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What Makes Gold So Valuable?

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why is gold so valuable

At some point, every would-be or current investor hears that they should consider adding gold to their portfolio. Gold often has a substantial amount of allure, a psychological impact that affects how people perceive its value, stemming back to ancient times when it was highly coveted. It’s also viewed as a form of safe haven, an investment that remains stable even during tumultuous times. If you are wondering what makes gold so valuable, and if its value is deserved, here’s a look at it from an investment perspective.

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When Are Manufactured Homes a Good Investment?

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are manufactured homes a good investment

Manufactured homes are a popular option for budget-conscious people who want to own a house. However, they don’t always have the best reputation. And they certainly have their quirks. As a result, figuring out if buying one is a smart move isn’t easy. As with all real estate-oriented purchases, the value can vary depending on a wide range of factors. If you are wondering, “Are manufactured homes a good investment?” Here’s what you need to know.

What Is a Manufactured Home?

A manufactured home is a form of housing that’s built in a factory. They are usually built on a steel frame, instead of on-site. After a person purchases one. The structure is brought to the buyer’s property. Which could include land they own or a rental plot, such as in a manufactured or mobile home park. Once on-site. It is assembled and secured to a base. The type of which can vary.

Some argue that manufactured housing and mobile homes are different. This is true to a degree. Technically, to be a mobile home, the structure must have been constructed before 1976. Anything after that point is a manufactured home. Additionally, manufactured homes had to meet different building standards. These standard are higher than what their pre-1976 counterparts had to follow.

However, they are both factory-built structures that are usually assembled before being placed on the owner’s land or rental plot. Further, each of these housing types may not be on permanent foundations, depending on the requirements set forth by the state when they were placed. As a result, the general public usually uses the terms interchangeably.

There is also a third category of factory-built housing: the modular home. These can be similar to manufactured homes but are typically delivered in pieces and put together on site. They are also more likely to resemble a stick-built home and more commonly have a traditional foundation.

The Benefits of Owning a Manufactured Home

Manufactured homes are often appealing because they can cost less than a comparably sized and appointed stick-built house. Since they are factory-made en masse, the production costs are lower. Some of that savings is passed on to the buyer.

Many of the construction materials used are also similar to other kinds of houses. Depending on the requirements in your area, the building codes may be equal to, or even more stringent than, stick-built homes, too.

At times, buying a manufactured home may even cost less than being a renter in certain areas. To include if you have to purchase land. However, this isn’t universally true. So it’s important to examine the costs on both fronts before committing to a manufactured home purchase.

The Drawbacks of Investing in a Manufactured Home

There are some drawbacks that come with purchasing a manufactured home. Usually, if it isn’t on (or being placed upon) a permanent foundation. You may not be able to get a traditional mortgage to buy one. Similarly, if you don’t own the land – or aren’t in the process of buying it as well – most mortgage lenders won’t finance the purchase.

Even if you do buy land and want to put down a permanent foundation. You may not be able to place a manufactured home just anywhere. Local zoning laws may prohibit them in certain areas. If that’s the case, getting an exception can be incredibly challenging, and may not even be possible.

There can also be insurance concerns. Manufactured home insurance is generally more expensive than typical homeowners’ policies. They may not be at risk of greater damage during certain kinds of catastrophic events, such as fire, high winds, and floods. In some regions, manufactured houses have a higher rate of theft claims, something that causes elevated insurance rates for all owners in the area.

Negative Opinions About Manufactured Housing

Additionally, while some people are beginning to view manufactured homes more favorably, others still have negative opinions of them. This harms their resale value significantly. Even when they are on permanent foundations and can qualify for mortgage loans. When they aren’t on permanent foundations. The situation is usually worse.

Now, local market conditions, maintenance and upkeep, and similar factors can help manufactured homes retain value. Similarly, the value of the land can rise. Thus, offsetting some losses. However, this is almost universally an uphill battle. So it’s important to keep that in mind.

Finally, if you don’t intend to purchase land, that means you’ll have to rent a property. With this, permanent foundations usually aren’t an option. Plus, renting plots at mobile home parks can be costly, and some neighborhoods may not be the nicest options.

