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Lauren’s blog covers topics that impact your finances, your family, and your future. Is there a topic you’d like Lauren to tackle? We’d love your suggestions and feedback.

Aging parents? 3 steps to pave a smoother financial path forward

Aging parents? 3 steps to pave a smoother financial path forward

Anna is amazing. At 94 years old, she is still incredibly energetic and remains larger than life in every way. Yes, she needs a bit of help getting out of bed in the morning, but from her perspective, that’s her only limitation. As she’s told me time after time, “My mind is still ticking away perfectly!” She firmly believes her cognition is faultless, and because she is fiercely independent, she’s kept her children completely removed from her finances.

A few years ago, Anna sold a piece of real estate and put all of the cash in her checking account. She still has plenty of cash remaining—enough to pay full-time, agency caregivers for another five to seven years. However, because her children are out of the loop, they have no idea how much savings she has or how soon her assets will run out. They worry that she’ll outlive her savings, even though Anna is set, literally, for life.

As a financial advisor, I see situations like these all the time. Anna’s situation is a simple one, but not all seniors—or their families—are as fortunate. It’s a fact that aging affects financial decision-making, even if that decline is not obvious to family members. That makes creating a long-term plan that includes some basic checks and balances, as well as a pre-determined timeline for transitioning financial responsibility from the parents to the adult child, one of the most important pieces of a smart financial plan.

If you have aging parents (or if you’re the aging parent yourself!), take these three steps as soon as possible to avoid costly mistakes in the years to come. Your future self will thank you!

  1. Start talking.
    In many families, money can be an emotional topic, and just as it can be difficult for many seniors to understand why they need to hand over the car keys when driving becomes unsafe, handing over control of their finances can also become quite the challenge. Ease the way with a family meeting. Have an open, honest discussion about how much money is available to pay for your parents’ care and who is the most suitable person to manage the assets when they are no longer capable of making prudent financial decisions. Decide together when and how to hand over the financial reins.  

    If you need help, consider hiring a mediator—a trusted financial advisor, family therapist, or mediation specialist. With the help of an impartial third party, everyone involved is more likely to remain open-minded and, hopefully, walk away with confidence in the plan and greater peace of mind. I also recommend sharing my blog post To protect your financial future, hand over the keys to your kingdom today with your parents to initiate the conversation. Hopefully, it will open the door to a more comfortable conversation.

     
  2. Create a system of checks and balances.
    As your parents age, they will inevitably need more and more assistance, and a system of checks and balances can help avoid a crisis. According to a 2016 report from the National Institute on Aging, trouble managing money is one of the earliest signs of Alzheimer’s disease and other age-related dementias. The deficit often becomes clear when the checkbook suddenly doesn’t balance because bills are paid twice, when every charity (not a select few) receives a check, or when a caregiver has too much influence.

    At our firm, we ask every client to sign an incapacity agreement when they turn 65. We ask, “What would we see you do that would be out of character so you would want us to intervene?” The answers range from making sudden changes to their financial plan, to gifting large amounts of money, to becoming secretive about their assets. The agreement allows us to call the person they name in the contract (perhaps you) when we see one or more of these triggers. By having this conversation long before any decline is anticipated, we’re able to ease the transition from financial independence to asking for help.

     
  3. Establish joint control of your parents’ accounts.
    We typically recommend establishing a revocable living trust, appointing the most responsible and available child as co-trustee, and opening a bank account in the name of the trust with multiple signers: the parents and the co-trustee. Another option is to name the adult child as an authorized signer (not a joint owner) on the parents’ account. Many of our clients’ families use our powerful eMoney Personal Financial Portal to oversee their parents’ financial transactions and balances and collaborate with us as financial planners.

Even without signature authority, Mom and Dad can give you visibility into their accounts using an “interested party statement” or giving you online access to their accounts so you can help manage the finances even from a distance. Both of these options are safer than opening a joint account, which can put your parents’ assets at risk. If your parents are not well enough to participate in financial decisions, that’s when it’s time to trigger the previously established power of attorney for their financial matters.

For any child, taking control of your parents’ assets can feel like you’re overstepping an invisible line in the sand. Suddenly your old roles are reversed, and you’re the one holding the purse strings. Yet making that transition can be an important stress reliever for everyone involved. If you don’t know where to begin, talk to us. We’re happy to help guide you through this delicate transition to create a smoother path toward a sound financial future—for the whole family.

 

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To stay on track in today’s market, simply take a look at the past

To stay on track in today’s market, simply take a look at the past

So far, October 2018 has been a discomforting reminder of what it means to be an investor. Intellectually, we all know that wise investing requires carefully balancing risk and reward over the long term. Despite having lived through the financial crisis of 2008, the Dot-com crash in early 2000 and, for some, the stock market crash of 1987, it’s been easy to forget about the risk side of the equation in recent years. As “the market” and our portfolios have swelled to unimaginable heights, we’ve come to expect long-term, stable, extreme growth, and we fear any loss of those gains.

Last week, the market dipped into potential correction territory. It’s no wonder that we’ve been getting a few calls and emails from clients who are feeling a new level of stress and anxiety. The two main concerns we’re hearing right now are 1) the stock market keeps going up (so it must crash soon!), and 2) my portfolio is performing much worse than “the market.”  These questions can make any investor feel like they need to do something. The place to begin is by addressing these very emotional concerns. As Benjamin Graham famously wrote 70 years ago in his book The Intelligent Investor:

“The investor’s chief problem—
and even his worst enemy—is likely to be himself.”

As long as you have an investment strategy in place that is designed to meet your goals and your needs, my short answer about what to do is simple: nothing. Here are some facts to help alleviate investors’ two main concerns, no matter what the market does next week, next month, or next year:

  • What if the US stock market crashes?
    A quick look at some facts about your portfolio and the market itself can help put the fear of a looming crash in clear perspective. First, if you’re a client of ours, the percentage of your portfolio in S&P US stocks is somewhere between 9% and 30%. That means that stocks play a balanced role in your portfolio, which is diversified in other assets like bonds, real estate, and international stocks. This diversification is designed to protect you from a US correction. Your allocation is designed to meet your goals through ups and downs, so sticking with that allocation is going to be your best long-term investment strategy.

    Second, no one can time the market. If you try to guess when to get out and back in, the odds are overwhelming that you will guess wrong. For more in this, see my blog post Volatility, escalators, and yo-yos from three years ago in October 2015. (Yes, it is the same old story!)
  • Why isn’t my portfolio keeping up with the stock market?
    No one wants to miss out on big gains. Headlines keep reminding us how great the US stock market is doing. It’s time to address this media-fueled FOMO (fear of missing out!) once and for all.

    Since most clients have less than 25% in S&P stocks, it’s not an apples-to-apples comparison between balanced portfolios and the US stock market. Also, when it comes to your long-term returns, risk matters, and the S&P 500 is about 180% riskier than our balanced portfolios. Lastly, bond prices, which also make up a portion of a balanced portfolio, have decreased this year, but these losses are temporary paper losses. For more depth on this topic, see my blog post Wall Street has gone wild! Is it finally time to change your investment strategy?

This is the perfect time to take a trip down memory lane. I opened the doors to Klein Financial Advisors in 2003, just five years before the financial crisis. This September marked ten years since the failure of Lehman Brothers, which is considered the triggering event of the financial crisis and the great recession. Consider these numbers for some perspective: On October 11, 2007, the S&P 500 Index closed at 1576.09. On March 9, 2009, the S&P 500 Index bottomed out at 676.53. That means that an investor with $1,000,000 in stocks would have seen the value of her investment drop by more than half, to $430,000.

In the weeks, months, and years that followed the crash, I held a lot of clients’ hands and successfully shepherded them through the financial crisis. Fear was rampant, but I assured them that the market would rise again and their portfolios would recover. However, many other advisors did not. Some advisors allowed their judgment to be affected by fear and inexperience. Many investors fired their advisors and went to the sidelines. After the crisis, many other advisors ‘played it safe’ by saddling their clients with illiquid, low-returning annuities and non-traded REITs—products designed by banks and brokerage firms to “limit volatility” and therefore investment returns. And just last year, after the 2016 election, some advisors counseled clients to hold cash for months. It was a costly mistake.

Experience, education, and judgment matter. Remember that so-called experts in the financial media industry are entertainers. Single-day returns are largely insignificant, and your portfolio is tailored to you and your life goals. So we repeat our mantra: stay disciplined and stay the course. And if you ever feel doubt creeping in, give me a call. I’m a skilled and patient hand-holder, and I’m always here to help.

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In Your Best Interest: Our Fall 2018 Newsletter

In Your Best Interest: Our Fall 2018 Newsletter

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.


Market Highlights Q3 2018

One lens we use to assess our economic and financial wellbeing is market prices for US stocks and foreign shares of corporations. From that perspective, Q3 was quite favorable for investors. US stocks and global stock indexes rose on strong economic indicators and corporate earnings. As you can see below, each of the US indexes posted solid gains, and global stocks overcame declines seen in the first half of the year. Prices for 10-year Treasuries dropped by the end of the quarter, pushing yields higher by 20 bps.

If your portfolio lagged compared to these impressive gains, don’t be alarmed—and don’t worry. A balanced portfolio is designed to avert risk by including US bonds which saw negative returns in the quarter due to the inverse relationship to rising interest rates. A balanced portfolio further includes global stocks whose returns were lower than the US market. Balancing risk and reward is the goal, and your portfolio should always reflect that reality. 

That said, current economic indicators point to continued growth. Jobs are up 196,000/month for the past year, and hourly earnings are up 2.9%. Interest rates are the highest they’ve been since April 2008 which signals a strong economy, and GDP growth is at 4.2%. Home sales are stable, consumer spending remains strong, and consumer confidence is at an 18-year high.

One of the few distractors from growth has been turmoil in international trade. The trade battle between the US and China has dampened Chinese stocks, though higher numbers at the end of Q3 hint at decreasing concern about the real impact of the trade war. Brexit—and its potential impact on commerce in the UK and Europe—remains uncertain. On the plus side, a revamped NAFTA (USMCA) agreement should ease tensions between the US and our trading partners in Mexico and Canada; Japanese stocks are approaching highs not seen since the early 1990s; and Germany, France, and the UK all saw gains in their respective stock benchmarks.

Will growth approach 4.0% in the last quarter of the year? Are security prices “too high”? Is a recession inevitable? We know that today the US economy is strong and security prices are exuberant. As always, the prudent investor stays invested, stays the course, and sticks to the basics with a balanced, risk-appropriate approach to growing and protecting your wealth through all market cycles.

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Rain in the forecast? It’s time to plan like an Easterner!

Rain in the forecast? It’s time to plan like an Easterner!

When I heard that there was a chance of rain this week in Southern California, I didn’t bet any money on the fact that it would happen. But I did do what I needed to: I pulled in my cushions from the patio and set my potted plants out from under the eaves ‘just in case.’ I suppose all that planning comes from my east coast upbringing. Where I grew up, we always expected a change in weather, and we never made plans without a backup. That was true for weddings, picnics, and even a short drive out to dinner. Yes, you could plan your day and hope for the best, but you always (always!) had a contingency plan.

When it comes to your finances, I recommend a good old, Easterner approach to planning. Why? Because even the best laid plans can go awry. Life happens, which means everyone needs a contingency plan.

Over the past week, I’ve been focused on income planning for two of our clients who are just entering retirement. It’s a deep-dive exercise in preparing for almost any possible scenario. We began, of course, with the basics: looking at their current assets, as well as their goals, values, and retirement dreams. Next, we built a plan that should fulfill their expectations. If they spend at the assumed rate. If the market remains at least somewhat reliable in its behavior. And if they live to be 100—no more and no less.

But we didn’t stop there.

I’ve always loved the Eisenhower quote about planning for battle: “Plans are useless, but planning is indispensable.” He knew first-hand that it is impossible to plan for an emergency on the battlefield because, by definition, an “emergency” is something that it is unexpected and certainly not going according to plan. My take on his wisdom is this: smart planning is what gives you the power to be flexible and adapt to stress when life doesn’t go according to plan.

So how do we plan for the unexpected? We shoot holes—lots of them—in every plan to see how it holds up. To do that, we look at the many stressors that could throw your plan off track. What if you or your spouse dies tomorrow? What if you need long-term care, and for how long? What if interest rates go through the roof, the stock market drops, or inflation escalates? And what if all of those things happen at once? Working from the best-case scenario, we look at the worst-case circumstances, and we create a plan that has the highest possible chance of succeeding—no matter what life throws your way.

What’s powerful about this approach is that it helps your plan build muscle. Pushing the boundaries helps us see what we can change to protect against stressors. The planning process also helps you understand which risks are worth taking—and which aren’t. Let’s say you’re already retired, and you have a large percentage of your portfolio invested in equities. That might be fine if you’re collecting a decent Social Security income, your house is paid off, and you have a good pension coming in.

But what if you don’t? What if you’re still paying a hefty mortgage, your Social Security income is minimal, and your only additional income is coming from your IRA? In that case, a significant market correction could create a major decline in your income so that overweighting equities could be devastating. Planning helps you understand risks, as well as the tradeoffs you may need to make if the unexpected occurs.

I’m a perfect example of someone who experienced a confluence of unexpected plot twists in life. My ‘plan’ was to get married, have two and a half kids, get a dog, and live happily ever after. When I found myself divorced with two kids and no dog, then remarried, then widowed, it was pretty clear that my best-laid plans were dust. In a way, I was lucky. All of those things happened when I was relatively young. I had time to rethink my plan, both emotionally and financially. But I never could have predicted then where I’d be today.

Here are the things you can predict (aside, of course, from death and taxes!): we will get rain again in Southern California, and we will see a market correction. By planning for whatever may come your way, you can act with knowledge rather than react out of fear. That’s the value of a carefully crafted, long-term financial plan. Armed with a financial plan that includes both the best-case and worst-case scenarios, when life takes you off track (as it surely will), you’ll have built the muscle memory to face any challenge with resilience and strength. Best of all, you can head into the unknown with financial confidence and peace of mind. That’s an empowering way to face any storm—and even find your rainbow.


Want to learn more about planning for the unexpected? See my blog post: There’s no such thing as an unexpected expense.

 

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September is the perfect time for a financial la rentrée!

September is the perfect time for a financial la rentrée!

I’ve been a Francophile for as long as I can remember. I’ve studied the French language (and used to be pretty darned good!). As I teenager, I spent two full summers as a student in the South of France in Aix-en-Provence and Grenoble. I fell in love with French culture, food, literature and, yes, even some cute French boys! When late August rolls around, I’m sure I’m not alone in wanting to emulate the French who, like the rest of Europe, almost completely shut down for a much needed (and completely un-American) two-week-long vacation. But there’s something new about France that I only recently discovered: the French tradition of la rentrée.

As you might expect, la rentrée does have some association with back-to-school season, but it’s about so much more than school children. La rentrée is a time when everyone—school children, yes, but also authors, politicians, and even newscasters—returns from the summer break filled with a nationwide sense of optimism for a fresh beginning. We may be thousands of miles away from Paris, but in the spirit of all things French, I’m on a mission to create our own financial la rentrée right here at home.

The best thing about la rentrée is that it doesn’t feel like a chore. There’s no word to describe it in English, but the closest I can come to putting it into my own words is that while there may be work to be done, each task is approached with hope and happiness and positive energy. Here are five simple steps to kick off your own financial la rentrée this month:

  1. Review your tax strategy.
    With autumn comes the final stretch of the tax year, which means that it’s your last chance to make changes that can have a real impact on your tax bill come April 15. While tax planning is important every year, the new Tax Law makes careful planning particularly important in 2018. As I wrote in my recent tax planning blog post, the current tax tables may understate your withholding, so now is the time to compare your actual withholding amounts with your projected tax bill, and to seek out other opportunities to optimize your taxes.

     
  2. Check your credit report.
    When is the last time you checked your credit report? Monitoring your account balances and financial transactions is very easy and it’s the best way to prevent identity theft and fraudulent use of your credit history. I recommend CreditKarma which offers unlimited and free access to your credit report, as well as a free credit monitoring service. I also like the idea of placing a credit freeze on your account which requires institutions to contact you before approving any new request for credit. Learn more about protecting your financial privacy in my blog post Getting personal about privacy.

     
  3. Weigh your cash balances.
    Cash planning is the foundation for any solid financial plan. If you don’t already have a sufficient “freedom fund” of cash, read why it matters and how to get started in my post There’s no such thing as an unexpected expense. If you do have your fund in place, take a look at how your balance has changed in the past year. If your balance is increasing significantly, you’re likely living below your means and may need to review your financial plan to be sure you are making your money work effectively. If your balance is decreasing, take a close look at why. If you’re living beyond your means or not saving appropriately for vacations, household purchases, and other “expected expenses,” an adjustment is in order.

     
  4. Review your long-term goals.
    Are your financial goals SMART: Specific, Measurable, Achievable, Relevant, and Timely? Are they in writing? As I wrote in my last blog post Am I on the right path?, whether you are investing your time, your money, or both, you need a plan. Reviewing that plan regularly to be sure you’re on track toward your vision of the future is a must. Sit down and spend some dedicated time to explore your goals today—alone or with your partner if you have one—and create a SMART plan to get there on time and on target.

     
  5. Get help with the details.
    When I was in my 20s, I was able to keep myself motivated and physically fit all on my own. These days, not so much. That’s precisely why I hired a personal trainer. Nancy S. knows how to get me in shape and how to keep me motivated throughout the process. Most importantly, she points out things I didn’t know about how to get and stay fit and healthy. When it comes to your finances personnelles, a Certified Financial Planner (CFP®) can be your dream coach. A CFP is trained to help you identify SMART goals and create a realistic plan to get you where you want to be when you want to be there. No matter where you are in your financial life, hiring a fiduciary advisor may be the best la rentrée activity there is.

La rentrée is all about optimism and creating a fresh start.My personal la rentrée this year has been focused on rediscovering my love for French. I’ve been brushing up on my vocabulary and grammar using the Duolingo app (if you want to discover or rediscover any language, I highly recommend it!), I’ve been nose-down in Martin Walker’s Périgord-based detective series Bruno: Chief of Police, and I just discovered a French-language podcast called Coffee Break French that I can’t wait to start. I’m on my way to better, more proficient French and having fun along the way. I hope you’ll join me by embarking on your own la rentrée to improve your finances. What a wonderful way to slip into autumn. And if you do need help to make it happen, you know where to find me. À bientôt!

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Am I on the right path? Rosh Hashanah is the perfect time to be sure you’re on track

Am I on the right path?
Rosh Hashanah is the perfect time to be sure you’re on track

I’ve been listening to the inspiring Rabbi Lord Jonathan Sacks recently. His blog and his podcasts are inspiring (it’s no surprise coming from a man who served as Chief Rabbi of the United Hebrew Congregations of the Commonwealth for 22 years, was awarded the 2016 Templeton Prize, has taught at Yeshiva University, King’s College London, and New York University, and is the author of more than 30 books). His latest blog post, Investing Time, resonated with me. As I sit here today after the long Labor Day weekend, I ask myself, “Am I on the right path?” It’s a weighty question. Perhaps that’s why, so often, we tend to avoid it altogether—including from a financial perspective.

Sacks's blog post is rooted in the festivals of Rosh Hashanah and Yom Kippur, the days when Jews stop for a period of self-reflection. As Sacks says, “Time is short…without a wakeup call, we can sleepwalk through life, wasting time on things that are urgent but not important, or that promise happiness but fail to deliver it.” It’s a message that keeps coming back to me, both in my own life and in the lives of so many of my clients.

Like Dominic and Paula. When they retired two years ago, they found themselves in an enviable financial position. They had sizable retirement accounts after saving and investing for decades. They had wisely waited until age 70 to claim Social Security to maximize their benefits. (For more on the benefits of delaying your claim, read my blog post How long do you plan to live? And are you planning for it?) Plus, they each have something that has become increasingly rare: a guaranteed pension. They were enjoying their journey and had enough income to live a very (very!) good life.

What they didn’t have was a plan.

For the past two years, I’ve watched Dominic and Paula take oodles of money out of savings—far more than a safe 4% withdrawal. Dominic’s gut tells him everything will be just fine, so they have been living the high life. Though Paula stresses about how they can sustain their lifestyle, it’s easier to go with the flow and pretend money is not a concern. They say the current spending is temporary, but without a plan, they have no way to know when they need to change direction.

Sheryl is the opposite extreme. When her husband died last January, she took control of her finances—something she’d never had to do. Jack had handled everything himself, so she had no visibility into how much they owned or owed. Sheryl came to me for help right away, but changing direction has proved to be a challenge. We put together a carefully constructed plan, yet her emotions make her unable to see or believe the numbers. Because she feels off balance and out of control, her finances feel that way too. The result: she continues to work and continues to worry about money, even though she is far under-spending her savings. My job now is to help her stop and take an honest look at where she is today so she can trust that her path—and her plan—is on track.

Sacks says, “Rosh Hashanah and Yom Kippur are festivals that ask us how we have lived thus far. Have we drifted? Have we been traveling to the wrong destination? Does the way we live give us a sense of purpose, meaning, and fulfillment?” How interesting that these are the same questions we ask when building a financial plan. What have you done so far to reach your goals? Moreover, what can we do to be sure you are traveling in the direction of your goals and creating the financial capacity to live your life with a sense of purpose, meaning, and fulfillment?

What I find beautiful about this time of year is that it offers us hope. Our time on earth is short and “unlike money, time lost can never be regained.” When we invest our time wisely following Rabbi Sacks’s Ten Life-Changing Principles, we focus on the things that truly matter. And whether you are investing your time, your money, or both, you need a plan. Which once again brings me back to the words of the wise Rabbi: “Without it, we can sleepwalk through life, wasting time on things that are urgent but not important, or that promise happiness but fail to deliver it.”

No matter your faith or beliefs, may the new year bring health, happiness, joy, and peace.
L’ Shana Tova U’Metuka.

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Grandparenting… and striving to age in happiness and health

Grandparenting… and striving to age in happiness and health

When my grandson JJ celebrated his Bar Mitzvah last spring, I asked him what he wanted as a gift from Grandma. His answer: “I want to take a trip with you!” I was thrilled. I love to travel, of course, and I was utterly grateful that this energetic and amazing 13-year-old boy wanted to spend a week with me. It was a wonderful gift for us both. And boy, did we have an incredible time! However, there is one thing I would have changed if I could: my level of health and fitness.

Always the planner, JJ had cleared the idea with his parents long before making his request (I may be Grandma, but Mom and Dad still make the rules!). He had imagined us in Mexico, but after some research and a wonderful travel agent, we settled on Costa Rica. I had never been there, but it has a reputation for being great for families, chock full of activities, and reasonably priced. For my grandson, Costa Rica sounded exotic and exciting. JJ and I were Central America-bound!

As soon as we arrived, I knew we’d made a great choice. The resorts cater to American tourists, so communication is easy. There were lots of families and people of every age, and I loved watching these multiple generations enjoying their time together. The whole atmosphere was relaxed and comfortable, and it felt like the perfect tropical getaway but without the premium price tag. (Aside from the thermal waters in Arenal, complete with a swim-up lounge and a sushi bar which, I can attest, is crazy expensive when you are accompanied by your teenage grandson who happens to have a passion for sushi!) Our trip included a perfect balance of higher-end resorts and activities that took us away from the tourist area and into the surrounding country.

The further we ventured into the country, the more we learned about the people who live there. I loved talking to our driver, who told us where his family vacations (a wonderful rented cabin very near the expensive hotels) and shared that, thanks to the tourism industry, most families earn about $25K/year—a living wage in Costa Rica. With the help of local drivers, we did everything JJ had hoped for. We hurled down a mountain together on zip lines. We explored the Costa Rican jungle from river rafts. We snorkeled from a catamaran. We trekked over mountain terrain on ATVs. Whenever there was an hour or two to spare, JJ had a new plan—none of which included letting Grandma lounge in a hammock or read a book! Though I was able to get through the trip thanks to sheer willpower, I know it would have been a lot easier and enjoyable for me if I were in better shape. My sedentary lifestyle has taken its toll, which means I needed more time and more help to climb in and out of the jeep, climb to the top of the zip line, and even just walk wherever we wanted to go.

On the flight home, I couldn’t help but think back on how challenging it had been for me to keep up. Yes, JJ is 13 and has boundless energy, but there is no excuse for my physical state. When I stumbled across this list of 30 ThingsYou’ll Regret When You’re Old, number 7 hit home: Failing to make fitness a priority.I don’t consider myself “old”—at least not quite yet!—but I’m done with regret! It’s time to take health and fitness seriously. It’s time to make a change. I talk constantly to clients about ways to build better, happier lives as they age. In my blog, I’ve written that living a joyous life is as much about having financial freedom as it is about being mentally and physically healthy so you can enjoy every minute. It’s time I practice what I preach.

