The Market, Investing and You

Hello 2016, Goodbye 2015.  I am not normally one who looks backwards and rarely one who talks about the market. However, I am a CFP® so I do have to ask the question…how are things going with your portfolio these days?

With the market acting like a two-year-old throwing a tantrum, are you holding more stocks than you are actually comfortable with?  When you first invested, you may have thought yourself a daredevil but, recently, you feeling more like a backyard gardener.  Are you getting towards the stage when you are thinking more and more about retirement? Contrary to the commonly held belief, you can’t make up for lost time with a more aggressive portfolio and the last couple of days are proof positive of that. Even if you are in your thirties and the market volatility is driving you nuts, perhaps you shouldn’t have as much exposure because, rest assured, this isn’t the markets last roller coaster ride. The point is, it is important to reassess your risk tolerance and investment objectives at least once a year.

Too often, people pick an initial couple of investments and call it a day – the “once done and forget about it” style of investing. Unfortunately, your money is a little like that goldfish you had as a kid – forgetting about him means Mr. Goldfish is getting flushed down the toilet just like…well, you get the picture. Investments are just like that goldfish, they don’t need much but every once in a while they do need some attention.

Now, while the year is young, why not take a look at how your money is positioned? Give your portfolio some attention and make an appointment with your advisor to review your allocations. Perhaps you have some tax losses you can stock pile for when the market rebounds. However, try to focus more on how your portfolio is balanced and whether or not it matches who you are. That way when the market decides to throw a tantrum in the future, you may not have to worry so much.


From “I Do” to “I Do Not”

We’ve all seen it on TV… A spouse says, “I want a divorce” and suddenly the couple finds themselves in a courtroom duking it out, trying to claim their valuable family possessions. Seems real, right? Oddly enough, less than 2% of divorces are actually settled inside a courtroom. Instead, there are a variety of options available today to “consciously uncouple,” as the saying goes.

First, you have to ask yourselves the big question…“Do you really even WANT to get divorced?” Perhaps what you really need is to talk to a discernment coach to help you determine if you’re just going through a rough patch in your relationship or if this truly is the end of your marriage. A little different from a marriage counselor, a discernment coach can help the two of you work through the decision of proceeding with the divorce or not.

If divorce is the answer, an attorney doesn’t necessarily have to be your next stop. You should consider talking with a Certified Divorce Financial Analyst (CDFA). This is a professional who can help you discuss your assets and financials and shape each person’s expectations for what your financial future looks like post-divorce.  The CDFA will give you an idea of what maintenance or alimony may be, how your assets might be split, and what the child support picture might look like. Additionally, and perhaps most importantly, the CDFA can give you an idea of what you can expect to pay for your divorce using the different methods available at this early stage.

At this point, you will have the information you need to take the next step in the process. If you both decide that you can be strong advocates for yourselves, you may consider using a mediator for the negotiations and then an attorney for the actual legal documents. However, if you feel you need more support in the negotiations, you should consider a collaborative divorce. A collaborative divorce is where both parties have an attorney as their back-up support, but the divorce process is handled outside of a courtroom.

If you don’t feel these methods will work for your situation, litigation may be your best option. Just keep in mind the reality of the situation – it’s not like the shows you see on TV. Most people are genuinely surprised by what “going to court” really entails. The time, energy, and relatively quick depletion of assets can not only affect your financial health but your mental health as well. Make sure to explore all of your options so that you can avoid the misinformation and misconceptions about the divorce process.


Kent on Money Radio Program

The first step in making smart financial decisions is understanding your financial situation. KentOnMoney.com invited me on their radio program for my take on the importance of understanding the ramifications of the financial decisions made during a divorce, and how I help clients to take control of their financial well-being.

 


Fees? What Fees?

Many Investors Are Unaware of Their Broker Fees

We’ve all heard the old adage that “nothing in life is free.” So, why do so many people assume that there are no fees associated with their money and investments? A recent survey conducted by the North American Securities Administrators Association (NASAA) shows that one in four investors had no idea what fees they were being charged by their brokerage firms. Additionally, it finds that about 30% aren’t even aware of any management fees or expenses.