It can also put you at the mercy of the property owner. Especially, since moving a manufactured home once it has been set in place can be costly, structurally devastating, or both. As a result, you may not have a choice but to deal with plot rent price increases, neighborhood quality declines, or other potential issues that could arise.

Are Manufactured Homes a Good Investment?

As you can see, whether a manufactured home is a good investment depends on your goals. Paying for a manufactured house (even with land) may cost less than renting a comparable-sized space. Additionally, the value of your land may rise. Which is one aspect that could work in your favor.

However, the structure itself will typically decline in value. This is something that doesn’t always occur with stick-built homes. There can also be issues with obtaining a loan. As most don’t qualify for traditional mortgages. Not only can this be troublesome for would-be buyers, particularly when it comes to finding a reasonable interest rate.  It also means you’ll face hurdles if you ever want to sell.

Additionally, while many may call them mobile homes, moving them may not be an option, or may be incredibly costly. If you were considering placing a manufactured home on a rented lot, you could be making a long-term commitment to that arrangement, and that may not work in your favor over time.

Do you think that a manufactured home can be a good investment? Why or why not? Share your thoughts in the comments below.

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Stock Splits, Asset Allocation, Cognitive Bias

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During the last month, the market and the economy have seen and done some weird things. Apple and Tesla announced stock splits, and the NASDAQ and the S&P 500 achieved record highs. All while COVID cases increase and the economy continues to suffer as a result.

What’s going on?

Stock splits

Apple (AAPL) and Tesla (TSLA) have seen some crazy increases in their stock prices over the last few months.

Since the beginning of the year, Apple is up about 67% and Tesla is up a whopping 390%. Tesla’s insane run-up is partially due to the influx of retail investors using online platforms, such as Robinhood.

I bring this up for two reasons:

  1. Incredible increases in stock prices, as we’ve seen with Tesla, can be dangerous. Warren Buffett illustrated it best when he said, “Only when the tide goes out do you discover who’s been swimming naked.” Insane run-ups in value attract more investors until the trade becomes crowded and unsustainable. Then people sell to capture their gains, and the stock price could fall as a result.
  2. Stock splits are not a “get rich quick” trade. I heard someone recently say, “buy Tesla now, before it splits, because once it splits, you’ll make 4x your money in an instant.” Tesla will undergo a 4 to 1 stock split. When Tesla’s stock splits, if you own one share at $2,000, you won’t have 4 shares at $2,000, you’ll have 4 shares at $500. Your total value does not change.

Asset allocation

I knew asset allocation was one of the biggest factors determining investor success, but this year confirmed that.

So far, in 2020, we’ve seen the fastest bear market in history, when the S&P 500 fell 37% in 6 weeks. Followed by an unprecedented run that brought that same index to new record highs.

With appropriate asset allocation, depending on your age, time horizon, and risk, you were able to miss some of the downside and participate in some of the upside.

It’s important to ask the right questions to figure out what the best asset allocation is for you.

Cognitive biases

I’m not going to lie, during the month of March and April, I was feeling pretty proud of myself. Yes, I was worried about the lives affected by COVID and the economic implication it could have, but I did a pretty good job of allocating client assets accordingly.

Even after the market bottomed and started to recover, I held the belief that ugly was just getting started. With everything that I listened to and read, it appeared that once the government stimulus ran out and bankruptcies started rolling in, things would get worse.

I still believe that, but I am making sure that I do research on the opposite view. I’m trying to do what Ray Dalio does so successfully. I’m trying to prove myself wrong.

Only finding sources that back up your thesis is called confirmation bias, and I’m trying to avoid that at all costs.

Make sure you are gathering information from a variety of sources. View both sides of the aisle. Keep your biases in check.

Related reading:

Why Asset Allocation Matters

Psychology of Money

The Questions You Need to Ask Yourself

Down Payment, Rainy Day, Be Prepared

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During the month of June, I wrote an article Down Payment or Investment Opportunities. It was my perspective on what to do with my savings, as I want to buy a home as soon as possible, but I also saw incredible opportunities to make money in the stock market.