My late Uncle Joe was everyone’s favorite uncle—whether they were related to him or not. Years ago, he told me that the secret to meaningful relationships is sharing one-on-one experiences with others. Children. Adults. People you love, and people you wanted to like better. It’s some of the best advice I’ve ever received. However, Uncle Joe had gotten something else right too: a lifelong Manhattanite, his daily walks kept him fit and healthy as he aged.

My younger granddaughters Noa and Zoe are 11 and 9 respectively. A new goal of mine is to take similar trips with them when they celebrate their Bat Mitzvahs. However, this time, I plan to be fit enough to run circles around them. I've begun working with Nancy S—my new personal trainer. (If RBG can do it, so can I.)  I’m changing how I eat and how I live. My body is going to be with me for the rest of my life. I’ve finally decided to give it the attention it deserves. So get ready to try to catch me, Noa and Zoe, because your new and improved Grandma is on her way!

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Even during the dog days of summer, tax planning is at the top of our agenda

Even during the dog days of summer, tax planning is at the top of our agenda

Holy moly, it’s hot out there!We’re deep in the dog days of summer, when laziness and lethargy rule. Luckily for me (and my clients too!), I’ve been tucked away for two and half days in a perfectly chilly conference room at the IRS Nationwide Tax Forum in San Diego. I’m here, thwarting the dog days, to study up on something that matters more to your finances than you may realize: the new tax laws and how they affect your tax strategy for 2018.

While I am sure this may not be most people’s vision of a perfect late-summer escape, here’s why it is at the top of my list—and why that matters to you and your wallet:

  • The new tax law is (very) complicated!
    While the idea behind the Tax Cuts and Jobs Act (TCJA) may have been to simplify the tax code, getting the details of the law hasn’t been easy for CPAs, EAs, CFPs—and even the IRS! Even now, in mid August, we’re being told that certain forms and regulations are not yet available, but that they are “imminent.” Not only is that less than comforting, but the lack of information is also making it extremely challenging for us to create strategies for our clients that we can be confident will be effective. That said, the topics at this forum are advanced, and they do cover the new rules, laws, and regulations that are clear at this time. I’m here to study the facts, ask questions, and get answers so we can create smart strategies that are compliant and that are designed to work in your best interest.

     
  • Taxes and financial planning go hand in hand.
    As a CFP (Certified Financial Planner professional), my number-one goal is to help give you greater financial confidence. I do this by helping you create and protect the wealth you need to live your ideal life and (here’s the key!) by working to maximize your after-tax cash flow from your income and investments. Considering that the “average” American with an “average” annual income of just under $75,000 pays out a whopping 24% of their income on taxes (excluding sales, FICA, and Medicare), building a smart, compliant tax strategy is a key part of that equation. In down markets, that may mean harvesting losses for use at optimal times. In any market, it means locating assets in appropriate accounts where they’ll be tax efficient, planning backdoor Roth IRAs to give higher earners the benefits of a Roth IRA, determining when and how to defer Social Security claims, and much more.
  • Not all financial planners get it.
    It’s true that the CFP® curriculum includes tax planning and strategy, and CFP candidates are all required to study individual and business tax laws relating to trusts, estates, property, passive activity, at-risk rules, charity, stock options, inter-family matters, state laws, and more. Unfortunately, many financial planners don’t keep up with changes in the tax laws once they’ve passed the exam. (Don’t even get me started on the practices of uncredentialed “advisors”!) The people I have been fortunate to be sitting with for the past two days are all committed to tax planning excellence, and I love that I’m learning as much from them as I am from the IRS team that is hosting the event. These are “my people”!

     
  • There’s simply no such thing as “tax season.”
    August may seem an unlikely time to focus on taxes, but from a planning perspective, tax season lasts all year long. All too often, people opt see a tax pro when they need forms filled out just in time for April 15th. When they take that approach, they miss out on the greatest benefits of tax advice: planning. In reality, the sooner we can start building effective tax strategies under the new law, the better. As an IRS Enrolled Agent, one of my promises to clients is that all of your planning and investing decisions include tax optimization as a top priority. Fulfilling that promise takes training, continuing education, and practice. And that’s precisely why I’m here. (The air conditioning and the San Diego breeze are pretty nice perks as well.)

As we muddle through these last days of summer, make tax planning a priority. At the conference, I attended several sessions about the new Section 199A Qualified Business Income deduction (ask me about it). I also learned that the current withholding tables probably understate withholding, so it’s vital to compare your actual withholding amounts with your projected tax bill now to avoid surprises. It doesn’t stop there. For 2018 there is no unreimbursed employee business expense deduction; ask your employer to consider an accountable plan so he/she can capture the deduction. Look for opportunities to amend prior year returns for items like depreciation and 179 deductions. Personal exemptions have been eliminated but may be made up through increased and additional credits for children and other dependents. Most importantly, if you get a notice—any notice—from the IRS, contact us right away so it can be addressed quickly and properly.

It’s true that the new tax law is confusing (that’s a polite word for it!), but the good news is that knowing the facts and participating in smart planning can have tremendously positive results on your financial picture. While on a break at the conference, I received a call from a client I’ve worked with for years. Gary was walking into his estate attorney’s office with numbers I had provided regarding some community property and the inherited basis. “This looks too good to be true, Lauren. Are you sure the numbers right?” I assured him that, yes, the numbers were accurate—and I let him know that the happy surprise was due to changes in the tax law. Knowing that those changes (and my knowledge of them) saved him a bundle had me smiling all afternoon.

When it comes to your finances, it’s often easier to focus on the things that make the headlines: gaining a few tenths of a percent on CD yields, the dramatic highs and lows of the stock market, and more. But it is taxes that often have the greater impact on how much of your income and your investment returns stay in your pocket. The new tax law includes lots of changes. Know that we’re paying close attention to those changes in the dog days of summer and all year long to help ensure the tax law is being applied in your best interest and, hopefully, in your favor.


NOTE: BEWARE OF IRS SCAMS!
This has been a big topic at the conference. Scams are more prevalent than ever, and phishing scams have bilked more than 15,000 people out of an estimated $272 million dollars! Remember that the IRS will never contact you via phone or email demanding payment! If you are contacted and suspect a scam, forward it to  This email address is being protected from spambots. You need JavaScript enabled to view it. . And talk to us first before handing your hard-earned dollars over to anyone claiming to be from the IRS. We’re here to help!


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From Tanzania: Lessons in the importance of community and the riches of living an ideal life

From Tanzania: Lessons in the importance of community and the riches of living an ideal life

 I'm on a plane again, this time on my way back home from a two-week safari adventure in Tanzania. 

 

Why Tanzania? Why a safari?  It was a trip planned by a women’s dive and travel club called the OBDC (short for the Old Broads Dive Club). Only women can be members, but many of the old broads bring along their old men, too. While I enjoy independent travel, there’s a special loveliness about traveling with a group of like-minded club members. Mfirst OBDC trip was to Fiji last year, and I loved it. So when the luxury safari trip to see the Great Migration was announced, I answered the call and encouraged my friend Robin to go, too. 

 

What an experience.  

 

If you’re unfamiliar with Tanzania, here are some of the facts about this distant part of the world. It is in East Africa and is the location of Mt. Kilimanjaro, Lake Victoria, and the Serengeti region. With a population of 55 million, per capita GDP is about $1,100 per year, and the workforce participation rate is low. (What a contrast to our dollar-driven society!) Unofficially, about 15% of the population does not have enough to eat. Yet, there are so many wonderful things about their society. The population consists of five major tribes, and about 120 tribes in total. People speak their tribal language, the national language of Swahili, and most learn EnglishThere is compulsory education until age 15, and the people take great in pride in their natural environment and their efforts to protect it 

 

Despite the obvious hardships, the people I met did not seem to be suffering. They are a proud, strong, loving community. They told us stories about when they gained their independence, and although the economy regressed after that, they are hopeful and dedicated to a better futureAt a village school we visited (where the children treated us like bona fide VIPs), one little girl told me she wants to be a pilot. Another wants to be a writer. These are people who work hard, cherish family, sing with joy, and are welcoming to strangers—even to 21 Old Broads whose lives and perspectives are worlds apart from their own. 

 

When we were on safari, wwere blessed with marvelous, English-speaking guides who seemed to know every fact there is to know about the incredibly beautiful Serengetithe national park where we traveled. As our guide drove us through the bush, he seemed to know all the other driver guides. For the people we had the good fortune of meeting, there was an easy joy that seemed to come from life itself and their relationships with each other.  

 

Henry Miller once wrote, “One’s destination is never a place, but always a new way of seeing things.” In Tanzania, the people we saw on the streets, met working at our resort, and served as our guides were all living examples of the importance of community in a world that, in my experience, seems to reward independence and the strength to go it alone. In villages that some might see as disadvantaged, I saw joy, hope, and love. Among a people who lacked money for what we Westerners might consider their most basic needs, they seemed to want little. By focusing on community and honoring nature, everyone around me seemed to be living fully—together. This overwhelming sense of community was infectious.  

 

Observing the behaviors of wildebeests, zebras, giraffes, elephants, baboon, birds, hippos, leopards (yes, we saw the big five) was the most amazing part of the journey. Elephantin matriarchal families took care of each other with soft, deliberate gentlenessMillions of wildebeest carefully herded their babies across the Mara riverAs we watched, our group connected at deeper levels and, much like the animals around us, we took gentle care of each other. Perhaps the lesson from the Tanzania trip was how the ability to live an ideal life is defined not by riches or belongings, but from the inside out, and by the community that holds us close 

 

The trip to Tanzania gave me the opportunity to see life stripped down to the basics—for the people around me and for all other species. What are the basics? They are more simple than you might think. What I saw was that all we really need are the natural resources to sustain us, and our interdependence and communityFor better or worse, iour developed society, our primary resource is money. We need money to obtain food, shelter, and clean water. We need money to care for our families and give them safe, healthyand happy lives. Without money, I could never have traveled to Tanzania to share another experience with my friends in the OBDCHowever, money will never—and can never—give us everything we need.  

 

As I head home to Southern California and back to life and business, the importance of community and its role in making it possible to live an ideal life—however you define it—is the lesson I am bringing back home. Perhaps that is the gift the Old Broads and Tanzania itself had in store for me all along. 

 

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In Your Best Interest: Our Summer 2018 Newsletter

In Your Best Interest: Our Summer 2018 Newsletter

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.


Market Highlights Q2 2018

The second quarter of the year can be called a lot of things, but boring certainly isn’t one of them.

Long before the trade war between the United States and China began in earnest in early July, Trump’s threats of tariffs on Chinese imports began to rattle the world, and threats of retaliation from the Chinese added fuel to the fire. As the battle of words escalated, investors braced for a storm. But while there was certainly some significant volatility, favorable corporate earnings reports helped calm some of the global economic angst, and investors were able to maintain a steady ship and see higher-than-anticipated gains in Q2. Most of the major indexes ended the quarter ahead of their Q1 closing values. The tech-heavy Nasdaq gained over 6.0%, and the small caps of the Russell 2000 grew by almost 7.5%. The S&P 500 also closed the quarter ahead of its first-quarter closing values, and the Dow finished the quarter up by less than 1.0%. Prices for 10-year Treasuries rose by the end of the quarter, pulling yields down by 13 basis points. 

Interestingly, even as Trump’s trade war moved from threat to reality in the first week of July, the market has continued to maintain an upward trajectory, at least for the moment. Trade skirmishes between the United States, China, Canada, Mexico, and the European Union are likely to remain a reality for some time, but those tensions have so far been offset by a strong US jobs market, steady corporate earnings, and increased household spending. Global tensions may be here to stay, but consumers and investors appear to be confident in the economy—and confidence is always a plus when it comes to investor returns.

As we move into the second half of 2018, expect the tensions to continue. Business has accepted the trend towards open markets and reduced trade barriers. The US economy has been strengthened along with our global trading partners. Businesses will eventually adapt to whatever conditions prevail, but current events are disruptive and time and money will be spent to reposition production and sourcing of materials. Outcomes of trade wars are unpredictable, but if the extent of reactions in the past weeks is any indication, the impact will be complicated. Nations are big ships and don’t turn on a dime, but slowly, slowly, we will experience changes in geopolitics. Yet whatever occurs around the globe, our team is monitoring your plan and your investments closely. And if you have any questions or concerns along the way, we’re always here to help keep you on course. 

Click here to read the full newsletter.

 

 

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Ready to help the planet and your portfolio? ESG investing may be the answer

Ready to help the planet and your portfolio?
ESG investing may be the answer

I braved last weekend’s brutal heat wave to meet a friend for Sunday brunch in Corona del Mar. My friend and I wandered into a home décor store and saw some beautiful decorative coral. As someone who loves diving and the sea (see my blog post Security vs. Freedom and the magnificent merits of flying business class), the display made me suddenly sad. We humans have been killing off the reefs for decades through coral mining, overfishing, and human pollution—including our sunscreen. Then I noticed a small sign that said this gorgeous coral was not mined, but farmed. Even better, the profits are used to help save and restore the reefs. A relief? Yes, but there’s much more to worry about.

Devastating heat waves across North America just killed more than 50 people in Quebec. At least 100 people died after record rainfall caused flooding and landslides in western Japan. It’s no wonder Jerry Brown and Michael Bloomberg are so committed to battling climate change through September’s Global Climate Action Summit.

If, like me, you’re feeling that recycling, reducing, reusing, and giving up straws is just the beginning, you may be a perfect candidate for ESG investing. ESG is an excellent way to put your money to work to make a global difference while also potentially improving your returns over the long term.

What is ESG investing?

ESG stands for environmental, social, and governance. Funds that are identified as ESG investments include stocks of companies that adhere to ESG guidelines. While each company’s ESG policy is different, an ESG label generally implies that a fund includes companies that are focused on helping improve environmental and social concerns. Selection criteria also exclude companies that contribute to or are responsible for human rights violations, environmental damage, or other violations of fundamental ethical norms, including the production of weapons that violate fundamental humanitarian principles through their normal use. What is particularly attractive about ESG funds is that they allow you, the investor, to align your investments with your values. 

That said, investing in this way hasn’t always been easy, nor did it necessarily reward investors. ESG investing grew out of a movement called Socially Responsible Investing—or SRI—that focused primarily on excluding companies that were considered ‘morally undesirable.’ The problem: there was little or no focus on economic value. The result: many of these investments didn’t qualify as much more than feel-good investments that were used by a niche group of investors: Millennials, liberals, and anyone who put their hearts far above their wallets. For these reasons, our team at Klein Financial Advisors has steered clear of SRI and ESG—until now.

For those of us who are concerned about environmental, social, and corporate governance issues and our wallets, new research shows that the approach to ESG investing has evolved to make it a viable and more potentially profitable investment option.

Thisis precisely why we are now pleased to offer our clients a selection of ESG funds as part of our carefully selected menu of available investment options. While we have not elected ESG investments in every asset class, we have approved ESG options in domestic core, small-cap value, international large-cap, and emerging markets. Each of these funds selects stocks based not only on a company’s ESG policy but also on how that policy adds value to the company’s offering. I’m not the authority on ESG investing, but I rely on solid information, research, and analysis from experts. I believe choosing ESG investments based on value makes sense.

If you’re one of our clients, we’ll be sharing these options with you at our next meeting. (Feel free to reach out sooner if you want the details right away!) Otherwise, I urge you to talk to your Certified Financial Planner (CFP) to get clear, independent guidance on ESG investing. Carefully choosing advisors and investments ensures your dollars impact issues that matter to you and that your investments offer potential for growth over the long term. After all, driving global change and investing are both all about the future.

In the past 50 years, we’ve come a long way in reducing carbon emissions. In 1970, there were 22.5 tons of carbon emissions per person per year. Today, that number is down to 16. The Paris Climate Agreement has set a target of 2.1 tons of carbon emissions per person. Unless we make individual and collective efforts to support change, we risk undoing that past progress and creating further, irreversible damage to the planet.

Making changes isn’t easy. I know. I drive a gas guzzler (but I drive it as little as I can). I had the air conditioning blasting the entire weekend (but I don’t think I would have made it to Monday if I hadn’t!). And I’m taking a long flight to Tanzania on Wednesday (if I could get there any other way but by plane, I would!). However, I am taking little steps. I make sure my fruit is from California. I buy eggs from a local farm. I’ve broken myself of the habit of using straws. I have a long way to go, but I try a little every day. If you, too, want to make a difference, look at specific actions you can take. Vote for representatives committed to combating climate change. Watch the live broadcast of the Global Climate Action Summit. And consider including ESG investing as part of your investment strategy. If you have any questions or are looking for suggestions, we’re always here to help.

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Not ready for retirement? It’s only too late if you don’t start now!

Not ready for retirement? It’s only too late if you don’t start now!

Years ago, I hit a major crossroads. I had been restructured out of a corporate job I loved, and while I was shell-shocked by the reality of being a victim of workplace ageism, I knew in my heart that I had something important to do in my life. There was a mission I had yet to find; it was out there, somewhere, waiting for me to uncover it.

Thankfully, I stumbled across Barbara Sher’sbook: It’s Only Too Late If You Don’t Start Now: How to Create Your Second Life At Any AgeOf the many books I’ve read, this guide was one of the most transformative. It empowered me, and it gave me the fierceness I needed to take charge of my life. I soon found my mission that had been lurking in the shadows, and Klein Financial Advisors was born.

Last week, I found myself sharing that story with Susan and Scott. My newest clients, they are on their own urgent mission: to build a nest egg… starting at age 57.

When we first sat down together, I could feel their apprehension. It was no surprise. They had told me they had minimal savings and were unprepared for retirement. Smart, responsible people, they had been dealt a tough hand financially. With three kids to raise and aging parents to care for, they were among the many who lost their homes in the financial crisis. As an independent contractor, Scott’s income had ebbed and flowed, and Susan had left her job at a local university to wrangle three teenagers and help her mother with some health issues. Since then, they’ve been focused on staying out of debt (cheers to that!), and even though Susan is now back at work, they haven’t been able to save a dime for retirement. Today, they’re ready to do something about it. Susan was blunt: “Are we just too late?”

My answer was simple: “It’s only too late if you don’t start now.” With that, we rolled up our sleeves and settled in for some serious planning. And it all began with making these four important promises to themselves:

Promise #1: Claim Social Security at age 70 (not a day earlier!)
Smart Social Security claiming is an absolute must. While most everyone is eligible to begin receiving Social Security payments at age 62, between age 62 and FRA (Full Retirement Age) at age 66 or 67 (depending on your birth year), your benefits increase 5% each year.Even better, between FRA and age 70, your benefits increase by 8% each year you delay, plus an annual cost of living adjustment. Therefore, if your monthly benefit at age 62 is $750, waiting to file until your 70th birthday nearly doubles your monthly check to $1,320. Plus, because spousal benefits are based on the other partner’s benefit amount, by waiting until age 70 to claim benefits for the highest earner both spouses’ benefits are increased by 8% per year. Your goal is to secure a higher monthly income over the long term, and delaying Social Security is one of the most effective ways to do it.  

Promise #2: Rethink your retirement age.
Most of us grew up with the idea that we would retire at 65… or earlier if we could swing it. It’s time to relegate that 20th century idea to the history books. People are living much longer. In 1970, the average U.S. lifespan was 67 for men and 74 for women. Today those averages have climbed to 76 for men and 81 for women.[1] That means that here in Lake Wobegon (where we’re all above average), your investments must meet your needs for an extra decade—at least. Instead of making your retirement goal 65, banish that idée fixe and put a plan in place to keep earning into your 70s.

Promise #3: Focus on building enough cash reserve to make work optional.
Saving cash can be challenging, but only because we’re usually rooted in habits and behaviors we’ve been honing for decades. Building a nest egg in your later years can be done, but it takes focus, diligence, and sacrifice. Get rid of debt first. More than anything else, debt has the power to hurt your future self.  Reconsider adopting your parents’ or grandparents’ depression-era frugality tips. You may have laughed then, but thrift serves your goal to eventually to make work optional. Again, it’s only too late if you don’t start some serious thriftiness today. Build that cash reserve dollar by dollar.

Promise #4: Don’t give away your future to your children.
Saying no to adult children isone of the biggest challenges you’ll face. For decades, the #1 priority for parents is to take care of their kids. You’ve been holding their hands since they opened their eyes for the first time. How can you stop now? You can. And you must. Especially when your retirement savings is lacking or nonexistent. (For more on this hot topic, see my blog post Money Rules.) If you haven’t saved for college tuition for your kids, work with them to create a plan that doesn’t put your future at risk. If you have 20-somethings living at home—a common scenario these days—they should be contributing financially to the household. When your adult child needs money, he or she really does have other resources. It’s time to stop being “the bank of Mom and Dad” and start making your future your new #1 priority.

Recognize that it is not too late, as long as you start now! I just read this great NPR article that talks about getting kids to pay attention, something Mayas in Guatemala are doing better than most. The writer quotes psychologist Edward Deci at the University of Rochester, who says that one of the most important ingredients for motivating kids is autonomy. In his words, "To do something with this full sense of willingness and choice." It’s a lesson in motivation at any age.

Susan and Scott have made that choice. They are catching up on savings through IRAs. They’ve stopped financing their kids. Susan is considering increasing her income with a better paying job or a side gig. They are both committed to right-sizing their lives so they can build the nest egg they will need in the future. They have a plan, and they are building momentum every day.

Whether you are just starting to build your retirement nest egg or your savings is not where you need it to be, make the choice today to actively create a financially secure “second life.” It’s only too late if you don’t start now.

[1] According to the National Center for Health Statistics 2016 data.

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From smart homes to smart finances, it’s time to learn some new tricks!

From smart homes to smart finances, it’s time to learn some new tricks!

My recent trip to Amsterdam was great in many ways. I explored a new culture with an old friend and had time to reflect on how to live a great life here at home. My first step: to (finally!) get a ‘smart’ home. If you saw this blog post I wrote back in May, you know that I’ve been living in technology hell for quite a while. My tools were outdated and, quite honestly, I didn’t know what I didn’t know. I had a problem I knew I couldn’t solve alone.

Thankfully Jason, my tech guru, was just a phone call away. After I landed in Southern California, I scheduled time for him to come to my house and do some serious diagnostics. What he found was a collection of technology—some great, others not so great—that wasn’t even being put to use. I had an Alexa that I barely used. I had decade-old TVs that weren’t connected to the Internet. I had a fancy tuner that, while it was once all I needed for great sound quality, couldn’t do the job anymore. As technology had advanced, my trusted tuner had quickly become a dinosaur. While I listened to Jason explaining all of the things we could do to make my home smarter, I realized it was time for this old dog (me!) to learn some new tricks.

I gave Jason the green light to transform my house, and we had a blast doing it together. He installed three new Amazon Fire TVs that I control with a Firestick and an Alexa voice remote. I have a Nest thermostat to control the temperature in every room of my house and Lutron switches to control my lights. Jason used some of my old beloved equipment—my favorite speakers—to support the new technology, so now all I have to do is tell Alexa what to play, and I have better sound than ever. I’m finally on my way to achieving my dream of true technology nirvana.

Being me, I have to compare my own technology planning to my world of financial planning. Just as I resisted solving my technology problems, many people resist doing what’s necessary to transform their financial lives. Why? I hear the same reasons over and over again from our clients who finally took the plunge after years or even decades of procrastination:

"I was embarrassed to show someone else the details of my money.”

"I knew I had a problem, but I didn’t know the cause. I didn’t know what I didn’t know!”

"My brother told me I should do it myself.”

"I thought it was just about investing.”

"I had no idea what to expect from a financial advisor.”

"I didn’t know how to find a financial advisor I could trust.”

"I didn’t realize how much professional help could change my financial life.”

Every reason is valid. Luckily, they can all be solved with just a little bit of knowledge.

If you’re embarrassed about sharing your finances, know that financial advisors have seen it all! Our mission is to help you gain greater confidence and reach your goals—not chastise you for past mistakes. It’s okay to ask for help when you know you have a problem. Even better, ask for help when you see a financial opportunity… or expect there may be one lurking in the unknown. Yes, an advisor can help with that, too.

When working with a financial advisor, every firm’s approach is different. At Klein Financial Advisors, we use a consultative process that focuses on your own goals, priorities, and values, and gives you a clear roadmap to get you from where you are today to where you want to be tomorrow. Don’t be intimidated by the process. A good advisor will hold your hand every step of the way. Just know that we are here to do one thing: help.

If you don’t know how to find an advisor you can trust, I recommend reading the Pursuit of a Financial Advisor Field Guide from NAPFA, the National Association of Personal Financial Advisors. From decoding advisor credentials and walking through compensation models, to outlining the elements of financial planning and understanding the importance of the Fiduciary Standard, the Field Guide is packed with the information you need to select the right advisor for you.

