Happy wife, happy life.
But what happens when she’s wrong? Even in these perilous times?
“My wife and I are those people that put most of our discretionary retirement money into cash before the markets declined in 2008, and we have stayed there ever since, expecting Crash #2 and an opportunity to buy back in at an ill-defined right time,” an Ontario blog dog writes. “Meanwhile we earn less than inflation on our money (and have entirely missed the last market rally) when our money should be working for us . We need some outside guidance to set us on a course along the lines of the one you preach on your blog (I think you are on target with your current approach). However, my wife is:
1. not a reader (claims to do too much for work and refuses to do any on her own time, ever);
2. does not like to talk about money, despite being a very intelligent and articulate person;
3. ultra-ultra conservative fiscally
4. suspicious of anything, everything and everyone financial except TD Canada Trust (she worked there as a teller while she put herself through school in back in the Stone Ages and is very brand loyal);
5. a child of immigrants and therefore brainwashed into the “house values always rise” and “GICs forever” mentality. In fact it took me 10 years to wean her off Canada Savings Bonds. In the 21st century!
6. her #1 idea for us to make our money work for us is to buy a house and flip it (not going to happen – I refuse to cooperate in this untimely idea).
Do you have a few lines I can use to help persuade her to get with the program?”
You bet. Remind her of where risk lies right now.
Money in a TD Canada Trust savings account or GIC is risky. The return, even for locking bucks away for a year, is less than the current rate of inflation – which means the yield is negative. Worse, interest (outside of a tax shelter) is taxed at 100%, so you get to keep only about half of what you make – putting you further in the hole. Saving money therefore means losing money.
Money in home equity is risky. Real estate values are at their zenith and destined to decline. HGTV is not a news channel. It’s porn. Nobody’s making any money flipping anything. People are over-extended, taxes are rising, the economy is slowing, sellers are still greedy, lending’s more restrictive and we could be on the cusp of a multi-year melt. Investing in spec real estate right now is the definition of risk.
Money in just one asset class is risky. Don’t care if it’s a house, a bunch of stocks or a garage full of gold. The world is experiencing a shift in its financial tectonic plates. The age of inflation, expansion, growth, endless credit and rock ‘n roll is ending. As it does, expect endless volatility, panic buying and selling and investors convinced bullion or Apple stock or US Treasuries are the only safe havens. They’re wrong. The only warm bosom is a balanced portfolio. Anything else will not give the agility now needed, and deliver only risk.
Money locked up is risky. Liquidity – the ability to turn assets into cash – will be king. Conditions are too changeable, the unknowns too large and the public mood too fickle, to be locked into anything you cannot monetize. Houses are illiquid. Bank GICs are illiquid. And gold won’t buy gas or KD.
Running out of money is risky. And those who need to know this most – long-lived women – often heed it least. The greatest danger is not losing money in an investment which tanks. In that case, a loss usually crystallizes only by selling at the wrong time. The greater danger, by far, is turning 77 and realizing you can’t afford the power bill, home care or fresh food. The CPP won’t save you. Most of us have no pensions. And life’s growing steadily longer. By seeking to avoid financial risk in your working years you may then run headlong into its icy embrace.
Finally, not trusting is risky. Your wife likely doesn’t do her own brake job, fix the furnace or paper a real estate deal, so why handle tax and investment strategies? If she (or you) doesn’t know about retractable preferreds, sector ETFs, investment grade bonds or options then where’s your plan coming from? The nice lady at the bank? The Dutch guy’s shorts? Mom?
Dude, tell your spouse you need a plan, not a hunch. Find an advisor who sells nothing. Plot your needs for the next decades. If you’re in the ditch, climb out.
Risk? Yeah, we’re knee-deep in it. And it’s piling. But so what? From challenge and pain springs hope.
Women know all about that.