Review a previous post

I thought I would revisit this topic, but my mindset shifted a little bit. That’s not to say that I’m proceeding in a different way than I thought I would, but now I’m thinking about it differently.

In that post, I said that I wanted to save $25,000 (I think) for a down payment, and wanted to do it in 4 years.

That meant that I would have to set aside a decent chunk each month to make that a possibility. The caveat to that is I would forego many chances to put money to work in the stock market.

Saving money for a down payment versus actively participating in the market is not the smartest financial decision (in my opinion), but in terms of what’s best for my family and for my psyche, this is the right move.

Because I have conviction in my decision now, my “regret” for not participating in the market has gone away.

When I first made the decision to save for a home instead, I often felt regret because the opportunities to make money were so great. Just from when I wrote that post (June 17) to now, the S&P 500 index ETF (SPY) is up 7.5%.

But I know this is the right choice, so I’m better able to focus my efforts on this goal. I’m eating out much less, I reviewed my budget to see where I could save more, and I’m finding bargains or buying second-hand items where I can.

Rainy day

While we are on the topic of saving money, I want to stress the importance of having some set aside for a rainy day.

As we’ve seen over the past few months, life can get pretty ugly. Now economic and humanitarian events of this scale don’t happen very often, but that’s not the point.

What I’m trying to convey here is that life is unpredictable. You don’t know what’s going to happen, or when. You don’t know how bad it’s going to be, so it’s important you have something set aside if things do get bad.

What’s more, it’s clear that the majority of businesses and corporations don’t have hardly any money set aside when disaster strikes. We like to think that if we put our time and energy working for a company, that they’ll take care of us when the time comes, but it’s clear now that most businesses won’t do that. They’ll protect the bottom line, and that’s that.

Obviously, not every company is like that, but I think it’s safe to say that the majority of organizations operate in this fashion.

Now, I do believe that this event will change how businesses operate. They’ll back away from the lean and mean operations, and start focusing on supply chain redundancy, as well as paying a little more for the security of their products and their people.

Be prepared

What I’m trying to say here is you need to look out for yourself and your family first. Sometimes, it’s necessary to forego big vacations, big expenses, or take out.

I think there’s room to be optimistic but also plan for the worst. I think it’s necessary to do both.

Living a life full of optimism is great, but you become a deer in the headlights when something bad happens. Taking the other side of things, being pessimistic, turns you into a cynic, and that has to be a depressing way to live.

Find room for both. Expect the worst, hope for the best, and save for a rainy day.

Related reading:

Everything You Need to Know to Set Up Your Own Emergency Fund

ClickTrades Review – Broad Coverage of Asset Classes

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ClickTrades Overview

Owned by KW Investments Limited, authorized and regulated by the Seychelles Financial Services Authority (FSA), ClickTrades is an online trading services provider establishing accounts for customers all around the world, except for the USA, Canada, and Japan residents.

With a long track record in the industry, it has become a reputable trading brand, constantly upgrading its services to meet the demands of the fast-changing markets. ClickTrades is well-known for its innovative and proprietary trading software, the 0-commission trading, useful educational resources, and a broad range of trading tools, including the popular Trading Central.

Asset Classes Covered

Diversity is one of the keywords when it comes to ClickTrades Assets. Customers using the WebTrader will have access to 2,100+ instruments, ranging from CFDs on FX, stocks, indices, commodities, cryptocurrencies, bonds, and ETFs. At the time of writing, there are 50+ CFDs based on currency pairs supported, , including majors, minors, and exotic pairs. Traders will have access to up to 1:300 leverage and fixed spreads for more of the FX pairs.

Due to increased interest in the stock markets, most of the ClickTrades offer is comprised of CFDs on shares from some of the popular markets around the world. USA, Germany, Australia, Switzerland, France, Canada, and CFDs on shares from many other markets are included right now. Up to 1:10 leverage, variable spreads, and 0 commission are some of the reasons why traders should choose this offer.

For traders wanting to get exposure on the stock markets, but prefer more liquid instruments, both CFDs on indices and ETFs have been included in the ClickTrades asset offer. S&P500, DAX30, Swiss 20, Sweden 30, VIXX, and the US dollar index, plus ETFs like QQQ, DIA, EWT, IDU, or FAS can be traded with leverage and variable spreads.

