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The FED, The Dollar, and Opportunities

January 13, 2021 by Jacob Sensiba Leave a Comment

My post for today was supposed to be a personal reflection, but in lieu of that, I’m going to lay out my thoughts on the market and the economy. Which includes the FED, the dollar, and inflation. In addition to that, I want to explain where I see risks and opportunities right now.

The dollar

We can expect the Federal Reserve to continue an accommodative monetary policy. They will invest in the fixed income market and they’ll resume the low-interest-rate stance.

If they continue this response to the Covid crisis, the dollar should go down in value. There are some risks and opportunities that arise if that happens.

Gold and cryptocurrencies should increase in value. A devaluing in the dollar is, normally, the right landscape for “alternative currencies” to do well.

International securities, especially emerging markets, do well when the value is priced lower. A large majority of international transactions take place using the USD. The value of their home currency goes up in relation to the USD.

The technology sector also has a negative correlation to a falling dollar. When the dollar goes down, that sector tends to outperform.

If the dollar, indeed, goes down look at these areas for possible investment opportunities.

The FED

As I mentioned earlier, the FED will continue to create an accommodative environment for the economy…until they don’t.

At some point, the recovery will gain momentum. GDP will go up and the population will gain confidence in that recovery. At this juncture, inflation will pop onto people’s radars.

If inflation runs too hot, the FED could possibly stop, or reduce, QE. They could halt the bond-buying program and they could raise rates. If that happens, keep your eyes out for a pullback.

We saw this happen at the end of 2018. The FED started raising rates until they went too far, and we had a 20%-25% decline in Q4. Then they reversed course and began easing again. We had a run-up in the market until March of 2020 when Covid hit.

Long term

I believe tech and healthcare will be the two sectors to watch over the next decade or more. With technology getting more advanced every day, investment opportunities will present themselves in these two areas.

Green energy, especially with the incoming administration, is also an industry with big potential. Technology will play a large role in the advancement of renewable energy.

My biggest concern

And I’ll preface this by saying I’m concerned because I truly don’t know the implications of it. MMT looks as likely as ever at this point.

The favorable stance by the FED plus the democratic party holding the House, the Senate, and the Presidency leads me to believe printing money is going to pop off.

An aggressive agenda to provide relief for Americans struggling because of Covid, a push for expanded Medicare/Medicaid benefits, possible student debt relief, as well as other initiatives.

It appears that reducing the national debt is not a concern. To be fair, it wasn’t a concern for the Trump administration either.

The bill comes due for everyone, and if other countries (namely China) are no longer buying US Treasuries like they were, I do not know how we can fund policies, branches, or even service the existing debt. Only time will tell.

Conclusion

I will close by saying that these are my opinions. Granted, I do a lot of research to come to these conclusions, but what I said above are still my thoughts and not foregone conclusions. Do your own research.

Related reading:

How to Beat Inflation with Investment

What Makes Gold so Valuable

 

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Filed Under: Investing, money management, Personal Finance, risk management, successful investing Tagged With: bitcoin, dollar, Emerging markets, FED, federal reserve, gold, Investment, investment opportunities, USD

The Best, Low Maintenance Way to Invest 30K

December 2, 2020 by Jacob Sensiba Leave a Comment

If you’ve been building your savings to start investing and you’ve managed to put aside $30K, you may be wondering what your next step should be. How do I invest 30k? What is the best, low maintenance approach?

Here are some great ways to apply that 30K towards growing your wealth.

Pay Off Debt

First and foremost, use some of the money to pay off any debt you may have. It will save you money in the long-run. If you’re carrying a $10K credit card balance with a 15% interest fee, you’ll be paying an extra $1500/year in interest. That’s money that can be better spent on investments down the road. If you want to invest 30k, first start by getting rid of debt.

Emergency Fund

If you don’t already have one, put some of your money aside in an emergency fund so you know you’ll be able to manage if something unexpected happens. You should have 3-6 months’ worth of expenses put aside in an easily accessible account like a savings account. Just make sure it’s not linked to your debit card so you can’t spend it. The period of time you need to cover varies based on how long you think it would take you to find another job should something happen to your current job.

Earning return

What’s next has all to do with three things: risk tolerance, time horizon, and investment objectives. As a matter of fact, that’s how all of your investment decisions are made.

