Your Spending and Your Values

As an opinionated personal finance expert still in my 30’s, I absolutely had to respond to this:

What do you wish you knew financially in your 20s and 30s?

— Elliott Appel (@ElliottMAppel) October 17, 2021

Growing up, I was always a saver. I collected my pennies, nickels and dimes to open a savings account when I was in kindergarten. I quickly learned to value earnings from work. My parents paid me to do extra chores and supported me when I got a job bagging groceries when I was 15. From a young age, my dad had planted the seed of interest in investing when he told me that foundational tale of my sister owning shares of The Coca-Cola Company. 

Suffice to say, when I was in my late teens, and certainly by my twenties, the basics of sound personal finance were as natural to me as breathing. I’ve worked hard, been frugal with my spending and careful with my saving.

The one thing that I didn’t quite understand was value.

Values are those characteristics, qualities and principals that you are willing to pursue harder and stand up for longer. Values go beyond addressing your basic needs, they go beyond your relationships. Your values define your very being. When your actions and lifestyle are in alignment with your values, you are living your best life. When they are out of alignment, you may notice feeling uncomfortable or just not quite right.

If you value something - you should be willing to spend your time, energy and money to pursue it.

As someone who is generally frugal, there have been times that spending an extra dollar pained me. However, there have been missed experiences that now pain me - even though I saved many more dollars. That is not to say that I have not spent and enjoyed my money at all, but I look back and ask myself why I didn’t spend a few extra dollars to eat at a fascinating top rated restaurant or avoid an adventurous weekend outing.

My life savings at age 25 were a tiny part of my overall financial picture. Most of the money I would ever have had not even been earned yet! Had I spent every penny that I had then, I would have bought myself incredible experiences that I would still treasure today. I did make the right decision to save that money, but my mistake was in not identifying what would be important to spend it on.

Could I have corrected this? A deep and honest assessment of my values would have helped. I was halfway there - I did not spend frivolously on things I did not appreciate. I was intentional about the time I spent, the home I bought, the investments that I made. On the other hand, I missed out on opportunities that would have brought me great joy and fulfilment, my money accrued with no realistic expectation of being spent.

I don’t regret saving my money - I do regret not spending on things that are more important than that money.

There is a balance, of course. At any age, having emergency savings is important. You should be able to save a dollar off of even your very first paycheck. The trick, however, is knowing what the highest and best use for that dollar is. 

Through the years, I have helped clients identify and understand their deepest values.  I have seen people transformed by saying yes to an opportunity that they truly valued, or no to a part of their lifestyle that didn’t align with those values. I have showed them how they can spend on the things they truly cherish, living a more bountiful and more financially secure life because of it. Further, I have studied the very concept of values and the conversations that bring them to light.

Money is more important than simply having it. Money is an expression of all of the work we have done to earn it. It is the result of our patience in waiting for it to grow. It is the gift of those who came before us and left something for us. Yes, it takes money to eat, drink and keep a roof over our heads, but it is how we do those things that is truly important.

I'd go back and say that saving aggressively is very important, but while you are very likely at the lowest income of your career, experiences and friendships can be your best investments.

— Ryder Taff (@jrtaff) October 18, 2021

We can't get back the misspent dollars of our youth and exchange them for experiences and investments we still cheris. We can make sure that our future spending is in the right place. Take time to think about their values. A guided conversation with your advisor can help draw those out. Have those conversations. Spend and live in a way that aligns with those values - live your best life!

Insurance Series - Post 3: Home Base

Our home is the physical center of our lives. It shelters us. It houses our possessions. It's where we spend time when we have no where else to be. It can even be where we put together a family baseball game! Many of us are buying, remodeling, building or have dreams of doing these things. All of these are investments of our time, energy, money, and future. But, are they adequately protected? Maybe not.

Most people believe house insurance has but one question:  Do you have it? Yes? Ok, I'm good to go. But, are you? I realize it's not leisure reading to sit down with your homeowner's insurance policy and read through it. It's not a novel. It's more of a gameday playbook you should be familiar with. It can be understood. But, it helps to have some coaching and practice. 

There are pieces to a homeowner's policy that you should educate yourself about.

• Do you know how your insurance company will determine what to pay on a claim?
• If you remodel your home, you may need to increase your insurance coverage. Did you know that if something happens to your newly remodeled home, your insurance company may deem your home underinsured and would pay less in the event of a claim?
• Your homeowners insurance protects your other assets too. If your dog gets too excited and accidentally injures someone on your daily walk, does your policy adequately protect your savings and investments?
• Or, maybe you are considering a pool for next summer. How will that affect your coverage? Or if you do put together that family baseball games and someone gets hurt, are you covered? 

