Purchasing a New Car?

By | 2018, Money Moxie, Newsletter | No Comments

Purchasing a new car can be a harrowing experience. So much has changed over the years. Remember when the average term for a car loan was three years? Rising prices have pushed lenders to draw auto loans out to 7 and even 8 years. Is this a good thing or a bad thing?

Think back to your beginning finance classes where you learned the difference between appreciating assets and depreciating assets. With a few exceptions, cars fall squarely into the depreciating asset side of the ledger. If a loan is stretched out over a longer period and the car is dropping in value, it is not hard to end up on the wrong side of this equation – owing more than the car is worth.

Sometimes the purchase of a vehicle is driven – pun intended – by wanting something rather than by applying logic to a need. You can avoid a costly situation by doing some homework before you make a purchase. Here are some things to consider before your next purchase.

(1) How much can you afford monthly?
This should be a starting point. Take this payment and find out how much you can afford to spend with a 4-year or 5-year loan. If you can afford a $325 payment, you should look for a car around $17,500. This is based on a 5-year loan at 3.99% APR. Most banks and credit unions offer online calculators to help estimate monthly payments. Don’t forget about the extra costs: sales tax, licensing, and insurance.

(2) Should you buy new or used?
It doesn’t take long for the excitement and new car smell to wear off. Buying used is often a better value and prevents you from owing more than the car is worth.

Most new cars have a high level of depreciation in the first 12 to 24 months after purchase, some see a drop of 30 percent or more. Others will lose that amount over three years. Even if you plan to hold onto your car for a decade, you will come out ahead with a little research. And keep in mind, a vehicle that depreciates quickly in the first couple years may be a poor choice for a new car, but worth considering if you are looking to buy a used car.

(3) How is the car rated?
Consumer Reports offers a wealth of research-based information on new and used vehicles. The focus is on safety, reliability, and resale value. You can sign up online to use the service and it’s well worth the price, or find similar information for free on the website of another trusted source.

Treat yourself well financially. Before hitting the car lot, know what you are looking for and how much you can afford. Make your car-buying experience less stressful and sidestep remorse when the deal is done.

Tags: , ,

Forge a New & Powerful Financial Paradigm

By | 2017, Executive Message, Money Moxie | No Comments

Dear Friends and Financial Partners!

How can you improve your savings and investing before and during your retirement? Here are some nifty (some might say awesome) tips to immediately change your personal money paradigm.

Change Your Money Mind-set: Chris Reining, who lives in Madison, Wisconsin, became a millionaire at age 35 by doing one thing differently. Chris started working to save and invest, rather than working to spend. By going through a self-imposed paradigm shift, your life can also transform from a working-to-spend environment to a savings-and-investing world. The outcome speaks for itself. This is one powerful idea.

Get Professional Financial Help: Ours, of course. When you are accumulating assets in your 401(k) or 403(b), you are in an automatic investment mode. If you don’t know what the sequence-of-returns risk is or how dollar-cost averaging works against you during your withdrawal years, you are already behind and need our help. Social Security has over 2,700 rules and hundreds of exceptions to these rules. Medicare is filled with land mines. Distributing assets during the decumulation phase is exponentially more complex than adding assets.

Take Charge of Your Emotions: Don’t let your emotions take charge and dictate your actions. Specifically, when the stock market is dropping or has dropped, don’t lock in your losses! Remember: Stock market drops are temporary. Locking in losses is permanent. Locking in losses by selling at or near the bottom of a market may be a mistake you and your loved ones will pay for the rest of your lives.

Ignore the Media: Call us. We know your specific financial goals. We manage money and segment your accounts by time to avoid the sequence-of-returns risk. Even when the media is all doom and gloom, there’s a good chance your accounts will be doing just fine with respect to your own financial goals. “The Sky is Falling” mentality illustrated by Henny Penny, more commonly known in the U.S. as Chicken Little, may cause you to want to lock in your losses. Don’t do it. Even well-meaning friends and family members can push you away from financial goals.

