The icy grip of death awaits you ☠️

Ah, estate planning. Such a fun exercise. No one wants to think about the end, but we will all smile, so we might as well plan for it. In this week’s podcast, join Matt Robison and I as we explore the importance of planning for your golden years, the ones filled with activity, those that slow down, and even the ones where you may need extra care.

Some of the ideas discussed in this podcast come from the fantastic article by Karen Kreider Yoder and Stephen Kreider Yoder at the Wall Street Journal. Their article entitled “We’re Retired and Healthy. But How Do We Plan for Our Decline?” has a lot of great information and quotes. I’m always trying to learn from those slightly ahead of me (in life), and I highly recommend the retirement series that they are writing.

In this episode, Matt and I discuss:

  • The spending smile 
  • Realistic goal planning
  • Reframing your perspective from what you have to do to what you get to do

Don’t let the icy grips of death scare you. Instead, view retirement planning as an opportunity, not an obligation. By thinking ahead and preparing now, you empower yourself to make the most of your time. Embrace change, seize the present, and shape a future that’s not just secure but also filled with the adventures and experiences you’ve always dreamed of.

Are you ready to create your ideal lifestyle? Let’s Connect.

Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

Be More Aggressive

This week, Matt Robison and I discuss the concept of being aggressive in your investment strategy, especially when you have time on your side. 

Over a 40-year period, historical data shows that investing $10,000 in the U.S. stock market could grow to an impressive $650,000, assuming an average annual return of 11%. Even in the worst-case scenario over the past century, where returns were just under 9%, that $10,000 investment would still grow to a substantial $300,000. 

In contrast, conservative investments like bonds would only see your initial $10k grow to around $50k over the same time frame. This stark contrast illustrates the potential rewards of being more aggressive with your investments.

But, what about Target Date Funds?

Many people rely on target date funds to simplify their investment decisions. These funds automatically adjust your asset allocation based on your expected retirement date. While target date funds are a solid starting point, they tend to include up to 10% bond allocations even when you have decades until retirement.

But, what if the stock market tanks?

One of the main reasons people shy away from aggressive investing is loss aversion, a psychological bias that makes us fear losses more than we desire gains. It’s a natural instinct, but it can hinder your financial progress if you’re overly cautious.

To overcome this bias, it’s essential to evaluate your investments rationally. Consider the worst-case scenario when it came to that $10k investment discussed earlier. Even at the lowest returns, it is still almost 83% more than the return on bonds.

In summary, being aggressive with your long-term investments can significantly enhance your financial success. While caution has its place, don’t let fear hold you back from embracing an aggressive investment strategy. Consider your long-term goals, evaluate your risk tolerance, and explore opportunities for higher returns. With the right approach, you can harness the power of aggressive investing to secure a brighter financial future.

Are you ready to create your ideal lifestyle? Let’s Connect.

Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

Inflation is a Drag

Inflation has a way of eroding the purchasing power of our money over time, making it essential to plan smartly to ensure financial security. In this episode, Matt Robison and I delve into the intricacies of managing finances in the face of rising inflation. Most notably, we talk about the importance of aligning investment strategies with specific timeframes to make the most of your assets.

What does time have to do with investments? Quite a bit, actually. We are currently in a period in which our savings are generating some income. We are seeing a return on CDs, bonds, and even checking and savings accounts. You might find yourself in a situation where you have some extra cash (yay!) but don’t know what to do with it. The most effective financial planning requires aligning your investment choices with your anticipated expenses. 

Consider the following:

  1. Short-Term Needs: Emergency Savings and Upcoming Expenses
  2. Maintain an accessible emergency fund (Cash, CDs or Money Market Funds) for unforeseen financial setbacks.
  3. Allocate cash for immediate needs or short-term expenses like a down payment on a house or a new car and keep those funds in appropriate safe options like cash, CDs, individual bonds or Money Market Funds.
  4.  Medium-Term Goals: Two to Five Years
  5. Consider bonds and bond funds as a way to preserve capital and earn moderate returns.
  6. Evaluate investment options to counteract the effects of inflation on your money by getting some interest payments plus potential upside returns.
  7.  Long-Term Investment: Over a Decade or More
  8. Stocks are the wisest choice for long-term growth.
  9. Companies adjust prices to account for inflation, offering an effective hedge against its impact.
  10. Real estate investments also present opportunities for long-term financial growth.

