Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!
The September issue of Money Magazine features a quote from myself in the article “What to tell the kids about your Hos Vikingslots hittar du forutom manga olika slots aven andra spel, sa som roulette online , blackjack och video poker, och populara spel som bingo, keno och skraplotter. money” by Margaret Magnarelli. I am pleased to offer my commentary to this very important topic. To view the article, click here.
Have you ever wondered what different titles and licenses held by “Financial Advisors” mean and what type of services and fees are affiliated with each? The link below leads to a good article published by Forbes that distinguishes between services, fees, licenses, designations and titles within the broad spectrum of “Financial Advisors.”
I am proud to say that Alpers Financial Planning, Inc. is a member of ACA (Alliance of Cambridge Advisors) and NAPFA (National Association of Personal Financial Advisors) . We are a Fee-Only, Fiduciary company, which means: For the Client – Always. Personally, this is the only way I could provide financial and investment advice.
We use a comprehensive process, analyzing all aspects of a client’s financial situation including how decisions and recommendations affect present and future goals. We stress client education while developing a client’s personal financial and retirement plan. We call it Financial Planning for Life. I encourage you to read more about our services on our website, highlighted in the contact information on this page.
Below is a link to a recent Wall Street Journal article illustrating the importance of long term goals towards financial independence. Secure retirement is less related to how much you currently earn and more related to saving for retirement, how long you work, and your current and future spending habits. How investments are allocated also matters, particularly near and during retirement, and sometimes not in the way one might suspect.
The article’s graph highlights an example of a new retiree pulling all their investments out of the market and into bonds in 2000, the same year he/she begins a retirement withdrawal rate of 4% and inflating that amount annually by 3% for estimated cost of living increases. The result is a ZERO percent chance of long term success. This is because inflation eats away at a 100% fixed income portfolio. So as much as some shudder at the market (just as they did in 2001 and 2008) it is important to keep a long term perspective regarding your investments. This is why we spend the time we do with clients on investment allocation, rather than reacting to volatility with short term responses that are either bullish or bearish. This article highlights the importance of flexibility before and during retirement.
I encourage some clients to adjust their perception away from spending and towards saving by shifting thoughts from what they don’t have towards what they do have (gratitude), and practice the exercise of separating needs vs. wants. Americans who are on track with their long term plan understand that flexibility before and during retirement is an important factor. If your plan includes knowing the difference between needs and wants, if you have built into your plan the ability to tighten up if needed, and if you maintain a pattern of saving appropriately, you stand a good chance of success.
This season is a good time to focus on gratitude, isn’t it? My family has a tradition of sharing gratitude at the Thanksgiving table, one by one. With at least 9 attending this year (10 counting our new baby grandson), we will need to start early, or our turkey dinner will get cold. And of course, all holidays requires some flexibility.
One thing I am thankful for is the opportunity to work with our wonderful clients. I thank each of you for placing your trust in us. I wish you all a blessed Thanksgiving and a few quiet moments of personal reflection.
From VOICES in the Wall Street Journal on February 23 2011.
Voices: Mary Alpers, On Getting Spouses to Agree
Mary Alpers is president of Monument, Colo.-based financial Alpers and Associates.
Too often one of the spouses is responsible for the household finances — such as investing , saving, budgeting or paying bills — and the other is left completely in the dark. A bad dynamic can develop, where one spouse feels overburdened and the other feels anxious because he or she never has an
idea of the family’s actual wealth. This is especially concerning with older couples, because if something happens to the financially responsible party, it can be disastrous to the surviving spouse.
I encourage all my client couples to tackle their finances as a team. At a minimum I urge them to share the following 10 pieces of vital financial information with each other: names of every account, account numbers and PINs; information on all insurance policies; credit card balances; contact information for all attorneys; bills and when they are due; location of any safety deposit boxes; contact information for advisers or brokers; information about retirement plans (including 401(k) plans and 403(b) plans); and finally, access to Social Security entitlements.
Another really helpful way for couples to approach their finances is to share a single checking account. When you’re married, most expenses, such as vacations, new cars and rent or mortgage payments, are family expenses. And if each spouse has his or her own account, neither has a clear picture of their total assets. It then becomes very difficult to create an accurate cash flow plan.
