Hansel and Gretel Vote at the Candy Cottage

I am mystified as to why Democrats assume mail in balloting is G-d’s gift to Democrats.

I get that anything Trump disses must be wonderful.  But remember.  Trump accuses others of what he does himself.  It is likely he will have cooperation from Republicans in authority in swing states.  I fear many Democratic ballots will be “lost” or “tossed”.

My husband and I did absentee ballots several years ago.  Fortunately, we decided to drop off the ballots.  We were told we did not complete them properly.  We had to redo them.  If we had mailed the ballots, they would have been destroyed – never counted. Both of us have post college degrees. It is not as easy to do these properly as the press continually implies.

A news article states, in Michigan, tens of thousands of voters were disenfranchised in elections and were never notified that their absentee ballot was rejected, a practice deemed unconstitutional in at least six states since 2016.  Unbeknownst to many voters, Michigan and many other states give broad authority to local clerks and election boards to purge absentee ballots that do not appear to meet strict standards. One of the main reasons ballots everywhere are discarded or not counted is also one of the most subjective and disputed: signatures on the ballots don’t appear to match those on file.  Who decides this?

Local election officials with no accountability or expertise in handwriting analysis are required by state law to toss out mismatched signatures. I have witnessed how signatures often change because of disabilities, injuries, or just sloppy handwriting. Signatures also can appear different based on whether voters are sitting or standing or simply the pen used.  How consistent is your own signature?

What’s worse, at least in Michigan, clerks have no obligation to notify voters or give them an opportunity to challenge rejected ballots, which judges in many states have called “fundamentally flawed,” “egregious,” “illogical, irrational, and patently bizarre.”

In October 2016, a U.S. District judge in Florida declared the state must give voters an opportunity to fix signatures disputes because election officials “have categorically disenfranchised thousands of voters arguably for no reason other than they have poor handwriting or their handwriting has changed over time.”  Will Democratic voters be notified under DeSantis?  I doubt it. 

Another example: in West Virginia, a mail carrier changed ballot requests from Democrat to Republican.  Similarly, do you remember the congressional district in North Carolina where Republican McCready fixed absentee ballots in his favor?

And another concern: the ballots won’t be delivered, deliberately lost in the mail, by the Trump crony Louis DeJoy now in charge of the post office.

Yes, I trust Minnesota more than other, more likely, swing states. But, fundamentally, I fear Democrats are way too trusting on this issue – why? Because Trump accuses Democrats of rigging the election.  Something Trump is likely doing himself while Democrats ride the waterfall down in favor of mail in ballots. 

Trump recently reversed his position regarding mail in ballots in Florida.  Did he and DeSantis recently have a cuddly heart-to-heart?

Yes, I am conspiracy theory minded on this issue.  I believe Trump and his sycophants have plans to steal the election tossing Democratic mail in ballots.

Post-election, will Democrats be able to protest the Republican rigging of mail in ballots after Democrats advocated it with such fervor?  Will we ever know how many Democratic ballots are tossed?

I want to know my vote is counted.  Even in Minnesota, I plan on voting in person, at the polls.  I hope Democrats in swing states will do the same.

The most recent of Fashion Statements

Nancy Pelosi, 80-year-old grand dame of the House, looked fetching in a white scoop necked shirt, ever-present large pearl earring studs, a pink pants suit and a matching pink face mask for her recent news briefing on the democratic house reaction to the Supreme Court DACA decision.

        On Memorial Day, former Vice President Joe Biden and his wife, Jill, wore solemn, solid, black masks while placing a wreath at a structure commemorating those who died in World War II.

        I, myself, have acquired numerous face masks in recent weeks.  My first was made by Julie, a dear friend.  A white and soft green outdoor motif stretch across my nose and mouth and colorful monarch butterflies flutter on each cheek.  Two long green ties allow me to fasten it at the back of my head.  This mask allows for a filter between the interior folds.  Most masks protect others, but not the wearer.  This protects me as well.

In response to Norman’s jealous pleas, Julie fashioned a similar mask with a yellow and green swallow poised on top of a pine cone.  Norman has not endured a lifetime of hooks, zippers, necklace clasps and buttons at his back – each part of the panoply of items used to secure female attire.  Cinching the ties is a breeze for me, but is a struggle for Norman. 

       Norman more often wears the disposable masks used by hospital workers.

       I acquired two adjustable elastic sonic the hedgehog masks for my grandchildren only to find poor sonic is unloved by all six of my grandchildren.  These are scorned, unused.

Each grandchild has been allowed to pick his or her own fashion statement.  I thought some would pick super heroes, but no.  Naomi picked white and red flowers on a blue background and Emerson cat whiskers. Raphael chose a tangerine background packed with filled ice cream cones; Saul’s mask sports chemical and physics formulas, and so on.

         I recently acquired a lovely iridescent green bamboo background with pandas hidden in the folds of the fabric.  The elastics are conveniently adjustable.

Senator Tim Kane, in a recent hearing, preferred a black and red scarf. 

I have seen legislators wearing a stretchy, heavier, balaclava type garment - usually in black, camouflage or subdued colors.  This is worn around the neck when speaking on camera, but is easily pulled up to cover the mouth and the nose the rest of the time.  Uncomfortably roasting perhaps, but the garment no doubt remains convenient and serves the purpose.

Protesters sometimes display the U S flag, or evilly grinning mouths, but more often their masks or scarves, if worn, have no particular political bent.

     A silly otter mask can reveal a playful disposition; a redwood forest or a ruined, oil-slicked shoreline would affirm a concern for the environment.  I appreciate the fashion detail shown when masks are attentively coordinated with the outfit, but am unable to task myself with that effort. A basic neutral solid color tells little about the wearer. 

The choice to wear a mask says more.   

Trump recently stated most Americans wear masks simply to show they disapprove of him – not as a preventive measure during the pandemic.  In this absurdly rare case, he is not entirely wrong.  When I heard Trump did not believe a mask was a good look for him, I decided it would be a good look for me.  I have been proven right.

Masks should get credit for the coronavirus spread that did not happen inside a Missouri Great Clips hair salon.  Two stylists with active coronavirus cut the hair of 150 people before their illness was diagnosed.  Great Clips required face coverings of all stylists and all customers.  Tracing revealed not one of their customers became infected.   

Why do some, including the Trump wing of my own family, refuse to do so when the health advantages are so clear?

