Uncertainty

In last night’s yoga class, while we tried to find our balance in precarious, unfamiliar postures, our teacher said, “Can you stay calm in times of uncertainty?” No doubt, he was transcending that question beyond the four corners of our yoga mats. Can you relax your jaw, your face, and even your eyebrows when faced with a challenging situation?

In the last four years, we have been bombarded with pessimistic commentary on the state of the economy. The title of a recent article stated that the average value of a home, when inflation is taken into account, stands at 1895 levels. Just last week, a report on Social Security projected that by 2033 (three years earlier than previously projected), benefits would be 75% of current levels if nothing is done to alleviate the problem. While the stock market has performed nicely so far this year, we are reminded that last year the market started off well and ended in a whimper. Some financial pundits say that the bull market will charge ahead this year, so we should load up on stocks; others warn that the bear could rear its ugly head yet again.

We hear financial planners and other professionals dole out the same advice ad nauseum: save more money for emergencies; diversify your investments; stay current in your career; pay down high-interest debts; update your will and beneficiary designations; maintain good health; contribute to your 401k and IRA. There’s a reason why they do it- it’s the uncertainty of life. We can’t always prevent setbacks from happening, but a healthy dose of planning will keep us relatively calm if or when they do.

Isaias Sarmiento
© 2012

Christmas, Uncelebrated

Many people assume that because my heritage is Filipino, I must celebrate Christmas like all other Filipinos. The Philippines is a predominantly Catholic country, and Christmas serves a highly religious meaning, alongside all the gift giving that is part and parcel of the tradition. But Mom and Dad did not celebrate Christmas. They weren’t Catholic; in fact, they belonged to a comparatively small Christian religion that, ironically, did not espouse the holiday. So there were no gifts under a Christmas tree (there was no tree to begin with), no stocking stuffers, no Santa Claus, no eggnog. December 25th was just another normal day for the family, except that the grocery stores were all closed.

As a child, I had mixed feelings about our detraction from Christmas. All of my school friends took part in the pomp and circumstance. In class, we sang Christmas carols, our teachers gave us candy canes, and we colored pictures of Rudolph the Red-Nosed Reindeer and Frosty the Snowman. (That’s when I learned the utility of the white-colored crayon.) My cousins openly celebrated the holiday and even gave me presents. I had always felt awkward that my family didn’t reciprocate with presents for them. As I got older, I became more comfortable with my lack of the Christmas spirit. From a financial standpoint, I’m grateful that I don’t celebrate it. I can’t imagine working my way through a crowded mall just to buy gifts for 2 parents, 5 siblings, their spouses, and 12 nephews and nieces, all of whom would probably discard them within a few weeks; or preparing pounds of food and decorating a tree with a hodgepodge of light ornaments for a big holiday party; or sending out 100 Christmas cards to friends and family who would ultimately tuck them in a box loaded with cards from holidays of yore.

Where Christmas does have an effect on me is a retrospective of the previous 12 months and an introspective on past behaviors. What were my successes this year? What were my challenges, and am I still facing them? Did I do anything that might have hurt someone else, and is there a way I can rectify it? Was I the recipient of bad feelings, and can I learn to let go? Christmas also obliges me to ruminate on friendships and family connections, how important they are every day of the year, and how difficult it is sometimes to maintain them meaningfully.

As I write this post, I realize that I probably do celebrate Christmas, just not in the traditional gift-giving or religious sense. It’s a quieter, more reflective day for me, and that is the way I choose to honor this holiday.

Isaias Sarmiento
© 2011

Tax Nostalgia

In my eternal quest to go paperless, I scanned all of my paper tax returns from 1998 to 2006 and saved them onto a CD. (Tax returns for 2007 and later have all been done online, so I had already saved the hard copies on separate CDs.) As I perused each tax return, schedule, and form, a wave of memories of past financial actions- both the savvy and the regrettable ones- came to the forefront of my consciousness.

