Get Started on Your 'Last Instructions'

 Are you prepared if a loved one becomes incapacitated or dies? What if you are the one to check out? Writing for The Wall Street Journal, 10/5/20, Glenn Ruffenach explains why and how to let your family know your final wishes and how to deal with your financial affairs. 

"I assume you already have an estate plan with all the necessary documents (a will, power of attorney, etc.). If so, you can move to, first, writing down the steps your family should take if something happens to you and, second, listing all the pieces and people—assets, accounts, insurance policies, bills, debts, credit cards, passwords, bankers, lawyers and the like—that are part of your financial life."

"If you search online (example: what my family needs to know free pdf), you’ll find numerous worksheets that you can print at no cost and fill out. In particular, check out Everplans, which offers (in addition to an online planning service) more than a dozen free checklists to get you started. (At everplans.com, under Resources & Guides, search for: downloadable checklists." 

A book: “Get It Together: Organize Your Records So Your Family Won’t Have To” by Melanie Cullen with Shae Irving. "Don’t be put off by the length: more than 400 pages. The authors cover just about everything a caretaker or survivor might need to know." 

Get started today!

Savings Rate skyrocketed during Coronavirus: How to use your dividend wisely

 While many Americans are truly suffering from job losses, health related expenses, and the stress of working at home while trying to help children navigate Zoom school, our economy is becoming more divided. For those who can work from home and aren't eating out, traveling, and shopping as they used to, while getting a $1200/adult & $500/child coronavirus "bonus," now is the time to put those extra funds to work. If you haven't already donated to your local food pantry, crisis center, political candidates, etc., consider upgrading your home's (and vehicle's) energy efficiency. 

Another factor to consider is how low interest rates are on savings accounts and money funds: less than 1%. Better to put that money to use in energy savings. 

Now is a great time to upgrade major home appliances to the most energy efficient models of refrigerators, washer-dryers, furnaces, and hot water heaters. Start with the most energy intensive appliances and those that are oldest.

"Heating appliances consume the most energy, according to the U.S. Energy Information Administration."

"In total, these appliances consume about 46% of a home’s electricity. Specifically, air conditioning uses about 17% of your home’s energy, space heating an additional 15%, and water heating uses 14%." https://www.beupp.com/articles/home-appliances-power-breakdown/

The balance between heating an air conditioning obviously depends on where you live.

Consider a tankless hot water heater:  https://www.energy.gov/energysaver/heat-and-cool/water-heating/tankless-or-demand-type-water-heaters

Other benefits of tankless water heaters beside saving energy are: no need to secure a large tank to a firm upright to prevent disaster during an earthquake and think about the outcome when an aging water heater leaks... especially if you are away fromh ome when it happens.

"Because heating and cooling is a huge source of energy consumption, replacing an inefficient furnace or air conditioning unit will save the most energy and money. When purchasing new appliances, you can compare their energy efficiency by checking the yellow tag that displays the appliance’s energy rating." https://www.wisegeek.com/which-home-appliances-use-the-most-energy.htm

With more and more hybrid and electric vehicles coming to the market and expanded charging stations, now is a good time to upgrade to a more energy efficient vehicle. 

Best electric cars of 2020 and 2021: also includes plug-in hybrids: https://www.edmunds.com/electric-car/

Best Electric Cars for 2020 (USN&WR): https://cars.usnews.com/cars-trucks/best-electric-cars

Of course, if you are getting an electric vehicle, you should first invest in roof top solar panels so you aren't burning coal.  

 

The least dirty shirt in the laundry: Negative bond yields

 Well, we aren't there yet (negative interest rates) but anyone with a savings account or looking a bond yields lately (or listening to Federal Reserve Bank Chair Jerome Powell) knows that rates are falling fast. 

Many European countries are issuing bonds with NEGATIVE interest rates, meaning that the investor pays the bond issuer a fee to keep their money safe. It's a strange concept when we are used to getting paid by the issuer for the use of our money. 

Why would anyone pay someone to hold their money rather than put it under the proverbial mattress? Why get back at some date in the future less than you invested?

There are $16 trillion of bonds world-wide paying negative interest rates!

Simon Constable, writing for The Wall Street Journal (10/5/20) explains 5 reasons:

1. The bond offers security (at a cost). Think of the negative yield as the storage fee, the cost of security that you will get your money back (less a fee) in the future. Some U.K. banks already are charging savings-deposit customers a negative yield.

2. The chance of a quick trading profit. traders are willing to accept a negative yield if they expect rates to dive lower in the future. they could profit by selling the initial bond at a premium. 

3. When expected currency moves will likely offset the negative yields. This applies to international investors. However, "forecasting future currency movements is notoriously tricky." Not for the faint of heart.

4. When the bond is still safe, relatively speaking. "During the 2008-2009 financial crisis, investors often described the U.S. as the least dirty shirt in the laundry basket, meaning that while the U.S. wasn't in great shape, other countries were in worse condition." The same concept applies today with regard to negative interest rates. What options do you have? Lots of money is flowing into U.S. stocks because bond yields are so low, which explains why the stock markets seem to be ignoring the world-wide coronavirus pandemic. 

5. Purchasing power is maintained. The main reason investors would invest in negative yields is during times of deflation (a sustained drop in prices of goods and services). If prices drop faster than the negative yield, one has more purchasing power.  "If your purchasing power grows over the investment period, it doesn't matter how negative the yield is on the bond." 

This article was followed in the WSJ on 10/9/20 with "Savers face limited option" by Julia Carpenter. Interest rates on savings accounts (including online accounts) are plunging with few options. "Looking for more yield, however, often means taking on more risk and sacrificing liquidity." Some options are money market funds (still low yields) and some fixed-income exchange-traded funds offering 1-2%. 

Just more dirty laundry!