Sharla Jessop–President of Smedley Financial

Dear Friends and Financial Partners!

Smedley Financial Services, Inc.® is pleased to announce that Sharla J. Jessop, CFP®, was elected and has accepted the position as President of Smedley Financial, effective immediately. Sharla was elected by acclamation at our annual Board of Directors meeting in February 2017.

Sharla officially joined forces with Roger on March 1, 1994. Sharla had previously worked as an insurance agent for 10 years in Ogden and Salt Lake City. Shortly after starting, Sharla astutely passed four exams in four months.

Sharla became a Certified Financial Planner® certification holder on October 10, 2006. This includes meeting rigorous professional standards and passing multiple challenging examinations plus a 2-day, 10-hour comprehensive exam.

One of the best things about Sharla is her love for people. With Sharla, you, our clients, have always been first and foremost in her mind. She has always put your best interests first. Her ethics are above reproach.

Sharla has always been a powerhouse. From the beginning she has demonstrated great drive, energy, and ability. In so many ways Sharla has been fearless. She has met challenge after challenge. Sharla has always been teachable. If she didn’t know something, Sharla wouldn’t stop researching until she found the correct answer.

What you may not know about Sharla is that she is well-respected nationally. Many of her peers throughout the United States seek her input on a regular basis. Sharla has made time for mentoring new advisors throughout the United States.

So, at Smedley, we are entering a new era. I’ll still be around as the Chief Executive Officer (CEO).

Bullish Best Wishes,

Roger M. Smedley, CFP®

CEO

Retirement is Full of Surprises

Retirement was only a few years away for Dan and Patti, and they knew it was time to get everything in order. Living in sunny southern California was wonderful, but they felt it was not the best place for them to retire. It was crowded, the cost of living was high, the traffic deplorable, and it would not allow them to be debt-free at retirement. All things pointed to finding a new city to retire to.

Five years ago, Dan and Patti started their search. Resources, such as Forbes 10 best places to retire, helped them create a list of potential cities. Some cities were easy to check off–they didn’t meet Dan and Patti’s list of must haves:

  • Small but with services including a hospital and modern medical facilities
  • Home price that allowed them to retire debt-free
  • Outdoor activities
  • Favorable tax structure
  • Growing economy
  • Community activities like continuing education

By 2015 they had created a short-list and began visiting the cities to get a feel for the local culture and people.

One year from their proposed retirement date they started planting the seeds in their new city. They purchased a home that could be rented until they were ready to move. They started preparing their home in California to go on the market. The wheels were in motion.

Throughout this five-year process they planned, reviewed, and updated their retirement and income distribution plans. This helped them feel financially confident about this exciting, but unnerving, life transition. It also gave them the financial framework to make their important decisions.

Today, Dan and Patti are living their retirement dream. They are excited about building their new network of friends, doctors, and social connections in their new community. Their new favorite saying is “We don’t have to if we don’t want to because we are retired!”

Some of the challenges they faced throughout the transition into retirement:
Timing the sale of their home
Continuation of medical coverage for a younger spouse
Slow response from employer’s human resource department regarding retirement benefits
Keeping important papers close at hand during the move
Finding temporary place to live until their new home was ready
Small things such as getting a library card while temporarily living outside of the city

Controlling your own time
Less stress and more fun is how Rolayne describes retirement. After a long and rewarding career she decided it was time to turn in her walking papers and she hasn’t looked back. Rolayne says she is busier now than she was before, but now she sets the pace.

Retiring gave Rolayne more time to help care for her aging father before he passed away; something she is thankful she was able do.
She lives an active lifestyle and as an outdoor enthusiast, regardless of the season, she can be found taking a hike or snow shoeing in the mountains. She also enjoys the flexibility retirement offers so she can spend more of her time volunteering for her church. Basically, she is doing what she wants, when she wants and loving every minute.

Retirement is delightful; however, there was some trepidation getting to this point. Navigating health care in retirement was a big concern. Rolayne found that putting the various pieces of Medicare and supplemental coverage together was frustrating and overwhelming.