I remember the fear and ultimate pride of completing, painstakingly line by line, my first federal and California tax returns in 1998. This was the year that I took advantage of the newest provisions of the tax code- the Lifetime Learning Credit and the Roth IRA. Not surprisingly, my interest in tax planning strategies also took shape at that time. The year 2000 served as my initiation into the unfortunate words “balance due.” I performed a summer teaching stint that year, not realizing I would be considered an independent contractor, i.e. 1099-MISC, and therefore, responsible for the income and FICA taxes. I owed about $1700 in combined federal and state taxes. In 2001, I endured the agony of completing three tax returns due to my move from California to Massachusetts. In 2002, I prepared my first state return via the telephone, not so much because I thought it would be easier than paper filing, but because I simply wanted to try something innovative. In 2003, I took the student loan interest deduction for the last time, because that was the year I made the psychologically satisfying lump sum payment to pay off the original $15,000 loan. Over the years, as attested by my Schedule D forms, I dabbled in individual securities outside of my retirement accounts, only to find myself selling too early, often at a loss.

Simply by reviewing these old tax returns, I learned plenty about my financial habits, successes, and foibles. There is no such thing as perfection in the world of tax planning, let alone financial planning. Perhaps the greatest insight that I gained from this experience is the never-ending process of learning, relearning, adapting, and analyzing. Incidentally, 2006, the last year that I paper filed my returns, was also the year I took up yoga. As I also reminisce about my yoga practice over the last five years, I can’t help but wax nostalgic about the evolution of my financial maturity.

Isaias Sarmiento
© 2011

The Older Self

I recently read an article about a research study on aging and saving. A group of subjects were presented with an avatar of themselves at an old age. When subsequently asked about how much money they would save, on average these subjects stated a savings rate 30% more than the control group- those who didn’t see images of their older selves.

While I would love to have been part of this experiment (I’ve always imagined what I would look like with more wrinkles), I suppose I didn’t need it. In my line of work, I already counsel seniors. Many of them live within a few hundred dollars of the federal poverty level. They access a variety of public assistance programs: food stamps, fuel assistance, Medicaid, a welfare program called EAEDC (Emergency Aid to Elders, Disabled, and Children), and of course, a small amount of Social Security. Some of them still have mortgages, in spite of a low income, and are having a difficult time making the monthly payments. Whenever I speak with one of them face-to-face across my office desk, I can’t help but whisper to myself, “I don’t ever want to live like them when I get to their age.”

To be sure, there are low-income seniors who feel that they live just fine. But I don’t want to wait thirty years to find out whether living poor is feasible, or even tolerable. So I save religiously and allocate funds into my retirement accounts. I take yoga with the hope that I can still tie my shoes and walk straight at age 70. Granted, one’s world can take a catastrophic turn at any moment, no matter how meticulous the planning. My point is that I’m trying to increase my probability of living a lifestyle that I could enjoy at an old age. To be young and poor may be acceptable, because you have time to build a strong financial future. It may even be romantic- think struggling idealistic artists in the opera La Boheme. I’m not so sure many people would say the same thing about being old and poor.

People in my generation, Gen X, and younger don’t need to see images of themselves at 60 years old. They can simply observe how the elders in their lives- their grandparents, perhaps parents- are living today, and then ask “Do I want to live like them?” Their answers to that question should inform them about saving money for the people they will eventually become.

Isaias Sarmiento
© 2011

Friendships

What are the makings of a fulfilling retirement? If you ask that question to a random set of people, no doubt you will receive different responses: lots of money, good physical health, hobbies or second careers to keep your mind sharp. I have imagined life in my 60s, taking lots of yoga classes, teaching math at local colleges, revisiting my Scrabble game or the piano, watching the ballet from center orchestra seats. Yes, life thirty-some-odd years from now would be grand. Except that there is one attribute of retirement living that I unconsciously left out– friends.

It’s not easy for me to make friends. My shyness tends to get in the way. Over the years, I’ve tried various methods to force myself to be surrounded by people (and then maybe later, talk to them). I joined Scrabble groups and other game night groups. I took up the gym and, later, became a member of a yoga studio. One time, I attended an Ethiopian dinner night for singles. I even answered Craigslist activity postings. From these attempts, I have secured a healthy, albeit small, group of friends who have made my life that much more interesting.

