Family Financial Advice

In the last year, I’ve done a ton of research and experiments about investments. And though I don’t yet have much in the way of wealth, due to being partially vested in an employee stock options plan (pretty much by accident) when I was in my 20s, I do have some meager retirement savings to manage. I recently shifted from my old, mostly ignored, socially-responsible IRA with Ameriprise, and I now do everything in “manual mode” in better way that works through my company. It’s a structure known as a Solo401k and it’s not for the faint of heart, but works for me.

So naturally I’ve become a resource for family members who hear me talking like I know what I’m talking about and want to know what I think they should consider. Here’s some of the advice I’ve given to them, which I share with you in hopes that it might be useful for your consideration as well. Please keep in mind that I am not actually a financial advisor, and this is for informational purposes only.  It should not be considered financial advice like a professional would give you.

You should absolutely consult with a real professional to determine what’s best for your individual needs. I’m not that guy for that. I’m the guy who looks at where we are in history and notices that all sorts of crazy stuff that’s not supposed to ever happen is now commonplace. I’m the guy who filters from risk before ever considering returns. I’m the guy who wants to know the details, and is suspicious of anything he can’t figure out himself. I’m the guy who gets nervous when people answer questions based in logical fallacies, emotionally-rooted ideologies, or who have counter-incentives to tell the whole truth. Since I have no incentives at all, I wind up talking about things few professionals would ever mention.

So maybe mention the following to your financial advisor and see what they say…

T-BILLS
28-day Treasury Bills are a significant portion of my Solo401k, and what I’d recommend instead of a CD. When you see “cash & cash equivalents” on a financial statement, this is generally the “cash equivalents” part. You can automate it to roll over up to 24 times, and stagger it to certain days/weeks, depositing a little dividend in your bank every time it rolls over. You only have to set it up once every 2 years, and it’s crystal clear what your counterparty risk is (which is not even identifiable in other investments most of the time). No, it’s not a great return, but it’s a helluva lot better than any bank in the US will give you these days.
As you know, I have little faith in the USA in the long term, but the next month? Yeah, okay sure. So there’s some money with Uncle Sam that it could take up to a month to get all the way out of. Okay!
Little known fact, you don’t need a broker to do this kind of thing for you. Just go to: https://www.treasurydirect.gov/. Look for the “Guided Tour” button on the right, it’ll show you what to do.

CASH
You probably have some around, but I’d really encourage you to have 3-6 months worth around. Like in a fireproof safe, preferably one that’s bolted down to something and is less than obvious. If you don’t have a safe yet, $100 bucks at Home Depot outta do it. There’s all sorts of good reasons for keeping ample cash on hand, and no bad reasons that I can think of, as long as you keep it secure. Stuffing it in the mattress is not secure, but looking around at the world’s financial state today…I think it’s time for that mentality made a comeback. Safety deposit boxes are not the same as a safe, they are the same as keeping your money in the bank because that is literally what you are doing.

METALS – JUNK SILVER
https://sdbullion.com/silver/junk-silver (link for research/pricing, not necessarily purchase)
Get some “junk silver” or 90% Silver US coins that are bought/sold as bullion, instead of as collectibles. It’s not “junk”, it’s actually what most US-minted coins where before 1965, and that’s what I’m talking about here. Old dimes, quarters, 50-cent pieces, etc. This is your emergency cash stash that’s easy to use in case of USD devaluation, grid-down collapse, or other shit-hits-the-fan scenarios. But if those things never happen (and let’s hope they never do!), this is a great and accessible hedge and storage of wealth. Probably best to buy these in person, but you can order them online too. These go in that safe of yours too. Silver is way low right now, so it’s a very good time to pick some up.

METALS – GOLD COINS
https://davidhall.com/collections/st-gaudens-20-1907-1933 & https://davidhall.com/collections/liberty-head-20-1849-1907
More hedge against dollar devaluation, but — these are also just really cool! Call the number on this website and order one of these rare coins (or order 5 or more and get free shipping). What you’re looking for is MS63 or XF or better. The guy who invented the MS coin grading scale is who I’m recommending, and he takes a much smaller markup on these coins than you’re likely to find anywhere else. We’re at an interesting spot right now in that the market has been flooded recently, so while the price of gold isn’t exactly low, the premium that you pay for the collectible is lower than it’s ever been. Meaning you’re getting a collectible at near the price of the bullion (melt) value. I tend to think gold will go up again over the long term as fiat destabilizes and blockchain gets torn down by those it threatens. But the Scrooge McDuck in me just likes gold coins too… Only downside is that these are not generally accepted for use in a Solo401k, as they are collectibles. While there is some disagreement about the interpretations of the IRS code here, I’d recommend you not plan to be the person who tests the law. Be careful that anything you purchase as an investment is in the right form for whatever financial vehicle you’re using, and always get a second opinion (or third) on that.

METALS – OVERSEAS
https://www.silverbullion.com.sg/
Go sign up, it’s one of the best hedges out there. I have a little bit of a couple precious metals stored in their safe in Singapore. Though the peer-to-peer lending is where it gets even more interesting. Anybody like me who has some gold or silver in their vault can borrow against it, though only up to 50% of the value. So as a Lender, I know that the money I’m lending out is secured by actual precious metals (I get the inventory records and pictures of it and everything). If the spot price drops by 40%, it triggers notifications offering to close out the loan, at a 50% drop it just closes out. As a Lender, even though I don’t know anything about the Borrower (other than their asset) I’m pretty well covered. My Solo401k is lending at 1-month, 3-month, 6-month, & 12-month terms averaging around 4%. Again, it’s not the greatest return, but it’s a very secure return. In some ways, even more secure than any returns based in USD.

