How to know when you need a new situation? (Part 2)
April Sage is the Founder of Senior Housing Advisory Services. In this series, Dr. Brock and April discuss the different levels of care for senior housing options and how to begin planning for the next phase of living!
Video series:
Part 1: April and Brock introduce the idea of Senior Living communities and that No plan fits everyone. https://youtu.be/RiMyNeFp8uM
Part 2: You’re watching this part!
Part 3: How do you help “mom or dad” get the living help they need? Planning for Senior Housing transitions. https://youtu.be/TgDTM3lZZGY
Part 4: Who is going to make decisions for you? The importance of planning ahead. https://youtu.be/VC24vqAxKRg
Get in touch with April: https://www.seniorhousingadvisoryservices.com/
Talk with Dr. Brock: https://www.kimballcreekpartners.com/meet-brock-bennion
Planning for Housing Transitions. (Part 3)
April Sage is the Founder of Senior Housing Advisory Services. In this series, Dr. Brock and April discuss the different levels of care for senior housing options and how to begin planning for the next phase of living!
Video series:
Part 1: April and Brock introduce the idea of Senior Living communities and that No plan fits everyone. https://youtu.be/RiMyNeFp8uM
Part 2: How do you know when you need a new living situation? Planning for Senior housing transitions. https://youtu.be/brRBx2SeTco
Part 3: You’re watching this part!
Part 4: Who is going to make decisions for you? The importance of planning ahead. https://youtu.be/VC24vqAxKRg
Get in touch with April: https://www.seniorhousingadvisoryservices.com/
Talk with Dr. Brock: https://www.kimballcreekpartners.com/meet-brock-bennion
Stock Markets Aren’t Normal- Wealth Insights #1
What is the average return of the market? The answer could be misleading because markets are not normal. If you are trying to figure out what to expect from the stock markets, you need to understand why the “average return” doesn’t tell the whole story.
What to do with your 401k once you leave your job
When you leave your job, you have several options when it comes to your 401k account.
One option is to leave your 401(k) with your former employer. If you have a balance of at least $5,000, you can usually keep your money in the plan and continue to manage it as you did while you were employed. However, it’s important to keep in mind that you may have limited investment options and may be charged higher fees if you leave your money in the plan.
Another option is to roll over your 401(k) into an individual retirement account (IRA). An IRA is a personal retirement account that offers more flexibility and potentially lower fees than an employer-sponsored 401(k) plan. You can choose from a variety of investment options and have more control over your retirement savings. To roll over your 401(k) into an IRA, you’ll need to open an IRA account and then transfer the funds from your 401(k) into the new account.
A third option is to cash out your 401(k). While this may be tempting if you’re in a financial bind, it’s generally not a good idea. Cashing out your 401(k) means you’ll have to pay income taxes on the funds, and you’ll also be hit with a 10% early withdrawal penalty if you’re under age 59½. This can significantly reduce the value of your retirement savings.
It’s important to carefully consider your options and the potential consequences before deciding what to do with your 401(k) when you leave your job. You may want to consult with a financial advisor or tax professional for guidance.
THERE IS NO SHAME IN BEING LAID OFF!
I have checked the “unemployed” box a couple times in my life. It stinks. It can also be scary, stressful, and lonely. But there is no shame in it (and don’t let your shoulder devil convince you otherwise!) There is also no shame in scrimping to save a couple bucks or being extra frugal while working hard to make ends meet. In fact, I think proactively meeting life’s challenges is noble and admirable.
If you, or someone you know, has recently lost their job, here is a framework for money-related moves to make.
You shouldn’t try and do everything at once. With that in mind, I have arranged them by “weeks” in the order I think they should be prioritized.
By the end of Week 1:
-Start applying for new jobs: Do this the first hour! Getting a new job is the most important thing. Delay only long enough to plan for what you need in a job, but then start sending resumes and networking. (Added plus, you can change the conversation from “I got laid off” to “I already found 3 positions I am excited about.”)
