Contact

Finding the Right Fit: Questions to Ask Your Wealth Manager

When you hear the term, “investment” a lot of people bring to mind quick ways to buy and sell stocks to make a large sum of money. In reality, that’s not how investing works (and isn’t a smart way to go about it). 

If you’re looking to build wealth and make beneficial investments for your future, one of the best things you can do is find a trusted financial advisor and investment manager to help guide your way. But, how do you find someone who you can trust with such a valuable asset? Ask questions.

Whether you’re new to investing and wealth management or a seasoned investor looking for a new partner, knowing what questions to ask can help you find a trusted advisor who has your best interests in mind. After all, it’s your money at stake.

Here are some questions to ask when searching for a wealth management firm, courtesy of the SEC.

Questions about products

Whether you’re investing in stocks, bonds, mutual funds, or other products, make sure you fully understand what that investment means to you. Here’s some questions to ask about investment products:

Questions about wealth management professionals

In addition to understanding the types of investments you may get into, it’s important to vet the people who are managing your wealth and purchasing your investments. Here’s some questions to ask wealth managers:

Questions about your investments

 

Navigating the complex world of wealth management and investing can be overwhelming. We take our time to work with you to understand your goals and help you decide on which investments are right for you. We pride ourselves on being trusted partners and make sure you understand your investments before you purchase. No matter who you choose to manage your wealth, make sure you ask diligent questions and they are honest and transparent with you. If you’d like to schedule an appointment to get to know us better, give us a call.

SPACS, NFTs, and Other Jungle Creatures

“The American marketplace is an economic jungle. As in all jungles, you easily can be destroyed if you don’t know the rules of survival. … But you also can come through in fine shape and you can even flourish in the jungle—if you learn the rules, adapt them for your own use, and heed them.” — Sylvia Porter

 

Is it just our imagination, or has there been an uptick lately in exciting new trading tactics for seizing riches from exotic new markets?

 

Unfortunately, as Sylvia Porter observed above in her 1,200-page, best-selling “Sylvia Porter’s Money Book,” excitement isn’t necessarily an investor’s best friend. Respecting the jungle rules is the wiser way to endure.

 

What’s Old Is New Again

Who is Sylvia Porter? A 20th century financial author and journalist, Porter challenged financial and social norms alike during her extensive career, which launched in the 1930s and peaked in the 1970s. Making her way in a male-dominated business, she initially wrote under the name S.F. Porter, to conceal her gender. By 1975 (when her Money Book was first published), she was syndicated across 350 newspapers as well as the Ladies’ Home Journal. [Source]

 

Porter is credited as having created the role of personal financial journalist, writing for and by the people. And yet, few remember her name. This in itself is telling of how readily financial times, tides, and fortunes can ebb and flow.

 

But let’s return to the here and now, and the current incubator of hot new trends. After a year of sitting at home, an excitable generation of do-it-yourself traders has been replacing traditional leisure-time activities with online pursuits—including aggressive, Tweet-worthy trading for fun and profit.

 

The result? Waves of volatile financial feeding frenzies and overnight sensations, egged on by a brood of freshly hatched social media stars, and a spate of flashy new trading platforms with captivating names like Robinhood.

 

When SPAC-Man Speaks

The movement roughly launched in January 2021, when a Reddit-driven rally abruptly sent the prices of several unloved stocks like GameStop through the roof. More recently, special purpose acquisition companies (SPACs) have captured a lot of attention. “When SPAC-Man Chamath Palihapitiya Speaks, Reddit and Wall Street Listen,” observed a recent Wall Street Journal column. “Amateur traders hang on [Palihapitiya’s] every word for clues about his next target—and for the insults he hurls at the high-finance elite.”

 

Non-fungible tokens (NFTs) have also been taking the trading world by storm. As described in this the Hustle article:

 

“An NFT can represent any kind of digital asset: a piece of artwork, an audio file, a video clip, a plot of virtual land. The NFT isn’t actually the piece of artwork itself; it’s a piece of code on a digital ledger (blockchain) that points to where the artwork lives — usually on a server somewhere else.”

 

If you think of an NFT as being like a collectible—say, an autographed baseball card—but in digital format, you’re getting close to envisioning its worth. Similar to playing cards, people are collecting these pieces of code, typically exchanging them in cryptocurrency such as bitcoin.

 

How much is an NFT actually worth? However much the market decides. Some are currently trading in excess of $1 million each. As the Hustle article describes, NFTs “have caught the attention of tech investors (Mark Cuban), the high-brow art world (Christie’s auction house), and major corporations (Nike) alike. And everyone from Lindsey Lohan to the rock band Kings of Leon is flooding the market with high-priced virtual creations of their own.”

 

Innovations vs. Investments

These and similar get-rich-quick possibilities may seem shiny and new. And some of the underlying infrastructure truly is groundbreaking. Like the Internet, electricity, and the wheel, intriguing innovations like blockchains, cryptocurrency and NFTs may lead to incredible applications we can’t even imagine at this time.

 

Plus, at least on paper, there are those who have amassed rapid fortunes by being in the right place at the right time. Trading into the innovations, they’ve caught a wave of risk-laden opportunity; some have gotten very rich in return. Much of the action is highly reminiscent of the 1990s tech bubble, when a trade at nearly any price into nearly any company with a high-tech name seemed sure to pay off handsomely … right up until most of them no longer did.