How much can working with a professional help change your financial life? Just ask anyone who has taken the plunge. The change is often dramatic—sometimes in riches, and almost always in the newfound financial confidence that goes hand in hand with having a personalized, long-term plan.

Financial planning is vastly more important than creating a ‘smart home,’ but it can be just as fun and satisfying. Like any new venture, there will also be benefits you could never anticipate. My new smart home came with a bonus: a new friendship. Jason is a quintessential millennial, which makes him quite a contrast to my usual circle of friends. When Jason saw my scuba gear in the garage, he told me diving was something he’s always wanted to do, but never acted on. I shared the name and number of a great scuba coach in the area. In the 12+ hours we were planning, shopping, and working together, we shared great restaurants nearby, pondered the challenges of living alone, and even ‘tested’ out one of my new TVs by watching videos of dogs riding on Roombas (yes, that’s a thing, and yes, we laughed our heads off!). The experience made me realize how much I miss hanging out with younger people and how enriching those relationships can be.

Perhaps my next personal challenge will be to foster intergenerational relationships. (You can read more about how others are making it happen in this article in the Harvard Business Review.) If you’re not already working with a financial advisor, I hope you make that your own next mission. Trust me; an old dog really can learn new tricks. And the benefits are well worth the effort.

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Could I live here? Exploring the dream of retiring abroad

Could I live here? Exploring the dream of retiring abroad

I’m in the middle of a dream trip to Amsterdam right now. What a vibrant city! It is walkable and bikeable, and it has a magnificent menu of great restaurants to choose from (my friend Lily and I are doing our best to try them all!). It’s a truly cosmopolitan city that is accessible to all of Europe.  The Dutch are tall, healthy, handsome people who all speak fluent English. There’s great public transportation, museums, a symphony... what’s not to love?

Our visit has been so spectacular that I keep finding myself playing the perennial travel game called “could I live here?” It doesn’t seem so far-fetched. Lily and I rented an apartment for over a week, and after a few days of being tourists and checking off the boxes of must-see attractions, we’ve now settled into a leisurely pace. It’s easy to imagine staying longer, combining work and travel and even (dare I say it?) joining the ranks of the growing number of Americans who have chosen to retire abroad.

But would it be my retirement dream?

Because I’m having fun with my little fantasy, I did some googling and read differing opinions about the feasibility of retiring abroad. In this Ric Edelman article, he writes that “retiring abroad is inappropriate for almost everyone.” Despite the plethora of articles on the joys of international living and lists of the “best international cities to retire,” it seems that turning the dream into reality is often thwarted by things like higher-than-expected real estate costs, lower-than-expected tax savings, unstable currency exchange rates, missing your family and friends, and more. Ugh. My bubble burst before it had begun to float.

But not everyone agrees with Ric’s dismal outlook. According to the Social Security Administration, more than half a million people who live outside the United States receive some kind of Social Security benefit. Plus, many retirees living abroad have their checks mailed to a US address, so the total number of American retirees is believed to be much higher. Even more surprising: those numbers are nearly twice what they were a decade ago. Awhole lot of people are finding a way to live the life of an expat retiree. I decided more research was in order.

Next, I came across this article in Money magazine, The Secret to Retiring Richer Than You Actually Are. It highlights Bob and Rose, a couple from Fairfield, CA, who retired to Ambergris Caye, an island off mainland Belize where I went diving in 2017. The numbers were compelling—their housing costs dropped from $6,000 a month in California to $1,100 a month to rent a two-bedroom condo with a “million-dollar Caribbean view”—and they apparently couldn’t be happier. “Bottom line, we’re spending easily half of what we were in the States, and in return we have our lives back.” As I read those words, I found myself gazing over the Amsterdam treetops from my balcony and drifting back to my expat daydream. That could be me!

Of course, like most life decisions, there are a million pros and cons to consider before leaping to life in a foreign country. Some considerations are purely financial. What is your budget? What is the cost of living in your dream destination, including housing, healthcare (a significant consideration for any aging retiree), and local income taxes? Like all financial planning puzzles, most criteria are less about money and more about how you want to live. Here are just a few questions to ponder if you’re considering such a move:

  • Are you ready to pack up—and give up—your life where you live today?
    Moving to a new, exotic location can sound thrilling, but packing up the life you’ve built can be cataclysmic. If your life includes spending time with your adult children or grandchildren, will you be happy so far away? If you have a strong circle of friends, are you someone who can easily rebuild that vital network in a new community?

     
  • Are you comfortable living in the “new”?
    New experiences can be wonderful… for a while. And yet I know how great it feels to finally climb into my own bed after a long and exciting trip. Sure, it’s likely you’ll be able to rebuild that sense of “home” after some time, but it’s important to be confident that you’ll be happy enough even in the midst of the transition—and that your new adventure gives you enough joy to outweigh the longing for your old life.

     
  • Are you prepared to become an expat?
    I recently heard an interview with a university professor who had retired in the south of France. While her French was passable, she said that one of her most significant hurdles was the fact that she may never be accepted as a true local by her new friends and neighbors. That’s just one aspect of becoming the resident expat. There are also the practical aspects. Can you get a residence visa? France, Ireland, and Canada are just a few places clients have told me don’t issue residence visas. Are you able to buy real estate? Can you maintain your US passport? And will you miss July 4th picnics and Thanksgiving dinners more than you could have ever imagined?

I love imagining retiring abroad. Yet, for me I know it is not the right choice—at least not for the foreseeable future. Maybe I’ll go to Europe for an extended stay, perhaps for a month or three to work and play and experience a different culture. I expect that Southern California will always be “home.” If you feel differently, I urge you to do your research, look closely at the financial pros and cons, and look inward to determine if life as an expat is the life for you.

Have fun exploring your dream, and if you want some guidance to help decide if you really could “live here” for good, we’re happy to help!

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To protect your financial future, hand over the keys to your kingdom today

To protect your financial future, hand over the keys to your kingdom today

Money. Depending on your family dynamics, it can be a blessing or a curse—no matter how much or how little you have to call your own. That’s especially true when it comes time to hand over the keys to your kingdom to the next generation. When that transition is managed carefully over time, it can be a natural, stress-free evolution. If there’s limited communication, secrecy, or just no plan at all, it can cause upset, bitterness, and unwanted financial consequences for Mom, Dad, and their adult children.

I spent yesterday afternoon working with Sarah. In her early 50s, Sarah is every aging parent’s dream financial trustee. She’s smart and educated, and she’s thoughtful and diligent about “dotting the i’s and crossing the t’s” when it comes to her mother’s finances. That thrills me because her mother Marion is one of my dearest clients. Sarah and my mission yesterday was to get all of her mother’s accounts connected to our eMoney platform so we can seamlessly work together to monitor and manage cash flow, bills, and investments. In less than an hour, we linked the accounts, agreed to a 6-month plan, and had our next meeting scheduled.

It’s not always so simple. First, not every parent is fortunate enough to have a “wise child” like Sarah to help. Second, not every parent is ready and willing to hand over the keys—even when the transition is long overdue.

Vicky and Rich are perfect examples of what not to do. Now in their 80s, the couple’s three adult children are all clueless about whether Mom and Dad have enough money to fund the remainder of their retirement—or not. They’ve named their son Josh as the executor of their estate, but they’re keeping the numbers a secret even from him. Josh is stressed because he has no idea where they stand financially or if he and his siblings may need to help them in the future. Vicky and Rich are stressed because they feel like Josh is invading their privacy every time he asks about money. My question to them is always the same: “If you don’t trust him with the keys to your kingdom when you’re alive and well, why should you trust him when you’re in a coma?”

Variations on the theme are endless. Melinda puts up appearances of being financially flush, but suddenly she’s out of assets and is ashamed of having to turn to her kids to help fund her remaining (and less-than-flush) “golden years.” Elizabeth notices that her dad, who has dementia, is suddenly writing large checks to his live-in caregiver (thank goodness she has that visibility!). Luci keeps urging her parents to “spend more and enjoy life,” but they (and I, as their advisor) know they’re wisely spending what they can afford.

Handing over the keys to your kingdom can be scary and humbling, and it’s hardly ever easy. But the process is better for everyone when the truth and the facts are out on the table. Take these three steps to ease everyone’s mind in the future—and the sooner, the better!

  1. Name a financial trustee.
    If you have adult children, begin by doing an honest, thorough assessment to determine who should act as your fiduciary. Can you trust them with your money? Do they have the character, the skills, and the time to work in your best financial interest as you age? A child is usually the ideal fiduciary, but you may find that a sister, best friend, or other relative is more suited to the task. Choose intentionally and begin the transition long before it seems mandatory.

     
  2. Communicate and educate.
    Once you’ve identified your “person,” communicate your values, so they have a deep understanding of what matters to you. Knowledge and insight are vital if and when they need to step in to make financial decisions in your place. Discuss how to recognize any red flags that mean you're not acting in your own best interest. Be clear about the details with your trustee and with your financial advisor to be sure everyone is on the same page.

    Next, educate your trustee on the technical aspects of your financial life. Create an inventory of your assets, including bank, investment, and credit card accounts; passwords; insurance policies; safe deposit box information (note that you must visit the bank in person together to add your trustee to your account and ensure access); contact information for your financial advisor and estate attorney; and estate planning documents, including your Healthcare Power of Attorney and Durable Power of Attorney (if these aren’t already in place, make this a top priority). And work with your financial advisor to make your personal documents available in a secure vault like our eMoney platform.

     
  3. Coordinate your team.
    With your trusted person on board, it’s time to arrange a meeting with your entire team, including your trustee, your financial advisor, and all stakeholders involved. Your adult children are a given, but it’s important to include any other beneficiaries of your estate as well. Taking the time to be sure everyone understands your wishes and is clear on who is in charge of what will make things easier for everyone—today and in the future.

The great news is that trusting the right person with the future of your finances can be tremendously freeing. When Marion appointed her daughter as her trustee, she told me how relieved she was. “If I’m forgetting words, I’m sure I’m forgetting to pay some bill or another. I worry about it all the time!” she said. “Now, Sarah is making sure I don’t make mistakes—big or little. What a relief!” Whether you’re 60 or 102, now is the time to hand over those keys and get on track toward an easier, less stressful tomorrow.

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From technology hell to financial nirvana, connecting the dots is the key

From technology hell to financial nirvana, connecting the dots is the key

I confess, I’ve been in technology hell for months. It’s not the first time. As a woman of a certain age, I wasn’t born into a tech-driven world like the Millennials. I don’t speak this language well— at best, I can converse with a thick accent, and I’m by no means fluent. Yes, I own an Alexa (Amazon’s allegedly life-changing device that can, according to my son Adam and my tech guy Jason, do just about anything I could ask). To date I’ve asked “her” to do two things for me: tell me the weather forecast, and set a timer for 10 minutes.I’m clearly missing the boat! But I just don’t get it.

I suppose that’s why I listened with a bit of guilty satisfaction when my friend Lily recently told me her saga of buying and installing a fancy new video doorbell and her own hell trying to get it installed. Long story short: it took 4 or 5 different people to help before Lily was able to see the person on the other side of her door. At least I know I’m not alone in my suffering and frustration! It does help, but it also has me wishing there were professional “technology planners” out there—someone to help me, Lily, and everyone else who doesn’t speak the language of technology get all of these potentially great tools to work together so we can, finally, use them to our advantage. That would be pure technology nirvana!

It makes me happy to realize that the role we play in most of our clients’ lives is to help connect the dots of their financial lives to create at least some level of financial nirvana. If you’re not yet there (or at least on your way), asking yourself these three questions may nudge you in the right direction:

  • Are you holding on to solutions that were great 5 years ago, but that aren’t adding value today?
    I have a box of “old technology” at home that I can’t get myself to throw away (that 5- pound laptop was wonderful in its day!), but deep down I know there’s no reason to keep it. In just a few years, everything in technology has changed. The same is often true in your financial life. Transitions—marriage, divorce, job change, retirement, losing a spouse, relocating—all of these things and more can have a dramatic impact on how you should be saving, spending, and investing. New financial products may be available today that didn’t exist five years ago. Are you using a Health Savings Account (HSA) to save for future medical expenses tax-free? Is your investment strategy aligned with your current goals and time horizon? Has your tax strategy changed to address the new tax law? Now is the time to let go of the old and bring in the new to connect all the right dots.

     
  • Do you understand the language of money?
    When we moved our office systems to the cloud, I wasn’t even sure what “cloud” meant. All I really knew was that it could protect client data and keep our software up to date with the latest versions. I drove our technology provider crazy. I asked a lot of questions so I could communicate in their language: the language of technology. Like technology, money has its own specialized vocabulary. Do you speak the language? Do you know the difference between good debt and bad debt? Do you understand compounding? Do you know what a CD is and its role in your portfolio? (If not, start by reading my blog When did it become ok to be financially illiterate?) The more you understand the language of money, the easier it will be to connect every aspect of your financial life.
  • Are you reaping the rewards of a fully connected financial life?
    Alexa can be used to manage your music, your thermostat, the lights in your house, and more—but only if the device is properly connected to everything else (or so they tell me!). Connecting all the pieces of your financial life is just as vital. Your investments, taxes, savings, budget, estate plan, and insurance are all interrelated. A “connected” strategy is the key to growing and protecting your assets over the long term. A great first step is to start connecting your financial life using an online app like eMoney. It’s a great tool that gives you a birds-eye-view of what you own and what you owe so you can both manage your finances and collaborate even better with your advisor.

I’m a firm believer in the importance of “knowing what I don’t know” and doing everything I can to learn more. To get there, I get help wherever I can find it. That includes hiring a professional to help me find a way out of my current technology hell. We may have moved everything to the cloud, but there are still some disconnects. Suddenly my scanner button isn’t working, two of my apps won’t open, and Skype thinks I don’t have a camera on my computer. Ugh! But I have a tech team coming to the office today, and I’m counting on them to fix what’s broken and to help me understand how to keep everything connected moving forward. We’ll be one step closer to technology nirvana.

I urge you to do the same when it comes to your finances. Ask questions. Get answers. And get the help you need to create a fully connected financial life that takes you one step closer to your financial nirvana—however you define it. That’s one thing I’m pretty certain Alexa can’t do for you… yet!

 

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When Breath Becomes Air: Building a values-based life

When Breath Becomes Air: Building a values-based life

I recently finished reading Paul Kalanithi’s posthumous memoir, When Breath Becomes AirIn it, he shares his personal journey of how, in an instant, he went from life as a highly acclaimed neurosurgeon to life as a terminally ill cancer patient. Perhaps one of the biggest lessons I learned from his tragic but beautifully shared experience is this: every decision we make should be based on our values. Not on statistics. Not on someone else’s expectations. And sometimes not even on our own expectations of ourselves.

As an avid reader, I’m sheepish to admit that I was a little late to the party on this one—the book was released in January 2016, became an instant bestseller, and was a finalist for the Pulitzer Prize (what was I waiting for?!).Now that I’ve finally read it, I find myself thinking about Kalanithi’s story constantly, and I am trying more than ever to view my life through the lens of my own values. It’s an idea that certainly makes me think—and rethink—about precisely what my values are and how they are reflected in my decisions every day.

Monday offered a perfect example. After decades of planning and working toward my goal, I was able to give myself a long-wished-for (and somewhat belated) birthday gift: I paid off my mortgage. Owning my home outright was a goal I’d had ever since my late husband, Ed, and I purchased it decades ago. Why? Because being able to stand on my own two feet was—and is—a deep-held personal value. Like many women, I think I’ve always had a hidden fear of becoming a bag lady. It’s a fear that’s so common there’s even a term for it: “bag lady syndrome.” No matter how irrational that scenario may be, owning my home gives me a much-needed sense of security. It’s what drove me to pay off my mortgage even when life threw me a long series of curveballs. Ed’s stroke. Getting laid off from my “stable” corporate job. Breast cancer. Widowhood. Life happens! And yet, because my goal was driven by my values, I kept my eyes on the ball. When I received a small inheritance from my uncle, I put it all toward the mortgage. Every month I paid a little bit extra to stay on track. Finally, my diligence paid off. The result: it feels amazing! I did it! I own my home, I won’t be a bag lady after all, and I did it all because I was clear about what I valued.

Being aware of that value helped me defend my decision to pay off my mortgage to colleagues who reacted with surprise. “Why would you do that? Interest rates are so low! Couldn’t you have made more by investing in the market?” “You have so much equity in your house! Why worry about paying it off?” While it’s true that paying off a mortgage may not always give the maximum return on investment, because it mattered to me, it was the optimal solution. That’s true whether you’re deciding to pay off your mortgage, leave a legacy for your kids, pay for college for your grandchildren, or start a new business. Yes, you want to be smart about your decisions, but knowing that your choices are values-based is the key to success.

Of course, as we grow and evolve, our values will change, which means aligning decisions with values is a dynamic process. Here’s how Kalanithi explains it:

“The tricky part of illness is that, as you go through it, your values are constantly changing. You try to figure out what matters to you, and then you keep figuring it out. It felt like someone had taken away my credit card and I was having to learn how to budget…. You may decide you want to spend your time working as a neurosurgeon, but two months later, you may feel differently. Death may be a one-time event, but living with terminal illness is a process.”

Life itself is dynamic. Even without a terminal diagnosis, our values are always changing. We are evolving. While our core values are likely to remain constant, we need to stay self-aware and continue to make decisions based on what matters most—today.

My core value of being able to stand on my own drove my decision to pay off my mortgage. It also steered me toward my career as an advisor. Helping others achieve that sense of security is my mission. Kalanithi writes, “The physician's duty is not to stave off death or return patients to their old lives, but to take into our arms a patient and family whose lives have disintegrated and work until they can stand back up and face—and make sense of—their own existence.” While my duty as an advisor may not be as weighty as a physician’s, I strive to do something very similar: to help each client to stand back up, identify what matters most today, and plan for a better tomorrow.

No matter where you are in life, I hope you, too, can take time to explore your core values and be sure you’re building a plan based on that strong foundation. If you do, your path is bound to be the right one for you—even when life throws those inevitable curveballs.


Want to read more on how to move forward when life happens? Read my blog Life happens. Plan today to make every transition easier.

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In Your Best Interest: Our Spring 2018 Newsletter

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.


MARKET HIGHLIGHTS: Q1 2018

2018 hasn’t been an easy ride so far. Market volatility began to rear its ugly head almostfrom the start, and then stocks went on sale again when the S&P 500 dropped 5.9% over five days—its worst week since January 2016. On the heels of a particularly celebratory 2017 (at least from an investment perspective), the stock market proved it is anything but predictable. For the quarter, the S&P index was down -1.22% and the Dow Jones was down -2.49%. And though the techheavy NASDAQ was up slightly at +2.32%, it was down for the month by -2.88% after gaining an impressive +7.4% in January. Market volatility is back, and it’s likely to be with us for a while. 

Why the change in sentiment? Investors seem to be falling into a familiar pattern: the Trump Administration announces tariffs—this time on Chinese imports— but is not specific on the details. Wary of retaliation against American products sold abroad, traders put a lower value on the large, multinational companies that make up most of the major indexes. 

The last time this happened, the tariffs involved steel and aluminum. This time, the U.S. announced plans to impose tariffs on about $50 Billion worth of Chinese goods, which prompted China to retaliate, slapping its own tariffs on $3 Billion worth of US exports, including fruit, pork, and steel pipes. The threats from both countries have fueled fears of a global trade war.

Meanwhile, in the wake of the Cambridge Analytica scandal, Facebook shares fell almost 10%, from 176.83 down to 159.39. This took the social media giant down from the 5th largestcapitalization company in the S&P 500 index to the 6th (behind Berkshire Hathaway) and dragged the index down even further. And yet there is some good news. What’s remarkable about the selloff over things that may or may not happen is that it came amid some very good news about the U.S. economy. Durable-goods orders jumped 3.1% in February, sales of newly-constructed homes were solid, and Atlanta Fed president Raphael Bostic announced that there were “upside risks” in GDP and employment. Translated, that means that the economy is looking too good to keep interest rates as low as they have been—which means this is a curious time to be selling out and heading for the investment sidelines.

If none of that helps you feel less rattled, I recommend re-reading my blog Wall Street has gone wild! for some additional perspective. And if you’re still not at peace with the market and your place in it, give us a call. As always, we’re here to help. 

 

Click here to read the full newsletter.

 

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3 tax-smart ways to make charitable gifts in 2018 and beyond

3 tax-smart ways to make charitable gifts in 2018 and beyond

Before TCJA (the new tax law), charitable deductions were a pretty easy piece of the financial puzzle. You chose your charity, donated a certain amount, and deducted that amount from your taxable income. Sure, giving pre-tax dollars was better, but even if you simply wrote a check to your charity of choice, you got a tax deduction. Oh, how times have changed! And those changes have me worried not only about the much-needed cash flow to charities, but also about the impact on our clients—especially those who give $1,000 or more over the course of the year. The good news: careful planning now can save you money on taxes in the coming years, and it can also help ensure your gifts are making a real financial difference to the organizations that rely on your help year after year.

The change that is likely to impact charities most is the increase in the standard deduction. The deduction for married couples filing jointly has nearly doubled, from $13,000 to $24,000. For single taxpayers and those who are married and file separately, the deduction will rise from $6,500 to $12,000. This increase presents a challenge when it comes to charitable giving. Because most taxpayers won’t exceed the standard deduction, they will no longer need to itemize. And without a direct tax benefit, charitable gifts may be much less attractive—at least from a tax perspective.

Luckily, there are strategies to help charitable donors maintain a tax advantage while continuing to support the good work of the organizations they support. Here are three options to consider today:

  • “Bunch” your gifts to deduct years of gifts in a single calendar year.
    If you have the cash on hand, you can bunch multiple years of gifts into one tax year. If you’re single, your standard deduction is now $12,000. Let’s assume your property taxes are $6,000 and your state income tax is $5,000, equaling $11,000 in deductions. If you then give $1,000 to charity, even though you max out your standard deduction, you receive no tax benefit. However, if you plan to give $1,000 each year for the next five years, opting to give a lump sum of $5,000 in 2018 will result in a taxable deduction of $4,000 beyond the standard deduction. Your charity of choice will benefit from the lump-sum donation, and so will your wallet come tax time next year. The only limit is that you can only deduct cash donations of up to 60% of your Adjusted Gross Income (AGI) in a single year. (And you can still use appreciated securities to fundthe donation.)

     
  • Create your own “charitable foundation” using a Donor Advised Fund.
    If your contributions to a particular charity are large, it may make sense to set up a DAF, or Donor Advised Fund (it’s easy, and yes, we can help!). A DAF allows you to make a lump-sum donation to take advantage of the up-front charitable tax deduction in the current year. But unlike bunching contributions in a single year, the DAF gives you the flexibility to spread your gift out over time. You can even name your children as “successor grantors” for the fund to effectively pass down the assets of the fund tax-free and help support their own gifting in the future. (And you can supercharge the contribution to your DAF by gifting appreciated securities.)

     
  • Give via a Qualified Charitable Distribution.
    If you’re over 70½, a Qualified Charitable Distribution (QCD) allows you to give to your charity of choice with pre-tax money, while also reducing your taxable income. It is a method of giving that saves you taxes twice. For example, let’s say you have an IRA with Charles Schwab and your RMD (Required Minimum Distribution) from your IRA is $20,000. Using a QCD to make your annual $1,000 pledge, Charles Schwab writes two checks: one for $1,000 that goes directly to your charity for it to use tax-free, and another for $19,000 that goes directly to you as taxable income. The QCD amount (up to $100,000 annually to any qualified charity) is excluded from your adjusted gross income, and you benefit from a full $12,000 standard deduction. It’s a great way to optimize tax savings compared to using a typical after-tax IRA distribution. You can use a QCD to give up to $100,000 annually—even if that amount exceeds your RMD. Note: you can’t request a QCD until you hit that magic age of 70½. It’s one of the perks that comes with age!

One last note: If charitable giving is part of your legacy planning, donating assets from your IRA is often a smart option—the charity can use the gift tax-free, and your heirs won’t pay a dime in taxes on your gift.

In the face of the new tax laws, careful, multi-year planning is more important than ever. That’s especially true when giving to charity. But by making ‘doing good’ an intentional piece of your overall financial plan, you can use tax law to your advantage to make every dollar count and, most importantly, continue to support the charitable organizations that are making a real and positive difference in our world today.

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5 reasons to consider a Reverse Mortgage (even before you retire!)

5 reasons to consider a Reverse Mortgage (even before you retire!)