Remember: Contrary to many, investing is not about beating the market. Financial planning and investment management are about meeting your goals, including having a sustainable income stream during retirement. At Smedley we strive to help you forge a powerful, yet personal financial paradigm. As always, we are on your side.

Bullish Best Wishes,

Roger M. Smedley, CFP®

Tags: , , , ,

Financially Empowering Your Adult Children

By | 2016, Money Moxie, Newsletter | No Comments

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

Tags: , ,

The Family Bank

By | 2016, Money Moxie, Newsletter | No Comments

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.

Tags: , , , , ,

Control is the Operative Word!

By | 2016, Executive Message, Money Moxie | No Comments

Hello Valued Financial Partners and Friends,

Being in control of your own finances is one of the great blessings of living in America. But to make this a reality—and not just a dream—ultimately depends on you.

In life there are things you can control. A physician once explained, “When you are overweight, you can do something about it. Losing weight will enable you to discontinue most, if not all, of your prescriptions. You will have increased energy, greater mobility, and lower medical bills. You will live longer to see your grandchildren grow up. All of the benefits are good. There is no downside risk.”

Continuing, the doctor said, “By contrast, a person with a fatal disease has little or no control over his or her circumstances. There is nothing he or she can do about it. But you can do something, in fact everything, about weight loss.” Wow! Talk about a tipping point.

Again, quoting the physician, “While you may think your diet is determined by major decisions, it is actually made of hundreds of small decisions, basically your everyday decisions.”

Gaining control of your life, whether it is diet, time, or money gives you power! Getting in control of those things you can control is empowering!

For example, consider being free of debt. Being free of debt has at least three tangible benefits. You will have more money for your future days, you will have more money to spend, and you will have more money to give. All of the benefits are good. There is no downside risk.

Being in control of your retirement is crucial. You want your money to last as long as you do! (That, of course, includes your spouse as well.) What is your plan for living longer? Who will help take care of you?

Many vital decisions await you. Decisions about Social Security benefits, pension plan options, 401(k) plans versus IRA, health insurance, life insurance, long-term care insurance, and so on…

We can help you. You don’t have to go it alone. Call us. Your financial success is our passion!

Bullish Best Wishes,

Roger M. Smedley, CFP®

Tags: , , ,

Make 2016 Pay off Big!

By | 2016, Newsletter | No Comments

Make 2016 Pay off Big

Social Security – Beginning April 30, 2016, the “File and Suspend” and “lump sum payment of suspended benefits” will no longer be available. If you are married, age 66 or older, and have not started taking Social Security, now may be the time to talk about maximizing your benefits before time runs out.

Currently a filer who is at or past full retirement age can file for individual benefits but suspend receiving them, allowing a spouse or dependent to collect based on the filer’s record. In doing this, the filer can capture the delayed benefit increases of 8 percent each year that benefits are delayed, beginning at full retirement age and available up to age 70.

After April 30, 2016, in order for a spouse or dependent to collect benefits based on the filer’s record, the filer must begin to collect his or her own benefits, thus forgoing the delay benefit increases. Furthermore, filers who have suspended benefits will no longer have the option to request a lump-sum payment of all suspended benefits. This strategy can be complex. We suggest that you start the process immediately to take advantage of this opportunity before time runs out.

Make up for lost time – Boost your retirement contributions. Living comfortably in retirement is largely determined by what you are willing to save today. Make the years before you retire really count by increasing your 401(k) or other retirement account contributions. This chart to the right illustrates the difference that setting aside 6, 10, or 15 percent of income can make. Even better, maximize your contributions, and make a significant difference.

The unseen result is what these contributions can do to supplement income at retirement. Using a 4 percent distribution rate, the difference in this illustration is $1,120 each month.

Decide today to make living comfortably in retirement a priority.

big in 2016 graph

Financial diary – This is not a typical diary. Keeping track of your spending goals and checking in on your finances regularly will keep you focused on your real financial goals.

Use the diary to list items you want or need and keep track of spending, investing, and savings. This will help you prioritize your spending. The result–focused spending and saving. Monitoring your diary will give you the emotional boost to keep you on track. When you see that you’ve accomplished a goal, you feel satisfied with your financial decisions. If you see that you are getting off track, this will be the silent kick to get you back on track.

