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5 Steps to Building a Successful Savings Plan

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When it comes to meeting and exceeding your financial goals, the first step is always to come up with a reasonable and achievable budgeting and savings plan. The following steps can help you get a handle on your expenses and establish a clear plan toward building your savings and meeting your financial milestones.

1. Look into your company retirement plans: saving a small amount of money per month, directly from your paycheck is an easy way to get started. Even if you only elect to save a small percentage of your salary, many companies offer a match on a percentage that you choose to save.

A Client’s Journey: The Challenging Decision to Divorce Your House When You Divorce Your Spouse

The clients we encounter and develop relationships with come from all walks of life. Each person’s story is different. As is the case with all things, not everything is as it seems from a distance. This is an important thing to be cognizant of, especially as financial advisors and planners because it is our job to identify what we can do to help people make changes in their lives that will benefit them financially, but more importantly give them a feeling of confidence and self-empowerment.

We met Jeanette at a financial independence session that we held a few years back. She was in her mid-fifties and had been divorced for two years. Jeanette confided in us that her marriage ended due to infidelity on her husband’s part and that it had been difficult to let go of the pain and anger that those circumstances caused her.

Bulls and Bears, Trade and the Fed: Advice for the Head Scratchers

As an investment advisor and partner to our clients, it is our responsibility to put stock market and investment news in proper perspective. While the media is reporting daily on market fluctuations and speculating on what might happen in the short term, it is our duty to help guide you through the ‘noise’ and stay focused on what truly matters when it comes to your financial plan and your portfolio.

It is not completely outlandish to feel a sense of uneasiness about investing in our current market climate. Unprecedented growth and increased volatility leave us wondering when the next market “crash” will occur. Political and economic influences are on the forefront, as investors scratch their heads in concern with everything from trade wars and maintaining economic allies, to inflation.

Emotional Investing and Consequences of Behavioral Biases

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Distraction from the media, uncertainty or volatility in the markets, or pressure to buy and sell from friends, colleagues, financial “gurus” and other less than reliable sources for investment advice can directly challenge an investor’s ability to make consistent, rational and logical investment decisions. The barrage of information coupled with some inherent behavioral biases can make long term investing a challenge for most people.

Behavioral Finance has been an academic area of study since the early 2000s when Daniel Kahneman, a psychology professor at Princeton University published research that demonstrated “repeated patterns of irrationality, inconsistency, and incompetence in the ways human beings arrive at decisions and choices when faced with uncertainty.” Dr. Kahneman’s findings won him the Nobel Prize in economics in 2002 and the research strongly suggests that investors will often make decisions based on their emotions rather than on logic and historical data, even if it is right in front of them.

Empathic Listening and Building Trust

The Greek witch-goddess Circe gave her son Telegonus a poisoned spear to protect him on his journey to find his father Odysseus. When Telegonus finally found Odysseus he inadvertently killed his father with the magic weapon. This is similar to some of the consequences we may inadvertently incur when we try to administer well-meaning advice to someone who is coming to us for help or guidance.

I recently had this experience with a new client who came to us to discuss the challenges she faced with her finances. She was recently widowed and under an enormous amount of stress concerning her investments because her husband had handled all the family’s money. When she entered the conference room she appeared very nervous. We tried to set her at ease by playing soft music as we usually do when meeting with all our clients. We curiously watched her open her carton of statements and documents. Many of her documents were out of order and looked as if they had been filed haphazardly inside a wastepaper basket! Even before she spoke, her eyes reflected a plethora of misfit investment information, peppered with the sad assurances that her husband had instilled in her before he had suddenly passed away.

Fast Times: Evaluate Your Commitments as Often as Your iOS

All we have to do to create the future is to change the nature of our conversations, to go from blame to ownership, and from bargaining to commitment, and from problem-solving to possibility.

Peter Block, American Author

Remember the days when you were young and saved your money to buy something you really wanted? When you brought it home it was yours. You could repair it if it broke. The inner parts were relatively easy to understand. After you used it for a while it did not become obsolete; you could sell it to one of your friends, so he could enjoy it too.

Times have changed. Our cell phones now contain software that is not ours and we sign a licensing agreement to use it. We may own the shell of the phone, but we rent the technology. We don’t even wait for the phone to become obsolete. Many consumers crave the technology so much, they line up in droves for the next new upgrade.

Financial Education is an Investment in Itself

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Parents are a child’s first and most important teachers. Natural learning opportunities arise daily to teach children lessons in health, safety, manners and morals: eat your vegetables, don’t touch the hot stove, always say “please” and “thank you”, and treat others the way you wish to be treated. All are essential truisms for leading a productive and satisfying life. Just as learning and living these lessons will help forge a path to a successful and happy existence, instilling solid financial values early and often can set children on a healthy financial path and help avoid common but painful financial pitfalls later on in adulthood.

