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It might sound a little crazy but there are many benefits to working even though you no longer need the money for your living or retirement needs.
These “retirement workers” have discovered that part-time jobs or volunteer positions allow them to keep a nice pace in life and find a balance among using their talents, enjoying recreation, traveling, and spending time with family. Some of our most ambitious clients even start brand new companies in retirement.
Here are three important benefits of working in retirement that might persuade you to clock back in a couple days every week.
Working is good for you.
Retiring early is a very popular goal right now. But while it makes sense to want to enjoy your assets when you’re younger, a recent study links retirement with decreased mental and physical activity and higher instances of illness.
Working keeps your mind and body active. It makes you engage in problem solving and creative thinking. It keeps you mindful about your health and appearance so that you make a good impression on colleagues and customers. It challenges you to keep achieving and rewards you when you do.
And, if nothing else, it keeps you from vegging out on the couch all day and driving your spouse crazy!
Work can give you a sense of purpose.
Many retirees struggle with the transition to retirement because their sense of purpose and identity is so tied to their work. Without that familiar job and its schedule and responsibilities, some retirees struggle to find a reason to get out of bed in the morning. A part-time job can restore some of that sense of structure and drive.
In fact, you might find that working in retirement gives you an even greater sense of purpose than your former career did. You might have worked a job you didn’t 100% love in order to support your family. Now that you no longer need to worry about that, you can take that community college teaching position. You can work a couple days every week at that non-profit that’s making a difference in your community. You can set up regular volunteer hours at a charitable organization that’s close to your heart. You can feel like you’re making a contribution to society without worrying about the size of your paycheck.
Work can improve your connections to other people.
Early retirement can be a period of isolation for some folks. Your friends and family might still be busy working and raising children. The familiar social interactions you enjoyed at work are gone. You and your spouse probably share some common interests, but you can’t spend every single second together.
It’s important for retirees to be open to making new personal connections in retirement. A new workplace is a great place to start that process. You’ll meet new people from different walks of life. You’ll work with and help people who can benefit from your personal wisdom and your professional skill set. You might meet other retired seniors who, like you, are trying to stay active and put their talents to good use. And the more involved you are in your community, the more curious and adventurous you’re going to be about trying new restaurants, shopping in new stores, and interacting with more people.
Of course, working in retirement can affect other aspects of your financial planning even if you don’t need the money, such as taxes, withdrawal rates, and your relationship with your spouse. If you’re considering a new part-time job, let’s schedule a conversation to discuss any adjustments we should be thinking about so that you get the best life possible with the extra bit of money you’ll soon have.
Longevity can be both a gift, and a curse. This generation of retirees is going to live longer than any in history. Today’s seniors are healthier, more active, and receiving better preventative care. And on top of that, a growing group of scientists is trying to harness technology and modern medicine to slow down the aging process.
Experts call the cumulative effect of these changes to life expectancy “the longevity effect.” They project that extending our years of healthy living can have tremendous benefits both to individuals and to society as a whole.
Let’s look at some of the cutting-edge advances in slowing biological aging, as well as what experts recommend folks can do right now to stay more than just young at heart.
You’ve probably seen products like AncestryDNA that can give you a robust genealogical profile from your saliva. Scientists are continuing to progress on more sophisticated versions of this technology that will be able to use your genes to test for serious diseases. There’s even hope of being able to test for genes that are associated with longevity, and others that could eventually shorten your lifespan.
We all know that the best medicine is preventative. But if scientists can perfect this “road map” for life expectancy, the implications for your financial planning could be enormous. An accurate longevity expectancy could make it much easier to plan ahead for significant medical expenses that might not be covered by Medicare. And if you had a better idea of when you were likely to start “slowing down” later in your retirement, you might enjoy your early retirement years more and worry less about running out of money.
Fighting “Zombie Cells”
The cells in our bodies are constantly dividing. After a certain number of divisions, cells usually die. Those that don’t – so-called “zombie cells” – can build up in our bodies over time and interfere with how our healthy cells operate.
Scientists are looking for ways to clear out zombie cells via “interventions” such as pills. Clear out the zombies, and you’re eliminating cellular environments ripe for things like cancer, cardiovascular disease, Alzheimer’s, and osteoporosis. The more resistant we are to these kinds of diseases, the greater our longevity will be. And the longer you live without having to cope with a debilitating disease, the longer you’ll be able to work part-time, volunteer, play your favorite sports, and vacation with your favorite people.
In the Meantime
There’s no guarantee that these specific medicines and technologies will be ready for the general public during your retirement. But it is safe to assume that advances both gradual and rapid will continue to improve the quality of your health care.
The most important thing you can do to keep aging in check during retirement is to take advantage of the services Medicare provides right now. That starts with your free “Welcome to Medicare” visit, which will help you and your doctors get a baseline reading of your health upon retirement. Medicare also covers many vaccinations, a wide variety of preventative screenings and tests, an annual wellness checkup, and a depression screening if you’re struggling with the emotional transition into retirement.
These services might not sound as exciting as fighting zombie cells, but they’re the most effective ways to detect significant health problems while it’s still early enough to do something about them.
So while we’re all waiting for the next big medical breakthroughs, old fashioned common sense will go a long way towards a long and healthy retirement. Go to the doctor. Eat well. Exercise. Wear sunscreen. Pursue your passions with a vigor that will keep your body and mind energized.
And any time you want to review how your financial plan will take care of you at every phase of your retirement, don’t hesitate to call us up.
As part of our Life-Centered Planning process, we’ve talked about how market volatility is a normal part of investing. We’ve also discussed how we’ve structured your investments to “weather the storm” and maintain a comfortable level of income for you and your family during turbulent times so you can avoid knee jerk reactions.
But we also understand that even folks who are armed with this knowledge can get nervous during a market dip. What’s important is that you know how to prevent that initial wave of negativity from leading you to rash decisions that could damage your nest egg much worse than a market correction.
Dr. Martin Seay is a specialist in positive psychology, which focuses on strategies that people can use to improve their sense of well-being. Dr. Seay’s ABCDE method can help you work through your reactions to distressing financial news and arrive at a positive outcome.
Let’s walk through an example of how to use this method to avoid making a bad, emotion-based financial decision.
A. Activating Event
Sometimes stress and anxiety can feel all-encompassing. Dr. Seay believes it’s important that we pinpoint the event that triggered our negative feelings.
So, while you might feel general anxiety about your finances, drill down a little deeper. Is your job secure? OK. Are you saving and investing according to your financial plan? Good.
Did you just read on social media that today’s market correction was “THE BIGGEST ONE-DAY DROP IN HISTORY!”
Ahh, there it is. Let’s move on to the next step.
Market volatility can rouse some of our worst instincts about investing. We might fall back on long-buried Beliefs like, “This game is rigged!” We might feel like we’ve entrusted our financial future to powers beyond our control.
As you work through this step, it’s important to ask yourself where your Beliefs come from. Have you been unsettled by widespread media coverage of major financial problems, like the 2008-2009 housing crisis? Have you had negative interactions with the finance industry in the past? Perhaps one of your parents distrusted the markets or made a poor investment that had a negative impact on your family.
Figuring out why you believe what you believe about the markets can help alert you before you fall back into bad financial habits.
Panicked investors who can’t shake negative Beliefs about the markets often make poor decisions during downturns. They think they need to “get out fast” to avoid more negative Consequences, like further losses.
Ironically, cashing out your investments during a market correction usually leads to far more serious Consequences in the long run.
So how can you stay focused on the big picture?
Start by using what you know to push back a little against what you Believe.
For example, we’ve discussed in our meetings that the historical, long-term trajectory of the financial markets has been to rise over time. And now, market averages such as the Dow Jones Industrial Average are near all-time highs. Therefore, when the market does have a temporary drop, we might say, “The Dow was down x hundreds of points today.” It sounds like a big number, but as a percentage, it may just be normal volatility.
We’ve also discussed that “market timing” strategies usually just don’t work. That’s why your portfolio is diversified, balanced, and strategically rebalanced as necessary. Decades of market history have shown that sticking to this type of investment strategy may be more effective – and stable – than trying to jump in and out of the market based on what’s happening in the news right now.
Today’s losses are really just a kind of “tax” that you’re paying on the wealth we’re helping you build for tomorrow.
It’s amazing how just reminding ourselves of what we know to be true can make us feel better about a negative situation. Hopefully at the end of this process, you feel a renewed sense of positivity about this present moment and your financial future.
But we understand that market volatility can be complicated. And as you’re nearing retirement, a downturn can be downright nerve-wracking.
So if you need help walking through your ABCDEs the next time the market corrects, make an appointment to meet with us. We’ll run through the important facts you need to know and decide what moves, if any, we need to make to keep you on track with your financial plan and avoid those costly knee jerk reactions.
How are you going to get the best, most fulfilling life possible with the money you have once you retire? Generosity is key, but it can be costly.
Study after study has shown that retirees who spend their time and money on experiences are much happier than those who just buy stuff. Charitable giving can be a particularly meaningful way to keep yourself active and put your assets to good use. Too much generosity can be costly, so it’s important you follow these steps.
Just as long as you don’t overdo it.
If you’re feeling an increased desire to give back now that you’ve retired, here are some tips on balancing your good intentions with what’s best for you and your family.
1. Do your homework.
Recently, there have been high-profile cases of fraud and misappropriated funds at some very famous charitable organizations. But even if you’re giving to a charity that is run well, you should understand where your money is really going. If you’re happy with your dollars helping a larger organization to pay its bills and employees, great. If you want your money to have a more immediate impact on those in need, consider giving to smaller organizations in your community.
Do some googling and check online watchdog databases to make sure your favored charity is on the up-and-up. And unless you know the organizers personally, avoid online crowd-funding campaigns that aren’t legally accountable for how they use donations.
2. Consider a volunteer position.
Your favorite non-profit or charitable organizations need money. But they also need manpower.
If you’re thinking about working part time in retirement and a paycheck isn’t really important to you, schedule regular volunteer hours instead. You’ll get all the same benefits of having a job: structure, responsibility, camaraderie. Plus, seniors who volunteer report lower levels of stress, an increased sense of purpose, and better physical and emotional health.
3. Teach, tutor, or consult.
When looking for a charitable outlet, don’t overlook the professional skills that you honed over your career.
You might not have the qualifications to teach at a school or university, but you could talk to your local community center about holding a seminar that could benefit your neighborhood. You might be done balancing your company’s books, but there are high school kids who could benefit from your mastery of math. Open your door to local small business owners or recent college graduates who need an entrepreneurial mentor.
4. Make a plan.
It’s a scientific fact that giving makes us feel good. But some seniors may get too caught up in their generosity. They forget that gifts and donations are coming from that same pool of assets that are supposed to keep them safe and secure for the rest of their lives. They may have trouble setting limits and saying no.
There is indeed such a thing as too much giving. You might not think much about writing an extra check or two early in retirement. But seniors have to maintain a long-term perspective on their nest eggs. This generation of retirees is going to live longer, more active lives than any in history. You need to make sure that helping someone today isn’t going to make it harder to cover your health care and cost of living needs tomorrow.
So, if you and your spouse want to make regular charitable donations, it’s important that you come in and talk to us. We can incorporate giving into your monthly budget and retirement income plan. If you want to make your generosity more permanent, we can also help you establish a charitable trust and add sustained giving to your estate plan.
We’re always happy when our clients want to help others. But it’s our responsibility to make sure your financial plan covers your best interests first. Let’s work together on a plan that will make your retirement secure and the world around you a little brighter.
Ever wonder how you can improve your relationship with money? Many people have a complicated relationship with money. Hang-ups carried over from childhood experiences get mixed together with positive and negative experiences from adulthood. Few people ever take the time to reflect on what money really means to them and how they can “get right” with money to make smarter decisions.
Take time to answer these 5 questions and you’ll do a better job of living your best life possible with the money you have.
1. What’s your first money memory?
Your earliest experiences with money probably happened in your home. You saw how your parents earned and managed their money. You probably compared the quality of your family home and vehicles to what you saw at friends’ and neighbors’ houses. An unexpected job loss or illness might have led to some very lean holidays or a skipped vacation. Or, if you grew up in an affluent household, you might have taken money for granted in a way you no longer do now that you’re the one earning it.
Identifying some of these early memories is critical to reassessing your relationship with money. Are you following positive examples towards decisions that are going to improve your life? Or, without even realizing it, are you repeating poor money habits that are going to hurt you in the long run?
2. Do you feel like money is your servant or your master?
Sometimes money makes us feel like we’re a hamster on a wheel, running as fast as we can without ever really getting anywhere. But if you never stop chasing after that next dollar, when it comes time to retire, all you’re going to have is money, and a whole lot of empty days on your calendar.
People who get the most out of their money recognize that it’s a tool they can use to skillfully navigate to where they want to be in life. So, instead of working too long and hard for more money, think about how to put the money you have to work for you.
3. What would you do if you had more money?
You’ve probably read about studies that show lottery winners don’t end up any happier than they were before their windfalls. This is a dramatic example proving some pretty conventional wisdom: money doesn’t buy happiness. That’s especially true if you’re stuck on your wheel for 40 hours every week just chasing more and more money.
If the idea of having more money gets you thinking about all the things you’d buy, it’s important to remember how quickly even the fanciest new car smell will fade.
If you would immediately quit your job if you had enough money to support your family and live comfortably, then maybe you need to think about a more fulfilling career.
Having more money might not “solve” some issues you’re currently experiencing, but asking what would you do if you had more money might lead you to new decisions that improve your current life satisfaction.
4. What would you do if you had more time?
Imagine you don’t have to work. You can spend every single day doing exactly what you want. What does your ideal week look like? What things are you doing? What hobbies are you perfecting? Where are you travelling? With whom are you spending your time?
These things often get pushed to the side when we’re busy working. But if your money isn’t providing you with opportunities to spend time doing what you love with the people you love, then your work-life balance might need an adjustment.
5. What would your life look like to you if it turned out “well”?
Hopefully by now you’re starting to think about how your relationship to money could be keeping you from getting the most out of your money.
The successful retirees that we work with don’t look back fondly on the amount of money they made or how much stuff they were able to buy. They tell us their lives turned out well because they used money to make progress towards major life goals. They say their money provided them the freedom to pursue their passions. And their sense of well-being increased as they committed time and resources to health, spirituality, and continual self-improvement.
When you reach retirement age, we want you to look back happily on a life well-lived. Come in and talk to us about how our interactive tools and Life-Centered Planning process can improve your relationship to your money.
There’s also some really great resources you can find at www.investopedia.com to help you improve your relationship with money.