Inflation can indeed be a drag on financial stability, but with careful planning, it can also serve as a catalyst for creating a resilient investment strategy. By understanding the relationship between timeframes and investment options, you can take steps to navigate inflation’s impact on your finances.

The Logistics Matter

In this week’s episode, Matt Robison and I dive into an often-overlooked aspect of job selection: logistics. While most people prioritize salary and job responsibilities, we emphasize the significance of considering the logistical details that contribute to job satisfaction and work-life balance.

What are Job Logistics?

The term “logistics” here encompasses various aspects of a job beyond the actual tasks performed, including the daily routines, commuting, office setup, and the energy derived from the work itself. How enjoyable are the tasks you have to complete on a day-to-day basis? Do you use the time spent sitting in traffic to listen to audiobooks or tap your fingers on the wheel, becoming more impatient with each passing minute? Do you work next to someone who reheats fish every day for lunch or in the corner of your dark basement with kids running overhead? These logistics can significantly impact your job satisfaction and overall well-being.

Become your own country, so to speak

Job logistics intertwine with family life in a number of ways and it is important to navigate these dynamics as a team. One way to address job logistics in terms of quality of life is to think of your household as its own country. Together, you produce a household GDP (gross domestic product) in the form of daily life. These products include money earned (to sustain the household), time spent (on shuffling kids, homework, etc), tasks completed (housework, yard work, etc.) and social interactions (managing the familys’ social obligations and desires).  Each partner contributes different strengths and responsibilities and not all contributions are financially quantifiable.

Have an honest conversation with your partner about your strengths and preferences in tasks. If you spend all day eyeballs deep in spreadsheets, perhaps you prefer to spend your weekends in the yard or driving kids to various activities. If you work in a hospital, perhaps you prefer the solitude and relative quiet of housework at home. Use the logistics of your job to create a balanced life at home.

The ongoing COVID-19 pandemic has brought the concept of job logistics into sharp focus. The shift to remote work has made people more attuned to the details of their work arrangements, including the frequency of office visits and the value of in-person interaction. Job seekers and employees alike are now paying closer attention to how these logistical factors align with their personal and family needs.

While salary and job responsibilities are undeniably important, consider the broader context of job logistics when evaluating your career options. Crafting a work life that aligns with your personal preferences, or a home life that balances work obligations can lead to greater overall satisfaction on and off the job.

Read the Ingredients – Even on your investment funds

Ever wonder what’s in your index fund? Similar to reading labels in a grocery store, you are likely to find things that you either don’t recognize (erythorbic acid in your frozen blueberries??) or are surprised to find (cane sugar in jarred pasta sauce??). It would serve you well to delve deeper into the components of your investment vehicles, particularly index funds, to avoid potential pitfalls and misconceptions.

Join Matt Robison and I this week as we discuss the various labels you should be paying attention to in the stock market. One of the first label mishaps is not knowing the difference between mutual funds and exchange-traded funds (ETFs). These investment wrappers may contain similar assets but have distinct characteristics such as tax treatment and use in investment strategies.

In case you aren’t completely confused yet, let’s jump into another sticky subject that even has Wall Street scratching its head. You’ve likely explored the concept of value and growth companies, which are commonly used labels to categorize stocks. Growth companies are expected to expand and generate higher future profits, while value companies tend to have stable earnings and lower growth prospects. Understanding these distinctions when choosing investments is key as different funds may focus on either value or growth stocks.

Speaking of funds and Wall Street’s “whoops,” a popular value index fund, the iShares S&P 500 Value ETF (ticker IVE) includes Microsoft which is typically a growth company. Here is where knowing the ingredients of the fund is crucial. 