So-So is Better than Diddly-Squat

So-So is Better than Diddly-Squat

This is a tale of two cousins and funds established to provide for after-high school education.
Priscilla Perfection and Dara Dauntless are cousins.  Priscilla’s healthy baby girl, Penelope, and Dara’s, also healthy baby girl, Daphne, were born within a month of each other.  Bills and the daily dramas of life sucked up most of the available income for each; there was little surplus cash to be found. 
Both received $500 of cash gifts from family members in celebration of the bundles from heaven.  Priscilla Perfection used the money to buy the ideal stroller, changing table, and part of the cost of the crib.
Dara Dauntless scrounged a hand-me down stroller and changing table from her elder sister and scoured Craig’s list to get a solid, but used, crib with a couple of scratches.  Dara instead put the $500 in a government blessed college fund called a 529 plan.  Don’t let the numbers fry your brain.  Concentrate on the phrase “college fund”.
In Minnesota, TIAA Cref (https://www.savingforcollege.com/529-plans/minnesota), brokerage houses and other on-line resources can help anyone set up these college fund accounts on behalf of your child, grandchild, niece, nephew or even someone you just care about.  The account grows free of taxes. If used for college or trade school, the earnings will never be taxed. 
The money is set aside on behalf of Daphne, but if Daphne, let’s say, gets a scholarship free ride and never uses the money put aside for after-high-school education, the money can be transferred and used by other family members – also free of tax. Or, it can simply be removed and spent for lottery tickets, in which case, the earnings will be taxed.
Priscilla knew about these college funds, but believed the amounts she had available would never amount to anything, they were “floccinaucinihilipilification”. (Hey, I just found this word and I had to use it, please forgive me. The on-line dictionary says it is the longest word in the English language.  It means “the estimation of something as valueless”.)
Dara continued to add to Daphne’s fund with every cash birthday and holiday gift from relatives, such as Great Granny Dumpling.  Dara is pleased to find these contributions to the after high-school education fund come with a Minnesota gift.  Minnesota, and other states, have a reduction in state tax to those who add money to these 529 plans.
Priscilla, instead, added to Penelope’s toy collection.  Priscilla constructed a shelf near the ceiling around Penelope’s entire bedroom to house the enormous collection of stuffed creatures that included a leech and a nano-virus.
Five years after Penelope and Daphne were born beloved Great Granny Dumpling choked on a large bite of chocolate eclair and “handed in her dinner pail” for good. 
All in the extended family grieve Great-Granny’s departure and remember fondly her zest for sweets.  Priscilla and Dara are warmed to be remembered in Great-Granny’s will by a gift of $7,000 each.
Dara continued her established practice and rolled her $7,000 of inheritance into Daphne’s college fund.
Priscilla, her husband, Paul, and Penelope took a Princess cruise through the Caribbean.  Unfortunately, they all became violently ill from some food problems on the ship and spent the majority of the cruise in the bathroom.
18 years after Penelope and Daphne are born, the entire family celebrates as each girl graduates from high school, each marching to the familiar strains of Pomp and Circumstance.
Priscilla promised Penelope, if Penelope retained a B plus average, she would send Penelope to whatever college Penelope chose.  Priscilla has no money saved to help fulfill this promise.  Tuition room and board at a typical private school average $45,000 per year. Priscilla is alarmed, but accepts the necessity – a promise made should be kept.  She reluctantly assumes a second mortgage on their home, and seeks a second job to fulfill that promise.  Priscilla is uncertain if even those measures will be enough to cover the four years of college education.
Dara made no such promise.  She and Daphne research schools and weigh the education, social aspects and price tag associated with each college in their decision.  No matter what the choice, Dara has roughly $36,000 or $9,000 each year to help with the tuition room and board.  $9,000 per year is unlikely to cover the full cost; Dara knows this.  But it helps.  A lot.
Exactly how much Dara has when Daphne enters college depends on a lot of stuff: how much does Daphne receive from family members each year?  Is Dara able to add anything at all to the fund each year?  What kind of investments does Dara choose and what earnings is she able to accomplish on the money in the 529 plan?  I used only a 7% rate of return and $500 of annual additions to the account over and above the inheritance. 
Make every family member mindful of the college fund - it is possible to give each one the account number to make additions directly to the fund on line (as I have done for my great-nieces).  It becomes a shared extended family goal.
And look for the state tax sweetener.   Minnesota provides a credit or a state tax deduction for contributions to 529 plans on behalf of – well anybody in any state.  It doesn’t have to be for a relative or an account you own.
My points? I have two. First, don’t make financial promises without considering the full consequences of those promises.  Second, full funding is ideal, but few families can accomplish that goal. 
So-so is still better than diddly-squat.

Whatever you own, owns you

Whatever you own, owns you.

I didn’t invent that phrase, I lifted it. (I got it from my brother and he got it someplace else, don’t know where.)
Your possessions demand to be dusted, oiled, stored, misplaced, searched for and tripped over. My point—-think before you buy something.  Wait at least a week after you fall in love with the TV before you marry it.
Discuss with Alice, does she think I will use this bike as a rack for my dirty laundry or the exercise I intend?
I advocate a long courtship with each possession before marriage. The courtship includes the google search for likely mates, the read of customer reviews, the weight on the scales of pleasure versus cost and, finally, the inevitable “where the heck am I going to put it?” before the wedding takes place. 
Spontaneity is not only the enemy of your budget, it will generate endless stubbed toes.
Try the longer courtship.  The anticipation increases the joy of ultimate acquisition and may avoid the avalanche of buyer’s regret.
If you can’t spend a smidgeon of time in the courtship phase, don’t marry it.
In my view, my possessions have expanded to suffocate the space available.  I have placed an additional stricture on any new possessions.  Before my husband and I buy anything new, we must identify an object that will leave. My husband will inevitably pick the one object in the entire house that I adore.  My fingers itch to throw one of his possessions at him, but refrain.  Negotiation must take place.  The rule remains.

