Baby Steps: The Benefit of Micro Savings

A while ago, I read something that really struck me. It was about a comedian, W.C. Fields. He was a successful guy but he lived during the Great Depression and, it seems, was very concerned about saving a few bucks whenever he could. A sensible thing. And of course, one learned the hard way during the worst of economic times.

W.C. toured many cities and towns with his comedy act. And everywhere he went, he would open bank accounts to deposit his earnings, so that he always had some money handy no matter where he was. Of course, there was a problem after a while –  keeping track of where the cash was. It is said that when he died, there were a bunch of these accounts scattered around the country abandoned.

Well, that is what the Great Depression can do to you I suppose. You can never have enough cash stashed to feel a little secure.

If W.C. was alive today, he would surely love how easy it is to set up savings accounts and keep track of them – all from your phone!

I think I have that ‘insecurity’ gene that W.C. carried. I feel the constant need to put a few bucks away. For emergencies or unexpected needs.

So I have really embraced some of these financial services (banks, brokers, funds) that allow you to start with any amount (spare change really) to open an account, and then have regular deposits automatically pulled from your bank account – all before you see it or spend it.

I’m a firm believer it the ‘out of sight-out of mind’ approach to saving. So these services have allowed me to set up what I call little micro-accounts, all drawing little amounts out of my bank account, weekly and/or monthly. Its truly painless and I don’t even miss the money I’m saving because I set the amounts so low and it all happens automatically.

In short order, these accounts are now beginning to grow, which gives me further incentive to continue, or even increase these little savings programs.

The services I am using for this purpose are:

  •  Acorns. This service rounds-up to the next dollar all transaction activity in my bank account, and invests this spare change into a stock fund. So, for example, when I buy groceries and the charge is $34.75, Acorns with take $0.25 and move it into my little savings account with them. All they do is round up all my spending and save the difference for me automatically.
  •  Robinhood. This service allows me to buy stock with money I deposit in this account. No commissions too; except I suspect they take their cut from the price I pay for the stock. Anyway, I have been socking away a few dollars through an auto-deposit each week into this account, and buying stocks, even only 1 share, based on my own research, or impulse. I like this account because it allows me to but only a few shares so I can start to watch a stock before I really commit bigger amounts to it. And I must admit, I do occasional buy stocks on impulse, like LYFT after its IPO. Yikes! But at least the damage is contained.
  •  Marcus Bank (which is actually Goldman Sachs). This is a straight savings account which offers 2.15% (as of Aug. 1, 2019) interest on your savings. This is a better place to sock away my “safety net” money that leaving it in my regular bank with its 0.15% annual interest! So, again, I have set up a simply weekly automatic swept from my bank to this bank.

All three of these accounts were set up online and linked to my current bank account to pull out automatic investments and to draw back money should I need to. There are others, of course. These work for me for putting away money that might have been in a cookie jar in my kitchen. And, as I see the balances grow in these three accounts, it spurs me to add more and more savings to reach savings goals, which I continue to revise higher.

I think W.C. Fields would love this new way of saving.


IPO’s – San Francisco Real Estate and Southern California

In March, a New York Times article observed that the rush of announced IPO’s, logjammed to go public in the second quarter of 2019, might have a staggering effect on the price of homes in the San Francisco area, where many of these companies are based.

Hundreds of Billions of Dollars could be unleashed as various “unicorns” (defined as $1 Billion plus private value companies) suddenly become liquid public companies, giving their insiders, and the local economy, an enormous windfall. Such companies on the docket, or expected, include Uber, Airbnb, Lyft, Pinterest among others. As of this writing, Uber, Lyft and Pinterest have gone public, along with several others. But more unicorn listings are still to come.

The Times article posits a few interesting expectations of this new money on a rather small slice of real estate:

  • Estimated 10,000 instant millionaires created, many will be looking to spend on an upgrade to their homes and cars (Tesla anyone?);
  • Average home prices could exceed $5 million in San Francisco (and I’ll bet that’s for a “tear-down” because its about the location, not the home itself that is being purchased);

The article further notes that these millennial buyers prefer to stay in the city where upscale eateries and entertainment abounds; thus reducing the geography in which buyers will hunt for homes.

So, the simple rules of supply and demand will surely drive up prices. Keeping pressure on the home market are the sellers, some of whom are holding houses off the market until after the IPO money flows.

As it is now, the article points out, the rental market is already red hot. The current average rent for a one bed / one bath flat ranges from $3,550 – $3,690 a month. Its no wonder that renters use the common space in apartments as an additional room to rent, in order to hold down the cost somewhat for all occupants. Even closets might be rented out! So I have heard first hand.

Look to Southern California Next:

My observations about this comes from my southern California home, and occasional business trips to the Bay. The high rents and limited office spaces and homes available in the San Francisco-Silicon Valley market has some start-ups and tech firms looking to the south to relocate or add new offices. The west side of Los Angeles-Santa Monica area has their own “Silicon Beach” scene with businesses such as Snap, Hulu, Google/YouTube among others making their mark in this “relatively” more affordable market.

But it doesn’t stop there. Continuing south on the 405 and you arrive at Irvine and the “OC” (Orange County), also attracting unicorns like Houzz.

