A Rookie’s First Bear Market

I have heard and read about bear markets, but I have never experienced one with ‘skin in the game’ until April. Everything I heard and most of what I read does not even scratch the surface of what I just experienced. Bear markets engulf investors in fear, loss, anxiety, panic, and regret. I experienced all these emotions.


Background: The Escalator Up


On March 9, 2019, the stock market passed the 10-year milestone from its 2009 lows. This bull withstood punches from all over the globe. A U.S. Federal Government credit rating downgrade, European sovereign debt crisis, U.S. – China trade war tensions, Brexit, and interest rate hikes to name a few. With bumps smoothed along the way with quantitative easing (QE), tax cuts, and the daily expressions of optimism from economists; most individuals began to think the longest bull market in history was invincible.


On February 12, 2020, the DJIA, the NASDAQ and the S&P 500 (all major stock indices) finished at record highs. (The NASDAQ and S&P 500 both reached subsequent highs on February 19th).


These highs were short lived.


Bear Market: The Elevator Down


In less than two weeks from the February 2020 peaks, major stock indices were in freefall. Bear markets, defined as a decline of at least 20%, occurred in the S&P 500 (16 days), DJIA (19 days) and NASDAQ (17 days). Since entering the bear market, each index dropped between 32-39% before bouncing.


In 2009, our country emerged from the Great Financial Crisis (GFC). Despite the accusations and finger pointing that occurred, markets declined, homes were lost, and many jobs disappeared. I personally do not recall the turmoil from the subprime lending crisis. I was insulated, sitting in a desk in ninth grade Math and English, and periodically escaping pranks from my football teammates. This put me at a slight disadvantage by not having a first-hand experience of facing the 2007-2009 bear market. Eleven years later, I am sitting behind a desk at LeConte Wealth Management. My position provides me an up close and personal experience of what truly occurs in a bear market.

As a rookie facing my first bear market, here are the top 5 things I learned:

1. The trusted adviser earns their keep, but it is quickly forgotten


“Where there is no guidance the people fall, but in abundance of counselors there is victory” Proverbs 11:14.


As the Good Book points us toward wise counsel, I believe this principal should flow over into every aspect of our lives. Throughout the past two and a half years of my professional career I have heard a lot. I’ve heard clients talked down from mortgaging their home to chase a “golden ticket”, I participated in meetings where we had to help clients understand the sacrifices that needed to be made to stay retired, and we’ve helped clients wrangle their emotions to avoid common investor behavioral mistakes – like chasing a hot market and selling when things underperform.


Human emotions are real, and they can swing to the extremes in a hurry. I was able to see the power of how a trusting relationship with an adviser can provide a practical approach to help individuals and families stay on the path toward their goals. Unfortunately, clients tend to quickly forget the value of a sensible approach that advisers provide in these situations.


I would encourage every investor to seek wise counsel, because as much as we think being sensible would be easy to do; I have seen otherwise.



2. "What do I care about the price of beef when I want milk from my cows”


This quote comes from Farmer Frank, who is one of LeConte’s first clients. His words were etched in my mind from LeConte partner, Hoy Grimm. His farming wisdom applies perfectly to our approach of Purpose-Built Planning. Simply put, this is a reminder to keep the main thing the main thing. If your investment goal is to reduce taxes; focus on that. If your investment goal is to grow your investment; focus on that. Do not expect growth from income investments and income from growth investments. Farmer Frank has helped me learn a valuable lesson by learning not to change your long-term investment strategy because a short-term price change captures your attention (a.k.a. triggers your emotions.)



3. Markets can stay irrational longer than you can stay liquid.


This February, valuations crept higher and earnings growth slowed, but money kept piling into stocks. It did not matter what your money was invested in. It was like throwing darts at a board covered with triple 20s. I sat in a 2019 client review and every asset class they were invested in was up. This is what their response was, “Why didn’t I have more money in the thing that made the most. “Without recognizing it, they were asking us why you did not buy (allocate to) more stocks even as prices became irrational.