There are several different vehicles you can utilize, so what I’m going to do is give each vehicle its own section, explain what it is, and then give a little more detail as to when it could be used.

Certificate of Deposit (CD)

A bank product with a specified interest rate and a specified maturity. CDs are used to hold money for a specified period of time in a virtually risk-free fashion. More about CDs.

You’ll choose a CD for two reasons. The first is if you want a safe, federally insured vehicle to stash away some cash. The other reason is if you do not want to touch that money for a specified period. For example, you’re going to buy a house in three years and you don’t want to jeopardize that down payment. You buy/invest in a 3 year CD. At the end of year three, you’ll get back your principal (what you put in) and some accrued interest. Early withdrawal penalties apply.

Savings/Money Market Accounts

Typically used for your emergency fund. Easily accessible, and able to earn a little interest.

That’s pretty much it when it comes to these accounts. The interest they offer will be (not always) pretty low, but, like the CD, it offers a very safe place to store your cash until you need it. Unlike the CD, however, there are no early withdrawal penalties.

Qualified accounts

Basically any retirement account. Traditional IRA, Roth IRA, and employer-sponsored plans (401k, Simple IRA, etc.). There are contribution limits associated with these accounts.

With these accounts, as I said, contribution limits are something to pay attention to. With your Traditional and Roth IRA, there’s a $6,000 contribution limit ($7,000 if you’re 50 and older). 401ks have a limit of $19,500 (25,500 for 50 and older). Simple IRA limit is $13,500 ($16,500 for 50 and older).

This is a long term investment solution, as early withdrawal penalties apply. There are several ways to “exempt” yourself from that penalty, however, such as a first home purchase. For an extensive list of these exemptions, click here.

These accounts are also called “tax-advantaged” accounts because, as the name suggests, there are tax advantages. You either lower your taxable income with your contributions or have the ability to withdraw the funds “tax-free” (barring an early withdrawal penalty, of course).

Non-Qualified Accounts

Brokerage accounts or any investment vehicle that doesn’t have any tax benefits. Meaning, you pay taxes on any capital gains and dividends you receive. No contribution limits.

Honestly, the only advantage to these accounts is there is no contribution limit. For example, if you’ve maxed your contribution for your employer-sponsored plan and your IRA, then you can dump the rest of your money here.

Health Savings Account (HSA)

Accounts specifically designed to help you with your medical expenses. Money that you contribute to this account is “tax-free” or “tax-deductible”, which means it lowers your taxable income. Also, the funds, if used for qualified medical expenses, are tax-free.

With some, not all HSAs, you can invest what you’ve contributed. So if you have 30k to invest, I’ll point you to the below section to help with that. There are contribution limits with the HSA, however, so keep that in mind.

Asset allocation

After you’ve selected an investment vehicle (this section does not apply to CDs, savings accounts, or money market accounts), it’s time to invest your capital.

Asset allocation is my preferred method to invest, and I’ve written extensively on it here. So if you want to invest 30k, here’s what you need to ask yourself. How long until I need these funds? What is my ultimate goal for these funds? What am I willing to lose?

If your time period is less than 5 years, ignore this section and stick your money in a savings account or a CD. The risk/reward is unfavorable in this scenario.

If you have, ideally, 10+ years, then you have some options. The next question is about risk tolerance. What kind of portfolio are you comfortable with? Using the stocks/bonds/cash breakdown, are you a 60/40/0 type of person? Maybe you’re quite tolerant and prefer an 80/20/0 approach.

For those of you that are not tolerant of risk and/or you have a shorter number of years until you need to access these funds. Your portfolio should start at 50/50/0, and then adjust as you see fit. The cash portion in this breakdown should be used as investable cash for when you see a buying opportunity and/or funds you’ll need access to in the near future (unriskable capital).

Risk Tolerance

If you really want to know what your unique risk tolerance is, take our quiz!

I know I didn’t really give a concrete answer to what’s posed in the headline, but that’s the thing about investing – it’s incredibly personal. You need to do what’s best for you.

If time is on your side, max your retirement contribution, then put the rest in a savings account until next year. At that time, max it again.

If time isn’t your friend, a CD isn’t a bad idea. As I said earlier, paying down/off debt is incredibly worth it. That’s an automatic 15% return on your money if you pay off your credit card. Money that can be used more effectively going forward.

