Tuesday, October 22, 2013

The End is Coming (Sooner Than You Think)…

“This is the end, my only friend, the end.”
“The End” – The Doors

Ok, it’s not the Apocalypse – that was last week with the Shutdown Showdown in WA D.C.

Seriously, it’s that time of year when steps you take before the end of the year can make a difference when you file your 2013 income tax return.

Have you fully funded your 401k for the year yet?  The contribution limit for 2013 is $17,500 and if you are age 50 or over you can add another $5,500 for a calendar year total of $23,000.  If you are contributing at an amount that will not hit either of these totals by December 31, you still have about four paydays – five if you get a separate bonus – to increase your contributions.

For W-2 employees, contributions to a 401k plan are done on a calendar year basis – once the year is up there’s no going back.

The annual contribution limits apply whether your 401k is pre-tax or post-tax (Roth) or a combination.  Tip: if you have a Roth option, split your contribution between pre-tax and post tax.  The current tax savings on the pre-tax contribution will offset the taxes you pay to make the post-tax contribution (for the most part).  After retirement, the Roth contributions and related earnings come out of the plan tax free (see earlier blog post “To Roth or not to Roth”).

You can easily check your progress:  your paycheck remittance advice (commonly referred to as your “paystub) should have your YTD 401k contributions listed.

Good luck!

Wednesday, February 13, 2013

Do You Suffer from A.A.D.D.?

"I was trying to daydream but my mind kept wandering."
-      Steven Wright (comedian)

You have probably heard about Attention Deficit Disorder (ADD) or Attention Deficit Hyper-Activity Disorder (ADHA) but I’ll bet you have never heard of American Attention Deficit Disorder (AADD).  That’s because I made it up.  That makes this Commentary a world premiere!

So by now you’re probably asking yourself something like “Kim, what the heck is AADD and why would you make up something like that?”  The answer is simple – I am a sufferer - just like you.  “What?  I never heard of this, how could I have it?”

Again, the answer is simple.  You and I live in America, the land that created and sustains AADD.  And it mutates, becoming more virulent – every day.  Don’t believe me?  Turn on the TV.  Turn on the radio.  Boot up the internet to any webpage.

Admit it – your attention is demanded, divided, diverted, crushed, spindled and mutilated every second of every day, even Sunday (Meet the Press? NFL football? 60 Minutes?).  You’ve heard of the “24 Hour News Cycle” – what about the “24 Hour Ad(vertisement) Cycle” – or the “24 Hour Social Media Cycle” - we are bombarded with messages demanding our attention all day, every day.

In America, we are PLUGGED IN.  Someday in the future, people will have a chip implanted somewhere that brings in all the sources, all the time.  Smartphone?  Pffttt.  Google H.U.D. glasses?  Pffttt.  It’ll be embedded under your scalp or in your arm.  Like “Johnny Mnemonic” or Neo in “The Matrix” we’ll have a plug-in somewhere.

I have become a slave to my Smartphone (Apple’s iPhone 4 if you want to know).  I can’t walk from my car to the grocery store without being sure the damn thing in is my pocket.  Someone might call me!  Someone might TXT me!  Someone might email me!  I might need to check my calendar!  Someone might send me an amusing picture!  Of cats!  (Please, no – I am not amused by cat pictures).  I might need to check my Facebook page!  I might find something amusing to tweet on Twitter!  I might need to take a picture of something - and then send it to all my friends!  I might need to check the stock market futures!  And I can do ALL of that while I wander the aisles at the local QFC.  Some people might call this “being productive” or “multi-tasking”.  No, it is AADD in full bloom.

I am the most plugged in person I know and I’m sure I’m a lightweight compared to others.  It is driving me nuts.  How about you?

How much of all of this is nothing more than a big waste of time?  I guess it depends on whom you ask, but if you were to ask me I’d say “pretty much all of it”.

What purpose does all of this distraction serve?

It’s a drug.  A drug that is intended to keep you distracted from what is really important in your life.  If you are distracted, your judgment is impaired.  You will spend money you didn’t mean to spend.  You will spend more money than you intended.  Think about the last time you went to say, Costco or Whole Foods.  Or the last time you bought a new car.  At Costco, the official name of this distraction is the “Treasure Hunt” – inventory is arranged and rotated so as to get you in the mood to wander the aisles to “see what they have this time”.  At Whole Foods - which should be called “Whole Food Circus” – the arrangement of the various departments and color schemes and even the music are all designed to put you in the mood to wander the aisles.  Ever get into a “discussion” with a new car salesman?  It’s not a discussion.  It’s a distraction to find out more about you so they can find the key to selling you on walking out with the keys right now.  Here’s a tip:  never wear clothing with any kind of logo on it when you shop for a car.  It will be used against you.

AADD will also cause you to spend less time with your friends and family.  I’ve had family members ask questions such as: “Are you checking your email right now? [Guilty!] Put that down!” [me in a small, sheepish voice] “uh, ok”.

When I first got my Smartphone, I thought “I’ll never be able to read stuff on that little screen.”  Well guess what – I adapted without even thinking about it and now I read lots of “stuff” on that little screen.  I’m hooked!  Somebody help me!  There should be a 12-step program for AADD!

So if you’ve read this far (lucky you!) you might be asking yourself “what does this have to do with investment management?”

I contend that AADD causes people to make poor investment decisions.  Sometimes AADD causes me to make poor investment decisions.  It gets difficult to separate the signal amid all the noise and distraction that emanates from the 24 Hour News Cycle, the 24 Hour Ad Cycle, the 24 Hour Social Media Cycle and the Wall Street Machine.  But I keep filtering – as should you - the tsunami coming at me.  Pick the important things to lavish your attention on and ignore the rest.

Some suggestions to combat AADD:
  •  Avoid TV – use it as a tool, not background – cancelling your cable service might seem extreme but it saves money and more importantly, time;
  •  Read more books – suggestions: “The Signal and the Noise”, “The Behavior Gap”, “Thinking Fast and Slow”, “Wait”, “Extraordinary Popular Delusions and the Madness of Crowds”, also, anything by Dickens  - reading about the misery of life in 18th and 19th century England makes me feel more fortunate;
  • Leave your Smartphone behind for social engagements, family outings and recreation;
  •  Listen to more music – there are several internet services that provide large catalogs for free (with a few commercials) or no commercials for a monthly fee;
  • If you play an instrument or write poetry or songs or have some other creative outlet – do it more often;
  • Attend live events – theater, music, Cirque du Soleil, Teatro ZinZanni, Trivia Night at your local pub, Open Mic nights for music and comedy;
  • Spend more time with family and friends;
  • Get outside – walk, run, ski, bike, row!

 Call me – I’ll join you in any of these – and good luck!