While there are numerous resources available, it was still difficult to make sure she had the right coverage for her situation. Rolayne sought help from a health insurance professional who could review her options and help her find the right coverage.

Without a pension to provide a stable monthly income, Rolayne knew she needed a plan for using the nest egg she had created. Longevity runs in her family; her income distribution plan is designed with the goal of helping her nest egg provide income throughout her retirement years.

Looking forward to retirement
Retirement should be an exciting phase of life. While transitioning from a career into retirement can be stressful, a plan can help relieve some of that stress and provide a better understanding and framework for this chapter of life.

Using years of experience, we have helped clients navigate the many obstacles of this transition. Let us help you.

Financially Empowering Your Adult Children

With life expectancy increasing each year, saving for retirement is becoming more important. You’ve worked hard your entire life, sacrificed to take care of others, and now, as you’re nearing retirement or are in retirement, it’s your time to live out your retirement dreams!

Sounds great, right? But then you realize the amount you’ve planned to live on each month is not enough because you are helping your adult child out each month financially. You could be helping them out with their mortgage, car loan, student loan, or the emergencies that come up each month; and you realize your retirement dreams will either have to wait or be downsized.

According to Consumer Credit, 31 percent of parents financially support an adult child on a monthly basis.1 If you find yourself in this situation, it’s time to set yourself free of the financial burden and empower your children to stand on their own feet.

Here are some ideas to empower your child:

Set boundaries
Let your child know you love and support them and want them to be able to take care of themselves without relying on you.

Have a candid conversation about your retirement plans and how your independence is impacted because of the money required to support them.

Explain that if something major does come up, you will be there for them. Define what those issues are and are not. For instance, compare medical emergencies to their kids’ need for new clothes. One you cannot plan for and the other you can.

For more information, the book, Boundaries: When to Say Yes, How to Say No to Take Control of Your Life by Henry Cloud is a great resource.

Create a game plan
Whether your adult child has just graduated from college or has a family of their own, it is critical to come up with a plan that will enable you to live your retirement dreams and allow your child to achieve financial independence.
Create a timeline long enough that your child will be able to get their finances under control.

Help them create a budget that will enable them to live on their current income. If expenses are higher than take-home pay, sit down and work through it by looking at their needs versus wants.

Budgeting is a great way to know how much money can be spent on items such as groceries, gas, clothing, etc. Once money is used up for the month, they will have to wait until the next month to purchase certain items.

Use personal growing experiences
Transparency can demonstrate to your child where you are financially and why it is important for your child to prosper without relying on you.

Use examples from your past where you wish you would have made better financial choices. Be sure to include what you learned and how the experience changed you. Your children will see that they too can make it out of a tough financial situation.

Financial conversations can be difficult. Yet, they are crucial to both your financial freedom and your child’s financial success!

1. http://www.consumercredit.com/financial-education/infographics/the-cost-of-supporting-adult-children-or-elders.aspx

The Family Bank

Many clients have wondered how to give money to adult children without creating dependence. Financial dependence can be an “addiction that is as serious as dependence on alcohol or drugs.”

This becomes even more problematic when you start looking to give assets to grandchildren and successive generations. One simple yet sophisticated tool to create a financial pool that can be self-perpetuating is a family bank.

The main purpose of the family bank is to use assets to improve the human and intellectual capital of each successive generation.

Rather than just gifting assets away, you create a “bank” where the children or grandchildren can apply for a loan through a formal process. There is a board of trustees, formed of family members, that reviews the application and approves or denies the loan. The loan is then repaid over time at an interest rate that is slightly lower than the prevailing interest rates. The repayment of the loan replenishes the family bank for future family members to use.

The benefit of using a family bank is that it promotes a sense of accountability as the recipient has to first prove the merits of their request and second return the capital based on the returns they receive from their endeavors.