Gambling and Income Tax

Gambling and income tax 

Dear Uncle Gary Gambler “cashed in his chips” while raking in his chips.  His vigorous arm movements caused the tall stool on which he perched to tilt over backwards.  At the same time, Wilma, a well-endowed waitress carrying an awkward tray with ten beers tripped over his tumbling stool and body, beers danced in the sky, Wilma’s chest landed squarely on Gary’s face and a large crack of Gary’s spine was heard by all.
You take comfort in Gary’s last moments; the pleasure he embraced in the million dollar win followed by the warm joy of two ample boobs pressed in his cheeks.
Of course, Gary had experienced $900,000 of gambling losses earlier in the evening, a prelude to his big win.  Gary’s gambling addiction also led him to have net losses of $2,000,000 earlier in the year.  Overall, he has lost, not won, with his gambling.  Five years earlier, Gary sold his thriving chocolate covered cockroach business for $5,000,000 and you are further dismayed to find there is not all that much left.
You, Bertha Bereaved, are responsible for filing his final individual income tax return and are amazed, in spite of his overall losses, to find he owes much of his remaining money to the federal government.  How can this be?
Tony Taxpreparer tells you it is difficult to argue Gary was a professional gambler.  He exclusively played craps; a game based on the toss of a dice, no skill whatever involved.  Professional gamblers can offset winnings with losings, and pay income taxes only on the remaining profit.  (Previously, they could take other expenses, like travel to and from the gambling establishment.  The deduction for related gambling expenses, under the 2018 tax law, is gone.)
Those who are not professional gamblers can still, under the new tax law, claim losses, but only as an itemized deductions (instead of the $12,000 standard deduction allowed single individuals), and only if the losses are documented.  Gary should have kept information on the date, where he gambled, table number, records of other people accompanying him, and the amount won or lost each time.  In theory, Tony Taxpreparer tells you, Gary should have kept a record of the wins and losses on each toss of the dice, but the IRS will likely accept a log of total wins or losses at each table each night.  It is best to have banking records to back this up.
You have torn his Vegas condo apart, but can find no written records.  Your attempts to find computer records are stymied because you have no idea as to what passwords he might have used, or where he may have saved it on his laptop.  You have turned over his laptop to some professional computer nerds and hope for the best.
In the meantime, those evil form 1099’s from the gambling casinos total $1,600,000 in gambling wins, and there is only poor documentation on the $900,000 gambling loss sustained before his big win on the evening of his demise.  You have absolutely nothing to document his earlier $2,000,000 losses other than the distant memory of a brief phone discussion with Gary.   If the computer nerds are unable to find any information, the estate will be out roughly $225,000 in federal income taxes.
You are tempted to simply not file his final 2018 individual income tax return, until the attorney warns you, as executor of the estate, you can be held personally responsible for his income taxes.
Is there a point to all of this?  I would say there are a few, both stated and implied.
1.    Gambling proceeds are income.
2.    Don’t expect the small amounts withheld from lottery winnings will cover all federal and state income taxes.  They usually don’t. 
3.    Keep records of your own gambling losses.
4.    If you are the executor or personal representative of an estate, you are personally responsible to make sure those income taxes for the decedent get paid before any money is paid out to beneficiaries.
Look for other chapters from Barbara Burbles on “As the Blog Churns.”

Withholding - will it cover your taxes?

Withholding – will it cover your taxes?

  I expect April 15, 2019 will generate much weeping and wailing from taxpayers.  Many people who previously got refunds, won’t.
Retired individuals, self-employed individuals, and others often owe taxes, but I expect the sorrow to be more widespread this time around. 
Let me give you an example to show you why people owe taxes in spite of withholding.
Jane and John Oldfarts each receive social security.  John gets $22,000 in social security each year, and Jane gets $ 24,000.  The $46,000 in social security they must report has no tax amount withheld to cover taxes, federal or state.  Medicare insurance payments reduce the actual amount they receive from social security, but they, by law, report the higher amount anyway.  Jane and John were among the few that understood there is a tomorrow and did squirrel some nuts for retirement when they worked, but during the last couple of years, the pile of nuts has dwindled.  What looked like a large haystack now looks like a crease in the hillside.
Jane and John removed $40,000 from a retirement plan at Nutjob, Inc in 2018. They refinanced their home 5 years before retirement to pay for a romantic trip to Fiji, and still have large mortgage payments. The social security, nice as that is, doesn’t cover their monthly bills.  There is, happily, the retirement fund to pay the extra monthly bills.  Anything left over was spent to pay for John’s Viagra, Jane’s tummy tuck and trip to visit the grandchildren in California. 
They also have some interest income on savings certificates of $2,000.  They take a standard deduction of $24,000 for a married couple (there are no special deductions for the elderly any more).  The only federal income tax withheld was 10% on the money they removed from their retirement plan: $4,000 total federal withholding, nothing to the state.
Jane and John prepare their 2018 tax returns and are stunned to discover their Trump taxes are $4,641.  With the $4,000 of withholding they actually owe $641 federal.  To add insult to this sad state of affairs, the retirement plan for Nutjob, Inc. did not withhold any state taxes at all – they owe Minnesota almost $2,000.
With a sniffle, Jane now looks longingly at the steak section of the grocery store but buys the cat food for her tuna casserole.  John, with a grim warning look at Jane, who is barely visible beneath her heavy purple sweater and winter woolen underwear, shuffles to the thermostat and turns down the heat setting from the already brisk 60 degrees to an austere 50.
Without boring you with more tedious details, understand the more withdrawn from the retirement account, the worse this gets, to the point you may feel you are plummeting from a cliff. (Yes, the withholding increases, but the tax liability increases faster.)
Withholding is designed to be an estimate of your income taxes, not the actual amount you owe.  When you file your taxes, sometimes you get a refund, sometimes you may actually have to write out a check and pay more.
The withholding tables look at only your wages and the filing status you report to your employer.  What your spouse makes, how much dividend or interest income you have, your social security, the number of children you possess under the age of 17, are a mystery to the withholding tables.  The amount withheld from your wages is a guesstimate at best.
The new withholding tables still bizarrely ask the number of your personal exemptions, but there is no deduction for personal exemptions on the 2018 tax return.  I honestly don’t know why they do this.
Following the Trump tax enactment, many taxpayers did not change their withholding exemptions at work to face the new realities.  You may have claimed extra exemptions for older children, for real estate taxes on your home and cabin, and for state taxes paid.  There is no deduction for children, only a credit for younger children.  The deduction for taxes is severely limited – more likely you will take a standard deduction in the future, even if you didn’t in the past. The standard deduction is built into the withholding tables, and you only get it once, not twice (not once for your spouse and again for you).  If you are married, probably both of you should fill out your withholding tax forms as “single” instead of “married” filing status and either you or your spouse should ask for extra withholding.  Definitely don’t claim any exemptions unless you have children under the age of 17.   If you have continued to claim exemptions, the odds are that you will owe taxes, not get a refund.
Immediately after the new tables kicked in, I noticed a large uptick in my husband’s take home pay.  I knew that wasn’t right for us.  Anal retentive, tax accountant Me computed our likely 2018 federal income taxes.  If we had lived with that little withholding for the rest of 2018, we would have owed something like $6,000 come April 15, 2019.  We reduced exemptions to zero, changed withholding status to “single” and were forced to ask for extra withholding to avoid not only owing money – but being penalized for too little withholding, even though withholding was based on the IRS tables.
I digress.  Back to my point.
Other people likely to discover their withholding does not cover the amount of their taxes: married couples with no children 17 or younger (me), (the 20 year olds turning to mushrooms in the living room no longer reduce your tax bill), self-employed individuals (they have always had a problem), anyone with significant income on which there is little or no withholding (examples: money removed from an individual retirement account, interest, dividends, sales of stock, lottery winnings, debt forgiveness in bankruptcy or when a house is foreclosed on by a bank……).
If you think your withholding will do the trick and you should get a refund because there was this wonderful tax cut, I have a marvelous set of clothing that can only be seen by those who are super-duper intelligent. I could sell you this fine attire at a modest fee.
My point: don’t assume whatever amounts you had withheld will automatically always cover your income tax liability.  Often it doesn’t.

So someone died... Who pays the taxes?

So Someone in your Life is Now Departed.  What happens with the income taxes on their assets?

