8 Healthy Financial Moves To Make While You Self-Quarantine
COVID-19 is your “wakeup call” and perfect time to get eight key personal finance items in order.
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COVID-19 is your “wakeup call” to get eight key financial items in order.
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Use the COVID-10 self-quarantine as a prime opportunity to recognize, reflect and plan your family’s financial future. Take the time to resolve difficult conversations and issues between you and your family. Organize a cache of all-important financial documents, associated usernames and passwords. Make sure that your will is updated and distributed to the proper people. Talk to your parents about how they want things to play out when they pass. Reflect and confirm that you are comfortable with your current investment allocations.
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I am writing to you from my home office, which I am currently sharing with my wife and all of her very loud online meetings, while the boys bitch and moan about having to do schoolwork on “more than one subject at home”. Needless to say, the Chamberlain family is in the process of figuring out how this entire COVID-19 environment is going to work out. We are cautiously optimistic, that we will get through this, with a lot of patience and, it could be a time that brings us closer together as a family.
As we adjust to the coming weeks of forced social distancing, WFH and home schooling, and open calendars, we are being given the rarity of time. Time to get crucial, but often overlooked planning items completed. Use COVID-19 as a wakeup call to get your documents in order, deal with difficult family conversations and make long-lasting adjustments that will benefit you and your family —guaranteed.
Create a shared file with all your accounts info.
For each of your individual and joint accounts, record the url, username, password and the latest pdf statement for the following:
Checking/savings accounts
Credit card
Mortgage
Car/student loans
Brokerage
IRA/Roth
401k
Car/home owners/umbrella insurance
529s for the kids
Life insurance policies
Ensure both you and your partner know where your latest tax files are located.
If they are soft, they are likely encrypted with a password, record it. Also record your accountant’s name and contact information.
Share your will.
Get a soft copy of your will. Forward it to family, beneficiaries and the executor.
Don’t have a will?!! Now is the time to get one.
Getting a will is not hard or time consuming. The hard part is the conversation between you and your partner about:
Choosing a guardian for your children, if both parents died
Divvying up special items
Deciding on your power of attorney to deal with property/assets
Choosing your executor
Who is going to make health care/life decisions for you should you become incapable of making your own decisions? And when does the plug finally get pulled?
Know your parents’ wishes.
Since we are on the will topic … have a conversation with your older loved ones. Do they have a will? Do they have specific wants, were they to die? Where will they be buried? Who is the executor of the will? Do all parties of the will know and understand the situation? Is their estate in good order? Do they owe money? Do you know where their important docs are kept? Who do they count on for tax/financial/business/insurance/banking advice?
Emergency cash reserve - build it!
Do you have enough cash in an emergency fund to accommodate 3 months of living expenses? Typically, it can feel burdensome to keep this much cash in an easily accessible savings account. During times of extreme uncertainty, such as the time we now face, cash solves a lot of problems (and relieves anxiety). If you don’t have enough saved, now is the time to start planning how you are going to do it.
Invest in your social network
Do you have the social/family network, in close proximity, that will help you through trying times? If you have been putting your friendships and family time at a lower priority than work, you are probably about to feel the negative affects of that decision. Now is the time to come up with solutions to enrich those relationships and make sure your family/friends know you love them.
Recognize your risk tolerance
How are you dealing with the extreme variability of your investments. Now is the time when you really start to understand how you emotionally handle the market’s ups and downs. Are you properly invested? Are the drops in your portfolio causing you extreme pain? Now is the time to talk to your financial advisor about your long-term investment strategy.
This is a wild time. Let it be a forcing function that helps you solve some outstanding ugly issues. And continue to look on the bright side of the situation.
*I discovered the ~10 Words, ~100 Words, ~1000 Words from the City Schools of Decatur COVID-19 emails and I’m a big fan of this communication style. Hopefully, you appreciate it too.
Worst Week In The Market, Now What?
