The coronavirus pandemic has wreaked economic havoc in recent weeks, causing unprecedented levels of unemployment, extreme stock market volatility and falling consumer confidence and spending across the board. It even spurred major financial players like Jamie Dimon, CEO of JPMorgan Chase, to predict a “bad recession” on the horizon.
If he’s right and the economic downturn continues, Americans will need to act fast to recession-proof their finances — especially if there’s debt on the table.
Recession-proofing your debts
Credit cards, mortgages, and student loans can all complicate things when times get tough, and it’s important to take steps to get ahead if you want to keep your head above water when things get hard.
As Mike Desepoli, vice president at Heritage Financial Advisory Group, put it, “Navigating a recession can be difficult enough, but it’s increasingly more difficult when you’re saddled with debt. A job loss during a recession could set off a spiral of financial issues from missed mortgage payments, student loans and credit cards. In difficult times, it is important to control what you can and prepare yourself in advance.”
Here’s what experts say to do before it’s too late:
“Start by focusing on your highest-interest balances,” Desepoli said. “These are the debts that are most damaging to your finances because they compound so quickly. This may cause you to redirect some of your monthly payments from lower-interest vehicles towards the higher ones. Your out-of-pocket will remain the same, but you will be having a more profound impact.”
Consider a balance transfer
Transferring your credit card balances to a new, zero-interest card can be a good option. This allows you to consolidate your other balances and pay no interest for a set period of time — usually at least six months or more.
While these promotional offers are generally widely available, according to Ted Rossman, industry analyst for CreditCards.com, they may be hard to come by in today’s economic climate.HOW TO AVOID HAVING YOUR CREDIT CARDS CLOSED
“You probably need a steady job and a credit score of 700-plus in order to qualify for the best balance transfer credit cards these days,” Rossman said. “If this describes you and you have credit card debt, I’d recommend signing up for one of these cards as soon as possible. You can save hundreds or thousands of dollars in interest, depending on how much you owe. And you can get a long runway — up to 21 months — with no interest being charged.”
Refinance student loans and mortgages
If you’ve got student loans, a mortgage, or a personal loan to your name, refinancing might be an option. The goal here would be to lower your interest rate, thus lowering your monthly payment as well as the long-term costs of your loan. You can then use those savings to pay down your debts faster or help offset any financial strain you’re dealing with.HOW TO RECERTIFY YOUR STUDENT LOAN INCOME-DRIVEN REPAYMENT PLAN?
A word of caution here: If this is a route you’re considering, you’ll need to act fast — especially if you expect your income or job may be effected in the impending recession. These changes could impact your ability to refinance (or the rates you’d qualify for when doing so).
If refinancing isn’t possible, a debt consolidation loan could be another option — as long as it would lower the total interest you’re paying, thus freeing up more cash.
Ask for help
Many financial institutions and credit card companies have options for consumers who are dealing with financial hardship. These can include loan modifications, repayment plans, deferment, forbearance and more. The recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act also offers a number of options if you’re unable to pay your rent, mortgage or student loan bills.
“Most banks are offering hardship programs that allow cardholders to skip payments — sometimes even without interest,” Rossman said. “Sometimes they will lower your interest rate upon request, waive other fees, and even raise your credit limit in some cases. As long as you have permission to pay late or to pay less for a time, this won’t hurt your credit score. Help is available, but you need to ask for it.”
Have a financial safety net
You should also figure out ways you can start cutting back expenses (could you reduce 401(k) contributions, for example), and start funneling those savings into an emergency fund.
In most situations, experts recommend having at least six months of household expenses saved up, but given the current economic uncertainty, it might be best to go beyond that — potentially up to a year of expenses — just to be safe.
This article was written for FoxBusiness.com by Aly Yale.
When Ellen Latham lost her job managing a Miami spa in 2000, she was a single mother to a 9-year-old and terrified she wouldn’t find work. She used her background in physical education to make ends meet, eventually turning her at-home Pilates class into Orangetheory Fitness, a fast-growing exercise brand that in 2018 booked $180 million in revenue.
Latham founded her Boca Raton, Florida-based company in 2010 with franchise-industry veterans David Long and Jerome Kern. They started with the premise that customers might experience better results if they were more attuned with how their individual bodies respond to exercise. The company achieves this with the help of wearables that track exercisers’ heart rates, inclines, speeds, and calories burned. The “orange” in Orangetheory refers to the “orange zone”–that is, a period of time in which a person’s heart beats at optimal efficiency. Ideally, customers should aim to spend at least 12 minutes in this zone during each 60-minute coach-led fitness class.
After hitting this point, a person’s body will work harder later to recover oxygen lost during exercise, which can accelerate the metabolism and help burn calories, says Latham. People don’t keep coming back to the gym for its orange motif, she says. “They are coming back because they get results from their workouts.”