To help get couples on the same page, I have them create individual lists of their values and financial goals. I’m always surprised at how many couples have never discussed these issues with each other. Once they have identified their individual goals, I work with them to create a plan to help them reach those goals.
It’s good to start clients out by identifying their hopes and dreams, but sometimes this process can be a reality check. A couple may realize that at their current income, spending or debt levels, they simply can’t afford to meet any of their goals. It’s in these instances that couples really need to work together as a team.
For instance, it’s usually very important that couples pay down debt together — even if it’s been acquired by only one of them. First of all, married couples share a single credit score. More importantly, out-of-control credit card debt can ruin the finances of the entire household. If couples work together to pay it down, it’s twice as easy to eliminate, and in the end, both parties come out ahead.
Often it takes baby steps to get couples on the same page, financially speaking — but the more they work together, the easier their financial lives become. The bottom line is that financial choices made by either spouse tend to affect the whole family. It’s important that information and values are shared from the get-go. In the long run, I’ve found it makes relationships stronger. ~end
I would add that some couples strongly prefer having separate checking accounts. Ideally all income should flow into a joint account and then an agreed upon amount swept to individual checking accounts. That way both individuals will know what is coming in and going out of the household.
Politicians have now made “the economy” their main talking point. But I don’t think they yet realize that throwing future tax dollars towards a “stimulus” without disciplined Federal spending cuts is like a shark feeding on its own blood. And why not wait until the last minute? The November elections are still 60 or so days away…even though most Americans have had a heightened concern about the economy since around 2008.
I’m really not gloom and doom as some because I have faith in the resilience of American workers and entrepreneurs and I sense that the upcoming voters will vote more based on their economic comfort than by pure political party. There are glimmers of stabilization in spite of, in my opinion, an ineffective economic team that insists on bigger government as the answer rather than pro business, private enterprise, and a light handed touch by a now massive federal government. I wonder how quickly our economy might have recovered had they been more hands off. Economists will need to sift through what is spun for the sake of politics versus true statistics. History supports smaller government and lower taxes as foundations for sustained economic growth in a free-market society.
Now come several tests: Will the midterm elections make a strong enough statement to BOTH parties that fiscal spending must decrease and private job sectors be treated with due respect? Will we be given a clearer picture of future fiscal policy so private businesses (meaning non-government) can plan for the long term? In other words, whatever the outcome in November, will there be an articulate and intelligent launching pad?
Imagine you were trying to lay out a financial plan for your family and your life. You’d like to set goals and define variables. You might use years to retirement as a goal, or the cost of future college, or the cost to take time off to further education or change careers, or how much to save to cover time doing philanthropic work, or saving for a special trip, or developing a hobby, or starting a business. I have worked with clients to project the approximate costs, savings and time required for all of these goals.
Now, imagine a Company is projecting future goals that include hiring new people, training employees, investing in capital to expand, developing new marketing territories, etc. As much as our politicians would like to think the private business world functions similar to the government, it doesn’t. Without some parameters and level of fiscal certainty, it is difficult to commit to long term expenses. This is because the private world needs to maintain balance and profits to succeed.
Let’s assume that both you and the Company above have defined costs, realistic investment returns or projected growth and plan to make steady, healthy financial decisions. And then…..all momentum ceases. Suddenly you and the Company are left hanging, dangling over the precipice of swirling rumors, speculation and fears of the vast unknown of TAXES. Yes, because our politicians were busy on other issues these past few years (spending future tax dollars) they apparently didn’t pay attention to their calendars or “forgot” that 2011 is nearing. And on January 1, 2011, unless something happens, a plethora of tax changes will occur. Those most affected will be individuals working for companies and individuals running businesses.
