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The FIG Blog
Your Source for All Things Financial Planning, From Concepts to Mindset.
The Insurance Inconsistency
October 26, 2021
As it happens, as we rocket through the endless expanse of space on this blue marble, we accumulate “stuff”. All kinds of stuff become our property. Big things, little things, things we couldn’t live without, things we are unsure we even have, things we don’t know how to use, etc., etc., etc. Outside of family and loved ones, amongst the pile of treasures, garbage, and everything in between, there are a precious, few assets that stand out. These are the things that would often be impossible (or at least extremely unpleasant) to replace on your own should something bad happen to them. Think of your largest assets, home(s), RVs, businesses, vehicle(s). Most Americans would have a tough time buying a new house should the one you own burn down. What about painfully shelling out a large chunk of cash to replace a car that an oak tree fell on top of in a hurricane. Thankfully there exists this little thing called insurance. For those large, important assets in your life, you get them insured, every time, without question. That way should something detrimental happen, you would be made whole again, you are protected. Let me throw this question out there: What kind of insurance do you have on your retirement/investments? Have you ever stopped to consider that your investment portfolio IS an asset just like your home or car? Often, investment accounts are the largest asset a family has, just check yours against the value of your home, car, etc. to see if that includes you. If something detrimental happened to your investment accounts, for a hypothetical example say a market correction drops your account value by 30%, would it not be devastating? After all, this is what is going to be supporting your lifestyle when your working days are through. This precious asset is the legacy you will be leaving to loved ones, charitable causes, etc. Why, oh why do we often not consider using insurance to put a degree of protect these precious assets as well? This is what I call the “Insurance Inconsistency”. People see insuring large, physically tangible assets as a complete “no brainer” yet have an investment account that could possibly be their largest asset twice over and seeking protection for that isn’t really a consideration. Is it because your investment account has always been seen as numbers on a paper you get in the mail monthly or quarterly and is not, for example, a massive 4-wheeled RV you can spot from a mile away and you’ve built a 2-story garage to store? Just ask yourself: Will it be ok with you if a metaphorical hurricane topples a tree onto your retirement nest egg potentially causing your desired retirement lifestyle to be compromised? If your answer is a resounding “NO”, then let’s have a conversation. These protections do exist and can help mitigate some of the inherent market risks as well as provide a degree of stability and peace of mind.
Identifying a Cheater in the Midst
October 20, 2021
Let’s take a trip back to childhood for a minute. A much, much simpler time where your only concerns were getting your homework done with enough time to play outside before it gets too dark. Basketball, baseball, football, hide & seek were always popular past times in my Central Florida neighborhood. We had a solid group of kids (many of which I’m still friends with today) that would get together to play. Well, as it goes with kids playing games, competition comes out and the temptation to push the boundaries of the rules grows. That’s right, the cheating commences. Maybe you exaggerate some contact to call out “foul” in a basketball game to get you to the free-throw line. Perhaps if you kick back that shoe you deemed “first base” a few feet when no one is looking, you’ll be able to throw out the runner easier next time. If you were to find a nice hiding spot in an area nearly “in-bounds” in a game of hide & seek, it’s not REALLY breaking the rules (especially if no one finds you!). We all did it, some of us more than others, and we all know people who never grew out of it! Either way you cut the cake; the cheater is making it more difficult for other competitors to win the game by constantly “moving the goal posts”. One of the biggest “cheaters” in the investment industry is inflation and as all good cheaters go, they hide it well. The average annual rate of inflation since 1979 is at 3.5%. Here’s an example of what this means, consider the amount of goods and service that say, $100 would buy you this year. In order to have the same “purchasing power” (actual value that your money provides) a year later, you would need $103.50 (based on the past 40-year average of 3.5%). Inflation chips away at your money’s value. From an investment standpoint, it chips away at your returns, wealth accumulation, and retirement income and it does it incrementally, over time, so you almost don’t realize it. These small, annual bumps from inflation really add up. The cumulative price increase since 1950 caused by inflation is 917.1%! Consider this: what $100 would have bought you in 1950, you would need $917.10 to equal that today! So, I urge you all, keep an eye on this cheater. Give your portfolio the necessary cushion it will need to weather this storm. Plan to overcome the inevitable mountains, bear traps, and mine shafts it will quietly lay out in front of you on your road to financial success.
