​Achieving any success has always come with a price. My wife, a wonderful piano player, spent her whole life practicing and developing her skills. Our first major purchase together was a beautiful piano, and nothing we have ever owned has gotten more use. I used to lay on the floor listening for hours as she played, and sometimes I would foolishly say, “I wish I could play the piano.” I say “foolishly” because of the irony that she was the one practicing while I was laying on the floor. I would then remember my mom trying to get me to practice when I was young, but the price of learning was too much for me. It was Emerson who said, “Everything has its price - and if that price is not paid, not that thing but something else is obtained.” I wanted to play the piano, but I was hoping to obtain the skill at a discount. The level of my piano skills today prove that Emerson was right.
 
Almost every day I hear people say things like, “I wish I was rich. I wish I could retire early. I wish I could live debt free like my neighbor.” Comments like this make me want to point out the obvious that if they really wished such things, then they would be willing to pay the price required to obtain them. The price for financial success is well known. It can be taught to almost anyone. But my experience has been that once the price is known, a great many decide they are not willing to pay it.
 
I have had many people say to me, “I wish I would have bought Apple, Google, Amazon, Tesla etc., when they were selling for a couple of dollars.” To which I respond, “Really? Do you have any idea the long years of uncertainty and even fear the early investors in those companies endured? Are you aware of the emotional and financial price those people paid? Are you really willing to pay that price?” 
 
What price will future investors need to pay for success? Essentially the same that past investors have paid. They will be the ones who can look at this messed-up world we live in, filled with fear, wars, dishonesty, sickness, political divides, social unrest and a thousand other worries, and still find the good in it. Amidst that good they will see possibility and from possibility, hope and opportunity. Then will come their biggest challenge. Seeing the potential good they will need to exercise faith, courage and discipline to set aside part of their resources and invest in it. That is the price they will pay. That is the price many are not willing to pay.
 
Here lies the painful catch that Emerson wisely pointed out. If you are not willing to pay the price for financial success, then you will obtain something else. And that, to me, comes at an even greater price. Says the guy, regretfully, who still wishes he could play the piano. 

​Sailing has taught me about being prepared. Every time we leave the safety of the harbor we venture into the unknown. We usually expect a fun pleasant journey, but we are always prepared for the worst, because we know that sometimes the worst will come. Sailors know that expecting the unexpected is the best way to stay safe. I decided this year to rely on some lessons from sailing as I share resolutions for 2022 that I believe might benefit all of us as we journey into the unknown.
 
Resolve to reduce your debt. Write down your entire family debt on this day and resolve to make that number smaller by year end. Debt is like a having a leak in your boats’ hull. During good weather your bilge pumps may have little trouble keeping up with the problem but when the storm comes you may find yourself quickly overwhelmed by the flood. In a time of trouble when you are least able to bail out the boat you may find yourself sinking quickly. Fix the leaks now while you have time by reducing your debt.
 
Resolve to learn more. Whatever your career might be, make the decision to improve your abilities in a meaningful way. A sailor never stops learning and is always working to sharpen their skills. Last time we were out I watched Jared, during a very smooth stretch, working on his knots. When the seas are rough, he will be glad he has his knot tying skills down. Make yourself more valuable to society and you will be rewarded for it. This applies to those still employed as well as the already retired. Continue to educate yourself and improve on your talents, and your ability to handle challenges will increase.
 
Resolve to live within your capabilities. Before embarking on a journey, a sailor checks the weather, including the ocean currents and size and shape of the swells to determine whether the craft he is setting out in is capable of safely navigating the conditions. It’s not so much the condition of the seas, as the abilities of the sailor and the vessel that determine the safety of the journey. Too many people live beyond their financial capabilities and expose themselves to unnecessary risk. Determine your financial capabilities and resolve to live within them.
 
Resolve to help others. It is the code of the sea that every sailor will render aid to another mariner in a time of trouble. I bought my first boat when I was 17 years old and since then I have often helped others in need, and others have helped me, and we all got home safely. All are benefitted when we care for each other, and the service we give always comes back to us. As you journey into 2022, remember the others sailing along with you, and take care of them. Given the past two years, maybe this resolution will be the most important of all if every one of us would make and keep it.