To be blunt, the fact that our government (both parties) allowed this to happen is the most irresponsible and narcissistic lapse of consciousness I’ve seen in politics in a long time. It’s as if they can’t walk and chew gum at the same time. It’s as if they just turned up their hearing aids and heard, “It’s the economy, stupid.” It’s as if they haven’t yet realized that a healthy economy is directly tied to deficits – you cannot separate the two. They now see how quickly the November elections are coming and that January 1, 2011 is around the corner. And they’ve looked at our nation’s balance sheets and realized they’ve already spent SO much money trying “fixes” (through expansion of themselves rather than fixing their own mistakes such as Fannie Mae and Freddie Mac), that it will be very hard to throw more money at the economy and collect more from those doggedly hard working Americans. Americans need to work, and the businesses they work for really need clarity regarding their future outlay to this massive government deficit.
It’s like they (both parties) spent the past few years wearing those blinders that let a horse see only straight ahead. They’ve conducted themselves like kids with their first credit card – only theirs has no limit, and they have operated with an attitude of astonishing short sightedness. I almost feel like they are “learning” rules of basic economics 101 on our time and at our expense. Of course we know that agendas play an enormous role in government spending. But someone has to pay for those agendas, eventually.
The truth is if any of us ran our households like this, or any business owner ran his/her company like this, our country wouldn’t survive as we know it. We voted for people (in both parties) who have yet to clarify the two most important “unknowns” for smart personal and business planning. One: Future Individual and Business Income Tax changes after the expiration of the 2003 Tax Cuts, and Two: the looming, gargantuan Healthcare Laws that they were convinced America needed – so much so that they spent a year working to pass it.
They owe clarity to Americans who keep our economy healthy. On this Labor Day, my prayer is that these politicians are thinking hard about how to prevent us from laboring in vain. I define laboring in vain as when more of my earnings go to a government that spends them in ways that magnify the size of government and minimize a private citizens’ independence, liberty, and ability to freely give and invest into their own lives and families. My prayer is that those in office have some conviction about how they view individuals who keep our country humming: the American majority who care about working and conducting their lives with purpose and clear focus. The vast majority of us want no entitlements, just a level of certainty that will allow us to take wise steps. I heard someone on the radio say that when politicians talk about taxes, if they use the word “target” or “targeting” preceding the word “taxes”, it won’t likely benefit the vast majority of those who actually pay taxes. Good point.
Asking Americans to work and conduct businesses without defining necessary variables (Tax law changes and looming Healthcare mandated costs to name a few) is like blindfolding a baseball pitcher and expecting him to throw a strike and not hit the batter.
Meanwhile, as politicians reposition themselves prior to the November election, I would like to honor all hardworking Americans, whether currently working (in and out of the home), looking for work, or retired from working. You and our exceptional military service men and women are the backbone of our nation. You are the generous ones – giving sacrificially of time and service and charitably to those less fortunate and in need. Without your ability to walk and chew gum at the same time our nation would not be the exceptional nation that is still quietly functioning and overcoming in the background, in spite of the loud and confusing “talk” by our elected officials in the foreground. You are the “Doers.”
Lately I’ve been thinking about risk in areas other than investing. Last week while visiting Yellowstone for the first time, I found myself calculating: “How close should I get to that wild buffalo I’m trying to photograph?” and “What are the odds that the geyser we are approaching might go off? (It did, and we were DRENCHED), and “Why are those families allowing their toddlers so close to the wild elk standing in the river?” and “Should that woman really be out of her car video recording a herd of buffalo crossing the road right in front of my car?”
Later, I had an interesting conversation with a saleswoman in Jackson Hole about the folly we observed. She called it “the Disneyland Syndrome” meaning some tourists are just certain there is a ride operator nearby who can punch a button to stop impending doom. (Maybe our culture is so used to being rescued on so many fronts that this is more common than in the past….I’ll save that for another day.)
In a typical lifetime career, most people take on various levels of risk. They apply for jobs, learn new skills, make career changes, continue education, start businesses, and hire employees. These risks are part of doing business and successful individuals and businesses are rewarded for risks taken. Of course, there is a chance of failure in some or all of the above. But there is little reward without taking some risk.
In sports or outdoor activities such as skiing, risk necessary for success and the “rush” some are seeking. Those who challenge themselves usually excel more than those on the sidelines playing it safe. Those who take on too much risk suffer injuries or worse.
