personal finance

Dealing with Financial Emergencies, Three Things

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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.

The Next Best Thing to Free Money

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We are always gratified when clients find themselves with money to invest and their first thought is to put it to work with us. We pride ourselves on our ability to help clients work towards their financial goals, and believe that we provide a compelling service. But regardless of how good we might be at what we do, there are some situations where you can definitely do better with your money elsewhere.

Occasionally, younger clients who find themselves with extra money to invest will ask us whether they should contribute to their brokerage accounts or their employer retirement plan. Sometimes, their employer plan has an employer match they have not yet maxed out, which makes this question a real no-brainer. A dollar-for-dollar employer match is essentially a guaranteed, instant doubling of your investment. We might be good—but we’re definitely not that good. Even if you are unhappy with your employer plan’s performance, an employer match lets you take quite a lot of losses and still come out ahead of a more successful portfolio that doesn’t have the match.

Another situation where it makes sense to put your money elsewhere first is debt. In today’s low interest environment, you might not feel a lot of pressure to pay off cheap loans. However, if you have debt you’re paying 8, 10, or even 12% on, you should put some serious thought into paying off that debt before you invest that money in the markets.

If you pay off $5,000 of credit card debt that you are paying 12% interest on, your $5,000 “investment” will save you $50 a month, $600 a year, like clockwork. You’d be hard pressed to find any other investment that will pay you that kind of return—and if you did, it would likely have many risks associated with it. But once you pay off your debt, those interest payments are gone forever. We can’t really compete with that.

This is basic financial literacy you can use to improve your financial situation before you think about investing. As always, everyone’s situation is a little bit different, and we’re more than happy to discuss the particulars of your situation with you—even if the obvious conclusion turns out to be that you have more important places to put your money.


Investing involves risk including loss of principal. No strategy assures success or protects against loss.

Four Habits for Financial Success

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They say it takes all kinds to make a world, but we’ve noticed four habits that most financially successful people share.

1. Put something away every payday. Researchers were surprised to learn that some top-tier earners end up broke in retirement, and some bottom-rung earners retire with considerable resources. The successful savers tended to have the habit of putting something away every payday. One client told us, “It doesn’t matter how much you make, it matters how much you keep.”

2. Take on sensible debt, and no other kind. The problem with using revolving credit to “make life better” is that revolving credit tends to make life worse. If you carry a credit card bill of $1,000 from month to month, this means that you got to spend $1,000 that you did not have. But it also means that you have $240 less to spend every year in the future until the debt is paid off. By reaching for the illusion that you could spend more, you actually will have less money overall.

3. Nurture and grow your human capital. Your skills, knowledge, habits, training, experience and education are the sources of your human capital. This is your earning power. Some of the most important parts are free: a positive attitude, sound work ethic, and a desire to be of service.

4. Improve your odds of getting where you want to go by spending some time thinking about it. As Yogi Berra once said, “If you don’t know where you are going, you’ll end up someplace else.”

Most of our readers do not need these lessons—you live them. We are writing in hopes of provoking discussions with the younger people in your life, ones who may not know what you know about money and life.

As always, if you would like help with the fine points or want to discuss some aspect of your plans or planning, please call.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.