-Make a new budget: If your income has changed, your expenses need to change with it. Take a hard look at where you are spending and ask yourself where cuts can be made. Streaming services, eating out, and home improvement projects are good places to start.
-Get your benefits in order: You may qualify for unemployment benefits. APPLY! You may need short term Health Insurance, GET IT! Your previous employer may still owe you for hours worked-REALLY GET IT!
By the end of Week 2:
-Have a family council: Kids can especially benefit from being included in this conversation. Discuss near and long-term spending habits. Talk about the plan, and the steps both individuals and family members can take to help. Emphasize that the family will get through this. By opening up the dialogue, you may also grow closer as a family unit.
-Talk to anyone you owe money to: This may include credit card companies, utilities providers, and mortgage lenders. Some groups have programs to help. Ask about these. They may be able to suspend payments, interest, or fees. Ask telephone, internet, and TV providers if they can switch you to a lower payment or reduced services plan.
-Avoid credit card debt: While you will need to spend from your savings, be very cautious about using credit cards to finance your life. It may seem like the only way, but too often accumulating debt creates a bigger problem. Family, friends, and community organizations can help you obtain the necessities of life (food, shelter, etc.), but rarely can they pay down your credit cards.
–Retirement accounts are for retirement: Raiding retirement accounts can be a tempting way to make ends meet. But if you are less than 59, there may be penalties for doing so. Additionally, many retirement accounts are protected in the event of bankruptcy. If you deplete these accounts to make ends meet, you risk losing this protection.
By the end of Week 4 (and beyond):
-Open a dialogue with those around you: Most people are willing to help if they can, but if they aren’t a hiring manager (or their company has been hit by layoffs too) they may not know what you need. Ask for help in different ways. Things like “can you write me a letter of recommendation?” or “do you have any contacts at company XYZ because there is a position I am interested in?” are concrete ways to get help, even if there isn’t an immediate opening.
-Enter the gig economy: Looking for a full-time position can take a lot of effort, but usually you can’t send resumes 12 hours a day for weeks on end! Ride share, online tutoring, or meal delivery offer a flexible schedule. A few hours a week may not seem like a lot of money, but it adds up. Perhaps more importantly, your body and mind are used to going out and working. Sitting at home waiting for job responses can erode your wellbeing. Getting out and working helps. If you don’t feel like doing gig work, consider volunteering. Animal shelters and food banks can be a great place to start.
-Stick to your new budget: After 1 month, you should be settled into your new budget. If you haven’t, get there quick! Find a way to live within your means. Even once you have gotten a job, keep these spending habits as you are rehabilitating
your financial circumstances.
Finding a new job takes lots of effort and lots of time. Be realistic. Don’t plan to have a job in 1 week. Think in terms of months, form a plan, and be proactive.
And remember! There is NO shame in losing your job. You are more than your occupation and you will get through this!
How to Think Slow About Your Investments
The stock market is crushed! Do you feel a pit in your stomach when you look at your portfolio balance?
It’s time to THINK SLOW.
Daniel Kahneman (winner of the Nobel Prize in economics) has written that there are 2 types of thinking:
System 1 is Fast. It is driven by instincts and emotion
System 2 is Slow. This system is more logical and deliberate.
Each system is important. System 1 helps us complete routine and simple tasks with minimal effort: Drive on an empty road, detect hostile sounds, read short sentences, answer 2 + 2 questions.
System 2 is used when a problem is uncommon or needs more attention: Choosing which washing machine to buy, filling out a tax form, walking faster than normal.
When you first pull up your investment portfolio, chances are the number at the top of your screen is invoking a System 1 pattern of thinking.
No one sets out to make emotional responses when it comes to investing. Yet often we do because we don’t take time to engage the slow and deliberate system of decision-making.
Here are some questions that you can ask yourself to help engage System 2.