Frequently, family banks are used to help pay for college, provide mortgages, or provide seed capital for a start-up business.
Again, the goal should be to improve the human and intellectual capital of each family member. It should be more than just a son asking his mom for $20. It should not be a gift that has no purpose and no expectation of repayment.

To set up a family bank you can use a legal document like a trust or a Limited Liability Company (LLC) to dictate how the family bank is operated.

As you work with an attorney to create these documents, be sure to include a mission statement. The purpose of the mission statement is to explain your intent and goals to help guide future generations in the administration of the family bank.

Once the governing documents are created, you can open an investment account that is titled in the name of the trust, LLC, or family limited partnership. It can be invested according to the restrictions in the documents.

If it is planned and implemented correctly, a family bank “can be a powerful mechanism to put wealth to good use for the benefit and development of the family.” If you have questions about how to set up a family bank, please contact one of our private wealth managers.

*Smedley Financial and its employees do not provide tax advice; therefore it is important to coordinate with your tax advisor regarding your specific situation.

A Lesson from the Decathlon Gold Medalist

Greetings Dear Friends and Financial Partners,

During this year’s Summer Games, I watched an interview with Ashton Eaton. At the time of the interview, Eaton was the reigning Gold Medalist and world-record holder in the decathlon from 2012. Eaton stated that he had a different mindset today than he had four years ago.

Eaton said his main goal four years ago was just to be there at the Summer Games. To get there, he did everything right physically. He was ready to go.

During the last four years, Eaton believed he had become smarter. This time around Eaton focused on preparing himself for all of the things he would not be able to control—the unknowable. He didn’t want to be surprised. As a result of his efforts, Ashton Eaton once again became the Gold Medalist by winning the decathlon competition in 2016.

What can we learn and how can we benefit from the paradigm shift in Eaton’s mindset?

Eaton’s 2012 training can be compared to our retirement planning. In our preparation we may focus on a financial number and like Eaton we may just be glad to be there. However, retirement is really just the starting line of another race—a race that may be different than what we expected.

There will certainly be unexpected expenses and unforeseen health challenges. Your investments will rise and fall daily in the commotion of the financial markets. How can you manage your assets in a world with so many things you cannot anticipate, let alone control?

Your investment results may ultimately be determined by how you psychologically prepare for the ups and downs of the market. It’s not the stock-market action that you should worry about. It’s your reaction to what’s happening!

At SFS, we can help you identify unforeseen events that may impact your financial well-being. We will create a plan that will help protect your assets and create an income designed to last throughout your retirement years. When the unexpected happens, you can feel confident. You have prepared. Call us.

Bullish Best Wishes,

Roger M. Smedley, CFP®
President

Get Your Social Portfolio Together

When juggling work and family, your idea of retirement may be fewer responsibilities and unlimited time to do the things you want. The reality is too many people get to retirement and find that their social connections revolved around work. They lose daily connections with co-workers as well as clients and customers.

Suddenly they are out of the loop with day-to-day happenings at the office. They miss hearing from friends and lose the camaraderie of lunch conversations.

The Stanford Center on Longevity found that traditional social engagement is waning. Today’s 55-64 year olds are less engaged with family, friends, neighbors, community, and religious activities than their predecessors 20 years prior (Sightlines report).

Building a social portfolio for retirement is just as important as building an investment portfolio. Meaningful relationships and participation in communities do not just happen once you retire. Building strong social connections before retirement is a key to increasing social connectivity in retirement. As a matter of fact, it is directly linked to wellbeing and a long life. The hurdle is knowing when and how to build new connections. Here are a few suggestions to get you thinking:

Family
If you value spending time with family, find ways to connect regularly. Get your family together a few times per month for a dinner. Rotate from house to house so everyone has a chance to host the group and you have the opportunity to get out of the house.

Make it a point to get together for an activity once per month. Play a game that involves family members at all age levels, or go to the pool, bowling alley, or park.
Plan a family vacation annually or bi-annually so that you can get others away from the day-to-day demands of life and create a backdrop for building memories together.

