New Year 2021 - Reflections on 2020
While the world struggles through a pandemic and political unrest, most of my friends and family have been fortunate. We are generally cautious and take the long view. A good summary of 2020 I've seen floating around in the online forums I frequent: "stonks go up."
"Stonks" is a reference to this video which has generated many memes joking about stocks and the way people talk about them. It was true for us this year, where the market gained us the equivalent of our household income. Many people who were fearful of the political winds pulled their money out of the market and missed out on that gain.
I attended a Schwab webinar several months ago and this graph was in the slide deck:
Please click on the graph to see the whole deck. The speaker has some great insights. This graph is a perfect visual of "stonks go up" and making the case for taking the long view. "Stay invested" no matter what happens in politics. As mentioned in another part of the slide deck, "campaign proposals are not legislation."
Another way to look at it:
It's a famous painting called The Treachery of Images. The French words on there read, "This is not a pipe." Because it's an image of a pipe... not an actual pipe. Just like you can't stuff this pipe and smoke it, neither can you end up paying higher income taxes unless the campaign promises turn into actual legislation that applies to you. So many things have to happen between the words and the legislation.
As someone who works in cybersecurity compliance in my day job, I see how difficult it is to make ideas into policies into processes into enforceable activities into repeatable and auditable givens that result in actual, measurable compliance. All along the way, it requires gobs of energy and effort to make it happen. To socialize the change. To obtain buy in. To check the work. To appease the auditors. To find the time and the social capital to collaborate. To come up with a solution to a problem or to work within constraints. To identify stakeholders. To obtain ownership. To get decisions made. To enforce the scope and to prevent scope creep.
Managing personal finances are something I've had on autopilot for quite some time. I haven't made a major change in years. The last finance-related change pertaining to me was initiated by my husband to refinance the house. We did it. When we bought the house circa 2016 we planned to refinance it within the next 10 years if the interest rates were favorable. At the time of the original purchase, we locked in a 5/5 ARM. Now we are on a 30 year fixed mortgage. It's permission to continue coasting. A solid financial strategy is one you can set and forget until it's time to tap into the funds.
Sure, there are folks who believe in day trading and actively managing or growing wealth, but I'm lazy and disinterested in working harder for more dollars. I'd rather work smarter, outsource unavoidable work, and automate as much as possible. I'm using money to buy time - the one thing money can't really replace. After years of doing this, we are seeing that ROI (Return on Investment) in this unusual year. Since I'm cautiously optimistic (cynical), I want to see that kind of return happen consistently for years before deciding that it's real.
I'm still marching to the below timeline for retirement, based on this Networthify graph:
Keep in mind that this particular retirement calculator makes several assumptions. A significant one that makes it different from other calculators is the assumption that you want to leave this money behind in perpetuity for someone else to enjoy the income it throws off after you die. Most other calculators (usually offered by brokerages) are calculating for an average American retirement where you spend your last dollar and then die. At that point it becomes about legacy - what do you intend to leave behind, if anything. We have causes we care about. We have our child. After our own retirements are covered, we still have years of purposeful work in us left. How we transition into the sunset is a big consideration during this last half of our working lives.