Commodities had been very active in 2020 and traders need access to as many instruments as possible. With ClickTrades, customers will be able to trade CFDs on cocoa, coffee, corn, rice, soybean, Brent oil, crude oil wheat, gold, silver, copper, and many other industrial or agricultural commodities, with up to 1:200 leverage and variable spreads.

Lastly, CFDs on bonds on 10Y German Treasuries, Gilt 10Y Bonds, US TBond 30Y, and the US TNote 10Y are covered for traders interested in the bond market. At the same time, CFDs on some of the popular cryptocurrencies like Bitcoin, Bitcoin Cash, Dash, Ethereum, Litecoin, and Ripple.

ClickTrades Trading Software

To get access to all of the above-mentioned instruments, traders will have to use the ClickTrades WebTrader, a proprietary and intuitive trading platform, available on both desktop and mobile devices. This is a platform designed to keep traders connected to the markets on the go or from the comfort of their workspace while accessing world-class assets.

Versatile, adaptable, as well as powerful 3rd party tools like Trading Central, make the WebTrader a complete gateway to the markets, integrating a full pack of features suited for many different trading strategies. With this platform, ClickTrades’ goal is to create the optimal trading environment and be a client-focused broker.

Also, the broker has support for the popular MetaTrader 5 platform, one of the most reliable platforms in the world, integrating many trading tools. It’s easy to access, has fast trade execution, is available on both desktop or mobile, and comes with an extensive package of analysis tools (built-in indicators, custom indicators, different time frames, and charts).

Summary

ClickTrades had proven over the years to be a reliable trading partner for customers. With 2,100+ instruments, reliable proprietary trading software, as well as many trading tools such as Trading Central, the broker continues to be a suitable choice for traders looking for diversified trading services.

 

 

Risk Warning: The materials contained on this document are not made by ClickTrades but by an independent third party and should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Trading CDF’s involves significant risk of loss.

 

Down Payment or Investment Opportunities?

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The current dilemma I am having is whether to stash my savings for a down payment on a house or contribute to my Roth so I have cash available for buying opportunities.

I’m pinching pennies, and I’m saving money wherever I can so that cash is accessible when I need it. I just don’t know what to do with it.

Do I put it towards a down payment or set it aside for investment opportunities. Like most things in life, the answer will lie somewhere in the middle.

Down payment

I’ve mentioned in prior reflections that I’m renting right now.

I’m renting because I got divorced and exhausted all of my savings on the down payment for my house. That house is currently being rented by another family, and my ex-wife and I still own it.

That’ll help build equity into the house so we receive more if/when we decide to sell, which is good.

I’m happy with my current living arrangements. I like the place. I like the neighborhood. My commute to work is 2 minutes, and I’m close to all of my family and friends. All good things.

The only bad part is I have no outdoor space to call my own. I have no yard.

I’m trying to frame it positively by saying that I’m not spending my time on yard work, and instead, have more time to spend with my son/work on myself when he’s not here. These are both very good things.

However, I want to give my son a space to play. A place to put a jungle gym and a sandbox. A place where he can just run around and have fun.

I want to give him that because he deserves it. I want to use my savings for a down payment on a house so we can have a place to call our own. 

Investment opportunities

Here’s the second part of my dilemma. I see a lot of chances to put my money to work in the market.

I’m able to play the long game because of my investment philosophy and my training. The best investors I have long term time horizons.

What I mean to say is I can see past the present and I have an idea of what my investments can do over the long term, and the [possible] reward for investing now can’t be ignored.

That’s why I’m having a difficult time deciding what to do.

What will I do?

As a parent, you want to give your kids everything. I want to have a place we can call our own.

At the same time, I know how valuable it is to start saving and investing early so I can take advantage of compounding returns.

So here’s what I’m thinking. I’m going to develop a “savings plan”. I’ll take the dollar amount for an ideal down payment and how far in the future (in terms of years) when I’ll want to use it.

I’m thinking of $25,000 for a down payment and four years until I’ll use it. I’ll, then, divide $25k by 48 to get my monthly savings goal. Anything over that number I’ll put in my Roth.

