17 | UNC vs. Duke and The Agony of Defeat

The losses drain the emotional tank more than the wins fill it up. Professional psychologists call it "loss aversion".

What a twisted psychological reality. That's not how it's supposed to work...right!?!

Enter the 2022 Final Four.

In my years at UNC-Chapel Hill and even after, I can remember speculating with friends on the possibility of one day meeting Duke in the NCAA Tournament...

Can you imagine the stakes and the environment? Can you imagine the bragging rights if we won? Can you imagine having the upper hand in the rivalry forever?

Sure enough in March of 2022, Duke beat Arkansas on Saturday and the Tar Heels beat St. Peter's on Sunday and CBS flashed the bracket onto the screen - UNC vs. Duke in the National Semifinals on April 2, 2022.

Within minutes of the final buzzer that Sunday night, the feelings of theoretical excitement and possibility pivoted almost instantly to...

What if we lose? Have the stakes grown too large? Will any game after this one ever mean anything?

If you think my feelings were unique, think again. Here is the Wall Street Journal's take on it.

Remember what we said at the start - the losses drain the emotional tank more than the wins fill it up.

We're not saying the losses count differently than the wins, they just have an out-sized emotional impact.

The emotions as a Tar Heel fan aren't very different from those as an investor.

The gains feel good when they happen, but the emotional high pales in comparison to the pit in your stomach when the losses start to add up.

The losses are part of the game. Unavoidable, painful, and hard to predict exactly how they will feel when they happen.

Recognizing that the feelings are inherent to the experience is the only way you can have enough courage, patience, and perseverance to play and eventually win the game.

Yes, the Tar Heels won the game, 81-77. To this day, it is probably the best game I have ever watched. You can watch the final three and a half minutes here if you'd like.

With that said, the Tar Heels have lost plenty of other games that have stung. Following those losses, there's been some amount of sulking, but there have also been conversations with fellow Tar Heels to acknowledge the feelings, highlight the silver linings, dream about where we go from here, and strategize about how we’ll win the next one.

I think that’s a pretty good blueprint for how to handle investment losses too.

16 | The Clear "Why"

This post is Part 3 of 3 of the “Clarifying Our 'Why' Instead of Searching for Tactics” series.

It might seem like I’m suggesting being reckless and oblivious to tactics - that couldn’t be further from the case.

The tactics matter but only to the degree that we've decided that we're committed to what we're trying to accomplish.

The specific way you finance a home or home improvement pales in comparison to the impact of choosing a specific neighborhood, honing in on a specific price point, or tying up a lot of flexibility into a down payment or ongoing mortgage payment.

The specific accounts you use to save will have minimal to no impact unless you're simultaneously saving enough to keep your lifestyle expectations in check.

The specific investments you use will have minimal to no impact unless you're able to stay invested when you see someone else outperform or another bubble begin to burst.

Without clear "Whys", the tactics - every single one of them - are sirens on a rocky shore tempting us to get distracted from the things that actually matter to us.

Clear "Whys" ensure that we remember why we are using money in the first place.

Clear "Whys" allow us to see something else that looks awesome on the surface and acknowledge that we don't have all the context or knowledge to realize that it's not as cool as it may seem.

Clear "Whys" allow us to step into an uncertain future knowing that some decisions may have bad outcomes, but that doesn't mean they were bad decisions.

Clear "Whys" allow us to recognize when a specific vocation or career trajectory is no longer aligned with what we desire at our core.

Clear "Whys" allow us to tweak our spending when our most deeply held desires are in jeopardy of not being accomplished.

Clear "Whys" ensure that we are making decisions about our money instead of having money (and tactics!) make our decisions for us.

15 | Thanks, But No Thanks, Maslow!

This post is Part 2 of 3 of the “Clarifying Our 'Why' Instead of Searching for Tactics” series.

You might be tempted to say, "Those are the basic tactics, there have to be more sophisticated tactics that are the real secret."

Nope.

The next set of tactics is even more discouraging because there is plenty of writing about them not being quite as impactful as they seem on the surface.

Tax-loss harvesting. Useful in some specific cases, certainly not all cases. See here. Sorry, Wealthfront.