Friends
Too often we talk with friends about getting together only to find months later that nothing has happened. This is a common experience for most people. Scheduling time to get together with friends regularly may seem excessive but it’s not. Getting your activities scheduled and on the calendar increases the chances that you will actually spend time with your friends.

Your friends are also looking for ways to make connections and get out of the house. Plan regular activities, such as meeting for lunch or taking tours of the city or surrounding areas that interest your group. If you enjoy being outdoors, find a new trail to hike each week or join an off-road riding club.

Group Involvement
Volunteerism is a great way to share your time with purpose and find fulfillment in retirement. But just like relationships, it is better to look for opportunities with charities before you retire. Understanding the needs within your community or religious group will help you gauge your time and availability. The Sightlines report states that while people want to volunteer their time, they feel like they don’t have enough information or nobody asks them.

Lining up opportunities and building a social portfolio before retirement will lead to a smooth transition and more enjoyment during your golden years.

Back to School College Planning: Real Advice from a College Student

College. When being described by those with a diploma hanging on the wall, it is a golden age of lasting friendships and high-stakes pranks. When imagined by youngsters that haven’t flown the nest, it is an escape from the demanding thumb of the parents. True, college is a great place to meet new people and discover independence; it is also a challenging time of learning to balance life with money.

The average college student graduates with $24,000 in debt, according to the Project on Student Debt.

college_debt

College doesn’t have to be four years of ramen noodles and Friday nights at home—with the right money management, any college student can have the same outlook (even if it is forty years in retrospect) as those that have moved their tassel.

Tip #1: Look at the Long Run
For as many times as the incoming freshman has been told: “College opens up so many doors, do whatever you want to do,” just remember that you cannot do everything that you want to do. Doing everything you want, satisfying every craving, or buying each impulse item will wipe out a bank account before the end of first semester.

Think about what will matter in a few years, rather than the latest craze or obsession. Will Jerusalem Cruisers last? Probably not. But having enough money to pay for next semester’s rent will matter. Save money for the long run, rather than spend it on something temporary.

Tip #2: Be Budget Friendly
The best way to manage money is to have a set budget and stick with it. Download one of the hundreds of budget-making apps (Mint is recommended), and decide how much you are going to spend and save each month.
Don’t just budget for bills and tuition; also budget for food, dates, books, and socializing. Being budget friendly goes beyond just having a reminder of how much you are supposed to spend though—you have to obey your own rules.
Find ways to cut back, whether it’s buying used textbooks online, having a suburban mom’s coupon book on hand, or trying your hand at a homemade meal. Many college campuses have fun free activities you can participate in. Having a budget will help you save money while still having enough for the essentials.

Tip #3: Shop Savvy
Taking a trip to the store is a dangerous activity; financially, that is. There are hundreds of options and sales, not to mention the pushy salespeople. To stay safe, shop savvy. Know exactly what you need to buy before you even enter the store, and how much you can spend.

Paying with cash is a great way to keep from going over-budget. Swiping a credit card is easy—sometimes too easy. It is easier to spend less when shopping with tangible money.

Be careful about the 5-buck-or-less temptations; those little buys add up quicker than you think. Finally, avoid impulse buys by making a 30-day waitlist. Put random finds and wants on the list. If in a month you still want something, chances are it will really add to your life.

Tip #4: Invest Early
Saving throughout college is the smart thing to do; automate your savings whenever possible. Leaving it in a bank or taped to the back of the toilet, however, isn’t always the best choice. If you’re not swimming in student debt or fishing coins from public fountains, it’s a good idea to start investing.

Before you jump in and make rash decisions, read up. Use the library and find out what will work best for you.

Whatever path you choose, start small. Diversify your investments, and plan on a regular schedule. By investing early, you garner one of the greatest advantages: time. Even if your investments are small, they will grow with time.

How Much Money Should You Give Your Children as an Inheritance?