Keeping a financial diary will help prevent emotional spending–a compulsion to buy something right now. Retailers are excellent at getting us to buy things we didn’t know we needed by simply placing an item strategically in view and setting the mood with a little shopping music. Keeping track of your spending can help you outsmart the retailers.

Looking at the financial diary weekly, even if you think nothing has changed, can help keep you on track and out of trouble.

Tags: , , , ,

Indexing: Best Thing Since Sliced Bread?

By | 2015, Money Moxie, Newsletter | No Comments

There has been a lot of buzz lately about indexing, and for good reason. Statistics show that many actively managed investments don’t beat their benchmarks.1 So, should we all invest solely in indexes? To answer this question, let’s look under the hood to get a deeper understanding.

Let’s say that the U.S. economy is like an engine made up of 500 parts. Each part is important and together they create motion, either forwards or backwards.

The S&P 500 is most widely regarded as the engine of the of the U.S. economy. This engine is made up of 500 stocks like GE, IBM, Apple, and Chevron. If most of these stocks are heading up, the economy is moving forward. The converse is also true.

For most people it would be too complicated to go out and buy 500 parts and build an engine from scratch. We go to a dealership to buy a whole engine already assembled.


The investment challenge is that buying all 500 stocks in the exact quantity of the index is impractical for most and one cannot buy an index directly. An index investment can assemble one portfolio that resembles the 500 parts of the index.

When you buy an index fund you usually get several important benefits such as clear goals, diversification, and reasonable fees.

The objective and implementation should be clear. One does not have to spend hours researching prospectuses to determine exactly what is being held.

When buying an engine, one gets the parts. This diversification reduces your risk because if one stock drops another may do better. With diversification there is a better chance of making money over long periods of time.

Passive investing requires little tinkering under the hood. This helps keep fees reasonable.

Like any investment there are drawbacks: risk, investor behavior, and inefficient markets.

Index investments behave almost exactly like their indexes. This seems so simple that it shouldn’t need mentioning. However, many people only look at the potential return without contemplating the risk.

A good illustration is the “Great Recession” when the S&P 500 went down by 57 percent from October 2007 to March 2009. People indexing only in the S&P 500 lost over half of their 401(k) and couldn’t retire as planned. This greatly impacted people planning to retire who were taking too much risk.

Research shows that individual stock investors have significantly underperformed the S&P 500.2 This is mostly due to investors buying and selling at the wrong time. Just holding an index investment does little to solve this problem and accomplish your goals.

Indexing works best where markets and information are efficient. However, many investors believe that when searching for worthwhile opportunities in other places where information is scarce, it may be worth it to hire an expert to gather more information.

Indexing has become popular and new indexes are introduced all of the time. Not only can you find indexes tracking “the market” but also segments of the market like tech stocks, international markets, and even commodities like oil.

The success of indexing might also be its downfall. “Investing theories run in cycles. A success becomes a fad and a fad becomes a failure. Smart people bet against fads.”3

One must ever be on the watch to ensure they aren’t just following a fad, but that they are using a strong investment strategy built for the current market environment and their own risk tolerance.

What do you do if your engine isn’t working perfectly or you want some improvements? You can either do it yourself or go to a mechanic. In the investing world, the mechanic is an active manager. That active manager is going to replace the parts he/she thinks are hindering performance with other parts designed to boost performance.

Smedley Financial specializes in designing efficient portfolios for the current market environment. We don’t just build engines, we build cars. We typically use indexing to be the engine of a portfolio but then we use other investments to build the remainder of the car.

If you would like to know if your engine is tuned correctly and your car is ready for the road ahead, please contact us for a free review.