Asset location. Theoretically useful, but a bit clunky and overrated when it comes to optics and logistics. See here. Thank you, Betterment.

Roth dollars instead of taxable dollars. Phenomenal benefit that is worth pursuing, but not a unicorn. See here.

Unique investment options. This is probably my favorite, because a link isn't even necessary. The average 401(k) offers between 8 and 12 fund options. There are around 10,000 mutual funds or exchange-traded funds (ETFs) in the United States. If the specific investment option was that important, don't you think we would have worked harder as a society to get the average person access to more than 0.001% of available funds for their largest bucket of traditional investments? The specific investment option certainly isn't the secret.

The endless search for tactics feels like it has to be a more productive use of time than trusting relatively simple rules of thumb and getting clearer on why we're building financial wealth in the first place.

I think the problem is that underneath the search for tactics is the underlying assumption that "more" is always better. "More" will fix everything, but "more" comes up empty when it is done without purpose.

Our typical use of next-level tactics is akin to leaping up Maslow's hierarchy of needs pyramid before we've addressed the basic physiological needs of food, shelter, and water.

In the case of personal finances, the base of the pyramid isn't sophisticated tactics, hacks, or tricks. I think the basic physiological needs equivalent is a clear "why".

14 | The Solution You're (Not) Missing

This post is Part 1 of 3 of the “Clarifying Our 'Why' Instead of Searching for Tactics” series.

It's easy to think that success with money is a matter of finding the right tactics.

A perfect combination of all the proper tips and tricks organized and assembled to achieve financial nirvana.

Google certainly contains sound tactical advice.

"How much cash should I have in my emergency fund?". See here.

"Which debt should I pay down first?". See here.

"How much should I be saving?". See here.

"Should I use a Traditional IRA or a Roth IRA?". See here.

"How should I invest my money?". See here.

All the answers are there. All the answers are sound (except the last one that is comically misleading!), but they don't seem to resolve that uncertain feeling in your gut when it comes to money.

Tactics certainly don't address how the way we generate income impacts the way we spend our time.

Tactics don't clarify how the way we spend constantly changes our baseline expectations and experience of life.

Tactics don't ensure that what we have set aside is accessible and wise to use the moment it's needed.

Tactics don't come anywhere close to helping us have more patience or less FOMO when we're investing.

There are plenty of other things that tactics don't do, but it's hard to remember this when tactics are constantly marketed as the solution that you're missing.

13 | Do You Trust Me?

In a recent conversation, my wife and I were reflecting on the realities of dividing roles within our household.

In this particular season, my work generates the majority of our household income and my wife's work is caring for our three young children.

Both roles are integral to how our family functions every single day. Both roles also require a high level of trust that the other person is playing their role to the best of their abilities.

One tension that always exists is how the breadwinner spends time at work, particularly on days that are challenging on the home front.

Some days I get home later than expected. Some days I go out to lunch with co-workers who fortunately are also close friends - the balance of work and fun can get pretty blurry. Some days I am still processing the day while we're sitting at the dinner table as a family.

The temptation is to believe that the breadwinner wastes time or prioritizes the wrong things or actively chooses to be at work instead of at home.

As we reflected, I was grateful for the trust and benefit of the doubt that is extended to me and realized that the exact same tension exists with our household spending.

In our particular case, my wife spends the majority of our household dollars. Not because she is a big spender, but because in this season she keeps our home life functioning.

Some days $500 gets spent at Costco. Some days a flurry of Amazon packages land on our doorstep. Some days there is a new lamp or picture frame or storage bin in a corner of the house.

The temptation is to believe that the spender wastes dollars or prioritizes the wrong things or actively chooses to spend instead of save.

The temptations are eerily similar. The accountability demanded and trust required are the exact same regardless of your role.

Do you trust me?

12 | A Shortcut to Financial Literacy

Here's an idea for a way to improve financial literacy quickly.

Make it easier to be literate with a mandatory cover page for all bank and investment statements.

Disclose, polish, detail, and market the heck out of every additional page, but give me one sheet that allows for apples-to-apples comparisons across firm, account type, and product type.