If you can't answer these questions, or you do not feel thoroughly confident in your home insurance facts, now is the time to change that! Visit your trusted insurance agent, then schedule time with someone at New Perspectives. While we do not sell insurance, we can help you decide the coverage that best protects your home, your peace of mind, and your financial future. So, you can feel SAFE at your home base!

Chicken Little

The sky is falling! The sky is falling!

 

Or is it?

 

We just got the latest numbers on inflation. The data show that inflation increased 6.2% for the 12 month period ending in October of this year. That’s WAY beyond the historical average of 3% annually and stirred up the inflation ghosts of the 80s.  While we take inflation pressures seriously, we find there are some mitigating factors here and some variables that mean these numbers will moderate.

 

First, this is being measured against the twelve months ending in October, 2020, when we were, mostly, in pandemic mode. Much of the twelve months from November, 2019, through October, 2020, were spent in full or partial lockdown. That means we are measuring from a low point. The previous inflation rate for that period is 1.2%, much lower than the historical average.

 

And what determines prices? Supply and demand. And we have some weird things going on for both sides of the equation.

 

On the supply side, we our seriously bogged down. Factories are trying to gear back up to full steam. Ships are backed up at ports. There are not enough drivers to deliver goods. There is a multitude of variables contributing to the mess, but it’s not permanent. Gradually, we will see  the chain unkink, but, right now, inventory levels are low. Want the hottest Christmas toy? You’re going to pay big bucks.

 

And what of the demand side? We’ve all been hunkered down, spending less and accumulating more. As my mother used to say, “The money is burning a hole in our pockets.” And we’re not just buying stuff. Now, we are buying experiences—booking travel like there’s no tomorrow.

 

More people chasing fewer goods/services. It’s a recipe for classic inflation. But will we keep spending like drunken sailors? Probably not. Things will slow down. We’ll get it all out of our system and settle back into normal patterns.

 

And what about the biggest cost of business? Labor. Well, we are waiting to see how this pans out. Yes, the labor market is tight, and wages are increasing. Will they stick? In some cases, yes. In areas with a lot of turnover, maybe not.

 

Ultimately, we believe prices will moderate, but don’t expect to go all the way back down to earth. For the last decade, inflation has been in the 2% range or less. We expect it to go above historical levels in the next year or two and hover in the mid 3% range. That’s highER inflation but not HYPER inflation.

 

So, when it comes to inflation, it’s a little cloudy, but we don’t think the sky is falling.

Why might you not hire us?

A prospective client asked me the other day to tell them why they might not want to hire us as their financial advisors. I thought that was such an interesting question that it kept resurfacing in my mind over the next several days. Had he asked me to tell him what value we could provide, well, I'd have probably a dozen or so ready answers. As a financial expert, I like to think that everyone needs good financial advice, but what kind of person genuinely should not hire an expert? That's such a great question that it deserves a thoughtful response. Here are a few potential replies:

You absolutely love DIY investing (and you're good at it). My first thought was of the staunch do-it-yourselfers. If you're one of these guys, you love investments so much that you will happily spend hours digging into the details surrounding a particular stock or bond, a specific fund or market sector, or a distinct investment strategy or even a series of investment strategies. You will have read enough of the right things to understand how the market works and where to invest your money to achieve pretty decent returns. You will pore over statements looking for where you may can eke out a few extra fractions of a percentage point. You'll watch the market throughout the day, make slight adjustments to your portfolio here and there, and will generally come out doing pretty well. The caveat? Despite all of the hours you put in (and despite how much fun this can be), there will be missed opportunities for realizing value.

The trouble is, investing and financial management may not be your day job. For us it is. While I do enjoy a day off and a vacation from time to time, our staff are more than capable of keeping things running smoothly. We provide continuous service, even when you decide that you don't want to handle it anymore.

There's also tremendous value in having an objective, outside perspective on your finances. Money is a very personal and often emotional business to navigate. Even the most logical and stoic among us can get tripped up by our emotions and our biases and may find ourselves making financial choices that are not ultimately in our own best interest. A professional advisor whom you trust can help here. 

Your wealth is income, fixed and you are pretty satisfied with your life. You have a known, fixed source of income, and the money it will generate is enough to meet your needs and wants throughout the remainder of your life. If you have truly maximized your wealth and well being, you may feel pretty well set.