Teaching children the importance of prudent money management is a lesson that is sometimes neglected by even the most caring and astute parents. Among the many crucial lessons children learn at home from their parents, basic financial literacy is often overlooked. Sometimes parents skip this lesson because they themselves struggle with understanding core financial concepts. If parents, as natural family teachers, fail to take the lead by modeling unhealthy attitudes towards money and its true value, children may grow up gaining independence in every aspect of life except when it comes to their money. Achieving a certain level of financial independence is essential to being successful as an adult. Parents can attain much peace of mind by educating themselves on basic financial literacy and passing that knowledge down to their impressionable children.

Finding Confidence in Retirement Planning

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In a perfect world, planning for retirement should be exciting (I can’t wait to retire early!), easy (automatic savings/contributions) and not stressful (I have so much money to save!)

In reality, thinking about retirement can make people feel very anxious. How much should I be saving? Will I have enough to live? Will I run out of money? Planning for the future can be very overwhelming and it can be difficult to picture how saving into an investment portfolio can actually provide an income for you when you are no longer working.

Many times, people don’t realize the importance of starting to save early on. The earlier you begin to save money for retirement, the more successful you will be. You will have saved more dollars, and you are giving it a longer time to grow and earn interest.

As we get older, the idea of no longer earning an income and receiving a paycheck is hard to comprehend. We’ve seen a lot of our clients fearful of making a mistake as they near retirement and they become very fearful of market declines. As you approach retirement, it is so important to discuss any concerns that arise with your trusted advisor.

As financial planners, we hope our clients can achieve a peaceful transition into retirement. Here are a few suggestions:

How to Disaster Plan and Build a Financial Emergency Kit

As Hurricane Season ramps up and with Sandy only a few years down in the history books, it is important to consider what plans you and your family have in place in the event of a natural disaster. Disasters rarely give us a heads up. The best we can do in the face of disaster is have a plan and build a Financial Emergency Kit. Having these essential items safe, secure, and at the ready, in case the unthinkable occurs will save a lot of headache and heartache. There are various websites, including Homeland Security’s government webpage and the Red Cross, which can help. In this article we will go over some of the basic essentials everyone should have stored safely in case of emergency, specifically relating to your finances.

Maximizing Potential: Why Women Succeed As Investors

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Much has been written about the reasons women investors arrive at retirement with less money than men. One of the most obvious reasons is that women are likely to take time off during prime earning periods to have children or take on the role of caretaker for elderly relatives. And despite significant progress in pay equality over the past few decades, women continue to make about 80% of what is paid to their male counterparts. All of these factors result in women being unable to squirrel away as much money as men during their top earning potential years.

If this paints a grim picture of women’s ability to successfully invest and prepare for retirement, don’t fret: while women may have less money to invest, they often do so with more success than men. Women and men often differ in how they approach investing, and these differences can cause women to be more successful investors than men over the long run.

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Mirror Mirror, Off The Wall!

“Life is like a mirror, we get the best results when we smile!”

Looking directly into a mirror gives you one perspective of yourself. However, if you turn the mirror at a right angle to another you will discover several images of yourself. Some may appear distorted and backward, like in an amusement park fun house. Nevertheless, each one allows you to see yourself differently. Similarly, the choices available to us when making decisions with our money can appear to be hard to figure out as well. Like the right-angle mirror, we are forced to view our finances differently even though they are the same.

Whether you are a budding Millennial or an aging baby-boomer our attitude and behavior regarding money and the way we consume it is crucial.

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Planning for One

Three Steps Toward Reshaping Your Financial Plan After a Divorce

“A story has no beginning or end: arbitrarily one chooses that moment of experience from which to look back or from which to look ahead.”
― 
Graham Greene, The End of the Affair

Life happens. Some of it we plan for, some of it we don’t. One transition that cannot be predicted is a divorce. Although it’s seldom in the plans, divorce ends half of marriages. For adults 50 and older the divorce rate has doubled since the 1990s. Many adults will have to divide up the saved assets that had been put aside to share in retirement. Even if both partners worked and saved well for their retirement, there is often a gap between partners when it comes to levels of earnings and wealth. This disparity can disproportionately affect women, as they may have taken time off for child-rearing or family needs. In this article, we will go over some factors to consider regarding divorce and your retirement.

Saving for Retirement as a High-Income Earner

If you are a high-income earning professional, you may need to take additional steps to ensure you are saving enough for retirement. Many investors find that maximizing their company retirement plans may not be enough. You want to make sure you are saving enough in your income-earning years to maintain a similar lifestyle in retirement. Here are some tips to get you there:

Use your HSA as a savings vehicle

Health Savings Accounts are what we call triple tax free. This means that contributions made into HSAs are not just tax deductible, but the earnings are tax-deferred and the withdrawals are tax-free as long as they are used for qualified medical expenses the scope of which is very broad.

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The Best Interest of the Client

Many unsophisticated Investors buying complex financial products commonly misunderstand their suitability in an investment portfolio.