Get Your Financial House in Order
“Does this spark joy?”
Millions of people are asking themselves this question about their homes and possessions thanks to Marie Kondo and her wildly popular decluttering philosophy.
Once the kids are moved out, it’s just you, your spouse, and whatever is still boxed up in extra bedrooms and the basement. Whether you’re looking for joy or just a little less space and stuff to manage, you might be thinking about decluttering and “downsizing” into a smaller home before you retire.
But sometimes less can be more: more hassle, more complicated, and more expensive. Before you and your spouse order that dumpster and make a down payment on that condo, consider these important pros and cons of downsizing.
PRO: Make a change while you can still enjoy it.
The younger you are during a downsize, the less help you’re going to need clearing out what you don’t want and relocating. And a clean, organized home can be a great “blank slate” as you start easing into your new life. You might even organize a move around interests you want to pursue in retirement, like a community with golf and tennis facilities, or a burgeoning foodie hotspot with an exploding restaurant scene.
CON: You might make a change you don’t both enjoy.
Couples need to be very clear with each other about their expectations for what life is going to be like in retirement, and how each of you want to spend your time separately and together. A downsizing that moves you to a new town, away from friends, family, and familiar comforts, can go from exciting to exasperating very quickly if both spouses aren’t committed to adventuring together. One spouse might be happily teeing off while the other is puttering around the house bored silly.
And while a smaller house without kids and clutter might mean more room for you and your spouse, it’s still going to be closer quarters than you’re used to. Is less space going to provide you both with enough personal space?
PRO: Simplified living.
A smaller home means less upkeep. If you buy, you’ll probably pay less in taxes than you did at your larger house. With less space to heat and cool, and no kids soaking up extra water, food, and electricity, your monthly bills might go down. If your smaller house is relatively new, it might require less upkeep and age well right along with you.
CON: Simple isn’t free.
There’s a pretty good chance your current furniture isn’t going to fit or fit in at your new house. Our old stuff is never as valuable to resellers as we want it to be, so you’ll probably end up dipping into your nest egg to buy new furnishings. Anything you don’t want to get rid of you’re going to have to store, either in that beautiful, empty basement, or at a storage facility you’ll have to pay for. If you move to a different state, your smaller home might come with higher taxes. What you save on taxes buying a condo might be offset by association and communal maintenance fees.
PRO: Living the best life possible with your money.
The best reason to consider downsizing doesn’t really have anything to do with decluttering. It’s not about managing space or what to do with all your possessions.
No, the reason to downsize is because that smaller home you’re thinking about will allow you to live the life you want to live in retirement. It’s because that home is going to give you the space to do the things you want to do with the people you love, while minimizing the things you don’t want to do anymore.
Does that idea spark joy?
Then let’s talk. Come in and tell us why you’re thinking about downsizing. We’ll run some numbers and discuss how a new, smaller home could open a big new world of possibilities for you and your spouse.
“How am I doing?”-Every Investor…..ever
Ever wonder how your retirement savings stack up against other people your age? That’s a big question that most people have when it comes to their money. One way we tend to look for answers is by comparing what we have to what our neighbors, friends, and family, have. Even though we know deep down that “the grass is always greener on the other side,” it can be hard to look away when our phones, computers, and TVs are practically forcing us to make these comparisons.
We understand the worry that you might not be keeping pace with your peers. But if you’re wondering about where your retirement savings “should be,” it’s important that you look at these numbers with the proper context.
According to Nerdwallet, here’s how average retirement savings break down by age:
Average household retirement savings: $32,500
Median household retirement savings: $12,300
Ages 35 to 44
Average household retirement savings: $100,100
Median household retirement savings: $37,000
Ages 45 to 54
Average household retirement savings: $215,800
Median household retirement savings: $82,600
Ages 55 to 64
Average household retirement savings: $374,000
Median household retirement savings: $120,000
Ages 65 to 74
Average household retirement savings: $358,400
Median household retirement savings: $126,000
As you might have guessed, retirement savings tend to ramp up as we age. In part, this is because the older we get, the more real retirement becomes, and more prepared we want to be.
But as fiscally responsible people age, their debt level tends to drop as well. No more kids to support. No more student loan payments. Vehicles and houses get paid off. Credit cards get used less (unless you’re focused on accumulating points) and paid down. There’s only so much you can keep in a low-interest savings account before you want to put more of your money to work.
The numbers behind the numbers
If these figures seem a bit low to you, you’re not wrong. Most financial experts believe that, generally, Americans are not saving nearly enough for retirement.
Yes, having a couple hundred thousand in savings and investment accounts may sound like a lot of money. But people are also living longer and more active lives than ever before. That means your retirement assets are going to have to last longer than your parents’ and grandparents’ did.
And as pensions continue to dry up, the responsibility for preparing for retirement has shifted more and more to individuals. That’s going to be a challenge for anyone who’s significantly below these savings levels. And it’s going to be a BIG problem for the 43% of households headed by someone 35-44 who don’t have any retirement savings at all.
Is an “average” retirement good enough?
Let’s say you’re the average 65-year-old with just over $300,000 in the bank. How long is that $300,000 going to last? Is that nest egg going to provide the retirement you’ve been dreaming about and working for most of your life?
There’s no one-size-fits-all answer to those questions. We all have different passions, goals, healthcare needs, and lifestyle expectations. Some retirees might live quite happily at or even a little below the average level.
But what happens if your spouse has an accident and needs to see a specialist? What if your roof needs a major repair? Will an emergency stretch your “average” retirement too thin?
What happens if, five years into a twenty-year retirement, you start to feel bored and restless? What if you decide you need to see more of the world? What if you can’t let go of that passion project you’ve always wanted to develop into your own business? Will your nest egg provide for changes that will make your retirement more fulfilling?
How your money measures up.
Successful retirement planning balances the things that we can anticipate with the things we can’t. That’s why, as we work together, we’ll never hold up a graph comparing where your money is to where your peers are. We’re not interested in outside standards of “measuring up.” We’re interested in how your money measures up to what YOU want out of life, and what you’ll need to stay comfortable on rainy days.
Many folks who have just begun working with us are surprised by how our planning process starts. We don’t begin by talking about IRAs, 401(k)s, or how much you’re saving. Instead, we begin by talking about you, not your money.
Putting your life before your financial plan.
As Life-Centered Planners, our process begins with understanding your life plan. We start by asking you about your family, your work, your home, your goals, and the things that you value the most.
Our job is to build a financial plan that will help you make your life plan a reality.
Of course, building wealth that will provide for your family and keep you comfortable today and in retirement is a part of that plan. So is monitoring your investments and assets and doing what we can to maximize your return on investment.
But we believe maximizing your Return on Life is just as important, if not more so. People who view money as an end in and of itself never feel like they have enough money. People who learn to view money as a tool start to see a whole new world of possibilities open in front of them.
One of the most important things your money can do for you is provide a sense of freedom. If you don’t feel locked into chasing after the next dollar, you’ll start exploring what more you can get out of life than just more money.
Feeling free to use your money in ways that fulfill you is going to become extremely important once you retire. Afterall, you’re going to have to do something with the 40 hours every week you used to spend working! But you’re also going to have to allow yourself to stop focusing on saving and start enjoying the life that your assets can provide.
Again, having money and building wealth is a part of the plan. But it’s not THE plan in and of itself.
The earlier you start thinking about how you can use your money to balance your vocation with vacation, your sense of personal and professional progress with recreation and pleasure, and the demands of supporting your family with achieving your individual goals, the freer you’re going to feel.
And achieving that kind of freedom with your money isn’t just going to help you sleep soundly at night – it’s going to make you feel excited to get out of bed the next morning.
What’s coming next?
So, when does the planning process end?
If you’re like most of the people we work with, never.
Life-Centered Planning isn’t about hitting some number with your savings, investments, and assets. And we’re much more concerned about how your life is going than how the markets are performing.
Instead, the kinds of adjustments we’re going to make throughout the life of your plan will be in response to major transitions in your life.
Some transitions we’ll be able to anticipate, like a child going to college, a big family vacation you’ve been planning for, and, for many of you, the actual date of your retirement. Other transitions, like a sudden illness or a big out-of-state move for work, we’ll help you adjust for as necessary.
In some cases, your life plan might change simply because you want something different out of life. You might start contemplating a career change. You might decide home doesn’t feel like home anymore and start looking for a new house. You might lose yourself in a new hobby and decide to invest some time and money in perfecting it. You might decide it’s time to be your own boss and start a brand new company.
Planning for and reacting to these moments where your life and your money intersect is what we do best. Come in and talk to us about how Life-Centered Planning can help you get the best life possible with the money you have. Visit Our Website to learn more.
Want to Retire? Take It for a Test Drive
There are many reasons why people who could retire are hesitant to do so. Some people think they need to wait until they’re 65 or older. Some are worried about running out of money. Many parents want to keep supporting their children through some major life transition, like college, marriage, or buying a first home.
Maybe the most common reason we see for a retirement delay is folks who just can’t imagine their lives without work. That’s understandable. A routine that’s sustained you and your family for 30 or 40 years can be a hard routine to shake.
But retirement doesn’t have to be all or nothing right away. If just thinking about retiring makes you jittery, use these tips to ease into retirement a little at a time.
1. Talk to your family.
Clear, open communication is an essential first step to approaching retirement. Be as honest as possible about what you’re feeling. What worries you about retirement? Does the idea excite you? What do you envision your days being like? Where do you want to live? What does your spouse want retirement life to be like?
2. Talk to your employer.
Many companies have established programs to help longtime employees transition into retirement. You might be able to trim back your hours gradually to get an idea of what days without working will be like. You’re also going to want to double-check how any retirement benefits you may have are going to work. Discuss any large outstanding projects with your supervisor. Make a plan to finish what’s important to you so that you can leave your job feeling accomplished.
Self-employed? Give your favorite employee (you) less hours and fewer clients! Update your succession plan and start giving the soon-to-be CEO more of your responsibilities. Make sure you have the absolute best people working for you in key leadership positions so that your company can keep prospering without your daily involvement.
3. Make a “rough draft” of your retirement schedule.
What are you passionate about? What are some hobbies you’d like to develop into a skilled craft? Do you want to get serious about working the kinks out of your golf swing? Are there household projects, repairs, or upgrades you want to tend to? A crazy idea you kicked around at work you’d like to build into a new company? A part-time job or volunteer position you’d like to take at an organization that’s important to you? New things you want to try? New places you want to visit? Grandkids you want to see more often?
Try filling out a calendar with some of your answers to these questions. As you start to scale back your work hours, take a few lessons or volunteer shifts. Sign up for a class. Leave town for a long weekend. See what appeals to you and what doesn’t.
Remember, you don’t have to get your schedule right the first time! A successful retirement will involve some trial and error. Learn from things you don’t like and make a point to spend more time doing the things you do like.
4. Review your finances.
This is where we come in!
Once you and your spouse have settled on a shared vision for retirement, we can help you create a financial plan to help ensure you are financially fit for (semi)-retirement. We’ll go through all of your sources of income, retirement accounts, pensions, savings, and other investments to lay out a projection of where your money is coming from and where it’s going.
We can coordinate all aspects of your situation and collaborate with you on the best course of action. You don’t have to face retirement alone and make big decisions without expert guidance.
Coming in and talking to us about your retirement is a great “Step 1” option as well. So if you are dreaming of those days when work is optional, give us a call and we can help you through this phase of life.
One of the reasons that divorce is such a challenging life transition is its public nature. A couple might keep their problems private as they try to work through them. But if a rift opens that can’t be mended, the couple will have to share some very difficult news with friends and family as they separate from one another.
Few of us will have to reveal emotional personal issues to as wide an audience as Jeff and MacKenzie Bezos recently did. The statement that Jeff released on Twitter suggests that he and MacKenzie are trying to make their split as amicable as possible by using three insightful ideas that could help anyone struggling through a divorce.
1. Be open and honest with those closest to you.
“We want to make people aware of a development in our lives. As our family and close friends know, after a long period of loving exploration and trial separation, we have decided to divorce and continue our shared lives as friends.”
Couples need privacy as they deal with strains on their marriage. But once a decision is made, clear communication with your family, friends, and each other will be very important. That goes double if any young children are in the picture.
The more open a couple is about what’s happening, the easier it will be for you to find the outside support that will help you through this transition. Good dialogue might also help you and your former spouse to focus on the essential tasks at hand, like dividing your assets and updating your essential estate planning documents.
2. Be grateful.
“We feel incredibly lucky to have found each other and deeply grateful for every one of the years we have been married to each other. If we had known we would separate after 25 years, we would do it all again.”
Shame, embarrassment, and guilt are common feelings associated with divorce. Playing the blame game or trying to “win” the divorce can quickly turn all those amicable best intentions into bitter personal and legal issues.
Instead, the Bezos statement is a reminder that the end of a marriage – especially a long one – doesn’t erase all of the positive things that came before it. If an amicable divorce is possible in your particular situation, then don’t be ashamed or embarrassed. Cherish those precious shared experiences, like the birth of children, happy vacation memories, the difficult times you helped each other through. Embracing these feelings of gratitude will help ease both you and your partner through this process.
3. Focus on the positives ahead.
“We’ve had such a great life together as a married couple, and we also see wonderful futures ahead, as parents, friends, partners and ventures and projects, and as individuals pursuing ventures and adventures.”
When we work through the $Lifeline exercise, we emphasis that important transitions like retirement, children graduating, weddings, and yes, divorces, are ends in one respect, but also new beginnings. They’re the start of new chapters in your life.
That might be difficult to see when the pain of a divorce is still raw. But it’s important to open yourself up to new opportunities when they present themselves. You’re about to start your single life all over again. And yes it’s scary. It may not be what you wanted. And you may be bitter. But over time, you may be able to see what awaits you on the other end. It could be traveling that you’ve longed for. Maybe you’ll relocate, start a new career, begin new hobbies, and meet new people. You might have more financial resources at your disposal to explore solo than you did when you were younger and unmarried. And you might approach these experiences with a more mature and grateful perspective, enjoying every minute just a little bit more fully.
We want to help you through all of life’s major transitions, the positives as well as the challenges. If there’s change on the horizon, make an appointment to come in and review the $Lifeline exercise with us. We can help you plan ahead so that the next chapter of your life is the most fulfilling yet.
How to Make Your Empty Nest Time a Prime Time in Your Life
Time flies when you’re a parent. Just when you’ve wrapped your head around the demands and responsibilities of raising a child, you turn around and your little bundle of joy is ready to head out into the world.
