financial planning

The Abundance Conundrum

© Can Stock Photo / Thilien

People reaching retirement age these days have witnessed a huge evolution in how people live. Growing up, many never saw the inside of a restaurant except maybe once a year. Family road trips usually included a picnic basket with cheese or balony sandwiches. Larger families lived in smaller houses back then, so now each person has about double the living space.

Author Eric Barker notes that we probably have far more now than in the past, but we seem to be no happier. We instinctively believe that more will fix it: more money, more food, more things. The problem is the quest for what makes us feel good doesn’t have a finish line. “It’s a pie-eating contest and first prize is more pie.”

The pressure to fit in, to keep up with the neighbors is now compounded by social media, which generally shows the best version of everyone we know, and none of the problems. There have been many more pictures of expensive cars than of the tow trucks sometimes sent to repossess them. You see vacation photos from exotic places, but not the credit card bills which detail how they were financed.

Aggravating the situation, technology has given many the option of working all the time. Flexibility is nice, but in the olden days, you could leave your work at work and be engaged with your family when you were home. Now our work is in our pocket, so we have to make a decision: answer emails, or play with the kids or talk to neighbors or enjoy some other leisure.

Going with the flow is perhaps more costly than ever to our wealth and sense of wellbeing. Thinking about the fundamentals of our own happiness, pursuing our fondest ambitions in a mindful way, being thoughtful about how we spend our time: these might be the answer to the battle between “more” and “enough.”

Financial planning is at the root of a balanced approach to life and living. It begins with the attempt to define life on your terms, to learn your internal motivations, to clarify your understanding of success.

Clients, if you would like to talk about this or anything else, please email us or call.

Dealing with Financial Emergencies, Three Things

canstockphoto17945890

The dramatic and unexpected events of 2020 have tested our adaptability and resourcefulness like no other. There are patterns in those who are navigating these times successfully.

1. Realize there are usually lessons in history to guide us; maintain perspective.
2. Avoid hasty decisions that could have negative long term consequences.
3. Look for the opportunity in the challenge, not vice versa.

By taking time to think about the context, understand our own situation, and get accurate information about whatever the new reality is, we usually can make better decisions.

In personal finance, tapping high interest credit cards to maintain spending in the face of income reductions may be necessary for some items. But any outlays that can be avoided, or are discretionary, should be deferred, not financed. The average credit card interest rate remains in double-digit territory, a huge drain.

In your investments, long term holdings should not be disrupted by short term considerations. When the situation changes in ways that everyone knows, the new circumstances are likely to be priced into the market already. So there may not be an edge in taking action. If you do not need the funds in hand for pressing purposes, you might leave them be.

The stress of the situation may be alleviated by working on things within your control. Practicing healthier habits with regard to exercise, nutrition, sleep, and alcohol can also reduce stress, while giving you a sense of conrol.

Finally, contact with other people is a necessity for social beings such as humans. It may be especially useful as you talk things out or need someone to bounce ideas off of. We would be happy to visit with you by phone or email, Zoom video or in person – about whatever is on your mind. Email us or call.

Special Relativity

© Can Stock Photo / Alexis84

A friend wrote to me recently about the two kinds of time. The time that gallops onward in an undistinguished blur, versus the time that resolves itself into perfect crystal moments that stretch on to forever. Haven’t we all had those kind of peak moments?

We seem more prone to the ‘undistinguished blur’ sort of time as the years go by, and routines get set. Perhaps breaking the routine, new experiences, are what sets those forever moments apart.

My friend concluded that if there is a secret to keeping time in a bottle, it must involve moving forward – a special kind of special relativity. This notion has some interesting aspects, including one that bears on our work for you, I believe.

Many financially independent retirees have noted that they spent much time when younger worrying about having enough money in later years. Then, when they get there, they discover that money is abundant, compared to time, which is finite.

If we spend our working years on a treadmill of accumulating a fortune for enjoyment way down the road, perhaps we live life in a routine, in which time is an undistinguished blur. This shortens the subjective experience of our lives.