The most common misunderstanding I hear: I loved my Aunt Frannie Fadedaway, but she is now “With the Lord”.  Aunt Frannie loved me too, so I got $100,000 from my Aunt Frannie’s estate.  I have $100,000 of income, right?  No. (You may now give me a happy face for this news.)
The income to report will depend on what you got and gets a bit complicated, let’s wander through a few examples, but first one bit of terminology.
Beneficiary: the person who gets the money (property, thing) after someone (the decedent) shuffles off this mortal coil.  You are a beneficiary of Aunt Frannie Fadedaway’s $100,000.
Example one:
Aunt Frannie had a savings certificate and, when she got the savings certificate, told Wells Fargo Bank you, Lillian Leftbehind should get the account if she “Left this Earth” (not for Mars).  She did this by telling the bank to “pay on death” this account to you, Lillian Leftbehind.  You are the beneficiary of that certificate.  Any interest paid on that account before Frannie “breathed her last” is reported on Frannie’s final individual income tax return.  Any interest paid on that savings certificate after Frannie “crossed over” is reported on your individual income tax return.
Example two:
Aunt Samantha Smithandwesson had a profit sharing plan at work before she “passed on” following an accident on the shooting range.  You miss her terribly, but are pleased to discover you were listed as the beneficiary of her profit sharing plan. You will need to report the amount you take out of Samantha’s profit sharing plan in the year you remove the money from the profit sharing plan and spend it for your bathroom remodel (or whatever). 
If the profit sharing plan allows you to do so, the government will also allow you to transfer (roll over) the money from Samantha’s profit sharing plan to an individual retirement account, still in Samantha’s name, but now for your benefit.  The title of the account will be something awkward like this: “Samantha Smithandwesson IRA (individual retirement account) for the benefit of Lillian Leftbehind (you)”. 
The transfer (from the profit sharing account to the properly titled individual retirement account) is not taxable.  The subsequent withdrawals (taking money out of Samantha’s IRA or profit sharing plan for your bathroom remodel) are taxable. 
It is wise, tax-wise, to take those amounts sssssllllloooooowwwlllyyyyy, over time.  Don’t binge and take it all at once.  When you binge, Uncle Sam gets more than his fair share.
Aunt Samantha was taxed on any money removed from the profit sharing/IRA during her life time, but you are taxed on any money removed from the profit sharing plan or individual retirement account after Samantha has gone to her “Better Place”.
(Side note, here: You can’t transfer that Samantha Smithandwessen profit sharing money to an individual retirement account in your own name, such as the Lillian Leftbehind individual retirement account; that is a no-no and taxable.)   
Example 3:
Uncle Samson was, inexplicably, crushed when he pulled a building down upon himself.  During his lifetime, he believed he was immortal, and is likely surprised to find himself either “with the angels” or in the “other place”.  He didn’t mess with any of those confusing beneficiary designations, nor did he draft a will.  Since you, Sandra Stillwithus, are his only living relative, the state in which you reside has graciously decided his remaining assets, primarily a brokerage account at Fidelity, should become yours, but there is some stuff to make this happen. 
An estate proceeding must be opened with the court, the court issues a letter of administration, and you present this letter of administration, Samson’s death certificate, and some personal identification to the Fidelity Brokerage person who previously worked with Samson, a dour-faced Delores Dollarsign.  All accounts at Fidelity are then transferred from Samson’s name to a temporary account titled something like “Samson Strongman Estate, Sandra Stillwithus, personal representative”.  (Say that 10 times really fast, I dare you.) 
Later, that fidelity account will close and anything remaining after you pay Samson’s debts, funeral expenses, and any costs of handling the estate, will become yours.  When it is transferred to your name and becomes yours, you will pay the income taxes on the interest, dividends and gains on sales of securities earned by those securities (assets or things). 
Until then, somebody has to report the income, but that somebody is not Samson Strongman and it is not you, Sandra Stillwithus.
As part of opening this estate, you, Sally Stillwithus, must get an identification number, like a social security number, from the Internal Revenue Service.  The Samson Strongman Estate will get a tax statement (form 1099) from Fidelity in late January or February, and must file a special kind of income tax return, an estate income tax return (form 1041).  (The estate doesn’t have to use a December 31 year end, it can use some other year end, but I digress.)
The Samson Strongman estate will report any interest, dividends, sales of stock, or other income it receives on that estate income tax return.  Exactly who ends up paying the tax on the net income reported on that different type of income tax return, that estate income tax return, is a bit more complicated and will be discussed on later episodes of “As the Blog Churns”.
To be continued……….

To probate or not to probate...

To probate or not to probate……

  OK, you are already asleep.  Face slap.  Wake up, now.
I often hear people say, “I am going to avoid probate.  I hear it is really expensive.”  (I don’t agree with this statement, to be explained later.)  This statement is quickly followed by “it is really important I draft a will.”  Those two statements, taken together, make absolutely no sense.  I will explain why.
Probate = Will.  Probate is the process in which a court makes sure your will is followed and your debts get paid.  If you avoid probate, your will is pretty much a piece of toilet paper.  It might be a guideline by which your children could view what you intended to happen, but there is no assurance whatever your intention will be followed.
You want to avoid the evil probate, so put your daughter Hannah’s name as joint tenant on most assets you possess. (Since she is joint tenant, she could also take your money and run with the local life guard to Maui, but I digress.) 
You can’t name Hannah joint owner on your retirement accounts, so, here, she is named the sole beneficiary. Hannah is the most responsible of your children, so this seems like a good idea.  You know if you have a joint tenant and beneficiary designations you will avoid the villainous probate. 
You have a will that clearly states all three of your children, Hannah, Harry and Hortense, each receive 1/3 of your estate. 
You have no assets to probate.  Nothing is governed by your will.  Hannah goes to the bank and brokerage firms with your death certificate and inherits….everything.  Harry and Hortense get……nothing.
That is not what you intended?  Too bad.  That is what you did.
Hannah may choose to give money to Harry and Hortense; that is totally up to her.  But before she can do that, she has to pay income taxes, at her rate, on your retirement assets.  She also has to pay income taxes on the interest and dividends earned by any of your bank and brokerage accounts after the date of death, and then figure how much is left over and divide that amount by three.  She is at the highest tax rate of your three children, so will, sadly, pay more income tax than Harry and Hortense would have paid if they got their shares directly.  Hannah will need some legal and accounting help to make all these computations, and that costs……money.  Maybe more than probate.
Oh, and she has to do gift tax returns to give the money to Harry and Hortense.The easiest way to avoid any expense on your death is to simply not have anything left over.  Spend it all.  It’s hard to manage that.  The zero.
Let me mention, it is a nightmare for your family if you have negative assets (you owe more money than you have).  You owe on your credit cards, medical bills, and have a house to sell with a mortgage higher than the value of the house.  The time involved for your family to navigate the maze of transferring the house to the bank and deal with creditors can be measured in ice ages.  The bank never wanted the house and has valid legal reasons to delay.  The credit card companies, utilities and so forth only semi-hear the reality there is no there-there to pay their bills.  There is no probate, after all, to tell the creditors that in a legal way; there is only the word of your children.
If you want to avoid probate you have to be picky, picky, picky on your joint tenancy and beneficiary designations.  Think about them and remember them each time you move accounts or open a new account.  After working in this field for more years than I choose to admit, most people aren’t careful enough.  Sally intends to list Harry on one savings certificate, Hortense on another and Hannah on a third.  Then the savings certificate that lists Hannah as the beneficiary comes due and Sally remodels her bathroom.  Harry and Hortense get their savings certificates, Hannah gets nothing.  If you don’t think you can complete the paperwork each and every time, don’t try to avoid probate. This is not a once and done thing.
What about a revocable living trust, you say?  Everyone talks about those these days.  A revocable living trust costs more money today than a will; they are not cheap. A trust does not avoid the trust income tax issues either.  But I do like the revocable living trust for reasons that have nothing to do with probate or the avoiding thereof.  I won’t discuss the pros and cons here because that would take more than the few pages both you and I want, and result in much eye-rolling from the reader.
Revocable living trusts require, again, you be absolutely certain the precise name of the trust is the owner or beneficiary of everything you possess.  It is not “Sally Smith” who owns the bank account.  It is “the Revocable Living Trust of Sally Smith” that owns the bank account. 
Is your car in your name or the name of your revocable living trust?  You just went to the bank and got a new savings certificate.  Does your trust own it, or did you forget and put “Sally Smith” on it?  Oops.
The cost of the court filings for probate is not that large.  It’s the attorney fees, should your family choose to hire one, and the mixture of the things you own that yanks the bucks from your pockets.
Do you own a Van Gogh, some Jackson Pollocks and some valuable antique furniture?  Or maybe you have a house, a cabin, an apartment complex, and several rental fourplexes, one of which is located in Hong Kong.  Expensive probates.  Also expensive in a revocable living trust, and also complicated if your three children are listed as the beneficiaries. The mixture of the assets governs the length of administration and the expense, not the probate as such. The assets (the things you own) are complicated, so no matter what you do it will be complicated.
Or, are you renting an apartment and all you own are savings certificates at one bank?  A breeze.  Your probate is opened and closed within a short period of time.  With or without probate, the mixture of your assets makes it simple.

