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.
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.
Allison Vanaski will be a featured speaker at the 2019 national conference for WIFS, Women in Insurance and Financial Services. She is thrilled to speak about her experiences and share her knowledge with her colleagues in the financial advisor industry.
With all the hype about the latest Avengers movie, it got me thinking about how we all can become superheroes in our every day lives. You may already be a superhero to your spouse, to your kids, but how can we become financial superheroes? Fidelity did a study a number of years ago. They looked at all of their accounts and they wanted to find out which accounts performed the best: what were the investments? How often did the account trade? How many “tweaks” did the account holder perform over this given time period? What Fidelity found out was very surprising. The clients whose accounts performed the best were the clients who forgot they had an account at Fidelity.
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.
It’s easy to see everything that is going wrong in the world. In fact, it would actually be challenging to read through a newspaper or turn on the news without being bombarded by all things terrible: political unrest, global warming, contaminated foods, disease outbreaks; the list goes on and on. On top of that, our brains tend to focus and remember the negative more than the positive. It’s called a “negativity bias”.[i] In this article, we will look at some reasons why this age of fast-paced globalization and unimaginable technology is pretty darn amazing.
Let There Be Light
It’s easy to take for granted the simple creature comforts when we have deadlines, kids, traffic, etc. But did you know that each day, nearly 300,000 people gain electricity for the first time? Another 305,000 get clean water. We are in a transitional state where huge populations are moving into the middle class, and with it comes advances in literacy, infrastructure, and amenities that improve quality of life, health, and infant mortality! For example, in 1960 19% of children died before the age of five and that number is now closer to 4%.[ii]
Investment fads are nothing new. When selecting strategies for their portfolios, investors are often tempted to seek out the latest and greatest investment opportunities.
Over the years, these approaches have sought to capitalize on developments such as the perceived relative strength of particular geographic regions, technological changes in the economy, or the popularity of different natural resources. But long-term investors should be aware that letting short-term trends influence their investment approach may be counterproductive. As Nobel laureate Eugene Fama said, “There’s one robust new idea in finance that has investment implications maybe every 10 or 15 years, but there’s a marketing idea every week.”
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.
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.
A quick online search for “Dow rallies 500 points” yields a cascade of news stories with similar titles, as does a similar search for “Dow drops 500 points.”
These types of headlines may make little sense to some investors, given that a “point” for the Dow and what it means to an individual’s portfolio may be unclear.The potential for misunderstanding also exists among even experienced market participants, given that index levels have risen over time and potential emotional anchors, such as a 500-point move, do not have the same impact on performance as they used to. With this in mind, we examine what a point move in the Dow means and the impact it may have on an investment portfolio.
impact of index construction
The Dow Jones Industrial Average was first calculated in 1896 and currently consists of 30 large cap US stocks. The Dow is a price-weighted index, which is different than more common market capitalization-weighted indices.
“The future’s uncertain but the end is always near.”
Jim Morrison, the Doors, “Roadhouse Blues”.
Many investors are losing valuable sleep listening to the misguided, canary-in-the-coal-mine commentators expounding on an imminent stock market crash due to a future recession (the “R” word). Paradoxically, if too many investors believe the same thing, as fate would have it, the “R” might just become a self-filling prophecy! On the other hand, the Wall Street axiom “a bull market climbs a wall of worry” may also suggest that too much negative investor sentiment may have the opposite effect and the market will continue to rise. It may make more sense to refrain from prognostications. The great investor Warren Buffett said, “Short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children." -- 1992 Berkshire Hathaway Chairman's Letter.
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.
“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.
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.
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.
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.”
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.
It’s the little things you begin with that matter most! The wisdom found in the Tao Te Ching says the long thousand- mile journey begins under one’s feet by taking small steps! If you are hiking and climbing a mountain you take one little step at a time. It is unrealistic to think you can physically run to the top.