wings side of things. And our close family relationship provides the roots. But she’ll never really have the “old family homestead” sort of roots. We are more wing type people.

The whole rent v. own financial conversation tends to generate very strong and very emotional reactions. That always seemed a bit odd to me. It is, after all, exceedingly simple to run the numbers and see which is the more financially prudent course in any given case. From there you’ll know if your preference will cost or save you money. If it saves, you need only celebrate and do what you wanted anyway. If it is going to cost, you are able to decide if you want to spend the extra money your living preferences require.

In our case, the numbers always pointed to renting as the better financial path. Right now that’s a beautiful thing. We get what we want and it costs us less.

But even when what we wanted was a house that cost more, that was fine. What was critical at the time was understanding how much more that buying choice would cost. It was that understanding that lead to us always buy less house than we could “afford,” and that in turn made for a far more comfortable home ownership experience.

Not being privy to the numbers, I have no way of knowing if the young couple who bought my tools have made the best financial choice. But what is clear is that they are very excited about putting down roots. They certainly have made the best emotional choice.

That being the case, and assuming they’ve not spread themselves too thin, even if the house costs more over time they will have made the “right” choice. Life choices are not always about the money, but you should always be clear about the money choice you are making.

Anthropologists tell us that we humans, Homo Sapiens, have been running around the planet for just about 200,000 years and that we have been “behaviorly modern” for the last 50,000 or so. For the vast majority of that time, we were nomadic hunter-gatherers. More wings than roots.

But then some 10,000 years ago something very profound changed. After 190,000 years of roaming around, we began farming. We began settling down. We began building cities. We began to go to war over territory. We began to put down roots.

Why this occurred is the subject of much debate and research, but nobody really knows. But occur it clearly did. It has become hard wired in our historical myths and stories:

Abel v. Cain

Hunters v. Farmers

Nomads v. Settlers

Own v. Rent

Cain Slaying Abel by Peter Paul Rubens

a bad day for Abel

Abel v. Cain

Did “Able v. Cain” sound odd to your ear just now? It does to mine. “Cain v. Abel” is how I’ve always heard it. The farmer is named first. The farmer survived and reproduced. The hunter is killed off. The west is settled. The nomads exterminated or rounded up. Hunter-gatherers teeter on the brink of extinction. No wonder this debate is so emotionally charged. Our biases are showing.

They are even written into our tax code. Mortgage interest and real estate taxes are deductible. Home ownership is a national good and as such is rewarded. It’s worth noting that both these deductions, and the very concept of mortgages being widely available, grew out of the Great Depression. It was time of dangerous unrest. The fact that a settled population is more docile was not lost on the policy makers of the day.

We might also look at this as…

 Expansiveness v. Efficiency

Personally, we fall on the side of Efficiency. We like owning exactly what we want, need and value and not a single thing else. The apartment we’ll be moving to has a bit more than 1/3 the space we are leaving. It is exactly what we need and not a square foot more. Maybe even a few square feet less. But I’d rather pare down to fit.

The problem with houses is that, even for people like us, there is the relentless tendency to expand to fill them. For those who value Expansiveness, that’s just one of their charms.

The far side of Expansiveness can be found on the TV show:

American Pickers

If you haven’t seen it, the program follows two guys who drive around the country looking for old things they can buy and resell at a profit in their stores. They seek out places filled to the rafters and across the fields with junk that owners have collected, most often for decades. The people who own these places and all this crap are the pinnacles of the Expansiveness motif. Once the house is filled, the barn is next. Then the out-buildings, fields and trailers they’ve hauled onto their land to hold still more.

It is hard to imagine a more different mindset than my own, and that’s likely what makes it endlessly fascinating to me. Well that, and the idea of buying low and selling high, of course.

The beauty of our lives is the endless variety of how we can choose to live them. The point of this blog is fundamentally to discuss how and why to accumulate F-you Money and the freedom it provides in making those choices.

Roots or Wings.

The choice is yours. But as with every thing you chose to buy, be sure you take the time to know what it will cost.

Addendum:

My pal the Mad Fientist and his wife are definitely ‘wings’ people. Here’s his plan for achieving FI with a brilliant insight into how renting will help: The Shortest Path to FI.