This empty nest transition can be very emotional. And in some cases, like children who stay on your health insurance until age 25, the break isn’t as clean as it used to be. But this change should also be exciting! Here are some tips on how you and your spouse can stay positive and make the most out of all your new free time, all that new space, and hopefully, all that extra money.
First off, some major congratulations are in order. Raising children is as rewarding as it is challenging. In order to get where you and your spouse are today, you had to make so many sacrifices, juggle work and family schedules, and carefully manage your finances.
An empty nest fills some parents with sadness and loneliness. But you should focus on the positive. Your kids are ready to be adults. Be proud of them, and of you and your spouse. Pop a good bottle of wine you’ve been saving or treat yourselves to a night out. You deserve it. An exciting new part of your life is about to begin.
2. Readjust your budget.
Children are wonderful. They’re also really expensive! No more sports fees. No more restocking the fridge every other day. Depending on their ages and how much you’re helping with their transition into adulthood, no more school tuition or piggybacking on insurance and phone plans.
Even the smallest of these expenses adds up quickly month after month. Now that they’re in the past, it’s time to make a new budget. You might find ways to ramp up your savings and contributions to your retirement accounts. You also might be able to afford a few more creature comforts or an extra trip or two.
3. Reclaim your space.
If your house suddenly feels a little emptier, well … it is. Too empty? If you and your spouse now have more room than you really need, it might be time to consider downsizing and economizing. Any new homes or neighborhoods in your community that look appealing? Have you considered moving out of state to start a new adventure?
If you’re happy where you are, take back those vacant rooms. Refurnish with a more grown-up touch to create a guest room for visiting friends and family. Give your hobbies and passions their own space by making a crafting room or a library.
Added bonus: if your kids have any trouble “adulting,” they’ll be more motivated to figure things out for themselves if there’s an easel or writing desk where their beds used to be.
4. Reconnect with your spouse.
You and your spouse are going to have more one-on-one time now than you’ve had since you were newlyweds, especially if you’re both getting ready to retire. What things did you used to do together before all those soccer practices and ballet recitals started dominating your schedules? What dream vacations for two have you been putting off? Have your golf or tennis swings gotten a little rusty over the years? Do you have time to cook meals together now?
Another activity that might bring you and your spouse closer is regular visits to your adult children and any grandchildren you might have. Seeing your kids on their own, flourishing at college or raising their own kids, will only deepen the sense of pride you should feel for a job well done.
5. Talk it out.
Major life transitions are often more challenging than we’re prepared to admit. More room, more free time, and more cash in hand are all positive. But the feeling that a large part of your life is over might be hard to shake.
Your blank calendar and lack of routine can be intimidating. Empty bedrooms can feel lonely. And while empty nest blues are often associated with the mother, many fathers suffer in silence. Make sure that you and your spouse are open and honest with each other about what you’re both feeling and get help if necessary.
On the flipside, you might feel overwhelmed in a good way – thrilled by all the options available to you, excited to start something new, but unsure of where to begin.
Again, step one is clear communication with your spouse. Make sure that you are on the same page about what you both want from this new stage of your life. Plan activities that you can do together. But also make space in your new routine for each of you to explore, learn, and grow individually.
Step two: come in and talk to us. We can help you sort through the financial implications of your empty nest and make sure you have the resources to live your best possible life with the money you have.
Is How You Use Your Money Aligned With Your Values?
A hamster in a wheel.
Have you ever watched a hamster running in a wheel? All that running, all that effort, day after day after day … But the poor little critter never really gets anywhere, does he?
Many of us feel the same way about our money.
More specifically, we feel that way about the work we do to get that money. We spend forty hours every week on a wheel, running after a paycheck. And then, first thing Monday morning, we’re back on the wheel, and the whole thing starts over again.
Many folks just keep repeating this cycle, over and over, until they finally retire. They think that stepping off the wheel just isn’t an option because they have bills to pay, college expenses to save for, and a dream to be “financially set” before retiring from work. It begs the question if he we use our money is aligned with our values.
How much is enough?
These are all persuasive arguments that keep people on the wheel. And the hope is that someday, you’ll be able to stop running and enjoy the fruits of all that hard work.
Unfortunately, more often than not, “someday” never comes. If your focus in your work and in your financial planning is just having enough money, you’ll never feel like you have enough. There’s always another dollar to chase, another way to economize so that you can save more.
But for what? Is having more and more money, in and of itself, something that you really value? Does having more make running on the wheel worth it?
You might think that this “never enough” mentality ends once a person retires. In fact, it just transitions into a new, related worry: “Am I going to run out of money?” Again, that “someday” gets pushed back in favor of more saving, more super-conservative living. You might not be working any more, but you’re still just chasing after money.
The wind in your sails.
At the end of the day, your money is not the shore we’re sailing for. It’s not the sea you’re sailing on. It’s not even the boat you’re steering.
Your money is the sail. It’s the tool you use to get where you want to go.
And the wind in that sail is your values.
Just like a good sailor learns how to maneuver the sails to catch the most wind, aligning what’s most important to you with your financial resources is the key to successful financial planning.
So instead of asking yourself if you have enough money, or if you will run out of money, ask yourself a better question:
Am I managing my money in a way that’s improving my life?
We don’t want you just to “have enough money.” We want you to live the best life possible with the money you have.
That starts with thinking about what’s really important to you. The people whom you love. The causes that are dear to your heart. The activities that keep you feeling fit and full of energy. The hobbies that put your unique skills to their highest uses. The opportunities for learning and self-discovery that enrich your understanding of the world and of yourself. The wisdom that you will pass down to your children and grandchildren so that they live their best possible lives as well.
We believe that aligning your financial plan with these values is every bit as important as analyzing your tax situation or managing your investments. Come in and see how our interactive tools can you help plan for your whole life and get more from your money than just more money.
How Are You Feeling About Financial Markets?
Heritage Insider Weekly November 12, 2018
Before you get too excited about the rise in optimism, you should know pessimism also remains at historically high levels. According to AAII:
Let’s take a look at some performance figures…
Data as of 11/9/18
Standard & Poor’s 500 (Domestic Stocks)
Dow Jones Global ex-U.S.
10-year Treasury Note (Yield Only)
Gold (per ounce)
Bloomberg Commodity Index
DJ Equity All REIT Total Return Index
- A gaggle of geese
- A crash of rhinoceros
- A glaring of cats
- A stack of librarians
- A groove of DJs
What is a unicorn company?
If you were to choose a collective noun to describe investors, what would it be? An exuberance? A balance? An influence?
Did You Inherit Your Beliefs About Money From Your Parents?
Parents know that children hear, see, and pick up on everything that is going on with the adults in their lives. And when you were a child, you were no different.
Our attitudes about money are formed at an early age, as we absorb how people around us deal with money. Some of these beliefs, such as a commitment to disciplined saving, are positive. Others, like skepticism about the stock market, can be more harmful than helpful as we try to build wealth in our own lives.
Answering these four key questions can help you look at your financial upbringing with a fresh perspective. When you’re done, think about which money beliefs you want to pass on to your own kids, and which might be preventing you from living the best life possible with the money you have.
What was money like growing up?
Your childhood experiences of money are a composite of details both big and small.
You probably compared the comforts of your home to what you saw next door and drew some conclusions about how comfortable your family was.
Did your parents get a new car every couple years or drive around the same station wagon until it died? Did you take frequent vacations? What were holidays and birthdays like?
Watching mom and dad carefully balance their checkbooks or set next week’s grocery budget also might have made a strong impression. And at the more serious end of the spectrum, an unexpected job loss, debilitating medical condition, or death could have had a profound impact on your family’s finances.
What was money like for your parents growing up?
Many baby boomers were raised by parents who had to tighten their belts during the Great Depression and World War II. The Greatest Generation probably impressed upon your parents the value of the hard work, the importance of saving, and perhaps some real apprehension when it comes to money. Your parents may have passed on these same values to you, or swung in the opposite direction and tried to make money as stress-free as possible.
How much do you know about your parents’ childhoods? If they’re still living, ask some questions that will fill in your family’s history a little more clearly. You might learn something surprising. And you might gain some insight into how their experiences of money are still affecting you.
What specific lessons were you taught that you have continued?
People who grow up in working-class households often learn negative lessons about wealth. Their parents may view affluent people with suspicion or even resentment. Sometimes there are valid reasons for these views. In other cases, hard-working adults see greener grass on the other side of the fence. They underestimate how much hard work and discipline really go into wealth-building. Their kids learn to do the same.
On a more positive note, your parents also made decisions that taught you what was more important. Perhaps they sacrificed their own leisure and comforts so that you could attend a good private school. A parent might have earned a modest living as a teacher or working for a nonprofit that made your community better.
What was the best thing you were taught about money?
As a child you probably rolled your eyes whenever your parents doled out maxims about money or started reminiscing about what money was like when they were growing up.
Now that you’re the one doing the earning, some of those lessons probably ring true. “Live on less than what you make” is hard to hear when it’s used to explain why you can’t have a new bike or take a big vacation. No child wants to sacrifice their weekends or summers working part time because their parents insist on it. But the lessons that were hard to swallow when we were young. These are the lessons that often create attitudes and habits that benefit us as adults.
The sum of all these memories, the positive and the negative, is a blueprint to your financial thinking. It’s also the schematic that we use to build your life-centered financial plan. Come in and share your blueprint with us so that together, we can lay a strong foundation for your family’s future.
3 Ways to Know When You Are Ready to Retire
There’s a pretty good chance that your parents and grandparents retired just because they turned 65. Today’s retirement is a bit more complicated than that. While age is still an important factor, your ability to connect your financial resources to your lifestyle goals is what will truly determine if you’re ready to retire.
Here are three important markers to cross before you crack open your nest egg:
You’re financially ready.
The most common question we field from our clients is, “How much do I need to retire?” While there’s no magic number to hit, a few key checkpoints are:
- You have a budget. Many clients who are preparing to retire tell us they’ve never kept a budget before. Time to start! If you have any big plans for early in your retirement, like remodeling your home or a dream vacation, let us know so we can discuss front-loading your annual withdrawal rate.
- Your debts are paid. No, you don’t necessarily need to pay off a fixed-rate mortgage before you retire. But try to reduce or eliminate credit card balances and any other loans that are charging you interest.
- Your age, retirement accounts, and Social Security plan are all in-sync. If you’re planning on retiring early, be sure that your retirement accounts won’t charge you any early withdrawal penalties for which you’re not prepared. Also keep in mind that the earlier you take Social Security the smaller your payments will be. Can you afford to live without Social Security until age 70 to maximize your benefits?
- You and your spouse have a health care plan. Medicare insures individuals, not families. If only the retiree is 65, the younger spouse will need to buy health care elsewhere.
You’re emotionally ready.
We spend so much of our lives working that our jobs become a large part of our identities. Rediscovering who we are once we stop working can be a major retirement challenge. To prepare for this emotional transition:
- Talk to your spouse ahead of time. Don’t wait until your last day of work to discuss how both of you feel about retirement. What do each of you imagine life will be like? What are the things you’re excited to do? What are you afraid of? What can each of you do to make this new phase of life as fulfilling as possible?
- Make a list. What are the things you’re passionate about? Something you’ve always wished you knew more about? A skill you’d like to develop? A cause that’s important to you? An ambitious business idea that was too ambitious for your former employer?
- Check that your estate plan is in order. It’s understandable that many people avoid this part of their retirement planning. But putting together a legacy that could impact your family and community for generations can have tremendous emotional benefits. The peace of mind that comes from knowing the people you care about are taken care of can empower you to worry a little less and enjoy your retirement more.
You’re ready to do new things.
Ideally, the financial piece of this conversation should make you feel free enough to create a new retirement schedule based on the emotional piece. Plan your days around the people and passions that get you out of bed in the morning. Some ideas:
- Work at something you love. Take a part-time job at a company that interests you. Turn that crazy idea you couldn’t sell to your old boss into your own business. Consult. Teach. Volunteer.
- Keep learning. Brush up your high school French by enrolling in an online course. Learn some basic web design so you can showcase your photography portfolio or create an online store for your crafts. Sign up for cooking classes and get some new meals in your weekly rotation.
- Get better at having fun. What’s the best way to lower your handicap or perfect your backhand? Take lessons from a pro. The second best? Organize weekly games with friends and family.
- Travel. Planning out a big vacation can be a fun project for couples to do to together. And while you’re looking forward to that dream trip, take a few weekend jaunts out of town. Stay at the new bed and breakfast you keep hearing about. Visit your grandkids. Go on the road with a favorite sports team and enjoy the local flavor in a different city.
If you’re nearing retirement and struggling with these issues, working through the Return on Life tools with us might provide some clarity. Let’s discuss how we can help get you ready for the best retirement possible with the money you have.
For more retirement resources visit the AARP website.
5 Next Steps When You Are Concerned About Aging Parents
As your aging parents begin to settle into their final phase of life, their health, residence, and finances could become a factor in your retirement planning. This is especially true if you are the person your parents have tasked with settling their estates.
There’s no simple way to tackle all the logistical and emotional challenges associated with caring for an aging parent. But these five steps will help you get the help you’ll need to make sure your parent is safe, cared for, and financially secure.
Call a family meeting.
No two families are the same, but in most cases, you’re going to want to gather together all siblings and close family members for an open and honest discussion. If your parent is dealing with a serious and potentially debilitating health issue, don’t sugar-coat the truth. Hiding the facts now will only lead to hurt feelings, resentment, and poor planning.
Depending on the parent’s condition, you might consider dividing up a caregiving or visitation schedule. Even pitching in on small day-to-day tasks like helping mom or dad buy groceries can be a big help.
If you’re contemplating a more serious decision, like assisted living, make sure you give everyone space to voice an opinion. Try to keep the conversation as positive and solution-focused as possible. Employing a mediator or family counselor to facilitate might be a good option if you’re concerned old family issues could boil over and prevent a solid resolution.
Don’t try to parent.
Shifting from the role of adult child to caregiver is going to be a difficult transition for both you and your parent. Don’t try to do too much too soon. Seniors who feel like they’re being “babied” are prone to depression or dangerous outbursts of independence, like grabbing the car keys or refusing to take medication.
A better approach is to try to frame your caregiving as a way of being more involved in your parent’s current routine. Take a seat at dad’s weekly card game. Put the grandkids’ sports and performance events on the calendar and offer transportation. Bring an extra dish to a dinner party. Drive mom to the movies … and let a sibling know the house will be unoccupied for a few hours if there are any cleaning or hoarding issues that need attention.
Gather the essentials.