Here it is...

---

Date Range

Beginning Balance
Contributions
Withdrawals
Dividends
Interest
Fees (broken out by investment fees, advice fees, and added features fees)
Gain or loss
Ending Balance

Portion that is cash
Portion that is accessible today
Portion that is accessible in 1 year
Portion that is accessible in 5 years
Portion that is accessible in 10 years

---

That's it.

Many will argue that more detail is necessary - it's not.

I don't want a percentage return calculation - you spend dollars, not percentages.

I don't want asset allocation, cost basis, realized or unrealized gains on the cover sheet.

Leave the overwhelming and disorienting details for Page 2+.

I just want dollar amounts assigning responsibility where it belongs.

Simplicity that someone with a high school diploma could understand and use to compare to the next statement.

Instead of continuing to make rules that increase complexity and overhead, give us a single sheet that will weed out bad players fast.

No nonsense, no deflecting, just clarity and a buck that stops on Page 1.

The capability is there at every financial services firm. People to audit it every so often are there too.

Let's get started. Then let's apply the same idea to debt.

11 | From Linchpin to Bottleneck

In a recent conversation with a friend, we discussed the strain on cash flow that often comes in the season of life with young children.

The strain can come from increased living expenses, reduced household income, or some combination of both.

For this particular friend, increased living expenses had impacted their particular situation and had led to a conversation around reducing their ongoing 401k contribution from 15% of their salary to 13% to provide a little cash flow relief.

The 15% rate was sound advice the friend had received right out of college and had lived into for nearly 10 years. Job well done!

In this current season, the savings rate had become an anchor that felt arbitrary, a little out of touch, but also untouchable.

Was a change "allowed"? Would a change knock them off track for saving for the future? Was a change the biggest "mistake" they could make?

A tactic that had once been the linchpin of financial freedom had slowly morphed into a constricting bottleneck in a different season.

I think behind these feelings sits the implied assumption that "more" saving is always better. The challenge is that sometimes "more" isn't possible and life circumstances demand something else.

Some seasons require "more" of other things - more time at home, more spending on things that are important, or more flexibility in where your savings land.

Your financial well being is not tied to the precise percentage that is saved into your retirement account for 30 consecutive years.

Your financial well being is more closely tied to your ability to slowly build resilience instead of grasping for certainty.

10 | The Beautiful Gray

My wife described a vision of a piece of art that she wanted to add to our home.

On one side of the painting, it would be solid black. On the other side of the painting, it would be solid white.

Both would converge in the middle to a messy mixture of black and white that appeared gray without being a solid, uniform gray. The "Beautiful Gray" is what she called it.

Not that we are old, but as we add years to our life experience it is becoming more apparent that the squishiness, ambiguity, and uncertainty of "gray" defines nearly every life experience that involves people.

There are no "perfect" answers or "clear" understandings, only trade-offs, emotions, differing perspectives and values, incomplete communication, and ever-changing facts and circumstances.

Yet, this reality is all too easy to forget each day.

The innate desire for black and white leads to...

Relationships that become rigid and transactional instead of nimble and forgiving.

Past decisions that are declared a wild success or are crippled by feelings of shame and regret.

Labels of rich or poor, Conservative or Liberal, friend or enemy, supporter or detractor.

Outcomes (outside of sports!) that are either a win or a loss. Nothing in between.

I've received the advice that if a decision seems too big then it is probably more than one decision.

I would add that if a decision or conversation seems too emotional or complex then there is probably more "gray" to be acknowledged.

It seems like the ability to see and talk about the "gray" is unique and infinitely more important than seeing and talking about the black and white.

9 | When Did Paying Cash Become "Creative"?

“Home Buyers Get Creative With Cash Deals to Fend Off High Mortgage Rates” is a headline from the Wall Street Journal from the last 60 days.

The first case study is a man paying $965,000 in cash for a townhouse in Colorado.

Raise your hand if you have $965,000 sitting in cash right now.

If you raised your hand, keep it raised if you’re up for parting with all $965,000 for the purchase of a townhome.

Wow.

Honestly, it is just disappointing to see this as a headline.

