08 Mar 2019 Exception and Nuance: The King and Queen of Finance
My son Miles and I went to breakfast this morning before I dropped him off at preschool. We got a bacon, egg, and cheese biscuit for each of us and a donut to share, plus milk for him and coffee for me. I don’t know of a better way to start a Friday.
At any rate, we were at a place near my in-laws’ old house in Raleigh, and I suggested to Miles that we drive by and see where they used to live. He sat there for a second and then asked, “Dad, why did they tear down their old house?” Now, their old house is very much still standing, but in our neighborhood a bunch of low-income housing was torn down about a year ago to make way for new apartments, so we’ve talked about how all of the people living there had been forced to move elsewhere. Miles had taken those discussions and applied them generally, in the only way he knew how: If people have to move, it’s because their old house is getting torn down.
This is the way we–children and adults!–engage in learning throughout our lifetimes. Whether we’re learning spelling rules (I before E) or physics (things can’t be in two places at once) we start with first principles, and then we move on toward the exceptions (except after C, etc. etc.) and the nuance (Schrödinger’s cat). It’s no different in the world of investing and financial planning.
- Buying a home is generally not a great financial investment, but it might very well be a great family investment.
- Investing in equities is generally going to earn you a greater return, but it necessarily comes with greater volatility, and, depending on your situation, you might not need the greater return to begin with.
- Waiting until age 70 to take Social Security guarantees your highest yearly benefit, but if you’re married it might be wiser for one of you to take it earlier.
- More income is generally better than less income, but it may not be worth the extra stress and time away from family, and it is only additive to your happiness if you give and save and spend the extra dollars in particular ways.
- Deferring taxes in a taxable account is generally preferred, but not if it requires holding on to an investment that is overly risky or not adequately diversified.
- Deferring taxes in a traditional 401k or IRA is generally preferred, but not if you’re reasonably confident you’ll be in a higher tax bracket in retirement than you are now, in which case a Roth option might trump a tax-deferred option.
- Spending less money now is generally better than spending more money now, but not if you’re buying cheaply made junk that ends up in the trash and didn’t serve much of a purpose to begin with.
- Our entire economy is built on the idea of scarcity, but you might be surprised at the abundance that results from giving more of your money away and living with much less.
I could go on and on, but hopefully you get the picture. When it comes to your money, you are surrounded by exceptions and nuance, and when you encounter either one it’s hard to know what to do without the help of someone with your best interests in mind and the knowledge and experience to do something positive about it. That’s where we come in. We’ll help you learn the “I before E” first principles to govern your everyday money decisions, and then we’ll help you navigate the complexity of the financial Schrödinger’s cats.