Money and relationships don’t always go hand in hand. Making you wonder if you and your partner are speaking the same financial language. If money is causing stress in your relationship, you are not alone. 31% of couples say that the biggest cause of stress in their relationship is money. We want to help you communicate better with your partner about money. On this episode, Allison Berger joins us to discuss four common financial disagreements in couples. Listen in to learn how to better your relationship with your partner and with money.
Does one person in your relationship spend more than the other? Oftentimes one partner feels that the other spends too much. This is so common since opposites attract in relationships. Our partners help to balance us out. So what can you do if you feel that your partner spends too much? Communication is key. It is important to be on the same team and make sure that you have the same financial goals. You can create a financial plan to keep you in check and keep you both on the same page. This way you can see if you are meeting your financial goals. Having a financial advisor can also be a great way to get a 3rd party’s view on the situation. The advisor can help take an objective opinion when there are arguments about spending that arise.
One spouse generally enjoys security more than the other and the other prefers to spend more money. When you have a financial plan in place, you can coordinate how best to save and invest for your specific objectives. Paying yourself first is a great first step. Automating your savings makes life so much easier. One way to easily increase your savings is by doing so when your income goes up. You can simply increase your 401K contribution whenever you get a raise. Another way to save more is to look for opportunities to increase your savings. If you pay off a car you can use the money you used to pay each month for savings instead.
The most common question we hear centers around people wondering if they will have enough? To best answer this question, the amount of risk in your strategy will play a tremendous role. Everyone has a different risk tolerance when it comes to investing. Sometimes one partner prefers to take risky investments and the other prefers to play it safe. Once again communication is key to understanding how your partner feels about investing. First, you should think about what your financial goals are as a couple. Open communication and education can help you understand each other’s feelings about risk tolerance. Learning about investments can also help you feel more comfortable about investing.
Debt can be an unnerving issue for some causing some to lose sleep at night. Understanding your feelings on debt as well as your partner’s feelings can help defuse arguments before they even pop up. People have different feelings about money based on past experiences. Often our concerns about money manifest in childhood. Learning both why you and your partner feel the way you do about money can help you better communicate your needs and come up with a financial plan that you can both agree upon.
Our listeners and clients often ask: Is now a good time to invest? Or what should I invest in? We give feedback on both these questions in our 2019 Investment Outlook episode. Be sure to check out the show notes for this episode in particular as we provide detailed charts to help demonstrate our discussion. If you are curious as to whether now is the time to jump into the stock market, what role bonds play in your portfolio, or what the experts say about the future of the markets then you'll want to listen to this episode.
After logging strong returns in 2017, global equity markets delivered negative returns in US dollar terms in 2018. Common news stories in 2018 included reports on global economic growth, corporate earnings, record low unemployment in the US, the implementation of Brexit, US trade wars, and a flattening US Treasury yield curve.
Many are still wondering why should we invest overseas given returns in the US have been so strong? Investors should remember that non-US stocks help provide valuable diversification benefits, and that recent performance is not a reliable indicator of future returns. It is worth noting that if we look at the past 20 years going back to 1999, US equity markets have only outperformed in 10 of those years—the same expected by chance. We can examine the potential opportunity cost associated with failing to diversify globally by reflecting on the period in global markets from 2000-2009, commonly known as the “lost decade” among US investors. While the S&P 500 recorded its worst ever 10-year cumulative total return of –9.1%, the MSCI World ex USA Index returned 17.5%, and the MSCI Emerging Markets Index returned 154.3%. In periods such as this, investors were rewarded for holding a globally diversified portfolio.
Are there risks today to invest in the stock market? Yes. Have their been risks in the past? Yes. Through all these risks the global stock market has gone from $1 to $59 from 1970 to 2017
History has found certain periods have resulted in higher returns than others. Part of this can be explained by starting valuation. Valuation is one of the best indicators of long-term returns (i.e. 10 years), but it is a horrible short-term timing strategy. One popular valuation metric we’ve discussed in the past is the cyclically-adjusted price-to-earnings (CAPE) ratio. Instead of dividing price by the past 12 months of earnings, the CAPE ratio divides price by the average inflation-adjusted earnings of the past ten years. The idea is to smooth out the good and bad years created by the business cycle.
Is the CAPE Ratio a good predictor of future returns? According to a study by Research Affiliates titled CAPE Fear: Why CAPE Naysayers are Wrong, starting CAPE Ratio has between a 48% to 91% correlation to future 10-year returns across 12 countries. So yes, starting valuations do matter over the subsequent 10-year period.
In addition, below Exhibit 4 is the average future 10-year real return based on starting US CAPE Ratio. As of December 31, 2018, below are the current CAPE ratios of the major equity markets:
As noted in our recent blog, Crystal Balls and CAPE, when one market (US or foreign) was trading at a material premium (such as today), the other market stock market outperformed over the subsequent 10-year period.
Our belief is that high quality bonds in your portfolio provide the following benefits:
Bond returns are largely driven by the term and credit quality of a bond. Long-term bonds experience bigger price movements for a given change in interest rates. Investor are expected to be compensated for taking that extra risk as a result. The same can be said for lower credit quality bonds such as high yield bonds. As the current time the spreads – the gap between the yield on credit and Treasuries – have remained narrow by historical standards. For bond investors, that means the compensation for taking on credit risk is relatively low, and the upside from here could be quite limited.
Future returns of bonds are highly correlated to the starting yield. Therefore, as of 12/31/2018 the yield on the Barclays U.S. Aggregate Index was approximately 3.28% which is depicted in the exhibit below. Therefore, over the next 7-10 years investors can expect returns similar to starting yield levels. Overall, bond yields have increased over the last couple years, but remain low compared to historical levels.
The Federal Reserve raised rates four times in 2018 and nine total adjustments over the past four years. The benchmark interest rate is in a range of 2.25% to 2.5%. The benefit of this is many investors have seen higher returns from their bank accounts but borrowing costs have also increased. What will the Federal Reserve do next? I have no idea, but below are the current market/Fed expectations as of December 31, 2018. You’ll notice the Federal Reserve and market is not expecting material rate increases from this point forward.
To summarize, with low returns expected for US stocks and bonds many investors allocated primarily to US stocks will be disappointed with returns over the next ten years. As a result, individuals may need to either work longer or spend less than expected to reach their financial goals.
For current savers a market decline should be viewed positively as it allows them to buy stocks at cheaper prices. For existing or soon-to-be-retirees it is important to understand your risk capacity and risk tolerance and adjust your asset allocation accordingly. You’ll need equity for long-term growth, but it is important to have high-quality bonds for current spending.
What can you do about potential lower returns? First, focus on what you can control (spending, taxes, estate planning, etc.) and your long-term financial plan. If you don’t have a financial plan in place, it’s the perfect time to contact a fee-only financial planner such as Financial Symmetry. Second, implement a long-term, disciplined investment strategy. And no, buying the mutual fund/ETF/stock that has done the best over the last three years is not a strategy. If you don’t have a disciplined strategy or want to learn more about our process click here to download our white paper.
What are the habits of successful investors? You may think that there are big differences between successful and unsuccessful investors. In the book Atomic Habits, by James Clear, he identifies the small habits that lead to success in life, these habits apply to investors just like anyone else. We all have intentions of doing the right thing, but there is a big gap between intention and action. Only about half of our intentions turn into actions. Join us on this episode to find out what sets successful investors apart from the rest of us.
See the Full Show Notes Here:
Making small changes can really make the difference in your life. When you bridge the gap between your intentions and actions you begin to change your habits and start on a path to success. Implementing these strategies can help to make you a better investor and they can be applied to many other areas of your life as well. Listen to this episode of Financial Symmetry to hear how you can create successful habits as an investor and these can bleed over to other areas of your life.