Read our articles, ask for advice, and do what’s best for you. That’ll help you answer the question: how do you invest 30k?

 

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see website for full disclosures: www.crgfinancialservices.com

Filed Under: Investing, money management, Personal Finance, risk management, successful investing, tax tips Tagged With: Debt, emergency fund, invest, investing

Is It Safe to Throw Away Bank Statements?

October 28, 2020 by Jacob Sensiba Leave a Comment

throw-away-bank-statements

 

Before we answer the question as to whether or not it’s safe to throw away bank statements, we need to cover how long you should keep certain statements. The following list is provided by TrueShred.

Statements to shred right away:

  • Sales receipts (unless you need them for tax purposes; in that case, scan them first)
  • ATM receipts
  • Packing slips and online purchase orders
  • Canceled and voided checks (that aren’t tax-related)
  • Utility, internet, and cell phone bills (once paid)
  • Credit card, insurance, and bank account solicitations that come in the mail
  • Expired warranty coverage
  • Correspondences from the DMV or IRS (once settled)
  • Travel-related materials (besides your passport)

List of documents to throw out after 3 years

  • Bank statements
  • Credit card statements (once paid)
  • Pay stubs (once checked against your W-2 for accuracy)
  • Medical bills (once paid and free of insurance disputes)



List of documents to throw out after 7 years

  • Tax returns
  • W-2s
  • Tax-related receipts and canceled checks
  • Records for any tax deductions you took
  • Other tax records

List of documents to throw out (variable intervals)

  • Auto titles (keep for as long as you own the car)
  • Home deeds (keep for as long as you own the property)
  • Disputed medical bills (keep until the issue is resolved)
  • Home improvement receipts (keep until you sell your house and pay any related capital gains taxes)

List of documents to keep forever

  • Birth certificates
  • Adoption papers
  • Social Security cards
  • Marriage certificates
  • Divorce decrees
  • Citizenship papers
  • Passports
  • Death certificates

You should keep these documents in a very safe place. I’d recommend a fireproof safe to keep these things protected.

How should you dispose of sensitive documents?

It is safe to throw away your bank statements, as long as you do so in a particular fashion. If you have a significant amount of paperwork, hire a shredding service. If you don’t have that type of volume, put it through a shredder. Tearing the papers up once or twice won’t do the trick.

Another safe disposal method, as recommended by Patch.com is to wrap up unused or spoiled food with the sensitive documents, and throw them in the refuse bin. Scavengers are more likely to “skip over” the refuse bin when they’re looking for sensitive information for identity theft purposes.

Below, are several ways to dispose of your sensitive documents without the use of a shredder. This list is provided by WigglyWisdom.com.

  1. Hand shred – tear up the paper with your hands. Make sure you tear the vital information and place it in separate recycling bins.
  2. Burn them – local ordinances can hinder your ability to do this, so be sure to check the laws for your municipality. Tear up the paper first, in the same way, you would for point #1, in case a piece of paper flies away.
  3. Compost – paper breaks down and can add carbon to your compost pile.
  4. Soak them in water – 24 hours in a bucket of water can leave your documents illegible.

There are three other items on that list if you’d like to learn a little more.

Conclusion

Bank statements and other financial documents contain incredibly sensitive information. It’s important you a) keep proper records and b) dispose of these items in a safe manner.

Related:

Earlier this year, I wrote a piece about the most important financial documents. If you’d like to learn more, go check that out here.

 

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see website for full disclosures: www.crgfinancialservices.com

Filed Under: Banking, Personal Finance, risk management, Tax Planning Tagged With: bank, bank statements, documents, identity theft, statements

Stock Splits, Asset Allocation, Cognitive Bias

August 26, 2020 by Jacob Sensiba Leave a Comment

stock-splits-asset-allocation-cognitive-bias

 

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

Filed Under: Investing, money management, Personal Finance, Psychology, risk management Tagged With: allocation, Asset, Asset Allocation, bias, biases, cognitive bias, stock splits, stocks

How to Make a Legally Binding Promissory Note

August 19, 2020 by Jacob Sensiba Leave a Comment

legally binding promissory note

A legally binding promissory note is used when lending money. It’s a document that states the parties involved, how much is being lent, any pertinent financial information, and signatures by the involved parties.