In 2007 I learned a valuable lesson from a dear friend who was running a successful business. Like most businesses, the growth of his company always preceded the revenue and so it was necessary for my friend to use credit as a funding mechanism. Lines of credit also helped him smooth out cash flow as expenses like payroll tend to be predictable while monthly sales were not. He had a little cash on hand but planned on his lines of credit handling most emergency and cash flow needs. It was not a bad business model. In fact, it is a very common practice. 
  
When the banking crisis of ’07 hit, my friend was unconcerned because his business was largely unaffected. But he was soon blindsided when his banks, who were having their own serious problems, cut off his lines of credit. It wasn’t his fault. He always made his payments and could continue doing so, but the banks were in a crisis with no money to lend. His business was put into jeopardy. He struggled, but survived, and in the process we both learned a valuable lesson about how much cash to keep on hand for unexpected storms.  
  
I have spent much of the past year telling people that my biggest financial concern has been rapidly rising inflation. Inflation can be one of the most regressive forms of taxation, hitting hardest those who can least afford it. I don’t suppose the upper 1% care about the cost of fuel or food but rising prices can be devastating for those living by each paycheck.  
  
I have advised that high inflation is a reason to avoid keeping too much money in cash.  As I have shared this counsel, I have come to realize that some have taken my advice to the extreme by not holding any cash at all. In fact, one person mentioned to me that they don’t need any cash because they have available lines of credit to handle any emergency. As you can imagine, that comment reminded me of my friend’s experience. 
  
So, to clarify my advice, I continue to maintain that holding too much in cash-like accounts is not a good idea during times of high inflation. But cash has its own purpose which is to provide instant liquidity in times of emergency. Even though cash loses value to inflation each day, holding the proper amount for your own peace of mind can be worth the inflationary cost.  
  
As a general rule I advise having enough immediate resources to pay your bills for at least 6 months. Take the value of your guaranteed payments such as pensions or social security, and then save enough cash to make up the difference. Never assume your credit lines can be accessed, or that your other assets can be quickly sold to cover an emergency. I just wanted to make that clear as we come into 2022 with all the uncertainty this year is sure to bring. ​

​The holiday season is a time when I meet with people to discuss their dreams, and their fears, for the coming year. They often ask why I am optimistic when there is so much to be worried about. Am I blind to the world around me or do I know something they don’t know?
 
Author Charles Geisst wrote an enlightening book called "100 years of Wall Street.” It takes the reader on a fascinating journey from Wall Street’s humble beginnings to when it became the world's largest investment market. It talks of the scandals and corruption that plagued "The Street" since its inception, and the continual efforts of Washington to regulate it. Powerful politicians would regularly declare war on the evil financiers of Wall Street and through legislation, hearings, and prosecution, attempt to clean up the mess. These were very public battles with each side blaming the other for the problems, yet behind closed doors the two sides were cutting questionable deals and scratching backs. "100 years of Wall Street" could easily lead a reader to become a cynic.
 
As a famous philosopher, (Pollyanna) once said, “If you look for the bad you will surely find it.” I am not blind to the evil in the world around me. “100 years” focuses on some of the problems with capitalism, but that is nothing new. It reveals selfishness and corruption in Washington but once again, no surprise there. Nor do Wall Street and Washington have monopolies on scandal. Wherever there is great money, there will always be great temptation.
 
When I read the book, what really struck me was the big picture that came into view. The Wall Street scandals over the years have been overshadowed by the unparalleled success of the system in creating wealth for the American people. In providing funding to fuel the world’s largest economy, Wall Street has helped, not just the 1%, but millions of average American families build their own personal wealth. In no other country do so many people have such access to a nation’s wealth. The ability for average working-class Americans to invest in and profit from the genius, ambition, hard work and creativity of others remains one of our great privileges. The employment opportunities offered by the Wall Street wealth creation machine is the envy of the world.
 
When I see business leaders working honestly and tirelessly to continue the American Dream, when I watch my client’s monthly dividend checks from those companies come in month after month, when I read of young entrepreneurs staying up late working on the next breakthrough, how can I not be optimistic?
 
For every sorrow, national tragedy, act of evil or scandal, there are millions of good, honest, hard-working Americans out there doing the right thing. In fact, most of them are. That is why I am optimistic. That is why I choose to look for the good and, in the years to come, I fully intend on continuing to help people find it.

