Student of the Market - August 2022

Stay ahead of the markets with timely insights by uncovering the latest on the global economy, geopolitics and retirement, among other timely investment ideas - Student of the Market - August 2022

Finding Purpose Every Day

What is your money for?

That's one of the most important questions that our planning process helps people to answer. If the purpose of life was just to make more money, then no one would ever stop working. The best use of our time and money leads us to more meaningful experiences that helps us grow as individuals, connects us with our loved ones, and makes a positive impact on the world around us.

If the hustle and bustle of life and work have come between you and your sense of purpose, try this three-step process to get back in touch with what matters the most.

1. Reflect on your purpose.

Perhaps the biggest obstacle between ourselves and our sense of purpose is finding time to reflect. Schedule a block of time to simply sit, relax, and think about where you are in your life right now. You might try meditating, journaling, or even light exercise as a way to tune out the rest of the world and clear your head.

So much of our identity is wrapped up in what we do for a living that it's important to think beyond how we earn money. Think about the people who are most important to you and how you work on those relationships. Think about the interests you had when you were younger, the courses you took, and how those things led you towards your career or away from another line of work. Envision a week when you didn't have to work at all and think about how you would spend your time.

After working through these questions, you might find that you're already more connected to your life's purpose than you realized. Or you might identify potential changes that you want to spend more time thinking about, such as building more self-care into your weekly routine, taking online classes to learn a new skill, or even contemplating a new career.

2. Focus on the little things.

Very few people get to spend every second of their day doing exactly what they love to do. The trick to getting through the inevitable drudgery is to cherish those moments when you are putting your talents to their most meaningful uses.

For example, the pandemic era has been particularly stressful on medical professionals. Doctors and nurses have had to contend with challenging work conditions, grumpy patients, staff shortages, and delivering the worst imaginable news. But they've also deepened their bonds with coworkers, exercised all their skills and knowledge, learned new things, and helped countless people through serious illnesses.

Every job has those moments of purpose that we should all spend more time focusing on. No matter what you do, there's an end customer whose life you're making better, a co-worker you're teaching or learning from, a problem that you're able to solve, or a family member who benefits from the fruits of your labor.

3. Take more purposeful actions.

 If your workday is so full that you can't build more purpose into it, you might need to be more mindful about how you spend your time outside of work. Volunteer at a school or charitable organization. Teach or mentor the next generation of professionals in your field. Wake up an hour earlier so that you can devote some extra time to your exercise goals or hobbies. Invest in more purposeful relationships by leaving work at work and focusing your free time on friends and family.

Or, if your current job just isn't improving your Return on Life, start working on a plan that will help you make a smooth transition into your next phase of life.

We want your Life-Centered Financial Plan to connect your life, work, and money in a purposeful way. Schedule a meeting to discuss how we can help you get more from your money and live your best life.

Understanding the Pros & Cons of Series I Bonds

Purchase Limitations, Lock-up Period, & Real Returns All Need to be Evaluated

Series I bonds are U.S. savings bonds designed to protect the value of your cash from inflation. And with inflation surging to 40-year highs, investors are especially interested in higher-returning, lower-risk investments.

But before making a decision to rush out and buy I bonds, make sure you understand the pros and cons first. This is critically important given that most will instinctively leap to own a security that pays out an annual rate of over 9% – but like any investment – know what you’re buying before you buy.

Taken directly from the U.S. Treasury Department:

“What’s an I bond?

A Series I savings bond is a security that earns interest based on both a fixed rate and a rate that is set twice a year based on inflation. The bond earns interest until it reaches 30 years or you cash it, whichever comes first.

What’s the interest rate on an I bond you buy today?

The fixed rate is locked-in for 30 years and is currently set at 0.00% for new bonds purchased today. The inlfation rate changes every six months in May and October (currently earning interest at an annual rate of 9.62 percent).

This is an important consideration because although the rate is currently very attractive, it is only maintaining it’s purchasing power due to high inflation. Compared to deposit accounts at the bank this is a good alternative. Keep in mind however that there is an opportunity cost for holding I Bonds for the long-term compared to stock investments that may provide better real (inflation-adjusted) returns over longer periods.