1) What do I think is going to happen? What specifically will cause this?
2) Is this what I think, or is this what I feel right now?
3) What do I think is going to happen in 5 years?
Crisis lives in the moment, but our goal is to make investment decision based on the future.
It may be that you need changes to your financial plan, or maybe not. If you do need some updates, make those changes in a logical and deliberate way.
Taking the time to THINK SLOW now, may set you up for greater success in the future.
5 Millionaire Behaviors For When The Stock Market Is Retreating
1) Stay Committed, Stay Goals Focused
First and foremost, resist the urge to run. It is natural and normal to think, “I could just sell everything and reinvest when the markets start to trend up again.” Please don’t do this. Millionaires are strategic. They have an emergency fund, balanced portfolio, and cash flow that allows them to stay invested even during volatile markets.
These strategies are best implemented during good times. If you find yourself overextended, it may be helpful to get professional advice on how to get back on course.
2) Remember the BIG picture, take SMALL actions
Millionaires invest with 5–10-year time frames. They focus on the long-term potential of investments. Big ideas and big picture concepts dominate their investing strategy. Things like the economy, technology innovation/adoption, consumer spending habits, and business fundamentals. However, the actions they take during bear markets tend to be small and measured. They rebalance and trim positions when appropriate, but they avoid the urge to change their strategy based on today’s sentiments and market prices.
3) Be systematic, not dramatic
The actions millionaires take during bear markets are often automated. They rebalance at set intervals and add to their investments in a predetermined manner (think: dollar cost averaging).
One way to emulate this behavior: Create a monthly plan to maximize your retirement account contributions for this year. Add every month and buy quality investments whether the market is going up or down.
Contrary to popular stories about going “all in”, most established investors avoid the dramatic actions that make for a sensationalized story. Rather, they create systems and behaviors that build success over time.
4) Know what you own
Millionaire investors focus on buying quality investments. When there is a downturn, understanding what they own is a shield against breaking rule #1 (and running for the hills).
Even great companies and investments can fall out of favor. Industry standard companies like Amazon, Microsoft, Apple, Walmart, IBM, and Boeing have had periods where their stocks are <50% below all time highs.
If you find yourself obsessively checking the balance of your investment portfolio each day, I suggest you spend at least a few minutes of that time researching the investments you hold. Not just the price of the investment, but the companies, bonds, or commodities that make up the holding.
As you learn about your investments, rank them. If you feel you should take some small steps (see point #2) concentrate your investment around high conviction holdings. These should be investments you feel good about and are well-positioned for the future.
5) Keep draw downs in perspective
During a market correction, it’s easy to forget that this volatility is quite normal. Millionaires often have the advantage of having lived (and invested) through multiple corrections. They have felt the drops, but also the recoveries. Here are some data points to consider:
· The S&P 500 Index averages a peak to trough fall of 14% across all years.
· During midterm election years, the average stock market correction is 17%, but stocks rebounded 32% on average in the 12 months following those midterm year lows.
· Of the last 21 times the S&P 500 has been down double-digits since 1980, stocks rallied back to end the year positive 12 times.
· During those 12 positive years, the average gain has been a stellar 17%.
These are just historical numbers, not a prediction of the future. There are no guarantees stocks will rally. But Millionaires tend to be optimists* and invest with a belief in long-term growth.
Important Information
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
All data is provided as of April 28, 2022.
Link to https://www.businessinsider.com/studying-millionaires-showed-me-the-importance-of-optimism-2016-2 is an outside article and is not affiliated with the author or related businesses.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
All index data from FactSet.
This articles contain research material prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
How to be a “Dispassionate” investor.
Just like scientific training, good investor behavior is a learned skilled.
Rigorous scientific training teaches us to become dispassionate about our data. To be dispassionate means a removal of biases. A dispassionate scientist may create a hypothesis (prediction), but they don’t care if they are right or wrong. They only want to discover the truth.