That’ll take care of saving for a house and for retirement.

My Last Reflection:

My Experience with Life Insurance

Related reading:

Your Go-To Budget Guide

What is Time Horizon and Risk Tolerance?

My Life and How I Manage Stress

My House and What Brought Me Here

How Much House Can I Afford? Use This House Affordability Calculator

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house affordability calculator

When you’re thinking about buying a house, you don’t want to rely on a bank to tell you how much you can afford. Just because you qualify for a $100,000, $200,000, or $300,000+ mortgage doesn’t mean that you can actually shoulder that burden. There may be aspects of your budget the lender isn’t taking into consideration, for one. For another, if your monthly payment is too much of a burden, you’ll make yourself “house poor,” which isn’t a great situation. Luckily, it is possible to figure out how much house you can really afford. Here’s a  house affordability calculator that can help.

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CAPEX.com Review – Fine Tuned Tech Resources for Eager Traders

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CAPEX.com is a worldwide brand owned by Key Way Investments Ltd. The brand is currently providing trading services for a wide range of assets, including CFDs on Forex, indices, bonds, ETFs, commodities, shares, cryptocurrencies, and blends. With fine attention to detail, the broker managed to gain a lot of popularity in a relatively short period. One of the main reasons for this lies behind versatile trading functionalities, highlighting the CAPEX.com brand above other brokers.

Regulation

Operating in a regulated framework is the top concern for CAPEX.com, which is why Key Way Investments Ltd is authorized and regulated by the Cyprus Securities and Exchange Commission (CySEC), with license number 292/16. Additionally, the broker had managed to get registered with 29 different regulators based in the European Economic Area. This aspect makes CAPEX.com one of the best choices for European traders choosing to rely on a regulated broker.

Trading Platforms

Specifically designed to streamline your trading, WebTrader is the proprietary trading platform of CAPEX.com, designed to work both on desktop and mobile. It’s built for traders of all levels and puts advanced tools at your fingerprints. With 6 different chart types and more than 90 popular indicators to choose from, this is a platform created to help you get the most out of your trading strategy. It’s intuitive, easy-to-use, and comes with complex built-in risk management tools to help you manage risk effectively. At the same time, the integration of Trading Central, as well as some other 3rd party features, make WebTrader a highly complex platform.

For traders wanting to stick to something more traditional, CAPEX.com has support for MetaTrader 5, extremely versatile trading software for desktop, mobile or tablet, Android, or iOS. It’s fully customizable, flexible, and convenient, providing instant execution and access to over 400 instruments across all asset classes. In 2020, MT5 is still a secure, stable platform, and an industry-favorite choice. However, clients choosing MT5 won’t have access to all 2,100 assets available for trading at CAPEX.com on WebTrades.

CAPEX.com Trading Conditions

Based on our analysis, CAPEX.com is a company devoted to providing clients with the best trading conditions. That’s the main reason why the company covers a wide range of assets like CFDs on Forex, indices, bonds, ETFs, commodities, shares, crypto, and blends. Due to the latest coronavirus pandemic, CAPEX.com has included the Corona Blend, a mix of drugmakers and biotech companies currently working on a cure, in order to give their clients access to the heart of the anti-pandemic fight and trading opportunity.

At the same time, CAPEX.com is well-known for a series of integrated tools, that are not too common among other CFD brokers. With Bloggers Opinions, Insiders’ Hot Stocks, Daily Analyst Ratings, and Hedge Funds Activity, traders get more insights into the assets they want to trade and eventually make much better informed trading decisions.

Traders can choose between three different account types, each with a different set of features, depending on the initial deposit. The minimum deposit required for opening a trading account with CAPEX.com is $100. Clients get support from their broker via educational resources like daily market reviews, analyst recommendations, webinars, news and analysis section, and a video library. A relationship manager and customer support representatives will also provide any help and assistance when needed.

Is CAPEX.com for You?

