Tag

Sharla J Jessop CFP

Who Do You Trust?

By | 2019, Money Moxie, Newsletter | No Comments

We like to think of our families, particularly our children, as centered individuals who understand the value of maintaining important family relationships. If you don’t think your family fits into this blissful picture, don’t take it to heart. Family dynamics can be challenging, and relationships can be fragile. This is especially true when there are difficult circumstances.

It’s not uncommon to have family members struggling with drug dependency, divorce, mental health, poor spending habits, or lack of financial independence. The list is inexhaustible. Sometimes there are family members who cannot get along. However, rather than sidestepping these sensitive issues, they should be addressed.

These emotionally consuming issues can become roadblocks when it comes to designing your estate plan. So much so that many take the position, “I’m not going to worry about it. I’ll let my kids handle it when I’m gone.” Unfortunately, rather than bringing families together during times of crisis, this approach can have the opposite effect. It can pit one family member against another.

It is common for families to name one or two of their children to act as trustee or co-trustees and personal representatives. This works well in families where children get along, there are no special circumstances, and your estate is straightforward. In these situations, you may feel confident your children can handle your estate the way you intend.

In our visits with clients, we often hear that they don’t want to burden their children. However, making them trustees when there are difficult circumstances may do just that–create a burden. Luckily, the situation can be remedied by using an independent trustee when designing your family trust. Upon your death, as trustee, they handle all distributions from the trust and assist in the sale of assets when needed. Their responsibility is to handle your estate the way you want. They deal with your family in a kind and understanding way, but they are also diplomatic. They can make hard decisions, something that may be hard for a family member who wants to take care of others or could be easily manipulated.

Avoiding conflicts of interest is critical when it comes to finding an outside trustee. You want things handled your way, not the bank or brokerage firm’s way. When researching an outside trustee, we recommend finding one that is independent. This means he or she is not affiliated with a large company.

Let us help you maintain healthy family relationships. If you think you may need the service of an independent trustee, give us a call. We can share our research and advise you on a trustee that may work well with your family.

Tags: , , , , , ,

Sharing Your Financial Stories With The Next Generation

By | 2019, Money Moxie, Newsletter | No Comments

We have the delightful opportunity to work with multi-generation clients. The difference in each generation surrounding what they value, how they view money, and where they place importance on things versus experiences is fascinating. Each generation has a different outlook on life and their opinions surrounding happiness.

In our work with multi-generations, we find it exciting to see how youth gain a different perspective when they hear what their grandparents or parents did to earn money when they were young. It provides them with a sense of understanding and appreciation for the sacrifices of older generations. I believe it also deepens the relations between the generations. I certainly value the stories I have heard about the financial challenges, successes, and failures of my parents and grandparents.

We are preparing for a youth financial summer camp next year. It will provide young people the opportunity to learn about money while they are still forming ideas and habits they can take into adulthood. One of our presentations will focus on ways they can make money through creative summer jobs. For this purpose, we are compiling information to share with the next generation and would love to learn about your experience as a youth. In the next month, we will be sending an email asking a few basic questions such as:

As a teenager, what did you do for summer work?
How much did you earn doing that job?
How many hours did you work each day?
What time did you go to work?
How did you get to and from work (walk, bus, parent, bike)?
What did you love about that job?
What valuable lessons did you learn?

Please help us by answering the questions. Your response will be anonymous unless you wish to be recognized. Thank you in advance for helping us guide future generations to financial success! Thank you for your business and your friendship.

Tags: , , , , ,

Are you feeling anxious about the market?

By | 2019, Money Matters, Newsletter | No Comments

If your answer is yes, you are not alone. We are emotional creatures. When things get rocky, or we perceive they are rocky, we can make decisions that feel good at the time, but in the long run, are not in our best interest. Let me share an example you may relate too.

You have worked hard and saved diligently for years, and finally, you have reached your financial goal, be it: saving for retirement, building a nest egg for a future purchase, or another purpose altogether. You feel a sense of relief – I did it! Once you reach this target number, every emotion you have regarding the market going forward may be tied to that target number.