“Part of the reason for believing that my wealth should be given back to society, and not, in any substantial percentage, be passed on to my children, is that I don’t think it would be good for them. They really need to get out and work and contribute to society. I think that’s an important element of a fulfilling life.” –Bill Gates, richest person in the world.1

Bill Gates touches on a defining question with which many parents struggle: How do we provide financial security for our children while ensuring they will achieve it on their own? How do we ensure a financial inheritance will help and not hinder their life’s journey? Too many times we see the rising generation become entitled and trapped by the very assets that are supposed to give them freedom. One unfortunate fact is that 70 percent of “rich” families lose their wealth by the 2nd generation and 90 percent by the 3rd generation.2

This same fact applies to most families; most assets that are accumulated by the 1st generation are squandered by the 3rd generation.

So, what can be done to pass on assets to children successfully and how much should you give?

Communicate with your children
The number one rule is communicate, communicate, communicate. The “we’re not going to talk about it” mentality often breeds mistrust and misinformation. If you don’t involve your children in the process, you are robbing them of financial training as well as ownership. You need your children to be involved in the process so that it becomes their future and not just what mom and dad “want.” That being said, financial discussions can be a very touchy subject and each family dynamic is unique. As you start into the process, remind everyone to work to keep the process open and honest.

Define a purpose
“If you don’t know where you are going, any road will take you there.”3 Successful families don’t just pass on assets, they pass on their legacy. Together, with your children, you should define the meaning and purpose of your money. Often this takes the shape of family stories that share values. These values direct how the money is used to benefit the family and society. Based on this you can then take some time to translate your values and legacy into goals.

Define an amount
When you have goals established, then you can assign monetary values, which will help determine the appropriate amount to pass on as an inheritance. For example, if you value the freedom to give back to the community, you could establish a base level of income for your children that will give them the freedom to pursue careers that may not be very lucrative, but have a high impact on the community. Other examples can be funds for education, a down payment on a primary residence, a family cabin to promote family togetherness, a medical emergency fund, a business opportunity fund, or a security fund.

The intent would be to provide a measure of freedom without dramatically changing the child’s lifestyle. Any amount that goes beyond providing a measure of freedom is discretionary and is not needed. Excess money can also lead to a shadow side of freedom – dependence or freedom without self-discipline.

There is a large difference between passing on assets and passing on a legacy. If you involve your children in the process and base your inheritance decisions on a purpose, you can leave the right amount of money to your children while creating a rewarding experience for both.

  1. http://www.forbes.com/sites/luisakroll/2016/03/01/forbes-2016-worlds-billionaires-meet-the-richest-people-on-the-planet/#71fac38041cb
  2. http://time.com/money/3925308/rich-families-lose-wealth/
  3. Alice in Wonderland

Smedley Financial and its employees do not provide legal advice. It is important to coordinate with your legal advisor regarding your situation.

Protect Yourself from Financial Avalanches

All too often you hear the unfortunate story of a backcountry skier, snowboarder, or snowmobile rider that was killed in an avalanche. The lucky ones are buried, but quickly rescued. They report the harrowing tumble down the mountain, the overwhelming weight of the snow, and the feeling of utter helplessness.

We have seen too many people get caught in financial avalanches that have the same feeling of fear, heavy weight, and hopelessness. What can you learn from their experiences that may help you protect yourself from a financial avalanche?

avalanche

1) Chart your course: After a big storm, backcountry adventurists will feel the urge to “shred” the powder. However, excitement may open the door to danger if one heads out without doing the homework or creating a plan. You need to understand what risks exist and then chart a course that will keep you away from potentially hazardous slopes. Investors that put all of their assets in one “hot” area risk being buried. We have seen retirement dreams destroyed. To help protect your assets, you can employ a certified professional guide. While they can’t guarantee that there won’t be avalanches, they can help guide you out of danger’s path.

2) Make course corrections: Any skier knows that you rarely take the exact line down the mountain that you envisioned. That is due to obstacles, changes in terrain, or skier error. Your financial plan needs to have a balanced approach that can still help get you where you need to go despite the minor variations in your path.