In a current housing market where refreshing a mortgage calculator feels like you’re in a cold shower that you can’t turn off, we get a headline that tells us the “trick” is to save a ton and pay cash for a home purchase.

The fact that the article is applicable to 0.000001% of society is unfortunate given that it was likely read by much more than 0.000001% of society.

The fact that saving a ton and paying cash for a home is considered “creative” is just misleading and publishing an article about it in one of the largest publications in the United States is just plain reckless.

The article was full of financing and tax planning tactics (and beautiful pictures of course!). Not once was there mention of purpose or “why” the home purchases were important to any of the highlighted folks. Per usual, tactics before purpose.

I don’t mean to beat up on the highlighted people or even the writer. I am bummed because articles like this only continue to compound the confusing, complex, and taboo nature of personal finances. Tiny glimpses into glamorous spending decisions without any context aren't improving our collective relationships with money.

8 | Confusing Compounding

Compounding is tricky.

It seems like some folks intuitively understand how compounding works and others learn once it is too late to matter.

Because the near side of the curve is so flat, it’s hard to have the patience to get to the far side. It seems like it’s always out of reach.

Because the far side of the curve is so steep, it’s hard to get oriented if you happen to make it there. It seems like the goalposts keep moving because the next “score” is so financially valuable.

To further complicate our relationship with compound interest, we get quotes like, “The first rule of compounding: Never interrupt it unnecessarily.”

Very useful if your goal is to make as much money as possible.

Somewhat less useful if your goal is to use money to fill a life as full as possible.

Not useful if life happens and you are forced to “interrupt” compounding at a less than ideal time.

I can’t argue with the power of compounding and the importance of letting it happen over time. The results on a spreadsheet or account statement are profound.

The tricky part is the squishiness of a word like “unnecessarily”. At some point, you’re going to have to “interrupt” compounding if you plan on using money to live your life instead of living your life to make money.

Once you understand how compounding works, I think the biggest growth opportunity is to get clear on what it means to “necessarily interrupt it”.

7 | My Least Popular Belief

This won't be my most popular post, but it's still important to say out loud every so often so we keep ourselves honest.

Most (I want to say all!) personal finance tactics pale in comparison to having some way to consistently track your spending.

As a matter of fact, I think the other tactics are primarily trying to accommodate the fact that as humans we refuse to reflect on our spending.

Enormous levels of income can mask this reality for some period. Enormous levels of financial wealth can likely delay it a little longer, but eventually the conversation will end up in one of two places.

A question of viability - where's the money going?

Or a question of contentment - is the money going where you want it to go?

Honestly, I think this is a good thing, even if it doesn't seem like it on the surface.

I don't think we will ever define our lives by how much we earned or where we saved or how we invested.

I think our financial lives get defined by how we spend what has been earned, saved, and invested.

All the colorful pieces of life come back to the quality of our spending and yet we still avoid talking about or tracking our spending like it's the plague.

The very thing with the most impact is constantly pushed to the bottom of the list because it's too complicated and too hard.

The fact that it's hard and that most people don't do it might be a pretty good indicator that figuring it out is the secret.

Additional Resources

The Biggest Returns by Morgan Housel

Budgeting Equals Awareness by Carl Richards

Accounting (and small business) by Seth Godin

6 | Meandering Through the Cone

I had a conversation with a friend who has dreams of a radical career change.

He had already started to converse with people in and around the industry. He had already started building up income and setting aside cash surplus. He had a recently developed understanding that it's a long race and the power of compounding applies to relationships, knowledge, and habits just like it applies to money.

After sharing what seemed like incredible progress, he asked, "What else should I do? What's next?"

Persist, my friend. I didn't know what else to say.

---

For 10+ years, I have been pursuing a new vision of helping people with money.

I have seen plenty of people do exceptional work helping people with money, but I have never seen my vision in practice.

Along the way, I have had...

Infinite conversations that had useful nuggets and useless nuggets.

Career changes that directly contributed to acquiring experience and included extra responsibilities that felt like a drag.

Continuing education that pushed me forward and felt like a waste of time.

Reading, tons of reading, much that felt relevant and much that felt totally worthless.

