Kevin Painter

Kevin Painter

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Ignoring the Problem

A recent study by eMoney advisor revealed that Americans aren’t looking for professional help when it comes to managing their finances. The results show that 63% of respondents have never consulted a financial advisor. The survey also shows that 33% of those same individuals were living paycheck to paycheck.

The results highlighted that while they make reviewing their finances daily, almost half of investors report being embarrassed or confused when talking about money. The study also found that 30% of those individuals that hire a financial advisor admit to hiding information about their spending habits to their advisor.

This study is one of many that highlights the lack of preparedness that many Americans face with their personal finances. If you’re experiencing feelings of fear, despair, embarrassment or disdain, you can ask for help. Our team at LeConte listens to our clients, develops an actionable plan and helps our clients execute those decisions along the way.  

There’s an old saying that if you find yourself in a hole, stop digging.  No matter how close to reaching your planning goals, let us give you a hand to get out of the financial hole and back on track to achieving your dreams.

A New Diagnosis for Health Savings Accounts

With the rise in health insurance premiums over the past decade, many individual and corporate health plans now offer a Health Savings Account option. The premiums are often lower than other traditional policies and the benefits of an HSA make this option worth a second look. Individuals can contribute either lump-sum or periodic contributions (up to $3,500 for an individual or $7,000 for a family in 2019) to an account like an IRA. They receive a tax deduction for those contributions, and then can use those dollars to pay for medical expenses, typically up to their plan deductible. Did you know those H S A dollars can be used for other things?

Unlike the old Flexible Savings Account options in health plans that had to be used in the same calendar year, HSA contributions can be invested and used in the future. They can be used for vision, dental or orthodontic care for your children or banked for future health or even long-term care insurance premiums.

In one specific example, a 55-year-old with family coverage who plans to retire at age 62 contributes $7,000 plus a $1,000 catch-up contribution if they are covered by a high deductible plan. They receive a tax deduction on that contribution and can use those dollars to pay for their annual health care. Let’s say the same individual has a $3,000 deductible which they meet each year for 7 years.

Annual Contribution $7,000
55 + Catch up $1,000
Total $8,000
   
Annual Spent $3,000
Net Savings $5,000

At his retirement, he would have $35,000 ($5,000 x 7 years). Since he retired before age 65, he can use those health savings dollars to purchase COBRA insurance if offered by their employer, or to buy individual health insurance coverage before Medicare kicks in. In the same scenario, if the 55-year-old has a long-term care insurance policy with annual premium of $2,500, he can use the same HSA dollars to pay those premiums in retirement.

Health savings accounts are incredible planning tools for future health care needs especially if you plan to retire early. These accounts allow individuals to defer taxes on contributions during their working years, when their tax rates tend to be higher. They can then use those dollars in retirement to pay for health premiums or expenses, often at a lower rate.

If you currently are covered by a high deductible plan and aren’t contributing the maximum, the above examples may change your mind. If you don’t have an HSA, I’d encourage you to research your options when your annual benefits enrollment or health insurance renewal rolls around. The diagnosis will likely be good for your future.

Take time to Change

I recently attended a financial planning conference and had the privilege to hear James Clear speak to our group. He’s the author of Atomic Habits (great read, btw) and spoke about getting 1% better in your life every day. If you accomplish that, you’ll be 33% better in a year’s time. This can apply to your health, your relationships, your job, your productivity or even your finances. Getting 33% better at anything seems daunting, but I can handle getting 1% better at something.

I’ve begun applying some of his talk into my daily life. I make my bed every morning and intentionally spend some devotional time before I pick up my smartphone. We also began implementing Clear’s system at the office. Small changes can bring big results especially if you chain these small tasks together.

When it comes to your personal finances, small tweaks to your behavior can have seismic results for your future. For example, if you forgo the Venti at Starbucks each day, you’ll save about $1,200 in the next year. If you put $20 a week into a savings account, you’ll have $ 5,200 in five years. Often, financial freedom is a result of what you don’t do, as much as it is what you do. We see that successful retirees developed a mindset early on to save more and spend less. They held off on spending too much on certain things and now live a fulfilled life in retirement.