Virtually every account that holds money has fees. These days it is tough to even find a bank account that doesn’t charge a fee. However, this survey also reveals that over 80% of investors recognize the importance of fees. That’s quite a disparity between those who feel that fees are important and those who actually know what they are paying.

First, let’s all admit that fees are important in servicing and maintaining your account. However, it’s your money so you should probably have some idea of how and what fees are assessed.

So, what to do?  If you want to be bold, and I recommend that you are, ask. Ask your retirement plan representative, ask your investment advisor, ask your banker. Have them total the fees charged on your account on an annual basis. Any good financial services representative should be more than happy to do this for you. If you are little shy about it, and that’s okay too, you can also check the Activity section of your statements for a rough idea of what you are paying. It won’t include the fees associated with the actual investment, but it will give you a good idea of what you are paying the firm who holds your money. If that seems too daunting, hire an objective hourly-only advisor to calculate it for you.

Next steps. You need to decide if the value you are getting from working with that advisor (firm or account) is worth what you are paying them on an annual basis. Sometimes it is, and that’s great. Nothing hits the sweet spot better than a good financial services relationship at a reasonable fee. But what if you aren’t getting great service and figure out that you are paying quite a lot in fees? First, have a heart-to-heart with your rep. Sometimes, just letting them know that you aware of the management fees can open up a dialogue on expectations.

This step might also be the wake-up call that you need to start looking for a new advisor, firm or bank. Either way, knowledge is power and you are in the driver’s seat once you have the information at hand.


Building Your Divorce Team

Building Your Divorce Team

Building Your Divorce Team

When you get married, you surround yourself with a team, which usually includes, at a minimum, a dress-maker (or seamstress), a caterer, a florist, perhaps a religious official and maybe a wedding planner. That’s just a few of the professionals who might be involved. It can take months to plan, be incredibly stressful, and the whole thing results in a piece of paper that says your official state of relationship has changed from single to married. However, for over 50% of Americans, that happy day is the beginning of a journey that ends with another piece of paper that, once again, changes your official state of relationship—back to being single. The average divorce today takes about a year, and sometimes longer, to resolve. It can also cost as much as (or more than) what you spent on your nuptials and has the potential to be emotionally overwhelming and financially crippling.

So what do you do?  Just as you did when you got married, you should surround yourself with a team of professionals when you get “unmarried.”  You probably didn’t make your own dress, so you should probably not write your own separation agreement. You would hire an attorney for that. Your legal professional is also going to help guide you through the legal system’s maze of Family Court, regardless of whether you use mediation, collaborative law or litigation. Instead of a caterer, you’ll have a financial professional who is going to help you understand the short-term and long-term financial implications of the decisions you will need to make. This piece can be particularly important, especially if one of the parties isn’t as involved in the family finances as the other, or if there is a business or pension involved. In place of the florist, you might have a therapist or counselor to help you, and/or your children, handle the emotional impact of uncoupling. Divorce can be emotionally complex for everyone involved and those emotions can, if allowed, result in poor decisions. And there could be others on your team depending on your circumstances, including a realtor, an accountant or tax-preparer, a child-specialist and/or a valuation specialist to name a few.

Additionally, just like most weddings are not cheap these days, a well-planned divorce comes at a cost. However, building a thorough divorce team and using those resources wisely can actually save you money in the long-run by making sure that you are making wise financial decisions to help protect you now and into your new future.

When we marry, we are building a future with “that special dance partner.” When we divorce, we are building a new future, just using different dance partners. Remember, when you go through a divorce, choose partners that have experience to try and avoid any missteps along the way.


Ready to Retire?

It’s time, you’ve been in the workforce for decades and you are thinking of pulling the trigger and retiring from your job. You worked hard at putting your financial house in order, reviewed your potential retirement expenses and income sources and now it’s time to think about collecting Social Security.

Did you know that there are over 1,300 different strategies for collecting your benefit? Some of these strategies will net you over $75,000 (during a lifetime) more than others. Additionally, there are over a dozen different items that you need to make a decision about and an eight year time frame during which you can make those decisions. And that’s just if you are single. There are nearly twice as many decision points if you are married and you can add more months to the equation. And you thought Common Core math was tough?