Recently, my best friend in Boston told me that he and his partner might move to California, perhaps as early as next year. As devastated as I was to hear the news, in the back of my mind, I knew that I couldn’t rely solely on him for all of my social needs. I could join or rejoin activity groups, as I had successfully done in the past. But lately, I’ve applied different tactics. I reconnected with a few old friends, including one who is now my de facto yoga buddy. I have become close friends with a co-worker, with whom I share my love of the performing arts. But my most daring strategy, and perhaps the scariest one for an introvert like me, is simply saying ‘hello’ to people and introducing myself. I did just that today with a fellow yogi whom I have seen umpteen times since last summer.

Three of my friends, in their 50s, 60s, and 70s respectively, have remarked about how much harder it is to make new friends at their ages. That may be true, for all I know. But I am determined to fight against those odds. I used to think of retirement in terms of Social Security, IRAs and 401(k)s, post-career work or volunteering, and health care. I’m adding friendships to that list.

Isaias Sarmiento
© 2011

Diversification

One of my favorite yoga teachers maintains a very eclectic, seemingly exhausting schedule of yoga classes, workshops, mentorships, and teacher trainings. She teaches at no less than 3 yoga studios and 2 gyms. Often, she leads retreats all over New England. This past winter, she organized a retreat in South America. Oh, and she also gave her time to teach at a yoga fundraiser called Saluting the Spirit.

In the world of finance, the word ‘diversification’ conjures up colorful images of pie graphs with sections titled ‘large cap stocks,’ ‘small cap stocks,’ ‘international stocks,’ ‘U.S. bonds,’ ‘international bonds,’ ‘commodities,’ ‘real estate,’ and ‘cash,’ to name a select few. (The ever-growing list can expand for miles, I imagine.) The whole point of carving up the pie into so many asset classes is to insure us against the risk that any one (or two or three) classes will suffer a strong decline in value.

In the short 13 years that I’ve worked to make a living, I learned the value that diversification in skills and knowledge can bring. At any given moment in time, I could be playing the role of financial counselor, tax advisor, math professor, freelance editor, nonprofit volunteer, or any combination of them. There are times when I wish I had just one job. But the memory of being laid off after nearly 7 years working for one company has branded into my skin the benefits of employment diversity.

Many people work several jobs just to make ends meet. Perhaps they can’t find a full-time job due to the tight job market. I empathize with them because I know how challenging it can be to juggle several responsibilities on top of trying to maintain a semblance of a social or family life. The physical demands can also be draining. At the same time, I would remind them of the tools, whether a piece of software or a communication skill, that they are mastering. (Perhaps that ability to create a website using WordPress will come in handy one day when you’re looking for that full-time job.) And I think Leonardo da Vinci, the great polymath of the Rennaisance period, would have bestowed his blessing.

Isaias Sarmiento
© 2011

Resisting Change

Not too long ago, I fell madly in love with a man. There was just one problem, at least through my perspective. He was living in Los Angeles, and I was there only for my annual 2-week family visit. He wanted me to live with him; I wanted to live with him. He said that he would shoulder the expenses for both of us until I secured a job in L.A. How perfect could this new life be? I could have a relationship and be near my family again after many years of living in Boston. I could come home.

But the rational, financially responsible side of my brain created multiple roadblocks. Would I be able to find a new job in L.A., where the unemployment rate stood above the national average? Would I be able to pay the mortgage on my Boston home? What if our relationship doesn’t work out, and I’m left still jobless? What if he lost his job and couldn’t support the both of us?

In the end, I turned my back from this dream and decided to continue my stay in Boston. From a practical, financial point of view, I think I made the right decision. Yet the emotional regrets linger. A close friend of mine advised me to follow my heart the next time an opportunity like that were to present itself again. Everything else will work itself out, he assured me. But is it really that simple? I suppose it would be if you’re very young and don’t carry a lot of responsibilities. But as many of us get older, we become responsible for someone or something else. We may have reached a point in our careers when starting over may not be the wisest choice at the present moment.

The first time I heard the famous phrase “the only constant is change,” I was in my very second yoga class. No two yoga experiences, like no two snowflakes, are identical. For sure, some changes are outside of our control. But the ones that are within our control can sometimes be the most difficult to direct. Do we resist change out of necessity or convenience, or do we take our chances in spite of the potential setbacks? For me, at least, the answer is not always clear.

Isaias Sarmiento
© 2011