If asked, most people are hopeful they will have a happy retirement. They're just not sure they are taking all the necessary steps to get there. We all have those moments in our busy lives where we stop and ponder, am I doing what I need to enjoy retirement? But then our busyness continues and takes over any productive changes we considered. As financial advisors, we work with people in all phases of life and often chat with retirees that have walked this path. The happiest of them agree, there are 4 main areas that contribute to their happiness. If you want to prepare for a happy retirement then listen to this episode to hear 4 secrets to a happy retirement.
The happiest retirees are able to move their bodies so that they can remain active. Physical exercise has the benefit of getting the endorphins going and creating joy. Staying active is an important part of maintaining a healthy lifestyle as you age. You can’t wait until you retire to become active or it will be too late. Part of creating a healthy body is by moving more now. Even though it can be a challenge to find the time to create a healthy exercise habit, this is an important part of ensuring that your body will work the way you want as you age. Are you doing what you can now to make sure your body will still function the way you want in your golden years?
Happy retirees have enough money to retire with and are financially independent. Are you doing everything you can to ensure that you will have a comfortable retirement? What savings rates do you need to have to have a comfortable retirement? How do you know that your money won’t run out when you retire? There are so many questions about money and retirement. A financial advisor can help ease your concerns about finances in retirement.
Having enough money means you will have less stress. A financial plan will help you make sure that you are saving enough. This may be obvious to some, but the fact is, only 35% of pre-retirees have a written financial plan. If you are unsure if you are saving enough now is the time to meet with a professional that can give you peace of mind. We recommend finding a fee-only financial planner to help you make sure you are doing all that you can to have the savings you need so that you won’t have to worry your way through retirement.
You need not only have a financial plan but a personal plan as well. If you have a strong sense of purpose that drives you this will help you to spend your retirement in a fulfilling way. Volunteering your time is a great way to further your knowledge and pass on your wisdom. Creating a life of purpose doesn’t just ensure that you aren’t sitting at home watching tv all day, it can result in leaving a legacy behind. What are your retirement plans? Are you planning to retire to something rather than away from something?
Happy retirees have friends. The happiest retirees interviewed have stated that they have a sufficient amount of friendships. Those with fewer friends are 3 times less likely to be happy. Are you developing friendships right now that will transcend the test of time? Creating friendships through common interests is a great way to ensure that you will have a number of friendships when you finally leave the work world behind. So how are you doing in these 4 areas? Do you feel like you are setting yourself up for a happy retirement?
2018 gave us a December to remember, with the S&P 500 index losing 9% for the month, locking in the worst December performance since 1931.
From peak to the most recent bottom, the S&P 500 has fallen more than 20%, marking the first bear market since 2008-09. Now the bear market is here, are you prepared to deal with it?
This most recent drop has given us all a scare. Does the drop have you worried?
Did you prepare for the bear market beforehand?
Preparing for stock market drops prior to experiencing one, helps you digest results when it occurs. It doesn't change the fact that disciplined investing is difficult. And while you'll never be excited about stock market declines, you can be prepared.
On this episode, we clue you in on the tricks for surviving a bear market. You’ll learn what a bear market is, the questions people typically ask when the markets drop, how to prepare for a bear market, and how to recognize a bargain when you see one. The markets are always changing, are you ready for what’s ahead? Listen to this episode to help you weather the storms that bear markets bring.
In long and strong bull markets, overconfidence is plentiful as positive returns inflate our perception of our investing skill-sets. But when the markets drop, we are quick to question our investment strategy. People ask themselves:
We feel the need to act when we see our nest egg evaporating. The biggest question people ask is: what do I need to do to preserve my money? If you feel like you need to sell and go to cash then you could be taking to much risk. Risk tolerance can be thrown out the window when things are going well. It’s when things go south, you learn your true risk tolerance levels. A poor decision in a bear market can often take years or even decades to recover from. Listen to this episode to help you learn how to make the right decisions in a bear market.
A bear market occurs when there’s a drop of 20% in a particular stock market. This differs from a recession which is declared after there are 2 consecutive quarters of negative GDP. Many people think there must be a recession to have a bear market, but not every bear market results in a recession. However, they do tend to work together. There’s about a 50/50 chance of having a bear market coincide with a recession. As painful, as bear markets can feel, they do happen much quicker than bull markets. The average length of your typical bear market is 1.4 years, contrasted with an average bull market at 4.5 years.
Bear markets can be scary to watch and unfortunately, the news channels cover them constantly. People pay more attention to bear markets since they are sensationalized by the news media. The most important thing to remember is to follow your strategy. If you feel like you need to get out immediately and go to cash then you are likely taking too much risk. Unfortunately, we can’t follow our intellect and instinct when it comes to investing. Our instincts influence us to stop the bleeding and sell stocks to hold more cash. The problem with that strategy is big up days occur very close to big down days. So when volatility spikes, your time in the market matters than trying to time the market.
The silver lining of a bear market, is the buying opportunity they create. For many investors that are steadily saving in their investment accounts, bear markets present bargains for higher long-term returns. But how do you know the best time to invest more in stock? How do you ensure that you are not buying too early? Studies show the best strategy is to invest a lump sum upon receiving, as your average long-term returns are higher with stocks vs. other alternatives. Our emotions tell a different story. Catching a falling knife is a risky game. This is where personal circumstances matter most. What does your future income, spending and savings rates look like? When will you need your savings? Answering questions like these gives you a head start on the best choices for your life. Because “knowing” what will happen in the short-term is a fool’s game. Understanding the historical context can help, if it gives you the confidence to begin and stay invested through potential worsening conditions.
Warren Buffet once said, “widespread fear is your friend as an investor because it serves up bargain purchases. Personal fear is your enemy and it will also be unwarranted.”
Welcome to Financial Symmetry, the podcast to help you discover financial opportunities that you may be missing as well as to warn you about many financial mistakes that you can make. We are here to help you improve your life through finances. Finances are so complicated which is why we are here to help you answer questions about your daily financial life. We are here to give helpful hints and education rather than financial advice. On this episode, we discuss our top 4 most popular podcasts of 2018. Listen to this episode to hear what our top 4 most popular podcasts were, as well as many of our favorite podcasts.
Our 4th most popular podcast aired relatively recently and we discussed why you should bother diversifying your portfolio with international stocks. On that episode, we highlighted why the U.S. has done so well and why you would want to have a mediocre portfolio by mixing it up with international stocks. We discussed the risks of investing internationally as well as our tendency toward home country bias. Episode 67 discussed the long-term benefits and how they can shine through our short-sighted viewpoints. Have you listened to the Why Bother Diversifying episode?
Episode 52 was the 3rd most popular podcast of 2018. The markets had just dropped when this one aired which makes everyone nervous. It’s important to remember that the markets frequently fluctuate. We often forget the rough times in the financial world which is why it is so important to have an investment plan. An investment plan isn’t there for the easy times when all is well, it’s there to help you through the hard times. That episode mentioned how to get through the emotional part of investing. We love to give you a glimpse behind the curtain so to speak so that you can see our own details and strategy that we use here at Financial Symmetry. Do you have a financial plan in place?
I’m glad this was the 2nd most popular episode in 2018. It discussed how we often act against our own best judgment. We tend to place more value in small rewards now rather than larger rewards in the future. This episode included easy steps that anyone can implement to improve their financial situation. We talked about small wins, automation, accountability, and how to have a bigger awareness of spending. Check out episode 60 to find out how to improve your financial decisions.
We were surprised by the number one episode of 2018. Episode 61 was our most downloaded episode. This one aired in June and discussed how to plan a more enjoyable vacation. We love encouraging experiences over things. Experiences create lasting memories and things are easily forgotten. Check out episode 61 if you are planning your next vacation. Find out which episode didn’t make it into the final 4 as well as which podcasts we really enjoy listening to on this episode of Financial Symmetry.