Bull markets produce this euphoric state in many investors and it certainly did in me. The irrational decisions others made in the market prompted me to follow suit with my personal holdings. In hindsight, I knew what was occurring as we had discussions almost weekly at the office about it, but my emotions overtook my sensible thinking. In their wisdom, the partners at LeConte did not give me trading authority for our client’s accounts. So… the harm was limited to my relatively new Roth. From this lesson, I will take the value of patience and strive to abstain from the herd.


4. "Be fearful when others are greedy and greedy when others are fearful” - W. Buffett


Markets can stay irrational both ways, as they go up and as they go down. Following the herd either direction is a mistake. Warren Buffett is the embodiment of disciplined investor behavior. His words above are contrary to the thoughts and emotions investors feel when markets drop 30% plus from all-time highs. Bear markets typically occur when fear enters the market and large “emotional” sell offs begin over a longer period. Throughout a bear market, volatility tends to pick up, which presents more fluctuation than the average investor can stomach. In turn, this creates the opportunities. Investors with a “greedy when others are fearful” mindset think about putting excess cash to work and rebalancing into better positions that will help reach longer-term goals. I saw this firsthand as we asked clients for more investment cash when markets were down to pick up positions at a discount.


5a. Recency Bias is real. (Be disciplined in taking profits)


This may be one of the hardest lessons I had to learn. I remember a year ago investing in an exchange-traded fund that was up ~36% in less than 6 months. It was quite incredible. I remember thinking there was no way the investment would slow down – it had to keep growing (this was a product of recency bias). “If only it could get to 40%; that’s when I will take some profit,” I told myself. Over the next 6 months, I gave back every penny gained, including some of my principal. Looking back, my first mistake was not implementing a rebalancing strategy. This would have helped shelter me from my emotions, kept me disciplined and ultimately kept me from learning the hard way.


5b. Is it for savings or for investing? (Bonus)


This is a question that every investor should ask themselves before they ever put a dollar in a security. Why? Two words, time horizon. Time horizon is a quantified length of time that an investor plans to hold a certain security based on a goal. In a situation that you have a question about whether you should invest, make sure you never put your savings in stocks. Do not be speculative with it. You do not want to be forced to sell your holdings while they are down 20%-30%.

I will leave you with this. Eighteenth century philosopher, Edmund Burke, stated the following, “In history, a great volume is unrolled for our instruction, drawing the materials of future wisdom from the past errors and infirmities of mankind.” As I move forward from the 2020 bear market, I plan to take Burke’s advice by learning from my past errors as an investor and continue to turn disadvantages into advantages. I encourage you to look back as I have done and reflect on what you could have done better. Draw from Burke’s advice and learn from the wisdom that has been unrolled in front of you.

P.S. If you are within 10 years of retirement, just make sure you are

       not investing like a 25-year old before his first bear market.

Your $50,000 Tax-Free Coronavirus Check is In the Mail

When your $50,000 tax-free Coronavirus check hits your hands, what are you going to do with it? 

Wait, you thought it was only $2,400? Think again. 

If you’re 25 years old and married (without kids), you and your spouse are about to receive one of the biggest checks in your life - $50,000. You ask, what do you mean? 

When the Coronavirus bill is passed and signed by President Trump, you and your spouse will be receiving a tax-free check of $2,400. Most will view it for what it is. Found money that you can take a vacation with after the virus calms, a new game system or two while you’re quarantined, or a new set of wheels for your ride. Though, what if you did the contrary? What if you viewed it from the standpoint of your future self?  

Here’s how: 

  1. You and your spouse receive the $2,400 tax-free check. 
  2. You open a Roth IRA (call us if you need help). 
  3. Use your government check to make a Roth IRA contribution. (You have until July 15th, 2020 to classify it as 2019. If contributed after that date, it will be a 2020 contribution.) 
  4. If this one-time investment grows at 8% for 40 years (an assumption, but not an unrealistic one). 
  5. It grows to more than $50,000.  

 I’m challenging you to think about this unexpected windfall with a fresh behavioral mindset. Instead of consuming it, will you make it the turning point for your financial future? 

 One more WOW number - $670,000! 

If you add $2,400 to this new account each year for the next 39 years until you’re 65you could accumulate more than $670,000 tax-free. “We’re from the government and we’re here to help you” could go from a bad joke to your reality! 