While it may seem laborious, it is essential to gain insight into the underlying assets and strategies employed by the fund. This knowledge enables you to make informed decisions based on your preferences and risk tolerance.

Stick to the Basics

Would you prefer to  avoid the intricacies of analyzing individual funds altogether? You would do well to stick to three broad categories of funds: 

  1. Total US stock market
  2. Total international market
  3. Total bond market

By investing in these diversified options, you can bypass the need to decipher specific ingredients and still achieve a well-rounded portfolio. (hint: use low-cost index funds that track the above)

In the world of investing, understanding the ingredients of investment funds is crucial for making informed decisions. While the complexities and nuances can be overwhelming, you have the option to either dive deep into analyzing funds or simplify your approach by focusing on broader categories. Whichever path you choose, the key takeaway is to be mindful of what you are investing in and align your choices with your financial goals and risk tolerance.

Your Life Doesn’t Matter

Join Matt Robison and I this week as we explore the idea that our individual lives may not hold significant meaning in the grand scheme of things. Don’t get disheartened, embracing the notion that your life doesn’t matter can actually be a fulfilling and liberating approach to life. 

By acknowledging that our actions have minimal impact on the universe, we can prioritize our personal passions and goals.

Why is that prioritization important? Simply put, it’s how happiness is derived. By embracing the idea that what we accumulate materially doesn’t define us, we can experience a sense of liberation and contentment.

What does this have to do with finance? Well, until you understand what brings you true joy and fulfillment, how can you possibly know how to prioritize your spending and saving? 

Our lives are ultimately finite, and the only resource we can truly control is our time. 

Focusing on experiences and connections rather than material possessions can help align your financial goals which leads to happiness.

Are you ready to create your ideal lifestyle? Let’s Connect.

Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

Rich vs. Wealthy

Rich vs. Wealthy: Do you know the difference?In today’s world, the terms “rich” and “wealthy” are often used interchangeably. However, it’s important to understand that there is a significant difference between the two. While being rich may imply a high salary, luxurious lifestyle, and expensive possessions, being wealthy goes beyond material abundance. In this podcast, Matt and I will explore the distinctions between being rich and being wealthy, emphasizing the importance of financial independence, stability, and a lifestyle of freedom.

Rich: A Mirage of Security 

Fancy cars, luxurious vacations…keeping up with the Joneses could actually cost you your wealth! A false sense of security can prevail among those who consider themselves rich. The allure of an opulent lifestyle can lead to excessive spending, squandering wealth and leaving individuals financially vulnerable. Thus, being rich does not necessarily equate to financial stability.

Wealthy: A Lifestyle of Freedom

On the other hand, being wealthy signifies more than just financial abundance. It encompasses the concepts of financial independence and stability. Being wealthy allows individuals to have the freedom to make independent decisions about their lives, including what they choose to do and when they choose to do it. True wealth is not measured by a specific dollar amount but by the ability to generate income without actively working for it. It grants individuals the liberty to pursue their passions and interests, thereby living life on their own terms.

The roadmap to Wealth

Achieving financial wealth requires a deliberate and strategic approach. Here are a few steps to consider:

  1. Increase your income and prioritize saving: Look for opportunities to enhance your earning potential, whether through career advancement, side businesses, or additional education. As that additional income rolls in, SAVE IT! Continue living life as you had before the financial bump and sock that extra away. Too much to ask? Ok, put a percentage into savings and spend the rest on riches.
  2. Diversify your assets: Invest in a diverse range of assets such as stocks, bonds, real estate, and businesses. This diversification mitigates risks and offers the potential for long-term wealth accumulation.
  3. Plan for the life you want: Develop a comprehensive financial plan that aligns with your goals and aspirations. This plan should incorporate saving, investing, and minimizing debt to ensure a secure and prosperous future.

Remember, becoming wealthy is not solely about the numbers; it is about embracing a mindset and lifestyle that prioritizes long-term financial security and personal fulfillment.

“The rich have money. The wealthy have time.”