There are risks in every relationship, but most people are more than willing for the expected rewards of loving, close relationships and friendships. Risk is a part of life – the degree varies by both what we can control (endogenous risk factors) and what we cannot (exogenous risk factors).
When it comes to investments, people tend to evaluate risk differently. For one thing, if you ask someone how much investment risk they are willing to take when the market and economy happens to be thriving, most will say they are quite willing to take on risk for the reward of a higher return. When the market is volatile or on a downward spiral, very likely that same person will change their view and become less willing to accept risk.
Investors who understand that adequate and appropriate investment risk should not be emotionally based, but rather methodical and strategic, are able to view risk with both short and long-term mindsets. Good financial planners need to help a client approach risk differently than riding the investment rollercoaster extremes of greed vs. fear. After years of seeing the upside of risk and then sudden downturns in the early 2000’s, many cannot stomach downturns because they took on inappropriate risks in the past. Unfortunately many brokers are untrained in the world of risk and confuse risk with speculation, leaving out the factor of time, as if all of us would remain young with unlimited recovery time.
The lessons from the last decade have led some to read or re-read the 1830 “Prudent Man Rule,” which elegantly says “to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested.” My belief is that combining ethical free market capitalism with the prudent rule mindset and understanding the purpose of investment risk, would allow most to experience less investment volatility and more to have confidence. Our financial markets would require less costly, cumbersome government regulation.
Financial planners should spend time with clients clarifying the amount and type of risk needed to meet personal short and long-term goals. They should explain how it is possible to minimize or smooth out some risk over the long-term. Clients should understand how investment risk is different from speculation or forecasting and particularly get rich quick methodologies Comprehensive financial planners use many variables including: time, stage of life, immediate, near and future needs, proper asset allocation, planned increases in assets (savings), estimated decrease these assets (retirement draw downs), and of course a client’s change in lifestyle. Some risks can be minimized, some can be avoided, and some risk is there for the purpose of long-term growth/reward.
It is important that my clients understand why we are recommending each investment. This allows them to relax and not react daily to market movements. When we review and rebalance, they know why. We don’t jump in and out of investments because each is serving a purpose, and it has been proven time and again that this doesn’t benefit the net worth of a portfolio. We carefully and methodically invest for their personal plan. With investment risk properly defined and assets allocated accordingly, they should experience less volatility than most of their neighbors and friends, and understand each investment’s function within their portfolio.
Not only does this allow clients the sleep they need and the energy to focus on other matters in life, our planner/client relationship invites open communication because we are both have the same goals: THEIRS.
You’d have to be unplugged from all media sources to not hear debates on “…the economy…” by academically refined “experts” and screeching emotional hot heads. Is it getting worse, is it beginning to recover, is it stagnate, are there are hopeful signs?
I’ve been wondering if changes to our economy precede or follow political beliefs – on both sides of the house. Which is the cart and which is the horse? What is reactionary and what is proactive and when should either tactic be used? It’s been awhile since I’VE seen strategic non-partisan proactive economic policies but maybe I missed a few along the way. Where does the role of government begin and end during shifts in our economy? What a lot to debate!
It is important to come to some sort of conclusion to the questions above to feel confident about the way our country is being led – either confident in the policies or confident that you want significant change at the next election season.
Our conclusions depend on how we define economic health. Regardless of differences in economic camps (there are big disparities), I personally do not know anyone who doesn’t include in their definition of a healthy economy: 1. low unemployment and 2. a healthy housing market. Maybe I have purely capitalist friends – but no, I do have friends with far more big-government instincts who also want healthy job markets and a healthy housing market. Really, what more affects us personally than our ability to earn a living, and where we sleep? With the American tradition of home ownership and a God given desire to plant roots and secure our place in this world, to convince a majority of Americans that this idea is outdated would be a very hard sell.