It is estimated that 90% of American retirees don’t maximize their Social Security benefits. Before you potentially leave a significant amount of money on the table, consider speaking with an advisor who can prepare you for the decisions that you face. Seek an financial advisor who is familiar with the process that can help guide you when it comes to making some very important decisions like:

  • Choosing between a spousal benefit or your own.
  • Whether to file or suspend.
  • Collecting against your ex-spouse versus collecting your own benefit.
  • Collecting early or letting your benefit build for a few years.

Let’s focus for a minute on collecting early versus letting your benefit build. It is Economics 101 that inflation on a higher amount will net you more later in life. However, every situation is different and finding a professional that can advise you on your unique financial circumstances may be the difference between being comfortable in your golden years or having to ask the kids for help.

If you are married, one of the other things you need to consider is making sure that your survivor receives the best possible benefit when you are gone. By maximizing your benefits and exploring your options you can help ensure a successful retirement.


Spring Cleaning of Your Financial House

Spring cleaning is the first thing that comes to my mind when I see the days getting longer and the flowers starting to sprout. Spring cleaning also applies to your financial house. Why not take an hour and review how you are doing compared to the budget you put in place last January? What? You didn’t write a formal plan for yourself for the New Year! It’s never too late to sit down and review where you stand financially. It’s not that difficult either, but it doesn’t hurt to have a coach on the sidelines helping you evaluate your next move.

For example, a good “best practice” is to (1) write down your goals and aspirations, (2) devise a plan to help you reach those goals, (3) periodically review where you stand relative to your plan and (4) engage the services of a professional to coach and counsel you on the right moves to make. As a career financial advisor, I work with very smart people every day who know what they need to do, but lack the resources to actualize their plan. That’s where I come in. As a fee-only financial advisor, my job is to provide as much or as little coaching as each client might desire. And, frankly, that’s all many clients need to feel confident and on-track with their plan. Questions? I am only a phone call away…


Retirement is just a stop along the way…

Good retirement planning is a balance of saving for tomorrow while maximizing your enjoyment of today. Are you holding out for when you’ll be retired “and you will get to do all those things you’ve been looking forward to doing?” Many financial advisors are wising up to the new reality of retirement. Retirement is in actuality an imaginary point on life’s path. People need to live their lives balancing enjoyment now and anticipation for later.

Now, this isn’t a license to ignore common-sense rules and throw caution to the wind with no thought to tomorrow (and, yes, some people actually live like this…). It is important to take time today to enjoy life while on the path. Surprisingly, many of the things people put off (taking care of relationships, postponing their overall well-being, reconnecting with old friends) cost little, provide perspective on what future retirement might look like, and can improve your health, which studies show helps improve your retirement finances.

The quickest route to a disappointing retirement is failing to contemplate, understand and experience what you’ll do when you get there. How will you know if you don’t do a little exploring now? Take a moment and speak with your financial advisor about the things you can do now to bring some perspective to your path to retirement.


Divorce American Style

The economy is on the rebound and many people are seeing the positive effects of the American economic recovery in their investment accounts. Good news…bad news! According to a study on Bloomberg.com, divorce filings fell to record lows during the Great Recession and are now on the rise. As we all know, divorces cost money. During the Recession, money was tight, assets balances were down, and many couples who would have otherwise gotten a divorce decided to consciously or unconsciously postpone their separation. With the economy on the rebound, fewer couples are deciding to stay together now that they feel they can afford to pay the bill, split their assets and support their separate lives.

If you are deciding to get divorced, take some time to do it right so that both parties come through to the other side in the best possible manner. Remember to consider all of your divorce options (i.e., mediation, collaborative law, litigation or plain old-fashioned do-it-yourself). Pull together all the information you need as efficiently as possible. Don’t just get any attorney; get a great attorney and don’t use your attorney as a therapist. Some of the professionals you should consider are: a mediator, an attorney (or two), a therapist (particularly if there are children) and a financial analyst. Building a team may seem like you are spending a lot of money upfront, but should actually save you money in the long run—well after the divorce papers are signed, filed and dusty.

Wondering where to begin on this painful topic? Check out the Foundation for Women’s Financial Education which is holding a series of workshops entitled “Second Saturdays.” These workshops are designed for women at any stage of untying the knot to help them better prepare for the complexities of divorce while avoiding common financial, legal and emotional pitfalls. Additional information can be found at WomensFinancialEducation.org