Alternatively, we can work to understand and perhaps moderate what “enough” means, and balance living in the moment against our longer-term objectives. Would this leave us open to more new experiences, new ways of thinking and being, and that sense of moving forward that might bring about more of those ‘forever’ moments?

Hey, I don’t know either. But I’m in favor of more special moments, and less undistinguished routine. Clients, if you would like to talk about this or anything else, please email us or call.

A Nickel Is Too Much

© Can Stock Photo / eldadcarin

Once upon a time, a colorful character roamed the streets of our village, loudly proclaiming an unusual philosophy of money and wealth. “If you have a nickel in your pocket, that’s too much. You better spend it on something so you won’t have to worry about it any more.”

This fellow always paid his bills, raised a wonderful family, and left a legacy of love and service that lives on in his children, grandchildren, and great-grandchildren. All who knew him (and everyone knew him) remember his joy and his generosity.

Without judging that philosophy, it is easy to see the benefit of combining a longer-term focus with the idea of enjoying the moments and days as they come. (Even this interesting old friend earned a secure retirement sufficient for his needs.)

Talking with clients over the past few weeks as we deal with the COVID-19 pandemic, the difference made by having some resources is astonishing.

  • People working at relatively advanced ages by choice have been able to temporarily withdraw from employment in exposed industries.
  • Retirees have seen some change in day to day activities like shopping and socializing, but parts of life including exercise and hobbies have been adapted to safer practices.
  • Some have made the choice to retire, having the resources for it, and wanting to avoid the stress of continuing exposure to health issues.

Money makes no one immune to disease. But those who have it have options that those without it do not. Before the virus showed up, we understood that money is awfully handy.

Clients, if you would like to talk about this or anything else, please email us or call.

Stagnation

© Can Stock Photo / stevekight

The word stagnant is an adjective used to describe things that are motionless, lifeless, lethargic, slow-moving, inactive or static, like water with no flow to it.

If these kinds of words also describe financial accounts you own, this may be a good time to get things moving. A dormant old 401(k) or too much cash parked in the bank could be in that category. Investments or advisors you don’t understand might be another sign.

A wise person once said that every past market crash looks like an opportunity. We do not have to wait until after the inevitable rebound to treat the current turmoil as an opportunity. It could be a great time to do something about the stagnant pieces of your financial puzzle. Or not. No guarantees.

(We address our communications to clients, but know that we have many eavesdroppers. To them we say, our approach is not for everyone. You can learn a lot about it here at 228Main.com, or in our Twitter or LinkedIn feeds.)

You may need to clean house in your finances or review your plans and planning in light of new information. If we might be able to help, put us to work. It’s what we do.

Clients, if you would like to talk about this or anything else, please email us or call.

Liquid Assets

© Can Stock Photo / sparkia

One of the keys to successfully weathering the downturns in the market, large and small, is having sufficient cash to do what you need to do in your real life. That helps avoid selling long term investments at bad times.

A few weeks back we went through investment advisory accounts to check cash balances for ongoing monthly distributions and make sure we had cash positions to last several months. And in our reviews with you, we inquire about upcoming cash needs.

As our lives unfold, our situations may change. For example, we talked with a pair of young adults a few weeks back, a brother and sister, who each are completing advanced degrees. In infancy, they received a gift of shares of stock from their great-grandfather, an old friend of mine.

Their holdings grew over the years. Each one called to talk about the strategy for paying off student loan balances later this year with the value of the accounts. When it became evident that the holding period was down to months, we advised the sale of sufficient stock to clear their balances, at once. Money that you plan on spending in the short term should not be invested for the long term.

The moral of the story is to communicate with us about exceptional cash needs that develop. If together we manage your liquidity to avoid untimely sales of long term investments, you and we will both be better off.

Clients, if you would like to talk about this or anything else, please email or call.

S.M.A.R.T. Goals?