Working moms face a difficult balance. People often feel that most women have a choice whether to work outside the home, but the reality is, 65% of families need both parents to work. Women in the workforce is a family issue, not simply a women’s issue, so this episode is useful for more than just women. Allison and Grace join us again to dive into the topics of gender bias, women in the workforce, and they provide helpful strategies and resources to help anyone that is struggling with how to balance it all.
Studies have found that as women achieve more success in the workplace they lose their likeability. This can make it a challenge for women who want to chase success. Even directly out of college women seem to start out behind men as they begin their careers. Only 7% of women negotiate their first salary whereas 57% of men do. Men are often rewarded for their drive and ambition while those same traits in women are considered self-serving and greedy. In Sheryl Sandberg’s book Lean In, she gives useful advice on how to make the most of your career and motherhood. Discover how to overcome your own gender bias on this episode of Financial Symmetry.
Working moms aren’t the only ones that seek the perfect work-life balance. But is work-life balance a myth? One way to bring more balance into your life is to consider what is truly essential to you. Once you give yourself permission to stop trying to do it all then you can make your highest contribution to the things that really matter. The book Essentialism by Greg McKeown inspires readers to prioritize what they really need. This book can help you reconsider what is essential in your life. How can you reconsider what is important to you? Listen to this episode to hear more about this book and other resources for working moms.
Some people seem to be so great at managing their time. What Laura Vanderkam discovered is that when you focus on what matters to you then you will make time for what you want. She emphasizes that time is elastic and you can stretch it to get what you need out of life if you prioritize what is important to you. We are all given the same amount of time in a week, it’s how we use our time that counts. Successful women get paid for the quality of work that they do, not the hours that they put in. How do you prioritize your schedule and make time for what you really want?
As you come back to work after having a child your life changes immensely while that of your husband doesn’t change much at all. Even though men often take time off of work, they are not faced with the same kinds of difficult decisions that women face. When returning to work you have to consider how much you will miss your kids when you go back. You have to decide whether you should you stop your career and stay at home or continue to work. Those that normally cheer you on now question all of your decisions. Listen to this episode of Financial Symmetry to find some fantastic resources for working moms.
As the holidays near, visions of new tax savings dance in our heads. But knowing how to spot them is what really matters. With all the new tax law changes, Will Holt joins us again to guide you through seven tax opportunities you can take advantage of before year-end. Some of these tips can save you thousands of dollars, so listen in to see how you they may benefit your personal situation.
1. Tax Harvesting (Loss or Gain) – This hasn’t changed with the new tax law, but depending on your tax bracket, that percentage of tax you pay may have. If you’re facing a significant amount of capital gains or expect large capital gain distributions, with the rough October performance, you may want to consider tax loss harvesting. This allows you to offset some of those gains and even go a step further, by using $3,000 of net losses against your income. It may seem counterintuitive to sell at a loss, but it could be an opportunity to offset high taxes. If you are in the new 12% federal tax bracket and lower, realizing more gains could be an opportunity instead, as these could be realized at 0%. But knowing your tax rate and all expected income is required. Discuss with a professional to know for sure.
2. Max Retirement Contributions – Understanding how close you are to the max of your retirement accounts, could present extra tax-advantaged savings at the end of the year. Maxing your 401K contribution is the first place to check. If you get a big year-end bonus, this could be a good trigger. Don’t forget your HSA, as this account provides a triple threat of tax savings (tax deduction, tax deferral, tax-free withdrawals).
3. Convert a Roth IRA? – Doing a Roth conversion can help you stay in your tax bracket by moving an IRA into a Roth. With the new lower tax rates, this could be an opportunity to lower the inevitable tax you were going to pay on this savings. Additionally, you will be taking money out of a tax-deferred account and moving it into a tax-free account. This is a good option for early retirees with large taxable accounts. But you’ll need to be more precise going forward, as the opportunity to recharacterize if you overshoot is gone.
4. Bunching Charitable Contributions – The new tax law has increased the standard deduction for individuals to $12,000 and for married couples from $12,000 to $24,000. This means around 90% of people will now be taking the standard deduction according to the Tax Policy Center. If you forecast your itemized deductions could be higher than the standard amount, consider bunching your charitable contributions into 2-year bundles. One way to do that is by using a bunching tool called a donor-advised fund. The donor-advised fund allows for more flexibility in taking the deduction now, but still allowing for spreading contributions throughout the year. For more information about donor-advised funds, refer to episode 59 for more details.
5. Look at a Qualified Charitable Distribution Early in the Year – One of the opportunities, that hasn’t changed but is getting more attention, is the QCD or qualified charitable distribution. To enjoy this opportunity you are required to be age 70.5 and older as you can designate a portion of your required annual distribution directly to a charity. This takes some precision and should be targeted for earlier in the year when the RMD still needs to be taken as it must come directly out of an IRA and go directly to the charity of your choice.
6. 20% Deduction for Qualified Business Income – If you are a small business owner or entrepreneur the qualified business income deduction will be of interest. What’s come to be called the QBI deduction, or 199A deduction, is used for any business that is not a C corporation. If you have self-employed income or are an S Corporation, you can receive a deduction of 20% on your profit. However, there are income limitations. After you listen to this tip you’ll want to sit down with your tax professional and plan your taxes. We wrote a more detailed article on potential savings with QBI here.
7. Watch the Tax Torpedos – To truly understand your own tax planning, you have to watch specific income thresholds. We refer to these as tax torpedos. For example, if receiving a premium tax credit for health insurance, you could lose your entire subsidy if you surpass the income limitations by even $1. These are set according to the amount of family members (up to 4). A great example of why tax planning matters throughout the year as well. We discuss other important income thresholds dealing with the medicare premium surcharges, child tax credit cutoffs, and roth IRA limits.
As you prepare for the holiday season, make sure you take a second look at your tax planning. By watching out for these financial opportunities, you could end up saving yourself thousands of dollars in taxes. It’s important to have a multi-year tax strategy and always consider the big picture, not just what is happening now. Being financially smart means considering all aspects of your financial life. This time of year, that begins with looking for ways take advantage of new tax laws for your personal situation.
If you've paid any attention to financial news recently, then you didn't have to look far, as stock market noise was at a peak. Media headlines were filled with phrases like: epic turmoil, getting crushed and no place to hide.
Emotionally charged words that make you feel like you need to do something to prevent losing more of your nest egg. But following our instincts when investing, can lead to dangerous outcomes.
In times like this, we need a strategy to give us proper perspective. On this episode of the Financial Symmetry podcast, we’ll discuss why market fluctuations are incredibly normal and provide techniques to help you cope with short-term volatility and keep your focus on long-term goals instead. If you’re getting nervous about the direction the market is taking, you’ll want to listen for steps to confront the inevitable next occurrence.
When listening to financial news it's important to remember that the media’s ultimate job is to sell advertisements. It's not their job to help you see the long-term picture or help you reach your financial goals. Easier said than done when markets around the world experience a 10-15% drops.
But if we back up, history provides a different perspective. Market volatility is reliably normal, but it can still make you feel nervous. To truly understand the ups and downs, take a look at the chart below from the Capital Group. There have been 12 full-blown bear markets since 1945. A 5% or more decline in the market typically occurs 3 times a year. And a 20% drop usually occurs about every 4 years. The past 10 years have actually been the anomaly. It is important to remember that a bear market isn’t a bad thing.
It’s actually a great time to reassess your investment plan and evaluate your risk tolerance.
With breaking news coming at us as quick as we want it with social media, it's even harder to block out the noise. Whether tweets or 24 hour cable news, today's financial news is near immediate compared to 30 years ago when you may not hear it until the next day.