For many that haven’t saved, retirement seems like an impossible dream. I like to say that you can’t change what happened, but you can control what happens next. You can’t go back and re-do what’s been done in your financial life, but you do have the opportunity to change what the next five years looks like.

Tolstoy wrote “true life is lived when tiny changes occur.” How are you going to get 1% better today?

What keeps you up at night?

Whether it’s been the World Series, election coverage or late night storm alerts, there has been plenty to keep us awake at night during the past few weeks. But just like a clap of thunder that keeps you from slumber, maybe you’ve had a worry about your financial life that has kept you awake.



Perhaps your concerned about the cost of health insurance in 2017. If you had an ACA policy with Blue Cross Blue Shield in TN, you’ve been shopping for other options. Perhaps even eyeing paying the penalty rather than a steep premium.

You could be in the midst of dealing with the loss of a loved one and having deal with probating assets, finding legal documents and paying bills. You might be confused on how and when to begin taking your Social Security benefits. Seminars and web searches can make the matter even more confusing. With the holidays upon us, you may be longing to stop the spending frenzy and make a commitment to get out of debt and allow you to retire sooner rather than later.

Maybe you need encouragement and validation of your decision to retire in 2017, but some uncertainty prevents you from making that decision. You may be worried about your grown children and their inability to act responsibly with their finances. Or maybe you don’t know where to begin. You’ve accumulated assets for the past 25 years, but don’t know what you have, what you spend or what to do. You want to be charitable to your church, but didn’t realize that you could give your RMD from your IRA as a gift.

These are all real problems that we’ve helped our clients solve in the past month. Our role as a wealth management firm is to assist our clients at all times, in all matters. That encompasses all aspects of your financial life, not just the management of your assets or the filing of your taxes. We can work with any investor regardless of the number of assets you have.

The questions that keep you up at night may differ with the seasons, but who you seek counsel to answer them should not. Don’t spend time worrying when you should be living.

Our phone lines are open. Just give us a call.

The Day After

Many Americans are waking up this morning disappointed, surprised, elated and shocked. Pundits are prognosticating about what the next four years will bring and social media feeds are filled with election commentary and lamentations. The financial markets are also uneasy, just as they were when the Brexit vote occurred in May. What are we supposed to do?



Start by focusing on the things that you can control. You may feel downtrodden after the election result, but that doesn’t change your financial goals. In 48 months, we all will be older and hopefully nearer to achieving financial freedom. Your children or grandchildren will be that much closer to going to college. Developing a sound financial plan, reducing debt, living within an established budget and investing wisely are key components of financial independence. It’s imperative that you begin with the end in mind. If you haven’t thought about what to do, find an independent financial firm that can help you get organized and take the first steps.

Our republic has lasted for 240 years. We have elected both good leaders and poor executives. The country will live on today and hopefully for another 24 decades. As individuals, we aren’t that lucky. With limited time on the earth, it’s important to make sound choices on the things we can control. Rather than gloating or sulking about the election result, use this time to begin planning and dreaming for what your life will look like in 2020.

Time to Jump?

It’s a day that only happens every four years.  Just like the Olympics and Presidential elections, we observe Leap Day today.   The extra date on the calendar brings an extra day’s pay for some and explanations to kids on why February doesn’t always have 29 days.  Then tomorrow March rolls in and we push on towards Spring.

Because it takes more than 365 days (365.24 to be exact) for the Earth to orbit the Sun, Pope Gregory XIII added February 29 in 1582 to what we now know as the Gregorian Calendar to synchronize the solar calendar to the ones that we hang on our walls.  So, what do we do with the extra day?