If your parent doesn’t keep all important documents in one location, now is the time to collect, copy, and file things like:
- Identification (driver’s license, passport, birth certificate, marriage certificate, etc.)
- Bank records
- Home deeds and vehicle titles
- Insurance records
- Investment and retirement account records
- Wills and trusts
- Power of attorney
- End of life directives
- Login information for important online accounts (banking, subscriptions, social media)
There may be other documents that are unique to your parent’s living or financial situation. We can help you make a comprehensive list.
Start attending doctor’s appointments. Don’t be afraid to ask questions that will help you familiarize yourself with your parent’s medical condition and aid with any at-home care like prescription drugs.
Also ask your parent to introduce you to his or her financial advisor and attorney. Make sure the relevant professionals have all important information about changes to your parent’s health, mental capacity, or living situation.
Plan for the next steps.
At some point, your aging parent may no longer be self-sufficient. The earlier that you and your close family members decide upon an action plan, the better. Do you or anyone in your family have the room, the time, and the means to take in your parent? How can non-caregiving siblings or other family members chip in on associated costs of living?
In many cases an assisted living facility is a more realistic option. But be aware that your parent’s Medicare plan probably will not cover those costs. If your parent does not have retirement funds earmarked for end-of-life care, you and your close family members may need to hold another meeting to discuss how to pay for a facility.
None of these steps are easy, and none of the associated options your family settles on will be perfect. The sooner you loop us in on how caring for an aging parent might affect your financial picture, the sooner we can get to work on the money side so that you can concentrate on giving your family the love and support it needs during this difficult time.
4 Things to Consider Before Financially Bailing Out Your Adult Children
According to a recent study by TD Ameritrade, 25% of baby boomers are supporting their family members financially (1). Support to adult children averages out to $10,000 per year. That’s $10,000 that boomers aren’t saving, contributing to retirement accounts, or investing.
Can your retirement afford that kind of generosity?
If you fall short of your retirement goals, is the adult you’re bailing out going to bail you out during your golden years?
Before you write your struggling young adult another big check, ask yourself these four key questions:
What, specifically, is this money for?
The key word here is SPECIFICALLY.
Many parents tend to err on the side of protecting their child’s feelings when weighing financial support. We know asking for money can be embarrassing, and we don’t want to deepen that embarrassment. Or we’re worried that if we ask too many questions the child will become frustrated and hide serious problems from us going forward.
These are understandable concerns. But it’s also important that you understand whether your child needs support because of something beyond his or her control (a car accident, serious health issues, unexpected job loss) or because they’re struggling with basic adult responsibilities. If your child is making poor budgeting decisions or settling for underemployment, you may be throwing good money after bad.
Be tactful, but get to the root problem before you decide if your money is the best solution.
What is the real cost to me?
Many parents are already helping their adult children more than they realize.
For example, you might not think much of letting your adult children stay on the family cell phone plan or piggyback on an HBO subscription. After all, it’s only twenty bucks a month, right?
But how long have you been giving your child that monthly free pass? Years? You can also set time limits. For example, tell your child they can remain on the family cell phone plan until age 25 or until they get married, whichever comes first.
Are you helping with larger monthly expenses, like student loan or car payments? When will it finally be time to pull the plug?
Our advice: get it all down on paper. Make a spreadsheet that accounts for the financial support you’re already giving your child, large and small. Seeing how even small expenses accumulate over time will be eye-opening for both of you and help inform a good decision.
What are the terms of the bailout?
This is another area that parents tend to tiptoe around because they’re afraid of insulting their children. But do you know of any bank that’s going to loan your kids money indefinitely, charge no interest, and ask for no repayment? Then why should your money be subject to such lousy terms?
Your children have to understand that your generosity is not open-ended, especially as you near retirement age. You’ve probably made many sacrifices for them already. You should not sacrifice your financial security or the nest egg that is meant to support you in retirement.
If your children want you to “be the bank,” then you have every right to act like one. Set clear terms in writing, including a repayment schedule. In more serious cases, you might want to bring us a copy of this agreement so that we can include it in your estate plan.
How else can I help?
It’s very likely that your child spent 16 or more years in school without learning a single thing about managing money. Financial literacy just isn’t taught in schools. This knowledge gap could be a big reason your young adult is struggling.
A BMO Wealth Institute survey found that two-third of parents give money to adult children when a sudden need arises (2). Does your child need money suddenly because he or she doesn’t know how to budget? Help find that balance between covering current expenses and contributing to savings and investment accounts.
Housing and transportation expenses can be a shock to recent college grads. You could help your child negotiate a car lease. You might help a child who’s already chasing after the Joneses by counselling against a rash home purchase that will stretch his or her finances thin.
Introducing your underemployed child to some of your professional connections might lead to a significant career upgrade.
One key connection you should be sure to tap: your fiduciary advisor! We’re always happy to help our clients’ adult children get on their feet. We consider this a service to our clients because we know that the less you’re worried about supporting your children, the more secure your own retirement goals will be.
Empower Yourself by Recognizing Your Freedom to Choose
“When we are no longer able to change a situation, we are challenged to change ourselves.”
We may not always be able to control the circumstances of a given situation we find ourselves in. But we always have the freedom to choose how we respond. The choice we make – and how we make it – often determines how well we survive the situation, and if we go on to thrive.
If challenges in your family life, your career, or your finances are making you feel powerless, try approaching the challenge from a new angle. This simple three-step process can put you back in touch with your freedom to choose how and why you live your life.
Consider your reaction.
Step back from the problem. Take a breath. Take a walk. Pour yourself a cup of coffee.
By creating some space, you’ll be able to ask yourself, “Why am I reacting the way that I’m reacting? Is there a better perspective I could be taking? Am I letting past experiences influence my reaction for better? For worse?”
When we feel overwhelmed by a challenge, we often fall back on established patterns in our thinking. Often these default reactions are negative. If we’re arguing with our spouse, we might replay past arguments in the back of our heads. Financial difficulty might trigger memories of our parents struggling with money as we were growing up.
Identifying the negative experiences and perspectives that create our immediate reactions to challenges can help us find ways to create more positive and empowering reactions.
Consider your purpose.
Instead of allowing the situation to dictate how you’re responding, push back. Refocus how you choose to respond around the goal that you are trying to accomplish.
For example, if your business partner backs out of the new company you’ve been planning to start, that loss of manpower and capital could make you feel defeated and powerless. But the reality is that you are choosing to dwell on negatives that you can’t control.
So, what can you control?
If you’re really committed to starting your new company, you can choose instead to focus on alternative funding sources. You can reach out to other friends, family, and colleagues about potential partnerships. You can choose to work on Plan B.
Another example is the investor who feels powerless as market volatility chips away at his nest egg for a quarter. No, you can’t control the natural disaster or political spat that’s giving the market fits right now. But you can choose to focus on your long-term purpose: a secure retirement for you and your family. That positive thinking and big-picture perspective could prevent a costly knee-jerk reaction.
Consider your values
One of the best ways to drive negative thinking from our reactions is to focus on the things that matter the most to us. Reconnecting our decision making to our values can lead to solutions that make life more fulfilling.
Work might be the most common source of challenges in our lives. And while no one loves absolutely everything about their job all the time, it’s worth considering how your job affects your sense of freedom. Do those 40 hours per week give you the financial resources to spend your free time doing what you want with the people you love? Are your skills and talents utilized in ways that make you feel like you’re making positive contributions? Does your employer have a mission bigger than profit that’s important to you?
If your answers are no, no, and no, you can choose to keep dragging yourself out of bed every Monday, resigned to the uninspiring week ahead. Or you can follow your values towards a more empowering choice. Consider a career change. Learn a new skill that will bolster your resume or line you up for a better job at your current employer.
If switching careers is really out of the question right now, choose to appreciate the parts of your job that you do well because of your unique skillset. And when you’re not working, make time for the hobbies, interests, and experiences that do fully engage your core values. Who knows? One day these pursuits might lead to exciting new opportunities for you and your family. If you’ve been committed to your values all along, you’ll be ready to make the right choice.
Are you choosing your best possible life?
If you’d like more insights on how you approach challenges and choices in your life, CLICK HERE to take our free ROL Index assessment. It will help you identify the areas of your life where you’re feeling good and those areas where you might want to make some enhancements.
After you’ve worked through the tool, you’ll receive a free, personalized report.
You may be surprised by the results! We’re here to answer your questions and to help you work towards a greater feeling of financial empowerment.
Stocks Remain Bullish in 2nd Quarter
July 9, 2018
What a rollercoaster of a quarter!
When it comes to the American Association of Individual Investors (AAII) Sentiment Survey, respondents tend to be more bullish than bearish about U.S. stock markets. The survey’s historical averages are:
- 5 percent bullish
- 0 percent neutral
- 5 percent bearish
As the second quarter of 2018 began, investors were feeling less optimistic than usual. (About 36.6 percent were bearish and 31.9 percent bullish.) Their outlook was informed by a variety of factors, according to an early April article in The New York Times, which said:
“First there was the risk that the economy might be growing too fast, which could prompt central banks to hike interest rates sooner than expected. Then there was the risk of a trade war ignited by the White House imposing tariffs on certain products, an action that quickly prompted countries like China to erect trade barriers of their own. Next came the threat of a government crackdown on technology companies, after revelations of their misuse of customer data.”
As the quarter progressed, investor optimism increased on signs of economic strength. In early June, CNBC reported the economy appeared to be “operating close to full employment, with an unemployment rate at 3.8 percent, inflation still hovering at or below 2 percent, and business and consumer confidence strong.”
How did corporate earnings do this quarter?
Robust corporate earnings helped spur optimism, too. FactSet Insight wrote, “The S&P 500 reported earnings growth of 25 percent for the first quarter – the highest growth since Q3 2010.” In mid-June, the AAII survey showed 44.8 percent of respondents were feeling bullish, 21.7 percent were bearish, and 33.5 percent were neutral.
As talk of tariffs and trade wars resumed, investor optimism plummeted. By the end of June, just 27.9 percent of respondents were bullish and more than 39 percent reported they were feeling bearish. AAII explained:
“Many – but not all – individual investors anticipate continued volatility and/or think that the current political backdrop could have a further impact on the stock market. Trade policy is influencing some individual investors’ sentiment as well. While many approve of the Federal Reserve’s plan to continue gradually raising interest rates, some AAII members are concerned about the impact that rising rates will have. Also influencing sentiment are valuations, tax cuts, earnings growth, and economic growth.”
Despite a downturn in bullishness, major U.S. stock indices moved higher last week.
|Data as of 7/6/18||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor’s 500 (Domestic Stocks)||1.5%||3.2%||14.5%||10.1%||11.0%||8.2%|
|Dow Jones Global ex-U.S.||0.0||-4.9||5.6||3.5||4.0||0.8|
|10-year Treasury Note (Yield Only)||2.8||NA||2.4||2.3||2.6||3.9|
|Gold (per ounce)||0.4||-3.2||2.5||2.5||0.3||3.2|
|Bloomberg Commodity Index||-1.4||-2.2||4.6||-4.5||-7.5||-9.4|
|DJ Equity All REIT Total Return Index||1.9||3.2||9.0||9.2||9.3||8.9|
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
there’s a carbon dioxide (CO2) shortage. really, it’s true.
Many people agree the world has too much CO2. It’s the reason representatives from countries around the world signed the Paris Climate Agreement. They committed to “adopt green energy sources, cut down on climate change emissions, and limit the rise of global temperatures,” reported National Public Radio.
The effort has been less successful than many had hoped, according to the International Energy Association (IEA). After several years without increases, energy-related emission rose by 1.4 percent in 2017. That’s the rough equivalent of putting 170 million more cars on the road, reported Scientific American.
Emissions rose primarily in Asia, although the European Union (EU) saw increases, too. The biggest decline was in the United States. There’s a certain irony there, since President Trump announced he would withdraw from the agreement in June 2017, reported The Washington Post.
Despite realizing a 1.5 percent increase in emissions, the EU is experiencing a shortage of food-grade CO2. The Economist reported:
“Food-grade CO2 is a vital ingredient: it puts the fizz in carbonated drinks and beer, knocks out animals before slaughter and, as one of the gases inside packaging, delays meat and salad from going off. A shortage of the stuff has therefore created havoc in food makers’ supply chains.”
The EU’s food-grade CO2 is a harvested by-product of processes for making ammonia and other chemicals, reported The Economist. Three of Britain’s five ammonia plants have been closed because farmers are using less fertilizer, and CO2 does not deliver enough revenue to keep the plants running.
Let’s hope the shortage of CO2 doesn’t affect the supply of beverages available to World Cup fans.
Weekly Focus – Think About It
“My garden is an honest place. Every tree and every vine are incapable of concealment, and tell after two or three months exactly what sort of treatment they have had. The sower may mistake and sow his peas crookedly; the peas make no mistake, but come up and show his line.”
–Ralph Waldo Emerson
4 Ways to Feel More “At Home” in Your Home
Do you feel “at home” in your home?
Your home is often the biggest financial purchase you’ll ever make. But is it also giving you the emotional payoffs you hope for?
Your home is an important part of your financial plan because we have to consider your rent or mortgage, utility bills, maintenance, and taxes as part of your monthly and long-term financial picture. But to get the best life possible with the money you have, your home should also be a safe place that makes you feel comfortable and relaxed.
Here are four things to consider when trying to make your residence feel more like home.
Your personal touches.
In this age of social media humblebrags and free two-day delivery, it’s never been more tempting to get sucked into “Keeping up with the Joneses.” But if you’re always trying to surpass you neighbor’s latest big splurge, you won’t be creating a space that’s truly yours. You’ll just be buying a copy of someone else’s idea of home.
Forget about the celebrity Instagram boards, and instead think about how to make your house reflect your family’s passions and stories. Turn an unused bedroom into a crafting workshop or personal study. Bring those old family photo boxes down to a framer and breathe new life into your walls. Brighten up shelves with mementos from favorite trips.
If you’re considering additions or backyard amenities, try thinking about these changes in terms of the experiences they can create for you and your loved ones. Sure, a swimming pool sounds nice. But a new deck and some green space might be a more versatile and welcoming environment for big family parties. Upgrading your kitchen might allow your inner gourmand to blossom into a truly talented cook.
Or maybe you create a personal space at a second home, like a lakeside cabin for fishing trips, or a condo with access to world-class golf and tennis.
Your personal comfort.
Sometimes less flashy upgrades to your living space have the biggest impact. A brand-new mattress isn’t as exciting as a backyard hot tub, but you’re certainly not going to spend 8 hours every day soaking!