It has been a crazy week in the market. By weeks end, the SP500 has lost ~12% … roughly where the market was back in September (not that long ago). And that is after the market returned 30% in 2019.
The current issue is being blamed on the outbreak of the corona virus (COVID-19) and how it will negatively impact the economy. And possibly to a lesser degree, on Bernie Sanders locking down the Democratic nomination come Super Tuesday.
I do not claim to have any idea how far this outbreak will spread, nor how many lives it will claim, before it is brought under control. I’m reasonably certain that many (or perhaps most) of the world’s leading virologists and epidemiologists are working on it, and I believe that their efforts will ultimately succeed. Clearly, this is nothing more (or less) than my personal opinion. But if the rich history of similar outbreaks in this century is any guide, this would seem to be a reasonable hypothesis.
Source: Stockcharts.com
I draw your attention to:
SARS in 2003-04, also originating in China
The bird flu epidemic in 2005-2006
In 2009, a new strain of swine flu
The Ebola outbreak in the autumn of 2014
The mosquito-borne Zika virus outbreak in 2016-17
Without belaboring the point: the super-spreader of SARS – a fish seller – checked into a hospital in Guangzhou on January 31, 2003, basically infecting the whole staff. The epidemic exploded from there.
On that first day of the litany of epidemics cited above, the S&P 500 closed at 855.70. Seventeen years and six epidemics later (including the current one), this past Friday the Index closed fairly close to four times higher. I’m confident that you see where I’m going with this.
You are investing for the long term, to reach long term goals. Several investment principles to be considered:
1. Stocks are completely irrational in the short term, making mad swings throughout days and weeks. However, stocks are completely rational in the long term, they grow at 9.5% per year.
2. Looking at past data, drops like this weeks, happen every 12-18 months and last 4-6 months.
3. Think like a business owner. We are not buying tickers, we are buying the best businesses in the world, with strong moats, great innovation, access to capital and willing purchasers. While there will be short term disruptions to these companies, its best to view them as wonderful assets ON SALE.
4. Always have some cash on the sidelines. It will help see you through turbulent times, as well as providing liquidity for buying opportunities. (For those of you whose money I manage, we just allocated some of your cash stock pile. to buying).
I don’t have a crystal ball, so I can’t tell you that stocks won’t drop another 10% next week. They could very well … or they could rally. What is important is that you understand market volatility, while committing to investing through it.
If you have any questions or concerns about your investments, please don’t hesitate to reach out to me. I am here to help.
Are You Underpaid? Find Out In 5 Easy Steps
I was recently asked by a client how I thought her salary compared in the market place. It was an interesting question, because I do have visibility into exactly how much money a large number of people make. And it is a bit of a taboo topic among friends to debate salaries. Not very often are you out at dinner with friends, sipping a craft cocktail, and everyone takes turns sharing their salary and compensation.
My initial thought was that this particular person was leaning towards the lower end of the range. It’s an unfortunate fact that the gender pay gap still exists today where the median salary of women is .79-.94 cents for every one dollar a man makes. So I told her my best educated guess, noting that I don’t have another client with her exact title and years of experience.
My second thought was: everyone in the work force should know exactly what they are worth in the open market. Unemployment is at historically low levels (~3.5%). And there are a record number of job openings (6 million). So the best way to find out exactly what you are worth is to hit the job market.
How to find out if you are underpaid
Update Your Resume
It may need a new format, if you have not updated it in a while. And make sure and specifically lay out major wins you have had on the job and how you participated in the win. If you don’t have a color picture, you need to add one.
Leverage Linkedin
Based on your resume, you need to update your Linkedin profile and connect with as many peers and friends as possible. You likely don’t need to pay for any add on’s at this point. But you do need to start creating a compelling presence. The vast majority of recruiters are using Linkedin.