I then began to think about things that I do once every four years.  I vote in the Presidential elections, watch the Olympics, and usually clean out my sock drawer. Others will attend a high school or college graduation or buy a new car.   But with only one extra day every four years, how do you make it count? What makes it different than any other Monday?

The word leap is defined as jumping or springing a long way.  In the past four years, have you leapt forward towards financial freedom?  What changes have you made to ensure your success in meeting your financial goals?  We are all four years older since the last time we saw the number 29 on our February calendar.    Live up its namesake and use this day to take the next leap towards planning for your future. For some, that could be developing a budget to control spending urges.  For others, it could be consolidating old retirement accounts to invest with a purpose.   

Whether it’s your first leap or your fiftieth, take advantage of this extra time to plan for your future.  You’ll have to wait four more years to have another day like this.

Financial First Responders



When you hear sirens and see an emergency vehicle speed past, it’s likely on its way to respond to an accident.  These heroes head to the fire or the car wreck to help people. First responders deserve our thanks for their bravery and unwavering duty to help those in need.  Yet when not fighting fires or saving lives, these same men and women spend countless hours educating us on how to prevent these accidents.  They teach our children how to”stop, drop and roll”, remind us to change the batteries in our smoke detectors, and gently remind us to obey traffic laws by writing tickets if we run red lights.  They are dedicated to preventing disaster to reduce damage and save lives.

You may wear your seat belt and look both ways before you cross the street, but do you exercise the same behavior when it comes to your finances? 

 

Here are some questions to ponder as you reflect on your financial situation:

If you had a financial emergency, who would you call?

Do you have an advisor that you could call to help you if you had an unforeseen event, such as a job loss, or significant loss to your portfolio?

Do you focus on preventing financial risk?

Do you have someone who proactively counsels you on how to prevent devastating financial problems?

Has that someone called you (not taken your call) in the past year to address what would happen if things went haywire in the markets?

If you are contemplating retirement in the next five years, do you have a plan to help you get there?

 

Financial markets move in cycles.  Investors have consistently shown their inability to make the right investment decisions when things get messy in the financial markets.  They want to buy stocks when they are at their highest and sell them when they are at their lowest.   

Our family has a plan to get out of our house if the smoke detectors go off.  Do you have the same plan in effect for your portfolio?

Is This Correction Different?

In this age of instant information, investors have access to more financial news than ever before. With headlines on the Shanghai markets trending on Twitter and client account access on smartphones, how will the reception of that information change the way that markets react? While the velocity of market downturns could be more sudden and end more quickly than in the past, it’s helpful to look to historical corrections as a guide.

Many pundits have made predictions that the current correction in the U.S. markets are different than the ones we’ve seen before. A correction is defined as a drop of more than 10% in an asset class, while a 20% drop in prices signifies a bear market. There have been nine bear markets since 1957 with an average duration of 14 months. The shortest has been 3 months (Black Monday crash of 1987) and the longest was 31 months from 2000 to 2003 when the dot com bubble burst.

Typically with market pullbacks, they are difficult to predict but after the smoke clears, they are quite easy to understand.

The S&P 500 closed at 1867.62 on August 25, 2015, down 12.8% from the highs in May of this year. It’s the first time the markets have entered a correction since 2011. As the markets continue to process Chinese economic data and look for guidance on if/how/when the Fed will act, it’s imperative to understand what this correction will be like. Has a swift drop in prices presented a buying opportunity or is it merely the beginning?

Black Monday (October 19, 1987)

We can look to history as a guide to what might happen. On October 19, 1987, the Dow Jones lost 22.6%, or 508 points in a one day crash. The pain was immediate and swift. The overall market corrected over 33% over a 3 month period.



Tech Bubble/9-11 Terrorist Attack (2000-2003)

When the dot-com bubble burst in 2000, the S&P 500 fell over 49% during a 31 month period. It rallied from the lows on two separate occasions before finally heading upward in the spring of 2003.


