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Dumping Rules of Thumb

Updating sage bits of advice.

Travis Gatzemeier asked his followers what financial rules of thumb are out of date and there were quite a few interesting replies. “This time is different” is typically thought to be a dangerous phrase but at the same time, things do evolve. One element of financial planning success is to get the balance between “different” and “evolve” right or at least right enough.

Maybe the rule of thumb about saving 10% of your income is out of date, it probably should be more. Not everyone can save 10% let alone more than 10% but if you can, then yeah, you probably should. How much you save can be just as much about living below your means as making a lot of money. Avoiding lifestyle creep, the wrong kind of lifestyle creep, also helps. Spending money you can afford to make life easier, yes. Buying bigger houses and more expensive cars every few years, no.

What about paying off your mortgage as quickly as possible? My take on this has always been that the math is simple, don’t pay it off earlier. Taking away the deductions for mortgage interest makes it less simple but more than anything else, this is psychological up to a point. There is emotional value to having no mortgage payment but at a younger age the numbers say otherwise.

This changes in retirement though. Over the weekend, Barron’s said that seniors spend 46.5% of their budget on housing. How much easier then is retirement, not spending 46.5% on housing? The financial crisis certainly cast doubt on the reasons for owning a home versus renting but those reasons are short term in nature. No mortgage/rent in retirement improves optionality. You can click here to see the entire thread.

It’s been a little while since we talked about the cryptocurrency space. There was what turned out to be a blowoff top and Bitcoin has since cut in half. I’ve been saying for a while that if the touts are right, that 80% declines are normal then this is nothing to worry about in terms of the future of Bitcoin. A large decline probably does nothing to change the future outcome, whether that future outcome is good or bad. At some point of course if this ends badly then cutting in half would be a rest stop on the way to zero. If you have too much in Bitcoin or any of the other cryptos then maybe this is something to worry about

Sizing is everything. With the stock market continuing higher, gains in equities should be much larger than declines in crypto.

Finally, for the last couple of months I have been involved with a campaign to lobby the Baseball Writers of America to change the name of the MLB MVP Trophy to honor negro leagues legend Josh Gibson. The campaign is being run by and Gibson’s great grandson Sean Gibson. It’s a baseball card art contest where a bunch of artists have printed up, hand painted or digitally created custom cards depicting Gibson. My card is in the header of this post.

Each week there is a competition between 10 cards (this is the final week and there are 19) with one winner moving on to a final round. My card competed last week and came in 5th out of 10 getting approximately 9% of last week’s votes.

I’ve long been interested in the history of the negro leagues. Recently, updated its database to include negro leagues players and the numbers mind boggling. I would encourage everyone to learn more and to get involved with the #JG20MVP campaign on Twitter and Instagram.

On a personal note, making up a card and putting myself out there was a positive challenge. The consequences of failing (like getting only two votes, my vote and one from my wife) were de minimis but still, it was out of my comfort zone. Where this is a new thing, will it ever turn into an income stream? Probably not but it definitely is a way to stay creative and I’ve raised a little bit of money for charity. The Gibson card is for sale for a donation made directly to the Josh Gibson Foundation (DM me through Twitter if you’re interested) and I also made up a card of Satchel Paige where I said make a donation of any amount to any organization and you can have one and I did sell a few of each so far on that basis.