Use your Network
Start getting the word out that you are looking for some interviews. Use your network to gain entre into potential job postings. When you find interesting jobs, that you don’t have connections to, apply for them. Put your name in the hat!
Interview
Even if you don’t really want a new job, use this is a fact finding mission. What are the important skills for your type of job? What are the technologies being valued? What are salary ranges?
Know your worth
If you get an offer, wonderful … you know exactly what you are worth. And now you get to decide if you want to stay with your current gig (and ask for a raise), or make a jump.
In all cases, hitting the job market right now, will provide a gold mine of information that will help you evaluate your current job/role, what you are worth, and areas that you may need to improve.
**Note that there are additional ways to learn more about salaries, like glassdoor, local recruiters or professional groups. These are good tools, but don’t provide the additional benefit about your own personal skills and potential. Nor does it keep you personally marketable, like going out and actually hitting the job market.
If you have any questions, don’t hesitate to reach out. I am glad to help.
How To Stop Worrying About Your Finances- In 3 Steps
Do you spend too much time worrying about your finances?
You’re not alone. Personal finance tops the list of a source of stress for more than two thirds of Americans. The most common finance worries include credit card debt, paying for college, budgeting, saving, market volatility and retirement savings.
The problem with worrying about finances
Worrying tends to lead to unproductive time and more worry, because you are spinning your wheels and not taking any set action.
“Worrying is like a rocking chair, it gives you something to do, but gets you nowhere.”
How to stop worrying
From How To Stop Worrying & Start Living by Dale Carnegie:
Ninety percent of worry can be relieved by writing out a descriptive and specific account of what is worrying you.
Next, write out potential things that you can do, to solve the problem. Once you have the list, pick the option that has the highest probability of success and do it. The act of doing something immediately relieves the pain of worrying. And begins the process of solving the problem.
Example:
I am worried about saving enough money to put my kid through college.
Things I could do:
Start setting aside $200 a month for college.
Do nothing.
Open a 529 and contribute $200 a month for the future.
Go tiger mom on my kids so they will get all “A’s” which will lead to a scholarship.
Likely best outcome: #3. Start doing it.
Ten percent of worry can be relieved by understanding the worst case scenario of what might happen were your worst worry to come true.
Once you understand the worst possible outcome, it frees you up to think about solutions. That is the key issue with “worry” it keeps you from taking action by causing you to jump between too many options, without taking any action.
Worst case scenario: Doing nothing.
If I do nothing, my kids will likely need college loans and start off their adult life with lots of debt or perhaps, they won’t be able to go to college at all.
3. In order to stop worry from creeping back into your life, you need to compartmentalize your days.
Wake up each day as if you died at the end of yesterday, and today you were reborn. You have any options at your disposal to accomplish what you can. And if you do your best today, your tomorrow will be a positive foregone conclusion.
what is The best financial option?
Often you won’t know the best outcome to your finance worries. Stop worrying, I am here to help you explore and solve those problems. Drop me an email, let’s talk.
How To Rebalance Your Portfolio - 4 Easy Steps
If you manage your own portfolio, you should rebalance your portfolio…
If you manage your own portfolio, you probably fall into one of two camps:
Actively manage: Seeking out interesting opportunities, buying and selling over time.
Set it and forget it: Check on how things are doing, on a monthly or quarterly basis.
In either case, you should spend some time once or twice a year rebalancing your portfolio.
What Is Rebalancing Your Portfolio?
Rebalancing your portfolio is the process of reallocating the weights of your current investments, back into the weights of your original investment strategy.
How To Rebalance Your Portfolio
Step #1 - Determine your current asset allocation across stocks, bonds, cash and alternative investments.
This will require a little bit of work, because you may have to access multiple accounts. The goal should be to have all of your assets categorized and accounted for in one tool. The tool should then break out by percentages at a high level, the total for each asset class.
Step #2 - Review your investment strategy.
