Thursday, December 19, 2013

TV: My Love Hate Relationship

I readily admit to being a TV junky. I first truly admitted my problem when I chose to skip Physics class for an episode of The People’s Court with Judge Wapner. At one point, I took all of the TVs out of the house for a year. It was liberating but I did bring them back in. Thankfully, I resisted the temptation to put a TV in my kids’ rooms. However, I am a slave to my own bedroom TV. Yesterday I watched an HBO documentary on childhood obesity. It said that studies now show the link to obesity and television viewing is not so much because we are couch potatoes but mostly from the commercials we view telling us to eat more crappy food (my paraphrase). What do you watch on TV? If you tell me the programs you choose to watch, I can tell you a lot about what you truly believe and your priorities. Does your viewing list reflect how you really want to be now? Someone I know says, “garbage in, garbage out” is really “garbage in, stays in.” TV gives us many of our opinions about the world around us although we don’t like to admit this is true. We can change our perspective by changing the information we allow into our minds. I stopped watching so much one-sided inflammatory TV and I think I am better informed as a result. Interesting.

Student of History

I hated History class in school. (I know, we’re not supposed to say hate but that’s honestly how I felt.) I was the kid in class that taunted the teacher with unrelenting comments about the uselessness of memorizing a bunch of facts about dead people. It took decades for me to realize the foolishness of ignoring history. There is nothing new under the sun. Are you a student of history? Do you understand human nature, why we behave the way we do, how our government works, how civilizations actually collapse, why men start wars, and how money works in our families and society? Being a student of history will make you a better investor. History gives us perspective and allows us to learn some lessons the easy way. Worried about a stock market crash? Read about how it occurred in 1929. Worried about the Affordable Care Act? Read about the beginning of social security.  It may not be as stimulating as a Jack Reacher novel but certainly more profitable.

History Really Does Repeat Itself

I readily admit that I hated social studies and history when I was in school. Why they wanted me to learn about the meaningless past and memorize a bunch of stupid dates was beyond my comprehension. I have the grades in social studies to prove my point! My boyfriend went to college to study history and political science and then became an Air Force officer, further proving the point that history was rather a waste of time, or so I thought. Since becoming a financial advisor, I have grown into quite the accidental student of history. I think it really started when I read The Big Short: Inside the Doomsday Machine by Michael Lewis. I wanted to understand more about what occurred behind the scenes in the financial industry during 2007 and 2008. I found it fascinating so I went on to read about the stock market around the depression and learned more about bucket shops. I was hooked. I have continued to learn about Congresses, Presidents, significant events in our country’s development, etc. My apologies to all of my very patient friends who teach history to ingrates like me.  If you really think this time is different, my humble advice is that you learn more about our collective history.

401(k) Math

Did you know that if you fund your 401(k) too quickly, you may risk losing some of the company match? It may sound like a good idea to get your maximum 401(k) contribution in early in the year to make sure you don’t miss out on the opportunity but if you max out your contribution before the end of the year, your employer will stop matching your contribution because there is nothing to match. Hit your max in June and your employer will only match for half the year. If they are matching 5%, it means you will really only get 2.5%. I know, it’s a math thing and so many people hate math things, but you could lose thousands of dollars in free money for doing 1 minute worth of math. Are you interested in the math now?

All Doctors Are Not Alike

My doctor is as old as dirt. He knows all kinds of old wives tricks and doesn’t like to write prescriptions. I have trusted and respected him for 20 years. It is easier to see the difference in doctors because we give them titles that reflect their knowledge. There are general practitioners and surgeons; young, new doctors and experienced practitioners. It is relatively easy to sort out doctors. The same is not true for financial professionals. We all make up our titles and so many are financial advisors, wealth managers or, the new hot title, retirement income specialists. One financial advisor is not like the other. Some are general practitioners, while others specialize. Some service hundreds of families and have a lot of experience, while others are just getting started in the business. Some do only the required continuing education while others spend time and money making sure they are well informed. Vetting a financial advisor to figure out who is right for you is a challenge. Truth be told, we often resort to picking based on personality. I don’t pick doctors solely on personality. I rely on well-trusted recommendations. I ask my pickiest friends about their service providers before going at it alone. How do you pick your doctors?

Realistic Expectations Work Better.

