When my wife Jo and I decided to sell our home in Illinois, the first question we asked ourselves was, "What are we going to do with all our stuff?" Somehow our children, neighbors, friends, the Salvation Army, and a moving van would have to magically make it disappear sometime before we closed escrow at the end of the month.
My many theories about stuff have proven to be true over the dozen or more homes I've lived in during the last 73 years. First off, no matter the size of the home, it's always full of stuff within five years. When we sold our home in Pensacola along with all of its furnishings, we managed to fill the next one to the brim in no time flat.
When we pack up a house, we often pause and hold up nostalgic items, fondly remembering a trip or event. Souvenirs are supposed to remind us of good times, but not everything fits that bill. We have everything from the newest TVs right on down to outdated technology hidden somewhere near the treadmill or in a guest bedroom. We even have a spare refrigerator in the garage. We use most of this stuff, other than the television in the family room, for less than ten hours each year. It's no wonder the damn things never wear out.
Most of the stuff that is important to us means very little to our children. Having cleaned out three homes that belonged to older family members, I can safely say that everything worth saving can usually fit into a Ford Explorer. The rest ends up at the Salvation Army or Goodwill, and a small amount of furniture is quickly dispersed among family members. For most folks, their children are well situated by the time their last home is cleaned out. There may be a few things the kids want, but little they need.
Jo and I have friends who've considered downsizing, but the thought of having to deal with decades of accumulated stuff is downright scary for them. Some of our friends have off-limits basements or storage areas where guests are not allowed. They're simply too embarrassed by the endless boxes and piles of stuff.
That's why I've come up with a "stuff grading system," to help us all rank the goods accumulated over a lifetime. A similar outlook holds true for our investments as well.
Really Good Stuff
This category includes anything appreciating in value. One may not have bought it as an investment, but it turned into one. It could be a coin collection, gold jewelry, artwork, Matchbox cars, or other type of collectible. Take good care of these items; one may need to sell them down the road. But for now, hang on to them, these are like the investments that Warren Buffett says he will never sell. You want to have a few of these in your portfolio to give you income and share price appreciation so that when the time comes—and you’ll know when that is—you have something of value that will fetch a substantial sum of money.
Good stuff includes anything we use regularly or still need. The TV in the family room, the good silverware we pull out when family comes at Christmas, and tools in our workshop all fit the bill. At the same time, I should confess that I don't need six socket wrenches or three electric power drills. Too much good stuff can quickly turn into bad stuff.
In my portfolio this tends to be stocks that are making me money for the moment, either through gains in share price or dividend payments. I won’t hold them forever, but for now they are tools to increase my assets. You probably have some in your portfolio, too. They're not the "next locked-in 1,000% winner," rather the more modest double-digit gainers that you'll cash out of when you've fully maximized their value. For me, very often dividend and income investments fit this bill.
Bad stuff includes all those possessions we never really use or need. When I pulled the radio out of my truck and replaced it with an in-dash navigation unit, I stuffed the old radio in a garage cabinet, and it's been there for the last three years. My wife has a wonderful vacuum cleaner, yet whenever she goes into the closet, she has to move the old one to get to it. You get the picture; we all have stuff that simply gets in the way.
Would we be better off selling a lot of it at a garage sale? Probably. A neighborhood garage sale is a fantastic stuff transfer station. They work well as long as you're a seller and not a buyer. Otherwise, the Goodwill or the Salvation Army is your best bet for bad stuff.
Any investor who has held a portfolio for a number of years has had his or her share of "bad stuff" stocks. These are the ones that we held too long and watched all our gains evaporate, the hot tip from our brother-in-law who turned out to know nothing at all about investing, or even the mutual funds we bought when we were young because we saw the previous year’s gains and thought past performance indicated future results. No matter how we got the stocks, eventually we shoved them into the garage cabinet of our portfolio hoping to one day they’d come back to life and we could move on.