Investing in Stewardship

One Million Dollars.

That’s what San Francisco 49ers cornerback, Richard Sherman, received for his 2020 Pro Bowl selection.

After facing a season ending injury in the 2017 NFL season, Sherman was released from the Seattle Seahawks. After sitting out the 2018 season to recover, Sherman negotiated his own contract (saving him agent fees) and suited up with the 49ers. In his contract, Sherman negotiated what we like to call a win-win. Since the 49ers were skeptical about his health and performance abilities coming off a gruesome injury, Sherman gave the 49ers an out after a year, but Sherman also loaded up his contract with incentives incase the opposite occurred.

Fast forward to Week 16 (out of 17 weeks) of the 2019 NFL season, Sherman was announced a 2020 Pro Bowler. For this accomplishment, Sherman received a $1 million dollar bonus. What’s noteworthy from this story is his comments on what he will do with it!


A Stanford graduate, and obvious forward thinker, Sherman had this to say about his bonus:

"It's getting invested in something that gives me a decent return," Sherman said. "So the kids will end up having it to enjoy. I don't get to spend it."

It’s obvious Sherman isn’t set on the now. He’s a long-term thinker that has said no to instant gratification. Difficult to say no to the now, Sherman sees the value and seems to have considered the long-term impact of his decisions.

Not only will his kids get a nice financial jumpstart in the future, Sherman is modeling the valuable lesson of stewardship to his kids and the world.


For more financial literacy thoughts, here’s a link to a LeConte blog post on financial literacy and tips for parents  http://bit.ly/2ty4XZj

SECURE ACT Final Update - Highlights

The SECURE Act, or (S)etting (E)very (C)ommunity (U)p for (R)etirement (E)nhancement, proposed to tackle the dismal retirement participation rate was signed by the President on December 20th. So, what does this mean for you and the rest of Americans?

  • Elimination of the ‘Stretch’ Provisions (In short, inherited retirement accounts must be distributed in full by the end of the 10th year following the year of inheritance.) **Although there are exceptions
  • Easier for small businesses to set up a retirement plan (Businesses to get tax credit for establishing a retirement plan)
  • Required Minimum Distribution (RMD) age pushed back from 70.5 to 72
  • 529 Plan funds can be used to pay back qualified student loans (up to $10k annually)
  • 10% early distribution penalty waived for a qualified birth or child adoption up to $5k per-child (If married, both spouses can withdraw up to $5k per-child)
  • Traditional IRAs no longer have a contribution age limit (Use to be at age 70.5)
  • Annuities to enter into employer retirement plans (Is this a good thing? Click for more insight)
  • Part-time employee 401(k) participation available
  • Increased max contribution percentages for employees who are automatically enrolled into a 401(k) plan (was 10% cap, but increased to 15%)
  • Kiddie-Tax TCJA revisions reversed (back to the child’s parents’ marginal tax rate)
  • Disaster relief distributions up to $100k
  • For students – stipend and fellowship payments are treated as compensation for IRA purposes (enables students to make IRA contributions)
  • No more 401(k) credit card loans


Final thoughts:

After surveying thoughts across the financial industry, there are still mixed feelings on the SECURE Act. Many are asking the question; does it really promote security for Americans, or does it just increase exposure to salesmen? I think both, but of course with every new law comes pros and cons. In my opinion, it is the plan participator that must educate themselves on what they are putting their hard-earned money in. With the new landscape set, I’d encourage everyone to read up on your retirement plan and dig into the investments (specifically focusing on the expense portion). For the full implications of the SECURE Act, we will have to wait and see.

The Santa Raid

Have you made a list and checked it twice? Chances are, you haven’t… 

The National Retail Federation estimates that consumers’ will spend upwards of $730 billion this holiday season. Perhaps this is due to a well performing stock marketlow unemployment and wage increases. Each of which has helped put extra cash in consumer pockets.  

Though, this time of year there is one question that every consumer must answer for themselves - Are you going to allow Santa to slide down the chimney and raid your bank account?  