In Jason Zweig's book, Your Money and Your Brain, he provides some powerful questions to prevent your feelings from overwhelming the facts. Instead of listening and reacting to the financial news du jour, stop to pause and think about if anything else has changed in your financial picture, other than price of your investment.
To successfully navigate a bear market, you have a long-term strategy in place. Cliche? Sure, but considering where you are in life now is instructive in developing your treatment plan for market short-term sickness.
If you're in your 20’s and 30’s don’t worry, there is still plenty of time. Investment choices still matter at these ages, but not nearly as much as your actual savings amounts. Choose and stick with an investment plan so you can steadily take advantage of the drop in stock prices, a fantastic long-term sale.
If in your 50's and 60's, it's much more important to focus on your overall investment strategy. How does your asset allocation match your retirement timeline? For many in this walk of life, investment returns will be larger than your annual savings amounts. You'll also be facing the sequence of return risk which can eat a big portion of your retirement without a strategy.
Professional help at this point, can help you respond accordingly to market events and more importantly, act as an accountability partner. Having a buffer between your emotions and the markets may be the most important financial decision you can make.
October is here so time to gather around the campfire. With Halloween around the corner, we are highlighting a few spooky financial stories that have scary circumstances. These feelings typically bleed in to stock markets as well. October is often wrongly characterized as the worst month for people to invest. Primarily because people remember the big historical market drops that happen during October. But scary moves for your portfolio aren't the only thing to fear in your financial planning. For all our listeners who love movies, you're in for a treat. We've picked 5 spooky financial stories that pair up with some classic Halloween movies. Listen in for some truly terrifying financial stories.
Remember Jack Nicholson’s classic movie, The Shining? "All work and no play makes Jack a dull boy.” Finding a work-life balance is difficult for so many of us. We had a client that saved diligently over a hard-working career. While building an impressive savings for retirement, he put off vacations, opting for promotions up the corporate ladder. But once he was finally ready to retire and enjoy his savings, he was diagnosed with a nebulous nerve condition that required daily care and limited physical motor functions preventing him from enjoying his hard earned savings. While we can't prevent crippling medical conditions, we can build in balance to our financial plans. Understanding how your savings and spending will transform throughout your life helps you make more confident decisions while enjoying time with those most important to you.
“I see dead people.” A now infamous quote from The Sixth Sense. This is because Haley Jo Osmond's character can see things others can’t. Similar scenarios occur when life is full of busyness that blinds us to opportunities that could make a noticeable long-term differences. Instead, by surrounding yourself with people who can spot things you can't see, you set yourself up for new opportunities to bolster your financial progress. The back-door Roth provides a great example. You may think you make too much money to enjoy the benefits of a Roth IRA, but maybe you didn't have enough time to fully understand and follow through with it.
The Blair Witch Project is a frightening scenario about a group of friends that wander into the woods without a plan. They lose their map and this leads them into trouble. Don’t let this be you. If you don’t have a plan you can swerve off course and lose your way to retirement. Many pre-retirees lose sleep over not having enough money because they didn’t set spending limits. You need to have a plan in place and know how much you can afford to spend and how much to save. Do you have a specific and customized plan for your life and your retirement?
Some employees are confused about how best to handle employee income incentives. This is much like the people in Tim Burton’s The Nightmare Before Christmas who are confused when Christmas comes to Halloween Town. Many employees don’t have the time or expertise of how best to deal with RSUs, ESPPs, and Stock Options. Partly due to the tough decisions of when to exercise, sell or hold. So many tend to hold, where positions build and concentration risk grows. This is breeding ground for nightmare scenarios of holding too long and not diversifying. Listen to this episode to learn how to deal with the familiarity bias and ensure that all your financial eggs are not in one basket.
Ghostbusters 2 is a classic tale of reinvention. The Ghostbusters are forced to reinvent themselves after their business goes bust at the end of the first movie. But their is beauty in their resilience and how they trust in their expertise. This is a good metaphor for our own lives. It is important to invest in your own human capital and have the resilience to face negative events that can happen in your own life. If you continually improve your knowledge you will be able to bounce back from challenges and change the trajectory of your life. Investing in yourself will always bring a high return on your investment.
If you're a mid-career professional, life is full of demands. You've worked incredibly hard to get here. You're sandwiched between young kids and aging parents. Your job is challenging and life is busy. Be it a technology company, medical practice or your own small business, stress comes with the territory during this season of life. This is fertile ground for growing a financial mid-life crisis. With all that's going on, it’s hard to know if you are making the right financial choices, because you don't have time to stop and focus on the financial considerations of the moment. Understanding this, we've compiled a list of the 8 most important wealth builders for all of you hard-working mid-career professionals.
As income increases to it's highest point in life so far, higher spending follows suit during these years. Deciding how much to save brings new challenges as bigger questions come in to focus. Things like when you really want to retire, changing careers, buying a bigger home for kids, or just remodeling your current home. When entertaining life-changing transitions, taking inventory is the first step. Where have you saved to this point? How will a major life change impact the long-term picture. Weighing alternative lifestyles are ripe with complexity that only becomes clear when comparing planning customized scenarios.
Everyone loves finding more tax savings. The best way to ensure you don’t have unwelcome surprises come tax day is to dissect your tax planning at the end of each year. Many tax saving opportunities are left on the table when other priorities dominate your time. Longer work hours, traveling, and shuttling kids to events take all our attention in our 40s. Without proper attention, you never know when potential tax savings are missed.
When starting out, how much you are saving matters much more than the returns you can earn on those savings. But upon reaching mid-career higher earnings, your investment returns could become larger than the actual annual savings. At this point, your asset allocation moves front and center. Choosing how to divide your investments could pay off if busy lives don’t get in the way. Even an increase of 1.5%/year has a huge impact over time. As with many other things in personal finance, building wealth should be boring with little things adding up in a surprising way over time.
When the mid-career attention is divided, important items get ignored. Several of these include life, disability and health insurance for your family. We all know insurance can be expensive, but not having the right kind of insurance when you need it can be detrimental. Many people set up their beneficiaries when they first set up their accounts and then forget to ever update it. Part of your estate planning is choosing a guardian for your children and ensuring that the right people are the beneficiaries of your estate. Working with a professional can assure your estate is in order regardless of any eventuality.
When making your retirement decision, you likely get one chance to get it right. These type of situations are where checklists can shine. Understanding all your financial opportunities pre-retirement can make life-changing differences in your retirement journey. Which is why on today’s episode, we are giving you our beautifully detailed Pre-Retirement Checklist to help you make the best of your transition. Because the decisions you make now will have a lasting impact on when and how you can retire. This checklist provides you with a detailed step by step approach to giving you the tools to prepare for your best retirement.
“Good checklists...are precise. They are efficient, to the point, and easy to use even in the most difficult situations. They do not try to spell out everything--a checklist cannot fly a plane. Instead, they provide reminders of only the most critical and important steps--the ones that even the highly skilled professional using them could miss. Good checklists are, above all, practical.”
― Atul Gawande, The Checklist Manifesto
What Will Retirement Look Like?
Answering this question brings a smile to most people, as they secretly picture the time they'll have to do all the things they've put off. But the biggest secret is some of the biggest financial opportunities occur just before and a few years after retirement. Lowering taxes in your highest earning years, and maxing low tax brackets in the first few years of retirement helps you hold on to more of your hard-earned savings. With so many things to focus on during the retirement transition, maximizing all opportunities is difficult without reminders. Enter the pre-retirement checklist. With 60 items highlighted, you're sure to find something to look in to for your own situation. With a plan this detailed, you can be assured you will feel confidence in your retirement transition.