Who may own an I Bond?

Individuals: Yes, if you have a Social Security Number and meet any one of these three conditions: 

• United States citizen, whether you live in the U.S. or abroad 

• United States resident 

• Civilian employee of the United States, no matter where you live 

To buy and own an electronic I bond, you must first establish a TreasuryDirect account.

Children Under 18

Yes, if they meet one of the conditions above for individuals.

Information concerning electronic and paper bonds:

• Electronic bonds in TreasuryDirect. A child may not open a TreasuryDirect account, buy securities in TreasuryDirect, or conduct other transactions in TreasuryDirect. A parent or other adult custodian may open for the child a TreasuryDirect account that is linked to the adult's TreasuryDirect account. The parent or other adult custodian can buy securities and conduct other transactions for the child, and other adults can buy savings bonds for the child as gifts.

• Paper bonds. Adults can buy bonds in the name of a child.

How can I buy I bonds?

• Buy them in electronic form at TreasuryDirect.gov

• Buy them in paper form using your federal income tax refund

What do I bonds cost?

You pay the face value of the bond. For example, you pay $50 for a $50 bond. (The bond increases in value as it earns interest.) 

• Electronic I bonds come in any amount to the penny for $25 or more. For example, you could buy a $50.23 bond.

• Paper bonds are sold in five denominations; $50, $100, $200, $500, $1,000

How much in I bonds can I buy for myself?

In a calendar year, you can acquire:

• up to $10,000 in electronic I bonds in TreasuryDirect

• up to $5,000 in paper I bonds using your federal income tax refund

Three Points:

• The limits apply separately, meaning you could acquire up to $15,000 in I bonds in a calendar year

• Bonds you buy for yourself and bonds you receive as gifts or via transfers count toward the limit. Two exceptions:

• If a bond is transferred to you due to the death of the original owner, the amount doesn't count toward your limit

• If you own a paper bond issued before 2008, you can convert it to an electronic bond in your account in TreasuryDirect regardless of the amount of the bond. (The annual limit before 2008 was greater than today's limit of $10,000.)

• The limits are applied per Social Security Number of the first person named as owner of a bond or, for an entity, per Employer Identification Number

Can I buy I bonds as gifts for others?

Yes.

• Electronic bonds: You can buy them as gifts for any TreasuryDirect account holder, including children.

• Paper bonds: You can request bonds in the names of others and then, once the bonds are mailed to you, give the bonds as gifts.

How much in I bonds can I buy as gifts?

The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for.”

MAKE SURE YOU UNDERSTAND I BONDS

One very important detail to especially keep in mind is that you need to hold your I bond for at least one year. And if you hold it for less than five years, you lose three months worth of earnings when cashing out.

Maybe the tax benefits and the protection against inflation are appealing to you. But like any investment, make sure I bonds fit well within your overall financial plan.

The Heat of Summer Reminds Us to Be Flexible

Your Financial Plan Must Be Adaptable Too – You Don’t Set it and Forget it

As summer heats up, it pays to take a good look at how flexible you are. When you plan for the future, you need to be adaptable. No one knows what tomorrow holds.

This is certainly true in the world of work. In just over a month from now we will celebrate Labor Day. In 1894 President Grover Cleveland signed Labor Day into law as a federal holiday to placate unions, following a bloody and tumultuous strike at the Pullman Co., which made railcars. Today, the break on the first Monday of September is less about labor and more about recreation, cookouts, and the mental end of summer.

To some, labor merely is about a job or the lack thereof. For others, the concept of labor transcends a job. It’s about a career, economic stability for self and family, satisfaction, fulfillment, success, and a sense of mission – a calling. Consider a young person attempting to think about a future of work that may span 50 to 60 years or more. How does one grasp a fast-changing world to formulate a job or career strategy, and an investment strategy to accumulate capital needed to fund their secure future?

Don’t Be Left Behind

Have you ever participated in one of those “future think” company planning sessions? You know, the one that asks where you want the company to be 5, 10, and 15 years from now?