Have you ever noticed that people just don’t make tough decisions until the last minute? I know I wait – hoping for something to happen that makes the tough decision unnecessary. Sometime I just wait for time to force my hand. Somehow it’s not as scary jumping when you feel you have no other choice. We’re anxiously awaiting yet another tough decision from Congress. The news channels have us whipped into a frenzy of concern that the country might be coming to an end. Actually, they just want us to stay tuned so that more viewers watch the ads that pay their bills. Why are we again surprised that Congress will not make a compromise until the last minute? When it comes to money, we tend to forget about human behavior. When it comes to Congress, we expect them to put their human behaviors aside and act magnanimously. Realistic expectations work better.

Don't Run!

The Montana wilderness guide says if you encounter a grizzly bear do not run. If you do, the bear will chase you as an instinct. The same is true for bear markets. Sometimes you don't see a correction coming but the worst thing you can do is run. The guide also says not to play dead. You need to get big, make noise, and stare down the bear. When corrections happen in the market, you should consider standing your ground, getting big on confidence, staring down the bad news and waiting! Keep your goals in mind and relook at your time frame and be bold. If you are working with a financial advisor, it helps to go back over the plan and review the process in which you chose your investments in the first place. Don’t Run!

Process is Important!

Process is important.  Let’s repeat that, process is important.  If you are a like me this is hard to accept. I’m a quick start, give me an idea and boom I’m off to do it! While this works some of the time I have learned that process is very important, especially in investing and retirement planning. Having a process allows you to track your progress. It also allows you to identify things that work well, and things that don’t work well. With no process in place, how can we be sure that we are growing for the better? Recently, I spent three days in Los Angeles with a mutual fund company learning about their process which has been developed since 1931. At Selah, we love process because it allows us to grow and learn so that we can better serve you. Ask us about our process anytime, but be prepared because we will ask you about yours as well.

A Tale of Two Service Centers

One day recently, we made the same service call to two different 401(k) service centers for two different clients. Tom needed to use advanced planning techniques to save about $20,000 in taxes and penalties. Ann needed to complete a “typical” 401(k) rollover. Although her 401(k) was also eligible for advanced planning techniques, she didn’t need them. When we called Tom’s 401(k) service center, the gentleman did a great job assisting Tom and Tom was able to utilize the planning techniques. Ann’s servicer must have been tired, stressed, or told to keep his time on a call to a minimum. He said, “You have company stock in your plan, so you want to cash that out and roll it over as cash, right?” Here’s the rub. If Tom had spoken with this operator and accidently given the “obvious” answer to this question, he would have irrevocably incurred a $20,000 higher tax bill. How many times have you wondered about questions like this from your doctor or mechanic? A seemingly innocent question, answered wrong, could have cost Tom $20,000. That’s part of the value of a knowledgeable advisor who is also well-versed in tax laws watching out for you.

Neither Selah Financial Services nor Commonwealth Financial Network® provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation. This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Thursday, December 12, 2013

A Whirlwind of Change - The President and Congress

There are a host of changes facing us– health insurance, social security, Medicare, and the aging of our society. We have a choice about how we are going to respond. Some of us will become so involved in the Facebook comments and news stories that agree with our position that we won’t get around to acting on our family’s behalf. It’s easy to do and I fight that temptation myself! The reality is that I (and probably you) have a huge responsibility to the people I serve at home and at work. I can’t afford to fall into this tempting trap. Can you?  Stephen Covey reminds us to focus on the things we can control. “Instead of reacting to or worrying about conditions over which they have little or no control, proactive people focus their time and energy on things they can control.”  Where politics are concerned, it seems harder for us to do. Things have changed and it’s time to make sure your family is prepared for these changes. Ask yourself if you have financial independence today and tomorrow.

Tuesday, October 29, 2013

What About The Boomers?

Did you know that the Congressional Budget Office estimates that 78 million baby boomers are expected to retire?[1] Have you actually thought about what this means to you and your family? I think the answer is very different depending upon where you are in terms of age and wealth. I imagine that senior living facilities will become about as prevalent as Starbucks and McDonalds. Who is going to work at all of these centers? It will be a job boom for the younger adults but will they want to do the work? Will the sale of adult diapers outpace the sale of baby diapers? Will the line of electric carts at Walmart soon grow into an entire department requiring as much space as the pharmacy section? How will that impact Walmart’s prices as Walmart figures out how to pay for the equipment, staff and electricity? Will the line at the drug store window rival what we say at Starbucks when they first caught on in a big way? Will it be harder to get into the doctor than it was to get our kids into the pediatrician back in the day? I know money doesn’t buy happiness but I would rather be well prepared for the changing senior landscape than caught unprepared. How about you?

[1] “Will the Demand for assets Fall When the Baby Boomers Retire?,” Congressional Budget Office, September 2009. Data shown is most recent.