And that’s led to significant growth for the boutique fitness brand. Indeed, in the last year, Orangetheory added 219 franchise locations and one corporate-owned studio across the U.S and India, bringing the company’s global tally to more than 1,300 franchise locations. It has also built a cult-like following among members–with some devotees getting tattoos of the company’s logo, notes Latham. Meanwhile, its two-year revenue totals shot up 341 percent since 2016, helping Orangetheory hit No. 35 on the 2020 Inc. 5000 Series: Florida list, a ranking of the fastest-growing private companies in the state.
While the company can credit much of its past success to helping customers understand their orange zones–and cultivating a community of superfans–its future success has everything to do with being able to deliver a fuller picture of customers’ health.
Part of that strategy rests in Orangetheory’s use of wearables. While the company started out simply strapping heart-rate monitors to people’s chests, in recent years it has begun selling the technology. Though customers can still borrow devices during class time, they can pick between four different versions of proprietary wearable devices. The gadgets cost as much as $129 and may be worn around the chest, wrist, or arm.
While Long says the devices account for just 10 percent of Orangetheory’s sales, the hope is the technology will become more popular with users, as the company builds out its offerings. In December, Orangetheory partnered with Apple to create a wearable that attaches to the Apple Watch, so customers can track a wide range of fitness and wellness data.
“We believed in it so much and it was a big focus of the brand early on,” says Long, Orangetheory’s CEO. “We wanted to build a wearable that was easy to use and helped us pick up massive member engagement.”
The company is also looking into joining the at-home fitness craze by releasing content on wellness topics, such as sleep, nutrition, and recovery guides. That’s a step in the right direction, says Andrea Wroble, a health and wellness analyst with the market research company Mintel–though she thinks Orangetheory could go further by streaming its classes. Home workouts have proved to be a promising way to scale for some companies–and that could deliver dividends for Orangetheory, she says.
Orangetheory’s plan to expand further into fitness tracking is a good one, because it could help the company build a stronger connection with its community, adds Wroble. “It creates a partnership with followers where the company can crowdsource ideas and the community feels seen and heard,” she says.
Still, standing out in the boutique fitness industry, which has exploded in size in recent years, may be tough for Orangetheory. In 2019, the U.S. health and fitness club industry reached an estimated $34.5 billion in revenue, amid different concepts like gyms and class studios, according to Mintel.
What’s more, at-home fitness incumbents like Peloton and Mirror are already doing a sizable business and gaining widespread traction among users. So elbowing in on that market might be tough.
Latham isn’t deterred. “We’re not trying to create another fad in fitness. We are still appealing to huge masses and getting new clients,” she says.
To that end, Orangetheory continues to grow its physical presence, which should bolster its bottom line. Individual franchises cost between $576,000 and $1.5 million to start, which includes a $59,950 initial fee. The company hopes to reach 2,200 locations worldwide by 2025.
This article was written by Emily Canal and published by Inc.com.
“Spend every dollar as if it were your last.” This is a quote from Sequoia Capital, a leading venture capital firm in Silicon Valley. No, this was not a quote from yesterday but from 2008 when we entered what would be called the “Great Recession.” While the coronavirus is probably not going to lead the USA or the world into a recession, it certainly will cause a significant disruption.
Perhaps, not so ironically, Sequoia just issued another message to its funded companies last week where they communicated that the “Coronavirus is the black swan of 2020.” The message had three parts. One, stay healthy and safe regarding family and friends. Two, disruptions are/would be occurring as it related to business revenue, supply chain and travel. Three, they offered advice and counsel across six major areas that included cash runway, sales and marketing forecasts and critical operations expenses.
While the effect of the coronavirus seems surreal and that opportunities are limited, remember this: lots of successful companies have been created in downturns. Adversity sometimes brings out the best in us as we move to be as creative and innovative as possible, not to succeed but to survive. Uber, AirBnb, WhatsApp, Square, Pinterest, Slack and Twilio were all started in 2008 and 2009.
Here is some advice that pertains to funded startups, startups seeking funding and also to small businesses.Today In: Small Business
Manage your cash. You know the saying, “save your money for a rainy day”; well, that day is now. Examine the cash you have on hand and imagine how you could make it last for at least six to nine months. And it you don’t have enough cash on hand, look at how you could cut expenses or increase sales by doing something different.
Examine or revise your sales forecasts. Don’t fool yourself and believe your most optimistic projections. Get very realistic. The goal is not to hunker down and hide but to devise or brainstorm ways you could actually sell more of your products or services. Perhaps it’s new markets, customers or leveraging a partnership.
More creativity, less cash for marketing. Remember when you started your business and had no money and you were super creative on using word of mouth, organic social media and key networks to sell your product or service? Well, get back into that mentality. Be more creative with respect to your marketing expenses and look for ways to use marketing tactics that don’t have a significant cost.
Control employee expenses. As you examine your business, look to control expenses related to employees. Travel and event costs probably can be controlled. If you were looking at increasing your business footprint, you might want to hold off on any additional monthly rent expenses. Instead, see if you can temporarily reduce your expenses by not hiring any additional employees, perhaps use freelancers or contractors. Also, let your current employees work remotely. To help with any workload issues, consider hiring a college intern.