 

Time will tell whether these brave speculators manage to convert their good fortune into lasting wealth once today’s trends fizzle or fly. Because beneath it all, the laws of the jungle remain the same. Among these immutable laws is determining whether you want to be a sprinting speculator or a long-distance runner in the wilds of the stock market—and trading accordingly.

 

In his book, “The Psychology of Money,” Morgan Housel describes two types of market participants—short-term traders and long-term investors—and why it’s essential to know which one you are:

 

“Short-term traders operate in an area where the rules governing long-term investing—particularly around valuation—are ignored, because they’re irrelevant to the game being played. Bubbles do their damage when long-term investors playing one game start taking their cues from those short-term traders playing another.”

 

97-year-old billionaire Charlie Munger (Warren Buffett’s long-time Berkshire Hathaway partner) is even more blunt about the differences between short-term speculators versus long-range investors. Some “may call it investing,” he said in a recent interview, “but that’s all bulls**t. It’s really just wild speculation, like casino gambling or racetrack betting.”

 

In yet another powerful piece, “Financial Implications of Robinhood Investors,” financial author Larry Swedroe took a look at a recent academic study that analyzed the new breed of stock market participants using Robinhood’s no minimum, zero-commission trading platform. The study found that Robinhood participants tend to be younger; less wealthy; and hungry for more frequent, higher-volatility trades. In aggregate, “zero-commission investors behave as noise traders,” with a market impact similar to past noise trading and inventory risk models.

 

Thriving in the Jungle

In other words, hot trends are business as usual in the financial jungle. Fortunes will rapidly rise overnight. But many will fade just as suddenly. A few will strike it rich. Far more will be left licking their wounds … if they’re lucky.

 

That’s a dicey way to patiently pursue your long-term financial goals. You may be seeking to harvest returns from the same market, but your end goals are entirely different from those of noise traders on the prowl. Remember these differences if you ever feel a little left out of all the excitement. It should address your concerns about whether they know something you don’t.

 

As 16th century Renaissance mathematician and gambler Gerolamo Cardano reportedly once said: “The greatest advantage in gambling lies in not playing at all.”

Is Inflation Haunting Your Financial Dreams? Part 2: What We Can Do About It

In our last piece, we covered the recent uptick in inflation, and what to make of it in historical context. For investors, it’s important to take a step back and look at the big picture before acting on breaking news. But what if inflation does get out of hand, and stays that way for a while?

 

The Federal Reserve has been suggesting rising rates should wane. We hope they’re right. But we also know the future remains uncharted. Nearly any outcome is possible, and none is inevitable. This means diversified investing remains our preferred strategy for being prepared for whatever the future holds.

 

Explaining Inflation Doesn’t Predict It

If higher inflation does materialize, will it arrive sooner or later? Will it be moderate or severe? Brief or prolonged? Forecasts vary widely, because we often forget the academic evidence that informs us: Even excellent explanatory models rarely serve as effective predictive models.

 

For example, scientists can readily explain why earthquakes occur, but our ability to forecast times, locations and severities remains shaky at best. The same can be said for inflation. We can explain its intricacies, but accurate predictions remain as elusive as ever. There are simply too many variables: COVID-19, climate change, political action, the Federal Reserve, other central banks, consumer banks/lenders, consumers/borrowers, employers/producers, employees, investors (“the market”), sectors (such as real estate, commodities, and gold), the U.S. dollar, global currency, cryptocurrency, financial economists, the media, the world, time … and YOU.

 

Each of these could throw off any predictions about the time, degree, and extent of future inflation. Besides, as an investor, you really only have control over the last two: You, and your time in the market. What will you do with your time?

 

Because We Don’t Know, We Diversify

It stands to reason: Some investments seem to shine when inflation is on the rise. Others deliver their best results at other times. Because we never know exactly when inflation might rise or fall, we believe an investor’s best course is to diversify into and across various investments that tend to respond differently under different economic conditions.

 

For example, until earlier this year, value stocks had been underperforming growth stocks for quite a while. You may have been tempted to give up on them during their decade-plus lull (during which inflation remained relatively low). And yet, when inflation is high or rising, value stocks have tended to outperform growth, as has been the case year-to-date.

 

Another example is Treasury Inflation-Protected Securities (TIPS) versus “regular” Treasury bonds. Neither is ideal across all conditions. But if you hold some of both, they can complement each other over time and across various inflationary rates.

 

In short, if you’ve not yet done so, it’s time to define your financial goals, and build your personalized, globally diversified portfolio to complement them. If you’ve already completed these steps, you should be positioned as best you can to manage higher inflation over time, which means your best next step is most likely to stay put. This brings us to our next point …

 

Stocks vs. Inflation: It’s a Knock-Out

 

Provided time is on your side, the stock market is your greatest ally against inflation.

 

Over time, global stock market returns have dramatically outpaced inflation. For example, as reported by Dimensional Fund Advisors, $1 invested in the S&P 500 Index from 1926–2017 would have grown to $533 worth of purchasing power by the end of 2017, after adjusting for inflation. Had that same dollar been held in “safe” one-month Treasury bills over the same period, it would have grown to an inflation-adjusted $1.51.