We are not built for discipline. We are built for novelty and excitement, not for careful attention to detail. Discipline is something we have to work at.”
― Atul Gawande, The Checklist Manifesto
How Much Can You Spend?
Surveys show when planning for retirement, a major concern is knowing how much you'll have to spend in retirement. Figuring out where income will come from is a significant part of retirement planning. Retirement income can come from social security, pensions, retirement savings, part-time work, and passive income. Knowing how you spend your money informs how much income you will need. Tracking 12 months of spending prior to retirement gives you a great start, but when forecasting you'll want to understand how your priorities will change throughout retirement. Taking time to work through the pre-retirement checklist helps spur thinking how spending may change. Taking a tour through the full pre-retirement checklist will help your achieve the most successful retirement for you and your family.
The Tax Diversification of Your Net Worth
Before you retire, taking inventory of assets and debts gives you meaningful feedback. You're now planning to start taking money out of all the accounts that you have nurtured and grown for so long. This actually may be challenging to watch as your savings begin to diminish. One of the more popular (and longest) sections of the pre-retirement checklist helps you understand how you can save more in taxes. Tax diversification helps structure your assets to be as tax efficient as possible.
Insurance may be the biggest question in retirement these days, especially health insurance. Planning to retire before you are eligible for Medicare is creating a conundrum of choices for pre-retirees. For many COBRA will be your choice for up to 18 months after you leave your job. However, if you've diversified your savings effectively, you could find cheaper health insurance on the federal exchange via a subsidy. This takes specific tax planning annually. Outside of health insurance, you may not have thought about long-term care insurance, but it's something you should consider with the rising costs of long-term care. Working with a financial advisor, allows you to model potential scenarios of extended skilled nursing situations providing feedback if you can self-insure or not.
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It's easy to stick with investments that are leaving all other assets in the dust. In fact, logic tells us because they're performing so well, we should buy more of it. While you're at it, shouldn't you go ahead and dump the lousy performers in your portfolio? These emotions are what makes investing so difficult. Additionally, when you diversify your investments, mediocrity is inevitable. Given the tear U.S. Stocks have been on, it's a good time to talk through the risks and benefits of diversifying away from areas that have been the top performers. Despite how cliche it's become at this point, the phrase "past performance is no guarantee of future results" is still a truth. Memories of previous bubbles seem like the distant past. Some of us don't want to believe and others don't want to miss out on gains any longer. Whatever the reason, it's inherently difficult to diversify away from seemingly never-ending profits. So in this episode, we discuss the answer to why you even want to bother diversifying with international and emerging market stocks and what the results could be going forward.
The U.S. stock market has enjoyed outstanding results over the past ten years, earning around 10.7% per year (S&P 500 with dividends through August 2018). With numbers that consistent, it's hard to find a reason to diversify with international equities when U.S. stocks are on such a hot streak. But we live in an interconnected world, our coffee, cars, electronics, are all created across the globe. While US stocks represent just 50% of global market values, 70-75% of Americans invest solely in U.S. stocks, influenced by home country bias which is common throughout the world. Furthermore, out of the last 20 calendar years through 2016, no country had the best-performing equity market for more than two years. As Howard Marks once said, "There’s little I’m certain of, but these things are true: cycles always prevail eventually."
Having diversified investments means there's always something you'll despise in your portfolio. This amplifies the fear of missing out on a high flying tech performer. Especially the past 10 years, where U.S. stocks outpaced foreign and emerging stocks by over 6% per year during that period, which is why it's a challenge to remember the Lost Decade from the 10 years prior (2000-2009). Investing often makes us shortsighted. Creating pressure that tempts us to pick winners when markets aren't going our way. Even if diversification feels mediocre, it increases the reliability of longer-term outcomes. Allowing you to have winners in all types of market cycles.
We highlight 4 major risks when dealing with international investments in this episode. Tariffs and trade wars have dominated the news cycles of late, but so far it's more talk than action. Equity markets often react to short-term noise based on overblown fears and exuberant hopes. Currency fluctuations will affect the value of your foreign returns as well. A rising dollar against other currencies will hurt foreign stocks. We also discuss economic and geopolitical risks in many areas of the world. Yes, there's always a reason to avoid investing in poorly performing areas, but valuations should be considered. We mention and link an article below discussing the historically high correlation of valuation metrics with 10 year future returns. So despite the risks, this research raises some interesting questions about the prospects for international and emerging stocks going forward. But this requires discipline and diversification. The type of discipline that you could question for years. Likely the same way most investors were questioning U.S. stocks prospects in 2009. We've all seen how that's turned out.
On this episode of Financial Symmetry, Chad and Mike revisit a few previous episodes to cover some important financial questions that frequently come up. Taken from episode 6 is the question: Do I need a financial plan? With this question comes further questions. You’ll want to listen in to hear what the answers are. Episode 11 asks the question: What little things can you do to improve your financial life? There are so many little things you can do to improve your finances, listen to this episode to hear what they are. The last question is taken from episode 13. How will you pay for your child’s college? You won’t want to miss this episode to discover the answers to these financial questions.
Many people, including our clients, wonder if they really need a financial plan. Is it worth your time and money to create a financial plan? People that have a financial plan discover more opportunities to save money which is a great way to make the plan pay for itself and then some! Compare a financial plan to a doctor’s checkup. Revisiting your planner and your financial plan each year is a great way to stay on track and focused on your financial goals. A financial plan is not just for retirement, it is something you should begin when you start your career. Listen to this episode to hear why you wouldn’t want to live your life without a financial plan.
Improving your finances doesn’t necessarily mean that you need to let go of all little luxuries you have become accustomed to. There are actually quite a few things that you can implement now that are relatively painless. The most challenging part of implementing these action steps are simply setting them up. One simple way you can improve your financial future is to set up an automatic monthly deposit into your investment account. This used to be something difficult, but with the advent of mobile banking, it can literally be done with the push of a few buttons on your phone. Listen to this episode to hear simple steps you can take to improve your finances.
Another way people to improve your financial situation is to make the most of your 401K. Some people don’t even have this set up to take advantage of their employer match. They are leaving a 100% return on the table! Make sure that your 401k is set up to deposit the most that you can each month. When setting up your 401K it is important to diversify. Many people are afraid to do anything with their 401K account and simply leave it all in cash or employer stocks. They are missing out on a great way to grow their money. Listen to this episode to hear how important it is to set up your 401K properly so that you can get the most out of your retirement savings.
Paying for college can seem like such a daunting task. A state university education can cost $100K and a private university can be more than double that. There are a few things you can do right now to help you figure out how to pay for your children’s education. There are many different ways to pay for college, but the important thing is to have a strategy. It is important to choose the right school for your child, one that has the right fit. By knowing what you can afford this can be a great way to limit your child’s choices and help you choose the best fit. It is important to remember not to focus on the sticker price of the school because there are many ways to reduce the costs of tuition. Listen to this episode to hear some great ways to create a strategy for paying for college.
All of us have a subconscious financial bucket list of things we want to accomplish. After having meetings with thousands of clients collectively over the years, we have a pretty good sample size of the biggest checklist items people would include on their financial to-do list. Now it’s Chad’s turn to share reflections on his 40th birthday. While Mike looked back highlighting lessons he’d learned, Chad looks forward describing the biggest bucket list items people hope to accomplish within their personal finances. Everyone has different things that they worry about or financial goals they are trying to achieve. On this episode, we explore what really gets people excited about financial planning.
Most people have entertained thoughts about retiring early. It is a dream for most when starting out. The retire early movement is about having the financial freedom to spend your time as you choose. To retire early you need to understand what you spend, what you save, and how your investment portfolio should be allocated as a result. But many people don’t realize what they’re spending. Important points when considering an early retirement is finding the best way to withdraw your money from a tax perspective, having a disciplined investment strategy, and planning how to best pay for health insurance. Having a plan for these will help you decide if you can retire early.