Emergencies - Aren't

Emergencies—Aren’t 

I exaggerate, (it is the style of the day) but largely true.
After you finish your car payments, maybe even before, expect to be stranded on the side of the road unless you replace your brakes, tires, yada-yada, as suggested by the manufacturer.
Never forget to change and REPLACE your oil.  No oil, and your engine blows and fuses as my daughter knows sadly by experience.
If you don’t own a car, budget for Lyft as well as the bus, sometime you will need to get wherever faster.
Do you own a Labrador with an incomprehensible desire to eat rocks?  An (un)expected vet bill may be in your future.
If you own your home, do you own an aged refrigerator, an air conditioner that does not chill above lukewarm, a blender that doesn’t, a toilet with a sluggish flush?
The list goes on and on, so expect a major repair or replacement of something you own every year. Don’t be shocked.
If you buy a new or recently remodeled, decorator-perfect home, begin the tedious job of stockpiling the resources to replace as soon as you move in.  If you do not, you will find the palace picking at your bones beginning 7 years down the line as the home’s contents meet their appointment with the grim reaper.
A list of assorted life expectancies from the internet (For many of these I only wish to have known them that long; others are older friends than expected.):

Appliance	Life Expectancy	range of cost (not installation or delivery)
Air conditioner	8-15 years	$500-4,000
Furnace	15-25	Forced air/boiler varies too much
Dishwasher	9	300-650
Dryer	13	300-1,500
Range hood	10	100-600
Cooktop	13-17	600-900
Oven	13-17	700-1,500
Refrigerator	9-13	400-1,100
Washing machine	5-15	400-600
Water heater	10-11	500-900
Wooden deck	10-20	$15 per square foot
Vacuum	3-5	200-1,300

     If you don’t own your home, hope you have a responsible and prompt landlord.  Wish for a landlord who doesn’t have a desire to turn your apartment into a condo complex and doesn’t increase your rent with each new lease, but prepare for less than that.

     If you live in a hurricane, earthquake, flood, fire or landslide zone, be sure to have the appropriate type of insurance and know and put aside your insurance deductible.  If you don’t, no matter how many times you turn and spit and say “feh” to ward off the evil eye of disaster, the wind will blow the windows of your dwelling to Oz (after or before it fills with water), the earth will toss your dwelling like a milkshake, the tide will wander through your crib, the habitation will become a marshmallow on a stick over the campfire or the mud will come as a tide and level your castle just like the big bad wolf blew away the house of straw.

     In all of the above I quote Murphy’s Law (“if something can go wrong, it will.”).  The more possessions you possess, the greater the odds of disaster.

It is not my desire to advocate a minimalist lifestyle.

     My point: plan your finances as if you expect life to pummel you on a regular basis.  It will.

Remember the power lawnmower needs gas

Remember the power lawnmower needs gas
”Knowledge is Power”

You need to know where your money goes.  Do not wave your arms vaguely: “well, there’s my mortgage payment, car payment, gas for my car, I suppose it is important to pay my Verizon bill, the electricity and heat-oh, groceries. Oh--and the cable bill. I think that’s it.” Not. 
Know each and every crumb of spending.  For a year.
I know, I know: You would rather have your toe-nails pried off one by one—-it is more pleasant to live in blissful ignorance.
My Father once told me he cashed his pay check each week and put the cash in marked envelopes.  First, the envelopes for his rent and utilities: all bills he absolutely had to pay if he didn’t want to live in a cardboard box.  When any non-essential envelope ran to empty, he couldn’t spend anymore and didn’t.  Within a month after he met my Mother, he created a new envelope: “Helen”. 
Credit cards and checking accounts have supplanted such simple budgets.  This remains.  Do not guess at what you spend—-know.  Do the tough down and dirty.  Log into an excel spread sheet and detail what paths your money wandered for an entire year. 
“Credit cards” is not a category.  Classify charges on your credit cards to things like “movies”, “eat out”, “books” (I hope), “kids activities” (soccer, baseball, swimming lessons), “gifts”, “house maintenance”, “hair-cuts”.  Your “miscellaneous” should not be more than $50-$100 per month—-if higher, create more categories.
Do this for an entire year of bleeding because some expenses don’t exist in the summer and some don’t exist in the winter.
There is a mountain of expense the mind conveniently wants to ignore in any mental budget check list.  How many times a month do you buy a snicker bar when you fill up?  How much did you spend for the ancestry DNA kit you bought Mom for Mother’s Day? (You learned Mom was part oriental and that was a surprise to all of you.) 
Did you remember to include veterinarian bills for your Persian cat, Sniffles, and the special grooming comb? 
Did you remember Hannah has a dental appointment with her pediatric dentist coming up?  Maybe not, because last time the nurse told you Hannah howled enough to wake the bunnies off the wallpaper.
Unless you intend to use a scissors on your grass or are more environmentally conscious (ashamed? I am) than I, your power mower will need gas.
I am no exception.  Unless you actually classify the flood of your expenses, you will choose to forget.
Once you know—-honestly know, you have the agent to determine what you can delete and prioritize.  Knowledge is your ammunition and your Remington Custom Shop M7 Scout Rifle.
Compare your expenses to your net income and determine how much spending needs to be shot and killed. 
Have a family meeting to discuss.  If Harry and Alice are involved, they will know why you must veto the trip to AirTime Trampoline or Chuck-e-Cheese to allow the summer baseball registration. (This may result in less whining.) 
Then aim and shoot at your target.
Next on Barbara Burbles: Emergencies Aren’t