How do you feel when you see that number going down? For some, the feeling is panic! All we can think is, “It took me forever to get to this point and I cannot afford to lose anything.” This is an emotional response. You have abandoned future perspective and are focusing only on the here and now. We often see this response to market volatility when someone is getting close to retiring or has retired. Suddenly, our long-term perspective is tomorrow afternoon. We have completely discounted the value of market performance over time.

I realize you may not enjoy looking at charts but bear with me for just a minute. Look at the two charts below. How do you feel about the chart on the left? How do you feel about the chart on the right? Believe it or not, the chart on the left is merely a subsection, representing a 90-day period, from the chart on the right, which illustrates a 5-year period. The difference is when viewing volatility over a longer time period it feels more comfortable than it does when viewed in a short period of time.

It is so easy to adopt a myopic view when emotionally, we feel like we should flee to safety. What the two charts teach us is that volatility is subjective and can be controlled by how often we look at our account balance. Now, look at the next two charts showing the exact 5-year period. The chart of the left represents the market value at the end of each quarter. The chart the right represents the market value each day. My guess is you feel better about the smoother chart to the left.

Managing your emotions during times of increased market volatility is challenging but can be done. Here are a few tips to help you through the volatile times.

1) Try to review your account no more than quarterly.

2) When you hear concerning news in the media remember; their job is to sell headlines and stories not to give personalized investment advice to you.

3) If you are feeling concerned, reach out to us. That is why we are here.

We have information regarding your financial situation, your financial plan, your investments, and the markets. We will give you advice and perspective that will help you stay on track.

*The illustrations are for educational purposes and are not indicative of an actual investment return. The Standard and Poor’s 500 (S&P 500) index is often considered to represent the U.S. stock market. Investments cannot be made directly into an index. Historical performance does not guarantee future results.

Tags: , , , ,

Early Retirement: A Lifestyle Change

By | 2019, Money Moxie, Newsletter | No Comments

Retiring early has a whole new meaning for Financial Independence, Retire Early (FIRE) adopters. With a goal to retire from the 9 to 5 rat race, those willing to make sacrifices can transition to a new lifestyle as early as
age 35.

The idea behind FIRE is living a frugal lifestyle so that you can create financial independence. This means living on much less and saving 50% to 70% of your income for the future. At the same time, the money you live on is focused on paying off debt as quickly as possible. Frugal habits would include eating in, shopping at thrift stores, buying food and supplies on sale, and enjoying at-home entertainment. It’s not as easy as it sounds.

Truth be told, most FIREs have had high-paying careers or were entrepreneurs. Their high incomes allowed them to save a great deal of money and still live comfortably while preparing for an early retirement. Not easy for the average American worker earning $60,000 or someone who lives in an area with high cost of living.

FIRE adopters are not retiring in the traditional sense. They are merely focusing their time on things that they enjoy and making a difference in the world. The majority have created income by blogging, teaching, or keeping a part-time job that offers lifestyle flexibility and health insurance benefits.

You may think this sounds great. How do you get started? Before you jump on board, there are things to consider. Most of us get insurance through a group plan where some of the cost is paid by an employer. For most, leaving the workforce before age 65 (Medicare age) means finding insurance in the marketplace. This can be costly because you pick up the full tab.

Leaving a lucrative job early also means you are missing out on your peak earning years. As we immerse ourselves in a career, we gain knowledge and experience, making us more valuable to employers and increasing our income over time. FIRE’s take the employer out of the picture. Their value is based on what they can market and deliver.

Saving for the future is also a concern. Without continued contributions to retirement-type accounts, like 401(k), IRA, or Roth IRA, your future income and lifestyle can be at risk. Forfeiting an employer match or profit-sharing contribution means you will need to bump up saving for future needs.
This can all be overcome with good planning and meticulous monitoring.
If you think the FIRE idea is for you, here are ideas to get you started:

(1) Determine why you want to achieve Financial Independence and Retire Early. What does that look like once you reach the goal?