 

That T-bill growth is not nothing, and welcome relief during bear markets. That’s one reason we advocate for maintaining an appropriate mix between wealth-accumulating and wealth-preserving investments. But what’s “appropriate”? It depends on your personal financial goals. The point is, as long as you have enough time to let your stock allocations ride through the downturns, you can expect them to remain well ahead of inflation simply by being in the market.

 

It’s important to add, no fancy market-timing moves are required or desired when participating in the stock market. In fact, moving holdings in and out at seemingly opportune times is more likely to detract from the vital, inflation-busting role stocks play in your portfolio. In the words of Nobel Laureate Eugene Fama: “The nature of the stock market is you get a lot of the return in very short periods of time. So, you basically don’t want to be out for short periods of time, where you may actually be missing a good part of the return.”

 

What If You’re Retired?

So far, so good. But not all your wealth is for spending in the far-off future. What if you’re depending on your portfolio to provide a reliable income stream here and now? If you’re retired, (or you have other upcoming spending needs such as college costs), eventual expected returns offer little comfort when current inflation is eating into today’s spending needs.

 

Again, you can’t control inflation, but you can manage your own best interests in the face of it.

 

Engage in Retirement Planning: Along with a globally diversified investment portfolio, you’ll want a solid strategy for investing for, and spending in retirement. For example:

 

Revisit Your Retirement Planning: Especially when inflation is on the rise, it’s worth revisiting your existing investment and withdrawal strategies. What are the odds your current portfolio won’t deliver as hoped for? We typically use odds-based “Monte Carlo” simulations to ask this critical question, and guide any sensible adjustments the answers may warrant.

 

Don’t Panic: What if inflation is taking too big a bite? A common misstep is to abandon your carefully structured investments in pursuit of short-cuts. For example, it may be tempting to unload high-quality bonds and pile into gold, dividend stocks, or other ways to seek spendable income. Unfortunately, we believe such substitutes detract from effective retirement planning. The goal is to optimize expected returns and manage unnecessary risks in pursuit of a dependable outcome. As such, we suggest avoiding dubious detours along the way.

 

Have a “Plan B”: What can you do instead? In “Your Complete Guide to a Successful and Secure Retirement,” authors Larry Swedroe and Kevin Grogan describe how to prepare an upfront “Plan B.” If a worst-case scenario is realized, you’re then better positioned to make any difficult decisions required to recover your footing. The authors explain:

 

“Plan B should list the actions to be taken if financial assets drop below a predetermined level. Those actions might include remaining in, or returning to, the workforce, reducing current spending, reducing the financial goal, and selling a home and/or moving to a location with a lower cost of living.”

 

These sorts of belt-tightening choices are never fun. But you should prefer them over chasing unsubstantiated sources of return that could dig your risk hole even deeper.

 

How Can We Help?

While anyone can embrace the strategies we just described, implementing them can be easier said than done. Plus, there are more steps you can take to defend against inflation, near and far. Examples include engaging in additional tax-planning, annuitizing a portion of your wealth, tapping lines of credit like a second mortgage, optimizing Social Security benefits, and more.

 

We hope you’ll contact us today to discuss these and other retirement planning actions worth exploring. After all, making the most of your possibilities is always a smart move, whether or not inflation is here to stay.

Financial Priorities for People in Their Forties

By the time someone has turned 40, they are likely to have achieved several life goals — a productive career, and possibly a house, spouse, and children. If you’re in your forties, you are familiar with and contributed to your employer’s 401(k) retirement plan. That’s a great basic step towards securing your retirement, but while you’re in your peak earning years, are you making sure you’re doing everything you can to leverage your retirement savings?

Here’s some top priorities for investing in your financial future in your forties.

It’s never too late to start investing

It’s not rocket science to know that the longer you can save and invest your money, the greater the return will be in your retirement (that is if you are smart with your investments). But the good news is that it’s never too late to start investing in your future. Even people who started investing later in life can achieve their retirement goals. Identify what’s important to you and your future, solidify your goals, and work with a financial advisor to develop a strategic investment portfolio to get you there.

Have children? Be strategic with college savings

If you have children in your 20s and 30s, you’re likely to be focused on the cost of raising them at that moment – diapers, food, childcare — children are costly and it can be hard to think of the future when wading through the new-parent fog. But if your child’s college education is important to you, the sooner you start saving for that expense, the longer it is for that money to grow. 529 college savings plans are an efficient way to save for college education costs. 

While 529 plans are an excellent choice to save for your child’s college education, understand the penalties of withdrawing for nonqualified expenses. Also understand that while your child’s education may be important to you, student loans are always available should more funds be needed. The same can’t be said for your retirement. Find the right balance of saving for your retirement and meeting college savings goals. 

Cut down on debt

Most Americans live with some kind of debt during their lifetime. From mortgages to car loans, debt is nearly unavoidable. But if you’re carrying an immense amount of consumer debt, it’s keeping you from reaching your financial potential and achieving your goals. Paying off debt can seem overwhelming and even impossible. Work with an advisor to help you make a plan of how you can tackle your debt. Making a plan and consistently sticking to it will have your debt shrinking in no time and free up that money for investing.

Optimize your taxes

Leveraging the tax benefits of your retirement accounts is one of the best things you can do for your investments. Understand the tax benefits of IRAs — both Roth and traditional — and determine which is right for your situation. Learn how other tax-advantaged accounts, such as a health savings account (HSA), can optimize your taxable income. Working with a knowledgeable CPA will ensure you are taking advantage of your investment accounts. 