A blood-sucking financial parasite

A blood-sucking financial parasite

Think of it as an anchor cast halfway out of your otherwise lightweight, red, Grumman canoe as you paddle furiously across lake Harriet.  It drags against the water and adds weight to your craft as you work against it to navigate.
Or your body sucked by a monstrous leech.
Interest.  Fees.
Two people.  Identical incomes. Matilda wants the perfect wedding, the honeymoon in Rome, the daily latte, and charges all of this expecting, vaguely, somehow to pay the bill tomorrow.  Matilda is unable to pay the full bill when due and incurs fees and interest at 16%. 
Jane also wants the perfect wedding and a trip to Rome.  She envies Matilda these things, but does not want to incur interest and fees.  She charges only what she knows can be paid off within the next month and comforts herself with a movie at home.
For a time, while the outstanding debt goes up, Matilda has acquired an overflowing closet filled with trendy dresses, Jimmy Choo sandals, dinners at Kincaids.  Jane has none of these.
Then, Today disappears and is the memory of Yesterday, the caterpillar of Tomorrow becomes the beetle of Today, and Matilda’s credit limit has been breached.  The trip to Rome is a memory, but the monthly payments linger.
Matilda’s debt mounts to $20,000 and the interest costs $3,200 per year.  That could buy you a trip to Maui, could it not?  Almost $300 each and every month.  An anchor. 
Matilda has reached her credit limit and is no longer able to charge her latte.  Matilda’s car blows its engine and she is unable to charge the repair. Now Matilda takes the bus.
Jane will always and forevermore have more days on the beach in Maui, a nicer house (the mortgage lender will take credit card debt into consideration when determining the size mortgage for which Matilda can qualify), and more dinners at Prima.
Deferred gratification.  The ability to put off the pleasure until you can pay for it in the cold hard green stuff. 
Find some magazine pictures of what you want, put it on a bulletin board (or magnetize it to your low cost, outdated, white refrigerator).  Make it a whole family project.  Tell Dick and Jane how the sacrificed trips to McDonald’s will result in an entire family trip to ski at Lutsen’s. The delay and the anticipation, for me, makes the pleasure, when it comes, more sweet. 
Calories work differently.  Two people do absolutely the same amount of exercise.  Oscar weighs 50 pounds more than Fred.  Every time Oscar climbs a flight of stairs he has to lever that extra fifty pounds up, up, up and thereby burns more calories.  Lighter Fred floats up the stairs and doesn’t burn off as many calories.  Every day Harold will be able to eat two bites extra of chocolate cake to maintain his weight than Fred.  My husband-the-doctor reminds me Harold will avoid the stairs because it is more work every time he simply stands up.  Whatever.  We would still like to be Fred, but the cake beckons.  I digress.  I warned you.
Pick the leeches off your body.  Feel the true pain of denial and pay off the credit card debt.  Short term you will have no trips to McDonalds with your unruly twins Harold and Maude.  You will have to shave your Golden Doodle at home.  Long term, you will be able to sun bathe at Maui.
Next on Barbara Burbles…..Remember your power lawnmower needs gas… (Knowledge is Power).

Choose Your Parents Properly

Choose your Parents Properly

Wealthy parents spawn Arowana (the most expensive fish I could find on-line) children.  If you want to be wealthy, choose your parents deliberately, but even when chosen properly, be assured you can blow your opportunity.  Even those blessed at birth must learn to say “no”.
Firm statistics related to inherited wealth are illusive.  If my parents left money to me in trust or by lifetime gifts, not through a will, the amounts I get will (as they should) be completely private.  Only inheritances through probate (court proceeding) are a matter of public record.
Wealthy people often prefer to imagine themselves to be self-made.  Often they will simply “forget” the wealth they have been given. You are unlikely to get the straight scoop on this.
Then there is inflation.  Let’s say you received a gift of $100,000 from your Dad in March of 1966.  That is the same as getting a gift of $783,673 today.  It earned zip.  It is just the inflationary equivalent.  So, anything someone tells you in terms of gift or inheritance way back when, has to be multiplied to get the today’s dollars’ equivalent.
To name a few of the wealthiest families in the U S: the Walton’s (Walmart), the Koch’s (Koch Industries), Mars’ (candy), Cargill (Cargill).
True, the founder of the wealth probably came from an upper middle class family, obtained a solid education and have sown those advantages and reaped that uber wealth through industry, intellect and creativity--but their children and grandchildren get a free ride indefinitely: Select your parentage--Be that daughter or granddaughter.  See, most of you already messed up and haven’t done anything yet.
Even if you did hit the jackpot, still learn to say “no” to yourself and your family. 
A couple of public figures as cases in point:
I want to talk about Romney first because he did work hard and was able to live within his means (although in later blogs I will talk about the unjustified favorable tax treatment accorded how he made his money).
Romney likes to say he gave away the inheritance he received, but let’s back up to gifts before his parents passed away.  He received substantial lifetime gifts from his wealthy parents: a private school education, a large down payment for his first home… entering work-life debt free, with a house, is a huge advantage, but he had more.  He was given a big nest egg to start his business.  Romney has done the same for his own children.  There is nothing evil or wrong in that—if I had the chips, I would do the same for my children.  But Romney (and the others like him) can’t say he is entirely self-made because he is not.  There are huge advantages that created his large wealth.  Financially, it would be awesome to be his child.
But Trump’s “wealth” (if there is any remaining) has all the issues I need to rag about.           
He was born the son of Fred Trump--one of the richest men in America—the crop Fred sowed was middle-class apartment complexes constructed in Brooklyn and Queens (and further enhanced with other less savory means). 
Donald didn’t like the middle class image and set his sights on gold plated office towers.  In 1978 he received a $1,000,000 loan ($4,000,000 in today’s dollars), and Fred guaranteed a 70 Million construction loan, and further guaranteed the project would be completed if Donald didn’t.  Donald could never have gotten that financing for his first project on his own.  During this time, he was an officer in his Father’s company and also received a healthy salary from that.
We are still not done.  In 1976 dear old dad set up a $1,000,000 ($4,000,000 today) trust for Donald—he got, probably still gets, income from that. 
Still not done.  There are two other trusts set up in 1949 that paid Donald income every year.
Finally, Mom and Dad did maximum gifting each year - $6,000 in the 1980s (think $24,000 a year).
Casino documents list more loans at favorable terms from Fred to Donald, but we will stop there.
Wouldn’t you like to have a start in life like that?  Maybe we could all be self-made successes.
He blew it all.  His drug of choice: money.
There are lots of sources detailing the abysmally bad business decision to build yet a third upper crust casino in Atlantic City and how that caused his huge tower of high-interest debt to implode. Not the issue I will talk about here.
  What I want to talk about instead is the problem Trump created and still has for himself in his lack of ability to say “no” to his ever burgeoning wants. Trump’s drug of choice: money. You and I may need to say “no” to lattes and vacations.  He couldn’t say “no” to yachts, numerous vacation homes, a personal jet and eye candy on his arm.
In 1990 his lenders believed they were better off without forcing Trump to personal bankruptcy, but did force him to sell his trinkets and put him on a personal monthly allowance of $450,000.  Did you get that?  By that time his personal spending had mushroomed to more than $5,400,000 per year ($11,000,000 per year today), because the allowance was a decrease—likely a substantial decrease.  That allowance did not include any mortgages, or other loan payments—that was just to cover groceries, clothing, travel, repair and maintenance of his cars–the trivia of living.  Personal living expenses.  He had been siphoning I don’t know how much off the losing casinos to feed his overblown spending addiction.     
How did he get out of that disaster and continue to feed his ever increasing spending habit?  There is smoke, but so far the proof is illusive to anyone other than Mueller’s team.  I have a good financial nose and the rotted rat meat tells me—Russia, money laundering and more debt.
Had he not won the presidency, I believe an earthquake of financial disaster was shaking his not-architecturally-sound castle.  I am soooo tempted to detail why I believe that, but that would make this tedious at best and is not the point of this blog anyway.
This is my point.  Trump is just one example.  There are other wealthy children unable to live within their luscious means.  There are numerous high earners unable to live within their plump incomes. “No,” “I can’t afford that.” is a mantra for all, not just the poor and middle class.
The next Burble of Barbara I call “A financial Parasite”.