A senior executive of a firm recalled the effort to formulate a five-year plan when he was in top management at a Fortune 500 company. When the plan was completed, the chief executive officer told her team, “If we execute this plan exactly as we have laid it out, in five years we will be out of business.”

Having deflated the egos of those who labored to produce a creative plan, she explained that the world and marketplace in five years would be totally different. If they did not change the plan as they went along, they would be left behind, becoming obsolete and less profitable.

We see examples in the stories of:

• Microsoft, one of the glowing success stories of the last century, now competing with Apple and Google. Personal computer sales, the historical mainstay of Microsoft, have been eroding for years as users switch to smartphones and tablets. But Microsoft has adapted.

• Canada’s Research in Motion was a global leader in wireless innovation, having revolutionized the mobile phone industry with the introduction of the BlackBerry in 1999. The company found itself on the ropes as the iPhone became the “must have.” Blackberry users went dark on January 2, 2022.

• Sears for years was an appliance sales leader with its Kenmore brand. For a myriad of reasons, Home Depot, Lowe’s and a host of other competitors cut into Sears’ profits. In 2018, Sears filed for Chapter 11 bankruptcy protection and as recently as May 2022, announced the closing of about 100 stores. This store-closing-wave leaves about 750 Sears stores remaining – down from approximately 3,500 at its peak.

Remain Flexible

The message? Flexibility counts. Anticipating change counts, with Plan B or even C at the ready. A plan, whether a career plan, a financial plan, or a life transitions plan is a road map. Every road is subject to disruption, detours, potential dead ends and rabbit trails.

Yes, you want a concept of where you will be in one, five, ten years and beyond. But any plan must be dynamic, fluid, and adaptable. You cannot set it and forget it.

Every money manager has a turnover ratio, the average percentange of stocks sold every year. Stock buys may disappoint and underperform. Other stocks may reach a targeted sell point and be sold in favor of a better bargain.

Asset classes may underperform or outperform in the short run and then change direction. Assumptions may appear wrong near term, and turn out to be sound in the long run. Diversification is important, as crystal balls are fallible.

Everyone, whether a breadwinner, a stay-at-home parent, a retiree or an investor, should have a contingency plan to deal with personal setbacks, career reverses and market disruptions because stuff happens. Change is the only constant. Well, death and taxes are also. Have you reviewed your “what if?” plans lately?

Labor Day will signal that the fourth quarter is less than a month away. Have you reviewed next year’s tax strategy? Christmas and holiday promotions will be here before we know it. Have you started planning for next year?

Make your summer …and life plan flexible.

Student of the Market - July 2022

Stay ahead of the markets with timely insights by uncovering the latest on the global economy, geopolitics and retirement, among other timely investment ideas - Student of the Market - July 2022

Market Commentary 2nd Quarter 2022

Please click on the following link for a full review of the 2022 2nd Quarter Market Review

Do You and Your Spouse Have Congruent Spending Habits?

Most married couples take a “divide and conquer” approach to household tasks and chores. One spouse might handle weekly shopping, the other might handle garbage and recycling. One spouse might handle laundry and cleaning, the other might handle yardwork and maintenance. One spouse might drive the kids to school, the other might handle pickup and extracurricular activities.

But household spending and budgeting is one of those responsibilities that’s best tackled together. Money issues are one of the biggest sources of marital tension, and a leading factor in divorces. Here are five ways that you and your spouse can make sure you agree on your household spending, avoid surprises, and maximize the Return on Life ™ your money provides.

1. Have an open and honest discussion.

Many couples assume their attitudes about money are aligned. Then one day the roof needs an emergency repair that taps a savings account, or someone walks in the door with an unexpected splurge purchase (or worse yet, hides it!).

Stressful situations are not the ideal time for a couple to discover significant differences in spending habits. Sit down with your spouse and have a thorough review of your finances and your monthly budget. Find compromises that will allow you to save for the future while still enjoying your present.

2. Understand the total household cash flow.

In many households one spouse often handles all of the bill payments. This can lead to misunderstandings and arguments about where the money goes every month.