Choosing an Estate Trustee

In this podcast episode, we delve into the complexities of estate planning and provide valuable insights to help you make informed decisions when it comes to choosing a trustee. Whether you’re considering a friend, family member, or professional as your trustee, learn how to navigate the process and ensure the smooth administration of your assets.

When deciding upon a trustee to oversee the management of your financial and logistical life plans, it is important to think about the following four W’s:

Who: Choosing a trustee – This is almost like choosing a life partner. The person you choose to be trustee of your estate is someone you intend to have a long-term relationship with. As such, consider the following:

  • Does this person want the job and everything that comes along with it? It’s a long-term commitment so be sure they are willing and available to fulfill trustee responsibilities.
  • Is this person qualified? Be sure to assess the potential trustee’s financial know-how and ability to handle complex duties such as investing trust funds and managing various assets.

What: Co-Trusteeship- Sometimes two heads are better than one. If one of your trustees lacks experience, you might consider adding a co-trustee to combine expertise and relationship dynamics. Some advantages of co-trustees include:

  • Achieving checks and balances for proper administration and accountability.
  • The role of an impartial trustee or trust protector in overseeing trustee actions.

Why: Professional Trustees – Choosing a professional trustee can aid in ensuring continuity and harmony. Why consider a professional?:

  • The long-term nature of estate planning lends itself to professional management since a company can outlive any humans assigned to the task. 
  • Conflicts of interest are commonplace among surviving spouses and ultimate beneficiaries. This can be alleviated by a professional, unbiased third party handling distributions.

How: Selecting the Right Professional Trustee – There are many factors to consider when evaluating professional trustees such as:

  • There are different options for different sized trusts. Look at banks for large trusts and trust companies for mid-sized estates.
  • Cost will inevitably be a concern. Be sure to appraise administrative and investment fees and keep in mind that this expense will be incurred posthumously. 
  • Customer service should also be examined. Choose a firm with a solid reputation, experience, accessibility, responsiveness and ability to collaborate with beneficiaries.

Don’t miss this informative episode, offering actionable advice on selecting the ideal trustee for your estate. Subscribe now to our podcast and embark on your journey to successful estate planning.

Are you ready to create your ideal lifestyle? Let’s Connect.

Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

Financial Misunderstandings

Managing your finances can be a challenging task, especially when it comes to making sound investment decisions and navigating the complexities of taxes. In this podcast, Matt Robison and I tackle some common financial misunderstandings and provide insights into how you can avoid them. 

1) Accounts and Investments are not one in the same

You might have a backpack for hiking, but it’s what’s inside that counts. One prevalent misconception is that the type of account you have determines the success of your investments. However, the truth is that the account is merely a vehicle for holding investments and has no direct impact on their performance. It is crucial to recognize that the key to growing your wealth lies in investing wisely, rather than solely relying on the type of account.

2) Index Funds: They aren’t all the ‘safe’ option

Index funds are often considered a reliable investment option due to their built-in diversification and lower expenses compared to actively managed funds. While they can provide stability and consistent returns over the long term, it’s essential to remember that all investments carry some degree of risk. Educate yourself on market dynamics and timing to make informed decisions.

3) Make sure you are truly diversified

You may eat at a different restaurant every night, but if they are McDonalds, Burger King and Wendy’s, then you aren’t really eating a diverse diet. The same holds true for investments. Diversifying your portfolio across different asset classes and industries can help mitigate risk and potentially enhance returns.

4) Roth IRA Contributions: Know the Income Limits

Contributing to a Roth IRA can be an excellent strategy for retirement savings, as it offers tax-free growth potential. However, it’s important to be aware of the income limits. For single individuals, the maximum income threshold is $138,000, and for married couples filing jointly, it is $218,000. Understanding these limits ensures you avoid any potential tax penalties.

5) Backdoor Roth IRA – Get Professional Help

The backdoor Roth IRA strategy involves converting traditional IRA contributions into a Roth IRA to take advantage of potential tax benefits. However, executing this strategy correctly can be complicated. Stay in your lane.