The Tightrope Walk of Your Life
October 11, 2021
Well, here it is, the wire pulled tight between 2 fixed, monumental points in your lifetime. You, on the side of retirement, prepared to start the carefully executed walk to the other side which represents more than just “The End.” It also represents success, goals met, a retirement lifestyle lived well on your terms, etc. You take a quick peek over the ledge toward the ground below, representing a “falling short”, a degree of failure, lifestyle concessions made, etc. As nerve racking as this walk may be, it HAS to happen, it will happen, for certain, with or without you and FAILURE IS NOT AN OPTION! So, you take a deep breath, you strap on your rope-walking shoes (your determination to succeed) and grab your balancing pole (your all-encompassing investment portfolio) and start the walk. In life, as in tightrope walking, things… will… happen (it’s all they ever do!). The wind will pick up, rain will fall, your foot will slip, a flock of birds will flutter through your daunting path. Throughout your walk, you will need to hold steady at times, regroup and reassess at times, and make necessary adjustments along the way to avoid the pit of tempered expectations below and end up safely on the other side. This is anxiety inducing. Just typing this blog is giving me a slight case of the shakes and I’m a few decades away from taking my own “walk.” So let me ease the tension a bit here by explaining where the similarities between a terrifying tightrope walk and successfully investing throughout retirement hit a fork in the road. What if you were able to keep all of the goals on the opposite end of the tightrope intact while simultaneously, say… Guaranteeing blue skies? Or blocking/minimizing the wind? Or eliminating birds? Or maybe even strapping on a safety harness fixed to the wire or a safety net below that would not allow you to plunge toward inevitable failure? Does that sound better? Does that bring some peace of mind? Thankfully, unlike tightrope walking, risk mitigation methods, strategies, and products exist in the investment world. A good, thorough portfolio review may reveal that safeguards can be used within your portfolio to put some degree of certainty in the otherwise uncertain, volatile world of investing. When it’s all on the line (literally), let us take a look. We might be able to help infuse peace of mind and make your trek across the wire much smoother. Drop me a line and let’s start the conversation!
Time and Her Constant March
October 5, 2021
“Time is never time at all, you can never ever leave, without leaving a piece of youth” as Billy Corgan eloquently put it in the Smashing Pumpkins hit song “Tonight, Tonight”. This tune was released in 1995. Feels like just yesterday, am I right? However, 1995 was 26 years ago. 26 years in the blink of an eye. How about another fun fact? If you had invested $20,000.00 in a moderate allocation that earned you an average annual return of 6% compounding interest in 1995, when this song was released, your account value would be $90,987.66 today, and that’s if you didn’t kick in another red cent of principal. That’s a 454.9% return. So, to recap, a one-time, moderate sum of money is invested, a moderate average annual return is made, and you’ve nearly QUINTUPLED your money! Just imagine if you had $50,000.00 to throw at it in ’95? ($227,469.15 today!) or even kicked $100,000.00 in back then?? ($454,938.30 today!!). It might seem pretty wild for just a 6% compounding annual return, but this just illustrates the massive role that time plays on your financial future.
Often overlooked, time is just as critical, if not more so, than any other investment consideration, yet it is not always treated as such. The major factor that plays into this detrimental mindset is that getting the ball rolling with your investment plan is very easy to put off. I totally get it. Maybe you’re in the throws of your working years, possibly raising a family, and the idea of retiring isn’t even on the horizon. Maybe you’re retired comfortably with extra cash on hand that you intend to pass along to your heirs. “What’s the hurry? We don’t need it”…“We’ll get around to it one day”, you might say. Ready or not, one thing is for sure, time will march on, and on, and on, and on, and you NEVER get it back. Once the years of missed investment opportunities to secure your retirement income goals pass, they’re gone. Or maybe you miss years of returns that could have padded the legacy goals you set for your heirs…you can kiss them good-bye (unless, of course, you find yourself alongside Doc Brown in the sci-fi classic film “Back To The Future”, which came out in 1985… 36 years ago… $20,000.00 at 6% compounding interest for 36 years would yield you $814,725.20 today!! Great Scott!!). What, if anything, is holding you back from starting the clock on your investing? Reach out and let’s start the conversation. I’ll be happy to make the… time… I’ll see myself out.