The Great Recession (2008-2009)

When the housing bubble burst, the market dropped 56 % over a 17 month period. Coupled with the Lehman bankruptcy and credit crunch, this correction was all encompassing and severe.



One day, six months or three years or nothing at all? Market corrections can be quick or they can also be a slow burn. As we saw with the market sell off late yesterday, dead cats do bounce. Patience and principle can be rewarded for those investors with discipline and foresight to maintain diversification when markets freak out. A portfolio without a purpose is like a ship without a rudder.

Even though we have access to more information than ever before, markets can still test the resolve of it's participants.

Living in the High Rent District

When a house sells in your neighborhood, many often look to see what the selling price was.  Depending upon the price per square foot, you might be relieved or a bit unnerved, especially if your house is also on the market.  In real estate the price per square foot is a standard measure of how expensive (or cheap) a house is relative to those that have recently sold.  The higher the price you pay per square foot, the more capital you have to come up with. Conversely, if the price per square foot drops in your neighborhood, it’s great news for the buyer but not for the seller.

In today’s equity markets, the P/E Ratio (a measure of the company’s price relative to their earnings) is at 22 times.   As a reference point, the historical P/E on stocks is 15.6.  Using the same analogy as you do on buying real estate, stocks are more expensive on per square foot basis than they historically have been.  If you have stock exposure in a 401k account or an investment account with your advisor, you’ve seen your assets appreciate over the past 6 years, and you’re now living in the high rent district. 

The challenge is this:  the more expensive the stocks become, the harder it is to project positive forward returns.  If you overpay for something and it declines (and it can decline rapidly), you spend much of your time making that money back rather than earning more on your money.

If someone knocked on your door and offered to pay you 40% more than your house was worth, you probably would consider taking it. Why not consider the same in your investment portfolio?  The equity market is full of buyers if you’d like to sell some of those appreciated assets.  Stock values can decline rapidly without warning and often without reason.   It may be a good time to put some of those assets on the market while prices are still high.

Through the iPhone Glass

 

My family and I recently returned from a Disney vacation. Despite the prevalence of mouse ears on almost every surface, shirt and head, I noticed an item that even more people had on display. Everywhere I turned, someone had their phone out to record a character, a castle, a ride or even in some cases, a squirrel. I often unintentionally walked through pictures, and witnessed many people bumping into one of our strollers or walking into the street because they were only watching their screen.

I've seen the same behavior at concerts. Instead of cigarette lighters, camera phone lights shine throughout the arena during the show. YouTube has plenty of videos of concert clips, parade floats and Mickey Mouse sightings to keep us entertained for hours. Why do we then feel so compelled to video every step of our lives?

Social media has created a way for us to show our friends what we're up to ( Look at me checking in at the five star restaurant in Vegas!) or let your friends know what great seats you have for the Garth Brooks concert. Is that really a picture that you'll get developed, enlarged and framed?

 

Viewing these events through our smartphone screens condenses our view and distracts us from what's actually happening. If you're focused on recording the fireworks display or live tweeting an episode of your favorite sitcom, are you really enjoying them? You can only see what's happening on within the angle of the screen. We're too consumed on capturing the moment rather than basking in it, and we are distracted by the limited view, rather than focusing on the entire picture.

 

The same holds true with financial planning. It's easy for people to focus on certain aspects of their financial plan, typically investment performance. Market information is ever present in the media and often misused by investors to monitor their financial health. There's an app that will give you your account balance on command, but that information is very limiting as a component of your overall financial goals. That doesn't cover questions like "what do you want your retirement to look like?" or "how much money will you spend each month when you stop working?" or "how would you react if your account values dropped by 25%?"

 

Understanding client motivations, fears and desires sits at the crux of providing prudent counsel. There's not an app for that.

 

You wouldn't drive a car down the interstate looking only through an iPhone screen. You shouldn't look at your financial future, or your life, in the same way. If you need some help in focusing on your overall picture rather than what's on the screen, give us a call.

 

It's okay, you can use your smartphone for that.

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