The “Blue Zone” of Financial Well-Being

Alexander Green
by Alexander Green, Chief Investment Strategist, The Oxford Club

In my last column, I discussed Dan Buettner’s inspiring new book, The Blue Zones of Happiness: Lessons from the World’s Happiest People.

Dan - a National Geographic fellow - has spent years studying the habits of the world’s happiest people, and he provides wonderful suggestions about how to tweak your own life to make it more satisfying.

And while money isn’t always the answer, it certainly doesn’t hurt.

In a recent Gallup-Sharecare study, nearly 90% of people who were managing their finances well said their relationships with their spouses or partners were strong.

Yet when finances were cited as a sore point in the household, the number of happy relationships plunged to just 60%. Moreover, it didn’t matter whether the couples were affluent or not...

Money troubles create relationship troubles.

I’ve seen plenty of couples, for instance, where one was an avid shopper and the other a dedicated saver. That’s a bad combo.

I’ve known others where one wanted to tap into retirement savings to get a new boat - or remodel the kitchen - and the other felt strongly otherwise.

Things went decidedly south from there.

Financial compatibility - or at least peacemaking compromise - seems to be a prerequisite for connubial bliss.

Arguing and worrying about money is toxic. It creates stress and conflict.

Yet when a household’s finances are managed smartly, relationships improve.

Studies show there is even an inverse relationship between wealth and obesity. Financial well-being, it turns out, even helps keep you healthy.

(An important consideration since obesity is highly correlated with hypertension, heart disease, diabetes, stroke, dementia and cancer.)

Yet in the 2018 Retirement Confidence Survey, the longest-running survey of its kind, only 17% of workers said they were very confident they’d have enough for a comfortable retirement.

(In fact, only 32% of current retirees were very confident they had enough.)

This isn’t terribly surprising when you consider that a quarter of Americans have no savings - and 62% have less than $1,000 set aside.

This is a national tragedy, one that will have serious ramifications down the road when those who have not saved press their elected representatives to more aggressively redistribute the incomes of those who have.

Don’t get me wrong. Some people are poor due to bad genes, bad luck or circumstances beyond their control.

But can this possibly describe the nearly two-thirds of Americans who haven’t saved for a rainy day... much less up to three decades of retirement?

The shame of all this is that financial independence requires only three things:

  1. A basic understanding of what happens when money compounds
  2. A resolution to save and invest regularly
  3. The discipline to follow through.

Here’s an example...

Let’s say that up until age 25, your need for a home, transportation, healthcare and other expenses takes every penny you earn.

Then, starting at age 25, you invest $190 a month in an S&P 500 index fund and earn nothing more or less than the market’s long-term average annual return of 10%.

With dividends reinvested, that turns into nearly $1.2 million by age 65.

That’s right. Just $190 a month takes you from flat broke to financially free.

According to the U.S. Census Bureau, the median household income in this country is $59,039. So $190 requires the average household to save just 4% of its income - or less than 5% post-tax -to hit the seven-figure mark in 40 years.

Even if a household could save only $95 a month, it would still turn into a half-million dollars in 40 years.

(And if they bought a home - and didn’t spend the equity along the way - that would likely get them the rest of the way to millionaire status.)

Saving. Investing. Compounding. Building equity.

It’s so simple. Yet most Americans never get off the starting blocks.


One reason is the abysmal state of public education.

It’s a crime that most high school graduates lack the basic financial literacy to understand compound interest, IRAs and 401(k)s, adjustable-rate mortgages... or why we even have a stock market.

The other problem is that too many people decide they’ll start saving after all their wants and needs are met.

Big mistake.

We live in a wonderful free market system where companies knock themselves out to bring us a constant array of new products and services.

If you plan to start saving after all your family’s desires are met, well, good luck with that.

Here’s the key realization: Financial freedom doesn’t just provide you with security and peace of mind.

As Dan Buettner’s research reveals, your health and happiness may depend on it as well.

Good investing,


Bottoms Up!

Cocktails make people happy too. Obviously we're not promoting sloppy debauchery or public intoxication, but a social drink here and there adds to the spice of life.

Since adding spirits company Diageo (NYSE: DEO) to The Oxford Communiqué's Trading Portfolio back in 2009, the stock is up more than 244%. Here's Alex's update from January when it reported half-year results...

The market had a great year in 2017. The S&P 500 - including dividends - returned 21.6%.

However, a number of stocks in our Oxford Trading Portfolio are doing better still. One of them is Diageo (NYSE: DEO), up 40% last year alone.

Based in London, Diageo (pronounced Dee-AHH-Gee-Oh) is the world's leading spirits company.

It operates in more than 180 countries and offers a wide variety of famous international brands, including Smirnoff and Ketel One vodkas, Johnnie Walker and J&B scotch, Crown Royal whiskey, Guinness stout, Baileys Original Irish Cream, Captain Morgan rum, Don Julio tequila, and Tanqueray gin, to name just a few.

Diageo generates more than $17.2 billion in annual revenue and is sitting on more than $1.3 billion in cash.

Demographics favor its business. The number of consumers reaching legal drinking age has been on a steady upswing since 1999.

And while the over-21 crowd is expanding, so is business with baby boomers. Studies show the over-55 group is increasingly reaching for spirits, not beer.

But the real bonanza lies overseas, particularly in emerging markets. The population has been increasing much faster there than in the developed world. Fifty years ago, approximately two-thirds of the world's population was based in less developed countries. Today more than 85% of it is.

The Distilled Spirits Council (DISCUS) divides the spirits market into four categories: Value, Premium, High End and Super Premium. High End and Super Premium enjoy the largest margins and, indeed, that's where sales at Diageo are increasing the fastest.

That's why the company recently made the $1 billion acquisition of tequila brand Casamigos, further expanding its position in the high-margin ultra-premium spirits segment.

In January, Diageo reported results for the half year ending in December - and the news was all good.

Sales were up across every region and hit $9.2 billion for the six-month period. Cash flow continued to be strong, and adjusted earnings per share rose 9.4% in local currency, driven by bigger margins and lower finance charges.

In a late-stage bull market like this one, it generally pays to invest in a global powerhouse (check), with well-recognized brands (check), in a recession-resistant industry (check), with growing sales and earnings (check), and a healthy dividend yield (check).

What else can I say about Diageo - up more than 244% in our Oxford Trading Portfolio - except "Cheers!"

- Donna DiVenuto-Ball with Alexander Green

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