I liken it to Maslow’s Hierarchy of Needs: The philosopher determined that until basic needs are met (physiological and safety,) more ecclectic needs such as self esteem and self actualization (whatever that personally means) aren’t important. It is odd in the world’s most advanced country to think of Maslow’s heirarchy of needs in general terms. Third World Countries come to mind when you think of food and shelter, although without a doubt this crisis also exists in America. The point is – to be discussing this in American majority terms says something to me. The phrase: “It’s the Economy, Stupid” rings true. Call me simple, but our government’s MAIN goals, actually pledged outloud are preventative: Defend and Protect the Constitution of the United States of America. This includes our economic strength. When all is well on the fronts of security and economy, THEN we can focus on other aspects of quality of life for us and the world in general. Sounds simple, doesn’t it? Of course we all know it is far from simple.
Terms are thrown around regarding our economy: inflation, deflation, stagnation, stagflation, depression, recession, debt vs. GDP growth. Defining a few of these terms:
During the depression, something called DEFLATION occurred: too few dollars for too many goods, translated simply: no one could buy what was for sale. This occured partially because businesses had a hard time getting credit and could not expand and weather slow downs, and because our economy was out of balance: not enough solid businesses to employ enough people. The result was a drastic slowing of the economy: prices dropped and production slowed – causing high unemployment. The government stepped in and created programs to stimulate the economy. The hope was to get people back to work. Many did go back to work, but most jobs created were for the government. Since the government has to make payroll for government jobs and they get their funds by taxing citizens or increasing US debt, it is seriously debatable that their actions really grew the economy in the LONG run. They did in the short run, with permanent government expansion being a consequence. Many respected economists argue that necessary production for World War II actually brought our nation out of deflation and the depression. So if we want to avoid a deflationary pattern, what long term policies will actually impact our nation’s economic growth? This is the million dollar question. Economists seem to know less about the causes and fixes of deflation than they do inflation. If we are headed towards deflation, then this is the CART that must be directed. It is usually harder for a society to recover from severe deflation than inflation – there are less variables to “tweak.” Interest rates are already very low, which is a typical way the Federal Reserve Board “tweaks” the economy. What is needed are JOBS and demand for supplies.
On the flip side, INFLATION can occur when prices rise quickly(due to rapid growth) and and it takes more dollars to buy necessary things. Raw materials begin to cost too much for businesses to expand. Some level of inflation means the economy is growing. There is a precarious balance to keeping inflation in check that is largely controlled by interest rates. When inflation surpasses the health zone, unemployment increases, just as with deflation, and the vicious cycle of high unemployment and high cost of living seriously affects quality of life. The Federal Reserve Board’s ultimate responsibility is to regulate the supply of money in accordance with the needs of the economy as a whole. They do this through interest rates and money supply. The US Treasury is in charge of money policies, tax policies (the IRS) and is an arm of the administration. Easing up money allows businesses to expand, but the money supply can’t be too loose or money loses intrinsic value as inflation creeps in. Just as in our personal finances, BALANCE is key. Overcorrection can bounce the economy from one extreme to another. There are actually 3 types of inflation that yield similar results but are based on different realities of our economy and corrective actions depend on understanding inflationary issues.
So where are we today? Low interest rates, high unemployment, increasing US Debt, increased government spending and regulations. Add to this mix that we are part of a global society – with economic stability of other countries affecting our economy and vice versa. In the near term, if our policies do not focus on JOBS, meaning business friendly activity, we could shift to deflationary times. Inflation could also occur with increased government spending and loose money policies that diminish purchasing power of goods. Much of this depends on how well our leaders balance our economy and put this balance ahead of political ideals.
Think about what matters most to Americans and what you think of our economy. Do you see glimpses of recovery? Further challenges? Personally, I see hope based on more than financial decisions. I think our economy is a filter to view our nation’s heart and what we stand for. Economic policies are a reflection of the values of those making them. That is what makes economics interesting. My hope is that as good economic decisions align with most American’s hearts and values, our economy will improve. Uncertainty is a stumbling block to a healthy economy. Taken to a personal level: how we handle our finances often reveals our hearts and values. Amidst Maslow’s hierarchy of needs in this economy, we as individuals can make a big difference in other’s lives. It has been demonstrated time and again that individuals and private citizens make the most significant and cost effective changes in other’s lives. How many dollars does it take for the government to feed the hungry vs. how many dollars does it take for individuals or private charitable organizations to help those less fortunate in their community and elsewhere?