3) Take the right amount of risk and stick with it: Investors that pull out at the bottom and never reinvest are like skiers that decide to ski down the mountain and then hike back up because the ski lift is too risky. With the current environment, some investors feel nervous and look for investments that don’t have any risk. While this may be a good approach for some of your assets, it is rarely a good approach for all of your assets. Make sure that before you get into a new investment, you understand all of the risks. Be cautious with investments that lock your money up for 7-10 years.

If you feel like you have already been buried by an avalanche, there is still hope. You have friends that can help dig you out and get you back on track.

Learn from the experiences of others and don’t become the victim of a financial avalanche.

Americans Are Taking Control of Their Money

Do you remember what America was like in 2006? If we could give the year a financial theme, I would label it, “Borrow and Spend!” Buying a home was easy; no verification of employment and no down payment were necessary. An interest-only loan could be obtained without any reasonable expectation of one’s ability to repay the loan.

As a matter of fact, you could borrow up to one-hundred percent of a home’s value, skip a month’s payment, and even cash out any value that had come from the rising price of the home. Leverage was the hot financial fad! Many Americans borrowed as much as they could and bought whatever they wanted!

money

What a difference ten years can make. Contrast 2006 with 2016; today people are taking control of their financial situations, putting themselves in the driver’s seat, and keeping their own hands on the steering wheel. Financial responsibility is much more prevalent.

Disposable income —the money we have left to spend after taxes have been paid—has increased at an average rate of just less than one percent per year over the past ten years. So income is up a little. This makes the fact that personal saving is up very impressive. We have seen the personal savings rate increase from 3 percent at the end of 2005 to 5.5 percent at the end of 2015.

This significant improvement demonstrates a shift for Americans towards greater financial strength. Here are some of the positive outcomes.Americans saving

Reduction in personal debt
Still smarting from the financial pinch of the last recession, cash flow is now king. For many of us the perception of acceptable levels of debt has changed significantly. Debt is financial fragility, which is why Americans again recognize the value of getting out of debt as quickly as possible. Many have taken advantage of low-interest rates and refinanced to shorter-term loans. Paying off short-term loans such as car loans and signature loans is now a priority, and the use of credit card debt has reduced significantly.

Spending less
Knowing what we should do and putting it into practice can be challenging. This is especially true when it comes to living within your means. However, it is possible and it is powerful. No other financial habit is more important!

We have had the opportunity to meet with many people that have adopted the philosophy of a simpler lifestyle. This allows them to enjoy what they have without the pressure to get more “stuff” and then live with the financial burden. Managing spending also impacts our future lifestyle. If we spend everything today…what will we live on in retirement?

Increased accessible savings
After experiencing financial instability, many people have gained a witness of the need for liquidity. Access to emergency money to cover needs for 3 to 6 months has been widely recommended for decades, but it has gained new favor in the last 10 years. The wisdom of this applies beyond those still working. Retirees are also paying attention to liquid savings to make sure they can cover the unexpected emergencies that will surely come.

Focus on planning for the future
A shift has taken place in young people as well. They are saving for their futures at the beginning of their careers. Company-sponsored retirement plans such as 401(k) or 403(b), as well as individual IRA or Roth IRA, are now common to this young generation and they are off to a strong start.

Financial Health

Those who see retirement on the horizon have a new goal. They want to maintain a comfortable lifestyle throughout their retirement years. With fewer pension plans providing retirement income, the burden to provide income during retirement has been shifted to them. Many have hit the ceiling on contributing to their retirement plans and are using additional savings to help them reach their goals.

It is clear that over time all things can change; the market, our spending and savings habits, even our perception of what’s important financially. We have learned many valuable lessons and have made significant strides to improve our financial situations. The next ten years will undoubtedly bring more changes; some will be good and some will be bad. Remember to prepare when times are good and don’t fall prey to the next financial fad. Keep in mind that you are in the driver’s seat.