When you live in Southern California, the equity in your home is often one of the most valuable assets in your portfolio. Not only are property values above the national average, but also home prices have tended to rise quickly (just talk to anyone who bought a home even five years ago!). Yet, few people see home equity as a “spendable” asset. But if you’re looking for a reliable source of cash today or 10 years hence, a Reverse Mortgage can be an ideal tool to turn your home equity into a tax-efficient source of income—even if you still owe money on your home.

Surprised? So was Lucy when we talked last month. I had already done the research and knew that she could qualify for a Reverse Mortgage. It seemed like the perfect way to access the cash she needed to take care of a half dozen home repairs she had been putting off since her husband died two years ago. As a retired widow, paying the $2,000 mortgage was cutting deeply into her resources, and she felt too cash constrained to set herself up for more bills to pay.

I suggested a Reverse Mortgage because I knew it could give Lucy the financial comfort she needed to maintain her home—whether she decided to stay put for the next 15 years or sell—and that it would also allow her some much-needed financial freedom. When I mentioned the idea, her eyes got wide. She couldn’t believe her ears. “Before Jack died, he told me a Reverse Mortgage was the last thing he would do,” she told me. “He said they were a scam.” She went on to say that using a Reverse Mortgage wasn’t something she even wanted to consider. “It’s too much of a gamble. I don’t want to risk losing my home.”

I can’t blame Lucy (or Jack, for that matter) for being wary. In the early days of Reverse Mortgages, they earned a bad reputation for being a shady product used by slick salesmen to take advantage of desperate, cash-strapped seniors. Despite late-night television ads that make them sound too good to be true, Reverse Mortgages really can be an important part of your overall retirement income strategy. In fact, while a Reverse Mortgage isn’t right for everyone, when used correctly and strategically, it may be just the solutionyou need to manage cash flow and protect your portfolio in retirement. Here are 5 reasons why it makes sense to consider a Reverse Mortgage today:

  1. A Reverse Mortgage is similar to a Home Equity Line of Credit—but with no monthly payments.
    A Reverse Mortgage is similar to a HELOC in that it provides a line of credit based on your home equity. Like a HELOC, that line of credit can be taken as a lump sum, in scheduled monthly payments, or reserved for future draws. However, while a HELOC requires you to pay back the loan with monthly payments over a set period, a Reverse Mortgage requires no monthly payments to the bank. Instead, the loan balance and interest accrues over time. Payment to the bank can be delayed until12 months after you leave your home.

     
  2. You can use a Reverse Mortgage to pay off your current mortgage.
    For many retirees in our “high rent” part of Southern California, paying even a reasonable mortgage on a fixed income can be a struggle. What’s great about a Reverse Mortgage is that because it’s based on the actual value of your home, you can use the money to pay off your current loan amount, potentially increasing your cash flow by thousands of dollars each month. You can also use a Reverse Mortgage to finance the purchase of a new home.

     
  3. It’s relatively easy to qualify for a Reverse Mortgage.
    Applying for a traditional mortgage or HELOC can be a challenge, especially if your income is limited. To qualify for a Reverse Mortgage, you must be at least 62, your home must be your principal residence, and you must have sufficient income to pay property taxes, homeowners insurance, and basic home maintenance. That’s it. Since you aren’t responsible for making monthly loan payments, even a less-than-perfect credit score or limited assets should not impact your eligibility.

     
  4. A Reverse Mortgage can help protect your portfolio.
    If the bulk of your retirement savings is held in an IRA, withdrawing assets before age 70½ will result in a sizeable tax burden. Using a Reverse Mortgage is a highly tax-efficient way to supplement your income and manage your cash flow. Because the money is a line of credit based on the value of your home, there are no taxes to pay. It can also give you the funds you need to delay Social Security until age 70, allowing you to take advantage of the Delayed Retirement Credit that increases your Social Security payment by 8% for each year you delay and nearly doubling your monthly Social Security income. (For more on this, see my blog Social Security & Women: Tackling the Challenges.) Plus, an available line of credit can prevent you from being forced to sell stocks from your portfolio should you need additional cash during a down market.

     
  5. Reverse Mortgages are regulated to protect the borrower.
    Lucy’s fear of losing her home is not uncommon. With a traditional mortgage, if the loan exceeds the value of your home, the bank can foreclose on your property and force you out of your home. Luckily, Reverse Mortgages are designed and regulated to protect seniors from this very scenario. A Reverse Mortgage is a “non-recourse loan,” which means that if the value of your home drops dramatically (think 2008!) you will never owe the bank more than the value of the loan. That alone can be a great source of financial security in your later years.

Of course, no line of credit is completely free of costs. Like traditional mortgages and HELOCs, Reverse Mortgages charge fees such as interest payments, origination fees, and closing costs. Reverse Mortgages also require a government-mandated, upfront mortgage insurance premium equal to 2% of the value of your home, plus 0.5% of the loan balance. But because these costs are rolled up into the loan amount, you pay no out-of-pocket expenses.

For most borrowers, that 2% is a small price to pay for the flexibility of turning their home equity into a spendable cash resource. And if you use the Reverse Mortgage to pay off your existing mortgage, you may even offset this cost completely. Do keep in mind that a Reverse Mortgage is best if you plan to stay in your home for the next five or more years. Otherwise, the upfront costs may outweigh the benefit.

One last thing to remember is that the best time to get a Reverse Mortgage is before you need it. A Reverse Mortgage should never be used as a last resort when all of your other assets have been depleted. Instead, consider applying for your line of credit while interest rates are still low so you can lock in a great rate. Having this flexible resource available if and when you need it can help turn your home equity into a powerful and strategic financial planning tool for decades to come.


A Reverse Mortgage is a complex planning tool that should be used as part of a carefully constructed wealth management plan. If you need help deciding if a Reverse Mortgage makes sense for you, let’s talk. As always, we’re here to help! 

 

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Want a great financial plan? All you need are the clues

Want a great financial plan? All you need are the clues

Solving puzzles is in my blood.

Growing up, solving jigsaw puzzles was one of our favorite family activities, and there was always a puzzle in the works on our card table. Sometimes we would work on them together, huddled over the still-broken image as we searched for the right shape, the right color, or the perfect edge. Just as often, any one of us walking by would spot a perfect fit and happily pop a piece into its rightful place.

Sunday brought with it a different challenge: the delivery of the Sunday crossword. My parents would work on it together (always in pencil), and we’d all try to help—even if it took us days to get the answers right. Even today, the New York Times online crosswords are a bit of an obsession for me. I love the challenge. I love the form. And I love that I’m always learning something new. (Today’s tidbit: Napoleon died in exile on the island of St. Helena. Who knew?!)

I suppose it’s no wonder I became a financial advisor… and that I love what I do.

The exciting thing about financial planning (at least for a puzzle geek like me) is that, just like for jigsaw and crossword puzzles, the process is all about uncovering a solution based on a set of clues. The more clues you have, the more context. And the more context, the easier it is to find the solution.

Julia is in her mid-40s and owns a fast-growing small business in Laguna Beach. Julia was referred to me by one of my long-time clients, and I could tell from the moment I met her that she is a smart businesswoman. But like many busy business owners, she has never really focused on her personal finances. I was excited to sit down with her and dive into her first-ever financial plan and start solving her financial puzzle.

When we met in January, my first question was, “What do you spend your money on each month?” Like many first-timers, she didn’t have an easy answer. She knew her annual income. She knew how much she had in her current investments. But she didn’t have a real sense of her expenses, how much she had remaining to spend as she pleased each month, or what she could (or should) be doing with her excess cash. Luckily, she had done her homework for our meeting, including gathering together all of the fragments of her finances. Her tax returns, her bank and investment statements, and (most importantly) her goals and dreams for the future. With her file box on the table, we had all the clues and context we needed to move forward.

Fast-forward to March, and Julia’s financial picture looks a whole lot more complete than it did just 8 weeks ago. The pieces had been there, but she’d had no idea where to put them, how they worked as a whole, or (and this is a big one) how each piece impacted the others. By working with the clues, we were able to puzzle out solutions to her key challenges, including:

  • How her spending habits were impacting her ability to save for a long retirement—and the tradeoffs she needed to make in both areas.
     
  • How she could balance investments in her business with other investments to diversify her assets and ensure she won’t have to depend solely on income from her business in retirement.
     
  • How her investments could be restructured to leverage her savings and better protect her from risk.

Julia has already made a ton of progress, but she’s still “piecing together the edges.” There’s much more to be done, and we’re working together to discover new clues and uncover solutions to each challenge we see. She has clearly defined her goals and can see the path forward, and I am helping her understand how all the pieces work together—and how we can adjust them to fit when they don’t. I hope Julia is having just as much fun as I am.

Julia thought she needed to put off working with an advisor until she “had all the pieces in order.” I wish she hadn’t waited! Now she understands that, just like most other puzzles in life, sound financial planning doesn’t require having 100% of the facts to start making better, wiser decisions. All you need to start solving your puzzle is your own set of financial clues. An advisor’s job is to use her experience and knowledge to see clues through a different lens and, ultimately, create a step-by-step plan to help you reach your goals. For me, that’s (at least!) half the fun.

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Sharing is Caring: A call to ‘Blaze it Forward’

Sharing is Caring: A call to ‘Blaze it Forward’

I’ve known Jeanne and Gideon Bernstein for years. We are friends and members of the same temple, and Gideon and I value each other’s ideas and input in our work as financial advisors. In the time that I’ve known them, what has continuously amazed me is their dedication to helping make the world a better place for everyone. This young family has always been tireless in their efforts to help others. As charity organizers and volunteers. As caring friends and neighbors. As true pillars of the community. Years ago, I asked Gideon why he took the time to post about all of his activities on Facebook. His reply: “Sharing is caring.” Simple. Wise. And I got it.

Fast-forward to the night of January 2, and suddenly Gideon and Jeanne’s lives were turned completely upside down. Their oldest son, Blaze, home from college for the holidays, was missing. A happy, accomplished, responsible kid, he had gone to meet a friend late that evening and never returned. The community response to Blaze’s disappearance mirrored the Bernstein’s own unfailing passion for helping others. In short, it was swift and powerful. Fliers were distributed. Emails were sent. Facebook alerts were shared not only in our own community, but nationwide. Offers for help from across the country poured in. Friends and family flew in from distant cities. Meals were delivered. Notes of encouragement flowed in. From their close circle of friends to complete strangers, everyone rallied around them and with them to try to ease their pain and help find answers. They were overwhelmed with the love that poured in from everywhere. Gideon’s words, “sharing is caring,” had taken on a whole new meaning.

Tragically, no amount of community support could alter the reality of Blaze’s brutal death by an ex-classmate. Yet, once again, Gideon and Jeanne found a way to give to others, even as they were suffering through an immense and unimaginable loss. Within weeks, they created a memorial fund in Blaze’s name. Less than a month after Blaze disappeared, Jeanne Bernstein wrote this stunning piece, My Son, Blaze Bernstein, Was Murdered. Then Came the Outpouring of Love. At a time when these mourning parents could hardly breathe, Gideon and Jeanne became powerful activists for a vital cause.

I continue to be amazed and humbled by Gideon and Jeanne’s sheer grace over the past two months, and by their ability to see the good, even in the wake of their own personal and tragic loss. Gideon and Jeanne have been working on building community their entire lives. After Blaze disappeared, they found themselves reaping the fruits of seeds they didn’t even realize they had been sowing. The result is now a beautiful movement in memory of their son.

As I watch their whole family move forward by opening their hearts to others, I can’t help but ask myself not just what I can do to help them, but how I can learn from their example to share more, to care more, and to make the world a better place—under any circumstances. As I help my clients ease into retirement and beyond, I wonder how each of us can offer more value to our communities. I wonder if the true role of money in our lives is to help us realize our own higher purpose in life. How might we change the world if, like the Bernsteins, we embraced the concept of “Sharing is Caring” as the force that drives us toward fulfilling our own purpose?

On Sunday, February 25, the Bernsteins are hosting #BlazeItForward: A Tribute to Blaze Bernstein and a Communal Call for Kindness at Segerstrom Center for the Arts to honor Blaze’s memory and to thank the community that came together to embrace them. The event has been underwritten, so all tickets are free to the public. Blaze loved cooking, music, art, performing, and writing. He graduated from the Orange County School of the Arts (OCSA), served as the copyeditor for the student-run food magazine Penn Appétit at the University of Pennsylvania, and was an activist in his own right, focused on inclusion and equal rights. Had Blaze lived, he would have surely made a difference in our world. The theme of the event is how we can work together in community to honor his memory as we #BlazeItForward.

One place to begin that effort is to donate to the two memorial funds at the Jewish Community Foundation of Orange County: The Blaze Bernstein Memorial Fund to support organizations that Blaze would have liked to support and charities that work to protect children from violence and that foster emotional health; and the Blaze Bernstein Memorial Scholarship Endowment Fund, for worthy, service-minded college-bound high school seniors who have overcome adversity.

Of course, that’s just the beginning. To further embody the idea that “Sharing is Caring,” I urge you to ask yourself how you might leverage your talents, passions, and assets to make our world a better place. There are so many people in need and so many causes that can benefit from our support—both within our local community and beyond. Jeanne and Gideon Bernstein created positive change from the depths of personal pain and unimaginable loss. You too can make a difference. Decide what matters most to you and begin to sow your own seeds for a better tomorrow. Now is the time to #BlazeItForward.

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Wall Street has gone wild! Is it finally time to change your investment strategy?

Wall Street has gone wild! Is it finally time to change your investment strategy?

It’s a strange time for investors.

Consider this: Just last week Gerry, a 65-year-old recent retiree, asked me if she should take on more risk in her portfolio. “The market is doing so well,” she said. “I feel like I’m missing out on all that growth.” My answer was simple. “No!” I explained that her strategy had been very carefully built to support her long-term financial goals—not just to grow her invested funds. It was an important conversation, and wow, is it a good thing she has an advisor to talk her out of emotional decision-making! Just imagine if she’d decided to gamble with her assets and take on more risk just a few days ahead of Monday’s volatility.

Of course, in the face of this week’s rather wild ride in the stock market, you may be asking yourself the opposite question: “Have I taken on too much risk?” My answer to you is the same today as it was for Gerry just one week ago. No! That is, of course, if you have a well-constructed financial plan already in place.

Whether the market is flying high or taunting your emotions with new lows and some bumpy volatility, here are four things every investor should keep in mind:

  1. Investing is not a stand-alone activity.  When the stock market is in the news (which it almost always is), it’s easy to forget that investing is just one piece of your overall financial life. A good financial advisor will work with you to look at that and everything else. What are your goals? What does your personal balance sheet look like? If you haven’t already, how soon do you plan to retire? How long can your existing portfolio provide a reasonable income? How much debt do you have? Do you have a sufficient emergency fund? The answers to these questions determine how much risk you can afford to take when investing. When a new client tells me she only wants to talk about investments and not the rest of her financial life, I know we have some important work to do! (Learn more about focusing on your financial big picture in my blog, Cold, hard cash! (Are you paying attention?).
     
  2. A balanced portfolio will rarely perform as well as the DJIA—or as poorly.  The Dow Jones Industrial Average (DJIA) is an average comprised of just 30 stocks out of a universe of thousands. In contrast, your portfolio includes a diverse menu of different asset types that each play a particular role within your portfolio. Stocks address your need for growth. Bonds address your need for stable income. Cash addresses your need for liquidity. How those assets are balanced—or allocated—in your portfolio depends on how long it will have to serve as your retirement paycheck, how much you’ll have to draw each month to sustain your lifestyle, how many years your assets have to grow, your legacy goals, and more. If your IRA goes down as stocks go up, don’t despair. Rest assured that your portfolio is balanced and diversified to meet your needs.
     
  3. Your best investment in any market is to pay off debt.  Debt is a huge problem in the US. According to this study by WalletHub, the average indebted household held $8,600 in outstanding credit card debt in 2017, and total household debt broke a new record of just under $13 Trillion.[1] If your portfolio is what makes your financial life secure, debt is what does the opposite. While “good debt” such as a home mortgage, student loans, and business loans generate benefits over time, “bad debt” poses serious risk to your financial health. Credit cards, auto loans, and other revolving debt reduce your income, add no value to your wealth, and force you to pay more every month for an item that is losing value. If you are carrying bad debt, use a debtsnowball to reduce and eliminate the debt you have today and avoid taking on more debt in the future. (For more on how debt can impact your future, read my blog There’s no such thing as an unexpected expense.)
     
  4. Your goal is to make work optional and sleep peacefully at night—not make as much money as possible.  It’s so easy to forget the endgame. We see the stock market hitting record highs or taking record dives, and it distracts us from the real goal of financial planning. Ultimately, everyone wants to have enough assets to support themselves and their family comfortably for the rest of their lives. While the definition of “enough” varies widely (check out John C. Bogle’s fantastic book, Enough: True Measures of Money, Business, and Life, for more on that important topic), a comprehensive financial/life plan can remove money stress by giving you the confidence that work will be optional someday and you can sleep peacefully knowing that your finances are secure today and tomorrow—independent of market volatility.

I have a colleague who likes to joke that he has the gift of “20/20 hindsight.” Don’t we all? It’s so easy to say, “I knew it all along!” Knew that the market was overvalued. Knew that you should have held on to Apple stock. Knew that your friend’s new boyfriend was a creep. The truth is you didn’t know it all along; you only feel as though you did now that the outcome is in plain sight.

No one—not even Warren Buffett—knows which way the stock market will go tomorrow. One thing we can anticipate is that we may have returned to more “normal” volatility. After years of historically low volatility and record highs, it may feel a bit unfamiliar, but with a solid plan in place, you can trust that you are safe. If you’re not certain you have a smart plan that’s working toward your long-term goals, let’s chat. As always, we’re here to help.



[1]The Center for Center for Microeconomic Data, Q3 2017

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Life happens. Plan today to make every transition easier.

Life happens. Plan today to make every transition easier.

Change. For some of us, the word alone can send a wave of panic. And it’s no wonder. Any change means transition, and any transition—whether happy or sad—begins with an ending. In all cases, something or someone fundamental in your life is gone. Marriage brings the end of complete independence. Retirement brings the end of decades of camaraderie, achievement, and a steady paycheck. Divorce brings the end of a relationship, and often years of hopes and dreams. Death of a loved one brings the end of companionship and a huge shift in how you live each day moving forward. Sending a child to school brings the end of one phase of parenting. While every stage of life has its own of transitions, for many women, it’s the 40s that seem to bring on the perfect storm.

In my own life, my 40s were an utter whirlwind. Jamie and Adam both graduated from high school and moved out of the house. Both of my parents died. My husband had a major stroke. And I lost my job. All in a tiny, 5-year window of my life. And like anyone facing such transitions, I didn’t know which way was up. In his seminal book Transitions: Making Sense of Life's Changes, Bill Bridges talks about the period following a significant life change as our “time in the wilderness.” I was the perfect example. As Bridges explains it, it’s a time when we’re forced to separate ourselves from the everyday and digest and respond to the immense change within us. And all of this must happen before we can return to the world, transformed.

While you’re in the wilderness, it’s normal to feel off-balance and uncertain. It can feel like survival is impossible, and the unending stream of questions won’t stop flooding every thought. How will I live? How will I pay the bills? How can I move on? While it may seem impossible at the time, it’s important to recognize that you will find your way. But even as you’re struggling, you must make sure the rest of the pieces of your life don’t fall apart.

I often say that when it comes to your money, there’s no such thing as an unexpected expense. The same is all too true when it comes to “unexpected” changes. Once you reach your 40s, 50s, and beyond, big changes come flying at you, fast and furious. Your children grow up. Your parents get elderly. Your aging body begins to throw you curve balls. You get sick. Your spouse gets sick. Life happens! The good news is that because you know all these things are going to happen, you can prepare for what’s to come—long before you’re thrown into the wilderness. Here’s how to start planning for tomorrow’s changes today:

  • Identify your “person.” In times of crisis, it’s vital to have someone who can give you an outside perspective and help guide your way. It may be an adult child, a colleague, a neighbor, a family member, or a best friend. Whoever you choose, your person is the one you know you can trust to be there when you need help and is the one who makes you feel safe—even when you’re in the wilderness.
     
  • Create a solid financial plan. All transitions create an imbalance in your life. By working with a trusted advisor now to create a solid financial plan that is stress tested for change, money will be one thing you don’t need to worry about when life happens. Even more, you won’t be starting from scratch after the storm. Instead, you’ll know precisely what your resources are moving forward. That alone can help breathe easier throughout the transition process.
     
  • Prepare for the inevitable. Like it or not, change is going to happen and your life will be filled with a series of transitions. The kids grow up, move out, get married, and have babies of their own. Parents get old and pass on. Jobs come and go. Marriages shift. Be honest with yourself about what changes you’ll face in the next decade… and the next… and prepare yourself emotionally and practically for what’s to come.
     
  • Create a community of friends. Emotionally you may feel isolated in the wilderness between the end of one thing and an eventual new beginning. Isolation leaves you vulnerable, so prepare now to engage in community by being a friend, a volunteer, or a member of a church, book club, or card group. The circle of friends you build will be your emotional life raft in the future.

Of course, you cannot anticipate every transition. The worst day of my life was when my first husband left me. My kids were three and five years old. I was a recent West Coast transplant and a stay-at-home mom. I had no job. I had no future. I couldn’t breathe. I couldn’t swallow. I had been thrown into the wilderness and trapped inside a bell jar. When my attorney Sheila Sonenshine told me to breathe, I listened. I inhaled. I exhaled. Again and again. She told me to get a haircut and get a job, and I did that too. Before I even realized it, I was putting one foot in front of the other and moving forward. With her guidance, I found my way out of my wilderness.

When the big changes hit—whether you’ve prepared for them or not—remember to make these your top three priorities:  

  1. Breathe. You’ll feel stuck. You’ll feel blinded. You’ll feel off-balance. But if you can remember to keep breathing, you can (and will) keep moving forward.
     
  2. Identify what’s urgent. Pay your bills. Be realistic about your finances. Take care of the necessities and put everything else on hold. And wait to make any irrevocable decisions until you’re able to see straight again.
     
  3. Get “up on the balcony. ”Count on “your person” to help you scan the environment, see the realities of your situation more clearly, and keep you rooted in what’s real. Don’t forget about your financial advisor. She can help you circle back to your plan so you can rise above your emotions and make rational decisions.

No matter what life throws at you—and no matter how unexpected the expected can feel—you too will find your way through the wilderness. The best thing you can do until you get to that next fork in the road is to put plans in place that help make even the toughest transitions easier. And when life happens and you need a guide to help find your way, we’re always here to help. 

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In Your Best Interest: Our Winter 2018 Newsletter

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.


MARKET HIGHLIGHTS: Q4 2017

If we looked only at the numbers, 2017 was golden. The stock market hit an incredible 71 new highs this year (no, that is not a typo!) and closed the year up 21% on average. The S&P index gained 19%, the Dow Jones index of 30 stocks gained 25%, and the tech-heavy NASDAQ gained 28%. For investors, it was a year to celebrate. 

 

There was lots of other good news as well. Congress tried—and failed—to repeal the ACA, ensuring continued healthcare access for millions of Americans. If anything, the publicity around the repeal helped increase enrollment, with December enrollment breaking records and beating all expectations. The labor market added 2 million new jobs, the Federal Reserve raised interest rates three times during the year (a sign of a strong economy), GDP increased to an annual growth rate of 3.2%, and demand for new housing remained strong.

On the less favorable side, the US trade deficit increased (something that will only get worse under the new tax plan) and inflation rates remained below the Federal Reserve’s target rate of 2%. Today, there seems to be one question on everyone’s lips: How long will this market last? 

By now, most of us have invested our funds in the market. And as the numbers continue to climb, it’s easy to fall into the trap of trying to “play the market.” Instead, I urge you to stick to your long-term flight plan and accept that the market cycle will work through any volatility. Strong corporate profits, low interest rates, and positive investor sentiment provide good tailwinds, although rich valuations could provide a headwind. In this environment, your best option is to invest strategically and focus on your personal balance sheet, paying close attention to your cash and debts. Be sure you have cash reserves to insulate you from being a forced seller in a down market, and reduce your debt and other fixed obligations. Doing so will put you in position to face the future with confidence—no matter which way the winds blow in the year ahead. 

 

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What’s today’s best investment? Here’s your answer.

What’s today’s best investment? Here’s your answer.

If you have investments in stocks (and I hope you do!), you know that the markets climbed in 2017. And climbed. With an incredible 71 new highs, the markets closed the year up 21% on average, with Emerging Market Stocks (MSCI EM index) leading the pack at 38%. For investors, it was a year to celebrate. But the question now is: where do we go from here?