(2) Figure out where you stand now. What is your net worth (total assets minus liabilities)?

(3) Where is your money going? You need to track how you spend every dollar.

(4) What expenses can be cut to reach a 50 percent savings rate?

(5) Pay off high-cost debts first.

(6) Build an emergency fund – six months’ worth of net expenses – in case you get in a financial bind.

(7) Take full advantage of tax advantaged savings accounts: IRAs and Roth IRAs.

(8) Find a side job to bring in extra money that can help pay off debt and build savings.

(9) Get advice from a Smedley Advisor to help develop a plan and track your progress.

Tags: , , , ,

What Women Should Know About Social Security

By | 2019, Money Matters, Newsletter | No Comments

Retirement is on everyone’s radar. Whether you are preparing for a future date or beginning retirement now, you need to know where your money will come from once the paychecks stop rolling in.

One retirement income source that is very confusing is Social Security. It is fraught with complicated options. From understanding how your benefit is calculated to determining the best time to begin receiving your benefit, the process can be painful. I want you to understand the nuances so you can be informed about your options and better prepared to make critical decisions.

To begin, almost everyone reading this article is eligible to receive Social Security benefits in some form. However, eligibility for retirement benefits is based on several factors. If you have worked at least 10 years, you are eligible for benefits based on your own earnings. If you are now or have been married, you may qualify for benefits based on a spouse’s earnings. The challenge is knowing which benefit to claim and how to maximize your income.

Something many women are surprised to know is that Social Security retirement benefits may be available even if you never worked outside of your home. If you are now or have been married, you can claim a benefit based on your spouse’s earnings record. This is in addition to what your spouse or ex-spouse will receive. At your full retirement age (FRA), you can receive 50% of your spouse’s benefit at their FRA. For example, if your spouse’s benefit at FRA is $1,800, you would receive $900 monthly. A spousal benefit does not increase beyond FRA. 

If you are divorced and have not remarried, you may be entitled to a spousal benefit. To receive this benefit, you must have been married for at least 10 years. You are entitled to the benefit even if your ex-spouse remarries.

Timing of benefits has a lifelong impact, and you should have a well thought out plan before signing up. For instance, beginning your benefits at the earliest age possible, age 62, will lock you into a reduced benefit for the rest of your life. To receive your full benefit, you must wait until you reach full retirement age. Stop thinking age 65 (that’s for Medicare). When it comes to Social Security, FRA is somewhere between age 66 and 67 – based on the year you were born. But it gets better, for every year you wait beyond your FRA up to age 70, your benefit will increase by 8% – locked in for the rest of your life.

The following chart shows a monthly benefit of $1,800 taken at a full retirement age of 66, and how it would change if taken earlier or later. For example, if taken at age 62, the benefit would be reduced to $1,350, and if taken at age 70, the benefit would increase to $2,376. That’s significant! A $1,026 difference each month – $12,312 annually.

There can be additional downfalls when taking Social Security early. If you take Social Security benefits before your FRA and you continue to work, you may be penalized. If you are under FRA for the entire year, $1 of your benefit will be withheld for every $2 you earn over the annual earnings limit ($17,640 in 2019). The earnings limit is higher in the year you reach FRA ($46,920 in 2019). The bottom line – you may not be getting as much as you think by taking your benefit early.

Understanding Social Security can be difficult and making the wrong decision can be costly. Don’t go it alone. Let us help you analyze your options so you can make the best possible choice regarding your benefit and future income.

If you have not started your Social Security benefit and are over age 55, watch for our Social Security seminar and webinar coming in the fall

Tags: , , , ,

A New Housing Paradigm

By | 2019, Money Moxie, Newsletter | No Comments

Since the housing crisis and recession of 2008, the American dream of homeownership has changed. Younger generations are weighing the benefits of owning their own home with the freedom that renting provides–flexibility to move for work and to avoid responsibilities and expenses that come with ownership. Plus, they are weighing the additional amenities that can be enjoyed from some rental communities: pool, fitness center, dog park, common use areas, etc.