Both spouses should understand how much the household spends every month and how your bills get paid. If you’re the one who’s usually in charge of bills, take an hour to walk your spouse through your process. Show him or her which bills are paid electronically, which are paid by check, the monthly amounts, due dates, etc. This won’t just help both spouses understand the monthly cash flow, it will ensure that both spouses can handle household finances in the event of an emergency.

3. Be transparent about all assets and liabilities.

Newly married couples might still have banking or credit accounts that are only in the original account holder’s name. The other spouse might not find out about these accounts until a credit card is maxed out, or a checking account is overdrawn.

Again, the less stressful your reason for talking to your spouse, the more positive the outcome will be. Financial secrets tend to come out at the worst times, compounding stress, hurt feelings, and strain on your budget.

Your spouse should be a cosigner and beneficiary on all of your accounts and vice-versa. If one of those accounts carries a large liability, get out in front of the problem and talk about how to start paying it down. Discuss the ramifications of combining any large individual assets with a tax professional or your financial advisor.

4. Agree on a budget.

If one spouse is responsible for budgeting and bill pay, that person often becomes The One Who Has to Say “No.” No eating out this week. No weekend trip to the waterpark. No new cell phones. No new clothes.

No fun!

Nobody likes being in that position, especially if you’re saying “No” to your children. Eventually, you or your spouse will resent being The One Who Has to Say “No.” You should both understand the household’s monthly cash flow and agree on how your money is – and isn’t – spent.

5. Get help

WFP clients have access to a tool within our financial planning software that help households set and maintain a budget. If you’re a small business owner, Intuit offers a line of bookkeeping and tax prep solutions to fit any needs. Automating select bill payments and regular contributions to retirement and savings accounts can also help to clarify your monthly budgeting picture.

Finally, if there’s a spending gap between you and your spouse that seems impossible to bridge, we can be an excellent resource. It’s important to us that we understand where clients’ attitudes about money come from, how they’ve developed, and how they can diverge between couples. Facilitating this dialogue is key to making sure both people have the best life possible with the money they have…and we can help you do that.

Five Lessons To Remember During Bear Markets

The Stock Market has been trying to teach these lessons forever…

The real value of a bear market may be that it gives investors, who are temporarily frozen within its grip, the opportunity to learn or relearn important lessons regarding risk and diversification.

For savvy investors, a bear market also creates a period for looking beyond emotional headlines and studying the hard facts – facts that can ultimately place them in a position to take advantage of coming opportunities.

Periods of falling equity prices are a natural part of investing in the stock market. Bear markets follow bull markets, and vice versa. They are considered the “ebb and flow” of wealth accumulation.

Staying Calm Can Pay Off

Bear markets create apprehension in the minds of many people. That’s natural. However, any feelings of anxiety should be balanced with reason for anyone seeking financial success.

Anyone dubious about the need for a stable outlook should consider that virtually every bear market was followed by a better than average annual rate of return from the subsequent bull market. 

Five Lessons to Understand

Instead of taking a “time out” from the market, and missing out on potential opportunities, investors should focus on five key lessons the market has repeatedly been trying to teach everyone during its naturally occurring economic cycles:

1. Periods of falling prices are a common part of investing in the stock market.

2. An investment’s value will be greatly influenced by fundamental factors, such as profit and revenue growth.

3. Diversification, while it does not assure against market loss, often provides the safest haven against the ebb and flow of changing markets.

4. Invest over time, rather than make single lump-sum purchases. In other words, falling stock prices are the friends of dollar cost averaging investors (of course dollar cost averaging cannot guarantee a profit or protect against a loss in a declining market).

5. Take a long-term view when investing in the stock market. Short-term fluctuations are natural. (The investment price and underlying business often have little to do with each other over the short term.)

Planning Matters

Remember that you’ll be inundated with all kinds of economic information during both bear and bull markets.

There will be reports, for example, about inflation, interest rates, and unemployment figures that may entice you to either give up on the stock market or invest in it to the exclusion of investments paying relatively smaller returns.

To avoid being lured to either extreme, develop a financial strategy that accounts for risks you find comfortable.

Review your investments on a regular basis to help ensure they are still relevant to your overall financial plan, and that you’re staying on track.

Then trust yourself and stick with the plan.