What value can we add as financial advisors? For one, we can help you with not just your investments, but rather with the whole financial planning process. We can help you to take a step back and look at the various pieces of your financial life as a whole: income, expenses, insurance, tax strategy, investing, retirement planning, gifting, and estate planning. What we hope to do for each client is to help him or her craft a life that is enjoyable, sustainable, and in line with that particular client's values. 

You enjoy doing the research to see if a particular bit of advice applies to you. Not only do you understand and enjoy investing, you enjoy all of the other pieces of the personal finance puzzle. You've read the instructions to the 1040, the WeWork S-1 and a few annuity contracts. Nothing makes you happier than to spend hours researching all of the minutia related to your financial situation, weighing the pros and cons of various options, and choosing and implementing the best course of action. If this is you, you're your own financial planner. Congratulations!

For many people, this may be where we provide the most value. Even for the most curious puzzle solver, an objective third party can help with research and help you confirm that your decisions are appropriate and free from hidden risks. We can also help with many of the details that may be overlooked or just unknown by the DIY investor. With a combined 40 years of experience, we are knowledgeable across a wide variety of personal and financial circumstances. In addition to this, products, services, and regulations change regularly and we work diligently to stay on top of these changes. 

I tell my clients all of the time that all of the knowledge that I have is available to the public, there are no secrets and no magic. The trick is getting the right information. With so much out there, the vast majority of what you read online is either inappropriate for your situation or directly harmful to you. I see too often thoughtful, well educated people making great decisions that simply are not appropriate for their situation or goals. Having a professional on your team, who's interests are aligned with growing your wealth is valuable for any level of involvement.

You have high return expectations. We are investment advisors. Nancy and I are CFA charterholders. We have spent years studying, exploring and participating in financial markets. We are finance nerds. From all of our knowledge, I can tell you exactly one thing for sure: the future is uncertain. That means that when you reach for higher return, you are taking higher risk. If your expectations for your portfolio are significantly higher than market returns, we may not be able to help you.

You are so focused on keeping costs "low" that you are willing to lose sight of the bigger picture. Some people are extremely cost-conscious. They cringe at the thought of paying management fees, advisory fees, even hourly fees. If the thought of handing over $1,000 in fees makes you feel sick to your stomach, I completely understand! I've felt that way plenty of times myself. What I don't want you to do, though, is hold onto that $1,000 but miss learning about and taking advantage of a tax strategy that could save you, oh say, $90,000. That's not good math.

As Warren Buffet says - "price is what you pay, but value is what you get."

Helping you to increase the number on your balance sheet is great, but we like to think that our value is broader than that. We connect your portfolio with your values and goals. When the market turns, we have calculated that as a risk that you can bear. When you are depending on your portfolio for income, we take care to keep the money you need tomorrow available and safe from the near-term swings of the stock market. We help you and your family to live the life you envision with minimal stress, worry, and hassle. It's difficult to put a price on that.

Insurance Series Post 2: Medicare Week!

 Calling all Medicare enrollees or potential enrollees!

Please remember Medicare Open Enrollment began on October 15th and continues through December 7th. If you are currently eligible for Medicare, or will be soon, this is the time to make changes to your coverage or plan your future coverage. 

Not sure you are eligible? Generally, you are eligible for Medicare at age 65 and if you have paid Medicare taxes for 10 years of your working life. 

When can you enroll initially? Generally, three months before the month of your 65th birthday; during the month of your 65th birthday; and three months after the month of your 65th birthday.

A few basic facts about Medicare:

• Original Medicare covers hospital visits, inpatient (Medicare Part A) and outpatient (Medicare Part B). You receive Part A automatically, but must elect and pay for Part B, which covers doctor visits, radiology/lab tests, etc., in addition to outpatient visits.
• Original Medicare will NOT cover all your expenses. You will be responsible for a portion. If you don't already have a Medicare supplement policy, Open Enrollment is the time to get one! Medicare supplement policies (Medigap) will help pay for expenses that Original Medicare will not cover.
• Original Medicare and Medicare Replacement Policies are NOT the same. Please read your policy carefully to understand what is covered.
• Overnight hospital visits are not always inpatient visits. Ask your doctor or nurse if you are inpatient or outpatient (this can also change during a hospital visit). This will help you understand how Medicare and any other insurance will pay.

Have questions? Call us! We can help you navigate your health insurance coverage! 

How can we help?

• If you are enrolling in Medicare or are interested in changing your Medicare coverage
• If you have questions deciding which Medigap policy you need
• If you need assistance in deciphering your Medicare explanation of benefits

We are happy to help with these questions and more!