The agreement must be clearly defined so that no argument can be made.

Four parts

There are four integral parts to a legally binding promissory note.

  • Parties – individuals or entities involved in the transaction. A party must be of legal age and of sound mind capable of entering into a transaction.
  • Promise – Defines what is agreed upon. It defines the amount to be paid and should also include a paid off date.
  • Sum certain – Specific financial information including, exact amount, pay off date, interest, amortization, penalties, and when those penalties must be assessed.
  • Signatures – to be signed by all parties involved.

These four parts must be included and clearly defined, otherwise the agreement might not be enforceable.

Once the promissory note is signed and has all the necessary parts in it, it becomes legally binding. Once legally binding, all parties involved must meet their part of the agreement.

Promissory Note Uses

Essentially, a promissory note is used when lending/borrowing money. Mortgages, car loans, student loans, personal loans, and business loans all use promissory notes to legally enforce that the borrower must pay back the loan, plus interest, in a specified period of time.

Different kinds

There are two different types of promissory notes, simple and demand.

A simple promissory note is one scheduled, lump-sum payment on a specified date.

A demand promissory note is when the lender asks for payment to be made. Normally, there is a reasonable amount of time needed between ask and delivery.

Collection

More often than not, the borrower will abide by the terms of the promissory note and pay on time. If they don’t, however, there are a few things you can do.

Talk to them. Make sure they are doing okay. Send them a written reminder. If need be, you can send one at 30, 60, and 90 days. If they’re in a tight spot, see if they can make partial payments.

A legally binding promissory note is a very important document. Make sure you include all four parts to make it enforceable and legally binding. Might not be a bad idea to have an attorney take a look at it before you enter into the agreement.

Related Reading:

What You Need to Know About Bankruptcy

How to Answer a Civil Summons for Credit Card Debt

Filed Under: money management, Personal Finance, risk management Tagged With: binding, legal, legally binding, lending, note, promissory note

Dealing with Market Fluctuations

May 6, 2020 by Jacob Sensiba Leave a Comment

Over the past couple of months, we’ve seen increased volatility. Put simply, volatility is periodic market fluctuations.

In a month, from the end of February to the end of March, we saw the S&P 500 drop nearly 35%. Obviously, it wasn’t a straight drop. There were several up days and a few relief rallies.

Since then, we have seen the S&P come back to the tune of 22%.

In this article, I want to give a little information about how I deal with market fluctuations, where I look for opportunities, and how retirement savers navigate these difficult times.

What I Learned

At the beginning of my career, I always dreaded experiencing a bear market. What do I do? Do I sell out of everything to avoid the decline? What do I tell my clients? How will they react?

As I gained more experience and read more, I learned what to do.

Keep in mind that I started my career in 2014, still in the middle of a long bull market, and since then I’ve read everything I could get my hands on about finances, markets, and economics. I’ve listened to podcasts and watched YouTube videos.

A lot of the people that I learned from attributed their success to when they got started. Two gentlemen really stick out.

One began his career in 1987 and lost his shirt on Black Monday (20% decline in one day, October 1987). This taught him about diversification and the importance of a long-term strategy.

The other got started in the early 80s but had a much different experience. He did some research and analysis and found a lot of risk in the credit market. He stuck his neck out on this trade and what he predicted came to fruition.

However, the markets didn’t react how he thought. What he learned was that fundamentals are important, yes, but what [almost] matters more is investor behavior.

Market Fluctuations

In periods of heightened market volatility, I pretty much hold my ground. I help my clients plan accordingly and coach them about what to do when stocks fall.

We put together the parachute before we jump out of the plane, not on the way down. That’s where people get into trouble. That’s why asset allocation is so important.

When building a portfolio, it’s vital to take your age (time horizon) and risk tolerance into account.

What may even be more important is the investor’s behavior. They might have a long time horizon and be fairly tolerant of risk, but if they’re going to lose sleep over a 10% correction, you need to position their portfolio accordingly.

Because my clients and I plan ahead, generally, I don’t do anything and I advise them to sit tight. What you don’t want to do is sell out of fear. At that point, you have probably experienced enough of the decline that it doesn’t make sense.

Exceptions

That said, I did some broad selling during the month of March. There were two positions that I used specifically to serve as a shock absorber during declines, and those did not perform as I’d hoped. So I sold them.