  1. “The Case for Index-Fund Investing,” Vanguard, March 2015. https://personal.vanguard.com/pdf/s296.pdf
  2. Dalbar Study
  3. “Is Vanguard Too Successful?” Forbes, January 21, 2015.
Tags: , , , ,

Fear Leads to 3 Costly Mistakes

By | 2014, Money Moxie, Newsletter | No Comments

To hear bad news, all you have to do is turn on the TV. Every other day another story appears about how we are in a bubble and stocks are going to crash, especially if you listen to the eternal pessimists. On the flip side if you listen to the eternal optimists, stocks have a lot of room to run. So, to which side should you listen?

You can usually find opinions at both extremes. The truth, however, usually falls in the middle. So, the next time you are ready to make a knee jerk reaction to some bad news, think through these mistakes to make sure you are making the right decision.

Trying to time the market and go into cash – It’s hard not to react to bad news because it is in our emotional makeup to protect ourselves. The next time you hear a pundit or a co-worker saying there is a bubble and stocks are headed down, try not to jump on that emotional roller coaster.

Just remember, “When you sell, you have to be right twice.”1 Not only do you have to time it right when you get out, you also have to time it right when you get back in. That leads to the next mistake.

Holding on to cash and not reinvesting – If you have sold some investments into cash, it is hard to figure out when to reinvest. You have heard the adage, “Buy low, sell high,” but implementing it is very hard to do.
Mark Yusko said, “Investing is the only business I know that when things go on sale, people run out of the store.”2

Don’t just sit on cash that is earning hardly anything. Look at market volatility as an opportunity and redeploy your cash into investments with at least a little growth potential.

Short-term thinking – The most common mistake people make is to change their entire portfolio structure based on what is happening right now.

One example is a retiree moving all of his investments into cash because of a conflict on the other side of the world. That is like boarding up your house to protect against a hurricane when the forecast is for an afternoon thunderstorm.

A properly designed investment plan should be able to weather the storms on the horizon. Don’t short circuit your plan by making a knee jerk reaction to the news of the day. Make sure that your investment plan is driven by your goals and values, and stick with it.


1. Fearing a bubble can lead to 5 costly mistakes, CNBC 11/10/14. http://finance.yahoo.com/news/fearing-bubble-lead-5-costly-140000840.html
2. http://mebfaber.com/2011/03/12/when-things-go-on-sale-people-run-out-of-the-store/#sthash.3bJmQucQ.dpuf

Tags: , , , , ,

What’s Your Happiness Index?

By | 2014, Money Moxie, Newsletter | No Comments

We have all heard the adage “Keeping up with the Joneses.” For many, this adage reflects a perception of happiness – seeing what others have and believing it creates an abundance of happiness in their lives. In reality, the desire to have more often results in less satisfaction.

When asked, most people would say if they had $_______ more (you can fill in the blank), they would be better off, financially speaking. It’s hard for most Americans to believe someone earning a handsome six figure income, say $400,000, can feel broke. But it happens.

This “getting ahead” mentality occurs at all income levels and generally has the same effect. As our income increases, even slightly, we think: “How can I spend this additional money?” More often than not, the answer is a purchase. Maybe it’s upsizing your home, moving to a better neighborhood, getting a new car, or buying a recreational toy. There is no limit to the human desire to have more.

We’d like to introduce a new idea. Perhaps getting ahead doesn’t mean buying more stuff. After all, what exactly are we getting ahead of? Contentment and happiness come when we are comfortable living within our means.


Financial Freedom
Debt does not create freedom. The treadmill of borrowing more money to buy more stuff gets tiresome and stressful. We become so focused on finding a way to pay for our lifestyle we seldom really live in and enjoy the present. Freedom comes from having enough discretionary income to cover the unexpected curve balls life can throw your way. Discretionary income provides the flexibility to slow down and enjoy the life we are living and the lifestyle we are striving to create.
Contentment Creates Happiness
This in no way implies that we shouldn’t strive to improve our lives and better our circumstances. The point we are trying to make is that using someone else’s lifestyle as a measuring stick for our personal happiness generally has the opposite effect. If we never feel we measure up financially, we’re going to be hard pressed to feel happy or content. Setting realistic expectations and balancing wants and needs is a starting point.