Final thoughts

If you’re not where you’d like to be with your investments, don’t fret. It’s never too late to start or even change course. If you’d like some guidance on achieving your financial goals, we’re here to help. Contact us to set up an introductory meeting. 

Why Career Advancement for Women is More Than Just a Title Change

In the U.S., women are still battling to make equal wages to men. The implications of women earning less than men are more than an issue of equality; it affects their financial wellbeing and future. 

 In this article, we wanted to explore why female career advancement is so important and what it means for women’s financial future.

The obstacles

Society still perceives women as the primary caregivers of their children as well as carrying the majority of household responsibilities. What this means for women who want to get married and/or raise children is that these responsibilities demand a good amount of their time. Children get sick or have days off of school which competes with working mothers’ working hours. For employers that have expectations of the number of hours an employee should be working, this can be a big impediment to women promoting within their workplace to higher-paid positions. 

Along with these responsibilities, women often carry the mental load of planning meals, making doctor appointments, keeping track of birthdays and school events, among other things. This constant mental tracking can take its toll on a woman and cause burnout. This can make her feel as if she doesn’t have it in her to devote more to her work or seek out better opportunities. 

There is no simple solution to solving these issues. It’s a collaborative effort between society, employers, and partners or the social network of working women. But let’s look at how professional development and growth can impact women financially.

More money equals more retirement savings

Higher pay can mean a lot for individuals. One of the most impactful ways that more pay can impact a woman’s life is in retirement savings. In the U.S., the life expectancy of women is longer than that of men, which means women tend to have a longer retirement period than their male counterparts. The more that women can invest in their retirement savings now, the greater that investment can grow to create a comfortable retirement living. 

Many employers offer their employees a 401(k) contribution match program up to a certain percentage. For example, an employer will match up to 3% of an employee’s salary that they contribute to their 401(k) plan. We always encourage people to contribute as much as they can comfortable to their 401(k) and take advantage of their employer’s contribution. 

Investing in future generations

For women who decide to have children, one of the most important things to consider is their education. Children are costly, and when thinking about how you want to set them up for the future in adulthood, paying for a college education can be added stress. A 529 college savings plan is a great way to save for a child’s education, and the more you can contribute to it now, the greater the payoff will be when it comes time to pay tuition. We love showing our children the value of hard work, but we equally encourage showing them how to be financially savvy. 

The art (and payoff) of negotiation

For women pursuing career advancement, there are no greater skills to bring to the table than confidence, knowing what you’re worth, and having the courage to ask for it. If you’re up for a promotion, come prepared. Demonstrate and explain your value to your employee and do your research for the market rate for the position you’re pursuing. Don’t be afraid to aim high. The worst that can happen is they negotiate to a lower number. But don’t settle with something you’re unhappy with or you don’t find fair. Make a compelling case and have confidence in yourself that you’re worth it. 

We love partnering with women on their unique financial journeys. Whether you’ve claimed that big promotion or are going through a difficult time such as a divorce or the loss of a spouse, we want to help you evaluate your financial plan to maximize the investments that are the most important to you and your future. Contact us today to get started.

Is Inflation Haunting Your Financial Dreams? Part 1: What We Know

Has the specter of inflation got you spooked? Recent headlines are filled with sightings. In this two-part series, let’s take a closer look at what to make of all the commentary, and what you can do about it as an investor. First and foremost, we caution against succumbing to fear or panic in the face of inflation. As usual, careful planning remains your best guide.

 

What Is Inflation?

Inflation is the rate at which a currency loses its purchasing power as prices increase over time. So, say a cup of coffee cost $1.00 twenty years ago. If the average annual inflation rate had been 2% between then and now, that same pour would now cost you $1.49. Various goods, services, and sectors often experience different rates of inflation at different times, but general inflation is usually calculated based on the Consumer Price Index (CPI), or a similar broad pricing index.

 

Recent headlines have been reporting a noticeable uptick in inflation. Superlatives like “best” and “worst” grab the most attention, so outlets have been abuzz with reports of how a 5% May consumer pricing surge was “the biggest 12-month inflation spike since 2008.”

 

Putting Inflation in Proper Context

Before you read too much into these recently rising numbers, it’s worth remembering their context. We’re comparing May 2021 to May 2020, when we were still deep into what The Wall Street Journal called a “screwy” pandemic economy. The WSJ explained, “If a company takes a hit in one year and then gets back to normal the next, it can look like its profits are soaring when in fact they are just getting back on track.”

 

Zooming out even further, the Federal Reserve’s 10 Year Break-Even Inflation Rate is one common estimate of the market’s expected average annual inflation rate for the next 10 years. As of mid-June, that rate stood at 2.3%. That’s up from the lower 1.2% rate expectation from mid-June 2020, but it’s still not eye-popping.

 

Which leads to another important point: Not all inflation is bad. In fact, a bit of inflation goes hand in hand with economic growth and reasonable interest rates for lenders and borrowers alike. A 2% annual inflation rate is typically considered a desirable norm for greasing the wheels of commerce, without destroying the working relationship between currencies and costs.

 

What if Inflation Runs Amok?