I realized they weren’t doing what I wanted them to and I cut my losses. Good traders and investors have an incredibly short leash when it comes to limiting their losses.

Opportunities

Generally speaking, I’m not a stock picker. I’m an asset allocator. Stock picking is not an efficient use of my time. However, sometimes it’s necessary and market fluctuations often create opportunities.

There are two positions, in particular, that I’ve been buying over the last month or two. I found enough of a disconnect between the price and what I thought the value would be over the long term, that I slowly invested into these two positions.

By the way, this slow investing is called averaging in, or dollar-cost averaging. Ideally, you invest at lower and lower prices, reducing your overall cost basis. My method is to take advantage of that disconnect I mentioned, but also leave enough on the side in case it goes lower so I can buy more.

How to Plan

Planning for market fluctuations isn’t something you do when you think it’s coming, it should be part of your plan all along.

Age is a big factor when determining the time horizon. The other items to consider, as I mentioned, are goals, risk tolerance, and investor behavior.

As an advisor, you have to be acutely aware and familiar with your clients, their risk appetite, and their personality. Only then are you able to plan with them, then guide them during trying times.

That’s probably one of the biggest things I’ve taken away from these market fluctuations. I’ve received two phone calls. That tells me that I’ve trained them well. That I’ve done a good job planning with them and that they are comfortable with how their portfolios are positioned.

Related Reading:

Psychology of Money

Why Asset Allocation Matters

Client Experiences

Filed Under: Investing, investing news, money management, Personal Finance, Retirement, risk management Tagged With: Asset Allocation, investing, investment opportunities, investment planning, market fluctuations, portfolio, volatility

Hacks for Covid-Related Issues

April 1, 2020 by Jacob Sensiba Leave a Comment

Our daily lives have been disrupted. People are working from home, unable to go to the store, or have lost their job.

For those of us that are able to continue living our lives, relatively normal, with some minor inconveniences, we need to adjust.

We need to take advantage of the 21st-century technology available to us. This could be anything from grocery shopping apps, social media, or the apps of your favorite stores.

In this article, we’re going to dive into some of the tools and hacks you can use to help get through this period of quarantine and social distancing.

Grocery Shopping Hacks

There are several hacks you can use to make your trips to the grocery store more efficient and effective.

  1. Get what you need and get out. You HAVE to make a list and you NEED to stick to that list. This isn’t the time to browse or look for sales (more on that in a minute), buy the items on your list and leave.
  2. Plan your route – If there’s a particular store you frequently visit, use that store’s app to plan your route. Personally, I go to Walmart for almost everything. The first thing I do is make my list. Then I go onto the app and start searching for the items on my list. The location marked as “your store” will pinpoint which department, aisle, and shelf position for your item.
  3. Buy in bulk – with items that won’t go bad or if the time in which you need to use it by is several months or years in the future, buy it in bulk. Be careful, however. It is important to do the math. Figure out the “per unit” price and make sure buying in bulk is an economically beneficial decision.
  4. Look up recipes ahead of time that require only a few/minimal ingredients. Ideally, you’ll want to find recipes that require few ingredients that can also make a healthy amount of food. That way you have leftovers. The way I like to think about it is how much does each meal cost?
  5. That brings me to my next point…buy foods you can freeze, or make meals that you can freeze. This gives you food that you can use down the road and also gives you something easy to eat if you’re tired or aren’t feeling well.
  6. One more quick one – Use your knuckles and/or elbows when possible. We all want to stay healthy and avoid passing Covid onto others. Where it makes sense, try not to use your hands.

Grocery Shopping Apps

There are possibly hundreds of grocery shopping apps available, but in doing my research, I found five apps that I thought were extremely useful.

  1. Flipp – Matches coupons from your favorite brands with the weekly flyer from your favorite store.
  2. MealBoard – Manages your recipes, grocery list, and it also keeps track of what you do or don’t have in your pantry.
  3. Grocery Pal – Browse sales and coupons from the stores you frequent, and seamlessly add sale items to your grocery list.
  4. Out of milk – Lets you know what’s in your pantry and what you need to add to your shopping list.
  5. Big Oven – Kind of like a social network for groceries and recipes. Find out what your connections are buying to get inspiration for recipes. You can also type in the ingredients you do have and find some recipes you can make with those ingredients

Working from home

It’s no doubt that we are extremely fortunate to be able to work from home. With all of the technology available, a considerable amount of the workforce is able to tap in from a remote location and still get their stuff done.