The Necessity of "No"

The Necessity of “No”

Let’s say you live in Syria in a bombed out building, no water, no heat, no light, and a scrap of moldy bread to eat.  I have (thank G-d) no advice whatever for you.  My life has been devoid of such experience (and may it ever remain so devoid).  Such individuals are on the edge of existence and, to them, their savings and credit card debt have no relevance.  On the other hand, this individual is unlikely to read my blog.
For everyone else, my first bit of financial wisdom is summed up in two phrases-- “deferred gratification” and “no”.  All decent financial advice will circle back to this over and over and over again.
Deferred gratification is putting off to buy tomorrow whatever you can’t pay for today in the real green stuff (not credit card debt).  Save up for that bit of blue sky in advance, and then and only then, buy it if you can pay for it in cash.
Mixed with that is the need to cultivate the art of “NO” to yourself and your loved ones. 
Examples:
“I want a new model Mercedes-Benz Maybach Exelero ($8 million per my google search) – but I can make do with a used, beat up, Chevy Malibu.”
And (not “or”) “I really, really, really want to sit on the white sand beach in Maui, but, No, I will make do with an afternoon on the beach at Lake Harriet.”  
And: “This old out-dated kitchen disgusts me and I look at magazines and drool at the marble waterfall countertops, the white shaker cabinets and the stainless steel appliances.  Truthfully, however, white appliances work just as well as the stainless steel and can actually hold refrigerator magnets without special paraphernalia.  Formica cleans better than the marble, and, in a few years, my cabinets will once again be trendy.” 
I feel the urge to digress here.  I am old enough to remember when Harvest Gold and Avocado appliances and décor were all the rage.  (Avocado is now cycling back in.) 
Anyhoo, when we first moved into our present home, our French provincial kitchen cabinets boasted knobs with intricate copper scrolling and matched copper hinges.  A six-burner copper exhaust fan worked above our stove.  But white knobs, hoods, appliances were “it”.  We spent (20 years ago) $250 for all new knobs (we have a lot of cabinets) and $450 for a new all white vent hood.  The old knobs and vent hood found their way to the trash because otherwise I would have suffocated in the mound of junk that we would have accumulated “just in case”.  Those copper knobs and that copper hood would be so totally wow now.
My point – this is just style, trend, not need or function – say “NO”.
Mutter to yourself this phrase: “I can and will say “no” to myself and those I love.”  (In later blogs, we will discuss why “No” is the better answer--the “yeses” you will receive in payment for your “no”.)
It is hard to say no.  Once is not enough.  You have to do it every day.  You have to listen to your children, spouse, lhasa apso, self, whine and whimper.  It would be great to pretend there were some easy solution-some way to have it all.
There isn’t.  The easy solutions are the devil incarnate because you accept a con and therein lie to yourself.
Another way to phrase this – spend less.  Every day.
Seriously-do you believe you can buy happiness for yourself, your spouse, your children, your lhasa apso?  Well, perhaps, the ability to buy things does make happiness more probable, but if it increases your credit card debt, it is a momentary bliss followed by the bars of cage of your debt.
With time and effort the “no” can become a habit.  With repetition, the “I must have” portion of your brain atrophies in response to the “no”. 
You can cease to feel the lure of the Giuseppe Zanotti boots, the tug of the creamed latte, and the rapture of the newest I-phone.  In your agony remind yourself: the Zanotti boots will likely be worn five times at a cost of $100 each time ($500/5 wearings) and otherwise add to the other 1,000 pair of shoes you cram in your closet.  If you buy one latte every day at $3 each, it would cost you more than $1,000 a year (get a coffee pot and a travel mug).  The iPhone will be supplanted with yet another new model next year.
I have gotten much too heavy so I will stop.
Next time on the continuing burbles of Barbara – Choose your parents properly.