And yet, while inflation has its purposes, it’s concerning if it goes on a rampage. When it does, uncertainty has spiked as well, wreaking havoc on commerce, the economy, job markets, real estate, and financial markets. (Deflation—the opposite of inflation—can also upset the economy if prices drop too precipitously.)

 

Investors who were around in the 1970s may remember the last time the U.S. experienced red-hot inflation, and what it felt like when it spiked to a feverish 14.8% in 1980.

 

The New York Times described it as an era when “prices of real assets like houses, gold and oil soared. Average mortgage rates exceeded 17 percent, and interest rates on bank certificates of deposit approached 12 percent. It was hard to know whether a 5 percent pay raise was cause for celebration or despair.” While 12% CD rates may sound great, when interest and inflation rates are comparable, the real returns from even high-interest CDs essentially become a wash.

 

After the 1980 high-water mark, the Volcker-era Federal Reserve tamped inflation back down. So younger investors have heard of, but never experienced such steep inflation for such an extended time. Despite occasional alarm bells, inflation has mostly continued to hit the snooze button for decades. At least so far.

 

Next Up: What Can You Do About It?

What if inflation does get out of hand, and stays that way for a while? Depending on who you heed, the possibility ranges from unexpected, to possible, to a near certainty. In our next piece, we’ll cover why forecasts remain as fuzzy as ever, and how investors can best prepare for whatever may happen next. As usual, prudent planning is preferred over rash reacti

Investment Options for Small Business Owners

Being an entrepreneur means you’re blazing your own trail. A big pro is that you have no one but yourself to answer to. A con — you are in the driver’s seat when it comes to your business, leaving you with big decisions. But, this can also be a perk of being a small business owner, as long as you are educated and have proper guidance.

To be a successful business owner, it is imperative that you learn how to invest so that your business is more profitable and competitive.

If you’re looking to learn how to maximize your return on investment, this article covers the most common investments for small businesses.

1. Stock Market

The most important thing to remember about investing in the stock market is that it is high risk and is a long-term investment opportunity. However, this is one of the most common investment types for small businesses. A company divides the business property into shares which are sold for profit. When someone buys a share of a company, they are investing in a small part of the company and shares in the profits and assets.

The stock market is a risk because it is contingent upon the success of the company in which someone is invested. If the activity of the company goes up, shareholders share in that success. But if it goes down, shareholders feel that as well. And if the company goes bankrupt, an investor loses their entire investment. 

The stock market is considered a long-term investment plan for the very reason of the volatility of the market. A company’s profitability cycles through waves and valleys and it’s near impossible to time the market, which is why investing in the stock market is a long game.

2. Managed Funds

Funds are reserves of capital that are established for a specific purpose and are often managed and invested by professionals. A business owner can also invest in funds to obtain a return. Funds have the advantage of giving the investor access to a large number of investments through a single transaction.

There are three main types of managed funds: 

3. Bonds

A bond is a fixed-income kind of investment. It consists of a loan you make to the issuer of that bond (such as a company or the government) in exchange for regular payments in the form of interest. The invested capital is based on the expiration date of the bond.

Bonds are considered lower risk than stock, but also a smaller return on your investment. 

4. Retirement Accounts

A traditional 401(k) plan is a retirement account offered by employers to their workers, which has tax advantages and contributions. Offering 401(k) plans to employees is an important benefit expected of employers. Additionally, a company can choose to match an employee’s contribution up to a certain percentage. 

Another type of retirement account is an IRA or individual retirement account. Two main types of IRAs are traditional IRA and Roth IRA. Roth IRAs let you contribute after-tax dollars and take tax-free distributions in retirement, while traditional IRAs allow you to contribute pretax dollars, but you’ll pay tax on the distributions. 

You can learn more about retirement accounts for small business owners in this blog article. 

5. Certificates of Deposit and Savings Accounts

These banking products are considered safer investments and guarantee a return. Both are issued by banks or credit unions but have parameters. Certificates of deposit, or CDs, offer the investor interest on their investment as long as they don’t withdraw funds within a certain amount of time. There are penalties for withdrawing money before the end of the term, so putting money into a CD should be left alone. 

There are high-interest savings accounts available and are a good option to save for emergencies or prepare to make a large purchase. Similar to a CD, funds in a savings account should remain untouched unless it is needed. 

Owning a small business and make those daily and overarching decisions can be a lot. But investing should be a priority to help you plan for the future and scale your business. We specialize in helping small business leaders make those financial decisions that will have the greatest impact on the company and themselves. Give us a call today to set up an appointment to learn how we can help you invest in your business.

Planning Tips for Working Moms to Help Reduce Stress and Achieve Goals

This past weekend, we celebrated the incredible women that give unabated and love unconditionally — moms. In today’s world, being a working mom demands a lot. With responsibilities to work and family, it can be easy for working mothers to feel overwhelmed. Because supporting women is one of our specific focuses, we wanted to provide a few tips to help working moms prioritize their financial planning and budgeting to ensure they are hitting their financial goals. 

Prioritize what’s important to you

One of the biggest myths of being a mother is that you have to do everything for everyone else all the time. The reality is that that isn’t healthy or sustainable. Despite what your kids or boss may think, not everything is an emergency that has to be done right now. It’s important for you to identify and prioritize what is most important to YOU so that you know where to split and devote your time. 