Aging boomers are also considering changes. They are also interested in reducing responsibility, as well as downsizing their homes. Having someone care for the lawn and shovel the snow is enticing. Not to mention the fun of living among neighbors near their own ages.

5 things to consider before purchasing a home:

(1) Your monthly mortgage payment should not equal more than 28% of your gross monthly income. This includes principal, interest, taxes, and insurance.

(2) Avoid mortgage insurance. It does not benefit you. You can do this by making a down payment of 20 percent or more. If you can’t put down at least 20 percent, then once you have 20 percent equity, check on removing the mortgage insurance.

(3) Plan for extra expenses! If your home is new, this will include window coverings, appliances, and landscaping. If buying an existing home, plan on costs for updating and fixing known and unknown problems.

4) Keep the loan term as short as possible without financially boxing yourself in. A 15-year mortgage should have a lower rate than a 30-year mortgage. Always try paying extra principal each month.

(5) Keep money available for emergencies in a dedicated savings account. Using a credit card or a loan for emergencies will compound your problems.

5 things to know before downsizing:

(1) Ask yourself if your current home can be modified or updated to accommodate your needs as you age. You can always pay for someone to care for the yard.

(2) Increased demand for patio-style homes and planned living communities has driven up the prices. You may find that selling your large home to downsize may not be worth the price.

(3) Determine what you want. Some retirees want to be close to family or need a place to host family. Others are looking to get away or want an adult community.

(4) Understand the additional costs of Home Owners Association (HOA) fees that cover the services, upkeep, and common areas. Get a copy of the HOA contract and consider asking about its current financial condition.

(5) Protect your retirement. Avoid debt. Remember, using savings to purchase a retirement home may create future liquidity problems.

Tags: , , , , , , ,

Get in the Right Lane

By | 2019, Money Matters, Newsletter | No Comments

Missing a freeway exit can be extremely aggravating. Once missed, you are required to drive farther away from your destination. It can happen for many reasons; being in the wrong lane, missing an exit sign, or heavy traffic preventing you from getting over. Once you realize you have missed the exit, you immediately begin making corrections so you can exit at the next opportunity.

Financial success can be like the freeway. You may be headed in the right direction, but are you making the right decisions? Here are some behaviors that may keep you from reaching your financial destination:

  1. Spending more than your planned budget. One of the greatest concerns of retirees is running out of money. The goal of a financial plan is to make sure your money lasts as long as you do, even if you live to 100. If you are depleting your nest egg too quickly, you should change lanes. 

  2. Giving money to kids. When adult children are having financial troubles, giving them money may seem like the right thing to do. That is not the case. In most situations, it just prolongs the problem. If you are bailing out your adult children, you should change lanes.

  3. Paying for things you don’t use. This could be a gym membership, a storage unit to hold more stuff, or the RV and toys that rarely get used. Letting go of these things has financial and psychological benefits. You no longer worry that these items are going unused. You can rent an RV for a vacation if you want, and most of the stuff you are storing is of higher value to you than it may be to your kids. Ask them what they would like to have and get rid of the rest. It’s refreshing! If you are paying for things you don’t need, you should change lanes.

Look at your financial goals. Are you on target to reach your financial destination? If not, I challenge you to make a lane change – make the needed corrections and continue to move forward. Don’t let anything keep you from reaching your financial destination. Having a plan can keep you headed in the right direction and the right lane.

Tags: , , , ,

Women Face Unique Challenges. Good Decisions are Essential.

By | 2019, Executive Message, Money Matters, Newsletter | No Comments

This year marked the 4th anniversary of our Just for Women conference and the launch of Smedley Financial’s Just for Women community. Hooray!

We want to thank the women who have participated in our community. Together, we have created a meaningful experience that engages, empowers, and educates women of all ages and from all social and economic backgrounds.