​I had an interesting visit with a younger investor this week regarding a particular cryptocurrency. Our office does not offer, nor make recommendations on cryptocurrency investments, but I will share this story for educational purposes only. The young man wanted to buy a certain coin that all of his friends were recommending to him. It was a fairly new coin that sold for only a fraction of a cent. The price appealed to his group since it allowed them, for a relatively small sum, to buy millions of these coins. The thinking, he explained to me, was that if they even went to a dollar a piece they would all be rich. He talked about other commonly traded cryptocurrencies that had skyrocketed in price and made others rich and saw this as his opportunity. His logic seemed reasonable on the face of it, but there were key elements he and his friends were overlooking.
 
Let me pause to say that as I continue to work more frequently with a younger generation of investors, it is clear they are much more social in their behavior. They care a lot about what others do and think, perhaps because the internet allows them to know a lot more about what others are doing and thinking. Their lives are in each other’s faces daily, creating a greater desire to be part of what their peers are doing. In several other experiences when I question their desires for certain investments the response is often, “everyone else I know is buying it.” I resist the temptation to reply with my generations’ classic “if everyone else jumped off a cliff…” response.
 
There is admittedly some value in owning something just because everyone else does. Prices of assets are driven by supply and demand so as the demand side increases the price would have upward pressure. At least this would be true in the short term. So, it is not unusual to hear stories of people earning high profits off questionable investments, at least from those who were the first ones in, and more importantly, the first ones out. Ponzi schemes, chain letters and similar scams all thrive on the concept that the early birds make all the money at the expense of the latecomers. But is this really a good way to invest?
 
Now back to my story. I reviewed with the young man the crypto asset in question, and we discovered that there are 550 trillion coins in circulation. According to the Federal Reserve the total combined household wealth of the United States is only 142 trillion. So, when his coin hits a dollar a piece, well, you get the picture. All the social media hype in the world will never overcome simple math. To my young investors, there is value in keeping an eye on what your investing friends are doing, but if their actions defy the laws of math and logic, I would stay away from that cliff no matter how many of your buddies are jumping from it.

​I had the opportunity a few years ago to drive a high-powered race car. At one point in the experience, cones were set up in an obstacle course with sprinklers creating slick conditions at many of the turns. It was a fun but frustrating experience, racing against the clock while trying not to spin out of control on the wet track.
 
After a few embarrassing attempts my instructor took the wheel and with great skill methodically navigated the course perfectly, and in a record time for our group. He then turned the car back over to me and said, “Sometimes you need to slow down to go faster.”
 
I love teaching my younger associates and I also love learning from their youthful perspective. This week we were discussing the disastrous announcement last week by the government of a new virus strain. The markets fell immediately as people rushed for the exits. Then only a few days later the same government official reversed course and essentially said, “Oops, never mind.”
 
Another lightning-fast event occurred this week. First, two of the top analytical firms issued strong buy recommendations on a little-known stock. Investors immediately rushed in and drove the price to record levels. Then just three days later a third firm reported that this same company was embroiled in illegal activity and fraudulent bookkeeping. The stock lost over half its value in seconds.
 
As we reviewed these two cases of investors being jerked around by instantaneous news reports, with many quickly losing large sums, we asked the question, “How do we know who to trust?” In my younger years these problems didn’t exist so much because it took so long for news to get out in the first place. I used to make investment decisions from reading printed financial reports that were often months old. With instant news there is so much more potential risk of making an incorrect snap decision.
 
We all agreed that though we live in a world where people make and lose money making quick decisions on fast moving stocks, reviewing our client accounts and our own experience showed that most money had been made with carefully thought-out investments in solid companies. We reinforced a guiding principle that if we feel pressured to make a quick decision based on emotions, a single news item, or desire to make a fast and easy profit, then we are acting on the wrong impulses.
 
As information speeds up I think it is even more important than ever for investors to take more time to think things through. It’s better to miss the occasional hot stock if in so doing you also miss a lifetime of losing money on bad emotional investments. It’s often best to allow some time for these rapid news cycles to play out just a little bit. This isn’t to say you shouldn’t pay attention, but as I learned from my very short racing career, sometimes you need to slow down if you want to go faster.