Spend every dollar as if it were your last. Okay, this sounds a bit extreme but you need to embrace the mentality that you need to protect the lifeblood of any business. Cash. Either cash going out in the form of expenses or cash coming in from revenues. You might also be able to negotiate with your suppliers or landlords, letting them know you need some form of cooperation in order to survive. If you do cut employee expenses, look for ways to inexpensively keep employee morale high.
Startups and small businesses that survived 2008 and beyond didn’t take life-threatening risks with their companies. Survival mattered more than market domination. Take the necessary steps so that you come out of this disruption stronger than ever.
Once in a great while, an athlete comes along who performs incredible in-sport feats, all of which pale in comparison to the kind of man or woman they are outside the sport. On Wednesday night, that elite group slipped a member’s jacket over the shoulders of Dwyane Wade.
That’s when Wade played his last NBA game, suiting up for the Miami Heat, who narrowly missed making the playoffs. The Heat lost to the Brooklyn Nets 113-94 but Wade managed 25 points, 11 rebounds, and 10 assists–the coveted triple-double.
The class act gave his final act in front of opposing but adoring fans who gave him repeated standing ovations. Also in attendance were friends LeBron James, Chris Paul, and Carmelo Anthony–an indication of just how respected Wade is.
After the game Wade thanked all the people who helped him along the way–one classy final assist.
You could be dazzled by Wade’s on-court accomplishments: three NBA championships, 12 consecutive all-star appearances, the 2006 finals MVP, and his 2009 scoring title. But Wade’s greatest skill isn’t his basketball prowess. It’s his in-all-ways impressive emotional intelligence. A skill he wields as a leader that every leader should strive to emulate.
In 2011, Wade’s Heat unexpectedly lost in the NBA finals to the Dallas Mavericks. Throughout the season, superstar teammates Wade and LeBron James showed friction that needed mending.ADVERTISING
After that finals loss, their families took a vacation together to the Bahamas. Wade recently told Sports Illustrated that the 2011 season made him realize LeBron was better than he was. It made him want to better himself–off the court. He made his move to do so during that family vacation. As he told SI:
I knew that LeBron could go to a level that I couldn’t go to. And I wanted to take a little bit of that ‘looking over his shoulder’ mentality away. So I said, go ahead bro,’ be your great self and we will all figure out how to be great around you.
Miami Heat head coach Erik Spoelstra said this of the gesture:
How many guys are willing to do that? He’s emotionally stable and has an incredible emotional intelligence. That’s when our team really took off, when LeBron was able to be the best player on the galaxy. Dwyane kicked that off.
Wade’s astonishing EQ was celebrated on Tuesday in a now-viral Budweiser ad that honors Wade for being “so much more than basketball.” Watch for yourself, but be warned, your defenses are useless. It doesn’t matter whether you’re a basketball fan or not: You will need a tissue.
The video lauds Wade for honoring Joaquin Oliver–a Parkland shooting victim who idolized Wade–by writing his name on his sneaker. For taking a family on a shopping spree after their house burned down. For paying full college tuition for a girl whose family couldn’t afford it. For giving words of encouragement to a young man who hailed from a place where people don’t fare well. For supporting his wayward mother through a prison sentence, and buying her a church thereafter.
Wade, as one of the people in the video points out, simply cares.
Of the commercial, Wade said last night on NBA TV, “The people in the commercial reminded me of why I try to be more than basketball.”
Dwyane Wade is so much more than basketball. The best leaders are so much more than business.
That’s the core of emotional intelligence. You either care or you don’t. There’s no gray zone. What’s trickier is whether or not you show it. Intent is the false idol of many a leader.
The single biggest thread connecting all the best, most memorable leaders for whom I’ve ever worked was their effortless way of showing they cared. They didn’t have to work hard to care. They just did. It can be that way for you too–it’s a choice, a matter of prioritization.
Here’s a simple trick you can employ for those harried days when it’s easy to forget that the troops want to know you care about them. Remember the number 29. Is that a new status symbol–29 is the new 30? The legal drinking age in Bulgaria?
No–it’s a percentage, as in only 29 percent of 1,000 employees I surveyed said they felt their boss genuinely cared about them. Or maybe the inversion of that number, 71, is a better prompt for you, as in 71 percent believe their boss doesn’t genuinely care about them. This is one number you don’t want to hit as a leader.
One thing I can say with great pride about my own leadership is that I’ve never seen myself as “in business,” despite being in business for 30 years. I’ve always been in the people business. And business was always good, which meant–not coincidentally–that business was always good.
Dwyane Wade is now retired. His number will be retired too, soon enough. But his role-model ability to care–those are shoes he’ll never hang up.
Nor should you. And if you haven’t laced yours up yet as a leader–game on.