As lucky as we may be, working from home comes with its own unique challenges. Here are some hacks for those working from home.

  • Get dressed like you’re going to work – this is something that’ll help you psychologically. It’ll trick your brain into thinking you’re going to work. This helps you frame your mindset for work.
  • Designate a work-space in your home – a psychological trick as well as a means to an end. You can’t work in front of the TV. You need a space where you can actually be productive.
  • Keep a strict schedule (if you can) – Now this isn’t possible for everyone, especially if you have little kids at home that need constant attention. Just do your best. Lean on your family members to watch the kiddos for a little while so you can get some work done. Also, please remember to take breaks. Check-in with friends and colleagues. Try to make your day as normal as possible.
  • Communicate everything – Almost to a fault. Send emails and texts. Make phone calls about anything and everything. We’re so familiar with communicating in person that we don’t realize how much we actually say.

Working together

My favorite part of this post. Writing about the human condition and how in times of crisis we always put our differences aside to help our neighbor.

During this pandemic, do what you can to help your fellow humans. Offer to pool resources together. Share recipes. Have a rotation of who goes to the grocery store.

If you have an elderly neighbor or family member, do everything you can to help them. Go to the store for them. Send letters to loved ones. Send letters to folks in nursing homes and assisted living facilities.

We’re not all scientists, healthcare professionals, retail employees, or other essential professions that are keeping the wheels turning, so we have to do our part in some form or fashion. Be nice.

Reading and Resources:

What are the Advantages and Disadvantages of Saving at a Bank

Feeding America

American Red Cross

CDC Foundation

Direct Relief

Filed Under: budget tips, Featured, International News, Personal Finance, Psychology, risk management

A Systematic Approach to Goals

December 25, 2019 by Jacob Sensiba Leave a Comment

With 2020 staring us in the face, it’s time to review goal setting and the systems you can put in place in order to reach those goals.

“A goal without a plan is just a wish.” – Antoine de Saint-Exupery

That said, let’s look at systematic ways to approach goal setting and actionable tools you can use to smash those goals.

How to begin

  1. Large/Lifetime goals – These are things you want to accomplish throughout your life. They can be philanthropic, health, financial, etc. Figure these out first.
  2. Short-term – Now that you have your long-term/lifetime goals determined, you can break them down into shorter-term goals. Consider these stepping stones, and a lot of these will change as you age. For example, your philanthropic goals. There may be causes you care deeply about now, but that can change.
  3. Actionable steps – Once you have your lifetime goals broken down into manageable targets, it’s time to create steps to get there and I’ll illustrate that using the three examples above.
    1. Philanthropic – Research causes and charities. Pick the ones you most identify with. Review your budget to find out how much you can give. Do a little more research to find out if your donations are tax-deductible (most, if not all, should be).
    2. Health – Establish the specific reason you want to be healthier (for yourself, your partner, your kids, grandkids, etc.). Research a diet that could work for you. Research an exercise regimen that could work for you. Consult experts (i.e. nutritionist and personal trainer).
    3. Financial – Create a budget/spending plan. Cut expenses. Save for emergencies. Insure you and your belongings. Save for retirement.

Here are a few articles I’ve written in the past about financial goals:

Worthy Goals For You To Set And Crush

How Do You Set Financial Goals?

Systems

We can think of systems as the sub-category of actionable steps. A routine is another word for it. When it comes to goals and habits, you can’t rely on will power. You have put a plan in place to do the work for you.

Take exercising for example. You need to create low barriers for yourself. Wear your gym clothes to bed or have your bag packed the night before.

If you go to the gym, put your bag and your keys in a place where you have to pass them to get to your car.

If you exercise at home, have your routine and your equipment laid out and ready for you.

Habits

When it comes to creating habits, James Clear, the author of Atomic Habits, likes to break down the habit into bite-sized pieces.

For example, if your saving for a down payment, go to your banking app and transfer $1 from checking to savings every morning (or whatever amount is realistic for you).

When that becomes second nature, bump it up a dollar a day.

Another thing that James says is, “People ask me all of the time, how many days does it take to create a habit? My answer, all of them because if you stop doing it for one day, it’s no longer a habit.”