If you’ve been sleeping in the same bed and slumping on the same couch for close to a decade, do some furniture shopping. Get some new pillows and sheets, or an ergonomic computer chair. These improvements aren’t just cosmetic – they’ll help you rest better and feel better.
Many of us also live with little quirks that have a negative impact on how we feel about our homes: that room in the back that doesn’t get warm enough in the winter, a leaky faucet, a living room with enough lighting for TV but not enough to read by, that nightmare hallway closet that’s going to explode someday. Minor household repairs and good old-fashioned spring cleaning can bring some welcome calm to the clutter we all accumulate.
Your personal geography.
Real estate pros like to say the three most important qualities in a home are: location, location, location. But the perfect spot for your first home out of college might not be the perfect place to get married, raise kids, and start your own business. Once your kids move out of the house and have families of their own, your feelings about where you live might change yet again.
Your home city or state might become more or less appealing to you over time as well. Beloved businesses and restaurants close. New establishments take their place. Friends come and go. The cost of living can fluctuate.
If your community no longer provides you the same comfort, activities, social circle, and engagement that it once did, it might be time to consider a move. This could be another reason to explore buying a second home for extended weekends closer to your family or vacations that allow you to explore your passions.
Your personal journey.
As your life changes, your experience of home will change along with it, especially as retirement nears. The big family homestead might become a difficult empty nest for you and your spouse to maintain as you age. The familiar comforts of home might start to create a restless sort of discomfort. You might feel drawn to new places, new people, and new experiences to keep your golden years fresh and stimulating.
Or, like more and more retirees, you might decide that your current home truly is where your heart is. You might “retire in place” and give your current home some TLC that will prepare it for the next phase of your life.
So what does “home” mean to you? Make an appointment to come in and talk to us about creating a financial plan that will provide you with as much comfort as your favorite reading nook.
You can make request an appointment with us by clicking HERE
For more great resources from the AARP, check out their website.
Don’t Just Work for Money, Work for Meaning
In a recent survey of 12,000 workers worldwide conducted by the Energy Project, only 50% of respondents found meaning in their work (1). Imagine spending 40 hours a week doing meaningless work. It’s soul-sucking, but it doesn’t have to be that way.
We understand why so many people stick with jobs that don’t provide meaning—it’s the money.
And working “for the money” is not all bad. Having financial security so we can provide for our families is obviously a worthy reason.
However, as important as money is, feeling that the work we do is meaningful matters too. It’s better for our health. It’s better for our relationships. And it just makes getting up in the morning much more desirable.
In an article in The Atlantic, author and cultural commentator David Brooks said, “There is no income level at which people are not desperate for meaning.” (2)
The good news is, there are proactive things we can do to derive more meaning from our work.
For some of us, finding that meaning in work might require a company or career change. For others, it could be as simple as reframing how we think about our current jobs and finding new ways to engage our talents. Here are a few strategies for maximizing your sense of meaning from 9 to 5.
Craft a new job out of your current job.
Hospital custodian isn’t a job that most people would consider meaningful, or even desirable. But Amy Wrzesniewski, now a professor at the Yale School of Management, found that many of the custodians she talked to didn’t consider their jobs low skilled or unfulfilling (3). Instead, they felt they were part of a team that was helping people get better. They may not have been performing surgery or prescribing drugs, but they believed their job was an important part of a bigger process.
In addition to basic cleaning duties, these custodians also went out of their way to bond with patients and visitors. They talked to unvisited patients, and even kept in touch with some after they were discharged. Rather than trying to find a different job, these custodians had crafted a more meaningful job out of their assigned work.
The job crafting concept can provide a new perspective on the work you do (4). Your current job might provide opportunities for expression, connection, and creativity that you never realized were there. Try to reconfigure your approach to daily work tasks around these opportunities.
Focus on WHY, not what.
It’s easy to get so bogged down in the things we have to do at work that we lose sight of why we do them. It can be helpful to your sense of meaning to consider the end result of your work. Especially, as it impacts other people.
For those happy hospital custodians, the Why was helping the ill. Your Why doesn’t have to be that altruistic. Although, somewhere at the end of all that paperwork and accounting there’s a person with a need you helped fill. Or maybe a problem you helped solve, an experience of joy you helped deliver.
Your Why could be the meaning you find from engaging your unique skill set. Instead of sagging under the weight of all that copy you have to edit, appreciate how your work engages your writing skills. Maybe a problem along the company’s supply chain engages your critical thinking. The company itself could also be your Why, if you’re working for a business that has a mission that you really believe in. You could also find a meaningful Why in the social bonds you create with the people you work with and the customers who rely on your products and services.
Examine your mindset.
If adopting a new mindset about your work doesn’t help you find more meaning … try examining your mindsets.
Business writer Dan Pontefract believes that we have three distinct ways of thinking about our work as it relates to our sense of meaning (5):
The Job Mindset is a “paycheck mentality,” in which people perform their jobs purely for compensation.
The Career Mindset is triggered when we focus on advancement. Things like making more money, getting that big promotion, increasing our power or sphere of influence.
Finally, the Purpose Mindset engages our feelings of passion, innovation, and commitment, and an outward-looking focus on serving your employer as a whole.
Pontefract recommends spending a week tracking your mindset. At the end of every day, write down approximately how much time you’ve spent in the Job, Career, and Purpose mindsets. At the end of the week, tally up the totals.
What do these numbers tell you about your mindset at work? Are you spending the majority of your time grinding towards that Friday paycheck, or looking for ways to get ahead? Further, how does your time spent in the Job and Career mindsets compare to the time you spend in the Purpose mindset? Can you use job crafting to adjust your mindset and focus your energy more? What about how your work contributes to something bigger than money?
If you can’t balance out these mindsets in a way that allows you to find more meaning in your work, you might need to adjust your role. Or you might need to explore new career paths. Either way, we’d be happy to discuss this with you and help you position your financial resources to support your decision. Please contact our office to setup an appointment.
Why Delay? You Can Start Improving Your Health Right Now!
A Common Scenario.
A busy 40- to 50-hour work week, kids that need shuttling to and from school and extracurriculars … and a gradually decreasing metabolism.
Young, working couples with no kids may have more time to be active and healthy. Long morning walks. Three trips to the gym every week. Playing organized sports with friends. Cooking their way through gourmet recipes.
Then life happens. Children. Promotions at work that lead to more responsibility and longer hours.
A couple’s free time together begins to dry up. Softball night turns into crashing on the couch for a few hours before bed. Weekend bike trips or trivia nights turn into weekend rushes to and from kids’ soccer tournaments. Gourmet cookbooks are replaced by fast food menus.
Then there’s the money crunch. Even couples with a financial plan in place tend to worry more about money once a mortgage, car payments, and children enter the picture. Many couples start pinching pennies at the expense of their creature comforts and well-being. New clothes and a replacement for that worn-out mattress aren’t as important as saving for college tuition or eventual retirement. Frozen meals and take-out are quick fixes when there’s so little time to cook a good meal before your daughter’s dance lessons.
The risks involved when we start neglecting our health are real, and harder to correct as we continue to age. But there are emotional consequences as well, especially if one spouse slips out of shape faster than the other. Innocuous suggestions like, “Let’s take a trip to the farmer’s market” or “How about we re-start our gym membership?” can feel laced with criticism. A loss of confidence, feelings of depression, and inattentiveness to basic hygiene and appearance can follow. Money – already the most common source of marital friction – will continue to be a barrier to self-improvement. Unhealthy people don’t like being told they’re unhealthy, and will often put off preventative care, like annual checkups.
If you or your spouse are struggling with a similar scenario, take a moment to work through the following questions and suggestions together:
Questions to Ask
Are you and your spouse able to maintain your health without any financial stress?
Do you and your spouse regularly confirm your health and overall well-being with your doctors?
Is your level of physical activity higher or lower now than it used to be? If you’re about to retire, do you anticipate a more or less active lifestyle?
What are some physical recreational activities that you enjoy?
What is a recreational activity you’ve never tried, but deep down always wanted to try?
How old is your furniture, especially your bed and mattress?
How many fresh meals do you and your spouse cook and eat at home every week?
Steps to Take
- Get up and get out there! Admitting that you need to get moving is the first step! Hopefully, many more will follow!
- Hate going to the gym? You’re not alone. Instead, incorporate some daily exercise into your routine. How about a bike ride through your neighborhood or a local park every morning? Carve a few hours out of your schedule for a weekly tee time or tennis lessons. Take small breaks during the day to stand, get away from your computer, stretch, or take short walks.
- Don’t ignore your creature comforts! The cost of a new mattress you’ll sleep on for the next ten years will be a lot less than the cost of braces and trips to the chiropractor.
- You are what you eat! Planning out a week’s worth of healthy, fresh meals will make your grocery bills much more manageable. You might even find that healthy organic and farm-fresh items aren’t as expensive as they seemed.
- The best medicine is preventative. Spotting potential health concerns as early as possible will keep both you and your bank account from hurting.
A Better Return on Life
The better you and your spouse feel individually, the better you’re going to feel together. An interest in improving your health can lead to new activities and interests that you’ll enjoy pursuing together well into your retirement years. After all, when you finish working and the kids are out of the house, you’ll need to find a whole new routine. Sports and active recreation are great places to start, both to keep you moving every day and as inspiration to see more of the world once you have more time to do so. Today’s daily walk around the block might lead to a hiking trip in Yosemite one day that neither of you will ever forget.
If you’re struggling to stay active as you age, or worried that you can’t afford a healthier lifestyle, come talk to us. We’ll help you review your budget, analyze your long-term financial plan, and offer suggestions on how to get the best life possible with the money you have.
Are You Financially and Emotionally Prepared for Life’s Big Transitions?
Financial planning is more than just a series of savings and investments you lock away and forget about. Your money doesn’t exist in a vacuum. Your financial needs are going to fluctuate in response to the transitions that we all go through as we work, raise our families, and look ahead to retirement.
Managing these transitions is one of the keys to maximizing your finances and to achieving a greater Return on Life™ (ROL).
It’s Better to Prepare Than Repair
When it comes to your financial future, it’s easier to prepare for what’s ahead than it is to repair mistakes. With that in mind, we have a tool called The $Lifelineä. It’s designed to help you prepare for life’s transitions by asking you to anticipate what’s coming up and the age at which you expect the transition to happen.
You can then plot the applicable transitions on your $Lifeline, and use a color-coded system to rate the transition based on whether it is a High, Medium, or Low priority. If you’re married, you and your spouse can plot both shared transitions and transitions that are unique to each of you on the same $Lifeline for a complete picture of all the milestones that will affect your household, and your finances. Each transition also includes links to additional resources that you can consult for more information.
Let’s take a look at the six $Lifeline categories, and a few of the important transitions we can help you map out and prepare for:
- Expecting a child
- Special family event
- Assistance to a family member
- Child going to college
- Child getting married
- Empty nest
- Worried about an aging parent
- Concern about the health of child
- Possible concern about the health of spouse
- Family member with disability or illness
- Recent death of a family member
- Create end of life medical directive
- Contemplating career change
- Job re-structuring
- Expand business
- Start a new business
- Acquire / purchase a business
- New job training / education
- Downshift worklife
- Full retirement
- Changing residence
- Start receiving Social Security income
- Eligible for Medicare.
- Start receiving retirement distributions
- Refinancing mortgage
- Reconsidering investment philosophy
- Significant investment gain
- Significant investment loss
- Considering investment opportunity
- Receiving inheritance
- Stipend to family member
- Gift to children / grandchildren
- Develop / review estate plan
- Create a foundation
- Create or fund a scholarship
- Fund a cause or event
Transitions Change Over Time
Once we’ve plotted your anticipated life transitions on your $Lifeline, we can start discussing the transitions that are most important to you from an immediate planning standpoint. Maybe you need to understand the financial implications of taking care of an aging parent. Perhaps it’s figuring out how to pay for your kids’ education. Or you may want to know the best time to start receiving pension payments.
Over time, as new transitions arise and old ones get completed, we can add, remove, and reprioritize transitions as necessary.
The easiest way to throw off your financial plan is to make a rash, emotional decision in the middle of a difficult moment. The $Lifeline, and our Life-Centered Planning process, will help you avoid reacting – or overreacting – to the ebbs and flows of your life by putting you into a more proactive mindset about your financial future.
You’ll be less likely to take on a risky second mortgage to pay for your son’s freshman year of college and your daughter’s wedding if you plan for those events in advance—something the $Lifeline helps you visualize.
As you prepare to go through the $Lifeline exercise, take a look at the categories and transitions listed above. If you’re married, talk to your spouse about them. Write out a list of transitions that you know you’ll want to plot on your $Lifeline. When we meet, we’ll fire up the tool and create your personalized $Lifeline so you can start preparing for life’s big transitions.
Are You Living Your Life On Purpose?
Why, day in and day out, do you do the things that you do?
Because you have to? Is it because you want to? Or is it because you’ve had the same routine for years and you’re used to it?
If you feel like your life is something that just happens to you, it’s time to reassess how you’re spending your time. Financial security, stability, and creature comforts are all important. But feeling that your life has purpose will become more and more critical to your emotional and physical well-being as you age — especially when you finally retire.
A healthy sense of purpose.
Research into the area of human well-being draws a distinction between happiness (experiencing pleasure and avoiding pain) and the feelings of meaning and self-worth that we derive from our lives (1).
Too often, we focus on the former and neglect the latter. This is why the sheen wears off so quickly from a big-ticket purchase. Buying a new car or big-screen TV gives us a quick hit of pleasure. But sooner rather than later, new things become just more things that we’ve accumulated. Once that initial happiness evaporates, we find there’s no additional layer – no purpose – to improve our well-being.
Researchers have also found that people who feel like their lives have purpose live longer and show decreased risk of cardiovascular problems (2). And as you age and prepare for retirement, living with purpose helps to limit your risk of cognitive problems, such as Alzheimer’s (3).
The purpose of work and family.
Most of us tie purpose to the things that we spend the majority of our time doing: working and raising our families. Again, it’s important to draw a distinction between simple happiness and purpose.
A doctor who has to deal with ill people and mortality might not consider her job “happy” all the time. But helping people gives her that critical sense of purpose that rounds out her feelings of well-being.
Taking care of children will, at times, make even the most patient parents want to pull their own hair out. But feelings of love, connection, and responsibility make both happy family vacations and frustrating afternoons in timeout purposeful.
If you feel like your life is lacking purpose, start by looking for misalignment in these two areas. Is your job “just a job” that pays the bills? How could you pivot to a career that uses your unique gifts and skills to create purpose? Or are you working so hard that you’re missing key family events, which are also critical to your sense of purpose? Are there ways to improve your work-life balance?
