Change that Will Do you Good

I am recently married and my wife and I have spent the past few days consolidating our households, realizing that we have 2 of everything in our kitchen, and trying to find the best way to fit two cars and six bikes into our garage. 

We’re also combining our bank accounts, updating our wills and changing the beneficiary information on our retirement accounts and life insurance policies.  The process was fairly simple, but only because we had copies of those statements and contact information for those companies.

Part of my role at LeConte is to help our clients get organized and stay organized.  We provide an online vault for clients to keep their information in a secure cloud format that they can access at any time. 

Just as I have updated my estate planning documents and beneficiary information, perhaps now is the time for you to do the same. 

  • When’s the last time you reviewed those designations on your life insurance policies?
  • Can you easily find the policy number and contact information?
  • Have you had a life event that would cause you to change those?
  • Do you have a will, and if so, when’s the last time you had it updated?

I would recommend creating a folder or online location to store all this information.  Tell your loved ones about it and show them that information. 

Waiting on hold, filling out forms for these changes isn’t how one would choose to spend their Wednesday afternoons, but the peace of mind that comes from planning and preparing for my wife and children easily outweighs that.

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5 Things to do before you turn 25 to Ruin Your Financial Life

Conveniences, efficiencies, and instant gratification. This is what our world is full of. When we want something, we usually expect to have it immediately. If we do not get it, we simply get annoyed.  

Renowned author, Stephen Covey titled a chapter “Begin with the End in Mind” in his book The 7 Habits of Highly Effective People. A simple concept, yet so hard to follow or implement for many. When we think about the end, that is the position we would like to have achieved or the goals we would like to attain, we tend to be too late. We give no time for our choice(s) or decision(s) to get off the ground, face objections, and allow ourselves time to adjust. 

Right now, I want you to create a mental picture your future self. The self that is at the end of your life. What do you like about that image?  

Good, bad, ugly, or indifferent; now is the time to think, prepare, and get started on how you are going to make that image a reality. 

Often, we read the thousands of thoughts or ideas that can make our life successful (however you define that), yet we often disregard the hurdles that can severely hinder or even ruin the opportunity to reach those successes.  

After much thought and after initially writing a list that stretched multiple pages, the following are the 5 things you should do to ruin your financial life by 25:

 

1. Refuse to accept responsibility  

We each have seen someone live a life that is overflowing with stress. Although stress is a normal part of life for everyone, it can be minimized. You ask how? I tell you, simple… by not accepting responsibility.   

If you do not have any responsibility you cannot be blamed, you will have no anxiety from expectations, and you can daily choose what to do! Sounds amazing right? 

Besides, mom, dad, or surely the grandparents will step in and take care of whatever you need. You have more important things to do anyway. 

And then you are 75 

You wake up and have a flashback. You get dressed, hop in your truck and clock in for an eight-hour day only to realize it is not a flashback, it is reality. I am not saying going to work at 75 years old is a bad thing, but when you are 75 you should have a choice. Therefore, it is so important to take responsibility for your choices and actions now. It is the very reason why it is important to ponder the choices you have made and revisit them to make changes when needed.  

Responsibility - the state or fact of having a duty to deal with something or of having control over someone.

- Oxford Dictionary

By definition you have a choiceto work or not workto spend your earnings or save some of them. The choice you make is the choice you live with.  

The results of your decision is not your parents’ fault. It is not your siblings’ fault. It is not your friends’ fault. The choice was yours, so the consequences are yours. Own it. If you don’t want to own the choice(s) you make, then continue to point fingers at everyone besides the one who made the choice(s) and put yourself on the fast track to ruining your financial future. Remember, the choices you make have consequences. 

I’ll post the rest of the list next week. Stay tuned... 

 

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Don’t Miss the Opportunity

I spent last night taking graduation pictures of my son and fellow graduating neighbors in our yard. It was great to be around a small group of people again, but it was much different than the hypothetical plans we had made a year ago before the coronavirus changed our lives. There were no large graduation parties, extravagant trips overseas or even the traditional graduation ceremonies everyone just takes for granted. 