The saying goes: there is an economist within each of us, whether we know it or not. Because in the end, we all have to deal with money in one form or another. That is why we, as individuals, should buffer both extremes of inflation and deflation when managing our personal finances. As a comprehensive financial planner using functional asset allocation, we help clients lay out individual life plans. We consider future streams of income, investments poised for growth, and identifiable standards of living that bring peace of mind to our clients. I’ve not yet seen a more complete and cost effective way to approach an individual, couple, or family with financial recommendations.
I’m beginning a series (I started to write “short blog posts” but realized that “short” is somewhat relative) to review financial and economic topics and highlight choices and possible action plans. Admittedly, it is disturbing to see some changes and decisions that have occured within our US and global markets and current US economic philosophies and strategies. But as a Comprehensive Fee-Only Financial Planner and student of economics, I tenaciously look for silver linings (vs. hype).
To maintain CFP®, Enrolled Agent and NAPFA requirements, there are significant continuing education requirements. I recently completed 3 days of education focusing on personal finances and taxes. One thing is clear: our world is changing, and tax and financial changes are part of the fallout. I’ll be attending a conference this fall that includes top economic and financial planning commentators/practitioners. But I don’t have to wait for that: facts are surfacing that allow for planning strategies. I’ll take requests – meaning if you would like a topic covered, ask me. I’ll touch on Economic Theories and how to identify what is being applied with certain government proposals. More importantly what does this means for families and individuals? I will aim towards the practical steps and decisions after understanding the larger picture.
I begin with this truth, which should not be glossed over: Most wise financial decisions are static regardless of our world changes. As the founder of the Alliance of Cambridge Advisors, Bert Whitehead says, know the difference between “endogenous” versus “exogenous” factors. This means: what can you most control about your personal finances (endogenous) versus what may be happening out there that alarms you but that really you cannot do much to control or change, financially speaking (exogenous).
Knowing the difference helps clear the clutter from our minds – as I don’t know about you, but sometimes the amount of information coming in via media and internet, is overwhelming. Some information is relevant to individuals, and some is not. And of course, since media often speaks with “biased tongue”, we also need to decipher truth from persuasion and agendas. So it is good to put into practice the ability to segregate out the Endogenous factors – those that we can control either immediately or in the future from those that may alarm us, but leave us dumfounded as to what actions to take. The endogenous issues are things I would put on the “A” list. They most affect how to improve our financial health.
Exogenous issues (issues outside of our personal control) may or may not provide opportunities or defensive action. If you are financially prepared and ready become the operative words. It’s interesting that most “get rich quick” methodologies are rooted in exogenous factors, meaning since such and such is going to happen, we need to do this – in a hurry. I encourage clients and when speaking or teaching to first understand the root of an idea or prospect and whether it is feasible, ethical, practical, and personally applicable before jumping into any new venture. Included in the analysis of exogenous “opportunities” are: What are my PERSONAL risks? What do I stand to lose either in money, time (which has a monetary value), other opportunities, friendships, reputation, momentum, ethical lifestyle and peace of mind? Is this something that fits you and your family?
Stay tuned. I’ll email and post update information on twitter and facebook. I look forward to your input as well.
In 1999, my neighborhood housed a nice, but eccentric family who was convinced the world was going to end at the stroke of midnight December 31, 1999 or Y-2K. They did extensive research and calculated that technology to keep our lights on, gas pumped, food stocked, and computers operating couldn’t possibly sustain January 1, 2000. They made this decision based on partial information about how computers would need to adapt, and how global systems need to talk to each other. Consequently they stacked their garage with food and sold emergencies supplies for nearly 9 months. Their entire lives adjusted to this certainty – to the point of leaving jobs and scaring some people half to death. By December they couldn’t shut their garage door. It looked like a yawning, gaping smile in front of their home, much to the dismay of those around them. I asked them why they were so certain and they never said anything like “God told me” such as Noah heard (which is hard to argue with, except I would have wished He had also warned me about Y-2K.) It was a compilation of information and worrisome acquaintances and meetings they attended about the threat of technology on our earth. Needless to say in 2000 they did not need to grocery shop for awhile.