For example, maybe your physical health is important to you. So you will want to prioritize time every day or several days a week when you are able to get in physical activity. Or maybe family dinners every Sunday are what fill your bucket, so keep schedules clear on Sunday evenings and turn off notifications on your phone. 

Whatever may be important to you, identifying them and how you’d like to fit those activities into your life will help you create a schedule that works for you.

Stick to a schedule and plan ahead

Speaking of schedules, now that you know what to prioritize, planning your time allows you to stay organized while focusing on what’s really important to you. Time blocking is an effective way to ensure you are carving out specific times for your priorities. Having a plan for your day can help you be proactive and reduce stress. 

For example, setting aside 30 minutes one day a week to plan a dinner menu and create a grocery list (and even order groceries) can help you stay on track. Similarly, sitting down for an hour every week to review your budget and pay any necessary bills is a great way to stay on top of your financial goals. 

Of course, things pop up from time to time, so reviewing your schedule every day and making any necessary adjustments can help you stay on track. This is especially where knowing your priorities come in handy. If something is impacting your priorities, you can ask yourself if it’s urgent or if something can be rescheduled. Stay committed to your plan and learn the power of “no.”

Automate, automate, automate

Friendly reminder that working moms don’t have to do everything. In fact, they shouldn’t. There’s enough on their plates that thanks to today’s technology, automation can be a mom’s best friend. Just think about it, you can automate many household chores such as vacuuming and washing dishes. 

The same simplicity can be applied to automating your finances. Automating tasks such as paying bills, saving, and investing can all be done automatically through a schedule that you create. When available, switch bills such as rent/mortgage payments, utilities, and phone to automatic payments. 

Additionally, to help meet your savings goals, set up automatic transfers every time you get paid or on a monthly schedule to automatically deposit a certain amount of money into your savings accounts. The same can be done with your investment and retirement accounts, and even 529 college savings accounts. 

Final thoughts

Even though we can take advantage of helpful technology, you can’t put your finances and budget completely on autopilot. Reviewing your budget and accounts should have a weekly block of time on your schedule. If you don’t know where to start when it comes to your financial goals and setting priorities, we’d be happy to help. Contact us to learn about how we serve women and help them identify their financial goals and create a plan to reach them. 

How to Prioritize Your Financial Goals

Everyone has different dreams and goals in life, including when it comes to their finances. How and what you spend your money on is up to you. But how do you prioritize and save for those big life purchases or events? We’ve got some tips for you to get you started toward your financial goals.

As financial advisors and wealth investment managers, there are three goals that we suggest for everyone.

1. Saving for retirement

We talk a lot about saving for retirement and the many strategies that you can utilize to secure your financial future. One of the easiest ways to save for retirement is to contribute to an employer-sponsored retirement plan, such as a 401(k). Many employers offer a matching contribution plan up to a certain percentage. Take full advantage of this by maxing out your contribution to receive the full match. For example, maybe your employer will match 100% up to 5% of your salary. Waste no time in signing up. 

2. Have an emergency fund

Having an emergency fund is a necessary safety net that could help you and your family should a serious situation arise, such as a layoff or injury that prevents you from working for an extended period of time. It’s suggested to save three to six months of living expenses for your emergency fund that could keep you from financial trouble should things take a turn for the worse. It’s important to remember that saving for this emergency fund should include enough money to cover basic living expenses such as food, shelter costs, and medical expenses.

3. Pay off debt

No one likes carrying debt and it can be a burden on your life. If you have debt that charges high-interest rates, such as a credit card, you want to work your way toward paying that off as soon as possible. The amount of money you will save from interest when you pay it off can then be filtered toward other financial goals you have. 

Once you are comfortable with your progress toward the three priorities above, then you can start prioritizing and saving for your other goals. But how do you do this? Start by answering the following questions.

4. How much will it cost?

You can’t really know how much you need to save until you start researching the cost. For example, maybe you want to save for your first home. Start by researching areas where you want to live and recently listed house prices in those neighborhoods. Then, talk to a financial advisor so they can review your current financial situation and consider your future goals to give you an idea of what you can reasonably afford. You will also want to talk to a mortgage lender to see what loan amount you’re approved for. Once you have an idea of how much house you can afford, start saving. It is best to put down 20% of the purchase price to avoid paying private mortgage insurance. 

5. When do I need the money?

You likely have a timeline in your mind of when you want to achieve your financial goal. Let’s keep the example of saving for a down payment on a house. You decide you can comfortably afford a $250,000 home, and you want to put down 20%, which is $50k. If you are starting from zero and want to buy a house in two years, you’d need to save more than $2k a month (50,000/24). You can adjust your timeline accordingly, knowing what you can afford to save.

6. How should I save for it?

Now that you know how much you need to save and how long it will take you to save for it, you have to decide how you will save for it (i.e. where should you put your money?). Here are some quick facts about different ways to save:

Once you have identified your financial goals, there are steps to take to save for them and achieve them. Whether it’s saving for the retirement of your dreams, or setting up a college fund for your children, we enjoy helping our clients identify their priorities and build an actionable and sustainable financial plan to achieve their goals. If you’re needing guidance, connect with us today to start building a better tomorrow.