If you listen to the media, the answers run the gamut from moving everything (yes, everything!) to cash to throwing everything you have (again, everything!) into the high-flying market and cashing in on the rewards. The reality is a lot less exciting. For long-term investors (which I hope you are!), excitement is rarely a good thing. Here’s why:

  • Investing should not be a thrill ride.
    If you want a thrill, go take a spin in a sports car. Let your investments be the reliable sedan that gets you where you want to be, when you need to be there. Investors are paid to take risks. Anticipate the ups and downs, but trust that your well-constructed portfolio will grow at an average of 5% to 7% over the long term. When your neighbor brags about her tremendous gains, don’t fret if yours aren’t quite so amazing. Chances are your portfolio is more conservatively allocated, which means that when the market does turn (which it will, eventually) you’ll continue to be reliably moving forward—with just the right amount of risk for you.

     
  • Toying with a portfolio does not deliver better results.
    On Monday, the news broke that Warren Buffet won his $1 million bet with a top hedge fund manager that he could do better than a hedge fund with a passive, low-cost stock index fund over 10 years. Instead of trying to time the market like his rival, he simply rode out the market—even during the depth of the recession. The result: Buffett’s stock fund achieved a 7.1% compound average return. The hedge fund return: just 2.2%. The US stock market has delivered positive returns in 29 of the last 38 years, delivering gains of more than 20% in 14 of those years. That’s the only information Warren Buffett needed to know to win the bet.

     
  • Even if the market does take a turn, a diversified portfolio won’t get very exciting.
    Again, that lack of excitement is a good thing. In 2017, the stock market saw amazingly low volatility—just 3% at its most volatile point. That’s shockingly low considering that most years, even great ones, usually see pullbacks of 10 to 15%. That means your diversified portfolio didn’t need to rely on its bond holdings last year to protect it from stock volatility. But while your bond holdings likely delivered portfolio returns that were under those of the S&P 500, they’ll be there to calm the waters when the cycle changes in the future.

You get it. A well-constructed, diversified portfolio delivers stable, reliable results over the long term. But what about new investments? With the market so high, what is today’s best investment?

My client Susan got quite the surprise this Christmas when her mother gifted her $14,000. Plus, she received an unexpected work bonus of $50,000. (Cheers to the improving economy!) She called me last week with the big question: “With the market where it is now, should I just hold $64,000 in cash? I don’t want to put it into a market that everyone says is about to turn.”

Susan is not alone. It’s easy to believe the headlines and assume that stocks can’t possibly continue to rise. And yet, historically, that’s precisely what they do. Market analysts and the media have been shouting about an inevitable downturn for years now, and while that grabs a lot of “eyeballs” (which publications both online and off need to sell advertising), they can predict the future as well as you or I can. In other words, they can’t. The one thing we can predict is that the market will continue to rise… over time.

So should Susan take the money that’s burning a hole in her pocket and invest it in stocks today? My answer was not that simple.

I told Susan that before we even began to think about investing, I wanted to review her overall finances. Susan and her husband have an emergency fund, so they have that fundamental element solidly in place. They’d had some home repairs in November and paid for them with a $10,000 check from her HELOC. Plus, they had racked up some holiday debt to the tune of $5,000. The total: just over $15,000 in debt on which she would have to pay interest until it was paid off. Plus, her daughter is a junior in college, and between tuition and room and board, those costs are putting a strain on the family budget.

My recommendation: use the money to pay off the debt entirely, and fully fund the remainder of her daughter’s college, minus what is now in her 529. Once all that was subtracted from the $64,000 windfall, $6,000 remained. Susan would be out of debt, and her daughter’s college expenses would be paid in full through graduation, eliminating that added financial stress each month. We agreed to invest the remaining $6,000 in her portfolio, allocating the money according to her existing strategy.

So what is today’s best investment? My answer is the same as it was for Susan. Your best investment is you.

You’re much more than an investor. You are living your own life. You have your own tax bracket, legacy wishes, and dreams for the future. Whether you have $5,000 to invest or $500,000, look at your financial big picture and make money decisions that help you live your best life—with greater financial confidence than ever. That’s a return the stock market will never, ever deliver. If you have questions or need guidance, know that no matter what the market brings tomorrow, we’re here to help today.

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Finding joy in January: 4 simple steps to sidestepping the post-holiday blues

Finding joy in January: 4 simple steps to sidestepping the post-holiday blues

Ah, December. It can be a whirlwind of activity filled with friends and family, and it seems the whole month is fueled by the motto of “Eat, drink, and be merry!” Even as I write, the flood of wonderful food and delicious drink is flying at me fast and furious. Last week alone I had a holiday party on Saturday, my daughter Jamie’s birthday celebration on Sunday, Hanukkah with the kids on Monday, dinner with a friend Tuesday, my bridge group on Wednesday—and the indulgence didn’t stop there. At home and at work, I’ve been giving and receiving food gifts galore. Latkes. Cookies. Candies. That Harry & David popcorn! And bottles (and bottles) of wine. It seems our culinary generosity goes hand in hand with our generosity of spirit this time of year, and I wouldn’t trade either for the world.

Of course, we all know the party can’t go on forever. Here are four simple steps—starting today—that can help you make the merriness of the holidays last all year round:

  1. Give experiences to make your holidays merry.
    Instead of buying costly gifts for his children this year, my friend Mark opted to take his family to Escape the Place, an “escape room” in Lake Forest for a special holiday adventure. CaroleAnne (our favorite marketing consultant!) gave her mom a day of singing together at the Holiday Sing-Along at Disney Hall. Jamie and I celebrated her birthday with an evening at a special restaurant. Celebrate with experiences that are meaningful to you, and the memories of your time together will last much longer than even the “hottest gift of 2017.”

     
  2. Take actions that deliver generosity—without breaking the bank.
    It’s easy to think that generosity requires spending (and often over-spending) money. But there are many other ways to be kind and giving. On Christmas Day this year, I volunteered to serve meals to the residents at Heritage Pointe while the staff enjoyed a day off. Rather than buying expensive hostess gifts for every party, my friend Laura bakes her “family secret” biscotti, seals a few in a mason jar, and includes a note: “Do not open until January 2!” What a great way to stretch her budget and extend the holiday joy into the New Year!

     
  3. Get moving—and get still.
    The mind/body connection is powerful, and even if you managed to fend off those extra pounds during the holidays, a routine of something—anything!—physical could keep the blues away as well. Walk. Swim. Hike in nature. Head to a yoga class. And if you aren’t already a fan, try meditating. My Sangha meditation group has helped me learn how to reap the benefits of stillness and mindfulness, and there are even mediation apps for your phone (check out Buddhify or Headspace). Whatever change you choose, try to make it your favorite new habit in 2018.

     
  4. Be intentional about changing your state of mind—especially after the holiday excesses.
    Rather than merely accepting the holiday blues, take steps to change your state of mind. I’m a lifelong journaler, and I plan to include gratitudes in my morning pages. Have a date with yourself for a drive up the coast. Visit a museum. Or just relax with a great cup of coffee at a new bistro. Even the simplest things can change your state in a heartbeat: read, move, meditate, laugh, or hang out in nature. With a little intention, you can cultivate a state of mind that exudes positivity.

We celebrate in ways that make the post-holiday holiday blues seem inevitable. It doesn’t have to be that way. Like any habit, creating a joyful state of mind takes planning and practice. With these simple steps and a good dose of clear intention, you really can get there! And if post-holiday finances are creating a bit of less-than-joyful stress, let’s talk. After you finish off that last glass of New Year’s Eve bubbly, remember, as always, I’m here to help!

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Sex, religion, politics… and money. Breaking the silence.

Sex, religion, politics… and money. Breaking the silence.

Most of us learned early on to avoid three things in polite conversation: sex, religion, and politics. Oh, how times have changed! Today, sex, religion, and politics seem to be the hottest topics—in the news and on the tips of everyone’s tongues. Unfortunately, few of these conversations are spurring rational, thoughtful discourse (often quite the opposite). And while it’s unlikely any of us can personally shift what seems to be the new societal norm, the one conversation we can shift is the one about taboo-topic number four: Money.

In my last blog post, I wrote about the importance of having “the money talk” before you get married. But what about the rest of the time? Talking about money before you say “I do” is important, but breaking the silence and keeping that conversation going in every relationship in your life can deliver some fantastic benefits. A stronger financial partnership with your spouse or partner. Better balance between your long-term and short-term goals. More financially aware children. A better understanding of your aging parents’ financial needs. And less money-related stress for everyone.

It’s a grand goal, but fostering healthy money conversations can be a challenge, especially when we’ve been taught that money talk is as taboo—if not more so—as sex, religion, and politics. In my own family, my parents seemed always to be talking about money. While it seemed to be their favorite topic, the taboos still existed. They talked (and argued) about money, but they never, ever mentioned amounts. Were we rich? Were we poor?  I never knew. But I do know I walked away with my own deeply held beliefs about money, and not all of them were good.

I’m not alone in that experience. I meet many people who don’t know a thing about their parents’ assets. They don’t know if Mom and Dad have enough saved to fund their old age (which can have a dramatic impact on the finances of their adult children). They don’t know if their parents have an estate plan, if they have any significant debt, or how they plan to pass on their assets to the next generation. Worse yet, many people carry on that tradition of money secrecy into their own relationships—and bring a whole lot of money “baggage” along for the ride.

It’s a tough cycle to break. Not only do many of us lack the vocabulary to talk about money, but breaking free from our old ways of thinking can be a huge challenge. If a friend or co-worker asks how much money we make, we cringe and wonder, “How can she ask me that?! She broke the rules!” The better question is, “Why wouldn’t she ask?” Does the question bring up negative emotions? Self-judgment? Pride? Ego? Shame? Consider this: What would the conversation be like if we could let go of those emotions and have a real conversation about money?

While you might not be ready for the leap of discussing your salary at work (though I urge you to get there eventually), the place where it is vital to start talking about money is in your own home. The first step: explore your money mindset by looking at the conversations you have with yourself about money. Ask yourself these questions and think deeply about the answers. Don’t be surprised if your answers run the gamut—from easy or exciting, to stressful or shameful, to downright emotional. Remember that there’s no right or wrong. Just be as honest with yourself as you can:

  • Talking about money is                       ?
  • Talking to my romantic partner about money is                       ?
  • Talking to my parents about money is                       ?
  • Talking to my children about money is                       ?
  • At work, money is                       ?
  • My parents taught me that money is                       ?
  • My religion taught me that money is                       ?
  • My biggest fear about money is                       ?

Once you’ve thought about your own responses, ask your spouse or partner to do the same—and then share your answers with each other. It’s a great way to open up the channels of communication and understand your unique perspectives about finances. It may suddenly make complete sense to you (and to him) why your spouse has a hard time putting money away for that next vacation, or why your stomach drops every time you take on even a little extra debt. There’s nothing like good communication to foster understanding.

Of course, understanding your partner’s perspective isn’t the same as agreeing with it. Money problems rank as the number-one reason for divorce, and it’s no wonder. In her book Breaking Money Silence: How to Shatter Money Taboos, Talk More Openly about Finances, and Live a Richer Life, wealth psychology expert Kathleen Burns Kingsbury suggests couples agree to the following rules for whenever money is a part of the conversation:

  • Be respectful.
  • Use “I” statements.
  • Listen actively.
  • Don’t mind-read.
  • Practice curiosity.
  • Agree to disagree.
  • Reward yourself.

Following these basic guidelines can help you turn money arguments into real conversations that spur the rational, thoughtful discourse that can lead to better decisions, better finances, and yes, better relationships. And if you find that you need assistance appreciating each other’s differences and working together toward a more sound approach to your finances, a financial advisor—especially one trained in mediation techniques—can be a tremendous benefit. As always, we’re here to help.

Let the conversations begin!

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Getting married? Unless you’re royalty, it’s time to talk money!

Getting married? Unless you’re royalty, it’s time to talk money!

On Monday, Prince Harry and Meghan Markle announced their engagement, and the media (and everyone I know!) is buzzing about the news. The royal wedding is scheduled to take place in May at Windsor Castle, and I’m sure the bride-to-be already has her eyes set on a wedding gown. The good news for them is that, while I’m sure they’ll have many challenges of their own to face in the years to come, one issue they’ll happily be able to sidestep is money.

Unfortunately, all too many soon-to-be couples who are far from royalty make the mistake of sidestepping the money talk before marrying. It’s a move that can lead to painful consequences.

  • Angela is money wise and has a generous spirit. Her husband Alex is very controlling, especially about finances. They have a healthy marriage, except when it comes to money. She enjoys spending what they can easily afford, but she knows that even the smallest expense will be an issue for Alex. Rather than argue with him, she regularly borrows or withdraws money from her 401(k). They don’t discuss it—until tax time when her 1099 arrives, and her withdrawals are right there in black and white. Her rationale: at least they only argue about finances once a year.
     
  • Bruce is the self-appointed CFO of his family—but he doesn’t have the skills to do the job well. When money is tight, he tries to keep the shortfall under the radar from his wife, Lisa. But that approach only works for so long. Soon the bills begin to mount and the truth is revealed. It’s a pattern that Lisa (and I) have watched repeat itself over and over again.
     
  • Patricia, a long-time client, died recently, and I’m now working with her adult children to manage their inheritances. Her daughter’s husband is already planning how to spend the windfall; he seems to have mixed emotions about the fact that his wife now has her “own” money. In contrast, Patricia’s son and his wife seem to be excellent financial partners; they’ve already placed the funds in a joint account and are working together to decide whether they want to spend, save, or invest the assets.

I have to wonder how things might be different if these couples had ironed out the details of their financial lives together from day one.

Whether you are marrying for the first time, blending families, or enjoying a later-in-life union, your life partnership is about more than your love for each other. Some of the best marriages have been broken by that troublesome nemesis that is money. The good news is that, with proper planning, money can also serve as a foundation for a wonderfully healthy marriage. But it all starts before you say “I do.”

What every couple should understand is that marriage is (hopefully!) rooted in love, but it’s also a business transaction. When you marry, you are forming a legal partnership that involves many rights and responsibilities. Before you take the next step from two legally and financially independent people to becoming a married couple, take the time to work out the business details of your relationship. Think of it like opening a shop together—and have a little fun.

Start by taking a close look at your current financial reality. Consider each of your personal incomes, what you spend, and what you save and invest. Determine your individual net worth and share your credit scores. This information serves as the starting point for your financial future. Next, combine your balance sheets and agree on how, and if, you want to use your joint assets together.

Next, create a set of bylaws and assign roles and responsibility. Who will serve as the CFO (learn from Bruce: don’t assume the role for yourself!) and who will be the bookkeeper? Agree upon how you will make financial decisions, including your household budget and large purchases such as a new home, a major remodel, or a new car. Talk through a process to handle financial challenges or disagreements. (Yes, they will happen!) If there are children from a prior relationship, what do you need or want to do for them? Will you both help fund their education? Will you pay for their weddings? At what age will you stop offering financial assistance? If you have siblings, friends, or aging parents who may need financial help, how and when will you be willing to step in?

Now comes the fun part: creating your shared vision for the future and drafting your strategic plan. This is when you align your dreams and set the path for a happy tomorrow, and it’s one of the most important things you can do as a couple. If your spouse imagines a simple retirement cabin on a lake and you fantasize about the hustle and bustle of Manhattan, there’s bound to be conflict down the road. Share your vision for five, ten, and twenty years into the future, and discuss how to combine your ideas and bring those dreams to life.

The last step is to put your plan in writing. Like any successful partnership, your agreements must be written down. Putting pen to paper clarifies the details, and it’s the best way to avoid miscommunication now and for years to come. Finally, review it all every year—because as we all know, life happens. And when you need help aligning your reality with your goals—or creating a shared management process that works for both of you—a financial advisor can be a tremendous help. The newest royal couple may never have to worry about managing debt or how to invest their nest egg, but for everyone else tying the knot, now is the time for the money talk! 

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Just for caregivers: 7 Dos and Don’ts to protect your financial future

Just for caregivers: 7 Dos and Don’ts to protect your financial future

Caregiving. It’s something I can speak to firsthand. When my late husband Ed suffered a severe stroke decades ago, I suddenly confronted a whirlwind of emotional, physical, and financial stress. It’s no wonder that I found myself having flashbacks when I read the results of a recent survey of 2,000 caregivers. The findings are frightening, but they tell a story that won’t surprise anyone who has been a caregiver for someone they love.

According to the survey, nearly three out of four respondents said that their personal financial situation causes them stress, and 92% said they help manage the finances of the person for whom they are providing care—from paying bills to handling insurance claims to dealing with debt. While struggling to manage another’s finances is certainly stressful, caregivers also tend to allow caring for a loved one to impact their own finances. Of those who help their family members financially, 30% said they’ve cut back on their living expenses to do so. Twenty-one percent have dipped into retirement savings. And 24% had trouble paying their own bills.

It’s a heavy burden. Financially and emotionally. The vast majority of caregivers—nearly 70% according to the National Center on Caregiving—are women. Since women as a group struggle more than men financially, this puts us in even greater peril to achieve financial security and confidence during our lifetimes.

I’ll tell you straight out that it is our giving nature—not our financial smarts—that puts us in that peril. My own story is a perfect example. There I was, a successful financial advisor, helping my clients make the best possible financial decisions. Yet, during Ed’s long disability, I was challenged by my new reality—being the sole earner while also being a caregiver. I was overwhelmed with the emotional side of the equation. As I was leaving the hospital to take Ed home, the case manager’s words filled my heart with even greater fear: “I guess it’s time to start spending down your assets.” And though I knew better, her chilling words cut me to the core. After all, my goal was to take care of my husband, but I was also a financial planner and swore not to put my financial security at risk.

Ed and I had been on track financially. Yet despite carefully managing spending (and feeling guilty every time I turned my focus to money), by the time Ed died, I had gone from financially comfortable to more than $80,000 in debt. Did I know what we were spending? Yes. But I simply couldn’t get myself to look at the numbers. As a result, I made some major financial missteps.

The good news: you can learn from my mistakes to avoid making them yourself. Here are my 10 “dos and don’ts” that can help every caregiver make better, smarter financial decisions—even when you’re in an emotional fog:

  1. DO recognize that your loved one may no longer have the ability to make wise decisions,financially or otherwise. Like caring for a child, you will need to make hard decisions—even when your loved one resists.
     
  2. DO have proper powers of attorney for healthcareand financial matters in place before a health issue arises—and use them when the time comes!
     
  3. DO have a written record and spending plan. Tracking expenses and knowing your budget is vital.
     
  4. DON’T confuse highest cost and what is best for your loved one. Consider the physical and mental needs of your loved one when choosing the best care option. A beautiful facility with extensive activities may not make sense for someone who is confined to a wheelchair or has advanced dementia.
     
  5. DON’T let your personal relationship with caregiver employees impact financial decisions. Be sure you’re paying the market rate for care, and maintain an arm’s length employer/employee relationship.
     
  6. DON’T give in to emotional blackmail.Make the best decisions based on your loved one’s current health and financial situation—not based on old promises to others or to yourself.
     
  7. DON’T neglect to keep your own financial house in order.Caring for a loved one can easily become your only focus, but caring for yourself and your future is just as important.

I learned the hard way what to do—and what not to do—when managing finances as a caregiver. Since then, I’ve focused my practice on helping women make smarter financial decisions, especially in situations when emotions can lead to disastrous results. One of the most important things you can do to help keep your finances afloat is recognize that your own emotional biases can lead to poor financial decisions—no matter how smart you are. To help stay on track, work with a financial advisor who can help you step back and look at the big picture.

As they say before every flight, in case of emergency, put your own oxygen mask on first so you’re able to help others. The same is true when you’re serving as a caregiver. By making your own financial security a priority, you can increase your capacity to care for your loved one—without sacrificing your own future.

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It’s Open Enrollment time! Act now to be sure you’re covered in 2018

It’s Open Enrollment time! Act now to be sure you’re covered in 2018

If Open Enrollment has you perplexed, you’re not alone. Medicare is a messy can of worms, the menu of corporate benefits seems to get bigger every year, and the Affordable Care Act—also known as Obamacare—seems to be changing by the minute. But picking appropriate coverage is one of the most important things you can do to protect your physical and financial health. Here’s what you need to know to get started:


Medicare

Whether you are already enrolled in Medicare or you’re turning 65 this year and are new to the maze of options, the enrollment process can feel overwhelming. Almost everyone is eligible and must enroll in Medicare Part A, which covers hospitalization. There are many Medicare Part B options, and the choice is not simple. Then there is Part C—Medicare Advantage Plans that often sound too good to be true (think free gym memberships, cheaper drug plans, and more) but come with some limitations and costs. Medicare Advantage plans replace Medicare Part B, and not all Part B options may be available if you change your mind—even during Open Enrollment. Making the best possible decision from the start is vital. There are also multiple drug plans, and your best choice depends on your current prescription needs, which means an annual reassessment of your drug plan is a must.

The good news is that help is available. HICAP (the Health Insurance Counseling & Advocacy Program) provides objective information and counseling about Medicare. The service is very good—and it’s free. Of course, we’re always here to help as well. Open Enrollment for Medicare closes on December 7, so be sure to explore your options now rather than rush your decision as the deadline looms.


Corporate Benefits

If you’re fortunate enough to have a corporate benefit plan, take advantage of Open Enrollment (which is likely happening right now) to review and update your benefit elections and make the most of your options.

  • Health Insurance. Most companies offer a variety of options, including PPO, HMO, and HealthSave plans. The costs for these plans vary widely, so it’s important to explore the options carefully to choose the plan that balances premium fees with out-of-pocket expenses based on your family’s expected health needs. If you have access to dental and vision insurance, take what’s available to be sure you and your family are covered.
     
  • Life Insurance. Life insurance is not for you, per se, but to replace your income to support your dependents. Group life insurance offered through your employer is often priced well, so do take advantage of it. However, corporate coverage does not protect your insurability when you leave the company due to a job change or retirement. Plus, because the premiums for group life insurance go up every year, private, level-term insurance is sometimes a better option. Work with your advisor to determine if supplemental private life insurance makes sense in your situation. And while many plans offer coverage for your children, this typically makes sense only if you don’t have funds for funeral expenses.
     
  • Disability Insurance (DI) and Long-term Disability Insurance (LTD). Knowing that the chance of becoming disabled in some way is much greater than the chance of dying early, this is likely the most important insurance you can buy. It’s expensive, but considering that it covers 60-70% of your salary should you become unable to work, it’s well worth the price tag. Note that because you pay for group DI with pre-tax dollars, the benefits are taxable income. Private DI is paid with after-tax dollars, so the benefits are tax-free, which can make it even more valuable. Talk to your advisor to determine your best option.
     
  • Health Saving Accounts (HSAs). If you have access to an HSA and can afford to pay the high deductible required, these plans can be a great retirement savings tool. HSAs allow you to contribute using pre-tax money, invest that money in mutual or other funds to maximize growth potential, and then withdraw assets for qualified medical expenses tax-free.
     
  • Flexible Spending Accounts (FSAs). Unlike HSA contributions that can be used at any time, contributions to an FSA accounts must be used in the same calendar year. FSA contributions can be used for health care and dependent care, and they can help reduce your taxable income. The key with FSAs is to plan well to be sure every penny is spent before December 31.
     
  • Accidental Death & Dismemberment (AD&D). This is one benefit that I rarely recommend. Yes, it’s cheap, and yes, it offers an extra boost to your life insurance benefits in certain cases, but this is one lottery you don’t want to win. Your dollars are probably better spent elsewhere.
     
  • Pre-paid Legal Plans. It’s easy to overlook a legal plan, but it can be one of the more valuable benefits, primarily because these plans offer low-cost access to legal assistance that could otherwise come with a hefty price tag. While I don’t recommend using this type of service for complex legal needs, from updating your Will and Powers of Attorney to reviewing rental and other agreements, a pre-paid plan may be the key to taking care of these important tasks sooner rather than later.

The Affordable Care Act (Obamacare)

Thanks to the current administration’s push to derail Obamacare, there is more confusion than ever about choosing ACA health plans. In California, the Open Enrollment period for 2018 opens November 1 and closes January 31, 2018. This is for all plans selected through Covered California and in the open market. Despite all of the news in Washington, the plan still offers tax credits and cost-sharing subsidies to help those who qualify afford premiums and reduce out-of-pocket costs. That doesn’t mean nothing has changed. Rates for all plans are being raised by about 12% due to the annual rate hike, and silver-level plans are increasing by an additional 12.4%. Actual premiums depend on factors such as where you live, your income, what level of coverage you choose, and which insurer you pick.

Just like with Medicare, it’s wise to get help when choosing your options. The Covered California website offers online videos and information on where to get in-person help from a certified insurance agent.


Choosing your benefits may not be the most exciting item on your to-do list, but Open Enrollment is only open for a limited time, so be sure to make the time to explore your options and make smart choices for you and your family. If you need more guidance, please reach out. We’re always here to help!