Really Bad Stuff
Really bad stuff is anything that keeps on costing money. We had a model train layout that was a lot of fun to build. When we had a new home built, we actually added an additional room to the house so we could display it. Five years later, the only time we ran the train (after I would crawl under the table to fiddle with it) was when the grandchildren came. After about fifteen minutes, they would usually get bored and go back to their computer games.
We had to heat, cool and pay taxes on that damn train display room. We eventually tried to sell the layout, but ended up calling the Salvation Army to haul it away. As I watched it go out the door I thought to myself, "Was it really worth all that time and money?" Over the years we invested several thousands of dollars in that train system, but wouldn't we have been better off investing that money? We could have even used some of it for a cruise or trip with our grandkids.
We have many friends with vintage automobiles or some other collection of depreciating assets who actually rent storage facilities to store their stuff. A few have even sheepishly admitted to not visiting their stuff in storage for the last few years. In most cases, it started out as fun stuff and turned into really bad stuff – stuff that costs money and chips away at retirement funds.
It is all too easy to become a slave to one's stuff. If something is eating away at your nest egg and not enhancing your life, it's time to let it go.
The Times, They Are A-Changin'
I saw a sign nailed to a post that makes my next point quite succinctly.
No, I'm not telling you to say five Hail Marys. However, it is time for us all to take stock as we move toward or through retirement. Retirement has many perks: free time, an empty nest, and kids who have moved off of the family payroll – which usually frees up some cash. But far too often folks end up spending that money on stuff, stuff… and more stuff.
Unfortunately, retirement also means we're producing less income than we were during our peak earning years. Retirement changes our financial situation, and our priorities need to change along with it. Capital, not an accumulation of stuff, is what will provide the income one needs to pay the bills during retirement.
Seniors Need Money More than Stuff
Numerous studies indicate that seniors are not generating enough income; they are working longer or taking part-time jobs to make up the difference. Many are also selling off assets (commonly known as stuff). How and when that happens can have a major effect on one's retirement lifestyle. If we wait until we really need the money, we are at the mercy of the market. Sellers never get the best price under those circumstances and we have to take what we can get.
Or people end up selling assets in the wrong order. They need money and sell their really good stuff first because it's the most valuable. Once the really good stuff is gone, they move down the ladder. But wouldn't we be better selling the other stuff first and hanging onto appreciating assets as long as possible?
On the other hand, even if one doesn't need the money now, maybe it's time to be proactive. Why not sell everything other than "really good" and "good" stuff, and invest the profits? Turning a liability into an asset is always a good thing. It’s almost like free money. Almost.
Senior Garage Sale Day
Like it or not, we are in the midst of a generational war. The government is stealing massive amounts of wealth through taxes and stagnant Social Security payments to seniors. They’re holding down rates so you can’t even sanely contemplate opening a CD account, while an ever increasing share of the rise of health care costs is being shifted onto the shoulders of seniors. It is time for us to throw off our "stuff shackles" and strike back.
I propose a national Senior Garage Sale Day. Seniors can sell all their non-appreciating stuff and invest the cash they receive to help fund their retirements. The day should include a reverse-carding rule: buyers over age 50 should be refused entry. It would be a generational win-win. The younger generation would get a lot of stuff at a discounted price, while their parents and grandparents would receive much-needed cash for their retirement accounts.
It is time for us all to repent and change our ways. Which would we rather have: money in our retirement accounts or stuff?
All kidding aside it’s time for us to make sure we’re not bogged down with junk and missing out on income for our retirement years. It’s gotten a lot harder these days to get by.
If you’re interested in not only surviving, but thriving during retirement then you should check out our upcoming online presentation, America’s Broken Promise: Strategies for a Retirement Worth Living, premiering on September 5th.
This event features John Stossel from Fox Business News and formerly ABC’s 20/20, David Walker, former Comptroller of the United States of America, Jeff White, president of American Financial Group, and me, Dennis Miller. Click here to find out more. (We expect response to be overwhelming, so you should sign up now—it’s free—to make sure you’re not left out.)