It’s never too late to start living.
Many people believe that living and giving generously with their time, talents, and/or finances is a luxury they can’t afford, especially once children, mortgage payments, and college tuition enter the picture. However, research indicates that senior citizens frequently cite “dying with their music still in them” as one of the biggest areas of regret when they look back on their lives, meaning, chances they didn’t take, ideas they never pursued, or opportunities they watched pass by. It’s not money they’re regretting, it’s the sense of purpose they missed out on that would have improved their Return on Life.
Of course, not everybody can have that “perfect” job. But even in those situations, think of it not so much about the work you do, but “who you bring” to the work you do. Find ways to bring purpose to even the most mundane jobs and how that work is helping others.
And it’s never to late to find that purpose. Even seniors can discover new passions that will give their golden years purpose if they approach retirement with an active, enthusiastic mindset.
If you’re having trouble getting started, try asking yourself, “Why do I get out of bed in the morning?”
Is it to take care of your family? If so, then consider planning a family vacation for the summer. Coaching your child’s youth sports team. Turning dinner time into a group cooking activity. Or setting a regular monthly date night with your spouse.
If you find purpose in helping those in need, consider finding a volunteer position for a few hours a week.
Do you like to express yourself? Then perhaps start a blog or a digital photography website that you can work on in your free time. Turn that spare bedroom into a craft room.
And if you think your purpose is simply to make more money? Well, then maybe you need to start asking yourself better questions. Remember, money is a means, not an end.
We encourage you to come in and talk to us so that we can start a new dialogue about how your financial plan can help you get the best, most purposeful life possible with the money you have.
Debt: What’s Your Story and How Do You Feel About It?
In a recent study, half of Americans said their debt and expenses is equal to or greater than their income. 1 Revolving credit, particularly credit cards, is an increasingly significant part of the equation. According to the Federal Reserve Bank of New York’s Household Debt and Credit report data, Americans’ total credit card debt hit $905 billion in 2017 – an increase of 8% from the previous year. 2
The phrase “credit card debt” usually triggers red flags when we’re talking about long-term financial planning. And in fact, the average US household now carries $15,654 on their cards, and pays $904 annually in interest. 2 But debt, in and of itself, isn’t good or bad. Instead of making a value judgement about how you use debt, when working with clients we like to understand:
- What is your debt story?
- What are your attitudes about debt?
- Why do you feel the way you do?
- How are your debt levels affecting the Return on Life your money provides?
Having a deeper understanding of the above helps us do a better job positioning your money to work more effectively for you.
What’s the big picture?
Our current high debt levels reflect a previous generation of low interest rates, an active housing market, a robust credit market, and relative peace and prosperity. This meant more consumers with more plastic and more loans. Again, debt is not bad in and of itself, especially in a healthy economy. But from 2007-2009, many highly-leveraged people and companies were vulnerable to foreclosure and bankruptcy during the Great Recession.
People who were born between the Great Depression and World War II grew up in the daily realities of war and lean markets. Unsurprisingly, this group tends to avoid using credit cards when they can. Instead, they rely on the cash in their hands and the checkbooks they balance with pen and paper.
That credit-aversion seems to have skipped the Boomer generation, who, generally speaking, happily used credit cards and home-equity loans.
The current generation of young workers—Millennials—seem to be warier about carrying debt than their parents were.
Young people are entering the workforce at a time when household income is struggling to keep pace with the cost of living. They believe taking on debt would only widen that gap. In particular, the costs of medical care, housing, and food continue to grow faster than income. 2
Many underemployed Millennials are living at home into their late-20s, so they aren’t using credit cards to finance luxury items or buy first homes. Even for millennials who do find good jobs after college, many start their adult lives in the red because of student loans. As of September 2017, the average US household had $46,597 in student loan debt. 2
Millennials are less enthusiastic about investing in the markets. Growing up during the Great Recession shook their faith in the economy. Growing up in the shadow of 9/11 and terrorism, they’ve only known a world unsettled by global unrest.
Millennials are also a more conscientious consumer group than their parents were. They want to spend their time, and their money, on things that help to make the world a better place. They consider personal fiscal responsibility to be part of a greater good.
What’s your story?
While looking at big picture debt trends is useful for predicting where the economy is headed, your Life-Centered Plan is about you. Now would be a great time to take a minute to consider:
- How do you feel about debt?
- Why do you think that you feel the way you do?
- Are you comfortable with your current level of debt?
- Is your current level of debt causing any problems with one of your loved ones?
- Do you pay off your credit card balances in full every month?
- How do your attitudes about debt align or differ with those of your parents? Why do you think that is?
We encourage you to reach out to us and we can take a closer look at your financial situation and help you get on a more comfortable path. Together, we can create a financial plan that will improve your Return on Life.
- Half of Americans are spending their entire paycheck (or more) http://money.cnn.com/2017/06/27/pf/expenses/index.html
- Nerdwallet’s 2017 American Household Credit Card Debt Study https://www.nerdwallet.com/blog/average-credit-card-debt-household/
Giving: How To Do The Most Good Without Disrupting Your Financial Plan
Many studies have shown that charitable giving provides greater happiness than buying more stuff. Eventually, you get used to your fancy new car, and the enjoyment it provides goes down. But giving forges feelings of connectedness and community that don’t fade away.
Incorporating charitable giving into your financial plan is a great way to make sure that your generosity is aligned with the things that are most important to you. Some forethought about these key issues will also make sure that your good intentions don’t throw off the rest of your long-term planning:
Have a purpose.
The most effective charitable giving is thoughtful and intentional. It may be helpful for you and your spouse to ask yourselves some questions that will narrow your focus, such as:
- Do we want to give to a national or local cause?
- Are there pressing issues in our community that we feel we can help impact?
- Do we have any personal connections to causes, such as medical research or support for the arts?
- Want to support friends or family by contributing to causes that impact their lives or fulfill their passions?
- Do we want to support a religious organization, such as our church?
- Are our charitable impulses motivated by on-going problems, such as education or homelessness, or would we rather position ourselves to react to events such as natural disasters
Do your homework.
Once you’ve settled on a cause, do some research on potential recipients. Visit the local nonprofit you’d like to support and meet with its leadership team. Is the organization running itself responsibly? Are there good, competent people in charge? Will these people get the job done? Don’t sink your money into a well-intentioned black hole.
If you’re looking to give to a national organization, keep in mind that even some of the biggest names have come under fire lately from watchdog groups for misusing donations. Make sure you’re giving to an organization that’s doing what it says it’s going to do with your money.
Also, remember that big organizations – even non-profits – have to manage things like overhead, salaries, and insurance. Are you happy supporting the organization itself? If you want to see your money in action more visibly, you might be happier giving locally.
Beware the internet.
Whenever something bad happens in the world, our inboxes and social media are flooded with donation links. Read before you click. Be especially wary of crowd-funded campaigns on sites like GoFundMe. The cause may sound worthy, but these sites do not provide meaningful oversight on every campaign. Your money could be going to a cause, or it could be going straight into a scam artist’s pocket. You’ll never know for sure unless you know the person organizing the campaign.
Find out what will do the most good.
There’s more than one way to give. Maybe the local adult literacy center needs volunteer tutors as much as it needs money. Perhaps you’d feel more fulfilled helping out at your church’s food bank than you would feel by writing a check. Taking a more active role in a cause that’s important to you might be the most valuable thing you can give.
However, if you want to help with large-scale problems outside your own community, like hurricane recovery on the other side of the country, money is usually the most effective way to contribute. Unlike toiletries or canned goods, money doesn’t have to be boxed and shipped. You’re better off contributing to large, trustworthy organizations that already have systems and pipelines in place.
Know your limits.
Especially as you near retirement age, your giving should be a planned part of your budget. Don’t make a large one-time contribution that’s going to force you to dip into an emergency savings fund. Don’t sign up for a recurring gift that’s going to put a strain on your monthly bills. If you can’t give as much money to a cause as you’d like, think about supplementing a smaller contribution with regular volunteering.
Sometimes our best intentions get us into the most trouble. It’s great that you and your spouse want to use your money to try to make the world a better place. But your comfort and happiness are important too. Even the wealthiest people have to say no.
If you are ever in doubt, let your core values be your guide. Apply the same principle to your giving as you do to the rest of your life-centered financial plan: use the money you have to get the best life possible. With a little planning, you’ll make life better for those around you as well.
Should I Sacrifice My Retirement to Support My Children?
Most parents will say that they want to help their children as much as they can and give them every advantage. But what if “every advantage” comes at the expense of the parents’ retirement savings and investments?
According to a survey by NerdWallet, 80% of parents are covering or have covered an adult child’s expenses after the child turned 18. That generosity can cost parents up to $227,000 of their retirement savings.*
Can you afford to press pause?
Some parents who are still supporting adult children rationalize the expense by telling themselves they’re “just pausing” their retirement plan. This is especially common of parents who want to help with a major life transition, like college tuition, a first home, a first car, or a wedding.
However, while your adult child can apply for scholarships, sign a lease, or take out a mortgage, there are no “scholarships” for retirement. If supporting an adult child causes you to slip below your baseline budgetary needs or savings goals, it can be difficult to catch up.
Even smaller expenses add up in the long run. You may think you’re “only” giving your young adult $30 per month as they continue to piggyback on a family cell phone plan. But if that $30 would have gone into an IRA, 401(K), or investment account, you’re not just losing $30 every month – you’re losing out on potential capital gains and compounding interest that can add up to thousands of precious retirement dollars.
Check their budget.
If you do decide to help an adult child, it’s a good idea to take steps to ensure your helping doesn’t turn into a lifestyle subsidy.
Depending on the nature of your financial support, it might make sense to get a good understanding of your child’s spending patterns. Chances are they don’t have a budget you could look at but ask them what their typical expenses are each month. You have every right to make sure that your child’s financial need isn’t the result of unnecessary creature comforts, lavish vacations, etc.
By getting a sense for their spending, you might be able to help your child find ways to economize, which could help limit your own expenses.
Another way to make sure your child doesn’t remain reliant on you is to set terms. Much like asking to understand your child’s spending, hammering out an agreement strikes some parents as intrusive, or even cruel. But it’s important that you and your child both understand each other’s expectations going forward.
For starters, are you giving your child a gift or a loan?
If it’s a gift, exactly how will the money be used? Are you helping your child solve a problem for good, or will this gift only lead to more problems, and more pressure on your retirement savings? Again, asking for specifics isn’t mean, it’s responsible giving.
If it’s a loan, what are the terms? Are you charging interest? When will your child pay you back? Maybe establishing a monthly payment plan as part of the child’s budget is a good idea.
Don’t be afraid to say no.
Saying no to your children never feels good, not even when they’re grown. But sometimes that’s the best thing you can do as a parent.
If you look at your child’s budget and the intended use of your money and decide a loan or gift is not in your child’s best interest, or could potentially damage your retirement plan, then saying no is an option.
There are more ways to help a child than writing a check. Maybe you have a connection who could help your child find a better job. Offer to go with your child to the bank and help with loan applications. Do some online research into scholarship and government grant opportunities that your child can take advantage of.
Many of our clients introduce their adult children to our life-centered planning team. Our advisors can be an excellent resource to help your child move towards financial independence and start planning for their own future.
Remember: your child has his or her entire working life to figure out how to balance their checkbook. But your retirement will be here much sooner than you think. Think long and hard about providing your child with a short-term fix if it’s going to set yourself up for long-term financial stress.
Spending: What to Do When You and Your Spouse are NOT on the Same Page?
Most married couples take a “divide and conquer” approach to household tasks and chores. One spouse might handle weekly shopping, the other might handle garbage and recycling. Or one spouse might handle laundry and cleaning, the other might handle yardwork and maintenance. One spouse might drive the kids to school, the other might handle pickup and extracurricular activities.
But household spending and budgeting is one of those responsibilities that’s best tackled together. Money issues are one of the biggest sources of marital tension, and a leading factor in divorces. Here are five ways that you and your spouse can make sure you agree on your household spending, avoid surprises, and maximize the Return on Life ™ your money provides.
Have an open and honest discussion.
Many couples assume their attitudes about money are aligned. Then one day, the roof needs an emergency repair that taps a savings account, or someone walks in the door with an unexpected splurge purchase (or worse yet, hides it!).
Stressful situations are not the ideal time for a couple to discover significant differences in spending habits. Sit down with your spouse and have a thorough review of your finances, and your monthly budget. Find compromises that will allow you to save for the future while still enjoying your present.
Understand the total household cash flow.
In many households, one spouse handles all the bill payments. This can lead to misunderstandings, and arguments, about where the money goes every month.
It is important for both spouses to understand how much the household spends every month, and how your bills get paid. If you’re the one who’s usually in charge of bills, take an hour to walk your spouse through your process. Show him or her which bills are paid electronically, which are paid by check, the monthly amounts and due dates, etc. This won’t just help both spouses understand the monthly cash flow, it will ensure that both spouses can handle household finances in the event of an emergency.
Be transparent about all assets and liabilities.
Newly married couples might still have banking or credit accounts that are only in the original account holder’s name. The other spouse might not find out about these accounts until a credit card is maxed out, or a checking account is overdrawn.
Again, the less stressful your reason for talking to your spouse, the more positive the outcome will be. Financial secrets tend to come out at the worst times, compounding stress, hurt feelings, and strain on your budget.
Your spouse should be a cosigner and beneficiary on all of your accounts, and vice-versa. If one of those accounts carries a large liability, get out in front of the problem and talk about how to start paying it down. Discuss the ramifications of combining any large individual assets with a tax professional or your financial advisor.
Agree on a budget.
If one spouse is responsible for budgeting and bill pay, that person often becomes The One Who Has to Say “No.” No eating out this week. No weekend trip to the waterpark, no new cell phones, and certainly no new clothes.
Nobody likes being in that position, especially if you’re saying “No” to your children. Eventually, you or your spouse will resent being The One Who Has to Say “No.” You should both understand the household’s monthly cash flow and agree on how your money is – and isn’t – spent.
Mint.com is just one of the many apps and web services that help households set and maintain a budget. If you’re a small business owner, Intuit offers a line of bookkeeping and tax prep solutions to fit any needs. Automating select bill payments and regular contributions to retirement and savings accounts can also help to clarify your monthly budgeting picture.
Finally, if there’s a spending gap between you and your spouse that seems impossible to bridge, we can be an excellent resource. It’s important to us that we understand where clients’ attitudes about money come from. We also strive to understand how they’ve developed these attitudes, and how they can diverge between couples. Facilitating this dialogue is key to making sure both people have the best life possible with the money they have…and we can help do that for you.
