“Do you know what you call those who use towels and never wash them, eat meals and never do the dishes, sit in rooms they never clean, and are entertained till they drop? If you just answered ‘a house guest,’ you’re wrong because I have just described my kids.” – Erma Bombeck
I want to start off by saying that I love our children and they really are great. It’s just that sometimes they do or say things that are so disconnected from reality, you are just bewildered.
This past Friday night was a classic example. After finishing our meal, my wife and children retired to the living room to stake out their space on a couch and just hang out. All is great except that I was left to clean up the table and do the dishes all by myself with zero help. Now I didn’t expect my wife to help because she basically does everything in the house, works very hard and in addition, as a birthday present, we gave her the Shabbat off. Meaning that we did all the cooking, setting the table, etc.
However, I was expecting someone under the age of 21 to get off the couch and help. After doing all the dishes and cutlery, I noticed that there were still glasses on the table as well as dirty napkins, and partially full bottles of water. I was already upset that I wasn’t receiving any help and made a face when I started clearing the glasses. That’s when our middle daughter decided to put some of her 12th grade psychology studies to use.
“Abba,” she said, “we all know that you really like to do the dishes. You make a face and complain but deep down you enjoy it.”
I looked at my wife in disbelief. She was also in shock. Then my daughter lobbied some of the other kids and got my oldest son to agree with her. I answered that I really DON’T like doing the dishes, but they need to be done, so I do them. While that is the truth I am not so sure she was convinced.
While it’s maybe nice to live in a fantasy world, we need to deal with reality. At the end of December, I got a call from a client wanting to know how much interest he had earned during the year. I gave him the number and he was shocked at how low it was. I explained that his whole portfolio is invested in US government insured certificates of deposit (CDs), and with interest rates at zero, they don’t pay very much. In fact I reminded him of multiple discussions we had on the very topic over the course of the last three years.
I REPEATEDLY said he should think about either corporate bonds, or a moderate percentage of his portfolio invested in some well-known dividend-paying stocks in order to generate more income, but he always refuses. He always ends up buying new CDs that pay about 1% annually. He says he remembers not too long ago buying CDs and getting 6%-7% a year. I reminded him that it’s been many years since that has been the case, and that CD rates have been low for a very long time.
When it comes to investing and financial planning, you need to be realistic. Whether that means planning based on average or even below-average stock market returns or basing your budget on real achievable numbers, if you continue to fool yourself, you will pay a big financial price down the road.
When trying to figure out how much supplementary income their portfolio needs to generate in retirement, so often I hear couples say that we spend NIS 30,000-40,000 a month, but we plan on cutting that to NIS 15,000. Uh huh, that’s going to happen. If you have lived a certain way (good or bad) for 40 years, don’t think that you are going to suddenly do a 180 and change your way of life overnight. It’s not realistic. So, too, I read about how investors believe that they will make 15%-20% returns on their money because that’s how they have done the last few years. Never even imagining that markets also can and will go down.
As Mel Lawrenz writes, “The only way to live a stable, healthy and fruitful life, is to live in reality. There are many ways by which we could live in fantasies and illusions that will set us up for certain disappointment and maybe worse. The fantasy that we are able to have or control whatever we wish is one. The illusion that we are entirely helpless is another.”
Oh, and to my dear daughter, better breakout the Palmolive. I think I will let you share in the enjoyment of doing the dishes because I’m taking the week off.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and a licensed financial professional in the US and Israel. Securities offered through Portfolio Resources Group, Inc. (prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit aaronkatsman.com or email aaron@lighthousecapital.co.il.