6) Taxation on Bonuses: It’s not as clear cut as it seems

Receiving a bonus at work is always a cause for celebration. However, it’s crucial to understand the tax implications. While tax is paid when the bonus is received, that money is also considered income so you will owe the difference between what you paid upon receipt and your income tax obligations at the end of the year.

7) DIY is not for taxes at this stage in your life

While filing your taxes yourself may have sufficed in simpler financial times, as your wealth and financial situation grow, so does the complexity of your tax obligations. Engaging the services of a certified public accountant (CPA) or a qualified tax professional can help ensure accurate reporting, maximize deductions, and minimize the risk of errors that could trigger an audit.

8) Pay Your Taxes – Filing an extension does not apply to paying your obligation

Extending the deadline to file your tax return does not mean you can delay your tax payment. Regardless of when you file your taxes, failing to pay your tax liability by April 15 can result in late-payment penalties and accrued interest on the amount owed. Make sure to budget for your tax obligations and submit your payment promptly.

Conclusion:

Avoiding financial misunderstandings requires a proactive approach and a commitment to ongoing education. By recognizing that investment success depends on wise decision-making rather than the type of account, understanding the importance of diversification across all holdings, and seeking professional guidance when necessary, you can set yourself up for financial prosperity. Similarly, staying mindful of tax implications, adhering to deadlines, and leveraging the expertise of a CPA when needed will contribute to a more successful and stress-free tax season. Remember, financial management is an ongoing journey, and by arming yourself with knowledge and sound strategies, you can make the most of your financial resources and achieve your long-term goals.

This episode has information from my great friend Meg Bartelt. You can find the original blog post here.

Are you ready to create your ideal lifestyle? Let’s Connect.

How to Beat the Stock Market

1) How can you beat the stock market?

Low-cost index funds can help you beat the stock market by providing diversification and low fees. Index funds are designed to replicate the performance of a particular index, such as the S&P 500, by investing in all the stocks in that index. This means you get exposure to the market as a whole, which can help reduce risk and increase returns over the long term.

In addition, low-cost index funds have lower fees than actively managed funds, which means you get to keep more of your money. Over time, these fees can add up to significant savings, which can boost your returns and help you achieve your financial goals. So, if you want to beat the stock market, low-cost index funds are a great way to start!

2) Does this approach really beat individual investors?

Low-cost index funds can outperform individual investors by providing broad exposure to the market and minimizing the impact of emotional decision-making.

Individual investors may make decisions based on emotions like fear or greed, which can lead them to buy and sell stocks at the wrong time and result in lower returns. On the other hand, low-cost index funds follow a predetermined strategy that removes emotional biases and is based on market trends and data. They also offer broad diversification, which minimizes the risk of putting all your eggs in one basket.

Additionally, low-cost index funds have lower fees than actively managed funds, which means you get to keep more of your money. Over time, these savings can add up to a significant advantage over individual investors who are paying higher fees for actively managed funds.

Overall, low-cost index funds are a great option for investors who want to beat the market without taking on the risk and emotional biases associated with individual stock picking.

3) Still want to try your hand at individually beating the market? Here’s how:

If you are looking to beat the market, there is no one-size-fits-all strategy that will work for everyone. That being said, there are some general principles that many successful investors follow.

One strategy is to focus on value investing, which involves looking for stocks that are undervalued by the market. This requires doing your own research and analysis to identify companies with strong fundamentals and good growth potential that are currently trading at a discount to their intrinsic value.

Another strategy is to focus on growth investing, which involves looking for companies that are poised for above-average growth. This often involves investing in innovative companies that are disrupting their industries or creating new markets.

A third strategy is to use a momentum-based approach, which involves investing in stocks that have been performing well in recent months or years. This approach relies on the idea that stocks that are doing well will continue to do well in the future.

Ultimately, the best strategy will depend on your individual goals, risk tolerance, and investment philosophy. It’s important to do your own research and consult with a financial advisor before making any investment decisions.

Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

Are you ready to create your ideal lifestyle?  Let’s Connect.