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Saving the vacuum cleaner: a lesson in disaster preparation

Saving the vacuum cleaner: a lesson in disaster preparation

Years ago, I was told a story by a woman who had been a child in England during World War II. She and her sister had gotten so used to the bombings that the spectacle seemed more exciting than frightening, and the two girls would climb to their attic and peer out of tiny windows as the bombs dropped in the distance. One day, as the planes flew over her neighborhood, for the first time she was afraid. In that wave of fear, she did the only thing that seemed to make sense; she grabbed a vacuum cleaner and frantically dragged it away from the window, high onto a dusty table—for safety. And she cried.

That story has stayed with me because it seems like the little girl’s reaction was improbable, illogical, incomprehensible, and even a little funny. Why the vacuum cleaner? Why was that the one thing that seemed like it needed saving as the bombs fell? I expect it’s a typical reaction… to grab what we can, no matter what it is. The inner child takes over because we haven’t planned ahead.

For months we’ve watched from afar as natural disasters wreaked devastation across the country. This month, it was our turn. More than 9,217 acres were burned, 25 structures were destroyed, and 55 more were damaged in the Canyon 2 fires in Anaheim Hills that was finally fully contained on Tuesday. And while “our” fire was mild in comparison to the wine country wildfires that burned at the same time, it certainly made the reality of such a disaster much more concrete. It brought home the need for each of us to take the necessary steps to prepare for a swift and well-planned evacuation in the event of any emergency.

As the fire worsened last week and our skies turned orange, I found myself in conversations I never thought I’d have. Friends and clients watched in fear as the fire swept closer to their homes. Most who faced evacuation were scrambling to figure out their next steps. “I have no idea what to take!,” Sara told me as she sat in my office last Thursday. “My son put together an earthquake kit last year, so I felt prepared for that kind of thing. But leaving everything behind feels even worse somehow.” Sara wasn’t alone. So many people I spoke to felt unprepared and vulnerable at the thought of having to evacuate their homes.

And then I talked to my friend Linda. Unlike most of us (myself included), Linda seems prepared for anything. She told me that when she’d worked at the fire department, they gave every employee a laminated list of what to grab in an emergency. As she named all of the items on her “grab and go” list, I saw how different this was from a typical earthquake kit (at least any list I’ve ever seen). Here are just a few things that stood out to me:

  • A waterproof bag with one full change of clothes, including underwear and outerwear, and comfortable walking shoes
  • Electronics (mobile phones, laptops, iPads) and chargers—including a portable back-up charger
  • Plastic sheeting, duct tape, and dust masks in case you need to seal your home or shelter from airborne contaminants such as smoke
  • Medications for you and your pets
  • A ziplock bag with copies of essential papers such as your driver’s license, proof of insurance, passports, social security cards, and printed list of personal contacts
  • Cash, ideally at least $500 in small bills in case a disruption in banking services renders your ATM and credit cards useless

I began to think about what my laminated list should include. Sara and so many others seemed overwhelmed with choices. I could suddenly see how, in the midst of the chaos, a little girl might choose to save a vacuum cleaner. I decided it was time to stop thinking about planning for an emergency and start doing.

I started with Linda’s list, which also included the usual supplies. Enough water and non-perishable food to care for every family member, including pets, for at least one week. A well-stocked first-aid kit. Flashlights and batteries. Even a whistle to call for help. (For a complete list of what to include in emergency kits for your home and car, see the Build a Kit guide at ready.gov.)

But what about the emotional things? Would I remember to grab my grandmother’s pearl necklace in a panic? What about baby pictures of my children that I haven’t stored anywhere else? If, like Sara, I faced the possibility of losing everything I left behind, what would I want to take with me? After some careful thought, I have the answers. They are written down in the Notes app on my iPhone, ready to “grab and go.”

I hope you too will take our local fires as an urgent call to action. Build your emergency kit. Be sure you’ve uploaded your important papers to a secure online vault like eMoney (which we offer at no cost to every client) or our online Sharefile tool. Include your birth and marriage certificates, wills, insurance policies, military documents, retirement account statements, loan statements, and deeds. Create your laminated or electronic list of what to grab if you have to leave your home urgently.

Hopefully,none of us will be forced to evacuate our homes or cope with a disaster, but by putting your plan in place ahead of time, you’ll have what you need if and when you need it. Plus, you’ll be much more prepared to preserve those items that matter most in your heart—whether or not your list includes a vacuum cleaner.

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In Your Best Interest: Our Fall 2017 Newsletter

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.


MARKET HIGHLIGHTS: Q3 2017

Thinking back over the quarter— and the entire year to date—I feel… breathless. Amid the whirlwind of global events, at least the economic and market news remains a bright spot, so let’s start the quarter review with some good news: 

In Q3, equity markets experienced gains, fueled by a late-August rally that pushed security prices upward. As the quarter came to an end, the benchmark indexes continued to rise. The Nasdaq and the Russell 2000 posted gains of more than 5.0%, followed closely by the Global Dow and the Dow. The S&P 500 trailed the other indexes listed here, yet still managed to increase by almost 4.0% since the end of Q2.

In September, the Federal Open Market Committee (FOMC) decided to hold the benchmark interest rate between 1 and 1.25% while setting expectations for an increase next quarter. The Fed noted that the labor market is continuing to strengthen, economic activity has been rising, job gains have remained solid, and unemployment rates are low. At the same time, household spending has expanded moderately, growth in business fixed investment has picked up, and inflation is running below 2%. 

In the rest of the news, the world is a mess. Donald Trump remains in the White House amid an accelerating Russia investigation, a frightening standoff with North Korea, and another failed attempt by Republicans to repeal the ACA. The Equifax data breach and the company’s inadequate response had everyone scrambling to secure their personal information. Protesters clashed in Charlottesville, Colin Kaepernick triggered a national debate, terrorist attacks escalated across Europe, and the US witnessed another mass shooting. Nature, too, was ill-tempered, with hurricanes devastating the Southern US, Cuba, Puerto Rico, and other regions; earthquakes in Mexico killing hundreds, and flooding causing record deaths around the globe. It’s been a year for the record books, and not in a good way. 

As we enter the final three months of 2017, it’s important to stay focused on what truly matters: love, health, and happiness. Know that our team will be doing our part by continuing to monitor your plan and your portfolio closely. For your part, do what you can to focus on what you can control… and to finally, hopefully, catch your breath.

 
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Now more than ever, focus on your Circle of Influence

Now more than ever, focus on your Circle of Influence

When I walked into my early morning Pilates class on Monday, I couldn’t decipher the expression on my instructor’s face. Was it compassion? Pain? Despair? “What’s wrong?” I asked. Her answer: “Las Vegas.”

I was fortunate that I’d had a more peaceful Monday morning than is typical for me. My iPad had gone missing, so I hadn’t checked my news feed or social media at all. Blissfully unaware of the tragic events of Sunday night, I spent my pre-workout hour reading an old standby: Stephen Covey’s The 7 Habits of Highly Effective People. As I sipped my coffee, Covey had been introducing the idea that being proactive means focusing on the things we can control—even in what seem to be dire circumstances. It’s amazing how things seem to come along at just the right time, even when you least expect it.

I was rereading the book to help manage my own “Post-Election Stress Disorder,” but Covey’s words hold some wisdom for all of us when the headlines are filled with news of one catastrophe after another. In just the past few weeks we’ve seen nine million children lose health insurance when Congress let the Children’s Health Insurance Program (CHIP) expire, protesters clash in Charlottesville, hurricanes and floods devastate communities in the southern US, Cuba, and Puerto Rico, and earthquakes kill scores of people in Mexico. Then Las Vegas happened, and we seem to drown in the negative…again.

But there is an alternative.

If you haven’t already discovered Covey’s The 7 Habits of Highly Effective People, let me introduce you to the first of the seven habits. It is an important one, especially after this “September to Remember.”

Habit #1: Be Proactive

According to Covey, being proactive means taking action, but it also means taking responsibility for your own life by actively choosing where to focus your attention. He stresses that our ability to be self-aware—to consciously stand apart from ourselves to observe what we’re doing and why, and to examine the way we see ourselves—is uniquely human. Unlike animals that simply react to stimulus in the world around them, we have a choice.

What a wonderful realization.

He also talks about “reactive people” who are driven by feelings, circumstances, conditions, and environment; and “proactive people” who are driven by carefully considered, selected and internalized values. To become more proactive, look where you focus your time and energy. All the things you care about—Las Vegas, Puerto Rico, the flag, politics, your children, money, health, and more—lie within what he calls your Circle of Concern. Next, look at each of those things and identify the ones that you can actively affect, or what Covey calls your Circle of Influence.

Stephen Covey quotes Viktor Frankl who said, “Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.” On Monday morning, many people were paralyzed by the tragic events in the news. Others chose to be proactive and act within their Circle of Influence. They got in line to donate blood for the victims. They offered transportation and housing to anyone and everyone affected by the shooting. Even during the shooting, people risked their own lives to save others. What an inspiration to us all.

There will always be tragedies in our world, but I wonder how things would change if every one of us could be more proactive—if, as Covey suggests, we each took responsibility for how we reacted to the world around us and focused on driving change within our Circles of Influence. I expect we’d all be more effective. And the world would be a better place.

This concept is also true when it comes to effectively managing your finances. While many events lie within your Circle of Concern—market corrections, inflation, gas prices, black swan events—you cannot influence their outcome. Know what you can control and strive to focus on your Circle of Influence: keep your fixed costs low, maintain sufficient emergency funds, select an appropriate risk profile, and have a solid financial plan in place.

By focusing our positive energy in the right place and acting wisely, each one of us has the power to be more proactive, more effective, and drive positive change in our own lives and in the world around us. Now is the time.

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Ready to shift your relationship with money? It’s time for some BRAVING

Ready to shift your relationship with money? It’s time for some BRAVING

I joke that I discovered Brené Brown in much the same way Columbus discovered America: I simply stumbled into the right place at the right time. And boy, am I glad I did. In just one Ted Talk and as much of her newest book as I’ve had the time to read (I’m not quite through, but I’m cherishing every word), this researcher and storyteller has me thinking deeply about vulnerability and bravery and how to build the courage to be “enough” for myself and others in order to live the fullest life possible.

What’s fascinating to me as a financial advisor is how much all of these ideas play into what I see every day with my clients—and how vulnerability, bravery, and courage impact each person’s sense of financial “success.”

If you’ve never heard of Brené Brown, I highly recommend taking some time out of your day to check her out. A social science researcher, she is a stickler for data and a mid-life convert to the power of vulnerability (listen to her Ted Talk for more on her journey). Through her research, Brown has studied people—mostly women—who experience love and belonging in their lives and those who don’t. What’s the difference? It’s shockingly simple. People who have love and belonging believe they are worthy of it. Those who don’t, don’t. Even more, it seems that what empowers people to achieve that state of worthiness—of believing they can be and deserve to be loved—is the courage to be vulnerable.

Courage and vulnerability resonate with me. In my life, I’ve observed that many of us seem to have lost our ability to be vulnerable. Perhaps it’s because we spend too much time in our bubbles. Alone and watching other people’s lives on social media or television. Alone commuting in our cars. Alone walking in a crowd with headphones in our ears, shutting out the world around us. Being alone has become our safe place where we are not judged or confronted or questioned. And it’s where we can choose specifically not to feel.

I think Brown hits the crux of it when she speculates that the reason we’re the most in debt, obese, and medicated adult population in history is because we’ve become completely uncomfortable with our vulnerability. When we feel exposed or conflicted or anxious, we choose to numb our feelings through food, alcohol or Facebook. Further, her research shows that there’s another way we numb our vulnerability, and that is to make everything in our lives certain. We no longer leave room in our public and private lives for reflection or uncertainty about our faith, our politics, and our preferences. It’s created an unsavory divisiveness in which everything is black or white. We’re labeled, and we label others in all-too-certain terms. We blame others as a way of discharging our fears. We use certainty as just one more tool to numb our vulnerability. As a result, we feel more judged, and, indeed, more vulnerable.

Perhaps the most important idea Brown presents is that numbing our feelings of vulnerability has an unintended consequence. Because we’re not capable of being selective about which feelings we numb, when we numb our vulnerability, we also numb joy, happiness, love—all of the feelings that make us happy and content as human beings. If there’s ever been a reason to nurture our vulnerability, this is certainly it!

As these ideas are all swimming around in my head, I keep coming back to how important it is to invite vulnerability into the financial planning process. If vulnerability is the key to more fulfilling relationships, it follows that it can have a dramatic impact on our relationships with money which, just like every other relationship, can come with a whole lot of baggage. Love. Fear. Anxiety. Shame. Obsession. The list goes on.

In Brown’s new book Braving the Wilderness: The Quest for True Belonging and the Courage to Stand Alone, she uses the word “BRAVING” as an acronym for the seven rules for building more connected relationships rooted in trust and vulnerability. It’s amazing to me how each of these statements can relate directly to every relationship—including our relationship with money:

  • Boundaries: I trust you if you are clear about your boundaries and you hold them, and I am clear about my boundaries, and you respect them.
     
  • Reliability: I trust you if you do what you say you are going to do. Not once, but over and over again.
     
  • Accountability: I trust you if, when you make a mistake, you are willing to own it, apologize for it, and make amends. And when I make a mistake I am allowed to do the same.
     
  • VaultWhat I share with you, you will hold in confidence, and what you share with me, I will hold in confidence.
     
  • Integrity: Choosing courage over comfort, choosing what is right over what is fun, fast, and easy. And practicing your morals, not just preaching them.
     
  • Non-judgement: You can fall apart and ask for help and not be judged by me.
     
  • Generosity: If I mess up, say something, or forget something, you will make the most generous assumption and check in with me.

I have strived to foster and live up to each of these values when I work with clients, but Brown has brought some valuable clarity to my thinking. I wonder if BRAVING may just be the key to help shift not just how we interact with each other, but also how we look at and feel about money. Brown says that when we are vulnerable, “We feel the deepest connection to our true self and to what matters most.” What a wonderful foundation on which to create a Brave New Financial Plan.

 

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When grandma fights back: the challenge of caring for combative dementia patients

When grandma fights back: the challenge of caring for combative dementia patients

It’s a treasured image: the loving grandparent with a soft smile, offering unconditional love and cookies to a bevy of grandchildren… until eventually she forgets their names and gently fades away. This scene of the aging grandparent often does happen, but sometimes there’s a dramatically different scenario that many of us may face at some point. Today, one in 10 people age 65 and older suffers from Alzheimer's dementia, and the number of new cases of Alzheimer's and other dementias is projected to soar[1]. On top of that, an unknown number of the nearly 6 million men and women with dementia will become violent at some point. When that happens, finding care can be incredibly challenging—whether it is for a grandparent, a parent, or a spouse.

Unfortunately, when a dementia patient becomes aggressive, combative, or otherwise non-compliant, their condition crosses into mental health territory. Similar to other mental health concerns, our health system is ill-equipped to handle the challenges. Despite the fact that as many as 1 in 10 Alzheimer’s patients lashes out physically, very few people talk about this issue. Perhaps it is the stigma of mental illness. Maybe we don’t want to admit to ourselves (much less our neighbors) that the people we love could become a physical threat, but the lack of care options for combative dementia patients seems to be the “dirty little secret” of elder care.


RELATED: Mental health, money, and breaking the silence


If you assume the issue is rare, think again. Here are just a few examples, and they paint a bleak picture:

  • When Randy’s wife Jean was diagnosed with dementia, he kept her condition a secret for almost two full years. He was embarrassed by the stigma of a mental health problem, but when Jean’s behavior changed, he couldn’t keep up the façade any longer. She refused to allow him to bathe her, fought him off when he tried to help her use the bathroom, and he couldn’t even coax her to bed at night. He had to get help. Sadly, Jean was just as uncooperative and aggressive with professional healthcare providers as she was with Randy. After three nights in a local nursing home, the facility called to tell him his wife would have to leave because she was “not manageable.” The next facility found her so difficult that they transferred her to a geriatric psych hospital where things got even worse. Two different memory care facilities refused her, and every time she was forced to leave another home, Randy was given a list of other facilities, a hasty “good luck!”, and little guidance.
     
  • Mia and Jon faced similar challenges.Jon had always been the decision-maker in the family, so when it was clear he could no longer keep up with the bills or manage their money, Mia didn’t know what to do. Even when Jon’s physician confirmed the early-stage dementia diagnosis, she felt stuck. Mia asked her adult son to help her talk to Jon about the necessary changes (beginning with taking away the car keys), but when they approached him about the issue, Jon was threatened, upset, and angry. Less than a year later, Mia and Jon moved into a continuing care community, but the transition proved too stressful. Within a week he was moved to the skilled nursing unit. When he became combative, he was transferred to the psych holding unit of the local ER for 24 hours. When he was released, Mia and her son were given a list of recommended facilities, but none of them would even consider accepting Jon because of his history of aggression. Four facilities later, an elder care placement worker urged Mia to consider a board-and-care home that specializes in combative dementia. It was there, says Mia, that Jon was saved by a caregiver who understood how to calm him and was able to give him the best quality of life he could have.
     
  • When my husband, Ed, suffered a debilitating strokeand became permanently disabled, he was only in his 50s, but we faced similar challenges. After a bad fall, Ed was placed in a medically induced coma to allow his body to heal. When he woke up, he was confused, angry, and combative. That didn’t change when he was placed in the best facility I could find—one where I knew they would not tie him to his bed. But after one violent episode, they transferred him to UCI without my permission, despite the fact that I had Power of Attorney at the time. Because there were no beds available in the psych unit, my husband was placed in the ER hallway (perhaps the worst possible place for someone suffering a psychotic break!) for more than a day. Finding any place that would accept him with that history was nearly impossible. The whole scenario was horrific.

Finding quality care for dementia patients who become non-compliant can be a nightmare for everyone involved. I wonder if the challenge lies not with the patients themselves, but with our society’s inability to accept mental illness—to give it a name, anticipate the possibility that this may become a reality in our own lives, and identify creative ways to help our aging population through the trauma and confusion of dementia.

To learn more, I recommend Esther Heerema’s article How to Respond to Combative Behavior in People with Dementia that looks at the daily challenges from the dementia patient’s point of view. She helps the reader understand what drives some of the anger and frustration that can result in combative behavior. If you do find yourself facing the challenges of caring for a combative family member, remember that dementia can take a devastating toll on caregivers. Find a local support group, join an online forum like Caring.com or the Alzheimer’s Association’s ALZconnected.com—get help wherever you can find it.

According to the Alzheimer’s Association, someone in the United States develops Alzheimer's dementia every 66 seconds. By 2050, that statistic is expected to jump to one new case every 33 seconds. By doing all we can now to help end the stigma of mental illness, perhaps we can help change the future for tomorrow’s dementia patients—ourselves and our families included—even when they become “non-manageable.”


Do you have an Incapacity Agreement?

To help our advisory clients anticipate dementia, we ask everyone 65 or older to sign an Incapacity Agreement. This agreement permits us to reach out to designated individuals if our client asks us to make changes to their investments or make withdrawal requests that are seriously inconsistent with their previously-stated life goals—something that we believe is an out-of-character request that could be due to physical or mental illness. Ask your advisor if he or she offers a similar agreement to help protect you and your assets in the case of age-related dementia.


 

[1]Source: Alzheimer’s Association Fact Sheet.

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Security vs. Freedom (and the magnificent merits of flying business class)

Security vs. Freedom (and the magnificent merits of flying business class)

I’m writing today swimming in jet lag after a week spent (literally) swimming with the fish in Fiji. And while it may be true that every vacation creates a mental shift of sorts (if for no other reason than that it takes us away from our daily routines), this particular trip was unprecedented in the impact of that shift. What was this dramatic change? After decades of helping others as a financial advisor, I’ve finally found my own internal abundance. I’ve finally been able to rise above the very basic need for financial security and embrace the ultimate goal: financial freedom.

Before you jump ahead and think I won the lottery during my travels (I didn’t!), let me take a step back to clarify.

Whenever I sit down with a client to begin the financial planning process, one of the first questions I ask is this: “What is important about money, to you?” In most cases, I receive one of two responses. The majority of people, regardless of income level or accumulated wealth, will begin with “security.” A small percentage (who admittedly tend to seem unusually at ease) will name “freedom” as their fundamental goal. For all the years I’ve been asking this question, I’ve always understood the need for security more. After all, who in her right mind wants to end up being a bag lady with no resources and no financial security to save her from the abyss?

I come to this scarcity perspective honestly. Raised by depression-era parents who saved everything from used tin foil to pennies, the fear of “not enough” was drilled into me from day one. Our family was frugal to a fault. Then, after becoming a single mother in my 20s, saving my pennies mattered more than ever. The responsibility to have enough to give my children was a heavy weight to bear. I expect this is why I was drawn to my career when I was. After all, the more I knew about money, the more security I could control, right? And though I’ve worked hard to have the skills and knowledge to help my clients plan for their financial security, I realize that I was never completely at ease with money myself. Did I have enough? Certainly. But whenever I saw friends spending on what seemed to be frivolous purchases, I caught myself asking, “How can you spend that money today when you might need it tomorrow?”

Fast-forward to two weeks ago when I boarded my flight to Fiji. For the first time, I had allowed myself to splurge on the luxury of a business-class ticket. Even as I walked onto the plane, I questioned what prompted me to spend a big chunk of my budget on a bit more leg room, a personal sleep kit (as if I don’t already have eye shades), and real food and drinks. But when I settled into my relatively monstrous seat, I had to confess it felt pretty darned good! When the flight attendant handed me a warm scented towel and invited me to “sit back, relax, and enjoy your flight,” I thought that, for once, I might actually do just that.

And I did. When we landed in Fiji more than 11 hours later, I was refreshed and ready to go. While I am sometimes apprehensive about meeting new people, especially an assigned roommate on a dive trip (Will I like her? Will she like me?), this time I felt light and almost giddy. More than anything, at the end of that flight, I felt empowered.

Once I settled in at the hotel, I learned that out of a group of ten, only three of us were planning to dive. The rest of our group were there to snorkel and enjoy the sights above sea level. So our band of three became fast and close friends, and in everything we did together, I felt more buoyant than ever—physically, mentally, and even spiritually—both in and out of the water. When we were diving, my buoyancy was amazing. I was breathing easily (not gulping air in fear of not having enough) and in my relaxed state, I found myself just hanging in the water—not sinking to the bottom or floating to the surface, but balanced and at ease. I was more present, more observant, and more at peace than I can remember. I felt completely free.

As I boarded my flight home on Saturday, I felt something that, until then, I’d only seen in others and never really understood. After years of careful planning and fearing scarcity, I was finally giving myself the freedom to overfill my glass a little. It felt fantastic.

The best part about financial freedom is that anyone can get it. Yes, as Jonathan Clements says, “Growing wealthy is embarrassingly simple: We save as much as we reasonably can, take on debt cautiously, limit our exposure to major financial risks, and try not to be too clever with our investing.” (Read my blog Money really can buy happiness for more on that great topic.) That’s why having a solid financial plan is vital for anyone. There’s no doubt that there’s a fine balance between knowing that you’ve planned to achieve abundance and trusting your plan will deliver what you need for the future. But achieving financial freedom—that buoyancy that enables you to trust in your own abundance—is as much about a mindset as it is about finance.

For years I’ve preached the value of striving for financial freedom to anyone who would listen. Today I can say I finally have that freedom myself. In the ocean, I now trust that I have enough air to sustain me for the duration of my dive. Back on land (or up in the air in business-class!), I now trust that I have enough resources to sustain me for the rest of my life—even if I allow myself to overfill my glass now and then. That is true financial freedom. I hope you can meet me there!

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New parents: Know the true costs before choosing to stay at home

New parents: Know the true costs before choosing to stay at home

Gail Hicks is a senior financial advisor at Klein Financial Advisors. She is this week’s guest blogger while Lauren is away on vacation.


It’s a question almost every soon-to-be parent ponders: should I stay at home after the baby is born? And if so, for how long? Even for the most career-driven parent, it can be a very emotional decision. To come up with the right answer for you, step beyond a basic pros-and-cons list. Be certain you’re considering every piece of the puzzle before making a choice—and do all you can to be sure that choice balances your emotions with what’s best for the long-term financial stability of your family.

If you think that puzzle is a simple one, think again. It’s easy to look at the high cost of childcare and assume that those costs, combined with the savings on everything from dry cleaning to taxes to eating out after a long day at the office, make staying at home the most cost-effective option. That’s rarely the case.The truth is in the data. According to a recent study by the think tank Center for American Progress (CAP), the average 26-year-old woman who takes a 5-year break from her career will lose much more than five years of her salary. In fact, when considering lost income, wage growth, and retirement assets and benefits during just five years, she’ll lose a whopping $467,000 over her lifetime. A man of the same age will lose even more: just under $600,000. To make those numbers more personal (especially knowing that Orange County is one of the most expensive places to live in the US) assume that staying at home will cost up to five times your annual salary for every year you’re out of the workforce. According to the latest U.S. Department of Agriculture’s Expenditures on Children by Families report, households with income over $105,000 should be prepared to spend at least $400,000 to raise a child to age 18. With that price tag in mind, it’s a challenge to make staying at home an affordable option!