Writing that forced me to crystallize thoughts even when I felt like I had nothing to say or the ideas felt too abstract.

In the conversation with my friend, I described it as feeling like I was in a giant cone.

At the start, the vision had infinite inputs and outputs that all fit into the top of the cone.

As conversations, career changes, reading, and everything else happened, I began to "intentionally meander" into and through the cone.

I have never known my precise location in the cone, and I don't believe there is a bottom.

There is a no destination - only the refinement and clarity that comes from moving down the cone.

When it comes to desiring change and casting a vision, I think the most important thing is to get in the cone, stay in the cone, and see where it leads.

Helpful Perspectives

The lonely unicorn by Seth Godin

5 | Grow a Tree, Don't Fill a Bucket

With a bucket of water, there’s only one way to fill it up - more water. With a tree, we know the basics that help it grow, but the exact blend of those basics is never the same.

A bucket of water can be sheltered from the elements. A tree gets a front row seat to every storm for its entire life - water, wind, and even fire can contribute to its growth.

With a bucket of water what you spill is lost forever. When a tree loses a limb, it recovers with time.

It’s always easy to track progress to a full bucket of water. With a tree, it's impossible to know how it will grow each month, season, and year.

A bucket of water will never grow on its own, but a tree will.

It's easy to fall into the trap of believing that building financial wealth is like filling a bucket of water.

If you don't believe me, wait until the next time you hear someone say...

"I want to wait until things are more certain and then I’ll invest." They're filling a bucket.

"I want to invest, but I don’t want to lose any money.” They're filling a bucket.

"Once I get to a certain amount, then I will feel secure." They're filling a bucket.

A tree can't be protected from the storm, it will probably lose a limb or two at some point, and it never reaches a final size or shape. But none of these things keep us from growing trees.

Grow a tree, don't fill a bucket!

For those that can't get past the fact that a tree can die, read more here.

4 | I Didn't Sign Up for That!

A friend of a friend who is an avid cyclist and extreme mountain biker recently broke both elbows in an accident.

Two slings. Restricted movement. Weeks of disrupted eating, dressing, sleeping, bathing, and everything else.

In reflecting on the accident, the friend of a friend said something along the lines of, "Yeah, it's sort of what I signed up for."

I am certain he hadn't listed all the potential downsides of extreme biking, but he clearly knew they existed.

I am also certain he will be back on the trails soon rather than later.

It's easy to see all the upsides on the front end of the decision, and bemoan the downsides when things inevitably fall apart.

Getting paid a salary feels secure and comforting. You're also signing up for uncertainty during lay-off season, needing approval for vacation time, and micro-management that is a little tighter than you might like.

Buying the cheapest option feels frugal and responsible. You're also signing up for functionality that might disappoint you, perpetual jealousy towards "better" alternatives, or sooner than expected maintenance.

Running a household with no cash in the bank feels efficient and return-maximizing. You're also signing up for a sleepless night or two wondering where you'll find your next dollar or having to say "no" to something when you'd like it to be an automatic "yes".

Owning stock in companies feels thrilling and glamorous. You're also signing up for moments of paralyzing fear about the future viability of the company or someone picking a better company than you.

The "falling apart" is inevitable.

Being able to acknowledge that you signed up for it is a superpower.

3 | Professional Bravery

In a recent conversation, a friend shared an anecdotal observation that "professional bravery" within careers seems to start drying up somewhere in the 40s for many people as the reality of the career slog sets in.

The specific example in the conversation was a pastor counting down the Christmases left before "getting" to call it quits on a career. The countdown had started with 20+ Christmases to go, not 2.

Initially, you might gasp, but I think there are countless other examples of this perspective across every field, and I don't think we need sophisticated research to confirm it.

Innovation and ambition replaced by status quo and not rocking the boat.

Working for a purpose replaced by working for an income.

The flexibility and freedom offered by change replaced by the hypothetical cost and fear of change.

Life circumstances certainly play a role - many of which might be out of our control.

I still think there are at least two things that are always in our control but have a sneaky way of slipping through our hands if we let them.