Amid the many distractions that occupy your attention throughout the holiday season, lays a decision that you must make. Will you try to keep up with your friends? How about your kids friends parents? Or, will you say no to Santa and spend modestly? 

Whatever you decide for yourself and your family is the choice you must live with. It might be too late for some of you to light a fire to keep Santa from sliding into your bank account, but for those of you who are not quite done shopping or still haven’t hit the malls; slow down and take a minute to think through the true meaning of Christmas, what you want to spend, and what your financial situation allows you to spend.  

Here’s a short list of things to think about and focus on financially throughout the Christmas season: 

  • Ask yourself what Christmas means to you. Don’t adopt your neighbors view. 
  • Check your bank account balances 
  • Make a list to keep you from window shopping
  • Compare prices (Add the Honey extension for online shopping) 
  • Create a budget for each person/group you buy for 
  • Save your receipts to compare to your budget 
  • Check your list twice 
  • Ask yourself if debt is worth it 
  • Wait for after Christmas sales (Usually the best day is the 26th of December) 
  • Track spending compared to the budget 
  • Remember you have to pay the credit card bill next month
  • Give group gifts to family members 

Enslaved in a Plastic Prison

Ever been sold on the payment instead of the price? Yeah, me too and so has everyone. Salespeople make it quite simple to get you in that new car, help you get the new bedroom suite, purchase a new boat, and even get you into a new wardrobe. 

It’s a Big Problem 

Millions of Americans don’t even need salesperson because they do this to themselves. They’ve bought into MASTERCARD’s tagline.    

There are some things money can’t buy. For everything else, there’s MASTERCARD.

 Are you the master of your Mastercard or are you enslaved to it like some Americans who are part of the 828-billion-dollar pile of credit card debt? 


This is the amount of credit card and other revolving plans debt that Americans had at the end of August 2019. 

828 Billion!  

The number alone stirs up many questions for me, but one question persists – how? 

After much thought, my conclusion isMinimum. Minimum. Minimum. 

Here’s what happens when you only pay the MINIMUM on your credit card: 

ExampleNancy purchases a $500 wardrobe on her Mastercard. It has a 17% APR. Her minimum payment is 4%, which equates to $20 per a month. After she pays the minimum for 42 months, Nancy’s $500 wardrobe will cost $659.75.   

Breaking Free from the Plastic Prison 

To get out of debt, intensify your payment strategy. Sacrifice right now in other spending areas to make it happen. No, it’s not easy and yes it can be painful, but it will be worth it. Be intentional and stay focused.  

Once out of debt, begin taking steps to stay out of debt. Delay your gratification until you have intentionally saved for a specific purchase. Self-impose a credit limit on your cards. Take Dave Ramsey’s approach – CUT UP your cards and progress to a cash only budget. In addition, always pay off the balance at the end of the month. We saw a horrendous example of what happens if you don’t in the video above. 

 Final thoughts:  

In the wise words of a colleague, “we don’t have an income problem, we have a spending problem.”  We must continually check ourselves and our motives regarding our purchases.  

Series: Essentially Essential – Thoughts from the Press box: The Phases

As a service to my local high school football team and town, my Friday nights are mostly spent in a press box with a headset on. I’m not a high school football coach. I have a pretty neat opportunity to color commentate during the local radio station.  

**In short, a color commentator is someone who assists the play-by-play commentator and adds details or interesting facts about the teamsindividual players, and the game as it progresses.   

With this unique opportunity, coupled with the recent and on-going lessons from co-facilitating Dave Ramsey’s 9-week Financial Peace University course, I’d like to give you my insights from the press box. No, this post is not about a recollection from a specific play or even a specific game, but a realization from a game that our society devotes countless hours to and how you can apply it to your financial life.   

Football fans know the basics of the game - offense, defense, and special teams. To be consistently good, all three must be accounted for. The same applies to a good financial life: 


From springtime, through summer, to scrimmages, and throughout the actual season, a progression occurs. Teams start with the basics. Laying the foundation to get the team moving in the same direction is crucial. The team sets goals, lifts weights, and practices different movements/drills. As the season nears, implementation of the playbook occurs. Then week by week, as new teams are faced, talent is discovered, and game plans change; ultimately opportunities are capitalized on. 