How do you balance delaying gratification and celebrating achievements? Many people pencil in becoming a millionaire near the top of their bucket list. Despite being an arbitrary number, it’s one that is concrete and still a significant symbol of consistent savings over a working career. If you’ve ever read The Millionaire Next Door, you know the simplest way to reach this goal is to live below your means. By delaying gratification you can invest more in your future. Sometimes you may miss opportunities but your rewards will come later. Try to sustain your momentum by celebrating milestones along the way. According to the book, The Power of Moments, elevating smaller milestones on the journey can speed up your progress.
Not sure the Bucket List would exist if it weren’t for vacations. Thinking, planning, and sharing the trips we hope to take gives color to financial planning in unforgettable ways. Are you able to spend whatever you want on a vacation without guilt or worry? Steward Butterfield, the creator of Flickr and Slack, shared a great definition of levels of wealth related to vacations in a recent episode of the podcast How I Built This. Many clients rely on a financial advisor to give an objective third-party view of how much they should spend on a vacations. When talking through this with clients, we set up a customized yearly cash-flow plan that helps you see the longer-term effects of your vacation dreams. As we discussed in previous episodes, lasting experiences hold great value of their own, especially when planned for appropriately.
Searching for security creates a wave of emotions when dealing with money. For many, this manifests in the desire to pay off their mortgage. Many feel that true financial independence can only come from living completely debt free. But before you write that check to pay off the mortgage you may want to think twice. Is there value in having a mortgage? Could it be a good financial move to keep a mortgage even if you can pay it off? You have liquidity and equity even if you do carry a mortgage. Paying off a mortgage is an important level of security for many. If you are going to pay it off, you need to think first where the money will come from.
One of the difficulties in decisions around retirement, is most people only get one chance. One of the more essential decisions centers around when and how you choose to take Social Security. Maximizing your benefit has huge impacts to you retiring well. So this is not a subject that should be independent of your complete retirement financial plan. Carefully analyzing the best options could mean hundreds of thousands dollar differences for you throughout retirement. So in this episode, we answered 8 of the top questions we hear about social security in less than 30 minutes. Our hope is that you'll have a desire to dig deeper in your on analysis, to assure you are making the best decisions for you and your family.
The social security program was created in 1935 to promote the economic security of the American people. It takes about 10 years of work history for someone to become eligible for the benefits. The system works on credits and you need 40 credits over your lifetime (earn up to 4 a year). If you're married, you're eligible for spousal benefits especially if you don’t have as much of a robust work history. There are also disability and widower benefits. If you land in the latter category you should work with a CFP to help you understand your best filing options. Social security benefits are calculated by taking your highest 35 years of earnings and your benefits are calculated by these.
The big question that everyone wants to know is, when should I claim social security benefits? The trick is, the answer is different for everyone. You can start claiming social security at age 62, which 34% of people do, or you could wait until age 70, which only 4% of claimers do. Full retirement age ranges from ages 65-67. Claiming your benefit before your full retirement age reduces your benefits by 5-6% annually. So claiming at age 62 could be a reduction of 25%. On the flip side, every year you wait to claim social security after full retirement age, your benefit grows by 8%. When deciding when to claim your benefit, health and life expectancy also should play a role in your decision. The decision about when to claim is an important one that can have significant financial ramifications.
A married couple has a lot to consider when it comes to thinking about filing for social security benefits. A spouse that hasn’t worked as much as the other is entitled to 50% of the higher earner’s social security benefit. For those born before January 1, 1954, the restricted benefit is still an option. Where one spouse, can take a "restricted" benefit equal to half their spouses monthly benefit. If one spouse passes early then the other spouse is entitled to the higher earner’s benefit amount. There are 3 main options for couples to consider: both spouses delaying, the higher earner delaying, or both taking early benefits. With singles, it is much easier to decide when to get your benefits, but still should be weighed with other income sources and current market environments.
A big influence on why people take Social Security early is the fear that it won't be there in the years to come. We've heard for years that the social security fund will eventually run dry. While it's true that the worker to retiree ratio is getting smaller, we shouldn’t have to worry about the program completely running dry in our lifetimes. Current projections show that social security will not be able to fully fund retirees beginning between 2033-2035. But, the system won’t run out completely and it could fund 70% if nothing is done to solve the problem. A few of the potential solutions include:
Listen in to hear the rest of the questions chocked full of useful information to help you uncover the mysteries behind the social security system.
Do you ever feel financial advisors speaks a different language? Many clients feel their advisors throw around financial terminology that creates more confusion than clarity. Financial planners use mnemonics and acronyms since they are a great way to remember things. But the shorthand can be confusing to those that are unfamiliar with them. According to Investopedia, there are around 1900 financial acronyms, and more being created daily. Join us on this episode as we decode 10 of the most common to give you a head start in the next meeting with your advisor.
FAANG and FOMO go hand in hand. FAANG refers to the hot tech stocks like Apple, Netflix, and Google. This acronym is reminiscent of the late 90's tech stock boom when there were only 5 or 6 tech stocks that were sustaining the entire market. FOMO (the fear of missing out) leaves you feeling like you are getting left behind if a decent portion of your portfolio is not invested in these stocks. This is where it's important to recognize how your emotions are influencing your investing decisions. History shows us the slippery slope letting your emotions drive your investing can be.
BPS is how a mutual fund expense ratio or financial advisor's fee is often quoted. BPS simply stands for Basis Points, the number of decimals after a whole number. For example, 50 BPS is 0.50%. Understanding the total annual cost of your investing strategies can help you more accurately compare the value you are getting from your investment strategy or financial planning relationship.
In the third slot is the CAPE ratio. This is an acronym for the Cyclically Adjusted Price Earnings ratio, a popular measure to help judge whether the stock market is cheap or expensive according to historical averages. A highly correlated long-term indicator of future returns, the CAPE ratio continues to be a good measure for understanding the stage of the market cycle.
FIRE is a newer movement, developing more over the last 10-15 years. It stands for Financially Independent, Retire Early. Many people are looking for the flexibility to work less or retire earlier in life. Folks that attempt to drastically limit spending or save considerably may be trying to achieve FIRE. Given the gravity of these decisions and the length of low to little expected income, it's most important to understand the risks. This is where evaluating your full financial picture with annual cash flow comparisons and tax planning opportunities can add extra benefits at the margins.
Does your financial advisor speak like this? Do you just nod your head and play along? Understanding these terms could shave your tax burden considerably if used correctly. QCD, DAF, and RMD are important acronyms for the charitably inclined which can also lower your annual tax burdens. RMD is the Required Minimum Distribution that you are required to take at age 70 ½ each year. QCD is the Qualified Charitable Distribution if you are over the age of 70 ½ which sends a percentage of the RMD directly to charity, therefore, reducing your taxable income.
Listen to this episode to hear all 10 financial acronyms decoded (plus a few bonus ones) to be fully engaged at the next meeting with your financial advisor.
You have been hearing about Bitcoin and other cryptocurrencies for the past few years now. Nothing attracts the attention of the public like the possibility of missing out on the latest craze. The fear of missing out or “FOMO” can be extremely powerful. So you may be wondering whether Bitcoin or another cryptocurrency might be worthwhile to invest in. Like anything money related, it is important to understand what you are getting yourself and your money invested in. Listen to this episode to learn more about what Bitcoin is, the risks involved, and how cryptocurrencies work.