The Building Blocks and Principles of Investment Strategies

There’s a lot of information to digest when you first start out investing, and it can be filled with a range of emotions. While we believe investing plays a critical role in the stability of your financial future, there’s a learning curve to understand what works and is comfortable for you. 

In this article, we cover the foundational pieces of investing and principles to help you better understand and build your investment portfolio.

Investment Options

When it comes to creating an investment portfolio, you have options. Each different investment option comes with its own risk and reward. 

Stocks

Stocks are small pieces, or shares, of a company that investors buy in the hopes that the business will succeed and the value of their share will increase. This allows the company to raise money to further grow their business while allowing their investors to share in the profit of their success. 

Individual stocks can also decrease in value. An option to balance this rise and fall of stocks is to invest in a stock mutual fund, which is a collection of individual stocks. Holding stocks in a variety of companies in different industries and sizes can be less risky than holding stock in a single company. Nonetheless, if you’re relatively young and investing for the long-term, investing in stocks is typically worth the volatility. 

Bonds

Bonds are loans made by an investor to a company or government that are paid back with interest over time. Although bonds pay out interest, their returns are typically lower than that of the stock market over time. But bonds often make up a part of every investor’s portfolio because of their stability and all bonds aren’t the same. Different types yield different interests and risks.  

Mutual Funds

As mentioned above, mutual funds house multiple individual investments into one offering. Investors don’t directly own the underlying assets themselves, but they do share in the ups and downs of the mutual funds’ value. Actively managed mutual funds have fund managers that execute the fund’s strategy, while index mutual funds are built to follow an index or a portion of the stock market. 

Identifying Your Goals

When you are determining your investment strategy, it’s important to consider your goals. In addition to your goals, factors such as your age and comfort level with risk will weigh in your investment strategy. 

Long term vs. Short term

When many people think of investing, they think about saving for retirement. While that is a big, long-term investment goal, there are other goals you may have. For example, maybe you want to invest to save for a down payment on a house. This is more likely a short-term goal (happening within five years or less), and there are investment options for that such as high-yield savings accounts or CDs that are more stable environments than the stock market. For long-term goals, such as retirement, the volatility of the stock market can be weathered more comfortably because the investments will be in the market longer. 

Active vs. Passive 

How involved do you want to be in your investments? Because of the complexity of investing, many people choose to have an investment manager handle their portfolios without weighing in too much on decisions, while others take a more active role. At Hiley Hunt, we enjoy partnering with you to determine your strategy and build an investment portfolio that works best for you. We always encourage our clients to stay informed about their portfolio, which is why our clients have access to monitor their accounts via an online portal. Additionally, we’re available to guide and inform our clients on their investments and rebalance their portfolio as necessary.

Choosing Your Risk

All investment strategies come with risk. But there’s a range from very low to very high, depending on the type of investment. However, risk and reward are irrevocably linked. Investments with the greatest reward come with the greatest risk. For example, investing stock in a technology startup is very risky, but could reward you with immense value should the company take off. At the other end of the spectrum, a bank CD comes with virtually no risk but pays very little return. Determining your comfort level with risk will help build an appropriate investment portfolio.

An Easy Way to Get Started

If talk of stocks and bonds and high risk versus low risk is overwhelming, an easy way to get started investing for your future is enrolling in your employer’s 401(k) retirement plan or opening an IRA. If your employer offers a contribution matching program, meaning they will match your contributions up to a certain percentage, opt-in for the highest contribution.

Along with helping individuals and their families understand and plan their finances, helping people create their investment portfolios is an exciting and important part of our jobs. If you don’t know where to start, or you’re a seasoned investor looking for a change, contact us today so we can help you build an investment portfolio that is right for you.

A Beginner’s Guide to Investment Tax Basics

Tax season is in full swing, and we wanted to give an overview of what to expect when it comes to investment taxes. Taxes are ever-changing and can have a significant impact on your net returns. Detailed tax rules for dividends are on the IRS website. We always encourage you to consult a tax advisor for the most comprehensive and up-to-date tax information, but here is an overview of investment tax basics.

Tax on Capital Gains

Let’s assume you buy some stock for a low price and after a certain period of time, the value of that stock has increased substantially. You decide you want to sell your stock and capitalize on the rise in value. The profit you make when you sell your stock is equal to your capital gain on the sale. 

The IRS taxes capital gains at the federal level and some states also tax capital gains at the state level. The tax rate you pay on your capital gains depends in part on how long you hold the asset before selling.

There are short-term capital gains and long-term capital gains and each is taxed at different rates. Short-term capital gains are gains you make from selling assets that you hold for one year or less. They’re taxed like regular income. That means you pay the same tax rates you pay on federal income tax. Long-term capital gains are gains on assets you hold for more than one year. They’re taxed at lower rates than short-term capital gains.

Tax on Interest

Most interest income is taxable as ordinary income on your federal tax return and is, therefore, subject to ordinary income tax rates. Generally speaking, most interest is considered taxable at the time you receive it or can withdraw it.

One exception is interest on bonds issued by U.S. states and municipalities, most of which are exempt from federal income tax. Investors may get a break from state income taxes on interest as well. U.S. Treasury securities, for example, are exempt from state income taxes, while most states do not tax interest on municipal bonds issued by in-state entities.