Slowly losing clarity on the "why" behind what you spend your time doing.

Slowly tethering your lifestyle to a specific, high level of income.

I think the combination of these two things is deadly when it comes to professional bravery.

When we stop the process of editing and refining our "whys" and our lifestyle, it seems like "professional bravery" is going to slowly start to evaporate.

2 | The Kick Six and Your Money

In the 2013 Iron Bowl between Alabama and Auburn, the final play was a missed field goal that was returned 108 yards for a touchdown to win the game. Watch it here.

One of the most nuanced, random rules of football determined the outcome of the game.

Imagine if someone's introduction to college football was that play.

Very literally, imagine if someone watched that play with no prior context for the game of football and attempted to start learning how to play the game from there.

It couldn't be more misleading and disorienting.

There were no quarterbacks involved in the play.

The kicker would have appeared to bring greater risk to the situation than potential reward.

The "field goal return man" certainly would seem like the most important player on the team.

No part of the experience would contribute to the person knowing how to win a typical football game.

The novice spectator would be reviewing a case study in the PhD level course before they even knew they should enroll in the 101-level course.

Whether we realize it or not, it's too easy to engage with personal finance in the same way.

The different ways to invest and talk about investing are so nuanced, unique, and overwhelming that we get distracted or never even know what matters.

The different ways to save are so nuanced, unique, and overwhelming that we are led to believe that the way you save is more important than just saving.

Few parts of the experience emphasize the things that actually lead to a healthy relationship with money.

The kick six is a cool story. Most things in mainstream personal finance are more like a cool story than the secret to winning the game.

1 | The Gap Between Plan A and Plan B

Plan A is what you're pursuing now.

Plan B is what you'd pursue if couldn't pursue Plan A.

The bigger the gap between Plan A and Plan B (and I'm not just talking about money!), the greater the chance of disappointment and the more fragile Plan A becomes.

When you're looking for a new home, the moment there isn't a Plan B is the moment you've lost all bargaining power and invited a disappointing outcome to the party.

When you're negotiating income, the moment there isn't a Plan B is the moment your boss tells you what your new income will be.

When you're taking kids out for dessert and Plan A is closed, I hope you have a Plan B.

Plan B is not a synonym for paranoia or worst-case scenario.

Plan B ensures you know the alternative and next steps if needed, but Plan B also strengthens and stabilizes Plan A.

Exploring and defining Plan B can also breathe new life and purpose into Plan A.

Seth Godin has said, "Power might be in the form of money, access to plenty of lawyers, or simply a willingness to burn it all down to the ground."

It's easy to skip over that third option, because the first two seem so obvious.

"Burning it all down to the ground" seems a bit intense, but being willing to walk away, pivot, start over, or try again is a choice that’s available all the time.

What's your Plan B?

Intentional Observers instead of Anxious Critics

Recently, in a conversation with close friends, we got to the topic of finances.

The question was posed, "How do you make intentional decisions about your money?"

Maybe the question was too open-ended. Maybe we jumped at the opportunity to hear ourselves talk. Maybe we thought we knew more than we did.

It felt like we rambled for 30 minutes and by the end arrived at a point where tactical takeaways were the "solution".

Review the budget more closely. Give money away. Have an annual retreat to reflect on the past and craft the future. Ensure we're saving to some degree.

Nothing was inherently wrong with any of these takeaways, but each felt sort of abstract, stale, and aimless.

After a couple of days, I circled back via email to acknowledge my discontentment with how the conversation went. I clarified that doubling down on tactics was not the takeaway I envisioned from the conversation and concluded with...

"I think identifying, reflecting, and refining our “whys” over time is what we are trying to get better at doing."

With the help of our friends, the beauty of this framework was quickly revealed...

It provides freedom. Your whys can and will change over time and that is OK.

It provides an intentional and simple start. You can identify a single "why" and then refine it with time. Then apply the same framework to your second, third, and one hundredth "why".

It provides feedback. If you've been specific with your "why", it's easier to know when it is or is not being accomplished. It's also easier to realize that it has changed.

It fosters connection by allowing us to reflect on what matters to us and to those around us.

It helps establish values without using the word "value".