And not to be left out, San Diego, all the way down the 5 near the border,  is already home to Qualcomm and its own tech “halo” effect, plus a host of biopharma companies, and is now seeing some of the fleeing Silicon Valley businesses add new campuses in the area, like Apple, in order to find convenient and affordable (again, a relative term) housing for workers, new local engineer talent (Qualcomm poaching); and a better quality of life. The extra sunshine and milder climate is an added bonus.

Commuting from Southern Cal:

It was only a matter of time before Silicon Valley would have to look beyond the Bay for business expansion. After all, flight from San Diego to San Jose, the hub for Silicon Valley, is a little over an hour, which is not that bad.

I used to make that “commute”, in my case flying up to San Jose on Mondays ands returning to San Diego on Fridays. I would see a lot of regulars on the same flights doing the same.

The difference this time is that more offices are locating in the various southern California coastal communities, reducing the need for regular commuters like this. It will be interesting to see it unfold.


Whole Life Insurance doesn’t pay

Like many other parents at the time, my parents were trying to do the ‘prudent’ thing when they decided to purchase a small $1,000 whole life policy when I was born “years” ago.

Over time, the policy had a cash value of about $750 which my parents were forced to borrow when my father lost his job. Sadly, every bit of money – even only $750 – was important to support a household of seven kids.

The first of my parents to pass away was my mother. She died of emphysema caused by years of heavy cigarette smoking. Five years later and my father died. It was then that I found this small policy (and its loan balance) on my life among the papers I sorted through to settle their estate.

Anyway, reviewing the policy and tiny loan repayments my mother scratched out from time to time left me feeling sad for their struggles to provide for a large family. And the more I looked at this policy, the more I felt that I should just go ahead and repay it for them. I didn’t have to. There was a small cash value to simply close the account, but I decided to make a series of small loan repayments. By doing so, I felt connected to what my mother was feeling when she made the small payments.

Once it was all repaid, the insurance policy had a cash value of about $1,650 (and death benefit of under $1,950). Factoring in the many years this policy has been outstanding, and the very modest accrued value, I have estimated that the annualized rate of return was less than 2%. Conclusion is obvious. It was (is) a bad investment and it didn’t even keep pace with inflation. But it is my link to my parents, and that’s certainly priceless.

A rib breaks

A cautionary tail about the unintended consequences of an innocent act:

A couple of weeks ago, while sitting on my office chair, I reached down to the floor to retrieve a piece of paper that had fallen. I stretched and tried to nab that paper. As I stretched, I pressed my ribcage ever tighter against the arm of the armchair.

Then I heard a ‘pop’. And felt a twinge of pain.

I thought “What was that? Did I just pull a muscle?” I rubbed the spot and knew that muscle soreness would take a week or more to go away.

I went about my life. The dull pain was with always present in the background, but I ignored it because it was pretty ‘dull’. I continued to hit the gym and jog, which only inflamed the pain temporarily. But it was tolerable.

Then, on Sunday, I stooped down to tie my shoes. That was tough to do for some reason and required an extra stretch. It seemed to inflame the pain, but I went about my business.

That night I slumped back in the coach and watched TV, but my posture seemed to bring an added sharp stinging pain from the area of my suspected muscle pull. Any move was greeted with excruciating pain. I could not get up from the coach. I also had a great deal of trouble breathing. Only short shallow breathes were possible because deep breathes were accompanied by sharp pain. A bit panicked at this point and unable to ever get up, I wanted for the pain to subside and the breathing to become less labored. I contemplated calling ‘911’ but really couldn’t reach the phone.

I had my iPad with me; so I decided to Google ‘fractured rib symptoms’. All that I was enduring were consistent with this type of injury. I really couldn’t believe it.

As the pain subsided and I was able to delicately rise from the couch, I walked – shuffled really – around the room still gasping to catch my breath, which I eventually did.

That night was tough. I couldn’t lay down to sleep and It was difficult to find a painless position on the couch to prop myself so that I could rest without pain. I nodded off from time to time, but it was a very difficult night. I was so worried about tweaking that pain and setting off the whole thing over again. I think the breathing difficulty was the most troubling and I thought hard about driving over to the ER. But by that time it was 3:30 am and I was managing to keep things contained.

Besides, WebMD and other sites all said there is nothing to do but rest and use basic pain medicine if needed. And this could last for 6-8 weeks! (so much for the summer and my plans to get in running shape for a few 10K’s!)

The next day seemed better. By being still that night, I seemed to be a bit more mobile (ever so gingerly though) and went over to my brother’s for a BBQ. He had broken some ribs years ago and could sympathize with all that I was going though.

Unfortunately, as I explained how this thing happened – along with gesturing the moves I made to trigger the stinging pain – it happened again! And I was unable to catch my breathe as I writhed in pain. He helped me up from the couch and I shuffled around the room to regain my breathe.

It settled down again, but this is what I have in store for a few days or weeks as my ribs slowly heal.

Last night (night 2 of the “incident”), I again slept propped up on the coach. I’m happy to report that I awake to only general stiffness from the way I was resting, and not sharp stinging chest pain. I’ve been careful of my movements today to avoid tweaking the rib. So far, so good. And it will be tenuous day by day I suppose.

A couple of tips:

1 – don’t reach over the air rail of the chair to pick something up!
2 – avoid watching comedies on TV because laughing definitely WILL trigger a sharp stinging pain.
3 – do rest alot