This article was written by Scott Mautz for Inc.com
Many folks who have just begun working with us are surprised by how our planning process starts. We don’t begin by talking about IRAs, 401(k)s, or how much you’re saving. Instead, we begin by talking about you, not your money.
Putting your life before your financial plan.
As Life-Centered Planners, our process begins with understanding your life plan. We start by asking you about your family, your work, your home, your goals, and the things that you value the most.
Our job is to build a financial plan that will help you make your life plan a reality.
Of course, building wealth that will provide for your family and keep you comfortable today and in retirement is a part of that plan. So is monitoring your investments and assets and doing what we can to maximize your return on investment.
But we believe maximizing your Return on Life is just as important, if not more so. People who view money as an end in and of itself never feel like they have enough money. People who learn to view money as a tool start to see a whole new world of possibilities open in front of them.
One of the most important things your money can do for you is provide a sense of freedom. If you don’t feel locked into chasing after the next dollar, you’ll start exploring what more you can get out of life than just more money.
Feeling free to use your money in ways that fulfill you is going to become extremely important once you retire. Afterall, you’re going to have to do something with the 40 hours every week you used to spend working! But you’re also going to have to allow yourself to stop focusing on saving and start enjoying the life that your assets can provide.
Again, having money and building wealth is a part of the plan. But it’s not THE plan in and of itself.
The earlier you start thinking about how you can use your money to balance your vocation with vacation, your sense of personal and professional progress with recreation and pleasure, and the demands of supporting your family with achieving your individual goals, the freer you’re going to feel.
And achieving that kind of freedom with your money isn’t just going to help you sleep soundly at night – it’s going to make you feel excited to get out of bed the next morning.
What’s coming next?
So, when does the planning process end?
If you’re like most of the people we work with, never.
Life-Centered Planning isn’t about hitting some number with your savings, investments, and assets. And we’re much more concerned about how your life is going than how the markets are performing.
Instead, the kinds of adjustments we’re going to make throughout the life of your plan will be in response to major transitions in your life.
Some transitions we’ll be able to anticipate, like a child going to college, a big family vacation you’ve been planning for, and, for many of you, the actual date of your retirement. Other transitions, like a sudden illness or a big out-of-state move for work, we’ll help you adjust for as necessary.
In some cases, your life plan might change simply because you want something different out of life. You might start contemplating a career change. You might decide home doesn’t feel like home anymore and start looking for a new house. You might lose yourself in a new hobby and decide to invest some time and money in perfecting it. You might decide it’s time to be your own boss and start a brand new company.
Planning for and reacting to these moments where your life and your money intersect is what we do best. Come in and talk to us about how Life-Centered Planning can help you get the best life possible with the money you have. Visit Our Website to learn more.
IN APRIL 2016, A NEW word entered many investors’ vocabularies: fiduciary. Even for those who’d heard it before, the term took on a whole new meaning when the Department of Labor’s Fiduciary Rule was released. All of a sudden financial advisors fell into two camps: fiduciaries and non-fiduciaries, adding a new level of confusion – and risk – to the advisor-client relationship for many investors.
Research by digital wealth manager Personal Capital found that nearly half of Americans falsely believe all advisors are legally required to always act in their clients’ best interests. Not only is this inaccurate, but it can also be detrimental to investors who unwittingly expose themselves to biased and potentially costly advice from advisors who put their own interests before investors.
“Not all advisors are required to put you first,” says Jay Shah, chief executive officer of San Francisco-based Personal Capital. “Only financial advisors who are fiduciaries are required to act in the best interests of their clients.”
What is a fiduciary? A fiduciary is a person or legal entity, such as a bank or brokerage firm, that has the power and responsibility of acting for another (usually called the beneficiary or principal) in situations requiring total trust, good faith and honesty.
The most common example of a fiduciary is a trustee of a trust, but anyone can be a fiduciary. If you undertake to assist someone in a situation where they place total confidence and trust in you, you have a fiduciary duty to that person. Corporate officers are fiduciaries for their shareholders, as are attorneys and real estate agents for their clients. Some, but not all, financial advisors are fiduciaries.
When you’re the beneficiary of a fiduciary relationship, you give that fiduciary discretionary authority over your assets. So a fiduciary financial advisor can buy and sell securities in your account on your behalf without needing your express consent before each trade. Because fiduciaries have this discretionary authority, they’re held to a higher standard than non-fiduciary advisors.
The fiduciary duty is the highest standard of care. According to the Cornell Law Dictionary, “A fiduciary duty is the highest standard of care.” It entails always acting in your beneficiary’s best interest, even if doing so is contrary to yours. For a financial advisor, this may mean recommending a product that results in reduced or no compensation because it’s the best option for the client.Play VideoPlayUnmuteLoaded: 0%Progress: 0%Current Time 0:04/Duration 1:39
Acting with undivided loyalty and utmost good faith
Providing full and fair disclosure of all material facts, defined as those which “a reasonable investor would consider to be important”
Not misleading clients
Avoiding conflicts of interest (such as when the advisor profits more if a client uses one investment instead of another or trades frequently) and disclosing any potential conflicts of interest
Not using a client’s assets for the advisor’s own benefit or the benefit of other clients
The commission concludes by stating that “departure from this fiduciary standard may constitute ‘fraud’ upon your clients,” which could result in the firm’s or investment advisor’s registration being revoked, the advisor getting barred from the industry or multi-million dollar disgorgement’s, among other penalties.
