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Financial Symmetry: Balancing Today with Retirement

When considering retirement, do you wonder what financial opportunities you may be missing? Busy lives take over and years pass without taking advantage. In this retirement podcast, Chad Smith and Mike Eklund unveil financial opportunities, to help you balance enjoying today so you are ready to retire later. By day, they are fiduciary fee-only financial advisors who answer questions about tax savings, investment decisions, and how to save more. If you’ve been putting off your financial to-do list or are just not sure what you’ve been missing, subscribe to the show and learn more at www.financialsymmetry.com. Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for over 20 years.
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Now displaying: July, 2019
Jul 29, 2019

How do you pick the books you read? Do you get book recommendations from friends or are you in a book group? Do you use an Amazon Wishlist or social media to help you discover what you want to read next? In today’s episode, we have some book recommendations for you to consider. We try to bring you a variety of genres ranging from finance to self-help, to fiction. Check out our favorite books of the year and let us know which ones you have read or plan to read. 

Digital Minimalism

Digital Minimalism might be the book for you if you are addicted to your smartphone or tablet. If you feel the need to constantly check your notifications you might want to check this book out. The idea behind Digital Minimalism is to help reduce the time you spend attached to yan electronic device. It discusses the psychology surrounding our need to constantly check those notifications and offers tips to scale back your tech usage. If you enjoy this book you also might enjoy Cal Newport’s other book called Deep Work.

Chop Wood Carry Water 

Chop Wood Carry Water is a quick, 110-page read that offers life lessons that are learned by a kid who wants to become a samurai warrior (think Karate Kid). This book is about learning to appreciate the process behind the mundane work you have to do in life. The thesis is that if you can focus on doing the boring everyday work with excellence then you can make great things happen. The book encourages you to take each challenge you face not as a test but as an opportunity to learn and grow. 

Redemption

Redemption is a work of fiction by David Baldacci which is a mystery-thriller. The main character is a Baldacci favorite, Amos Decker. Redemption makes for an exciting beach or vacation read. Like binge-watching a tv series, you’ll want to rush through it quickly to discover how it ends. 

Principles

The book Principles is another self-help book written by Ray Dalio. It is essentially laying out his 5 step process for building success. He encourages readers on how to deal with setbacks and continue to move forward. These are the 5 steps that he covers in the book:

  • Step 1 - instead of feeling frustrated and overwhelmed see pain as nature’s reminder that there is something important to learn. 
  • Step 2 - potential problems are actually potential improvements
  • Step 3 - diagnose problems to get to their root cause
  • Step 4 - design a plan
  • Step 5 - push through to completion

Books we haven’t read yet but plan to

We also have several books on our wishlist or that we plan to read soon. Mike is looking forward to reading Personal Financial Planning for Executives and Entrepreneurs to help him provide the best service possible for his clients. The Happiness Advantage is another book Mike would like to read that redefines success and happiness. 

Chad is looking forward to reading Messy Marketplace which is about buying companies. He thinks this will help him serve his clients who are in the process of selling businesses. The Family Board Meeting is a book that encourages people to enjoy the experiences they have with their children. The Algebra of Happiness and 30 Lessons for Living are 2 more books that he’d like to read.

Outline of This Episode

  • [2:17] Digital Minimalism
  • [6:05] Chop Wood Carry Water
  • [10:54] Redemption
  • [13:38] Principles
  • [16:01] Books we plan to read

Resources & People Mentioned

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Jul 15, 2019

Most people know little or nothing about sequence of returns risk. The subject doesn’t make for the most interesting topic for cocktail party discussions. Some refer to it as your biggest retirement risk. Reason being, sequence of returns risk can have a major impact on how long your hard-earned savings will last through retirement. This week's episode we dive in to examples of how you could be affected and steps you could use to fight against it.

Dollar-weighted returns vs time-weighted returns

Many people aren’t familiar with the difference between dollar-weighted returns and time-weighted returns. Dollar-weighted returns are the actual returns you get. The dollar-weighted return is a more accurate representation of your actual return. A time-weighted return impacts your cash flow. A time-weighted return assumes you don’t contribute or withdraw any money during a period of time. If you put a lot of money in the bottom of the stock market and pull the money out at the top of the stock market then you will have a better dollar rated return than a time-weighted return. 

An example of sequence of returns risk

Let’s consider a couple that is 60 years old with a million dollars who just retired. In the first example, they earn 8% each year over the next 30 years. They withdraw at 6% which leads them to the ideal scenario and after 30 years in which they end at zero dollars. Their money ran out just as they did. The second example takes the same couple but rather than earning 8% each year they had great returns of 25% for the first 2 years, then they averaged 8% and then the last 2 years they averaged 0%. This scenario left the couple with a million dollars at the end of 30 years. The last scenario has the couple experience a bad market the first few years then 8% returns and then a great market at the end. This scenario leads the couple to run out of money. Although all of these examples had the same average return the end results were completely different. The first few years have a big impact on your long term success. 