Of course for some parents, the math isn’t enough to sway the emotional desire to stay home with children. For others, there are family and cultural biases that strongly influence the decision. But it’s vital to look closely at the reality of your choice before opting to leave the workforce. As someone who has been there myself, I know the real-world challenges all too well.

When my husband and I were contemplating expanding our family from one child to two, we remembered the toll my job took on my health during my first pregnancy, including a very frightening pre-term labor that resulted in being put on bed rest at seven months. The high cost of childcare and the fact that we had no family in the area to help out were also factors to consider as we considered our options. We did the math (it’s what I do, after all!), and determined that with our savings and the extra income from my husband’s side business, we could make it work. We knew there would be sacrifices, but it was an important—and yes, emotional—decision for us both. So I walked away from a high-paying corporate job and walked into stay-at-home parenthood.

Unfortunately, the decision didn’t play out in real life as well as it had on paper. First, our second son was born with a mild disability. That alone tipped the financial and emotional scales. Jumping through hoops to get a diagnosis and then therapy two or three times a week was hard. Soon afterward, the recession hit, and with it came the end of the consulting income we had counted on to help replace my salary. Even worse, my husband didn’t want to add any more stress to an already high-stress situation, so he postponed admitting that his side business had completely dried up. Our plan of just breaking even quickly turned into the reality of taking on debt. Now the numbers didn’t make sense. How could I go back to work when my younger son needed me at home and my older son had grown accustomed to having me at home with him too?

At the same time, I was in a world of the unknown. I’d been a businesswoman my entire life. I was home with a special-needs child, I knew only a handful of my neighbors, and the few stay-at-home moms I was able to meet had never worked, so our experiences were completely different. I felt isolated and alone. And while it was a difficult choice to go back to work, money was just one piece of the equation. I was confident my choice would be best for our whole family, and it truly was. Within months of going back to work, I felt we had found balance again. Yes, I missed the time with my sons, but I knew I was a better mother when we were together as I watched the financial and emotional stresses wash away.

Everyone’s situation is different. The key to making the best choice for you is to understand the true financial impact of staying at home, and then to decide what makes sense for you and your family—both today and over the long term. How can you be sure your emotions aren’t overriding your common sense? Work with a professional advisor to help you crunch the numbers and be sure you’re really considering every piece of the puzzle.


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Ready to retire? Consider taking the road less traveled

Ready to retire? Consider taking the road less traveled

It’s inevitable. You tell your friends you’re retiring and the first question out of their mouths is, “What are your plans?” Question number two: “Where are you going?” It seems the connection between travel and retirement has become an obsession in our society. And while it may conjure up images of tropical destinations and “once in a lifetime” adventures, the dream doesn’t always reflect the reality.

My friend Joyce is a perfect example. After working in corporate healthcare for decades, ten years ago she was finally ready to call an end to her career. Of course, the questions and suggestions began immediately: “Where are you off to? Have you thought about a cruise?” “You should go on a safari! It’s the trip of a lifetime!” “We loved Capri! You just have to go!” “You’ve never been to Paris?” Joyce had already traveled a fair amount in her life, for work and pleasure, so the idea of planning a big retirement trip wasn’t even on her radar. Suddenly the pressure was on. She started to feel like she had to travel—it was, after all, what retirees are expected to do.

When we met for coffee a week after her retirement party, she was restless. “I don’t even know where I want to go, but I feel like I should figure it out soon. I’m already bored with my routine!”

It’s a dilemma I see all the time. As retirement looms, people are so focused on closing the door on their careers that they don’t take the time to think about what’s next. They know they’re not ready to settle into a rocking chair, but they have no idea how they want to spend their days.

To help guide Joyce, I posed a question that was much different than, “What’s your travel destination?” Instead, I asked, “What do you want to do in your second half of life?” Joyce looked like a deer in the headlights. I took a sip of my coffee and continued. “Is there anything you’ve dreamed of doing, but have simply never had the time—not including traveling?” We sat quietly for a few minutes, and I could see the wheels turning in her mind. When she did speak, she seemed almost embarrassed, as though she was confessing a dark secret. “Paint,” she said. “I’d love to paint.”

Joyce’s vision was no standard image of an elderly gentlewoman quietly painting landscapes on a sunny hillside. Her dream was to paint large, bold canvasses that would take people’s breath away. I could already picture her in paint-covered overalls tossing paint onto the canvas like a modern-day Helen Frankenthaler. She didn’t know her next step, but she now had a vision in her mind, and it had nothing to do with jumping on a retiree-filled cruise ship.

Don’t go me wrong. I’ve recently discovered my love for travel, and I get that, at least for some people, travel is a retirement dream come true. Even then, I’ve seen peer pressure turn what should be a time of financial freedom into a whole new level of stress and anxiety. Travel anxiety can be especially challenging for anyone who lives in an affluent area, and even more so for affluent couples who set out on their travels together. Suddenly, what could have been a modest, budget-conscious Alaskan cruise morphs into a five-star, luxury journey on the Crystal line—for five times the original cost. The pressure to overspend can come from relatives as well. Knowing that memories are important, it’s all the rage right now for grandma and grandpa to treat the entire family to an all-expenses-paid family vacation, yet few retirees can afford this level of extravagance. I’m all for spending money on experiences instead of “things,” but it’s important to be realistic. If a trip is beyond your budget, that’s the moment you need to stop and ask yourself: whose dream am I living? Mine—or my neighbor’s? Peer pressure can be tremendous, but swallow your ego and make choices that align with your dreams and your budget.

Joyce’s story has a wonderful outcome. After our talk that morning, she decided to make her dream come true. She signed up for classes at Otis College of Art and Design, studied with master teachers, and earned a certificate in Fine Arts. She’s been painting ever since, and though I have yet to see her in overalls (I guess that’s my version of her dream, not hers!), she’s happier than I’ve ever seen her. She does travel a bit, but mostly to New York City on artist trips. By focusing on what she truly wanted, she took the road less traveled (pun intended!) and painted a beautiful “retirement” that even she never saw coming.

If you’re on the cusp of retirement—or even already there—take some time today to brainstorm how you want to spend the next decade of your life. Build a vision board. Journal. And don’t let anyone else’s expectations stand in your way. Once you have some ideas, I recommend sitting down with your financial advisor to figure out a realistic budget, and then take it from there. By charting a path based on your dreams and your finances, you can paint your own picture of a wonderfully fulfilling retirement that’s free of financial anxiety. That’s what I call the “golden years”!

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Rethinking retirement in the “gig economy”

Rethinking retirement in the “gig economy”

There’s a movement going on in America, and it’s something retirees, and those even close to retirement, should start studying—hard. It’s called the “gig economy,” and it’s changing how people think about almost everything. Work. Play. And even the fine line in between the two. It’s changing how we pay and get paid for both, and it’s transforming how people look for work and how the work itself is getting done. Whether you’re looking for extra income to help fund your retirement, or you simply want to work to keep your mind and body active in your later years, understanding the gig economy and how it functions is vital to rethinking your retirement.

Anyone who has been forced to look for work recently can tell you firsthand how the gig economy has flipped the traditional work landscape on its head. Old-fashioned resumes have been replaced by LinkedIn profiles, and even the idea of finding a conventional “job” is fast becoming a thing of the past. Companies like Uber, Lyft, and Airbnb have provided a way for almost anyone to earn an income, as well as a whole new way for consumers to find and pay for services.

These companies aren’t alone. Today, there’s a website or an app that offers on-demand services of almost any kind imaginable. DoorDash delivers breakfast, lunch, or dinner from your favorite restaurant to your door at the click of a button. TaskRabbit lets you order up a “trusted and local handyman” within an hour. Dogvacay gives pet owners online access to 5-star pet sitters and dog walkers. And there are just as many services for professional freelancers. Upwork helps companies hire web developers, writers, accountants, and virtual assistants. Guru is the place to find professionals in management and finance, engineering and architecture, and sales and marketing. And UpCounsel is the go-to site for legal services.

Of course, every one of these services requires individuals to provide skills. Whether they are driving for Uber or DoorDash, putting together IKEA furniture, or helping a business crunch the numbers, these workers make up a growing workforce that is already in place. That means that if you thought serving up lattes at your local Starbucks was the only job in town for anyone “post-career,” you’re happily mistaken. The gig economy is taking over, and that’s good news—at least for those who get it and can adapt to this new reality.

The business school at UCI certainly gets it. My friend Howard Mirowitz is on the advisory board at the school’s new Beall Center for Innovation and Entrepreneurship. The center is devoted entirely to inspiring innovation and entrepreneurship in the 21st century. Here students learn both why it’s important to become an entrepreneur, as well as the processes and tools to help turn that dream into a reality. The center fills a need that’s positively exploding. While being an entrepreneur may have sounded like a lofty dream a decade ago, it’s fast becoming mandatory for anyone hoping to succeed in an environment where it’s predicted that 43-50% of workers in the US will be freelancers by 2020. Let me repeat that: 43% to 50% of workers will be freelancers. Whatever your age, if you’re looking for work today, you are part of that statistic. Which means that now is the time to figure out what you have to offer the world and how that fits into what the world needs from you, and then begin to create your opportunities as part of this new, dynamic workforce.

For those of us who grew up in a business world where “climbing the corporate ladder” was the norm and playing by the rules led to a coveted lifetime pension, this new era can be pretty daunting. It requires flexibility and agility, not to mention a good dose of personal marketing savvy and technology know-how as well. So where do you start? It may be a moving target, but these five steps can help you take those first important steps:

  • Start to think differently.Rather than thinking about getting a “job,” make a list of all of your skills—both skills you learned in the traditional workplace and those you learned in life. Next, examine your list and circle the things you would like to continue doing and what someone else wants enough to pay you for. One of these skills may very well be your next “gig.”
     
  • Get a mentor.There’s no doubt about it: millennials have the gig economy down pat. To them, it’s just the way the world works now. If you need help figuring out how you can offer your skills, or even what skills people might be looking for, ask someone younger to serve as your mentor. You’ll be amazed at the knowledge they can offer.
     
  • Market yourself. Create a great LinkedIn profile that uses keywords that match your skill set to be sure people can find you online (learn all about LinkedIn keywords here). No, you don’t need to include dates that might “age” you or list every job you’ve ever had. Focus on what’s relevant to what you’re marketing today. If there’s already an on-demand service that matches your skills (think Upwork and Guru), explore how to get listed. There are even services which provide that service, helping to market everything from your Airbnb rental to your skills in human resources or healthcare.
     
  • Save madly.While there are many upsides to the gig economy, the downside is that it isn’t always consistent. Even if you do find the perfect niche, there may be off times when your services aren’t needed, or the need may change entirely, causing you to have to rethink your focus once again. Having a sizeable emergency fund can help offset potential gaps in income.
     
  • Be flexible.When I left my own corporate career, I realized there was a whole set of skills I needed to learn to succeed at my new goal. If you have some but not all of the skills you need for your new “job,” don’t let that scare you away. And if your interests change, know you have the freedom to change your work focus as well.

The gig economy may be replacing the traditional workplace, but what powers it are three things that will never be replaced: people, knowledge, and skills. By taking a look at the knowledge and skills you bring to the table, you may find that working in the gig economy can help your golden years shine that much brighter. How fun is that?!

 

 

 

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In Your Best Interest: Our Summer 2017 Newsletter

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.


MARKET HIGHLIGHTS: Q2 2017

 

“Global Stocks Post Strongest First Half in Years, Worry Investors.” That Wall Street Journal headline from the last day of Q2 caused more than a few investors (perhaps you included) to ponder “what’s next?” 

As we closed out the first half of the year, most indices were continuing to rise at a pace we haven’t seen since 2009. Despite certain political and global events that would have dampened investor exuberance in “the old days,” investors have been nothing but enthusiastic, and the economic data has certainly supported that fervor. Tumbling oil prices have driven down energy prices and inflation. The housing market seems to be gaining steam. And while growth in the GDP, inflation, and consumer spending has slowed, they are still showing modest increases. All of that, plus expected tax cuts, strong corporate balance sheets, and central bank support, seems to have outweighed any negative news and buoyed both the US and Global indices. The result: the Dow, NASDAQ, and S&P 500 are up 8.03%, 14.07%, and 8.24% respectively; and the Global Dow is up 9.54%. That strong economy spurred The Federal Reserve Bank to raise the Federal Funds rate another 1/4 point. 

So what can investors do to assuage their worries about the future? Jason Zweig’s interview with Peter L. Bernstein offers some answers. In the interview (which took place years before the Great Recession) Zweig asks: How can investors avoid being shocked, or at least reduce the risk of overreacting to a surprise? Bernstein responded with this wisdom: 

“Understanding that we do not know the future is such a simple statement, but it’s so important,” he said. “Survival is the only road to riches… I view diversification not only as a survival strategy but as an aggressive strategy because the next windfall might come from a surprising place. I want to make sure I’m exposed to it. Somebody once said that if you’re comfortable with everything you own, you’re not diversified.” 

Berstein then posed this question to investors: “Can you manage yourself in a bubble, and can you manage yourself on the other side?” 

I’m happy to say that our approach is consistent with Bernstein’s Yoda-like guidance. We continue to actively diversify our client portfolios, reallocating fixed income with international and global bonds, inflation-protected securities, and real estate. “Survival is the only road to riches.” And while no one knows what the future holds, we promise not to overreact—no matter what surprises come our way. ~

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Declare your (financial) freedom!

Declare your (financial) freedom!

As we head into the Fourth of July weekend, almost everyone I know is making plans for a celebration. Barbecues. Fireworks. Family and friends. It’s a time-honored tradition of celebrating the declaration of our independence from England way back in 1776. And while we should never take those liberties for granted, one thing that can give you a great reason to celebrate every day is your personal financial freedom.

Sound like an impossible dream? No matter what the state of your finances today, here are five steps to help pave your way toward true financial freedom:

  1. Freedom from illiteracy. According to this 2015 S&P Global Financial Literacy Study, nearly half of the U.S. population rates as financially illiterate. Financial illiteracy’s close companion, innumeracy, or mathematical illiteracy, is also a challenge. Even many highly educated people don’t understand the impact of compounding, the difference between “good debt” and “bad debt,” or why working with a financial fiduciary is vital to financial success. No matter where you are on the spectrum, make it your mission to be a lifetime learner when it comes to money, investing, and your finances. The more you know, the better your decisions will be. A great place to start: read How to Think About Money by Jonathan Clements. This easy read will have you on your way to worrying less about money, making smarter financial choices, and squeezing more happiness out of every dollar.
     
  2. Freedom from chaos. If your financial files are in a constant state of chaos, you can bet your financial life is in pretty bad shape as well. No matter what the reason, know this: you’re not alone. Finances are complicated, but the longer you procrastinate, the more complex the challenge will be. If you can’t get yourself to dive into that growing stack of papers, or if you simply don’t know where or how to begin, set your pride aside and reach out to your financial advisor to get help now. Need more inspiration? Read my blog For your finances, getting organized can be the greatest challenge.
     
  3. Freedom from debt. Debt is a huge problem in the US. In 2017, the average US household held more than $8,000 in credit card debt, up 6% from last year. And that doesn’t even include auto loans and other “bad debt” which, in contrast to “good debt” such as a home mortgage, student loans, and business loans, doesn’t have the potential to generate benefits over time. Because “bad debt” reduces your income, adds no value to your wealth, and forces you to pay more every month for an item that is losing value, it’s one of biggest threats to your financial freedom. Use a debt snowball to reduce and eliminate the debt you have today, and avoid taking on more debt in the future. For more on how debt can impact your future, read my blog There’s no such thing as an unexpected expense.
     
  4. Freedom from mindless spending. Financial independence requires understanding that every dollar matters, and being mindful about how you spend each and every dollar you have. Does that mean every dollar has to be relegated to paying down debt or saving for the future? No. But it does mean creating a budget to plan how much you need to save and how much you can spend every month. By creating a cash budget, you’ll already feel liberated because you’ll be in charge of your finances, instead of letting your finances be in charge of you. To dive deeper into budgeting and learn how making mindful choices with your money can help you relax about your finances, read my blog Cold, hard cash! (Are you paying attention?).
     
  5. Freedom from the unexpected. A recent survey from Bankrate revealed that 57% of Americans don’t have enough cash to cover a $500 unexpected expense. If you too are living paycheck to paycheck, it’s time to create a “freedom fund” to cover 6-12 months of living expenses. While that may sound like a lot of cash, think of it like paying off a debt to your future self now, build it into your budget, and pay yourself first every month. Once your “freedom fund” is at the ready, you’ll be amazed by the sense of relief you’ll experience when you’re no longer living paycheck to paycheck. Want to learn more about this approach? See my blog Celebrate retirement planning week: Create a “freedom fund.”

Financial independence isn’t only for the wealthy. By being mindful about your finances now, you can intentionally work toward a level of freedom that ensures you can always stand on your own two feet. Best of all you’ll have financial peace of mind so you can relax about your money. That’s the kind of freedom you’ll want to celebrate every day of your life! If you need help getting there, I’m always here to help!

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Are you ready to become an investing Wonder Woman?

Are you ready to become an investing Wonder Woman?

The new Wonder Woman movie broke every box office record last weekend, and critics and audiences continue to shout praises, calling it one of the most entertaining—and empowering—movies this year. I had a great time seeing it myself, and while I’m no critic, I thought it was the perfect summer treat: a big, noisy movie with a woman super hero. What could be better?!

But while yes, having the power to win the battle of evil in the “war to end all wars” would be pretty great, what I really wish is that I could give every woman Diana-level confidence in a superpower she already has today. That superpower, of course, is investing.

Here’s the great news for all you warriors out there: Another study just came out that showed that women are better at investing than men. That’s something to celebrate! As a group, we plan better, we take less risk, and (this should be no news to anyone!) we’re more patient—and these are all factors that add up to larger returns in the world of investing. But here’s the not-so-good news: we lack the confidence of Diana. Despite the data, women continue to see men as better, smarter investors. Among 1,500 women polled last December, only 9% thought women would earn a bigger year-end return than men. That’s a disconnect that matters. After all, if we don’t see ourselves as smart investors, how can we ever overcome the earnings gap and finally take control of our own finances?

Whether you’re one of the doubters or you have complete confidence on your investing skills, here are five things every woman can do today to become an investing Wonder Woman:

  1. Own the fact that you have the mindset to be a wise investor.
    Diana has the skills to fight evil. You have what it takes to be a great investor. Know this. Research shows that when women take the helm for our own retirement planning, we tend to be smarter, more levelheaded investors. And yet in most families, men have the trusted relationship with a financial advisor, while women take on the role of a “financial child” in the household. It’s time to take a different path. Trust that you have what it takes to make smart investment decisions, and talk to your advisor yourself to be sure your investments address your own needs and are aligned with your own values. And if you need to build up your knowledge of the basics, start with my blog post When did it become ok to be financially illiterate?
     
  2. Make retirement planning your number-one priority.
    Longevity is a huge issue for women. According to the Centers for Disease Control and Prevention, women can expect to live about five years longer than men. At the same time, between taking time off to care for children and our own aging parents, a persistent wage gap that reduces our take-home pay as well as our future Social Security payments, and a historically lower pay rate, we typically have fewer resources to fund our longer lives. That means it’s critical that you start planning for retirement as early as possible. While you may not be able to overcome some of the gender barriers that can haunt any woman’s account balance, the combination of persistence and compounding can help close that gap.
     
  3. Pay your future self first.
    If you’re like most women, it’s easy to put saving for retirement on the back burner. But let’s face it: there will always be bills to pay and extra expenses to manage. To be sure your retirement doesn’t get lost in the financial shuffle, work with your advisor to determine how much you need to save, and then set a schedule to pay yourself first—every month. The more automated your contributions can be, the better. And rather than feeling deprived, think of that savings as a “freedom fund” for your future self. A June 2016 studyshowed that 83% of women in the US aren't saving enough for retirement. Don’t represent that statistic! By being diligent now, you can create your own financial freedom—no matter how you choose to spend your time later in life.
     
  4. Make conscious decisions about 'image' purchases.
    As a professional woman and business owner, I know all too well how expensive the societal pressures can be for women to spend on our images. We are judged by appearances much more than men, so the cost of a wardrobe, manicures, haircuts, and more can take a very real bite out of every paycheck—which is already smaller than a man's. (Just ask Hillary Clinton, who has said she was thrilled to put away her makeup after losing her Presidential bid last year; I doubt any male candidates felt the same relief!) It's a double standard, and whether you are paying your bill at Nordstrom or the plastic surgeon, it all adds up. Remember: your image is important, but that doesn't mean you need a Prada suit to look your best. Decide which purchases are necessities, which are optional, and be honest about what you can really afford.
     
  5. Fight like a superhero for equal pay!
    Women still earn less than 100% of a man’s dollar, and that will likely never change without pay visibility. For decades, corporations have promoted a culture of secrecy about pay. This reality puts women and minorities at a distinct disadvantage. After all, how can we advocate for ourselves if we don’t even know what our co-workers earn? By removing the taboos around pay transparency, we can end this inequality once and for all. At the same time, we need to start placing a real, tangible economic value on caring for children and aging parents—work that is largely taken on by women. By offering benefits such as disability insurance, health insurance, and Social Security credits for this very real and necessary work, we can finally begin to recognize that the care being provided is a valuable part of the fabric of our community and our society as a whole.

Women can be great investors, but our mindset alone isn’t enough to change our trajectory. Just like Diana, Princess of the Amazon, we need to take real action. We need to see ourselves as the smart investors we are, focus on saving for our own futures, and balance our need to create a great image with our need to gain a greater financial advantage. And we need to fight the good fight for equal pay—even if it takes Diana’s God-killer Sword and Lasso of Truth to spur on salary transparency! Lastly, even Wonder Woman counts on the rest of the Justice League to help her succeed. Find a team you trust, and start taking control of your financial life today. Your future self will thank you for taking your job as an investing Wonder Woman seriously—no shield required.

Photo: TM © 2017 DC Comics

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Ready to be a successful investor? It’s time to rewire your brain

Ready to be a successful investor? It’s time to rewire your brain

If I asked you to make a list of your biggest financial mistakes, what would be on it? Overspending today and not saving for tomorrow? Taking on too much debt? Pulling your money out of a down market, or being guilty of too much hubris when the market was up? Investing in that “sure thing” that wasn’t so sure after all?

No, I’m not psychic. (If I were, I’d most certainly have beaten the market into the ground years ago!) The sad truth is that everyone can add at least one of those mistakes to their list at one time or another. Why? Because so many of the most common mistakes stem from the fact that we are hardwired for financial failure. And hardwiring is extremely tough to fight.

Jonathan Clements does a great job explaining this phenomenon in his most recent book, How to Think About Money. I covered Clements’s Steps 1 and 2 in my blog posts Money really can buy happiness and How long do you plan to live (and are you planning for it?), and while those steps were certainly important, Step 3, Rewire Your Brain, deals with issues I see my clients struggle with every day.The good news according to Clements (and I wholeheartedly agree) is that it is possible to be more sensible about how we manage our money, but changing that wiring takes great mental strength. Rewiring does not mean you need to be smarter or more educated than anyone else—you just need to stay focused on the right things at the right time. Here are four things you can start doing today to start to change your thought patterns and truly begin to think differently about money:

  1. Save like crazy. It sounds so simple, doesn’t it? But unfortunately, our brains aren’t nearly as rational as we’d like to think. Many people lack the self-control not to overspend, so they take on too much debt. My friend Lydia was always one of the most “fabulous” people I knew. She always had the best clothes, the cutest shoes, and the fanciest car. But Lydia was a victim of her own fabulousness. While she was dressing to impress, she wasn’t saving enough for retirement. Now in her late 60s, she has to continue to work—not by choice, but by necessity. In contrast, there’s the story of Carol Sue Snowden, a librarian who lived modestly and then made headlines for gifting the library where she worked over a million dollars in her will. As Clements says, “Growing wealthy is ridiculously simple, but it isn’t easy.” It requires saving early, saving often, and focusing on becoming wealthy tomorrow—not appearing wealthy today.
     