​A contractor friend was telling me his employees’ wages have almost doubled in the past year. I asked if they were taking advantage of the windfall and setting aside money for a future slow down. He laughed and said that despite record wages, just as many were asking for Holiday advances on their paycheck as always had. This comes as no surprise in a country where most tend to spend all that they make, whatever it is. This careless money management practice will inevitably lead to future foreclosures, repossessions, and financial struggles when the economy turns south again.
 
Many falsely believe that if they only had a little more money they would be financially sound. But financial soundness does not come from income, but from discipline. Wealth is not built on high wages, but on properly utilizing whatever wage we currently have. Thus, every good financial plan begins with a budget. The challenge with budgeting is in sticking to it, which can be very difficult. Professional advisors can help draft up a detailed and beautifully designed budget plan, but it serves no purpose if not followed. And my experience is that few follow them.
 
So, continuing with my theme that you must start well to end well, let me offer some advice on a first step to budgeting that I think anyone can follow. Most people budget backwards. They begin by listing their needs (usually overstating real needs), and then allow for their wants, and whatever is left over gets saved for the future. The problem is, even with rising wages there is rarely anything left over since both needs and wants tend to grow with rising income.
 
So, let’s budget the other way around. When you get paid take 10% immediately and save it for the future. This is called paying yourself first. Before you pay your mortgage, or buy food or toys, pay yourself. Think of your future self as your most important creditor and set this money aside religiously, because it truly is sacred money. Then live on whatever is left over, needs first and then wants. Follow this principle regardless of whether you earn $1,000 or $20,000 a month.
 
Here is what I have seen happen when people do this. First, the very act of setting aside money up front develops financial discipline and you begin to think more carefully about the remaining 90%.  You will find yourself viewing your needs and your wants differently. Paying yourself first is an empowering act. It puts you in control of your money rather than having it control you. With your growing financial confidence the once impossible process of living by a budget starts to become not only doable, but enjoyable. I have watched this happen, even among my own children. Those that followed this principle early have been more financially sound than those who did not, regardless of income. Getting control of your finances can be one of the best gifts you can give yourself, and your family. 

​When I was 11 our family moved from Southern California to Toronto, Canada. My dad was promoted to run the new Canadian division of the defense contracting firm he worked for. There were 10 kids in our family at the time so moving was a huge project.
 
My dad was a highly organized production manager so he put his skills to work preparing for our move. I remember carefully boxing all my clothes and possessions under his watchful eye. He insisted that every box be filled to absolute capacity. The boxes were then weighed, labelled, and sorted by size so the truck could be packed as tightly as possible. Watching him put it all together was a great education. We teased him a little, especially when he would ask for a box or item perhaps the size of a toothbrush, to fill a small gap. He said, “If you want any project to end well the most important thing is to start well.” He let us know that if the early packing was sloppy, we would never be able to fix it at the end.
 
I still have a picture of me holding the very last item, my very thin hoola hoop, and trying to fit it in the back of the truck just before closing the sliding door. There wasn’t an inch to spare. My Dad’s careful packing paid off in two ways. We were able to bring all our belongings, and when we arrived in Canada four days later everything was still in excellent condition because it was packed so tightly.
 
The principles that lead to a well-packed moving truck apply just as well to building a proper retirement account. If your early saving years are sloppy or careless, then it becomes very difficult in later years to clean up the mess. It is hard to retire well if you start poorly. In fact, I don’t know if I’ve ever seen it happen. At the same time those who start early and are careful with their finances, are able to build a solid portfolio that holds together during that lifelong trip. A modern-day example might be the famous Warren Buffet. People view him as one of the worlds smartest investors. What I see in him is a guy who started buying stocks methodically at age 11 and never stopped. Yes, he made some smart moves along the way but the smartest thing he did was get off to a good start.
 
I have watched young investors, even some of my kids, follow the path of Mr. Buffet. Because of their good start and consistent practices, I have no doubt that one day people will look at them and say, “Oh what great investors they have been.” But the truth of it is they got off to a good start and they are sticking with it. Next week I will go into more detail about what a good start in retirement savings looks like.