This can be difficult for 2 reasons.
· Scientists are naturally passionate about their work! Long hours and a 90%+ fail rate are overcome by a love of the discovery process, the patients we serve, and deep curiosity.
· When you work hard to generate data, it is easy to become attached.
However, good scientific behavior requires us to be detached from the results. Dispassion is created by learning sound scientific principles and applying them in a systematic fashion.
When investing, it is natural to desire an increase in in our portfolio value. Thus, we may become emotionally tied to an investment’s performance. When we select investments, it feels good to be validated in our choice when they go up, and it can hurt when they go down.
Despite any emotional connection, good investors avoid emotional decisions. Like a good scientist, they too are dispassionate.
Here are 3 steps you can take to be more disciplined in your investment decisions.
1) Define your time horizon.
A time horizon refers to how long you plan to hold a given investment in your portfolio. In general, riskier investments should have a longer time horizon, and short-term investments should be made in more stable assets. A diversified portfolio may hold both long-term (risky) and short-term (safer) investments depending on the goals of the investor.
When making an investment, decide from the beginning the amount of time you plan to hold it.
2) Make decisions by degrees.
Too often, investors make decisions based on ideas they have only partially researched. They learn of an idea and want to act “before it is too late.” One way to mitigate this type of “leap as you look” behavior, is to make investment decisions by degrees.
For example, let’s imagine you have learned about a new investment opportunity. After your initial research, you decide you would consider investing a maximum of $20,000 into it. Instead of investing $20,000 right off, start with $10,000. Continue learning and monitoring the position for 3 months. If you still feel good about the investment, add $5,000 more, and then another $5,000 3 months after that (A similar strategy can be employed when selling an investment).
3) Seek the advice of others.
Scientists learn early about the value of collaboration. Especially from researchers who think differently than you do. I have never met a scientist that would only show their data to peers at the time of publication.
Similarly, good investors seek the opinion and perspective of others. Don’t create your financial plan or investment strategy in a bubble. Find peers you trust and get their advice. A professional advisor, colleagues, and friends are great resources. If you are naturally aggressive in your decisions, consider finding cautious voices, and vice versa.
There is a popular investing “legend” about Fidelity doing an internal review of their most successful customer accounts. What they found, was that these customers had either forgotten they had an account at Fidelity or had died.
This story is probably not true, but it has become popular because it vividly depicts a true principle: When investing, our natural behaviors tend to work against us. While it’s nearly impossible to eliminate all our biases, cultivating a dispassionate attitude towards our investments (and our data) helps position us to make well-reasoned decisions.
The Need For A Coach: Why Should Someone Hire A Financial Advisor?
The Harvard-Yale football rivalry began in 1875 and Harvard didn’t see the need to hire a coach. As a result, Harvard only won 4 games against Yale over the next 30 years.
In 1908 Harvard decided to hire its first dedicated football a coach. In the next 30 years’ worth of games against Yale, Harvard won 15, tied 3, and lost 11 (No games were held in 1917-1918). Harvard has had a coach ever since.
For those who are serious about improving, a coach provides real value. A coach can see things you cannot either because of their experience, or because of their position as an objective 3rd party. Whether you are a novice or an expert, having a coach can accelerate your progress and help you reach goals.
Want to get great at something? Get a coach. -Dr. Atul Gawande
There are sometimes negative misconceptions when it comes to paying for Financial Coaching. Stop me if you have heard this before: “Why would you pay someone for financial advice? A financial advisor’s fee just cuts into your return. It is simple, just buy some broad market ETFs, max out your contributions, and leave it alone.”
Where to start… first I will be agreeable. Yes! Saving for financial goals does not have to be complicated. While there are a lot of nuances to the words: advice, contributions, max out, and broad market ETF (that would be an Exchange Traded Fund), many savers and investors have had great success managing their own finances.