Create Your Own Security
September 28, 2021
On August 14, 1935, President Roosevelt signed into law the Social Security Act which allowed American workers, by way of taxation, to fund a portion of their retirement. The basic concept was simple, you pay in throughout your working years to then receive that money back to help subsidize your life throughout retirement. Who doesn’t like this? What could go wrong? Well… a lot, as it turns out. Let’s look at a few of the factors that have Social Security on the brink of extinction. Life Expectancy: in 1935 the average life expectancy was 59.9 years of age, today (even at it’s lowest level in 2 decades) is 78.99 years of age, the discrepancy between retirement age and longevity throughout the years has eroded Social Security funds. The Baby Boomers Calling it a Career: the population “boom” of the 1950’s and 1960’s has made up a huge chunk of the workforce (a.k.a. Social Security Contributors) for the past 5 decades or so and this mass exodus from the work force is resulting in a massive “boom” in Social Security benefit collection coupled with a massive decrease in Social Security contributions. Basicially, there’s a lot more money going out than coming in, A LOT. Shrinking Workforce: we have become a country of diminishing population. Due to social and demographic changes, the birth rates in the US are below replacement level and, for our purposes in this blog, less people, less workers, less contributors toward Social Security. So, it seems a perfect storm for the complete collapse of Social Security without some form of intense intervention. The bottom line is, (unless something changes) Social Security will be bankrupt in 2035 (this according to the Social Security Administration), and if you’re keeping score, that’s a mere 14 years out. But… Do not get too worried, THERE IS HOPE! That hope is you and your willingness and ability to take action and grab your own future financial well-being by the horns to create your own streams of income, your own “security”. This way, if somehow Social Security is saved, it’s just icing on the cake for your retirement cash flow and not a gaping financial hole for you, should it stay on it’s current course to obliteration before today’s babies reach high school.
What do you think is going to be the fate of Social Security? Want to make sure you’re prepared to live the life you want with or without Social Security, give us a shout.
Don't Be The Dragon
September 15, 2021
What is it about money that has many of us clamoring to acquire and hoard as much of it as possible? Is it the crisp texture of a nice new “Benjamin”? Is it the joy in the lower back pain of sitting down on a wallet that is overstuffed with greenbacks? Is it the excitement in counting “zeros”, right to left at the end of your bank or investment statements? Or how about the idea of taking your final breath atop a mountain of riches like a dragon in a conquered castle somewhere far, far away? I doubt it (not that these aren’t fun to think about), yet some of our emotionally guided instincts can lead us to seeing wealth more like the dragon and not viewing it for what it simply is… A means to an end. The dragon misses the whole point. The dragon focuses on the tool itself rather than the wonderful things it should be used to facilitate. The dragon is enslaved. We would all do well to take some time to set the focus on the almighty dollar aside and place it squarely on the “what’s it all for's”. What does your ideal life look like and what is important to you? Golf 4 or 5 days a week? Jump in the RV and travel the country? Fly out to visit the kids and grandkids as often as possible? Leave a legacy for your loved ones, charitable organizations, etc.? Or maybe it’s simple financial freedom to live your day-to-day life knowing for certain that money will never again be a concern? Identifying these life goals for yourself and your family is the proper starting point for a healthy and productive relationship with money. Now, stepping back and exploring the best ways to get you there, that’s where I would love to help! Whichever way your desired path leads, make sure it’s the “important things” leading the dollar and not the other way around. Don’t be the dragon!
Drop me a line and let me know what your ideal future looks like!