Your strategy should take into account your risk tolerance, your time horizon and your goals. Your strategy should not appreciably change from year to year. But there are instances where it could, and you should account for them. At a high level this could look like: 65% - stocks, 25% bonds, 10% cash.
“Believing that a presidential election could have adverse consequences to the stock market, is not a reason to change your “strategy”. ”
Step #3 - Compare your strategic allocation goals to your current situation.
Once you understand your current situation and you have affirmed your strategy, it is time to compare the two for alignment. Often, over the course of a year, one asset class will have changed compared to the others. This will cause the percentages to have drifted out of alignment.
Why allocate across Asset types? asset percentages drift.
For example, when stocks are rising, then bonds are likely dropping or staying level. When stocks are dropping, bonds are likely rising. The goal of your allocation is to provide diversification, and to prevent wild swings in your portfolio.
Step #4 -Diversify inside each Asset class
Typically you will want to diversify inside each asset class. For example, in stocks, you might want 50% in US large caps, 10% in US small caps, 10% in REITs, 20% in emerging markets and 10% in cash. After ensuring that your asset classes are properly balanced, you will then want to make sure that your investments are properly aligned to your diversification percentages.
How Often Should You Rebalance Your Portfolio?
Once or twice a year. You don’t want to rebalance too often, because you will spend more than you need on trading fees. You want to rebalance often enough, that if one asset class increased in value, you can reap the rewards by selling high, while reallocating into an asset class that will likely increase its value in the future.
Are you properly allocated? Are you diversified? Have you recently checked? Questions? Set up some time to analyze your portfolio with your financial advisor.
**PS, that is my nephew, Cooper Greer and Shaq. They are decidedly not “balanced”.
What You Need To Know About Crafting An Agile Financial Plan
Agile financial planning is the most effective method I’ve seen to help people successfully reach their financial goals.
“Plans are useless. But planning is INDISPENSABLE.”
-Eisenhower
What is Agile financial planning?
Agile financial planning is crafting and iterating a financial plan over time, through an ongoing partnership with clients, so it specifically suits the client’s short/med/longterm goals.
How is Agile financial planning different than the traditional financial planning process?
In a traditional financial planning engagement, a client needs to gather all of their personal financial documents such as bank accounts, brokerage accounts, 401ks, insurance for car and home, etc. Then, they have a brief meeting with a financial advisor, who will create a financial plan based on the data from the financial statements provided. The advisor and clients meet again, where the financial advisor hands off the financial plan for the clients to implement. It’s much akin to your physical therapist giving you a list of exercises to do at home, that you never do. Or a dietician giving you a strict diet plan that doesn’t allow you to eat any carbs, even though your little guilty pleasure is pasta.
What’s the benefit of Agile financial planning?
Your financial statements only captures a snapshot in time and tells the stats of your story. You, your family and your goals are all unique to you and should be reflected in your financial plan. Most people aren’t comfortable pouring out their hopes and dreams to a financial planner in a consultation meeting. As a result “personalized” financial plans often turn out to be just based on numbers and stats and the client doesn’t implement it or stick to it.
In addition, life changes: Children are born, careers change, houses are bought, tuition comes into play, debt becomes an issue, relatives need help, inheritances come your way, retirement comes on to the horizon, etc. If you don’t have an agile financial process in place, your financial plan, no matter how good it was when it first was purchased, quickly becomes out of date and out of alignment with your life for today and the future.
Reaching your financial goals requires three key pieces:
1. Having a plan that will actually work for you.
2. Implementing the plan.
3. Having a plan that adjusts with your family’s circumstances.
A sneak peak Into How I Implement Agile Financial Planning
The first step in my agile financial planning process is to start by building the family Profit and Loss (P+L).
To do this we need income statements and spending account statements: savings, checking, credit cards. I ask clients to send me their statements as they track them down, rather than having to dig around for a massive amount of documentation.