It helps us become "intentional observers" instead of "anxious critics" of ourselves.

Thanks to CB and KB for helping us connect the dots!

Love Letters to my Future Self: Why a 2022 RAV4 Hybrid XLE Premium?

Why RAV4?

• We have had great success with both Toyota and Honda over the last 10 to 12 years. Both of our extended families have experienced similar success. This filtered out a number of car options as we really didn't look beyond these two brands with the exception of gut checks to ensure other brands did not offer something dramatically different. Limiting the brands from the start, felt like it saved significant time in the evaluation process.
• Allen at TLC has been a trusted mechanic for the past 4 years and he only works on Toyota and Lexus cars. This all but eliminated Honda from contention for us.
• We liked the design of the RAV4. It is a good looking car and popular on the streets in 2022. Of course, since we decided to look for a RAV4 it seems like it has been the most frequently spotted car on the road.
• The size felt like it closely resembled our existing 2004 Highlander which has served us well as mid-size SUV for transporting a handful of people and surprisingly large amounts of boxes or furniture for moves or big purchases.
• The current Highlander feels like it is bigger than we need and the price tag was a lot more than we hoped to spend.
• The current Camry costs a little less than the RAV4, but not so much less that it convinced us to get a sedan over a mid-size SUV.

Why hybrid?

• The markup for a hybrid was ~$2,500. We were not strongly considering a hybrid until we saw what we felt was an immaterial markup.
• Part of our decision was a values-based decision of trying to be more conscious of gas consumption for environmental reasons
• Part of our decision was knowing that it would reduce the amount of gas paid for in our ongoing household budget
• In a conversation with Allen, our trusted independent mechanic at TLC, he acknowledged being hesitant to get a hybrid due to the maintenance costs on the latter half of a car's life (i.e. a hybrid battery currently costs ~$6,000 and is likely replaced somewhere between 10 and 15 years of ownership
• All things considered, we felt comfortable going hybrid knowing that we were controlling our ongoing cost of gas consumption and may or may not have maintenance costs late in life that might offset some of these cost savings. It also felt silly to save $2,500 today and then have a gas only car for the next 12 to 15 years. We are at a point in time where it feels like hybrid and electric must and will become more prevalent over the next decade.

Why XLE Premium?

• Primarily for the leather seats.
• There are a number of other convenient features that come with it, but the difference in models was relatively nominal for each level up and the leather seats were not a default option until the XLE Premium level.
• We have become a little self-conscious of the state of the fabric seats in our 2004 Highlander (i.e. stains, odor, stickiness, etc.) and felt like leather seats would be a significant value added throughout the entire life of the car.
• Ironically, the first evening I drove the car home, the kids were waiting out front to see me pull up. Excitedly, they hopped in the backseat to check it out for the first time. After a few minutes, we realized Charlie had a stubbed toe that was bleeding and leaving multiple blood spots on one of the backseats - with a wet paper towel it all disappeared!

Why new and not used?

• As absurd as it sounds, new cars are currently less expensive than used cars. Due to supply chain issues, new cars are typically taking 2 to 3 months to be delivered, while a limited number of used cars are available immediately if you can find them.
• It seems that another contributing factor is that manufacturers place a limit on the price that a new car can be sold for, but there is no limit on the price for a used car. It seems like dealerships would prefer to sell used cars more than new cars right now because they can charge based on demand instead of based on pricing rules.

Why now?

• Our 2004 Highlander has an active leak that we addressed 4+ years ago. Allen at TLC said it probably was not the kind of thing that would be worth fixing at this stage of the car's life. It is actively leaking transmission fluid, power steering fluid, and some oil. He suggested limiting the car's usage to daily commuting only. Since the recommendation, we have tried to limit but inevitably have needed the car to drive longer distances and this has started to feel a bit reckless from a safety standpoint.
• We have known the date to purchase a new car has been coming and 4 years ago would have been elated for it to last 3+ more years.
• Once the purchase felt imminent (i.e. within the next 6 to 12 months), the only reason to delay the purchase was to speculate/hope that car prices might go down or that we could wait out the crazy car market - when money is the only variable impacting the decision, it's good sign to think a little harder!
• We realized, though this was not a reason for the decision, that this car could end up being a great first car for our kids to drive. Sara Brooke will be 16 years old in 10 years. We would hope that this car could last well beyond that point in time even if it required some investment at that stage of its life. Ironically, the first night we had it at home, Sara Brooke said, "Daddy, I want to drive this car when I grow up!"