Women face many unique challenges when it comes to financial security: longer life expectancies; the likelihood that they will be in the driver’s seat, financially speaking; reduced pension payouts and retirement account balances due to periods away from the workforce to raise children or care for an aging parent. This reality makes it even more important that they set precedence regarding finances. Women should become more educated, build financial confidence, and most importantly–make good financial decisions.

Good decision-making will have a more significant impact on financial success than skill and talent combined, regardless of your gender. Dalbar, an independent research firm, has confirmed this. Their 25 years of research has found that investors’ performance has suffered significantly due to poor decision-making. Decisions which have been emotionally based or made in the “heat of the moment” tend to end with poor results.

This issue recaps some of the highlights of our Just for Women conference. If you were not able to attend, please make it a priority to join us next year — mark your calendar for May 8, 2020. Hopefully, our women’s community will help ignite a financial passion in everyone who participates.

If you would like to receive our Just for Women – Money Matters email, send us a request at [email protected] Provide your name and email, and we’ll make sure you receive the next issue.

Tags: , , ,

Is Your Brain Risking Your Financial Success?

By | 2019, Newsletter | No Comments

The world is full of information, yet our brains are only capable of processing a certain amount. If we had to analyze every aspect of every situation or decision, we would never get anything done. In order to cope, our brains have created shortcuts to help us make sense of things. These cognitive shortcuts – known as heuristics – are rules of thumb or educated guesses. In many cases, being approximately right is good enough. However, there are times when these shortcuts are not good. Recognizing when they are creeping into our decision-making will help us determine if they are helpful or hurtful in our current situation. This is critical when it comes to your money.

Overconfidence

While confidence is good, overconfidence exaggerates our abilities and can cause us to underestimate the risk of being wrong. For example, you may pick a stock that is growing. If the stock price continues to go up, you conclude that you have a good strategy or a natural talent. However, when the stock plummets, you distance yourself from the truth, believing it was just bad luck. An overconfident person may even repeat the same mistake over and over again.

Framing

When we have already made up our minds, we place our existing perspective on all new information that comes our way. For example, expecting a drop in the stock market, you put a negative spin on any good news. People who frame eventually get a big surprise when they find out the cost of being wrong.

Anchoring

Every one of us has experiences that form our opinions. When we anchor ourselves to these opinions, we ignore anything that doesn’t fit our views. If you lost money investing in a recession, you might conclude that the stock market is too risky. Even when presented with a better perspective of its potential growth, you may still feel like there is too much risk.

Herding

Have you ever found yourself doing something you would not do on your own? Going along with what a larger group is doing, whether those actions are rational or not, even in the face of unfavorable outcomes is known as herding. You hear that investors are selling, so you sell, or you hear they are buying, so you buy more without considering how it impacts your financial plan.

Tags: , , , ,

Your Values Matter

By | 2019, Money Matters | No Comments

When it comes to money, your values matter, why? If what you value most and your goals are not in alignment, you will experience a state of financial and emotional conflict. Your ideals and your actions will not match up, making it difficult to reach your goals.

Here’s an example of a value and a goal that would be in alignment. If family is important to you, then you value time spent together and want to take care of them. Your goal would be to protect your family financially if something should happen to you. Your actions might be to provide money to cover debts, pay for children’s college, replace your income, and provide end of life care. You would make saving for emergencies and retirement a priority, so you are prepared to live a dignified retirement, you would have legal documents and beneficiary designation in good order to protect your loved ones.

There is no right or wrong answer when it comes to personal values. They can be anything from Family, to Independence, to Education. There is no prerequisite to what you value; it is the culmination of your life experiences, education, and beliefs. The trick is which values are most important.

What are your top 5 values? You may be able to name two or three right off. Then you may go into a stupor, wondering “What else do I value”? Sometimes it is not easy to identify our top 5; it takes time and thought. If you find yourself stumped let me know; I can help.

Your decisions and actions have the most significant impact when it comes to reaching your goals. They have more to do with your financial success than the market or the investments you choose.

That’s why your values matter!

Tags: , , , , , ,