Fiduciaries have a “duty to care.” That means these obligations extend beyond the first meeting. A fiduciary will continually monitor a client’s investments and financial situation and adhere to best practices of conduct for the duration of the relationship.
“I think most investors would expect their advisors are doing that anyway, but that’s not always the case,” says Shelby George, senior vice president of advisor services at Manning & Napier, an investment manager in Fairport, New York. Non-fiduciaries are held to the suitability standard, a lower standard of care.
Fiduciary standard versus suitability standard. For advice to be considered merely “suitable,” the financial professional must only have an adequate reason to believe a recommendation fits the client’s financial situation, needs and other investments. For that to be the case, an advisor must obtain adequate information about the investment as well as the customer’s financial situation before making the recommendation.
The most common difference between “a fiduciary and an advisor acting under a suitability standard is the decision-making process,” George says. Before making a recommendation, fiduciaries undergo a prudent process designed to determine their client’s best interest. After making a recommendation, they discuss it thoroughly with the client to ensure there’s no misunderstanding about the recommendation and the fiduciary’s rationale for making it.
“Advisors acting under the suitability standard may, but are not required, to have the same depth of discussion,” George says. As a result, their duty to a client’s investments and financial situation ends once the trade is placed. These advisors aren’t obligated to monitor client accounts or financial situations on an ongoing basis.
Instead, the suitability standard only calls for fair dealing and best execution, which means the advisor must do the following:
Execute orders promptly and at the most favorable terms available, determined through “reasonable diligence”
Disclose material information
Charge prices reasonably related to the prevailing market
Fully disclose any conflicts of interest
The suitability standard does not require advisors to put their clients’ best interests before their own, nor must they avoid conflicts of interest.
“If your advisor isn’t a fiduciary, he can steer you into products that put more money into his pocket, as long as they’re considered suitable for you,” Shah says. For instance, when faced with two comparable investments, one of which has a higher commission, a fiduciary couldn’t recommend the pricierinvestment because paying more in fees isn’t in the client’s best interest. An advisor held to the suitability standard, however, could recommend the more expensive product provided it’s “suitable” for the client.
“Of course, not all non-fiduciaries are bad guys hoping to eat your financial lunch, but it’s important to understand that, legally, they can,” Shah says. “What’s more, their compensation structure could inherently make it difficult for them to act without conflicts of interests.”
How advisors are compensated. Generally, you pay for financial advice in one of three ways: advisory fees for fee-only advisors, commissions, or a combination of fees and commissions for fee-based advisors.
Fee-only advisors are either a flat or hourly rate, on a per- service basis or as a percentage of assets under management. They do not earn commissions or trading fees so their compensation is independent of the investments they recommend.
Commission-based advisors are paid from the sale of investments. They may also receive a fee from their financial institution for selling a particular product, collect a percentage of the assets a client invests or be paid per transaction.
The Financial Industry Regulatory Authority requires that commissions and fees be “reasonable” and disclosed at or before the time of investment. The organization’s 5 percent guideline considers any markup at or above 5 percent seldom reasonable and any commission near that threshold is subject to regulatory scrutiny and must be justified.
An advisor who receives both a flat fee and commissions is considered fee-based. Fiduciaries must be fee-only or fee-based. Non-fiduciaries can be commission-based or fee-based.
The commission structure opens the door to conflicts of interest between advisors and their clients. An advisor who is paid based on the products recommended would have an incentive to steer clients toward investments that generate a higher commission. If an advisor is compensated per transaction, clients may be encouraged to trade excessively, a practice known as churning accounts.
“Many advisers do not provide biased advice, but the harm to investors from those that do can be large,” writes the Department of Labor in the Federal Register Vol. 81, No. 68. The Obama administration’s Council of Economic Advisers estimated that advice from advisors with conflicting incentives costs IRA investors about $17 billion per year. The council estimated that recipients of conflicted advice earned 1 percent lower returns each year.
If conflicted advice is given when a 401(k) is rolled over into an IRA, it can cost the investor an estimated 12 percent of his savings over 30 years, with those savings running out more than five years sooner as a result.
These findings, coupled with investors increasingly seeking investment guidance for retirement savings outside of an employer-sponsored plan, particularly with rollovers, provided the impetus for the Department of Labor’s Fiduciary Rule.
The DOL’s Fiduciary Rule “is not moot.” The goal of the rule was “to encourage more transparency of fees, close certain payment loopholes, simplify retirement advice and improve investor education,” says Jason Schwarz, president of Wilshire Funds Management and Wilshire Analytics in Santa Monica, California. But the Fifth Circuit Court of Appeals found the rule “inconsistent with governing statutes” and said the department was “overreaching to regulate services and providers beyond its authority.”