Once I have enough information, I review the family’s cash flow and share my observations. If I am way off… they let me know. If I am close … they let me know. For example, often clients tell me, “Oh, actually much of my spending is on this other credit card and I haven’t given you that statement yet.” Through this process, we start to build an understanding of how we best communicate, a common language and a shared awareness of the family’s financial habits. Based on this collaborative and iterative process, we organically begin to develop a plan for how to handle the P+L in the future, that actually works for the client.
Do you have a partner that you can work with, who will craft and iterate your financial plan over time, through life’s ups and downs, so it specifically suits you? Everyone needs that type of partner.
This Is How Much You Should Save For Your Kid's College
With the families I work with, a common early financial planning question I get is:
“Are we saving enough to put Junior through college?… is $50/month sufficient?”
It’s funny how common this question is, even down to the dollar amount.
My first question back to them is:
“Tell me about your college experience. Who paid for it? What do you think are your responsibilities?”
There are a variety of responses to this, but usually align with one of the following:
“I came out with debt, and I don’t want my kids to carry that burden.”
“My parents paid for (much of) my college, and I am super thankful.”
“I put myself through school, and the experience made me who I am … and I want that for my kids.”
Where do you fit on that spectrum? Do both partners agree?
My second question is, how old are your kids?
College usually is planned to start when they reach 18. So this number will determine the time frame for saving.
Then we get into a few subjective areas
The parents’ college education is indicative of their kid’s future college experience. If you went to an Ivy League college, and you have a MD/PhD, your kids are likely to follow a similar path. On the other hand, if you and your spouse got liberal arts degrees from a state school your kids will, in all likelihood, follow a different path than the MD/PhD kids.
This data will help me model the proper yearly college expenses.
Harvard current yearly expenses: $71,000
Harvard yearly expenses in 10 years: $127,000
Ga Tech current yearly price: $28,000
Ga Tech expenses in 10 years: $50,000
Find stats for your college here.
The last few subjective areas are: What is your current income (and capability to pay as you go) and are you “saver”.
At this point, we have the basics we need to start putting together a college savings plan.
The Basics for a College Savings Plan
Your thoughts on paying for college
Where you went to school and the type of degree = where your kid will likely go
How long until the bill is due
The approach to saving/paying for school
I typically advise clients to start with saving for two years worth of college expenses, and to think about using a standard in-state college tuition rate. There are a number of factors that have led me to this advice:
The kids may not go to college
They could get HOPE scholarship money
College could be free in the future
The kids may take an alternate route than their parents
You don’t want to have all of this money tied up in an account that makes it difficult to access
That gives you a number: (Ga Tech 10 years out *2) = ~$80-100k
After you have wrapped your head around that big number, its time to add the additional factors from your own situation.
Lets say that you want to plan for 2 years of a top tier private school: (Harvard 10 years out * 2) = ~$250k
As the kids get closer to high school graduation, the muddy picture of their college future will begin to clear up. As the picture becomes more clear, the next planning steps will also become more clear.
The investment vehicle for college savings
You want a 529. A married couple can add ~$30k/year. You add money after tax. However the growth of the account is not taxed, if withdrawals are made for college expenses. The state of GA offers a small tax break for using the GA 529 program. If you live in a state that does not offer a tax break (like FLA, since they don’t collect state taxes), the VA plan gets high marks. If you need any help setting up these accounts, I can help.
The accounts should be in YOUR NAME,
with your child as the beneficiary.
I also recommend forwarding deposit information to your parents and other family members. In years to come, your kids will appreciate their college being paid for, much more than Poe’s x-wing lego set.
Josh’s College Saving Recommendations:
Talk to your kids about this. They need to understand how much college costs.
Children need to understand the value of their degree and future job prospects.
Take them to college campus’ sooner than later … start when they are in middle school or freshmen. Don’t wait until they are seniors. The more colleges they see, the sooner kids will gain a better understanding of what they want from their college experience. And that means you will have a better picture of how much you should be saving for college.