Prescription Drug Marketing Absurdities

Prescription drug Marketing absurdities

I have seen it again.  An ad for a medication to combat “non-24”.  This is a medication for blind people only.  Individuals who are not blind should not use this medication.
This was an ad on football game.
Now I ask you…. How many blind people watch football.  I grant you, some.  (Of course, they wouldn’t watch per se.  It would be “listen to”.  So they can’t really see the ad.  But they could hear it.)
Also, I truly understand, for anyone, not just blind people, if you can’t sleep, it sucks.  Our lives are defined by get up, go to work, school, whatever, play a bit, go to bed.  If you can’t get with the program and everyone else, you will be an orphan.  A loner.
Of course, being blind, I imagine, (thank G-d that particular evil has been spared me so far) sucks already, so this just heaps it on.
Approximately .34% of the population of the U S is blind, one source said 1.1 million people in the U. S.  What percentage of them listen to football?  No idea.  But the drug companies believe it is worthwhile to advertise this drug on national TV.  The cost has to be enormous – making the ad, buying time on football for G-d’s sake. 
Let’s work this out.  30 seconds of national advertising time on the Big Bang Theory is about $345,000.  Let’s use that, because football advertising is pretty expensive too (I think the ad I watched was a full minute, but maybe not).  Let’s say half (it would never be that many, but let’s go high here) of the blind people in the U S listened to that one ad.  That means the average cost per blind person, this one potential user, of this one ad is $.63.  And it will be run over and over again. At $.63 per potential user (or more) each time.
On what planet does this make sense?
Well, clearly ours, but it was not a real question.
So they have to cover that in the cost of the drug, right?  They charge more – must do or it doesn’t make sense. 
The cost of 15 capsules (20 milligrams) – just 15 folks - costs $7,200 to $7,700 and that can’t even cover an entire month.  If you wanted to take 1 a day for a month you would be talking $15,000 a month or $180,000 a year.  Just for that drug.  Nothing else.
Of course, many would say, “but it is covered by insurance.”  But, if insurance pays it, then the cost of insurance goes up, and up and up…… which it has.  Somebody has to pay for it.  Just because it is covered by insurance doesn’t mean it is free.
I say, the drug simply costs too much as the majority do.  No drugs should ever be advertised on TV.  It is crazy.
My husband-the-doctor says those who advertise drugs should be required to disclose, throughout the ad, in big bold print, the retail cost of the medication, after all - not everyone has insurance.  The way it is going, even fewer people will have insurance.
The result of advertising drugs? People go into my husband all the time saying “I have non-24”.  My insurance should cover this.  This medication is only approved for, only works, on blind people.  Seeing people who have circadian rhythm issues should be looking at other medications, not this one.  So the ads actually cause problems.  Doctors generally are aware of the medications that help patients.  Selling over-priced medications directly to the consumer with the idea they will badger their doctor into prescribing things the patient truly doesn’t need (and has side effects) is, well, to use the hyperbole of the day, evil.
Why evil?  Because people pay a lot for insurance as it is.  Even if your employer pays it, you get a lower salary so the employer can pay it.
And people get mad at their doctors when the doctor says “It isn’t appropriate for you”, “you don’t need this”.  They simply believe the doctor is mean.
And the side effects are substantial: can wipe out your liver, give you pneumonia, etc.
For some, I am sure it is appropriate.  But the right thing would be you complain of your symptom to the doctor, you and your doctor determine if you are willing to take the risks, and the drug companies charge less.  Much less.
I am not going to hold my pee until the powers that be get some sense.
In my next blog I will discuss the Art of the financial “NO”.

What do Bed Partners and Stocks have in Common?

What do Bed Partners and Stocks have in Common?

  Answer: If you want to reduce costs and make money, don’t trade honeys or stocks any more often than you absolutely have to.
 Let’s define day trading: that’s buying and selling stocks daily or hourly chasing profits in the daily wave of transactions.  To make profits, of course, you must believe you can predict the short-term price fluctuations. 
You want to day trade?  It’s like trying to score at soccer facing the entire French, English, and Brazilian soccer teams with all three world cup soccer goalies against you.  The professional day traders have programs you don’t have and buy and sell all day.  The gurus have computers that make your computer look like an abacus. 
In truth, they may not know any more than you do, but whatever they are doing, they are doing it together, even if it is as stupid as jumping into the middle of a shark feeding frenzy, and, no matter how smart you think you are, hunting the daily trade gains and losses is like capturing a mirage.
Set a loss limit and take a trip to Vegas instead.
An example:
Dear Auntie Susan Steadfast recently succumbed to a heart attack while driving.  Fortunately, no one other than Susan and a light pole “met the Lord”.  A long time before her demise, in December of 1968, Auntie Susan invested $10,000 in a broad range of stocks that moved closely with the standard and poor stock market index.   She reinvested all dividends she received.  At the time of her demise in December of 2018 Susan has more than $1,068,000.  (I used a Standard & Poor 500 dividend reinvested price calculator.)
Or, let’s say she didn’t reinvest dividends.  She spent them, but left the stocks alone to grow with the market.  Today she would have a mere $268,000. Compare that to her original investment of $10,000.
Susan’s investment was made just as the market took a nasty downward dip that, with minor ups and downs, lasted an appalling twelve years. Susan Steadfast didn’t worry about that drop and stayed true to the buy and hold strategy.  Her companies still looked good to her.  The market hit its bottom at just a bit more than $2,000 in 1982 and, with ups and downs since then, stood at $25,538 when she “crossed over”.
Uncle Tony Trader started with the same $10,000 in 1968.  He bought and sold daily through the 1960’s and 1970’s as the market went, more or less, steadily down.  Commissions were higher in the 1960’s, 1970’s and 1980’s, but let’s just say he paid the lowest current $4.95 per trade.  Odds are, since the market went down, he would, on average, have lost money on his trades, but let’s say he didn’t.  Let’s say he broke even.  It would take him 5 ½ years with just one trade per day, to spend the whole $10,000.
I know, some of you will say Tony Trader was a wonder, a maven.  You will say, he knew his stuff and made overall gains on his trades.  My witnessed experience and every study that looks at this says no.  Tony certainly told you about his wins.  He had some wins, yes.  Gamblers at the slots will have the wins that tease them to continue.  When the market goes up, maybe they have a number of gains.  Did you tell you about his losses?
Susan had gains too.  Did Tony Trader make more than if he bought and held a diversified 10 or so stocks in different industry classifications, a selection of the market, like Susan did?  No.  Overall, he just didn’t make as much as buying and holding.
And Tony had to pay income taxes on every trade.  If he made money, the tax man visits right then.  If he had overall losses, in recent years, he would have been limited to $3,000 of capital losses in a year and in previous years, less. 
If he is a professional day trader his rules are a bit different and I won’t discuss those rules.  Too complicated for this blog.
Susan owned the stocks in her own name; they were not owned by her individual retirement account or by a pension or profit sharing account, but Susan didn’t pay any income taxes on capital gains because she never sold her shares.
You, Agatha Anguished, ache at the loss of your Aunt Susan, but pay no income taxes on the gain either.  The stocks receive what is commonly referred to as a “step up in basis” upon the death of the owner.  That means you get a new start on the shares of stock.  Let me back up and explain what I mean.
If you bought the shares yourself for $100 and sold the shares ten years later for $1,000 you have a capital gain you have to report on your income tax return of $900.  The gain is reported in the year you sell the shares.  You pay income taxes on that gain.
Because you inherit these shares from Aunt Susan, you no longer care what Susan paid for the stocks.  You compare any sales proceeds you have to the value of the shares on the date of her death and report only the gain or loss since the date of her death.
(The wealthy, do, indeed, take care of themselves.  We get the best tax laws the wealthy can buy for themselves with congress, but I digress.  I warned you.)
Those who consistently make money select stocks they believe have good long term growth potential and hold a piece of those companies for a long time.  Probably not forty years, but, a long time.  They do not stress over the daily, or even yearly, ups and downs in the stock market.  They think in terms of ten, twenty years or longer.
You should too.

New Blog

There will be more content coming here soon. In the meantime, you can find older postings of Barbara Burbles here: https://medium.com/@barbaraburbles