It could easily seem that so much was taken away from us, but I think we got more out of it than we at first realized. For months, we had my now 18-year-old son and his two younger brothers in the house together with no place to go. We played UNO, Wiffle ball, basketball, Monopoly, watched movies, and started a nightly work-out program. I truly believe very little of that would have happened if not given the opportunity to slow down, stay at home, and focus time on what is really important.



At the same time, I was working from home during this pandemic and missed out on so many opportunities. I found myself tied to my makeshift office desk trying to help people with PPP loans and Stimulus checks, and I had a hard time pulling away for lunch or to end the day anywhere near the 5 o’clock whistle. That doesn’t even take into consideration the multiple projects that seemed destined to be completed with all of this “extra time”. Instead, what I have now is stacks of paint cans ready to transition bedrooms into new teenage oases. Where did the time go to complete these projects?

What I’ve come to realize is we didn’t get more time, but it was just different and other things consumed my attention. Today my son selected his college dorm room, so he will soon be out from underneath my roof. He will be making important decisions that impact the rest of his life. I have had 18 years with him, but how many opportunities did I miss to show him the right way or help him figure out how to make difficult decisions? I’ll still have opportunities to be an influence going forward, but we only get one shot at today. If this virus was good for anything, I hope it slowed us down enough to think about the important things in life and to take the opportunity to enjoy or accomplish those things we’ve been putting off.

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A Well Earned Holiday

If I took a quick poll, I bet most folks would label Memorial Day as the official start of Summer. People who have family members who died in combat have a different perspective because of their personal loss. It's hard to recapture the honorable origins of Memorial Day from it's historical roots. Maybe this year we will reflect on the voluntary loss of freedom in the wake of the COVID "pandemic." The toilet paper shortages are disappearing and the beaches are opening up, but before we get back to our normal "busyness", maybe we can dedicate a few minutes of our families' time to discuss freedom and what it costs. 



How were you impacted but the economic shutdown? What part did fear play in your mind and decisions? What was the financial cost to your family? Did the government help you (stimulus, small business loans, unemployment assistance)? Did the government hurt you (extended closures, bad decisions)?

What could you have done differently to be better prepared to navigate through COVID craziness? 

The Trial of Socrates offers interesting parallels to the current debate over the limits of our government in the face of a public health scare. The philosopher was associated with the Thirty Tyrants who were overthrown. Socrates was perceived to prefer Technocracy instead of majority rule. He espoused that political decisions should be made based on facts and data that only learned and capable leaders possessed. Only these leaders on Socrates view would be competent to make the best decisions for Athens citizens. Do the names Trump, Cuomo, Fauci and Brix come to mind? 

At the end of the trial, Socrates was faced with the option to flee Athens in exile or accept his death sentence. At 70 years old, he chose the latter and downed a glass of Hydroxychloroquine. Not really it was actually poison hemlock.

Socrates was credited with the phrase "The unexamined life is not worth living" in the writings of one of his young disciples named Plato. This is the takeaway for us today. We've all faced an exile of sorts in the mandated quarantine rules. What did we learn from it? Have you discovered an appreciation for something after it was taken away during quarantine? What are you thankful for? What is important to you?  

Before summer gets started and you bring the seersucker out of storage, take some time to ask yourself some questions. Discuss with your spouse and kids what they could live without if the past few moths became a permanent way of life. What should you leave in quarantine even after they end? Use the Memorial Day break to give thanks for the men and women who paid the ultimate price so that we have the freedom to contemplate the luxury of modern American life.



America is still the best place on the planet.
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Five Little Things

If you’re like me, you’ve reached the point during your time at home where you’ve cleaned out your closets, re-learned the rules to UNO and redefined how long something will stay edible in your freezer.  As you look for something to occupy your time in the coming weeks, here’s a list of five little things that will help your financial and mental health heading into the summer. 


1. Open your mail Walking to the mailbox each day may be a new part of your routine I would encourage you to take this time to read your investment statements, insurance documents and other financial information.   You may remember that you have a 401k from 2 jobs back or some Disney stock that your grandmother gave you.  Take this time to assess what accounts you have and where. You’re likely to find the need to consolidate some of those old accounts and get more organized. 