STOCKS
More than falling for the lure of any stocks, the thing to really focus your attention on right now is boring: paying off your debt. Once you’ve done that, then we can talk about saving better.

Please don’t even think about buying individual stocks unless you’re willing to become very experienced. Instead, I’d recommend what Warren Buffet does: go get a low-cost index fund and call it good. Click that link, call ‘em up, and get started today. Spread everything out evenly over each of their “market cap index funds” or in whatever way feels good to you. Just get started and know that you can always change this stuff down the line.

They may try to sell you on their ETF funds or something else that’s new & shiny, but you just tell them that your family told you that you’re interested in “the lowest recurring fees, commissions, & transactional costs” and “lower risks before higher yields”. They should know what that means — it means they won’t make as much money off of you 😉 Still, they’d much rather have your business than lose you to a competitor, so they’ll happily work with you. But if anything gets confusing, just let me know.

So that’s just one phonecall to get started, and then automating a deposit from your bi-weekly paycheck into that account. Any contributions that are company matched, just max them out as best you can. Whenever you get a raise is the easiest time to increase your allocation, because your wallet will never know the difference.

CRYPTO
Yes, I’m a big enthusiast of cryptocurrencies, and have been since the beginning. In fact, I’ve been researching and supporting alternative currencies since before the first crypto whitepaper was a glimmer is Satoshi Nakamoto’s alleged eye. Yes, I do have small amounts of 20 different cryptos that I bought before the prices went crazy, and I even lost the few bitcoin that I purchased in 2011 that could allow me to retire right now if I could get to them. But let me be clear on this — NO CRYPTO IS AN INVESTMENT. Not yet anyway. Maybe someday some of them will be, and if any of them exist yet, my bet would be Dash. But really, we’re only a decade in on this whole crypto thing. Right now the market is stupid on top of stupid, it goes up just because it’s going up and down just because it’s going down. Most of the people buying have no clue what they’re getting or why or how it all works. Anyone buying because they don’t want to miss out is already far too late.
While I have great hope for this sector in the long run, right now it is pure speculation. It’s like buying beanie babies at the height of the craze. It might work out where you sell them and make money, or more likely you’ll just be left holding a bunch of things that you paid too much for and now make you feel dumb. I do like crypto, but I never confuse investing with speculating. Neither should you.

FOR THE 40 & UNDER FOLKS
You’ve got a while before retirement, and nearly every asset class is at an all-time high right now — which has never happened before in the history of the world. So remember that no one knows WTF is gonna happen from here. Truly, “set it & forget it” is my advice for now.  Know that the market will go down before it moves up at times, and this will make you nervous. But unlike your parents, you are looking several decades ahead. Compounding is very much in your favor, and you can afford a lot more market drops and volatility than they can. Likewise, the fees will hurt you way more than them, so keep those low. Ignore all the recommendations from older people who have different needs than you, ignore the financial advice from people who have a financial incentive, ignore all the daily panics that will just stress you out. Be polite to people who mean well, but don’t let the FOMO distract you.
The best thing you can do for your financial future right now is to increase your earnings, and keep squirreling away as much as you can in automated ways that you never even look at.

ALLOCATIONS
Most financial folks will ask you about your “risk tolerance” and build up portfolios based upon past performance risk percentages from there. That seems crazy to me. Instead, I find it far more useful to think in terms of runway.
If I suddenly lost the ability to earn any new money, how long would I be able to survive before I was in real trouble? I keep a few months of runway in cash on hand for that. Rarely do I have to dip into it, but never have I regretting having it there. Yes, as a non-interest bearing savings, in 20 years it will likely be worth half what it is worth now because of inflation. Fine, I don’t have it to grow it, I have it as insurance for the uncertainties of life and it’s well worth that opportunity cost to me. I increase/decrease this as my living expenses increase/decrease, or my runway increases/decreases.
I also keep a few years of runway in precious metals. The prices of these do fluctuate quite a bit from day to day, but I don’t care about the spot price. I have it to hold it, and because it paves me an excellent runway. For instance, for thousands of years, 1/8th oz to 1/10th oz of silver was a day’s wages. So for every ounce of silver, I figure I have an equivalent of 8-10 days of living expenses. How many days do you want? Having that much is pretty easy to figure out.
T-bills are a form of short term US bonds, which are low risk and easy to get out of but will only give about inflation level returns. You won’t make much, but chances are you wont loose much either. Great, so a little more runway there in that zero position.
Once I’ve got all those things funded up as much as I need to feel like I’ve got a comfortable enough runway should stuff get crazy before I “retire”, only then do I put money the other riskier places where it has a chance to grow for my retirement. Risk is required for reward, but not every risk is rewarded. Since I can actually afford to lose all that I’m gambling with (because I’ve got my runway), I can gamble very differently.

Hope this helps! Remember, always ask questions until you understand. The moment you don’t, you are easy prey for those who want to help themselves more than they want to help you.