Financial Planning’s Most Undervalued Question: Where?

Dirt never looked so pretty” read a text from the Texas hill country I just got.

Wide open spaces surrounded by a whole lotta nuthin is worth a lot, to many people. The amount of people looking is growing and the amount of dirt ain’t.

Microsoft’s spellcheck does not like those two sentences. But, when I shared the photo that came with that text, those were the real words that came next in a conversation with a client. He wants to join my friend and move to a smaller town.

He is not a country boy; he happens to work for Microsoft and has always lived in a big city. Our mutual friend who sent that text works for IBM. When knowledge workers are asking me about buying John Deere’s (and not the stock) we might not just be looking at an unusual cycle, but a secular shift.

Gave Himself a Pay Raise

They both know we talk through every piece of the financial planning puzzle with each family we serve. While investors crowd around the “How’s” and “What’s” to do, we think the most underestimated question is WHERE to be?

The pretty dirt our buddy was referring to is 5.5 acres smack dab in the middle of beautiful, as he likes to say. He is moving from the city where he lives on 0.25 acres. Yet his property tax bill will go down by 60%.

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His next-door neighbor pays even less taxes after an agricultural exemption. Not everybody wants to be a rancher or farmer. He used his first tax break to buy a boat.

Going Offline

The photo he sent me the next day almost seemed unfair to have so close by also.

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Who needs the Caribbean?!” he texted, before going offline for hours.

Better than any tax break or great view for my buddy, was returning to a pace of life and culture that he placed increasing value on. And, he is doing it the hard way. He’s not retiring to the country. Uprooting kids still in school to finish raising his family there first, he wants to keep working hard.

That is what a smaller town shift towards the middle of the country, already underway, looks like when it is accelerating. A highly respected global investor, Nancy Lazar, who has 40 years of experience traveling the world for the best risk and reward says: “Middle America is our favorite emerging market.”

Here is his new back yard. He taught the kids how to mow with an old-fashioned push mower, no motor and no problems.

After finishing their hard work, he said, “We jumped in the neighborhood pool, installed by God.”

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Profiting from the ‘Life Out Here’

Back at my office, and between those photos and smiles I was on an earnings conference call. I heard a Wall Street analyst holler “Holy Cow!” for the first time in my career. He was referring to the same store sales of the company hosting the quarterly call.

Through the fastest stock market crash in history, this was the only specialty retail store in the S&P 1500 whose stock was up, year to date through May. I look for signs of relative strength within a group. Rarely do I get a stand-alone clue screaming like that.

The company’s mission is to provide “Every day needs for families who value the rural lifestyle.” They sell farm and agricultural equipment, and smaller versions of each if you’re just a reformed city slicker who wants to have a bigger garden.

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Their biggest category caters to the four-legged members of the families. Pet supply sales advanced the most.

The company’s mission as the one-stop shop for rural communities for more than 80 years is “We equip a way of life we respect, love and live ourselves – Life Out Here.”

No comment was available after the call from these two leading spokesmen, outside one of the stores, greeting all customers. Doors remained open every day in 2020, without interruption. Record breaking sales with expanding profit margins allowed permanent raises for employees, expanded benefits, bonuses across the board, and thousands of new hires…. all during the retail apocalypse everywhere else.

U-Haul Indicator

Last month pageviews of residential listings for sale in small towns more than doubled year over year, according to data from Redfin. Then, the biggest tailwind for the math of moving anywhere just hit a fresh all-time low.

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Those buddies of mine at Microsoft and IBM are not alone. I asked them to take a guess how much the current rate is to rent a 26-foot U-Haul truck to go one way from San Francisco to San Antonio. They had no idea it was $4,275.

Using that baseline, they were much more surprised to learn that renting the same truck for a one-way trip in the opposite direction, going from San Antonio to San Francisco costs $855. Supply versus demand imbalances like that offer better data than any news or opinions. People vote with their feet every day.

It's Not What You Make That Counts...It's What You Keep

I will take a guess when we look back in 10 years that some of the numbers changing the most will be on this map below. States handle problems very differently, with the balance sheets to prove it. Investors need to consider the long-term consequences of those choices.

From my friends at the Tax Foundation here is the ranking for each state and the number of days it takes its average household to work to just pay for a year’s worth of taxes.

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When building financial plans, our families are counting on us to know all the how’s and what’s of investing, so they .

Figuring out WHERE can make planning so much more inspiring, which the key ingredient – wanting to plan.

Let us know if we can help answer any of your questions. We are thrilled to share everything we have learned works, and why.