2. Update your beneficiaries.  Gather all your insurance policies, retirement accounts, even 529 college savings plans, and verify the beneficiaries on those.  They are easily accessible online or by calling the provider.  You may have gotten married or had another child.  Always a good time to update that information if it hasn’t been done in a while. 

3. Develop a monthly budget.  You’ve likely been home for going on 8 weeks now.  Take a glance at your credit card bills and bank accounts for March and April.  The Amazon charges and the grocery bills are likely higher, but what about your other spending?  This may give you some insight on what you spend money on and perhaps how you could save more. 

4. Keep an eye on your tax return.  Many things have changed in 2020 because of COVID-19.  Review last year’s tax return and educate yourself on new deductions, income changes and opportunities because of the pandemic. If you haven’t filed your 2019 return, develop a plan to get that done, and if you owe taxes, see goal number 3 above. 

5. Write down three things that you have enjoyed during this time alone.  It could be time with family, walking your dog, or cooking new food.  Write those things down on a notecard or post-it note and put it on your refrigerator or bathroom mirror.  Remember those positive experiences and think about implementing them into your life permanently going forward. 

The first four of these suggestions can have a significant impact on your financial health both now and in the future.   While the fifth task is personal, it too can transform the way you approach life and relationships with those you care about.    

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A Rookie’s First Bear Market

I have heard and read about bear markets, but I have never experienced one with ‘skin in the game’ until April. Everything I heard and most of what I read does not even scratch the surface of what I just experienced. Bear markets engulf investors in fear, loss, anxiety, panic, and regret. I experienced all these emotions.

 

Background: The Escalator Up

 

On March 9, 2019, the stock market passed the 10-year milestone from its 2009 lows. This bull withstood punches from all over the globe. A U.S. Federal Government credit rating downgrade, European sovereign debt crisis, U.S. – China trade war tensions, Brexit, and interest rate hikes to name a few. With bumps smoothed along the way with quantitative easing (QE), tax cuts, and the daily expressions of optimism from economists; most individuals began to think the longest bull market in history was invincible.

 

On February 12, 2020, the DJIA, the NASDAQ and the S&P 500 (all major stock indices) finished at record highs. (The NASDAQ and S&P 500 both reached subsequent highs on February 19th).

 

These highs were short lived.

 

Bear Market: The Elevator Down

 

In less than two weeks from the February 2020 peaks, major stock indices were in freefall. Bear markets, defined as a decline of at least 20%, occurred in the S&P 500 (16 days), DJIA (19 days) and NASDAQ (17 days). Since entering the bear market, each index dropped between 32-39% before bouncing.

 

In 2009, our country emerged from the Great Financial Crisis (GFC). Despite the accusations and finger pointing that occurred, markets declined, homes were lost, and many jobs disappeared. I personally do not recall the turmoil from the subprime lending crisis. I was insulated, sitting in a desk in ninth grade Math and English, and periodically escaping pranks from my football teammates. This put me at a slight disadvantage by not having a first-hand experience of facing the 2007-2009 bear market. Eleven years later, I am sitting behind a desk at LeConte Wealth Management. My position provides me an up close and personal experience of what truly occurs in a bear market.

As a rookie facing my first bear market, here are the top 5 things I learned:

1. The trusted adviser earns their keep, but it is quickly forgotten

 

“Where there is no guidance the people fall, but in abundance of counselors there is victory” Proverbs 11:14.

 

As the Good Book points us toward wise counsel, I believe this principal should flow over into every aspect of our lives. Throughout the past two and a half years of my professional career I have heard a lot. I’ve heard clients talked down from mortgaging their home to chase a “golden ticket”, I participated in meetings where we had to help clients understand the sacrifices that needed to be made to stay retired, and we’ve helped clients wrangle their emotions to avoid common investor behavioral mistakes – like chasing a hot market and selling when things underperform.

 

Human emotions are real, and they can swing to the extremes in a hurry. I was able to see the power of how a trusting relationship with an adviser can provide a practical approach to help individuals and families stay on the path toward their goals. Unfortunately, clients tend to quickly forget the value of a sensible approach that advisers provide in these situations.