President Trump told the department “to re-examine the Fiduciary Rule and prepare an updated economic and legal analysis” of its provisions. The department could then ask the Fifth Circuit Court of Appeals could be asked to review the rule again or it could be taken before the Supreme Court.
As the Fifth Circuit Court of Appeals writes in its decision, the case “is not moot. The Fiduciary Rule has already spawned significant market consequences.” Many firms have removed products like high-fee, low-cost mutual funds that don’t meet the fiduciary standard, Schwarz says. The result for investors is higher-quality investments and an easier investment selection process. “I think it’s not unreasonable to expect the fees advisors charge will come down along with the fees of the underlying products they use,” he says.
“It’s impossible for the industry to roll back the change that’s taking place, as much as some institutions would like to,” Shah says. Investors are demanding more objective, transparent advice and fee structures. “Smart advisors will realize this change is coming and that advice that is ‘good enough’ is no longer good enough for today’s investor.”
Meanwhile, “among the over 300,000 brokers and advisors across the industry, the delivery of fiduciary advice is uneven, erratic and irregular,” says Knut Rostad, founder and president of the Institute for the Fiduciary Standard, a nonprofit advocate of the fiduciary standard in McLean, Virginia.
*This article was written by Coryanne Hicks for U.S.News
Did You Inherit Your Beliefs About Money From Your Parents?
Parents know that children hear, see, and pick up on everything that is going on with the adults in their lives. And when you were a child, you were no different.
Our attitudes about money are formed at an early age, as we absorb how people around us deal with money. Some of these beliefs, such as a commitment to disciplined saving, are positive. Others, like skepticism about the stock market, can be more harmful than helpful as we try to build wealth in our own lives.
Answering these four key questions can help you look at your financial upbringing with a fresh perspective. When you’re done, think about which money beliefs you want to pass on to your own kids, and which might be preventing you from living the best life possible with the money you have.
What was money like growing up?
Your childhood experiences of money are a composite of details both big and small.
You probably compared the comforts of your home to what you saw next door and drew some conclusions about how comfortable your family was.
Did your parents get a new car every couple years or drive around the same station wagon until it died? Did you take frequent vacations? What were holidays and birthdays like?
Watching mom and dad carefully balance their checkbooks or set next week’s grocery budget also might have made a strong impression. And at the more serious end of the spectrum, an unexpected job loss, debilitating medical condition, or death could have had a profound impact on your family’s finances.
What was money like for your parents growing up?
Many baby boomers were raised by parents who had to tighten their belts during the Great Depression and World War II. The Greatest Generation probably impressed upon your parents the value of the hard work, the importance of saving, and perhaps some real apprehension when it comes to money. Your parents may have passed on these same values to you, or swung in the opposite direction and tried to make money as stress-free as possible.
How much do you know about your parents’ childhoods? If they’re still living, ask some questions that will fill in your family’s history a little more clearly. You might learn something surprising. And you might gain some insight into how their experiences of money are still affecting you.
What specific lessons were you taught that you have continued?
People who grow up in working-class households often learn negative lessons about wealth. Their parents may view affluent people with suspicion or even resentment. Sometimes there are valid reasons for these views. In other cases, hard-working adults see greener grass on the other side of the fence. They underestimate how much hard work and discipline really go into wealth-building. Their kids learn to do the same.
On a more positive note, your parents also made decisions that taught you what was more important. Perhaps they sacrificed their own leisure and comforts so that you could attend a good private school. A parent might have earned a modest living as a teacher or working for a nonprofit that made your community better.
What was the best thing you were taught about money?
As a child you probably rolled your eyes whenever your parents doled out maxims about money or started reminiscing about what money was like when they were growing up.
Now that you’re the one doing the earning, some of those lessons probably ring true. “Live on less than what you make” is hard to hear when it’s used to explain why you can’t have a new bike or take a big vacation. No child wants to sacrifice their weekends or summers working part time because their parents insist on it. But the lessons that were hard to swallow when we were young. These are the lessons that often create attitudes and habits that benefit us as adults.
The sum of all these memories, the positive and the negative, is a blueprint to your financial thinking. It’s also the schematic that we use to build your life-centered financial plan. Come in and share your blueprint with us so that together, we can lay a strong foundation for your family’s future.
At times it can feel like life is bad on all fronts: you work is stagnant, you personal life is unsuccessful and your personal health, physical and mental, has been neglected. You are not achieving your goals or fulfilling your potential, and you are unhappy as a result. First, know this happens to everyone- you are not alone. Also know that this does not have to be your life, you can change it. You can better yourself. It will take a lot of work, a lot of courage and a lot of grit, but if you keep going and believe in yourself you are going to achieve your goals and be the best version of yourself. Here are some good habits to improve your life in the new year, that will help you reach your goals when it becomes hard to continue:
Stop Sacrificing What You Want Most For What You Want Right Now
It would be lovely to relax, watch a movie or a show, meet a friend for dinner, etc. instead of working longer on a project that needs attention, going to the gym, making dinner at home, etc. Instant gratification is seductive and satisfying, but not when it is at the expense of long term goals, especially goals that will help build your self-esteem and help make progress towards your goals. Stop sacrificing substantive happiness, that will bring you consistent and lasting joy for superficial, momentary happiness, which will fade quickly and ultimately extend unhappiness.
