I Know, But . . . 

In my last post, I bored my Dear Readers silly waxed poetic about how I make suboptimal financial decisions to . . .make more optimal financial decisions. 

Huh?!

If you didn’t read that post, the gist was that while I know OF several investing and withdrawal strategies that might allow us to reap greater rewards and withdraw at a higher-than-four-percent-of-total-liquid-investment rate, but I choose a less complex, but simpler approach. Less optimization. More Keep It Simple Stupid (KISS).

That got me thinking of other probly good (and proven) personal finance approaches that I don’t follow, or haven’t followed at some point. Stuff that’s probly cost us monies but that I’m nonetheless OK with as it generally aligns with my KISS philosophy.

What sorts of advice? Well, Dear Reader, let’s see, shall we?

Just an average guy

First: lump sum investing (LSI) vs. dollar cost averaging (DCA). We’re invested in part in broad based equity market funds. Those markets go up more often than not. So, it makes sense more often than not to invest as much as you can in them as soon as you can. LSI beats DCA. Time in the market beats timing the market. 

Makes sense. And I rarely do it. 

That once bit me in the keister. Bigly. To wit: when I didn’t immediately invest the equity proceeds from our Midwest condo sale when we moved from the Midwest to the Mountain West, instead letting it collect dust in our almost-no-interest checking account. Why? Cuz this was a time of turmoil in good ol’ US of A. Surely the market saw this, too, and felt the same. Surely? . . .Right? Yeah, no.

The market gave zero flutes about my sentiment. After having waited about 18 months or so for the market to wise up, I conceded that the market would continue to behave irrationally longer than I could remain hopeful. I brushed the dust off the dollars and invested them. It’s since returned a tidy sum. One that’d have been a fine sight tidier had I LSI’d it. Or even DCA’d over the ensuing 18 months. Oopsies!

Anyhoo, as The Missus and I still contribute to our respective employer-sponsored retirement accounts, we could invest more money earlier each year. Instead we make equal DCA investments all year. 

Why? In part, for The Missus it’s because she sort of has to to get her employer match. Were she to max out her contributions before her final calendar year paycheck, she’d miss matches that the employer otherwise would make and so lose on the maximum annual match dollars. It’s silly that the employer structures its match this way. But it is what it is.

The Missus could contribute more earlier in the year so that at some point her contributions could drop to the minimum amount to get the maximum per-paycheck contribution. But we don’t do that. 

Why? First, I don’t wanna do the math to figger out the investment sequence sums. Also cuz what paycheck money that gets put into our checking account after taxes, deductions, and contributions covers much of our ongoing living expenses. Higher employer-sponsored retirement account contribution sums earlier in the year would mean less living-expenses money from those paychecks during that time, necessitating taxable brokerage account sales. That takes work. And me proactively hitting the “sell” button, which I still dislike as irrational as that sentiment is given our situation.

DCA’ing also tricks my flea addled brain into thinking that sometimes we’ll buy high, and sometimes we’ll buy low but in the end the result might not be worse than LSI’ing. It might even work out better! Might. Forget the fact that, as noted above, I know that more times than not it won’t work out the same or better.

Off balance

Next up is rebalancing. The conventional wisdom—the soundness of which I concede—is to settle on an asset allocation and then rebalance “regularly,” after having defined that term. This allows an investor to buy low and sell high. Sensible. For us, I settled on the asset location but never have rebalanced.

Why? Well, for starters I’m lazy. Second, I admit to a certain gambler’s mentality. Failing to rebalance has resulted in us being more equity-heavy in our portfolio than the original plan provided for. But as much of our equity investments have (far) outperformed the rest of the portfolio ever since setting the asset allocation, it’s worked out favorably. Bigly. That could change, of course. But so far it’s worked out. 

Mitigating the effects of my inaction is that our bond funds are in retirement accounts, which we’re not yet drawing from. Income that they spin off—elevated in recent years due to high bond yields—has been reinvested, propping up the funds’ value. I guess you could say that we’re sort of rebalancing by default, cuz we could instead invest the bond income in equity accounts. That’d take a little work by me. Work I don’t wanna do. 

As it’s turned out, our portfolio is less than 10% off of the original target. I can live with that. 

The numbers racket

Last, we don’t track our expenses meticulously. Per se. ‘What?!,” you might wonder, Dear Reader. Also, “How do you know what you’re spending, and thus how to effectively calculate how to cover those expenses?!” Good questions, Dear Reader. I’m glad you asked!

Truth told, we don’t track our expenses meticulously, but we track them in what I’ll call broad strokes. Some of our expenses—including some bigger ones like rent and health insurance premiums—I know exactly what we spend. Others—including some regular expenses that add up over the year, such as utilities and vehicle and renter’s insurance premiums—I can ballpark pretty well. Others, past experience gives me decent clarity, so can guesstimate pretty well. 

What’s left are a buncha variable and unforeseeable expenses that we can count on every year. They all go into a “miscellaneous” category in my “budget” spreadsheet. I budget for a pretty high dollar amount in that category, and I’ve found that it does a pretty good job of covering most of said expenses. 

Yeah, I’m sure that if I meticulously tracked our expenses year over year I’d uncover some unpleasant surprises. Maybe some biglyish ones. Surprises that if addressed not only would increase clarity but allow for yet further control, leading to more efficiency. 

But that’d take work. And as I’ve stated, me no likey da’ work. Even if I did decide to track everything, getting The Missus to, too, would, I think, be a fool’s errand. I doubt she’d do so on her own, and I’d likely not be diligent enough to ask her for receipts so I could input the numbers into our tracking tool. Oh, and The Missus likely would revolt and threaten to divorce me. My thinking: keeping The Missus onside, even at the cost of possibly saving a few thousand dollars a year is cheaper than a divorce. Imma take the win.

And in the end . . . 

There you have it, Dear Reader. A buncha ways in which I’m no optimizer. Some of you Dear Readers might think nothing of that, like me. Others, however, might say that given the relative ease with which the optimization can be realized, I’m just a dummy. I can’t argue with that.