 

I would encourage every investor to seek wise counsel, because as much as we think being sensible would be easy to do; I have seen otherwise.

 

 

2. "What do I care about the price of beef when I want milk from my cows”

 

This quote comes from Farmer Frank, who is one of LeConte’s first clients. His words were etched in my mind from LeConte partner, Hoy Grimm. His farming wisdom applies perfectly to our approach of Purpose-Built Planning. Simply put, this is a reminder to keep the main thing the main thing. If your investment goal is to reduce taxes; focus on that. If your investment goal is to grow your investment; focus on that. Do not expect growth from income investments and income from growth investments. Farmer Frank has helped me learn a valuable lesson by learning not to change your long-term investment strategy because a short-term price change captures your attention (a.k.a. triggers your emotions.)

 

 

3. Markets can stay irrational longer than you can stay liquid.

 

This February, valuations crept higher and earnings growth slowed, but money kept piling into stocks. It did not matter what your money was invested in. It was like throwing darts at a board covered with triple 20s. I sat in a 2019 client review and every asset class they were invested in was up. This is what their response was, “Why didn’t I have more money in the thing that made the most. “Without recognizing it, they were asking us why you did not buy (allocate to) more stocks even as prices became irrational.

 

Bull markets produce this euphoric state in many investors and it certainly did in me. The irrational decisions others made in the market prompted me to follow suit with my personal holdings. In hindsight, I knew what was occurring as we had discussions almost weekly at the office about it, but my emotions overtook my sensible thinking. In their wisdom, the partners at LeConte did not give me trading authority for our client’s accounts. So… the harm was limited to my relatively new Roth. From this lesson, I will take the value of patience and strive to abstain from the herd.

 

4. "Be fearful when others are greedy and greedy when others are fearful” - W. Buffett

 

Markets can stay irrational both ways, as they go up and as they go down. Following the herd either direction is a mistake. Warren Buffett is the embodiment of disciplined investor behavior. His words above are contrary to the thoughts and emotions investors feel when markets drop 30% plus from all-time highs. Bear markets typically occur when fear enters the market and large “emotional” sell offs begin over a longer period. Throughout a bear market, volatility tends to pick up, which presents more fluctuation than the average investor can stomach. In turn, this creates the opportunities. Investors with a “greedy when others are fearful” mindset think about putting excess cash to work and rebalancing into better positions that will help reach longer-term goals. I saw this firsthand as we asked clients for more investment cash when markets were down to pick up positions at a discount.

 

5a. Recency Bias is real. (Be disciplined in taking profits)

 

This may be one of the hardest lessons I had to learn. I remember a year ago investing in an exchange-traded fund that was up ~36% in less than 6 months. It was quite incredible. I remember thinking there was no way the investment would slow down – it had to keep growing (this was a product of recency bias). “If only it could get to 40%; that’s when I will take some profit,” I told myself. Over the next 6 months, I gave back every penny gained, including some of my principal. Looking back, my first mistake was not implementing a rebalancing strategy. This would have helped shelter me from my emotions, kept me disciplined and ultimately kept me from learning the hard way.

 

5b. Is it for savings or for investing? (Bonus)

 

This is a question that every investor should ask themselves before they ever put a dollar in a security. Why? Two words, time horizon. Time horizon is a quantified length of time that an investor plans to hold a certain security based on a goal. In a situation that you have a question about whether you should invest, make sure you never put your savings in stocks. Do not be speculative with it. You do not want to be forced to sell your holdings while they are down 20%-30%.

I will leave you with this. Eighteenth century philosopher, Edmund Burke, stated the following, “In history, a great volume is unrolled for our instruction, drawing the materials of future wisdom from the past errors and infirmities of mankind.” As I move forward from the 2020 bear market, I plan to take Burke’s advice by learning from my past errors as an investor and continue to turn disadvantages into advantages. I encourage you to look back as I have done and reflect on what you could have done better. Draw from Burke’s advice and learn from the wisdom that has been unrolled in front of you.



P.S. If you are within 10 years of retirement, just make sure you are

       not investing like a 25-year old before his first bear market.

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