Stop Making Excuses
If you are looking for a reason/excuse not to do the right thing, you will surely find one. Part of taking ownership of your life and reflecting on how you got to an unhappy state is understanding how you are enabling your poor decisions. It is usually with excuses, like you’re tired, or you don’t have time when you’re not making time, you will do it tomorrow, etc. Stop making excuses, and start owning your life and pushing yourself to do the work. Happiness doesn’t fall into your lap, it takes work like everything else. So get out of your own way and stop making excuses.
Stop Taking Things Personally
When someone makes a comment, gives unsolicited advice, or treats you poorly, unless you did something to merit a reaction, chances are the comment says more about the commenter than it does about you. Do not let people discourage you, or tell you who you are when they are not close to you. Keep moving forward, build on your progress and do not let people get you down. Not only because you should stay focused and because what they said likely isn’t true and doesn’t matter, but because most of all it wasn’t really about you in the first place.
If you need to feel better at this moment, go change your clothes and go get some exercise. Endorphins make you happy; they release stress and help clear your mind. If you want some perspective, go work out first then revisit the issue. Chances are your emotions will be stabilized, your mind will be sharper and you will have less anxiety than you did before you got some exercise. So if you panic and feel overwhelmed by whatever you have been confronted with, try and see if you can get some exercise before you make a decision. You will make a decision that is less reactive and more grounded in reason than emotion.
If you find yourself wasting a lot of time staring at various screens, constantly checking social media or mindlessly doing things on your phone, start trying to monitor those habits and change them. Whatever your go-to distraction is, start managing it so you can be more productive and stop wasting time.
Stop Playing The Victim
You are not a victim of every whim and circumstance, you do have some control over your life at any given time. It is about how you wield that control that determines whether you change your circumstances. Stop resisting responsibility for your life, because the sooner you take ownership of it and stop blaming others, you will have more autonomy, you will start doing the work therefore you will begin making progress.
Any wildly successful person has failed, sometimes on a massive, humbling scale. No one who is successful will ever judge you for failing, so start summoning your courage and stop being afraid to work hard and fail. The only people who will ever judge you are people who have not failed themselves, usually because they’ve made incredibly safe choices. So face your fears, stop being afraid of failure and do the work. Doing the work is how you gather courage and begin making progress towards becoming your best self.
We tend to overestimate what we can accomplish in the short-term and underestimate what we can accomplish in the long-term. The frustration that results is one big reason why so many New Year’s resolutions die before Spring.
But if you use these key strategies that are supported by deeply-held values – and science! – you’ll set better goals, achieve them, and feel better about yourself while doing so.
Know your values.
Knowing your values can provide real clarity on what you want to achieve in your life.
So ask yourself, what’s important to you? What makes you excited to get up in the morning? What are the passions and interests that fill your time when you’re not working? Who are the people you do those things with?
Another way to explore your values is to try new things. For example, volunteering at your local church or community center might reveal a passion for teaching or philanthropy that you never knew you had. These active experiments can become even more important as you age and start thinking about how you’ll stay happy and engaged in retirement.
Align your goals with your values.
Behavioral scientists have found that achieving goals is rarely a matter of ability or knowledge. For example, a person who wants to lose weight knows that eating ice cream with hot fudge five nights a week is not compatible with weight loss. Yet, the reason they keep downing that ice cream is often due to a lack of motivation. They might feel the immediate pleasure from the ice cream outweighs (no pun intended) the longer-term result of no weight loss, or worse, weight gain.
The more important a goal is to us, the more motivated we are to achieve it. Asking “Why?” can help you align your goals with your values and increase that motivational component:
Why should you stop eating ice cream five nights a week? Because I want to be healthier.
Why do you want to be healthier? So that I can live a longer and more active life.
Why do you want to live longer and be more active? So that I can do more things with my children and grandchildren.
Now we’ve identified core values – health and family – that are tied to the goal. These values will make the goal more important, and more likely to be reached.
Develop an action plan.
Asking “Why?” helps us move our goal-setting to a higher, value-driven space.
Asking “How?” helps us drill down into specific actions we can take to achieve those goals.
“I want to lose weight” is the sort of goal many people set and then abandon. That’s because it’s too unspecific. You can’t just “lose weight” every day until you hit your desired number.
So ask yourself, “How am I going to lose weight?” An answer like, “I’m going to exercise more” is closer, but still not actionable enough.