Bitcoin is a worldwide cryptocurrency and digital payment system. It was invented in 2009 by a person or group of people named Satoshi Nakamoto, and it is still unknown who exactly the founder was. There are now more than 1500 cryptocurrencies in the virtual world today. Cryptocurrencies are different than regular currency because there is no bank or government backing them. Cryptocurrencies are created by mining. Like gold, cryptocurrencies have a limited supply which is where their value comes from. Listen to this episode to learn more about Bitcoin and how cryptocurrencies work.
There are many risks to buying Bitcoin and other cryptocurrencies including, regulatory, security, insurance, fraud, security, and market risks. The government can essentially outlaw cryptocurrencies if it so chooses. There is a security risk in protecting your purse or online wallet. Someone can hack into your wallet and steal your coins. Your money at the bank is insured by the FDIC, but cryptocurrencies are not. So if someone does steal your coins you will not be insured. How do you know that you are buying real Bitcoin? The risk of fraud when buying cryptocurrencies is real. The price has see-sawed up and down dramatically over the past 8 years so along with all the other risks, there are substantial market risks. Listen to this episode to become informed on all the risks associated with Bitcoin and other cryptocurrencies
Investments are something you can estimate the expected returns of by reading up on the background of the stock or bond. By researching the growth rate and fundamental value of an investment you can get an idea of what you may think the future return will be. The value of Bitcoin is dependent upon what someone else is willing to pay you and the history of it is all over the map. For this reason, we feel that cryptocurrencies are a speculation rather than an investment. Listen to this episode to hear why we feel that cryptocurrencies are not something you should invest a significant amount of money in and why you should not try to use Bitcoin to fund your retirement.
Although cryptocurrencies are tumultuous and it can be difficult to see what their future may bring, blockchain technology may have a big role to play in the future. Bitcoin is distributed by a blockchain which is a publicly distributed ledger. The technology of blockchain may completely change over time. The future of blockchain may include payment processing, money transfers, digital voting, and real estate or title transactions. Cryptocurrencies may not be the best investment but they have opened a new frontier in digital money and accounting. Listen to this episode to hear why blockchain technology could be so important to the future of money.
Next to the weather, vacation questions are in the small talk hall of fame. Each year, as summer approaches, more time is spent thinking, talking and planning for the perfect summer getaway. For most of us, the joy of some relaxation can make us all daydream. After all, most people choose to spend more time planning their vacations than their finances.
This makes sense because the greatest amount of happiness around vacations, peaks in the anticipation period. Looking forward to your travels boosts the pleasure factor positioning you for the highest return on that vacation.
With summer now in full swing, we love hearing about the tricks and tactics of how people are planning their vacations. In this episode, we've compiled 5 steps that draw parallels between your vacations and your financial planning. Taking these steps should deliver more enjoyable vacations.
Did you know that your natural human behavior could be affecting your finances in a negative way? Behaviors may seem like small decisions but they build up over time. Human behavior makes a big difference in whether you are able to reach your financial goals. On this episode, Mike and I explore how human behavior impacts your financial choices. We have discovered 5 secrets to improve the way you go about making financial decisions. Are you looking for new ways to improve your finances? If so, then listen to this episode to hear 5 ways to improve your financial decisions.
According to the book Thinking Fast and Slow, your brain has two systems. One system is automated, and the other is for deeper thought. What does this have to do with your finances, you ask? If you have ever tried to make a financial choice you could get to the point of analysis paralysis with all the options. One way to make decisions easier is by limiting choices. You can get overloaded by having too many choices. If you set things up to automatically happen, like an automatic withdrawal to savings or an IRA this can really help ease your financial decisions. Listen to this episode to hear five great tips to modify your behavior to positively impact your finances.
This seems so easy. Of course, you are aware of how you spend your money. But are you really? Studies have shown that simply having an expense tracking app on your phone makes you more conscious of the way that you spend money. Whether you compare your receipts to your budget each month, track your spending with an app, or simply take a moment to process what you just spent on that ice cream, take time to be aware of your financial choices. To hear all five tips on how you can change your behavior to improve your financial decisions listen to episode sixty of Financial Symmetry.
The power of momentum can get you over big financial hurdles. It can seem that some financial goals are completely unattainable when you are just starting out. This can feel incredibly frustrating and make some people give up hope of attaining their goals. Rather than focusing on the big picture, focus your energy on achieving small goals. If you can get some small wins under your belt this can help you achieve the momentum you need to achieve your financial goals. Listen to his episode to hear how you can improve your behaviors to make better financial decisions.
There is power in accountability. This may be the most powerful tool that we mention on this episode. It is important to have a human accountability partner rather than a technological one. If you rely on an app to try and help you with accountability, you could simply turn it off. A human is harder to ignore. Having a friend or financial counselor can help you achieve your goals. When you have an accountability partner to help you with your financial decisions this could be the most effective way to reach your goals. Listen to this episode to hear how having an accountability partner could help you with your financial decisions.
Charitable giving fills a need in our society and betters it as a whole. And until recently, donating to nonprofits helped people receive attractive deductions on their tax bills. With the recent tax law change, it’s important to understand how your charitable contributions will affect your next tax return. We want to make sure that you continue to get the biggest tax benefit possible when giving to your favorite charities. So in this episode, we discuss a strategy to help you find the best tax solutions for your charitable gifting going forward.
The newest update to the tax law could limit charitable giving due to the increase in the standard deduction. For many, it may be challenging to find ways receive a similar tax benefits for giving they were already doing. But there are solutions out there. The first is to do nothing. With the 2018 tax law changes, most will no longer receive the same benefit for giving to their favorite non-profits. Your second option is to give the same amount to your favorite charities and lump your contributions so that you give a larger amount every other year rather than annually. This will allow a bigger tax benefit biannually this way. The downside to gifting directly to the charity is the disruption in annual cash flow for their regular operations. Nonprofits often rely on yearly contributions to stay afloat and this strategy could lead to financial problems for the charity.
A donor-advised fund may be one of the best tax solutions for the newest tax law changes. You can set up a donor-advised fund with Fidelity, Vanguard, or Charles Schwab. This is an account where you can contribute the same amount that you usually do each year and realize the biggest tax savings over a period of time. This way the charity can still receive the same amount that you would normally give within the same timeframe. You can then distribute smaller amounts throughout the year to smooth your charitable contributions, so operations of the charity are not affected. A Donor-Advised fund can receive many kinds of capital and turn your investment into cash for your favorite nonprofits to use.
It is best to start planning your tax year in November. With a donor-advised fund, you can give to your favorite nonprofit in many different ways, whether it be stocks, private equity, hedge fund interest, real estate, or cash. Your donor-advised fund will then give your favorite charity cash that they can use. You are able to set up your charitable donation to be gifted whenever you choose, whether it is weekly, monthly, quarterly, or yearly. Using a donor-advised fund is a great long-term tax strategy to use as part of the changing laws’ tax solutions.
Heather Gudac and Haley Modlin join Mike and me on this episode of the Financial Symmetry podcast to discuss how to become a financially successful millennial. We have had targeted advice toward other age groups in the past, and now we’re excited to find ways to help out the younger generation. Heather and Haley have worked hard to put together a fantastic list of five money tips for millennials to help them become financially savvy. Be sure to listen to this episode to hear excellent ideas to get you or your favorite millennial on the road to financial success!
This is perhaps the most important of the money tips for millennials. It is so important to come up with a plan, not just for now but for the future as well. Planning can help you discover how to pay off student loans, how and where to save money, and how to make a budget. The sooner you can start making smart financial decisions the better off you will be later on in life. Remember you don’t have to have money to have a plan. Having a financial plan will help you to save efficiently. As you take on more responsibilities in your career and in your life, be sure to periodically adjust your financial plan to stay on track. To hear more about creating a financial plan to help you succeed financially, listen to episode 58 of Financial Symmetry.