External versus Internal

This section is speaking specifically to mental health versus other goals. You could also consider physical health as an internal goal, but for this article internal relates to mental health.

There are several things you can do to work on your mental health. See a therapist, exercise, and start a journal. Those three are low-barrier, easy things you can implement into your day to help.

Meditation, medication, and other forms of mindfulness training/practice can also help. There’s a podcast that I listen to regularly called “10% Happier” that will help you with establishing a meditation practice.

Do some research about this. Meditation can and will take many different forms, and not each modality will be right for you. Reading has also proven to have meditative benefits.

Financial Goals

It really is up to the individual as to what they consider, short, medium, and long-term, but my definitions are as follows: Short-term – less than 3 years. Medium-term – 3-15. Long-term – 15+.

My definitions are almost entirely based on the investability of those assets for that specific time period.

  • Short-term – Emergencies, a new car, what have you. This is money you will need soon, so risking it in the stock market is out of the question. High-yield savings accounts should be your go-to in this scenario.
  • Medium-term – Things like down payments for a house or sending your kid to college. What you’re saving for will dictate the vehicle that you use. If it’s saving for college, a 529 or a Coverdell ESA should do the trick. If it’s for a down payment, your best bet is usually a taxable brokerage account, as there are no fees for early withdrawal.
  • Long-term – This should be strictly focused on retirement. Assets should be in a retirement account(s) and invested (investment selection should be based on risk tolerance and time horizon).

Once you’ve established your short, medium, and long-term goals you can break them down into actionable steps as we talked about earlier.

Wrapping it up

Each New Year brings about resolutions that we hope to achieve. Whether it’s getting in shape or paying down debt, your barometer for success should be progress and consistency.

Are you in a better place than you were on January 1st? Do you have more saved? Are you still committed to the goals you set in the first place?

Yes. It feels great to set a target and hit it, but as far as I’m concerned, if you’re better than you were yesterday, that’s all that matters.

Take it one day at a time and keep your eyes on the prize. You got this!

Related Reading:

How to Set Long & Short-Term Goals (And Reach Them Too!)

Filed Under: College Planning, conservative investments, Investing, Misc., Personal Finance, Productivity, Retirement, risk management, successful investing

Guide to Cash Home Buyers: 3 Ways They Help You Sell Your House

August 24, 2019 by Susan Paige Leave a Comment

Cash home buyers are a relatively new trend, but have become an alternative to selling your house traditionally through an estate agent. Cash house buyers are generally companies with a team of people that are experts in surveying, estimating, buying, and selling houses. By having all of these skills in the business, they don’t have to rely on third-party people or companies to estimate or survey your house. This means you can get an estimate on your house very quickly, and the company will make a cash offer for your house. This comes with several advantages.

Avoiding selling fees

As cash home-buying companies have all of the stuff necessary to make the sale, you avoid the significant fees that come with selling a house. This includes the money spent on getting an estimate, which will usually be done by a third party for a cost. It also includes solicitor fees. Usually, both you and the seller will pay solicitors to do all of the communications and negotiations. With a cash home seller, this isn’t necessary. Some cash home sellers will try to add in a fee for the survey and estimate of the value of your home. If this is the case, then make sure to avoid them, as some can charge over $1000 for this service. Find a company that’s as inclusive as possible.

Quick sale

Most house sales take a considerable amount of time. Depending on if the house is a new build or not, you may find yourself in a chain of sellers all needed to get confirmation on the purchase of their own home before you can buy theirs. If one sale falls through, then you’ll need to wait for your seller to buy a new house before you can move in. This process can sometimes take a year or even more. This is how cash home buyers can help. Because cash home buyers are never in a chain and are buying your house with cash, the time of the sale is reduced significantly. There’s no waiting for your seller to find a new house, and there are no issues with mortgages falling through.

Lower stress

Selling a house is a traditionally stressful job. There’s a lot of money at stake, and the process can take a long time. This is particularly stressful if you need to sell the house of a loved one that has passed, or if you need to sell quickly to get the money to cover another investment. This is where cash house buyers can be very useful. You can get your house sold in a short amount of time with the least amount of stress possible. Be aware that the amount that a cash house buyer will buy your house will typically be 10-15% lower than if you sold privately through an agent. Some of these fees will be covered by the saving you make in fees, though, and the rest can be attributed to the cost of having a stress-free sale.