Tax Losses and Wash Sales

Investors can minimize their capital gains tax liability by harvesting tax losses. If one or more stocks in a portfolio drop below an investor’s cost basis, the investor can sell and realize a capital loss for tax purposes. Investors may offset capital gains against capital losses acquired either in the same tax year or carried forward from previous years. Individuals may also deduct up to $3,000 of net capital losses against other taxable income each year. Any losses in excess of the allowance can be used to offset gains in future years.

But there’s a catch. The IRS treats the sale and repurchase of a “substantially identical” security within 30 days as a “wash sale,” for which the capital loss is not allowed in the current tax year. The loss increases the tax basis of the new position instead, deferring the tax consequence until the stock is sold in a transaction that isn’t a wash sale. 

Tax on Dividends

Companies pay dividends out of after-tax profits. That’s why shareholders get a break, a preferential maximum tax rate of 20% on “qualified dividends” if the company is domiciled in the U.S. or in a country that has a double-taxation treaty with the U.S. acceptable to the IRS.

Non-qualified dividends paid by other foreign companies or entities that receive non-qualified income are taxed at regular income tax rates, which are typically higher.

Final Thoughts

People get excited and eager to learn about investing and investment strategies, but don’t have quite the same interest when it comes to understanding investment taxes. For this reason alone, we encourage you to work with a trusted tax advisor and wealth management advisor. Part of a successful financial plan is astute tax management. When you work with us, we can refer you to experienced tax advisors that can round out your financial strategy and ensure you are getting the most out of your investments. Set up an introductory meeting with us to see how we can help you on your investment journey.

How to Be Tax-Wise Throughout the Year

Last year crept to a close and the new year means “tax season” is on a lot of people’s minds. But thinking about your income taxes shouldn’t be confined to one short time period of the year. The best way to minimize your tax liability is to engage in year-round tax-wise investing. To do so, you must consider your personal investment habits and the tax efficiency of individual investments. 

You and Your Investments

Tax-efficient investing starts with you. There are several personal habits you can embrace that make for smart tax-wise investing. Here are a few ways to get started. 

It’s such a simple adage, but if you invest according to plan, specifically in the form of a written Investment Policy Statement, everything we are about to explain will be easier to accomplish. By clearly defining and documenting what you plan to achieve with your investments and how you plan to achieve it, you and your financial team are best positioned to ignore the inevitable, often tax-incurring distractions along the way. A detailed investment plan also serves as your reliable guide for resolving any conflicting priorities when balancing tax efficiency versus other considerations within your overall wealth management. 

Simply put, the more trading you do in your taxable accounts, the more “opportunities” you create to be taxed on the proceeds. The fewer trades that are required to accomplish your investment plan, the better off you’re likely to be when taxes come due. 

The more assets you can hold in tax-sheltered or tax-free accounts such as IRAs, Roth IRAs, 401(k)s, 529 college saving plans, and health savings accounts (HSAs), the more opportunities you have to avoid or at least postpone the tax ramifications otherwise inherent in building capital wealth.

Inside Your Investments: Not Every Fund Is Created Equal

Next, consider your individual investments. For example, let’s say that your investment plan calls for holding a diversified mix of domestic and international stocks in your taxable accounts. Unless you’re planning to invest directly in thousands of individual securities (which we generally advise against), you will need to choose one or more funds to make up the desired mix. That’s where the challenge begins because even if two funds share identical investment objectives, one may be considerably better than the other at tax-efficiently managing its holdings on your behalf.

It’s easy for fund managers and investors to ignore this important detail because not all dollars lost to a fund’s tax inefficiencies show up in its published returns. Some of them may show up as annual capital gains distributed to fund shareholders (i.e., you), who must pay taxes on the gains at their individual tax rate – whether or not the share value of the fund itself has gone up, down, or sideways.

To minimize such scenarios and otherwise soften the blow of your fund’s taxable trading activities, it’s worth seeking out managers who exhibit best tax-management practices, especially for funds that you plan to hold in your taxable accounts. Below are some traits to look for. 

Just as you should minimize your own hyperactive trading, your fund managers should do the same by heeding the academic evidence on how markets operate. Most managers try to “beat” the market by actively picking individual stocks or forecasting when to be in or out of it. Instead, look for managers who are seeking to build lasting value by patiently participating in the long-term growth expected from the return factors being targeted. Evidence-based investing is not only a more sensible overall approach, it also is typically more tax-efficient. 

As implied above, it’s best to invest in funds in which your fellow shareholders are less likely to panic-sell during bear markets. Undisciplined investors may force a fund manager to liquidate appreciated holdings to fund their flight, incurring distributed capital gains that you, as a fellow shareholder, must shoulder along with them. Investors who form personal investment plans adopt an evidence-based strategy and choose like-minded fund managers to help them implement their plans should be better at retaining their resolve, even during volatile markets.

Some fund families offer versions of their evidence-based funds that are deliberately tilted toward favoring tax-friendly trading over maximizing gross returns with no regard to the taxable consequences. Tax-friendly trading can include practices such as avoiding incurring short-term (more costly) capital gains and more aggressively realizing available capital losses to offset gains

 

Follow these basic best practices when it comes to your investing and you will be well on your way to making tax-wise investments. As always, for specific advice you should engage with a tax professional and nothing in this article should be relied upon as tax counsel. If you’d like to learn more about how we can help you with your own tax-wise investing, contact us today.