I needed help from a major company that I have done business with for years. They have always provided the highest level of service. When the virus hit, this wonderful company struggled to continue the high-quality service upon which they had built their reputation. It wasn’t their fault. The changes the virus imposed made it impossible for them to function normally. So, they struggled along and did the best they could and as a customer, I accepted the new normal. After all, “we were all in this together.”
 
Now it is late 2021 and the virus remains with us, but our approach to it has changed. Humans are great at adapting and yesterday’s unbearable risk becomes today’s normal life. We move on. As we have adjusted to our changed world, I see a new opportunity arise for investors. This column is written to investors, but also directed at the companies who want to attract their dollars.
 
Recently I called the company mentioned above and was bounced around for more than 20 minutes without getting an answer. Two years ago, this would have been completely unacceptable for this firm. As my frustration became apparent, the person on the phone commented about how sorry they were but “due to the virus situation,” they were working with limited staff and resources. I must say I have heard that excuse for 20 months and quite frankly, I am tired of it. I am tired of contractors, fast food restaurants, accounting firms, car dealerships and every other business blaming their lack of service on the virus. It has become the universal excuse for not doing a good job. Don’t get me wrong. I am not saying they are lying about their challenges. We all know businesses are struggling with labor problems, supply shortages and health issues. I am only saying I am personally tired of “hearing” the excuse.
 
An important principle of business is that if you are having a negative, or positive, experience with a business, it is likely other customers are having the same. Using your personal experience can be a valuable tool for assessing an investment opportunity. Great businesses know this, and it is why they strive to make every customer experience positive. So, if you are tired of hearing businesses blame their bad service on the virus, many others are tired of it too. Again, it doesn’t mean they are not being truthful, but it does mean companies that move on from this excuse have an opportunity to stand out.
 
The economic tragedy of the covid virus may turn into an opportunity as it will give the greatest companies the chance to rise up and provide great products and services in spite of it. To investors I say, seek out businesses that stop blaming the virus for their bad service, whether it is justified or not. To businesses I say, recognize that your customers are tired of the virus excuse, so stop using it and you will stand out. In our office we will be searching for these industry leading companies.

​I needed a new car and if you haven’t shopped for one lately let me just say, good luck. After a couple of weeks, I found myself wondering if I was living in cold war Russia. Each salesperson said some form of “You want a new car? Yes, we can get one in three months. You must take whatever features and color it has and pay whatever price it is at the time.”
 
They did have plenty of used cars available but prepare for a price shock. When I finally found a suitable car, it was a slightly used vehicle that happened to have the original window sticker in the glove box. I asked why the current used price was thousands of dollars higher than the new sticker price. The salesman’s answer was, “Do you need a car or don’t you?”
 
Inflation is a nasty thing. When operating in full force it can eat away at your finances faster than taxes. In essence it is the worst kind of tax, hitting hardest those who can least afford it. Middle class Americans are paying a heavy price, and most recognize it is much higher than the 6.2% the government claims. The only inflation numbers that matter are the ones you pay personally.
 
Gasoline, healthcare, food, clothing, and toilet paper (if you can find any) are all tracking significantly higher than the official rate. Supply shortages are part of it but not to be overlooked is massive government spending. Printing new money dilutes the current supply, driving up prices. Another overlooked source is marketplace competition from the government itself. Years ago, the owner of a large paving company taught me that when he receives a contract from the government, he is required to pay his employees what is known as the “prevailing wage.” At the time this was more than double the private sector wage.
 
With the passage of the very expensive infrastructure bill, contractors on private projects are going to be competing for employees who have the option to work on government contracts at a significantly higher wage. One financial outcome of this scenario will be rising costs of construction across all sectors. If you think houses cost a lot today, wait until contractors are competing with over a trillion dollars to be spent on new public projects.
 
There are only two options for dealing with inflation. Keep up, or watch your buying power diminish. Fortunately for my friend, the government was willing to pay more to cover the higher wages, but for private contractors the price squeeze gets passed on to the customer.
 
Planning for retirement will always face many risks, but I believe the greatest risk today is inflation. You can’t stop it and you can’t get around it, so the best solution is to invest to stay ahead of it. Own assets and companies that have the flexibility to raise prices along with inflation. Then when you find yourself needing a new car, you will have your own inflated dollars to pay for it with.