If you are a retail trader looking for a broker that’s well-regulated and is providing a solid trading offer, then CAPEX.com could be one of the best picks. The company behind it has a long track record in the investing world and it is well-known for providing consistent and reliable services. Additionally, CAPEX.com is constantly adjusting its offer to keep up the pace with the changing markets’ behavior. Our analysis concluded the broker is trusted and can provide enhanced trading capabilities.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.93% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

Mistakes to Avoid in Retirement

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In many finance websites, blogs, and articles, a lot has been said about how to prepare for retirement, but I believe there hasn’t been enough written about what to do when you get there. More specifically, there’s a lack of content about mistake, or mistakes, to avoid.

In this article, we’ll explore several mistakes to avoid when you reach this milestone.

Spend beyond your means

This seems obvious, but once the psychological barrier of spending versus savings is breached, people (not everyone) develop this mentality of “I saved for 40 years for this moment, why shouldn’t I enjoy it?”

You should enjoy it. You worked your butt off for it, right? There are strategic ways to do this, however. The mistake is going gangbusters right away.

  • Create a budget/spending plan – Your budget in retirement will be different than your budget before retirement. Create line items for everything, and get real granular with your discretionary spending (i.e. sub line items to breakdown where the discretionary spending is actually going).
  • Plan for healthcare – Healthcare costs, generally speaking, will be your largest expense in retirement. Plan accordingly.
  • Income strategy – More than likely, you’ll have a few different income sources (social security, pension, retirement distributions, etc.). Create a line item for each source.
  • Senior discounts – Take advantage of every single one. There might be a psychological hesitation with this, as it forces you to come to terms with your age/where you are in life
  • Spoil grandkids – Every grandparent wants to spoil their grandkids to death, but it must be done within reason. Get creative and be strategic about when and how much.

Make Quick Decisions

Another mistake is making quick decisions. Don’t do it. Any decision you classify as BIG needs to be well thought out. This could be anything like moving, downsizing, vacations, or eliminating a vehicle.

I would argue that any decision about an expense that’s not in your budget/spending plan, should be thought about for several days. My rule of thumb is a week. By then, the euphoria of such a purchase has gone away, then you think more logically about it.

Investing Aggressively

Over the years, a big mistake clients make is the desire to invest more aggressively than they should. Oftentimes, this is to compensate for an inadequate savings rate during their working years or a significant market pullback that hurt their portfolio.

While capital appreciation is still an investment objective in retirement, it’s no longer the primary goal.

This primary goal should be capital preservation. Limiting losses on what you have. This has less to do with time and more to do with your decreasing ability to go out and make more money. Allocate your portfolios accordingly.

Ignoring Estate Planning

Estate planning is a key ingredient to your financial planning recipe. It mustn’t be ignored. Every debt and asset you have needs to be accounted for, listed, and given a task for when you pass.

Estate attorneys can be expensive, but I believe it’s 100% necessary to find one you trust, so your estate is well taken care of.

Isolating Yourself

Your social life is more important than ever. Countless studies show that people with strong relationships outlive those that don’t. So the mistake here is not making your social life a priority.

Join a community, volunteer, retain, and nourish friendships. Whatever flavor of social life sounds desirable, make it a priority.

Letting Yourself Go

Taking care of your mind and body is always important, but especially now. It will keep you healthy, therefore, lowering your healthcare expenditures, but it’s also another way for you to meet people.

Go for walks with neighbors and/or friends. Join a gym. Many of which have reduced rates for seniors. Additionally, many health insurance companies have “silver sneaker” programs that offer inexpensive services and programs for seniors.

Expecting it to be easy

This is a BIG life change and the transition will not be easy.

Not only will you shift from saving to spending, but those social connections you developed over your working years can reduce in frequency and strength.

Go easy on yourself and be patient.

Taking Social Security too early

Unfortunately, there are situations and scenarios where taking Social Security Income (SSI) distributions early is necessary. However, for those of you where this does not apply, speak with a trusted advisor about optimizing your SSI strategy.

Getting Swindled

Scammers adapted. They’re smart and they know how to target susceptible people. Unfortunately, elderly individuals are inherently more at risk than the general population.

Any email, phone call, or text that you receive (unsolicited, of course) should be greeted with a fair amount of skepticism. Don’t willingly give out any pertinent information (name, DOB, social security number, etc.).

