Aug '98
LESSONS AT 37,000 FEET
On my recent flight to New York, the flight attendant began her customary flight-safety instructions. It struck me as odd: Seatbelts much like those on airplanes have been mandatory in cars since 1975, yet she still demonstrated the proper way to engage and disengage the belt. For anyone who hadn't been living under a rock since '75, this was not new information! Nevertheless, airline regulations wisely re-quire that the basic rules be reviewed and nothing left to chance, even though a problem during flight is a remote possibility.So, fellow travelers: Put your seats in the upright position and lock your tray tables, while I review some basics with you.
Lesson 1. Buy your tomato sauce when it goes on sale, and buy a lot of it.
Intuitively, we all know to buy more at the supermarket when the price is lower. The same holds true when buying the Great American Companies. When the media-TV, newspapers, and/or radio-declare a "stock-market correction," we know that just means, "Stocks are on SALE; buy more!"
Lesson 2. Long-term isn't three monthly statements.
Since 1925, the stock market has chugged along very nicely, averaging just over 10% a year. During that time frame it went up and it went down-sometimes decidedly so. When it went down it never stayed down, and the real loss was to those who sold out. The media warn about "volatility"; we know not to let short-term events interfere with our long-term family goals.
Lesson 3. Fixed-income doesn't mean "fixed expenses."
The greatest threat to retirement is living longer than your money can support you. For the average per-son, expenses will triple over the retirement years. The task must therefore become to make income grow accordingly. The media call it "inflation"; we know it means creating a growing income stream.
Lesson 4. It's neither the bulls nor the bears that you need to beware of-it's the pigs.
Although we were recently blessed with extraordinarily high rates of return, they were just that: Ex-traordinary. Managing our expectations is just facing reality. Whenever we do even a little bit better than the averages with a little less risk, we are doing very well. The media may trumpet the end of "ir-rational exuberance"; we know it means still returning fair value.
Lesson 5. It's not what you make, it's what you get to keep.
The direction of taxes-income, estate, and or local-will be higher over time. Despite all the hype, our federal, state, and local tax burdens will not become smaller; the only thing that changes is how they camouflage the increase. If your tax planning isn't current, it's as good as non-existent. The media can proclaim "tax reform"; we know it means less spendable income.
I'm sure none of these lessons are new to you. The object of our plan is to arrive safely at our ultimate destination. Yes, sometimes there's turbulence and the ride gets bumpy. Rest assured that your flight crew-the Financial Architects team, of course-has traveled this route for a very long time. Experience counts, and we know the flight plan.
You may now loosen your seatbelts (but keep them fastened). Recline your seats or move about the aisles if you wish. It's going to be a great flight!
P.S. Only in America...Do we leave cars worth thousands of dollars in the driveway and leave useless things and junk in boxes in the garage.
Only in America...do banks leave both doors open and then chain the pens to the counters.
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