This is what we must do in our financial life. Realizing a good offense doesn’t just happen is a big keyIt begins with intentionality. Laying the foundation by setting individual or joint goals, then implementing a scheme/strategy, taking action to accomplish those goals, maintaining discipline throughout, and adjusting when necessary based on new challenges or discoveries that life introduces. 

In short, here are a few things to think about: 

  • Just as a head coach sets the vision/goals for the team, you set the vision/goals for your future
  • Just as teams adjust from quarter-to-quarter in a game, you have stages in life that you must adjust in to capitalize on opportunities around you 
  • Just as the offensive players practice their plays for the game to score points, you must practice discipline in paying yourself first (contributing money to a retirement plan) 
  • Just as the quarterback manages the play clock by choosing when the ball is snapped, you must manage your budget/spending plan


Defense is about protecting your side of the field, especially keeping the opponent out of your endzoneThe goal is to stop the opposing team from scoring more than your team. Defenses do this by working together as a unit. They take an inventory of their skill sets, they implement different coverages and blitzes, they tackle the ball carrier, cause turnovers, and execute the game plan.  

This is what we must do in our financial life. Just like offense, realizing a good defense doesn’t just happen, so taking steps to be intentional is keyIf we know the goal is to keep the opponents from scoring, we first must study their products, learn their sells techniques, and put a guardrail up for ourselves to stay off their turf. We then take an inventory of our assets and implement a strategy based on an evaluation on what assets should be protected. Nextresearch coverages that make sense and that are most effective (cost and protection). As time passes, reevaluate your defense to determine if it’s effective and make sure it’s helping you win the phase. 

In short, here are a few things to think about: 

  • Just as defenses take inventory of their skill sets to build depth in positions, you should build depth in an emergency fund for unexpected expenses
  • Just like the eleven guys on defense that are working to protect their endzone, protect your large assets
  • Just as a defensive lineman occupies offensive linemen to keep the linebackers free/safe to make a tackle, occupy an appropriate amount of term insurance to keep your family safe if something happens to you
  • Just as defensive secondary change their coverage, review your current coverages and see if they still provide proper protection

The adage, defense wins championships is true, but it also ensures your possessions will be protected and your family will be taken care of regardless of unforeseen events. 

Special Teams 

This phase of the game is most often overlooked or downplayed by spectators until a dynamic play occursMostly focused on the kickersmomentum or even the scoreboard can swing to the opponent in just one kick. Whether it’s a missed point after touchdown (PAT), a 55-yard field goal to end the first half, a punt stopped on the one-yard line by the coverage teamor a punt return for a touchdown, this phase is extremely important.  

Most of the time, people group actions into offense or defense, but I view special teams as financial life occurrences that can significantly multiply your chances of winninggive peace of mind, or be a detriment to accomplishing your goalsSome may only happen once in your lifeso as former University of Tennessee head coach General Neyland put it, “Press the kicking game. Here is where the breaks are made.” 

In short, here are a few things to think about: 

  • Just as the kickoff team working hard to get the returner in for a touchdownworking hard at an extra job to maximize your retirement account in the early years can rapidly increase your chances of a successful retirement  
  • Just as a field goal safe or punt safe is called (this means that the rushers do not rush the kicker, but drop back in case a fake field goal or punt is called), have a professionally drafted will to ensure your familyassets, and last wishes are safeguarded
  • Just as a team kicking a twenty-yard field goal at the end of a half producing three points forgoes the opportunity to score a touchdown (which means the ball is on the three-yard line), review your investments at year end to harvest any losses, if necessary
  • Just as a snapper snaps the ball over the punter's head into the endzone and the punter tries to pick the ball up, but fumbles it to the other team for a touchdownan individual can inherit a bunch of money and change their spending habits and fumble the inheritance away 

From Hero to Less Than Zero

Despite earning the title of “Highest-Paid (Cumulative) Running Back in the history of the NFL,” collecting just shy of $100 million throughout his 12-year NFL career, Adrian Peterson has gone from hero (money wise) to less than zero.