From there we must break down our income to first cover non-discretionary needs. This would be a roof over head, food on the table, electricity, etc. Then we prioritize wants and determine how to use current resources to cover these items. At the end, there should be discretionary money that is not appointed to any specific goal, other than creating excess cash – savings.

The Happiness Index
Balancing our wants with the ability to pay for them is a challenge. There have to be trade-offs. Buying the newest high-end luxury car may result in a high level of debt. On the other hand, a beat up jalopy with high miles may not last long. The idea is to purchase a vehicle that meets your needs and that you can reasonably afford. That way you feel good about the purchase and still have some cash flow flexibility. This decision making process is your happiness index.

Each time you spend a large amount of money or commit monthly cash flow to an ongoing expense, ask yourself, “How will this financial transaction impact my happiness?” Applying this technique will help set you on a positive financial course. In the words of author Mitch Anthony: “Be content with what you have right now. If you can’t enjoy it now, you won’t enjoy something
better later.”

Tags: , , , , ,

3 Reasons to Run with the Bulls

By | 2014, Money Moxie, Viewpoint | No Comments

Our current bull market is more than five years old. Since hitting a new high on March 28, 2013, the S&P 500 has continued to reach 67 more records—averaging almost one each week. Is this market too strong to continue or is it too powerful to end now?

Herbert Stein famously said, “If something cannot go on forever, it will stop.” This undisputable fact is profound in its application to life and investing. In other words, planning for growth over a lifetime is reasonable, but a new high every week is an unrealistic expectation.

On March 28, 2013, the S&P 500 stock index reached a new, record breaking high. I wrote about this event in the following Money Moxie article, “Patience is a Rewarding Virtue.” My conclusion then as it is now was to continue to hold on. Making money is what stock ownership is all about. I also pointed out that “The average return following a new high is positive for 1, 2, 3, 6, and even 12 months following the high.” Fortunately for investors that forecast was correct. In the 12 months following that new high the S&P 500 made over 18 percent.

Bulls and Bear

Don’t Fear a Correction
This is an unusually strong time to be investing in U.S. stocks and it will not last forever. The S&P 500 averages one 10 percent correction each year and a few 5 percent drops. This is all it takes to spook some investors, causing them to miss out on the growth that follows.

While short-term events can be shocking, long-term returns are predictable. Investing in a diversified portfolio for long periods of time, such as 10 or 20 years, almost always yields positive results. Whatever happens, hang in there. Once we accept the fact that corrections are a normal part of stock investing we will begin to see them as opportunities to invest.

Indicators Look Good
Bear markets are typically defined as a drop of 20 percent or greater. These large drops are extremely difficult to predict. (Those who do are like broken clocks-correct only twice a day.) However, bear markets have some common threads.

1. The yield curve is the difference between long-term and short-term interest rates. It has turned negative around nearly every bear market in the last 50 years, but it is extremely positive right now.

2. Energy prices matter more than any other price in the world. Oil use has an impact almost ten times greater on the economy than any other commodity. So it is no surprise that oil prices have spiked around the end of bull markets in the last 40 years. (1987 was the only exception!) Right now, oil prices look relatively stable and thanks to growing domestic production there is reason to think it will continue.

3. Consumer spending represents 70 percent of the U.S. economy. On average, Americans are spending nearly everything they make, so we cannot expect much more from them. Improvement will come as the number of unemployed workers drops and as employers raise wages. While watching for increases has been like watching paint dry, it is happening. Momentum is positive in the jobs front.

New market highs come for a reason. The economy is continuing to improve. The most important indicators are pointing in the positive direction. The greatest warning sign in stocks is that returns have perhaps been too good. That alone is only enough fuel for a small correction, not a major bear market. When one of these corrections comes we should try to see it as an opportunity. This is an incredible time to be an investor.

*Research by SFS. Data is from the Federal Reserve Bank of St. Louis. Investing involves risk, including potential loss of principal. The S&P 500 index is often considered to represent the U.S. market. One cannot invest directly in an index. Past performance does not guarantee future results. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or investment plan.

Tags: , , , , ,