So how are you going to exercise more? Take a bike ride through your neighborhood every morning? Jog for 30 minutes after work three days every week?
Those are small but solid steps that you can use to develop an action plan. You might even go a little further and join a gym, start a neighborhood walk group, or hire a coach to add an extra layer of accountability and keep you on track. And yes, cut out the ice cream and hot fudge!
Measuring is Motivating.
Whatever goal you set, try to keep score. It could be as simple as pulling out a piece of blank paper and putting a checkmark on it for each day you don’t eat ice cream. We find that the act of keeping score creates its own momentum and can be like a “pat on the back” for a job well done.
Even a perfectly-set, highly-motivated goal will be challenging. Some lazy Saturday you’ll snooze past your workout. You’ll cheat on your diet. An unexpected home repair might throw off your budgeting goals for the month. But that’s ok! We’re all human. Roll with it that day but then get right back to your plan.
All goals and personal improvements require effort. The grit we need to get over those inevitable humps is its own kind of skill that you can cultivate. Try to push yourself above and beyond your smaller targets. Welcome and accept feedback and criticism that can make you perform better. Prepare yourself to do better tomorrow when your alarm goes off.
And most importantly, stay positive. If your goals truly are aligned with your values, then working towards them shouldn’t feel like punishment. When you experience setbacks, try to embrace them as learning opportunities and adjust your action plan accordingly. And here’s an important piece of advice–when you hit small milestones on your way to big goals, treat yourself. We can all use a little positive reinforcement.
We’re here to help you.
What you aspire to achieve may require a financial commitment. Please contact us and we can discuss your particular situation and see how we can help you get on a faster path to achieving your life’s aspirations.
In a recent study, half of Americans said their debt and expenses is equal to or greater than their income. 1 Revolving credit, particularly credit cards, is an increasingly significant part of the equation. According to the Federal Reserve Bank of New York’s Household Debt and Credit report data, Americans’ total credit card debt hit $905 billion in 2017 – an increase of 8% from the previous year. 2
The phrase “credit card debt” usually triggers red flags when we’re talking about long-term financial planning. And in fact, the average US household now carries $15,654 on their cards, and pays $904 annually in interest. 2 But debt, in and of itself, isn’t good or bad. Instead of making a value judgement about how you use debt, when working with clients we like to understand:
What is your debt story?
What are your attitudes about debt?
Why do you feel the way you do?
How are your debt levels affecting the Return on Life your money provides?
Having a deeper understanding of the above helps us do a better job positioning your money to work more effectively for you.
What’s the big picture?
Our current high debt levels reflect a previous generation of low interest rates, an active housing market, a robust credit market, and relative peace and prosperity. This meant more consumers with more plastic and more loans. Again, debt is not bad in and of itself, especially in a healthy economy. But from 2007-2009, many highly-leveraged people and companies were vulnerable to foreclosure and bankruptcy during the Great Recession.
People who were born between the Great Depression and World War II grew up in the daily realities of war and lean markets. Unsurprisingly, this group tends to avoid using credit cards when they can. Instead, they rely on the cash in their hands and the checkbooks they balance with pen and paper.
That credit-aversion seems to have skipped the Boomer generation, who, generally speaking, happily used credit cards and home-equity loans.
The current generation of young workers—Millennials—seem to be warier about carrying debt than their parents were.
Young people are entering the workforce at a time when household income is struggling to keep pace with the cost of living. They believe taking on debt would only widen that gap. In particular, the costs of medical care, housing, and food continue to grow faster than income. 2
Many underemployed Millennials are living at home into their late-20s, so they aren’t using credit cards to finance luxury items or buy first homes. Even for millennials who do find good jobs after college, many start their adult lives in the red because of student loans. As of September 2017, the average US household had $46,597 in student loan debt. 2
Millennials are less enthusiastic about investing in the markets. Growing up during the Great Recession shook their faith in the economy. Growing up in the shadow of 9/11 and terrorism, they’ve only known a world unsettled by global unrest.
Millennials are also a more conscientious consumer group than their parents were. They want to spend their time, and their money, on things that help to make the world a better place. They consider personal fiscal responsibility to be part of a greater good.
What’s your story?
While looking at big picture debt trends is useful for predicting where the economy is headed, your Life-Centered Plan is about you. Now would be a great time to take a minute to consider:
How do you feel about debt?
Why do you think that you feel the way you do?
Are you comfortable with your current level of debt?
Is your current level of debt causing any problems with one of your loved ones?
Do you pay off your credit card balances in full every month?
How do your attitudes about debt align or differ with those of your parents? Why do you think that is?
We encourage you to reach out to us and we can take a closer look at your financial situation and help you get on a more comfortable path. Together, we can create a financial plan that will improve your Return on Life.
Half of Americans are spending their entire paycheck (or more) http://money.cnn.com/2017/06/27/pf/expenses/index.html
Nerdwallet’s 2017 American Household Credit Card Debt Study https://www.nerdwallet.com/blog/average-credit-card-debt-household/