Savings: Does Your Desire to Save Match Your Reality?
“The only money that’s really yours is the money you spend.
Everything else goes to somebody else.”
That piggy bank we remember from childhood wasn’t just a place to store our birthday money and spare change: it was a lesson, a way our parents encouraged us to get into the habit of saving. Many parents even go so far as to deposit half of any monetary gifts their children receive directly into a savings account, just to drive the point home. Adults who took that lesson to heart might set up automatic deposits into long-term savings or retirement accounts from their paychecks every month – a modern mechanism for implementing this age-old lesson.
But the quote from Teddy Chafolious raises an important point: What are we saving FOR? Many new investors come to their financial advisors with a number in mind: “I want to save $1 million before I retire.” There’s even something of a fad among millennials who work as hard as they can, save as much as they can, and try to retire before age 50.
But why? After all, “you can’t take it with you.”
It’s important to have financial goals, and committing to a regular savings plan is good first step towards achieving them. But if you treat your long-term financial planning as just a series of targets to hit, or numbers you have to drive up as much as possible, your return on investment is going to be a lot higher than your Return on Life – the feelings of happiness and fulfillment that your financial planning should provide you.
How much are Americans saving?
According to the US Bureau of Economic Analysis, Americans today are saving a lot less than they have in years past. Personal savings in the United States averaged 8.29 percent from 1959 until 2017. The rate for 2017 is hovering around 3 percent. Experts tie this historically low savings rate to increased household spending, which continues to outpace wage increases, and high levels of revolving debt, like credit cards.
Figures like these drive many people to the opposite end of the spectrum: they save as much as they possibly can, especially if they’re nearing retirement.
We tend to think that the person saving more is doing a better job of managing his or her money than the person saving too little. But neither extreme is going to maximize your Return on Life. Spend too much enjoying the now, and you might end up having to work much longer than you want to – maybe even all the way through retirement. Save too much too early, and you and your family might miss out on the experiences that you deserve to enjoy with your hard-earned money: big family vacations, a new home, creature comforts, entertainment and culture that will enrich all of your lives.
Worse, new retirees who have spent their lives stuck in “savings mode” often have trouble transitioning to the reward mentality that should provide for a meaningful retirement. These retirees worry so much about running out of money that they often neglect their own wants and needs, to their emotional and physical detriment.
So how do you find that balance between enjoying today and preparing for tomorrow?
First, ask yourself if your rate of savings is in line with your reality. Are you saving so much that you’re not enjoying life as much as you could be? Or are you hovering around that 3 percent savings figure, telling yourself that you’re putting enough money away when you know, deep down, that you’re not?
Next, make an appointment with your Advisor to talk about your financial goals, and your vision for a dream retirement. Work together to find that saving/spending balance that’s going to align your savings with your reality, and hopefully, your goals and dreams. Find that sweet spot, and your money won’t just be numbers on a balance sheet. It will be yours. Don’t have an advisor? Here is a helpful article to show you what to look for.
Three Overlooked Keys to Being a Successful Investor
Does investing strike “fear” in you? We once heard somebody say the word “fear” stands for “False Evidence Appearing Real.” That seems to apply to investing. Here’s why.
The stock market makes some people nervous. This can be especially true for young people who grew up during the Great Recession. Not only did these folks see market volatility at its worst, but they also came away with negative impressions about the financial markets in general.
The truth is that the market is neither a one-way ticket to instant riches nor a dangerous game for insiders only. There is risk involved in any kind of investment, but if you understand how the market operates in the long run, then the rewards can be significant.
By understanding the following three important facts about the market, you might be able to turn “fear” into “False Evidence Appearing Real” and not get scared out of letting your money work hard for you in the market.
The market tends to move in long cycles.
The amount of info we have at our fingertips makes it tempting to check in on our investments weekly, daily, or even hourly. As a financial professional, though, we take a much wider view of the markets. And while past performance is no guarantee of future returns, the history of the market continues to trend upwards.
Consider the S&P 500 Index. If we go back and look at all the bull (upwards) and bear (downwards) markets from 1926 to 2017, the average bear lasted 1.4 years and resulted in a 41% loss on average. However, the average bull lasted 9 years, and gave investors a 480% gain on average, according to First Trust.
When volatility strikes, patience is usually a good course of action. Your financial plan is designed to provide for the rest of your life, not for one bull or bear cycle. Instead of panicking when the market dips, try to think of volatility as a tax that investors pay on the wealth that the market can create.
And if you do find yourself checking in on your investments as regularly as you check your email, maybe think about uninstalling that app—or calling us.
Make consistent contributions to your portfolio.
Besides struggling to accept volatility, many people are skittish about the markets because they feel powerless. Money goes in, and decades later, who knows what’s going to come out. They feel that politicians, corporations, and geopolitical tumult will have the final say in how big their retirement nest egg grows.
However, often times the biggest factor that determines the success of your investments is simply contributing new money on a consistent basis. As discussed above, the market will most likely trend upwards in the long run. The more of your money that’s along for the ride, the bigger those eventual gains will be.
For example, suppose that you decide to invest $10,000 every year for 10 years into your portfolio. In a flat market returning 0%, that $10,000 would account for 100% of your portfolio’s gains. In a modest market returning 6% per annum, that $10,000 would account for 73% of your portfolio’s gains. And even in a bull market, charging ahead at a rate of 12%, your $10,000 would STILL account for more than half of your portfolio’s gains, according to Invesco.
Focus on what you can control.
To be sure, part of investing involves accepting things you can’t control. A hurricane on the other side of the world might rattle the markets for a couple days. A large company might become embroiled in an accounting scandal. The Federal Reserve might make an unexpected interest rate move. Market corrections might follow.
But if you understand volatility and continue to focus on the big picture, you’ll start paying more attention to the things you can control, like a monthly budget that allows for automatic contributions to your investment and retirement accounts.
Better yet, think about setting a goal to ramp up the size of those contributions. Many people try to save or invest 10% of their income. Can you shoot for 15%? 20%? The bigger the contributions, the bigger the payoff when you retire. And if retirement isn’t on your radar, that big investment cushion will go a long way toward giving you a feeling of freedom.
If you’re still unsure about investing in the markets, make an appointment to talk to us. We can help clear away any misconceptions you might have about investing and craft a plan that makes you comfortable about how your money is working for you.
7 Simple Tips to Curb Your Spending
By Mike Desepoli, Heritage
Create a 30-day list
Make a new rule: you can’t buy anything (except necessities) until a 30-day waiting period has passed. Put a 30-day list on your refrigerator, and when you have the urge to buy something, put it on the list with today’s date. After a month has passed, you can buy the item. Many times the urge will have passed and you can just cross the item off the list. This works if you stick to your rule. The only exceptions would be groceries and other similar necessities.
Don’t go to the mall
You only get the urge to buy on impulse if you’re in a shopping area (or if you’re watching TV). So, prevent the urge from happening in the first place by not going shopping. Don’t go to the mall or Walmart or other shopping areas. Only go to a store if you have a specific necessity to purchase, and go with a list. Don’t buy anything not on that list. Now get out as soon as possible. Don’t just walk around window shopping for entertainment, or you will be sorely tempted. Find other ways to have fun.
Don’t go to online retail sites
Just as the mall will create the urge to buy, so will online sites such as Amazon. They make it too easy to buy something. Instead, stay away from these sites.
Monitor your urges
Make it a point to monitor your urges, if it’s a big problem. Keep a little piece of paper, and put a tally mark on it every time you get the urge. This helps you to become more conscious of the urge, which is usually something we don’t even notice. Different symptoms can appear, such as faster breathing or a faster heart rate, when we have the urge. By becoming more aware of the changes in our body, we can begin to get the urges under control.
Plan your purchases
Making a list before you go shopping is important. If you can make it a habit to stick to that list, you’ll eliminate a lot of little impulse buys. For other purchases, make it a habit to plan them, save for them, shop around, and even see if you can get it for free. Going through this process ensures that your purchases are more deliberate, and less on impulse. Plan ahead for birthday and Christmas gifts, and other large purchases that you know are coming up in the month ahead.
Before you buy anything, ask yourself a series of questions. Is the purchase going to improve your life in some important way? Is the purchase supposed to make you feel better? Does it help you meet one of your life goals? Will it simplify your life? These are useful questions to help you evaluate the value of a purchase, and why you’re making it. Be honest with yourself — don’t try to sell yourself!
Keep the end in mind
It’s useful to have clear goals in mind at all times. What do you want to do with your life? Do you have financial goals that you’re trying to accomplish, in the long-term and medium-term? Keep your savings goals in mind, and know when you’re about to make a purchase how the purchase will affect your goals.
Fore more information on this topic, check out our weekly Video Show by visiting the link below:
Heritage Weekly Market Insights
January 30, 2018
This Week In The Markets
The numbers are coming in.
Publicly-traded companies report their earnings and sales numbers for the previous quarter in the current quarter. For example, fourth quarter’s sales and earnings are reported during the first quarter of the year, and first quarter’s sales and earnings will be reported during the second quarter, and so on.
Through last week, about one-fourth of the companies in the Standard & Poor (S&P)’s 500 Index had reported actual sales and earnings for the fourth quarter of 2017. As far as sales go, a record number – 81 percent – of companies sold more than expected during the fourth quarter. That was quite an improvement. FactSet reported:
“During the past year (four quarters), 64 percent of the companies in the S&P 500 have reported sales above the mean estimate on average. During the past five years (20 quarters), 56 percent of companies in the S&P 500 have reported sales above the mean estimate on average.”
The mean is the average of a group of numbers.
The money a company makes through sales is called revenue. For instance, if a lemonade stand sells 100 glasses of lemonade for $1 each, then the proprietors have earned $100. That is the stand’s ‘revenue.’ Of course, as every parent who has financed a lemonade stand knows, revenue doesn’t include the cost of the product. ‘Earnings’ are what the company has left after expenses – the bottom line. If every glass of lemonade cost 50 cents, then the stand’s earnings are $50.
Companies in the S&P 500 are doing pretty well on earnings, too. About three out of four companies have reported earnings higher than expected. Overall, earnings are 4.5 percent above estimates.
Through Friday, annual earnings growth for S&P 500 companies was 10.1 percent. It’s still early in the fourth quarter earnings season, but the data so far seem likely to confirm that 2017 was a bright, sun-shiny year for U.S. companies.
Let’s Take A Look at Performance
|Data as of 1/26/18||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor’s 500 (Domestic Stocks)||2.2%||7.5%||25.1%||11.8%||13.9%||7.8%|
|Dow Jones Global ex-U.S.||1.9||7.0||28.2||7.8||5.5||1.6|
|10-year Treasury Note (Yield Only)||2.7||NA||2.5||1.8||2.0||3.6|
|Gold (per ounce)||1.4||4.4||13.7||1.8||-4.0||3.9|
|Bloomberg Commodity Index||2.6||3.0||2.9||-3.4||-8.4||-7.1|
|DJ Equity All REIT Total Return Index||1.7||-2.8||4.6||2.8||8.2||7.4|
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
certain parts of the circular economy
probably adapt to cities and towns better than they do to rural areas.
What is the circular economy?
It is “a system that reduces waste through the efficient use of resources. Businesses that are part of the circular economy seek to redesign the current take/make/dispose economy, a model which relies on access to cheap raw materials and mass production. For example, car sharing addresses the inefficiency of privately owned cars – which are typically used for less than one hour a day,” explains Morgan Stanley.
Imagine not owning a car.
Clearly, it’s not something that would work everywhere. However, if you live in a city or town that has public transportation, ride sharing, car rentals, and bicycles, it’s possible. If you’re retired and you can organize your days in the way you like, it may even be sensible because owning a car is expensive. Transportation costs are the second highest budget item for most households, reports U.S. News. Housing costs top the list.
Giving up a car could help households save a lot of money.
According to AAA
owning and operating a new car in 2017 cost about $8,469 annually, on average, or $706 a month. Small sedans are the least costly ($6,354 per year), on average, and pickup trucks are the most expensive ($10,054 per year), on average, of the vehicles in the study. The calculations include sales price, depreciation, maintenance, repair, and fuel costs.
AAA’s estimate does not include insurance. In 2017, the national average premium for a full-coverage policy was $1,318 annually, according to Insure.com. Auto insurance premiums are highest in Michigan ($2,394) and lowest in Maine ($864).
Combining the averages, the cost of auto ownership is almost $10,000 a year. It’s food for thought.
Weekly Focus – Think About It
“Conservation is a state of harmony between men and land.”
–Aldo Leopold, American author and conservationist
The Heritage Team
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* Consult your financial professional before making any investment decision.
The 2018 Personal Finance Roadmap
By Mike Desepoli, Heritage
Ah Spring time. Warm weather and longer days.
People also tend to be more motivated in the Spring to organize, clean, and go through their stuff.
While it’s always good to get rid of old stuff and clean your house or apartment, I think it’s also a perfect time to leverage your motivation to give your personal finances a good deep cleaning as well.
Regularly checking up on your finances is important. There are many things you can do to improve your personal finances. However, a majority of them are really easy to put on the back-burner. Trust me – “buy life insurance” was on my to do list for two years before I finally got around to it.
Carve out some time this Spring to go through this spring cleaning personal finance checklist. It will help you start doing some things you’ve been meaning to do, as well as give you a check-up on certain things you are already doing to ensure you are still in a good spot.
Check your Net Worth
Checking your net worth can be a painful experience, especially for those who are in student loan or other debt. Even if you fall in this group, though, it’s still better to know where you stand than to be ignorant of your situation.
I have said in the past that for a large majority of people, especially millennials, it’s more important to focus on income than net worth. That’s exactly why it took me so long to get around to utilizing online platforms to track my finances. But once I did it felt good to know exactly where I stand at any point in time.
Review your Budget or Start Budgeting
One of the things I stress in personal finance lunch and learns or coaching sessions is to not only budget, but to regularly review your budget.
If you haven’t started a budget yet, that’s the first thing you should do. Budgeting can be as hands-on or hands-off as you want. Some people hold themselves to a specific spending threshold while others (myself included) just track the monthly trend and make sure they aren’t spending too much on things they don’t care about.
If you already budget, take some time to review your monthly spending. Ask yourself these questions:
• Is my spending in alignment with my values?
• Are there areas I can cut back spending on (i.e. restaurants, cable, cell phone, entertainment)?
• Is my current spending habits allowing me to pay down debt or prohibiting me from paying down or incurring more debt?
• What changes can I make to create more cash flow?