When you are just starting out in life all kinds of people want to give you financial advice. This is usually well-meaning advice from people that care, but it may not be the best advice for your life. Some things to consider are: have they done this themselves, and are they people you really want to be taking advice from. Sometimes people may give you advice that was applicable twenty years ago but may no longer apply today. Listen to this episode of Financial Symmetry to hear important money tips for millennials to get a head start on a strong financial future.
Joint bank accounts can be a touchy issue for some people, especially millennials. The most important thing to remember when you are getting married or embarking on a serious relationship is not to keep financial secrets. Many relationships fail due to finances, so money should be an ongoing conversation. Whether or not you have equal incomes your money is a joint effort and what you do with it now affects both of you and your future. We discuss many of the available options when joining money, so be sure to listen to this episode to hear fantastic money tips for millennials.
What are your financial values? Millennials think differently and spend their money differently than previous generations. Studies have shown that 75% of millennials would prefer to have a great experience rather than buy goods. Knowing how you prefer to spend your money will help you plan your budget. Make sure that you are getting the most from your dollars by planning how you spend them. Use this episode to help you learn how to plan your budget, listen to Heather and Haley as they give us the top money tips for millennials.
Do you know what the number one most avoided financial subject is? On this episode of The Financial Symmetry Podcast, we are diving deep into estate planning where you'll learn why it is so avoided and why you really shouldn't avoid it. Cameron Hendricks joins us on the show today to help us navigate this touchy subject. Estate planning is easy to forget to do and so many people end up putting it off so that it is actually the most avoided subject when it comes to financial planning. If you don’t have a proper estate plan you need to be sure to listen to this episode as Cameron lays out many of the possibilities that could happen if you have no will in place.
What is the purpose of an estate plan? The purpose is to look out for your family and loved ones. You want to make sure that the people you want to receive your inheritance actually receive it. This also simplifies matters for your beneficiaries. It reduces family conflicts and confusion during an already emotional time. Because of this emotional roller coaster, planning your estate can be very challenging, but it's arguably one of the most expensive financial mistakes you can make.
Cameron Hendricks joins us to walk us through different scenarios so that we can understand what happens to our estates if we don't even have a simple will in place. You may be at a time of life where you don’t have any dependents and so you may think that it doesn’t matter if you have a will in place. Would you like to leave your money to the state? If so, then there’s no need to do anything, but if you want to have any say in where you’re money will go when you are gone then you need to have proper beneficiaries named. Listen to this episode to hear what could happen to your money after you are gone.
Many people that have families still avoid proper planning of their estate. The reasons are usually emotional. No one wants to think about what will happen to their children when they pass. If you are a stepparent, you probably haven’t thought about what might happen to your estate regarding your stepchildren if you haven't planned your estate properly. You’ll definitely need to hear this episode if you are the parent of a blended family. Make sure you don’t miss this episode on estate planning so that you can understand all the ramifications of improper estate planning.
No one wants to think about what life will be like after they are gone. Making decisions about what happens after your passing is emotional and not much fun. Estate planning is one of those difficult tasks that we just have to get done for the sake of our families. After a loved one’s passing many families experience rough times. Family relationships are already challenging enough. Don’t let your lack of estate planning make them worse. Listen to this episode to hear how important it is to properly plan your estate no matter what stage of life you’re in.
Allison Berger and Grace Kvantas are stepping in for Mike on this episode. They join us to talk about how to navigate through a life crisis, specifically financial considerations after the death of a spouse. It’s hard to think financially after such a terrible emotional blow, but proper financial planning can help ensure that you will have less to worry about in the years to come. Listen to this episode to hear our top 5 financial planning opportunities to think about after the death of a spouse.
There are so many financial questions after the death of a spouse. This is an overwhelming time and it can be scary to move forward on your own. Having a checklist of things that need to be done is a fantastic idea. One area of confusion for widows and widowers is how to file your taxes. In the year of the death of a spouse, it is important to continue to file married filing jointly to take advantage of the lower taxable income rate. If you are interested in hearing about how to save money on your taxes for two more years after the death of a spouse then listen to this episode of Financial Symmetry.
Many people don’t even realize that they should file for portability of the deceased spousal exemption, but even if you’re not a millionaire you should still file. This exemption doubles the rate that your heirs will be taxed so that when you pass they have a larger amount of tax-free inheritance. You may not have this kind of money now, but you never know what the future may bring. It’s always a good idea to be on the safe side and file this exemption while you have the opportunity. Listen to this episode to hear all the details why and how you should file for this exemption.
It can be tempting to pay off all your bills and even the house with the proceeds of life insurance. But before you do this, you should look at some alternatives. What kind of savings do you have set up for your future? Would the proceeds be more beneficial to you by maxing out your 401k contributions or even a put into a 403b? This is a good time to build your net worth as tax-free as possible. If you have surviving minor children ensure that there is a trust provision in place for them so that they don’t receive a large sum at the still so young age of 18. If you are wondering what you should do with life insurance proceeds, then listen to this episode of Financial Symmetry to get some ideas.
You can never assume that the social security administration is giving you the right amount of money so it is important that you ensure that you are receiving the correct amount of spousal social security benefits. If you have surviving children many widows and widowers feel the need to save this money for when they are older. But the social security administration would actually prefer that you use the money to care for your children’s needs right now. If you have any questions about social security, this episode of Financial Symmetry may provide the answer. Make sure you listen in to hear all about social security as well as 4 other important financial concerns to consider after the death of a spouse.
On this episode of Financial Symmetry, we’re getting you ready for tax time! We've been helping clients check their taxes for many years and we know that there are two types of people that file their tax returns. The optimists try and get their taxes done as quickly as possible and probably have already filed their taxes. Those of you that are pessimists are waiting until the last minute and probably haven’t filed yet. If you fall into the latter category then you will definitely want to listen to this episode before you file your taxes. On this episode, we cover the top ten tax return filing mistakes. Remember, the IRS will never send you money that you missed on your tax return. Make sure you listen to this episode to avoid these common tax return mistakes.
Many times people make tax return mistakes simply because they are disorganized. They misplace paperwork and often do not have all the data at hand to complete their 1040 correctly. One thing you can do to avoid making costly mistakes on your tax return is to keep a file handy where you can put all of your tax documents for the coming year. That way as you receive documents throughout the year you can just place them into the file and have them ready when it is time to prepare your taxes. Getting your tax documents organized is one way to avoid tax return mistakes. Listen to this episode to hear other ways to avoid making mistakes on your taxes this year.
Having a checklist can help you become organized and avoid costly tax return mistakes. This can help you not to overlook anything. Without a checklist, you may forget to enter correct data or follow up on new tax rules. Some capital gains rules have changed and the custodian of your accounts does not have to keep track of all of the costs. These new changes could lead to costly mistakes. Listen to this episode to hear how these changes could affect you and your tax return. If you are looking to avoid costly tax return mistakes you will want to hear the best ways to avoid them!
Are you a small business owner? Do you do any side work that involves a 1099? If so, that means you are! When you begin your small business or even if you simply have a couple of side gigs to bring in extra income then you need to pay attention to all the rules for filing your 1099 so that you can complete your tax return correctly and save money. Knowing what is taxable income and what isn’t is important and can save you thousands of dollars on your tax return. Listen to this episode of Financial Symmetry to hear about all the ways you can save money by avoiding these tax return mistakes.
Many people think that finding deductions is the best way to save money on their tax returns, but that is not the case. Finding relevant tax credits is actually more important than finding deductions. You need to understand all the credits that apply to you and your family to make the most out of your tax return. If you have a college student you may be making a big mistake when filing your tax return. On this episode of Financial Symmetry, we discuss the top ten most common tax return mistakes that we see on our clients’ taxes. If you want to get the most out of your tax return, you’ll want to listen in.