Why financed and not 100% cash?

• We have historically had a strong preference towards paying cash for cars. We have even referred to the ~$60k to ~$65k of cash that we have on hand as covering our emergency/opportunity fund as well as a car purchase in the next couple of years.
• Over the past 6 months, the possibility of starting a financial coaching/planning business on our own over the next 18 to 24 months has become much more likely than before. This has led to us wanting to build up cash on hand to be able to fund and manage the first few years of starting a business.
• Currently most of our traditional investments are down 25% to 30% from their most recent peaks in Summer 2021. We wanted to leave these investments, specifically our taxable account, alone so that they could recover and grow instead of selling them at depressed values and having $40,000 no longer invested for growth. We discussed using both cash flow surplus and even investment dividends or gains over the next couple of years to accelerate the repayment on the loan.
• Some part of me wanted to experience financing a car (and to some degree purchasing a new one!) to be able to relate to other friends and clients who finance their cars and to have firsthand experience both with financing and paying cash for cars as well as buying used and new cars.

In the end, when it comes to finances, our goal is to make many good decisions and not get lost trying to make perfect decisions. It feels like we have accomplished that goal with this purchase.

Pep Talk for the Hard Times

In case you needed to be reminded what it felt like to see your account balance go down, now you likely have recent, first-hand experience.

These are times when a motivational speech is likely more appropriate than a technical lecture.

When, if necessary, not logging into your account is more impactful than any tweak you could make.

When reflecting on what we’re aiming for is more appropriate than adding up the current score.

When a hug is more appropriate than a slap on the back.

When patience is more necessary than sophistication.

Alas these types of drawdowns are not only inevitable, but necessary for long term growth. Failure sowing the seeds of progress.

As Morgan Housel puts it, “Returns are never free. They demand you pay a price, like any other product. And since market returns can be not just great but sensational over time, the fee is high. Declines, crashes, panics, manias, recessions, depressions.”

The sneaky part about investment returns is that the “price” they demand isn’t showing up on a label – it shows up in the form of sleepless nights, impulsive slashing of spending, second-guessing your own investments when you hear a friend describe theirs, higher blood pressure when you follow the news, fear that your investments won’t stop dropping until they hit $0, etc.

These are times when it is easy to forget that the “markets” are not a slot machine but instead are a group of real businesses run by real people showing up every day to add value to this uncertain world that we live in – figuring out how to operate in a post-COVID world, dealing with supply chains upended by a war in Ukraine, trying to add value to the world despite experiencing higher costs, worldwide leadership that is turning over to a subsequent generation, and on and on.

Like exercise or dieting or relationships, timing and magnitude of effort do not always match up with immediate results.

I have found that it is helpful for me to remember that building resilience will always beat grasping for certainty.

When it comes to investing, resilience looks like…

Investing in a manner that you believe in and in which you have a baseline understanding knowing that, regardless of strategy or plan, the only guarantees are that someone will always outperform you and that how you behave during the inevitable unsettling times will be the biggest determining factor in your lifetime returns. Owning companies tends to increase potential returns, diversification tends to make the ride smoother, long horizons tend to increase the probability of positive returns, and above-average patience is a superpower.

Have hope. Stay the course. Don’t process this alone. Find someone and talk to them about how you’re feeling right now. That will be more powerful than anything else you can do.

Additional Reading

Behavior versus everything else by Carl Richards
Reminder that “how you behave matters more than what you know”.

Days or decades: What’s it going to be? by Carl Richards
Halftime speech because maybe that is what you need right now.

A Market Update for Real Investors by Morgan Housel
Timeless, humorous, and a helpful reminder that effort and results are not perfectly correlated.

Selloffs Through History by Ross Mayfield
Historical context because this has happened before and will happen again.