Filed Under: Real Estate, risk management Tagged With: Real estate, wacky real estate tips

The Questions You Need To Ask Yourself

August 14, 2019 by Jacob Sensiba

Questions are a fantastic way to understand things better. They are vitally important in our everyday lives.

One area where I think they are underutilized is personal finance.

You NEED to ask yourself questions on the regular so you can discern if you are doing the right things and taking the correct steps for YOU.

In the following article, we’re going to explore the various questions you need to ask yourself in order to be financially effective.

What is my goal with money?

This is a fairly general question, so we’ll break it down into three buckets: short term, medium-term, and long term.

  • Short-term (Under 2 years) – If you are saving for a short-term goal, what is it? A vacation? Down payment on a house? No matter the goal, that money will be used soon so the best place for it is in a savings account.
  • Medium-term (2-10 years) – This could be anything from a down payment for a house to saving for your kids’ college education. What you do in the interim depends on when you’ll need it and the goal you are saving for. If it’s less than 5 years, I’d still recommend a savings account or short-term bonds. Something that can earn you a little interest, but is still relatively safe. That 5-10 year period depends on the goal. If there’s a particular dollar amount you need to it (down payment, for instance) I’d go no more than moderately aggressive. You want to earn a little, but you don’t want that saved amount to go under what you need.
  • Long-term (10+ years) – Most often, a goal that’s over 10 years away can be invested in the stock market, though the percentage of your assets that’s actually in the market depends on the risks you are willing to take and when you need to access those funds.

Related reading: Financial planning for all ages

How much am I willing to lose before I sell?

I almost always propose this question to new clients because it gives me a good understanding of their risk tolerance.

If they are only comfortable with losing 10 percent of their portfolio, they’ll be invested pretty conservatively.

On the other hand, if they can tolerate a 50 percent drawdown and not bat an eye, then we can “put the pedal to the floor”, excuse the expression.

Determine how much of a loss you can stomach and that will give you a good idea of how to allocate your assets.

Related reading: Are you taking on too much investment risk?

How long will it take to adjust my allocations?

Questions regarding asset allocation, typically, pertain to risk and time horizon. For example, if you start saving for retirement when you’re 25, the majority of your portfolio will be in equities (stocks).

This allocation, generally speaking, is suitable for you for a couple of decades. At which point, you’ll probably (again, speaking generally) want to shift a little more of your portfolio to bonds.

Your allocation will, and should, shift over time, and once you get within a few years of your goal, the primary objective of your portfolio becomes capital preservation.

Related reading: Why asset allocation matters

Are my actions suitable for my current financial situation?

Financial situation takes everything into consideration (income, debt, spending, savings, etc.) Actions can be anything related to those items.

Specifically what I’m talking about is how much you are saving, how much you are spending, and how much $ you’ve dedicated to paying down debt.

If you have a sizeable amount of debt and not a whole lot of savings, it’s time to cut your spending. Conversely, if you’ve paid down your debt and are ahead of the game with your savings, it would be alright if you loosened up a little and enjoy yourself.

Like everything in life, your personal finances are a delicate balancing act, and when you ask questions, you can figure out how to shift your priorities.

How is my money being spent?

Kind of related to the last point. Tracking your spending to find out exactly where all of your dollars are going is an important step.

Another recommendation I usually make is to create a financial playbook. Here’s a brief outline of how I create a financial playbook:

  1. Big picture – List all assets and liabilities. How much you have saved and how much debt you have.
  2. List your necessary expenses – These are things that you have to pay (rent, utilities, transportation, food, minimum debt payments, etc.)
  3. List your monthly income
  4. Total up your monthly necessary expenses and your monthly income and see how much you have leftover. What’s leftover will help you discern what to do with it.
  5. I would list another line item for “fun,” though I would keep it to a minimum.
  6. What’s left after fun should be saved and used on debt.

Related reading: How to cut your spending

Conclusion

As I said in the beginning, questions help us understand the world, and ourselves, better.

Having a better grasp on why and when we make certain changes or do certain things is a must if we are to be more effective in managing our finances.

Filed Under: budget tips, conservative investments, Debt Management, Investing, money management, Personal Finance, Retirement, risk management Tagged With: money goals

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