  2. Embrace humility. Are you a victim of the Lake Wobegon Effect? In Garrison Keillor’s fictional town of Lake Wobegon, “all the women are strong, all the men are good-looking, and all the children are above average.” The Lake Wobegon effect is the tendency to overestimate your capabilities and see yourself as better than others, and it’s a common affliction. The antidote? Embrace humility—and require anyone managing your money to do the same. Because when it comes to investing, average is good! But our hardwired brains want so badly to be above average that we feel a need to beat the market, or we hire someone who says they can beat it for us. But historically, active investors lag the market indexes. That means that “buying and holding” almost always wins in the end. While your neighbor may be bursting with the news of an approach that helped him beat today’s market, you can bet he’ll be quiet as a mouse when his returns fall behind. “The meek may not inherit the earth,” says Clements, “but they are far much more likely retire in comfort.”
     
  3. Find value. If you find it difficult to ignore fluctuations in the market, you’re not alone. It can be a challenge to turn off that voice in your head that starts making noise when the market dips. Remember this: your goal is to seek long-term value in your portfolio. Ultimately, the market is efficient (really!), and that efficiency makes it extremely difficult for anyone—even the most seasoned money managers—to beat the market over the long term. Focus on investments that are poised to deliver value, and then stay put. (For more on how to win this battle with your brain, see my blog post Market volatility making you crazy? 5 tips to managing your emotions.)
     
  4. Stay grounded. When the market does bounce around (and considerable bounces are inevitable), think like a smart shopper: when the market is down, the companies who offer stock haven’t fundamentally changed, which means their stock is on sale! Avoid mental errors such as over-confidence, loss-avoidance, anchoring, confirmation bias, and more. Stay focused on the long term, secure in the knowledge that market prices of securities will fluctuate, often wildly, in the short term. Over decades, the trajectory has always been up. By staying grounded in the knowledge that you own shares in real businesses whose value is derived from dividend yields and earnings growth, you will achieve the investment success to which you are entitled.

It’s natural: every time you think about money, your hard-wired, reptilian brain tells you that your very survival is threatened. But in this case, following your instincts may be the very worst thing you can do, leading to financial mistakes that can truly threaten your future. It requires great mental effort to save, stay humble, find value, and stay grounded, but by challenging your thought patterns, you can train yourself to think differently about money and help drive your own success.  And if you need help with the rewiring, give me a call. I’m here to help!

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Taking a stand for women’s health and wealth

Taking a stand for women’s health and wealth

Every Mother’s Day, our firm does something special for the women in our client family. One year we sent candy. Last year we donated to the Alzheimer’s Association. This year we donated to another nonprofit: Planned Parenthood. Our email was delivered a few days before Mother’s Day, and we were happy to receive many thankful notes in response. What I didn’t anticipate—and what drove some serious self-examination on my part—were the negative responses. There were only a few, but the vehement objections from women whom I respect and whose relationships I value made me wonder how an organization that does so much good in the world has the power to elicit such a response. I think what happened says a lot about the world we live in today and the long-term view of women’s health and wealth.

If you know me at all, you know I’ve been fighting my whole life to help women thrive in the face of oppression. I began working in the corporate world at a time when women had to fight for the right to smoke at our desks (not a good choice in retrospect, but having the same rights as our male colleagues was the point!), wear pants to work, and not be confined to a role as a “Gal Friday.” An issue that goes hand-in-hand with the fight for those rights is the fight for our reproductive rights.

Whether you agree with abortion or not, it’s a basic fact that, throughout history, women have had—and will continue to have—abortions. The reasons are as varied as the women themselves, which is why I believe not one of us has the right to judge or restrict that choice. And while I honor the views of others who feel differently on religious or other grounds, I also believe that regardless of those beliefs, all women should have access to safe healthcare, including ending an unwanted or unsafe pregnancy. I am old enough to have seen the repercussions of illegal back-alley abortions first hand, from the aftermath of poor (or no) follow-up care, to infertility, to death. I believe that the separation of church and state should protect the right to healthcare services that prevent these tragedies.

All of that said, my intent when choosing Planned Parenthood as our Mother’s Day charity this year wasn’t rooted in a desire to make a political statement. On the contrary, my goal was to contribute to an organization whose dedication to safe, accessible health services for women is unmatched. It's undeniable that Planned Parenthood has become a lightning rod for activists on both sides of the abortion issue. I believe that’s unfortunate, in that it misdirects people’s passions. After all, regardless of your stance on abortion, who can argue against the fact that safe, accessible reproductive health care is something every woman should have? The current political environment has managed to polarize our thinking to the point that we can’t even agree on the things we agree on. The issue of abortion rights has landed smack at the intersection of religion and politics, and while Planned Parenthood may invite its reputation as a hotbed of activism, I wonder how they could take any other stance and still promote the rights of women. It’s an issue that I hope all of us can somehow get past in the future.

We women still have a long way to go when it comes to equality as citizens of our society. Access to healthcare is just one piece of the challenge, and it coincides with the financial obstacles that continue to plague us. I worked my entire corporate career earning 60 to 70 cents on the dollar compared to men who did the same job, and today’s statistics aren’t much better. Women continue to pay the price of the “non-job” of child rearing with delayed retirement, lower Social Security checks, and lower personal wealth than men. As a financial advisor, I see these challenges play out every day. Women my age have paid a big price to get where we are today, but I have done this gladly. I believe that by fighting for women’s rights, I am helping to knock down at least part of that wall for future generations of women. I hope that my efforts will foster a greater sense of safety for tomorrow’s women in every area of their lives—including their health and their wealth.

I am sorry that our donation to Planned Parenthood offended even one client, yet after re-examining the matter with more careful research, I continue to support this organization. On this issue, I’d like to cross the political aisle and continue to stand up with Planned Parenthood as I fight the good fight for women’s health and wealth. I hope you choose to join me.

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When risk is a good thing, embrace it!

When risk is a good thing, embrace it!

Risk. It’s a word that makes most of us feel uncomfortable—at best. Even if you’ve been blessed with an appetite for adventure, when it comes to taking risks with money, you may find your stomach feeling a bit queasy. While I can’t recommend skydiving or cliff jumping (especially for my retired clients!) taking the right amount of risk with your money isn’t a bad thing. In fact, it’s often the best way to help grow your assets to meet your retirement goals.

Anne is one of my favorite examples of a smart risk-taker. She loves (and I mean loves!) Las Vegas. She loves pitting the thrill of victory against the agony of defeat—even when it is her money at stake. And yet, despite her penchant for slot machines, she’s clearly not much of a true thrill-seeker. She has had the same gambling budget since the first day she walked into a casino over 30 years ago, and she’s never lost more than she can afford to lose. “I started with $100 of ‘play money’ in my wallet, and I promised myself I’d never let myself dip below my $20 reserve,” she says with a smile. And she does have something to smile about. Over the years, Anne has won (and lost) thousands of dollars, just playing the slots. “For me, it’s my favorite form of entertainment,” she says. “It’s a ‘safe’ risk that makes my adrenalin go crazy!”

A ‘safe’ risk. What an interesting term.

The dictionary definition of risk—“exposure to danger, harm, or loss”—sends a pretty clear message that risk is something we should avoid if at all possible. And yet, as counterintuitive as it may sound, when it comes to investing, risk is the one thing that drives reward. In fact, in a capitalist economy like ours, investors are paid to take risk. It’s that simple. Every time you invest in a company you are, in essence, assuming ownership of that company and are entitled to the rewards that owners receive. When earnings grow, you reap the rewards. If the company fails, your investment will fail as well. That’s the risk.

In skydiving, the risk is pretty clear—particularly if your parachute doesn’t open! In investing, risk is a bit more complicated. To understand why investment risk is something to embrace, let’s look at the three basic kinds of risk:

  • Credit risk. When a bank loans money to a borrower, there is a risk that the borrower may default on the loan. If that happens, the bank loses the principal of the loan, and the interest associated with it. That’s credit risk. Your own credit rating dictates your ability to borrow money and the interest you pay, and the same is true for bonds. Lower-yield Treasury bonds are “safer,” so they pay less than high-yield or “junk” bonds. That means that, as a bond investor, when you take more risk by lending to less credit-worthy borrowers, you get paid more interest.  
     
  • Term risk.When you buy a bond or CD, you are lending money for a fixed period. When the bond is due, your money is repaid. When you lend money for a few days, that’s a short term. When you lend money for ten years, that’s clearly a longer term. Long-term is riskier than short-term because you don’t expect the borrower’s situation to change in a month, but in 10 years? Anything can happen. That’s term risk. That is why a one-month CD pays far less interest than a five-year CD. So, term risk is another way investors get paid more to take on more risk.
     
  • Equity risk.Every time you hold stock in a company, you accept the risks of ownership. As an owner, you are paid a share of earnings, and the value of each share increases with company growth. Because of the risk of ownership, investors are paid an equity risk premium to bear uncertainty, price fluctuations, bear markets, business failures, and other perils. Earning the equity risk premium is how investors get paid more for owning stocks.

As an investor, by definition, you must be willing to take some level of risk to reap the rewards. Whether you take on credit risk, term risk, equity risk, or a combination of all three, risk creates value. While risk and reward may not be a perfect relationship, if you add time and discipline to the equation, it’s nearly perfect. It’s what capitalism is all about, and it’s what gives every investor (including you!) the opportunity to leverage assets for continued growth.

Of course, just like Anne and her slot machines, the smartest way to play is to know how much risk you can accept. If you’re a younger investor with years of saving ahead of you, you have time on your side. You can breeze through a bear market, happily buying up equities at sale prices, and waiting for the inevitable bull market to come your way decades from now. If you’re already retired, you may still have years ahead to enjoy growth, but you’ll need a strategy to meet your changing income needs. Whatever your life stage, remember that risk is your friend. Unless you’re skydiving, in which case I can only recommend that you check that parachute just one more time before you jump!

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What would you change if you were rich?

What would you change if you were rich?

I’m a theatre lover, so it won’t surprise you that I know the lyrics to “If I Were a Rich Man” from the classic musical Fiddler on the Roof by heart. In the song, Tevye sings about how his life would change if he were, indeed, a rich man. For the peasant Tevye, his dreams are pretty simple. But have you ever asked yourself how you would change your life if you were rich?

I sat down with Jack and Mary last week and asked this very question. Both recently retired, they’re financially fortunate. They have been very careful with their money, have saved a significant amount and, as icing on the cake, five years ago they received a large family inheritance. Logic would say that they should be able to relax now and simply enjoy the benefits of a well-planned, well-funded retirement. But when it comes to money, logic doesn’t always prevail. Instead of enjoying their assets, they focus on being frugal—to an extreme. And because Jack is even less comfortable spending money than Mary is, it’s a source of tension in their relationship.

To help de-stress the situation, I gave Jack a little homework: I asked him to simply write down what he’d do differently if he felt rich. When I read his answers, I couldn’t help but think of Tevye’s simple dreams. Why? Because while they aren’t the dreams of a fictional peasant, Jack’s dreams are almost as simple., Jack said that if he felt rich, he would eat more sushi, buy more books on his Kindle, and eat out at nice restaurants more often. If he felt really wealthy, he said he would think about replacing his 10-year-old car, fly first-class on an airplane (at least once!), and treat himself to a new camera. Even in his wildest dreams, Jack is anything but a spendthrift!

My good friend Ava is another example of someone who has turned frugality into an art form. Divorced when her children were still small, she was determined to create a financially sound life for herself and her family. She spent as little as possible, saving every penny she could in jars labeled as “lunch money.” Today Ava’s “lunch money” amounts to tens of thousands of dollars. She may not be rich (yet), but she’s well on her way to a very comfortable retirement. The problem? She rarely lets her frugal mindset—or herself—take a luxury vacation. Over the years, I’ve done everything I can to persuade her to use some of her savings to do things that will make her happy today.

Happily, we’ve made great progress. I’ve had more than a few calls lately that burst with excitement: “Lauren, you’ll be so proud of me!” Ava is finally remodeling her home (something we’ve talked about for over a decade!), and she’s now planning to go to a yoga retreat… in Hawaii. I couldn’t be happier for her. She’ll never overspend, but at least she’s allowing herself to enjoy the fruits of her labor—and her “lunch money.”

If you’ve built your life around saving, it can be quite a challenge to suddenly change your mindset, no matter what the numbers tell you. As an advisor, I know that I can’t solve internal problems with external solutions. You can look at all the charts and projections in the world, but that won’t change how you feel on the inside, and that’s what matters most when it comes to financial confidence and peace of mind. So what’s the answer?

Start by recognizing that the process is different for everyone, and that it takes time. Just as it can be difficult for someone who has overspent their entire life to put boundaries on their spending habits, if you’ve never let yourself feel comfortable spending—even when you have the money to spend—it can be difficult to open your wallet without feeling those old pangs of guilt.

The next step is to take a close look at your assets and your budget. Are you under-spending? If so, do you know why? Are you scared of outliving your money? Did your parents teach you that saving was “right” and spending was “wrong”? Perhaps start by journaling about it to get to your essential truth. Ask yourself why you have trouble spending. And if you’re ready to have some fun, ask yourself the Tevye question: How you would change your life if you were rich? Your answers may surprise you!

Of course, finding the level of spending that’s right for you is a balancing act, and very few of us have such unlimited assets that we can completely forget about budgeting. A trusted advisor can help you understand how much money you have today, establish a realistic budget based on your cash flow, and help you start to internalize your boundaries moving forward. It can be a freeing experience, but it has to come from the inside.

My friend Donna is newly widowed, and understanding how to set her spending boundaries is a learning process. She calls me often for help. “Can I buy this?” she asks. My reply is always the same: “I don’t know… tell me, exactly how long are you going to live?” We both laugh, and then we move on to the reality of helping her find her new balance. It will come. Until then, I just keep reminding her that she does have assets. Her real challenge is to gain the confidence and peace of mind to know she’s not overspending, while still being generous to herself. Donna deserves it. Don’t you?

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In Your Best Interest: Our Spring 2017 Newsletter

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.


MARKET HIGHLIGHTS: Q1 2017

We’re living in interesting times. 
 

In the aftermath of the Brexit vote, last week the UK gave formal notice to the European Union that it would formally exit the EU in two years. The UK’s unprecedented decision will have unexpected consequences. On the home front, the Trump presidency continues to deliver unwelcome surprises. A key example: Trump’s baffling cabinet picks, which include Steve Mnuchin, a 17-year Goldman Sachs executive, as Secretary of the Treasury. So much for “draining the swamp.” Trump (fortunately) failed to deliver on another campaign promise: to repeal and replace the Affordable Care Act, which some attribute to the administration’s lack of political skill and experience. It seems business interests, not the wellbeing of our citizens, are the thrust of this administration’s agenda. On the flip side, the Democratic resistance learned some lessons from the Tea Party movement and rallied its base to participate actively in the budget and legislative processes. This new activism means the budget, as well as any pending tax reforms, will need bipartisan support to proceed. 

Beyond the political headlines, market indices continued to reach new levels. Buoyed by rising corporate profits and expectations of corporate tax cuts, the S&P climbed 5.5% for the quarter, and both the Dow and Nasdaq reached—and held—historic highs. The Dow hit the magic 20,000 mark in January, and consumer inflation topped the Fed’s 2% target rate for the first time in five years, which drove March’s interest rate increase of . percent (25 basis points). While rate hikes sometimes cause an unfavorable reaction in the market, this increase seems to have been priced in, and investors nodded their collective approval and moved on. 

All of these factors, combined with unfailing investor confidence, added up to deliver a solid quarter, with each of the indexes listed below posting impressive gains over their fourth-quarter closing values. 

One notable star in the market constellation was Apple (AAPL), which reported record Q1 revenue and earnings. It is counterintuitive, but Apple is now classified as a value stock rather than a growth stock. Based on its market cap, Apple has another claim to fame: the stock is the largest component in both the Dow and the S&P 500—an interesting indicator of the power of innovation and globalization, and the importance of technology moving forward. 

As we begin Q2, the fundamentals are certainly in place for continued economic growth. Employment, hourly earnings, disposable income, and consumer spending are all on the rise, and consumer prices are up 2.7% for the year—the highest rate of growth in almost five years, and solidly above the Fed’s 2.0% target for inflation. Even the core rate, which excludes energy, is holding steady at 2.2% since February 2016. As 2017 progresses, we look forward to continuing to leverage the power of investing to support your personal financial goals.

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How long do you plan to live? (And are you planning for it?)

How long do you plan to live? (And are you planning for it?)

Back in January, I dove into Jonathan Clements’s fantastic book How to Think About Money. My blog Money really can buy happiness introduced the first step in this great guide: Buy more happiness. The second step may be even more important, in part because it’s something almost everyone I know seems to be in denial about. What is step two? Bet on a long life!

It’s quite an anomaly. Humans embrace anti-aging remedies and strive for immortality, but when planning for our financial life, we frequently place our bets on living fewer years than is reasonable to expect. The data is out there. We are living longer. In 1900, the average life expectancy was just 52 for men, and 58 for women. What a difference a century makes! Men and women who are in their mid-60s today can now anticipate living to age 90, and 10% can plan to celebrate their 95th birthdays! Knowing that, why do so many people plan their finances as if they were still living in the olden days? If our golden years are likely to last two to three decades, it’s time to start getting serious about planning to sustain a long, happy, healthy life. And while there are lots of pieces to the planning puzzle, here are five ways to help propel you on the right path forward:

  1. Reset your expiration date. For years, we’ve been conditioned to see our 60s as the final stage—the denouement—of our lives. Get over it! The fact is, if you only live to your 60s, you’ll be among the unfortunate few. The good news is that once you change your mindset and reset your target date, almost every decision you make about the future will change. Your approach to investing will shift (see #2). You’ll suddenly have permission to make a mid-life career change and finally explore a passion that brings even greater joy in the decades ahead. Instead of seeing the years ahead as a slow, inevitable decline, you’ll start to look at—and hopefully realize!—all of the breathtaking opportunities ahead.
     
  2. Invest (and keep investing!) in stocks. When it comes to investing, the golden rule is to “invest early and often.” Thanks to the magic of compounding, the longer your dollars stay invested, the greater the compound (i.e. exponential) growth. My client Polly is my favorite example of this in action. She and her husband bought shares of great companies in the 1950s, reinvested dividends, held the splits and spinoffs, and didn’t react the to “the market.” When her husband died a few years ago, she was assured a secure widowhood and is planning her charitable legacy. Intuitively Polly and her husband know that capitalism works. Markets work. Downturns happen, but over the long term, the market continues to climb skyward. Invest as early as possible, and you can sit back for the ride.

    Twenty years ago, there was a rule of thumb to “hold your age in bonds” to protect your savings from any untimely downturns in the market. Why doesn’t that rule apply today? It assumed that retirement would last only a decade or so. Imagine a 30-year-old pulling out of the market to “protect her assets” at age 50. It’s unthinkable! In the same way, while you may choose to get slightly more conservative in your later years, staying in the market continues to provide the greatest potential for continued returns. Invest—and keep investing—and you’re much more likely to enjoy a lifetime of financial freedom.
     
  3. Delay claiming Social Security. The Social Security claiming decision is one of the most critical retirement decisions most American will make. For most of us, it should be a no-brainer. Claiming benefits before Full Retirement Age (FRA) costs you a bundle. In fact, between age 62 (when most people become eligible for Social Security benefits) and FRA at age 66 or 67 depending on your birth year, your monthly check increases by 5% a year. Waiting until age 70 increases your benefits even more, by a whopping 8% for each year you delay, up until age 70. Knowing that the chances are good that you’ll live another 15-20 years (especially if you’re a woman), why would you not take advantage of this guaranteed, inflation-adjusted longevity insurance? You can’t get much better! (For more details, see my blog Social Security & Women: Tackling the Challenges.)
     
  4. Consider other income streams.  While traditional pensions are largely a thing of the past (consider yourself lucky if you do have one!), guaranteed lifetime income is something for which we all strive. Consider options such as income annuities (an entirely different product than deferred annuities, which I hate, and so should you!), fixed income strategies, and longevity insurance (a less expensive option that starts paying a guaranteed income when you reach a certain age, say 80 or 85). Everyone’s situation is different, so be sure to work with your advisor to do a detailed analysis and identify the options that are best for you. The most important thing: don’t delay. The earlier you put your plan in place, the more optimal your outcome.
     
  5. Stop worrying about dying young. One of the biggest arguments I hear from clients when it comes to longevity planning is, “What if I die earlier? Won’t I be leaving money on the table?” It is true that most analyses will provide a “break even point” for Social Security and certain insurance benefits, and if you do die earlier than hoped, you may have given up a small percentage of potential earnings. But just look at the alternative: by making your decisions based on a long life—not a short one—you can create more income, which gives you more choices and more freedom, no matter how long you are lucky enough to live. Focus on the amazing possibilities a longer life has to offer and bet on living it to the fullest!

If you groan, roll your eyes, and say “God forbid” when someone mentions the possibility of living beyond 100, give me a call to discuss how to make your money last. The sooner we start planning, the more prepared you’ll be if (when?!) you reach that triple digit!

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There’s no such thing as an unexpected expense!

There’s no such thing as an unexpected expense!

When I met Carolyn for the first time in January, she was distraught. What finally got her to pick up the phone and get financial help was this year’s extreme rainy season—and a big financial surprise. “I didn’t even realize how old my roof was, or that it needed repair, until the water started coming in!” And come in it did. Carolyn had been out of town on business when the leaks opened up, and her home was a mess by the time she found it three days later. Her homeowner's insurance was covering the interior damage (minus a hefty deductible), but she was told she needed a whole new roof. The cost: $22,000. A high-earning corporate executive, Carolyn had lots of credit, but her emergency fund was non-existent, and a new roof was one thing she couldn’t put on a credit card and pay off over the next few months. She needed cash, and she needed it now. “I thought I was in great shape financially,” she told me. “Who knew I’d need so much cash with no notice?”

The answer? I knew. Or at least I could have provided a pretty close estimate, even though I’d never met Carolyn until she walked through my office door that afternoon. I’m no psychic (if I were, there’d be no need for financial planning!). How did I know Carolyn would need that much cash for a home repair? It’s all in the numbers. It’s all in the budget. I repeat: There’s no such thing as an unexpected expense!

All I needed to know was this: Carolyn owns a home in Newport Beach. If her home is worth anything close to the median price of about $2M, a 1-percent rule tells me that her home maintenance will average about 1% of the purchase price of her home—or $20,000—per year. Suddenly $22,000 doesn’t sound that surprising at all! But without a budget, every expense was unexpected. Without a budget, Carolyn didn’t have a clue.

The 1-percent “rule” means that when you purchase a large, illiquid, expensive-to-own asset like a personal residence, almost everything will have to be repaired or replaced eventually. I guide people to set aside a replacement fund of 1% of the purchase price each year for these very predictable costs. The work may not occur each year. It could be a roof, a kitchen, a driveway, plumbing… but it will be something. It always is.

The new roof is just a drop in the bucket (pun intended) when it comes to Carolyn’s money challenges. She was earning a substantial income but wasn’t setting aside cash for irregular discretionary expenses. She had no revolving debt, and she was saving for retirement. But her cash flow planning was a non-starter. In hindsight, maybe her leaking roof was a good thing; it was just the wake-up call she needed to get her to take action.

We began by finding the cash she needed to fix her roof (thank goodness for her good credit and a good chunk of home equity!). But we didn’t stop there. Next, we worked together to create a budget so she knows what she earns, what she spends, and what she can afford. She began to use eMoney (my favorite personal financial management software) to be sure she stays on track. She’s now building an emergency fund rather than relying on credit cards, and she’s earmarking cash reserves for those not-so-surprising expenses such as car replacements, home repairs, annual vacations, and even a planned future nip-and-tuck. The next time a large expense hits her, I have no doubt she’ll have the funds in place to cover the bill.

What Carolyn has discovered is that cash planning is the foundation for a solid financial plan. A cash budget creates a wonderful sense of financial freedom. “I always thought budgeting was like dieting—that I’d always feel deprived—so I just didn't look at how I was spending,” she told me. “Now, I feel the exact opposite. Because I know how much I have and where I want to use it, I don’t get stressed about an expensive dinner that I know is in the budget. Even better, I know I’ll never have surprises, and I don’t worry when I see my credit card statement arrive!” She’s also building a “freedom fund” to be sure she has the funds to support her dreams down the road, whatever they may be. (Read my blog Celebrate Retirement Planning Week: Create a “freedom fund” to learn more!)

Like many of my clients, Carolyn has discovered one of the great financial secrets: cash planning is empowering. Remember, there’s no such thing as an unexpected expense! Making intentional, conscious choices about when, where, and how to spend your hard-earned dollars is key. Align what you want with what you need and (finally!) relax about your finances.

Ready to get started? Check out 7 Steps to a Budget Made Easyor use NAPFA’s find an advisor guideto find a fee-only financial advisor near you.

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All written content on this site is for information purposes only. Opinions expressed herein are solely those of Lauren S. Klein, President, Klein Financial Advisors, Inc. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. Read More >