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Millennial Financial Success

By | 2017, Money Moxie, Newsletter | No Comments

Each generation seems to think the next generation is less prepared and doesn’t appreciate what they have. In reality, each generation is changing and evolving to its surroundings.

Time described generational issues, “The young seem curiously unappreciative of the society that supports them. ‘Don’t trust anyone over 30,’ is one of their rallying cries.”1 Surprisingly, this was printed in 1967.

Millennials–those born between 1981 and 2001–are the generation that will be required to forge financial success without a pension. As investors, they need to redefine their landscape. These are some common Millennial financial mistakes:

1. Not having a proper emergency fund: When you don’t have an emergency fund, every little unexpected event is a catastrophe. Paying with credit cards is easy, but hard to pay off. Avoid this trap by having an emergency fund of three to six months of living expenses readily available.

2. Forgoing the employer retirement match: About 75 percent of millennials are saving in their employer retirement plan; however, only 40 percent take advantage of the full company match.2 Those are free dollars that can help fund a retirement.

3. Holding onto debt: Student loans and car payments seem to hang around for way too long. Most people can afford to pay off debt faster than the minimum payment yet choose not to. Paying off fixed monthly payments frees up money that can work for you, instead of against you. Get aggressive and start to chip away at that debt.

4. Not using a financial advisor: A financial advisor can help you dream with numbers. Between work, social commitments, and family, most millennials don’t have time to focus on their finances. Financial advisors are here to help and work with all ages, incomes, and stages in life. We can create a plan and help you work toward making it a reality.

(1) Time Magazine, 1967
(2) http://www.benefitspro.com/2014/11/17/millennials-arent-meeting-their-match-in-401ks

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3 Myths of the Market

By | 2014, Viewpoint | No Comments

Every year we find reasons to question the future prosperity of America. We wonder whether investors’ prospects are dimming. Last year, our minds were occupied with government slowdowns and shutdowns. This year, we are more focused on the question, “Has the stock market come too far too fast?” While the problems are real, they should not derail us from our plans. Most difficulties are overcome and the myths of the market are not true. Keeping proper perspective will help us make better financial decisions.

Myth #1: Investing is rigged
The U.S. stock markets are the most efficient in the world. All investors have the potential to build their wealth as they participate in it. The longer we invest in a diversified portfolio, the more likely we are to have success.

There is a related question, “Is investing like gambling?” The clear answer is no. When we invest we purchase part of a company (stock) or a promissory note (bond). We become owners of these and we have rights to future cash flows that may come from them. The risks and outcomes are determined by the free market. If a company is successful then all investors that own it have the potential to benefit.

This does not mean that markets are perfect. There have always been some who try to take advantage of others. However, investors become their own worst enemies when they make poor financial decisions. Saving too little and trading too often are two of the most common mistakes. Save sufficiently and invest wisely to attain your goals.

American Manufacturing

Myth #2: America is broke
The United States is in better shape now than it has been for many years. The unemployment rate is down to 6.3 percent and consumer confidence is up. Workers are expecting raises, and according to surveys of executives it looks like it may actually happen this year. Household debt is at record-low levels and corporations have more cash than ever.

Some people may argue that we don’t make anything in this country. This is false. U.S. manufacturing is up 22 percent since 2009 and near record levels. We have an abundance of natural resources, educated workers, and innovation. We have laws to protect and promote business.

Worries over ballooning government debt (over $17 trillion) are diminishing for now. The expanding U.S. economy has led to greater tax revenue (up 8 percent) and a lower deficit ($306 billion). These numbers may not sound great. We still have a long way to go to reach a surplus so we can pay off some debt, but these are the best numbers since 2007. The future appears brighter.

Myth #3: A market crash is imminent
Herbert Stein famously said, “If something cannot go on forever it will stop.” We all know that when the market stops climbing, it can be painful. Two stock-market crashes in the last 15 years are still vivid in our memories. However, just because stock prices have increased doesn’t mean a crash is coming this year.

What can we expect?
The Dow Jones index had double-digit increases in 2012 and 2013. This has happened more frequently than one might think. In the last 99 years, returns of this magnitude have occurred back to back 22 times. What happens in the year that follows two positive, double-digit years? The average return is a positive 5 percent. That would be a reasonable expectation for 2014.

When we examine critical factors for a healthy market, we see more positives than negatives right now. Of course, there are no guarantees.

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