But just because investing can be done simply, doesn’t mean having a dedicated coach is worthless. After all, playing a football could be considered straightforward as well.
In my experience, when a person chooses to hire a financial advisor, they do so because they want to take their finances seriously. Not because they are incapable of “figuring it out” on their own, but because they want to be rigorous in their decisions and they value having a professional help them work towards goals. They recognize that by leveraging a professional, they can often make better decisions while also freeing up their time to focus on family, work, and hobbies.
Vanguard, the company famous for providing low-cost investing solutions, has publicly proclaimed the value in paying for investment advice. In a 2019 study, Vanguard concluded that a financial advisor may add around 3% net return to a client portfolio. Nearly half of this value (1.5%) was attributed to the coaching an advisor can offer!
Does this mean you have to have a coach to be a successful investor? Of course not. Some people really enjoy self-directed learning and managing their own finances. They find satisfaction in the DIY aspect of going at it alone. That is great. Some people like to remodel their own kitchen too, while others like to hire a contractor. Neither decision is right or wrong.
We provide our clients with coaching and advice that is tailored to their situation. We remind them that anytime they have a question, with a dollar sign attached to it, we encourage them to call us. Not because they are incapable of figuring it out on their own, but because we are their advisor and coach! Not only do we do this every day (all day too!), but we are a 3rd party with a different perspective. We are a sounding board.
And like any good coach, our biggest goal is to see our clients thrive!
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
The 4 “T’s” of finding a financial advisor
When searching for a financial advisor, we recommend you use a defined process to help you make an informed decision.
Since we are base in Tacoma, Washington (“T”acoma), here are the 4 ‘T’s” to finding the right advisor for you:
Trust
Having trust in an advisor will not only give you peace of mind, but often the confidence needed to follow a financial plan. Trust is built as your advisor gets to know you and you learn about them. Here are a few ideas that will help start the trust building process
- Identify 2-3 advisors to meet with. Meeting multiple advisors will allow you to compare personalities and styles. Taking the time to speak with more than one advisor is always worth it.
- Try to speak in person or on a video conference. Seeing body language and mannerism can be informative.
- Search for the advisor on www.brokercheck.finra.org. BrokerCheck is a free service and provides an advisor’s history as well as any formal disclosures.
- Learn about any potential advisor’s team. A good advisor will always make time to talk with you, but many of your interactions will with the office staff. Make sure the team supporting the advisor is top notch.
- Your advisor should be a fiduciary (legally obligated to act in your best interest).
Teacher
When you ask a question, you should expect an advisor to give you a complete answer. You should also sense that your advisor wants to help you understand. Acting as a good teacher will help you build trust (see the first point) and demonstrates that the advisor is competent and cares about your concerns.
When searching for an advisor, ask questions. Evaluate not only what they say, but how they say it.
Transparent
Professionals need to get paid, and that is not a bad thing. But how an advisor gets paid is important. Different pay structures have pros and cons. Be sure to ask why the pay structure they are proposing is good for you (and not just them)!
Paying an advisor is only part of a client’s total cost. Many investments charge an additional fee. Be wary if an advisor makes more money for putting you in certain investments. Even if the advisor doesn’t receive additional money themselves, they should be able to justify why a certain investment is worth the cost you are paying.
It may be worth getting a second opinion on your investments if you are concerned you are overpaying.
Tactics
Different advisors will take different approaches to investing. Some will encourage choosing diversified mutual funds, while other will advocate buying and holding individual company stock. Some advisors prefer bonds, while others prefer insurance-based investing products. If you have a preference, find an advisor that lines up with your goals!
Along the same lines, some investors want to be really involved in the planning and execution, and other investors want an advisor to “just take care of it”. Neither approach is wrong, but make sure your expectation match that of the advisor.
***You have lots of choices for where to get your financial advice. Ideally, the relationship you build with an advisor will be of benefit to you for years. Take your time in the search and find the fit that is right for you.***
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