There is a misperception that investment products promising high returns and the maximum amount of safety do not come with risk. Lifestyle risk is the chance that some investments may not reflect our needs nor synchronize with our future lifestyle. The reason is the current assumptions for our investments are too vague since we cannot possibly foresee future events that may significantly affect our lives. We must prepare to live with uncertainty. Do not be simple in your financial decisions. Not all poems rhyme and not all stories have happy endings. These include the loss of a job or a loved one or both. Investments should be pliable to adjust to the needs at different stages of life as well as meet any unforeseen events that may unfold that affect our health, career or family. Therefore, investors need to be aware that one particular investment (putting all your eggs in one basket) may not be the solution that procures a safe secure financial future.

“I took a test in Existentialism. I left all the answers blank and got 100.”

Woody Allen

Investment companies and advisors who work at these financial institutions have a responsibility to consider not only the suitability of each investor but to carefully consider the appropriate diversification of his other investments as well. Decisions an investor makes today can significantly affect his financial stability. If circumstances change, the original reasons why he purchased the product may also change. If you went to the doctor today the doctor might prescribe something for your current ailment. But the prescription will only address the needs you have now because neither you or doctor know what your needs will be twenty or thirty years from now.

space needle seattle

The Space Needle

 

It is not the strongest of the species that survives, nor the most intelligent. It is the one most adaptable to change.

Charles Darwin

How much should you save? How much should you spend in retirement? How much do you leave to your children? How little do you leave? What happens if some unforeseen event happens? Is your investment portfolio safe in case of a sudden change in the world economy?

I was traveling on family business to the Emerald City, Seattle, Washington. While there I visited the 605-foot tourist trodden tower called the Space Needle which was built to celebrate the 1962 World’s Fair. As I observed the enormous edifice from the base, it appeared to gaze in soulful benediction over the sprawling city. After I stepped into the elevator it swiftly lifted me to the top floor. As I exited the doors high above the city, I walked onto the deck of the brightly lit observation turret. The sun’s rays were so bright they seemed to kiss the expansive windows as the visitors inside enjoyed the spectacular views. Near a set of elevators, a teenage attendant with red streaked hair was talking excitedly to a group of eager tourists. He spoke about the substantial sturdiness of the structure and how it was riveted into a foundation of reinforced steel and cement that can withstand a 9.1 earthquake as measured on the Richter scale. He added that the materials in the design were not only strong but also very flexible. In case of a hurricane, the tower had the special design capability to sway back and forth on very windy days even with winds of 200 miles an hour! The elevator may have to slow down during these conditions, but the structure was built resilient enough to adjust for sudden changes in the forces of nature. I thought of the many modern buildings and physical structures built in this way to withstand the daily effects of nature and weather, including our human bodies. If they were not flexible like the Space Needle structure, they would also suffer the strains of daily living causing us discomfort and pain.

To Bit or Not to Bit: What Should Investors Make of Bitcoin Mania?

Bitcoin and other cryptocurrencies are receiving intense media coverage, prompting many investors to wonder whether these new types of electronic money deserve a place in their portfolios.

Cryptocurrencies such as bitcoin emerged only in the past decade. Unlike traditional money, no paper notes or metal coins are involved. No central bank issues the currency, and no regulator or nation-state stands behind it.

Utilizing Investment Opportunities to Achieve Goals

Risk Business Man on tight rope RESIZED
If you are like many conservative investors nearing retirement, adding a higher rate of equities to your portfolio can seem like risky business. But a portfolio that relies too heavily on fixed income carries its own form of risk. In our low-interest rate environment bond yields are low, and if your portfolio isn’t outpacing the rate of inflation, then you might find yourself running the risk of outliving your portfolio. As investors approach retirement, instead of reallocating to a portfolio comprised entirely of fixed income, investors may be better served with a combination of equities and fixed income to ensure the portfolio lasts for the next twenty-five to thirty years.

The Idea of Taking Risk is Unique to us All

Risk means different things to different people. Many times, risk implies permanent loss. Labeling a portfolio or investment as “risky” doesn’t really help us define how that investment will perform over the long term, or whether that investment belongs in the portfolio in the first place. When talking very broadly about stocks (equities) or bonds (fixed income), labeling these asset classes as risky doesn’t help much at all. A better way to define these two categories is using a measure of volatility. It is true that equities are more volatile than fixed income. Stocks fluctuate more than bonds on a daily basis and for many investors, looking at the daily volatility of their portfolio will drive them crazy! Volatility isn’t necessarily a bad thing—it is finding the right mix of stocks and bonds in a portfolio so you aren’t making major changes over normal market fluctuations. Over time, investors are rewarded for taking on more volatility, as stocks outperform bonds in the long run.

Visualizing Goals for a Confident Financial Future

 “There's no scarcity of opportunity to make a living at what you love. There is only a scarcity of resolve to make it happen.”

—Wayne Dyer, author and new-age thinker


 This past year we (Walter and I) wrote a book, “The Millionaire Within”. We are proud to announce that it has been published and that it is available for sale on Amazon! We chose to write it in order to share our experiences working with clients to help them change their perceptions about money. People often seek financial consultation to gain insight into “new” investing strategies or promising stock trends for the coming year. What we know is that trying to predict an unpredictable market is as futile as spending your last dollar in the hopes that more will come out of thin air.

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