Doing it alone

A BIG mistake people make is thinking they can plan by themselves. It would behoove you tremendously to consult with several experts. Estate attorneys and financial advisors should be at the top of this list.

Do your research, check online reviews, and get testimonials from trusted contacts. Having capable professionals in your corner could set you up for success and put your mind at ease.

Related reading:

Why Asset Allocation Matters

Your Go-To Budget Guide

Why Your Will Should Be Up To Date

Your Estate and Your Family

Moving: Another State, Another Country

How My Finances Have Changed with Covid

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Aside from the death and illness, it has caused, Covid-19 has done a number on the financial system and the economy.

I’m writing this on May 19th, and up to this point, over 30 million people have filed for unemployment benefits.

In my previous post, which can be found here, I detailed how you can plan in the event of job loss.

Even if you haven’t lost your job, more than likely, your finances have changed. In this article, I want to pull back the curtain on how my finances have changed during this environment.

My Job

Thankfully, I’m still working. I work for my family’s business. Technically speaking, we have four family businesses and I work three out of the four in various capacities.

Two out of those three businesses are very resilient during recessions, so I’m not terribly worried about my income from those two sources.

The last, however, will be influenced by movements in the market. If I do my job well, it shouldn’t vary a ton, but if I don’t, my clients will feel the pain, as will I.

The reason being is I, typically, charge a percentage of the assets under management (AUM). If account values go down, so does the fee I receive. The two go hand in hand, as they should. If I do a poor job, I should make less. It just makes sense.

With that said, my income hasn’t moved too much from the financial advising gig. It dropped a little bit last month, but I imagine it’ll come back up by the end of May, as the market has recovered.

Opinion: The Economy

I don’t know if I’ve mentioned it yet here, but my opinion of the economy is darker than some. I think there will be a cascade of bankruptcies in the public and private sectors.

With regard to the public sector, the companies that are rated BBB are already at record highs. When revenues stop coming in or significantly reduce, it’s hard for companies to make interest payments to lenders (holders of debt).

Companies will start defaulting on their debts, and the ability to pay, as well as other factors, help determine the credit rating. This will cause a slew of BBB rated companies to get downgraded.

Funds

With regard to fixed income mutual funds and ETFs, the vast majority of them have rules they need to abide by. One of those rules could be only investing in investment-grade companies.

Investment grade is anything from AAA to BBB. My fear is that when companies get downgraded from BBB to BB, it’ll cause funds to dump those companies; exasperating the sell-off.

My Finances

With that said, here’s how I’ve adapted.

My finances really haven’t changed much. I’m spending more on groceries, especially right now as I am stocking up on certain goods. The added benefit of that is I’m spending less on food from restaurants, which saves me money and I’m eating healthier too.

So you’re spending more on groceries and less on take-out…what else? Well, given the nature of Covid and the uncertainty that surrounds it, my priorities have shifted a little.

More Cash

I’ve planned my clients’ portfolios with the above scenario in mind. The majority of clients aged 60 and up are positioned more conservatively than normal. With that in mind, all of the portfolios I manage will take a little hit, and my income will drop as a result.

I’ve suspended my retirement contributions, via payroll deduction, until I feel comfortable again. This may seem counterintuitive because of the stress I put on leaving things alone and dollar-cost-averaging as prices go lower.

Due to the fact that my income has some variability, not to mention my rental property and the uncertainty of my renters’ making rent payments (because of talks about forgiving rent payments for those affected by Covid), I have to keep more cash available than normal.

Retirement Contributions

As I mentioned, I stopped my automatic retirement contributions, but I am making voluntary contributions to my Roth IRA when I feel my cash available is adequate.

Other than that, nothing else has changed. Debt payments will continue as planned and saving for a down payment on a house will also continue.

Be advised: Any opinion expressed about the market/economy is strictly an opinion and should not be viewed as a certainty. Additionally, my preparations for said opinions are specific to me. Consult your financial professional about your particular situation.

Related Reading:

Why Asset Allocation Matters

What You Can Learn From Different Market Environments

Job Loss: What To Do

Dealing With Market Fluctuations