I’m writing this because our volatile markets and our economy are uncertain. So we should take reasonable precautions. However we shouldn’t lose sight of the larger picture and the fact that the media spouts only partial information depending on which station you are tuned to. Some in the media blame the volatility on the European economy including Greece and other countries overwhelmed with locked-in entitlement programs and no money to fund them. (I happen to view this as a serious warning Americans should recognize and prevent asap.) Some in the media blame our expanding government bailouts for the skittish markets. Some put the blame solely on politics, reasoning that if we all just “get along” the economy would straighten itself out. Some may even blame global warming. Everyday, since I am a financial planner, I read a “reason” for a change in the market. Most of the time, there is more than one. One indicator happens to outweigh another depending upon what is on the minds of investors. As we saw recently, trades errors can trigger a tsunami that has nothing to do with anything but a glitch.
I am attaching to this blog an article that describes in layman’s terms how fiscal spending and debt play into the long term economic health of our nation. Why? Because it is good to know, and there are slivers of answers in this article. Now, after reading this, some might reason they should put their money under the mattress or in a bank or gold. Others may think it is great to move in the other direction, believing the economy will recover sooner than later and this is an opportune time to take chances for big returns. This is because people operate somewhere between the extreme personalities of fear and greed. They do. Extreme emotions can be devastating to growing long term wealth.
I caution against any extreme action. Here is why: If you are wrong – you stand to lose a lot, either the purchasing power of your cash and gold, or the amount of assets you are left with if you risk it all. Those who miss out on a market recovery usually take years, if ever, to catch up. They wrestle with when to “get back in.” By the time the average American hears investment information, institutional traders handling large amounts of money have bought or sold, minimizing the “deal” or raising the price. What a dollar can buy, the supply and demand of money and goods, unemployment, and global activity change quickly. Regulatory oversight can be healthy or it can truly stifle a country’s economic growth, depending upon who is regulating, what they are regulating and for what purpose. Our ties to foreign governments both as strategic allies AND through our debt obligations are forever complicated and affect global markets, which is our reality.
Simply put, it isn’t simple. It’s extremely complex. If it was simple, we would have consistent and convincing advice being thrown towards the White House. And we don’t operate in a purist society – some stand to lose big politically and economically if we race down the “fix it” track. While it may be good solution for the U.S.A. in general, those who stand to lose may be the ones controlling the outcome and pace (little cynicism implied.) In personal finances, radical actions based on partial information leave one at risk that unknown information negates your entire purpose.
The beauty of fee-only comprehensive financial planning using functional asset allocation is that without assuming to know the future, we design and implement a logical plan that minimizes emotions. This involves understanding a lot about our clients: their goals, their present reality, their tax situation, what we can improve and what matters most to them. This helps us make calculated recommendations for investments and other aspects of their financial life. We focus on what matters most to our personal situation. Bert Whitehead, the founder of Alliance of Cambridge Advisors, points out that choices are either exogenous or endogenous based. We should understand what we CAN control and change through our own behavior, action and decisions (endogenous) without ignoring or dismissing exogenous realities.
Our recommendations include maintaining an adequate “emergency” fund. They include preparing for a potentially long life that allows important choices: re: careers, choices about how much you will depend upon government programs such as social security to determine your quality of life, charitable and legacy planning, protecting your assets, good and bad debt management, long and short term financial needs and goals, tax planning, and others. We understand that peace of mind frees clients to a great extent from worrying about what the market does each day. Clients know their plan is logical, understandable and takes into account the appropriate risk for them. We help them to live smart with the goal of minimizing risk and positioning for growth as it fits their needs and life plan. An important endogenous factor is SAVING. Being prepared and ready for opportunities by saving and living beneath your means creates a wide path towards peace of mind. Your financial decisions should include keeping an eye on the big picture, long and short term goals and considering your financial stage of your life.
Signing off with the following article, written by Thomas Friedman, courtesy of the New York Times, May 8, 2010: http://nyti.ms/b9x9hO