Finance Fridays - Issue #18

Millionaires Need Luck, Warren Buffett Likes Cash, Middle Class Starbucks

Author

Seyi Agboola
May 10, 2024

#18 - Finance Fridays - Millionaires Need Luck, Warren Buffett Likes Cash, Middle Class Starbucks

This is the Reality Cheque’s newsletter where I document my journey to financial freedom through learning more about personal finance. Every week expect curated content on personal finance, career advice and entrepreneurship.

*This is not financial advice, just me brainstorming about things related to money. Stocks are extremely volatile - value can go down as well as up. All investments and income streams may be subject to tax.

Contents:

  • 💡 Idea of the Week - Is the decline of Starbucks sales a symptom of the Middle Class Decline?

  • 🎒Useful Resource - How bad are Retirement Funds? Really bad.

  • 🎒Useful Resource - Cash Is King Again - Word to Warren Buffet

  • 💹Investment Idea review - Corporate Pensions

🧐 Did This Millionaire Just Prove That You Need Luck To Be Rich?

To me this just proves that luck is a massive factor in becoming wealthy. Anyone can develop health issues or have a loved one become susceptible to disease at any moment. If you’re from a wealthy background you’re more likely to have access to good healthcare and a healthier lifestyle thus less likely for these things to impact you. 

But somehow the millionaire’s takeaway message was you can do anything if you put your mind to it. Yeah right mate.

I’m not trying to make excuses but maybe we should show more compassion for those less financially fortunate than ourselves.

🎒Cash Is King Again - Word to Warren Buffet

These are my 3 takeaways from this video:

  1. Even big time investors like Warren Buffett admit that the US government’s debt is a big problem

  2. 5% guaranteed returns from bond payments looks more appealing than 5-10% potential returns in a volatile stock market at the moment

  3. Cash is back on the menu boys!

Recently I’ve been putting more of my money into High Yield Saving Accounts with 5%-ish returns (like my Cash ISA) instead of the stock market. So seeing Warren Buffett admit that there’s nowhere to deploy his cash in the stock market due its volatility makes me feel slightly vindicated. 

💡 Is the decline of Starbucks sales a symptom of the Middle Class Decline?

Based on my small bubble of reality, I believe middle management office workers have been getting hammered in the job market. It started with the tech layoffs and it’s spreading into other sectors. I’ve never heard of so many redundancies from friends, family and the news simultaneously over such an extended period like this. The UK and US economy is worse than the numbers show and the middle class office workers are getting the brunt of it.

While I think the Starbucks boycotts are a significant factor in their sales declining, I do also feel this is a symptom that middle class workers no longer feel comfortable enough financially to buy expensive coffee or other small pleasures in life.

Time will tell but we will look back on 2024 and realise how bad the economy was.

🎒How bad are Retirement Funds? Really bad.

This documentary is eye opening for those who have never really considered what is happening with their retirement fund/pensions. Imagine a product where:

  • The customer buys it without checking it’s quality

  • The customer never checks if it’s even still working after decades of use

  • The customer never questions the price tag

  • The business can charge whatever they want without scrutiny

That is your pension ladies and gentlemen. The financial sector struck gold with pensions and have been getting paid handsomely for abysmal results ever since.

💹Investment Idea review 🚥 (Corporate Pensions)

🔴 - Potential dealbreaker

🟡 - It depends

🟢 - Very Ideal

1. Potential upside 🟢 - Any pension where your employer matches your contribution is free tax free money. That’s a hard bargain to say no to.

2. Level of risk 🟢 - Naturally most pensions are low risk

3. Upfront costs 🟢 - Since they are pre-tax they hardly make a dent on your earnings 

4. Historic performance 🟡 - The stock market may have performed well but the fees being charged on them is capping your potential returns in the long term (as explained in the section above).

5. Skill required 🟢 - Pensions are set up to be beginner friendly (unless you try to transfer them)

6. Market saturation 🟢 - Market saturation isn’t really a factor in this industry.

Even if the financial companies behind pensions are overcharging you on fees, it is probably still a better investment than taking the money post-tax without employer’s contributions and investing it yourself. Only thing that I think more people need to do is actually check what pension schemes they are currently on.

✍🏿Quote of the Week 

“All bubbles start with some nugget of truth.”

― Howard Marks