Review your Debt
While Personal Capital does a good job of pulling in your debt, I think it can be valuable to lay out all your debt in a spreadsheet as well.
When I’m looking at my debt I focus on a couple things: what type of debt it is and what the interest rate is?
There are different strategies you can use depending on the type of debt, but the first goal should always be to get a lower interest rate. If you have high interest credit card debt it can make a lot of sense to refinance it through a personal loan. It it’s student loan debt there is also opportunities to refinance at a lower rate.
Debt can be overwhelming, and I always encourage people to be action-oriented with their debt. Sometimes no action is needed, for example if you have it on auto-payment and it will be done at a specific date in the future (assuming you are happy with the interest rate). Others may want to be more proactive, such as refinancing, increasing their income through their 9-5 or a side hustle, or cutting expenses to pay it off faster.
Analyze your Income
It’s easy to get comfortable in a job and lose a pulse on whether or not you are getting paid fairly. Take some time to review your 9-5 income and give your resume a refresh. Some specific things you can do include:
• Review and compare salary data on sites like glassdoor
• Review job listings on an app like indeed to see what sort of skills employers are looking for
• Update your LinkedIn Profile
• Update Your Resume
Perhaps you are happy with where you are at with your 9-5 and the prospect of switching employers – even if it meant a higher pay – isn’t attractive. Or perhaps you are already maxed out at your 9-5 but still want to increase your income.
Check your Emergency Fund
Now you probably don’t need to check your emergency fund. If you have one, you likely know how much it is. If you don’t have one, you also know how much you have.
But when I say check your emergency fund I want you to actually think about whether or not your emergency fund is sufficient. How many months could you live off of it? If your answer was less than three months, it’s time to make building your emergency fund a priority. If you really want to challenge yourself make a plan of hitting somewhere in the six to twelve month range.
Now, if you don’t have an emergency fund then it’s time to get one. I will be the first to admit that building an emergency fund is not easy, especially when you have debt and other things that you want to put your income towards. But I can also tell you that it’s one of the best things you can do for your peace of mind.
Start by setting a realistic goal like saving $100. Then challenge yourself to increase that to $500, and so on. Eventually you will want to have the equivalent of three or more months of monthly expenses set aside. The important thing is to get started.
Review your Retirement & Health Savings Account
Another thing you should review is your retirement and Health Savings Account. A few things to check are:
• Are you contributing up to your company match for your 401k?
• Whether you have a company match or not, how much money are you actually putting into your 401k and/or IRA?
Are you able to contribute more?
• What investments do you haven in your 401k and/or IRA? Do you need to re-balance it?
I’m all about the “set it and forget it” approach to investing, especially when it comes to retirement accounts, but it is important to check up on them every once in a while, even if it’s just once a year.
Review your Insurance
The last thing on the Spring Cleaning Personal Finance Checklist is review your insurance. Insurance isn’t the most exciting thing in the world, but it serves an important function and can protect you from expensive, unexpected bills – or even bankruptcy.
Take an inventory of your current insurance coverage. How much do you pay in premiums? What are you actually getting in return? Is your coverage adequate?
Many times people don’t realize how much they are paying for insurance because it’s baked into their paycheck, mortgage payment, or is on auto-pay. Understanding the true cost of your insurance is important, if not just to have it as a reference point.
Insurance isn’t all about cost. You can oftentimes get cheaper insurance, but if the coverage is bare-bones you are going to regret it if something big happens. One of my former manager’s house burnt down right after he switched to a cheaper home insurance company. They ended up being very difficult to deal with and caused much more hassle than a different company likely would have. That’s not always the case, but I think it’s important to balance cost with quality of coverage.
Besides reviewing your current coverage it might make sense to add some additional coverage as well. Up until a little over a year ago I did not have any life insurance, but I decided to open a million dollar policy at age 27. There’s are many reasons to consider life insurance. In general, if others depend on your income and would be impacted if it were to go away, you should look into getting life insurance.
What To Do With Your 401k When Changing Jobs
By Mike Desepoli, Heritage
Last year, millennials were nicknamed the ‘job-hopping generation’ after a Gallup report revealed that 6 in 10 millennials are open to new job opportunities.
According to this report, millennials have a reputation for job-hopping and are said to move freely from company to company, more so than any other generation.
That being said, I don’t think switching jobs is a trait unique to millennials only, even though they are said to job-hop three times more than other generations.
The job market is ever-changing and is not like it used to be. Fewer companies offer pensions and some entry-level jobs offer very little benefits or stagnant wages. Self-employment, temporary work, and side jobs have all become increasingly popular work options.
Also, there is less loyalty among employees who realize they can be laid off at any given time.
At the end of the day, if you come across a better job opportunity that you think you’ll be happier with and has better pay and benefits, you may feel tempted to switch jobs and there’s nothing wrong with that.
If you have a 401k however, you may be wondering what you can do with it when you do secure another job. You don’t want all the money you saved for retirement to go to waste, so here are a few options.
Keep the Money in Your Old 401k
Most companies will let you leave the money you saved for retirement in your 401k where it is. In other cases, there may be a balance requirement.
Employees who move on to another company may choose this option out of default especially if they have no idea what to do with their 401k. The major downside is that you won’t be able to contribute to your 401k anymore. Also, you’ll have to keep track of more than one retirement account.
If you tend to switch jobs every couple of years, you could wind up with multiple 401k plans that you can’t contribute to which is why it’s best to consider some of these other options first.
Roll Over Your 401k to Your New Company’s 401k
If you had a good 401k plan with your old employer, you can easily roll it over to your new 401k. Check to see what the investment options are along with the fees with your new company. If you don’t like your current options as much as your old plan, consider rolling it over.
Most employers will accept a 401k rollover. As long as you have at least $5,000 in your account, it’s your legal right to do roll it over. If you have less than $5,000 in your account, your employer will have the option to cash you out of the plan.
If you’re going with this option, always ask for the rules to be clarified since you may have limitations since you’re no longer with the company. For example, you may be charged extra fees since you no longer work there.
Move Your 401k to an Individual Retirement Account (IRA)
This is another option you’ll have especially if you don’t like your new company’s 401k plan. IRAs and Roth IRAs are great options that typically have lower fees and allow you to have more control over your investment options. With an IRA, you will just have more control overall. You can choose low-fee investments and won’t be limited to name just your spouse as your beneficiary like with most 401k plans.
Keep in mind that there is a difference between a traditional IRA and a Roth IRA. With a traditional IRA, you contribute pre-tax dollars. The money is not taxable until withdrawals begin. If you withdraw funds before then, you’ll most likely have to pay a penalty fee.
With a Roth IRA, your contributions are taxed when you make them so your earnings will be tax-free. Withdrawals are also tax free once you attain age 59 1/2.
There are also income limits to be eligible for an IRA. In 2017, you must earn less than $118,000 if you’re single and less than $186,000 if you’re married. The maximum contribution you’re allowed to make per year is $5,500 and $6,500 if you’re 50 or older.
Cash Out Your 401k
This isn’t the best option, but it is an option nonetheless. If you want or need the money in your 401k account to pay bills, meet other expenses you have, or even to reinvest another way, you can simply cash out what’s in your retirement account.
A major downside is that you will have to pay taxes on the money along with a penalty. If you cash out a smaller amount, what you receive will be even smaller. If you cash out a large amount, it won’t really be worth it due to your large tax bill.
You could also destroy your retirement nest egg in the process especially if you received a nice 401k company match.
Depending on how many times you switch jobs that provide you with a 401k account, you may need to make the decision of what to do with your old 401k more than once. To determine which option is best for you, determine your current and future needs. Always consider factors like fees along with your investment options.
I’m sure everyone wants to retire some day so it usually the better option to keep money from your 401k and roll it over or put it in an IRA.
4 Ways to ACTUALLY Keep Your Resolutions
By Mike Desepoli, Heritage
You might know that 41% of Americans make New Year’s resolutions annually. But did you know that out of those, more than 42% never actually succeed, yet continue to make new resolutions every year? As the saying goes, if change were easy, more people would do it.
Fortunately, there are some simple ways for you to set yourself up for success. Read on to explore some of the most common resolutions and how you can actually make them stick.
Resolution: Manage Time better
Most of us can think of some way we’d like to improve our time management. Whatever you want to make room for, there’s a key strategy that can help you actually make it stick.
Success Tip: Name Your Why
You have 24 hours in a day, but old habits can be hard to break. To make a lasting change in how you’re budgeting your time, first establish your “why”.
Let’s say you want to spend more time with family, or spend an hour a day reading. What’s the reason behind your goal? How will it enrich your life? If you review your “why” regularly, you’re less likely to quit when those old habits come calling.
Resolution: Learn a new skill.
Adding new skills can help you maintain a sharp mind and a sense of purpose in life. It can also be a lot of fun! If there’s something you’ve been wanting to learn, the new year is a great time.
Success Tip: Get Classy
You don’t have to go at it alone. Take a class and let an expert show you the way. There are top quality online classes available for everything from tennis to organic farming to screenwriting. Looking for more in-person experience? Check out the offerings at your local community college.
Resolution: Get Healthy
Whether you want to eat better, sleep more, or amp up your exercise regimen, “getting healthy” is one of the most popular wishes at the beginning of a new year.s
Success Tip: Partner Up
For better or worse, we often tend to show up for other people more easily than for ourselves.
Doing a cleanse? Checking out yoga? Find a buddy to do it with you. Chances are good that someone you know has a similar goal. With a partner who’s counting on you, you’re more likely to stay accountable and get in great shape.
Resolution: Get Organized
The new year’s invitation for a fresh start also extends to your personal space and working environment. But trading a habitual mess for lasting tidiness can feel like an impossible task.
Success Tip: Start Small
Whether you’re looking to empty an attic, declutter your desk, or finally put all those National Geographic in chronological order, keep it simple and flexible.
To get unstuck, ask yourself: “What is one small thing that I can do today?” Just keep taking one small step each day, and you’ll have the job done before you know it.
For more information on this topic, check out the #asktheadvisor show episode 53 by clicking HERE
Senate Tax Reform Highlights
by Kristi Desepoli, Heritage
Tax reform, a campaign promise as old as the walls of congress. This weekend, a 51-49 vote occurred on Saturday by the U.S. Senate to pass a tax reform worth about $1.4 trillion. Although the bill is not yet finalized, this brings many Americans much closer to a tax cut.
Here is how the latest tax reform legislation would affect you:
The bill allows deductions of up to $10,000 in local property taxes, but does away with federal deductions for state and local income and sales taxes. As far as personal deductions, the bill nearly doubles the standard deduction level to $12,000 for individuals and $24,000 for couples; up from $6350 and $12,700 respectively.
The Senate bill keeps seven tax brackets, but reduces them to 10, 12, 22, 24, 32, 35 and 38.5 percent. Currently, the seven brackets are: 10, 15, 25, 28, 33, 35, and 39.6 percent.
Corporate Tax Rates
The Senate bill will cut the current rate of 35 percent to 20 percent, but it calls for a one-year delay in dropping the rate.
Tax Reform and 2017 Returns
The changes will not have any impact on your taxes for 2017.
President Trump and congressional Republicans have vowed to make tax reform law before the end of the year. If that is the case, most of the provisions would take effect on January 1st.
The Importance of an Annual Financial Check Up
By Kristi Desepoli, Heritage
It’s crazy to sit back and think about everything that can happen in a year. With all of the curveballs that life throws your way, it’s important to adjust accordingly. When it comes to financial success, it’s critical to have a plan in place and make adjustments as things change. What may have been important last year, may not be as important this year, and it’s imperative to assure your plan aligns with what is significant to you and your goals.
Here are three reasons why an annual financial check up should be at the top of your to-do list:
Your retirement plan may no longer reflect your goals.
Along with everything else, our priorities tend to change. What many see retirement looking like at one point, can often change drastically after the addition of grandchildren, real estate purchases, or any other major life-changing event. Even in the event that your goals remain the same, and no major life changes occur, sitting down annually to review and make any necessary adjustments is critical in assuring that your retirement dreams become a reality.
Your insurance needs and beneficiaries may need to be updated.
Insurance can serve as a great protector against the unexpected, but it is always smart to sit down and take a look at your needs annually. Make sure that you have the proper amount of coverage in all of the right places. For example, when it comes to life insurance, as your family grows it may be best to increase your amount of insurance to protect your loved ones. Additionally, although most people typically make changes to their wills after major life changes, more often than not other accounts get overlooked when it comes to those changes. Assets in retirement accounts pass directly to the beneficiaries that you designate within the account. Because of this, it is vital that you review your beneficiaries annually to be sure they are up to date.
Your investing goals might have changed.
Since our priorities change from time to time, during your annual financial review it is important to evaluate your current investment strategy. If things have changes, you can be sure to make adjustments as necessary. Even in times where your goals may have remained steady, it is vital to also look at different economic factors. Real estate conditions, interest rates and inflation, all determine whether your portfolio needs adjusting based off of those factors.
For more information on financial wellness check out The #AskTheAdvisor Show Episode 22
Majority of Americans Living Paycheck to Paycheck
By Kristi Desepoli, Heritage Financial Advisory Group
Making ends meet seems to be a struggle for most people these days, no matter how much they seem to be earning.
According to a recent report from CareerBuilder, seventy-eight percent of full-time workers said they live paycheck to paycheck, which is up from seventy-five percent just last year. From a debt perspective, last year sixty-eight percent of U.S. workers overall said they were in debt, which has risen to seventy-one percent for this year’s research. Only forty-six percent say that their debt is manageable, while fifty-six percent say they are in over their heads.
These issues are no stranger to those making over six figures either. About 1 in 10 of those making at least $100,000 said that they live paycheck to paycheck, with fifty-nine percent of them claiming to be in the red.
Most financial professionals would advise saving at least a six-month cushion for emergency purposes to take care of any unexpected expenses- such as car repairs or medical expenses. However, if you are a business owner or head of the household, six months may not be enough. Household incomes have been growing over the past decade, however they have not been able to keep pace with the rise in cost-of-living expenses over that same time period.
What about savings?
Surprisingly, about fifty-six percent of people save $100 or less per month. Many claimed they have cut back on their 401k contributions and personal savings in the past year, with about one-third of workers who have not been putting money away for retirement at all. Although not entirely to be blamed, personal responsibility has played a huge role in Americans’ financial problems. The surveys have found that only one-third of workers actually stick to a budget.
With the statistics rising over time, it can be hard not to fear that these circumstances may affect your financial future. With a sound financial plan and a strategy to reach your goals, both present and future, you can feel confident that you are prepared for what lies ahead.