© Can Stock Photo / PixelsAway

We’ve all hard about SMART goals, haven’t we? The acronym stands for “Specific, Measurable, Achievable, Relevant, Time-bound.”

Perhaps SMART goals should be balanced with GUT goals: General, Unbounded, Timeless.

SMART goals are all about what we do. GUT goals are all about who we are.

Great thinker James Clear talks says the key to lasting improvement is to change who we believe we are. This is key because we humans are always in the process of becoming who we believe we are. This is a general concept. For example, we might come to believe we are a person who prioritizes exercise.

Compare that to a SMART goal like ‘walk two miles every day.’ Life has a way of getting in the way of our plans; the specific plan to walk might fall to inclement weather, or an upset schedule. But if we believe we are a person who prioritizes exercise, we will usually figure out a way to get exercise despite the disruptions that inevitably pop up.

The SMART goal of walking two miles every day is specific, so involves failure when it is not met. But the GUT goal of becoming a person who prioritizes exercise, being general, does not chalk up a failure when the inevitable lapse occurs.

On another parameter, SMART goals can only be applied to things that are measurable. Many of the most important things cannot be measured. Try to quantify empathy, love, a sunset, or the work of an inspired person. A GUT goal might be about things that cannot be measured. One example, to be present in the presence of others: more empathetic, more attentive, more closely connected to the moment. If we come to believe we are that person, our actions will reflect it.

There are corollaries to personal financial planning. If we believe we are people who put something away every payday, who think twice before committing to large expenditures, who live below our means, who balance long term goals against impulsive spending, then our daily actions may support our key objectives.

Clients, if you would like to talk about this or anything else, please email us or call.

Financial Inflammation

© Can Stock Photo / staras

Inflammation is one of the ways the human body deals with harmful stimuli. It keeps us healthy. Chronic inflammation is something else: it is thought by some to be at the root of many health challenges. It seems to be a factor in heart disease, cancer, Alzheimer’s, and other serious problems. Complex processes are difficult to manage, but some things have been shown to reduce chronic inflammation.

We use the concept of chronic inflammation to think about other areas of life, as well. Sometimes we meet people who have conflicting goals, plans that are unlikely to happen, unsatisfying spending habits, or ineffective use of wealth.
All of these are a form of financial inflammation.

The first step in dealing with inflammation is understanding its role in keeping us from healthy bodies or working financial plans. Then we can work on the things that are aggravating it and the things that may help control it.

1. Clarifying goals provides a focus that may guide our decision-making and reduce uncertainty.

2. Figuring out a path to get to your goals provides a roadmap to move you toward that desired future.

3. Fixing the things that interfere with progress, and finding ways to improve your progress, are ways to systematically reduce the financial inflammation in your life.

Vitality is a good thing in your financial plans and planning, as well as in life.

Clients, if you would like to talk about this or anything else, please email us or call.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All or Nothing

© Can Stock Photo / agencyby

We keep hearing reasons why financial advisors should have 100% of every client’s invested assets, instead of some fraction. This theory is popular with… financial advisors.

You might guess we have a contrarian opinion on this subject, like most subjects. Our theory is that we end up with all the business we deserve. Since you who own the money are the judge of that, we are relieved of the burden of worrying about it. We don’t want any money in our shop that doesn’t want to be here, after all.

There are sound reasons to consolidate assets in one place – including lower costs through volume discounts. But some may prefer not to do that, for whatever reason.

Our investment approach is different than most. Rather than use the standard pie chart approach of owning a little bit of everything, or outsourcing investment management to some third party somewhere, we do hands-on research and our own thinking, using individual securities as appropriate. So our work is a useful diversification, something different, from run-of-the-mill conventional portfolio management using investment products instead of stocks and bonds.

When somebody wants to allocate a fraction of their wealth to our care, it is fine by us. We already know how much business we will ultimately end up with: all that we deserve.

It turns out that remembering whose money it is not only respects the people who engage with us, but also reduces our stress.

Clients, if you would like to talk about this or anything else, please email us or call.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.