Why did Chad and Mike end up with different balances at the end of their careers?

Chad and Mike work for the same amount of years, they make the same pay and save the same amount each year. One of them begins their career before the other and they retire at different times. The last years before retirement Mike experienced poor returns. Chad had poor returns when he was just starting out. This is an example of a good sequence of returns for Chad and a bad sequence of returns for Mike. The difference ended up being a $300,000 difference between Chad and Mike’s final balance. When you are younger your balance isn’t that big so how the market performs doesn’t matter as much. When you are older it is important to your balance sheet that the market rate of returns are high.

What strategies can you implement to protect yourself from the sequence of returns risk?

  1. Diversification is important. Think about a globally diversified portfolio. U.S. stocks, international stocks, large and small cap investments. 
  2. Consider your asset allocation. The time right before and right after you retire is not a time to take on a lot of stock risk.
  3. Adjust your spending based on portfolio performance.
  4. Adjust the amount of stock you own based on market valuations. If the market is expensive you should own less in stocks, if the market is cheap you can own more.
  5. Don’t get nervous and go to cash and bonds. Stocks are a good hedge against rising costs of inflation. Remember that people are living longer, you may need that money to stretch farther than you thought.

Outline of This Episode

  • [4:27] What constitutes good or bad returns?
  • [8:56] The first few years have a big impact on your long term success
  • [11:15] Why did Chad and Mike end up with different balances at the end of their careers?
  • [14:23] What strategies can you implement to protect yourself from the sequence of returns risk?

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Jul 1, 2019

Often in social conversations, it’s not uncommon to hear us say, “That reminds me of a scene in the movie…” to emphasize a point. Movies have a powerful way of presenting memorable situations where real life decisions and money intersect. Given the financial lens we view the world through, these financial themes jump off the screen to us.

So in today’s episode, we put on our movie critic hats and have some fun discussing lessons we’ve spotted in films that we all can learn from. Some are obvious but in others, you have to dig a bit deeper. Allison Berger joins us in this fun-filled episode to discover financial influences in the best and worst that Hollywood has to offer.

Financial references from the best and worst Hollywood films

Many times, the large financial outcomes in life are a result of a lot of little decisions along the way in emotionally-charged environments. The circumstances range from pressure-filled decisions amidst a tragedy to pre-conceived notions of long-held family belief systems around money. Some can seem more cliche, like always have a plan B or pay attention to the small print, but paying attention to the emotions that lead to these moments can provide the most intriguing insights. Other messages reinforce strong values that help position you for long-term success, like the benefit of hard work and having an open mind.

Here’s a summary of the movies we discussed:

Gone Girl – This is an intense 2014 thriller with loads of money themes. The movie begins during the 2008 financial crisis and the featured couple loses their jobs. A twisted and circuitous journey ensues from there.

Money themes: This couple could benefit from better financial communication. Strangely, a financial advisor wasn’t around to help (wink, wink). Separately, she keeps all her money in a money belt after she goes on the run. This is a terrible idea! It’s no wonder her money gets stolen as you should never keep all of your money in one place, even when on the run. Finally, do your best to set yourself up so you are not forced to rely on someone else financially.

Edge of Tomorrow – Tom Cruise stars in this 2014 Sci-Fi film. He plays a public relations guy thrown into the battle who gets stuck in a time loop.

Financial lessons: You may not see a financial theme here but we can’t help but think about what we might do financially if we could do yesterday over again with the knowledge that we have today. There are so many uncertainties when dealing with investing which is why balance is so important. When you have a process to help you deal with all the options that are out there. We all have 20/20 hindsight but this movie can be a great thought exercise. What would you learn from today? Would you invest more? Spend differently? Or maybe create an automatic savings plan to make sure you’re saving?

Crazy Rich Asians– This 2018 film is rich with money themes. It is basically set in a rich fantasyland in Singapore.

Financial themes: Money alone will not make you happy, it’s the experiences money buys that can provide lasting happiness. Related, it’s dangerous to have your identity attached to money. Communicating openly with your partner about finances can prevent larger emotional disagreements along the line. Even further, the pressure of misplaced expectations around money can be problematic between spouses. This is why it’s important to choose your spouse wisely as research shows in The Next Millionaire Next Door.

Miracle – This is a family-friendly 2004 Disney movie. Miracle is the story of an Olympic hockey team before Olympians were allowed to be professionals in their fields.

Money lessons: The movie shows the value of hard work without money attached. At the end of the film, it showed what each character’s career was after their hockey career. This movie holds powerful lessons to show kids not to rely on one thing, especially a sport, to provide income for the rest of their lives.

Be sure and listen to the rest for the our takeaways from 3 other movies, including one in Allison’s favorite classic series of movies.

Resources & People Mentioned

Connect with Allison Berger

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