We’ve all heard the rags to riches stories in the athlete realm, whether it be Michael Oher, Lebron James, or Manny Pacquiao. Unfortunately, we’ve also commonly heard the contrary. Poor investments, reckless spending, and even divorce (but not limited to) have each been a cause of reduced wealth. Whatever the circumstance, there are usually three commonalities between each rich to rags story – behavior, mistrust, and a result of shame.


I know what you’re thinking… “if only.” If only I had $99 million, there would be no way I could possibly spend it to zero.

Let me propose a short scenario to show you how this happens to the average individual/household:

Your gross salary is $50,000 annually and you live a comfortable lifestyle. You are able to cover your daily living expenses, your mortgage, and your car payment. In addition, you aren’t too conscious about your spending, because you think you have no reason to be. You also spend almost every dollar after your fixed expenses are taken care of. You spend your “extra” on entertainment, eating out multiple times a week, and taking spontaneous weekend trips once or twice a month.

One day your boss walks into your office and praises you for your efforts and dedication to the company you’ve displayed over the past two years. He rewards you by increasing your annual income by 50% effective the following year - resulting in a $25,000 pay raise.

As you receive your pay raise, you begin to get excited and your “dreamer” mentality begins to take over. At the beginning of the next year, your monthly income has significantly increased. You “suddenly” begin to get tired of the car you drive and decide to purchase a new one – doubling your monthly payment. You also decided to move into a new home on the opposite side of town, which increases your monthly mortgage payment significantly. Oh, and that jet ski you’ve seen your neighbor pull into their garage… Yeah, you bought one of those too.

See how quickly your $25,000 raise can be wiped out. This is a result of poor behavior and impulse spending. Just like APs multi-million-dollar contract(s) got the best of him; your raises can get the best of you.

Solution: Create a zero-based budget. A zero-based budget is simply taking your income and subtracting your expenses to equal zero. This means give each dollar you earn a purpose.


“The truth behind Adrian Peterson’s current financial situation is more than is being reported at this time. Because of ongoing legal matters, I am unable to go into detail, but I will say this is yet another situation of an athlete trusting the wrong people and being taken advantage of by those he trusted. Adrian and his family look forward to sharing further details when appropriate.”

The statement above made by attorney Chase Carlson claiming fraud on AP’s behalf may be accurate, of course only time will tell. Yet, although AP may be a victim of this classless act, the problem is deeper, and it cannot be pawned off just on mistrust alone. Trust is assured reliance. Most point fingers, but from my experiences when one is pointed, there are four pointing back. In any situation whether it be with $99 million or $50k, at times trust is initially misplaced in ourselves. We believe we have the awareness and financial acumen to manage our new circumstances, even without previous experience or insight. AP had choices, whether he pawned off responsibility in a “trusted” attorney or businessman, AP is still left in a situation resulting from a form of mistrust.

Solution: Seek wise counsel and properly conduct due diligence.


$99 million to $0. That is a shame. Unfortunately, this story is too common and unfortunately (or fortunately if someone will learn from it) it is public knowledge. Whether it’s a businessman, a movie star, an athlete or even the common man – shame is the result of poor behavior and misplaced trust. AP has sacrificed his body for years – pee-wee football, middle school, high school, college with the Oklahoma Sooners and now 12 years on the grandest stage. All these years of brutal wear and tear on his body with no financial gain to show for.

Solution: Stand in the shoes of AP and observe his shame to avoid shame for future self. Start beginning with the end in mind.


• Implement a zero-based budget and if you don’t like the word budget, call it a spending plan. Spending plans are implemented to minimize regret and maximize your freedom while staying inside the guardrails you placed.
• We all think we know what we should and would do when facing a new circumstance, especially when it comes to a windfall of money. If/when this occurs to you, take a step back, seek wise counsel and conduct due diligence before you place your trust and financial future with them.
• The only way to avoid shame is to internalize someone else’s “mistake” and do the opposite. One way to do that is to follow Stephen Covey’s advice of beginning with the end in mind.

Series: Essentially Essential – Compounding with Time

Time. You cannot hold it. You cannot see it. You cannot stop it.
But… you do have a choice. Utilize it or don’t.
When it comes to planning and building wealth (or for anything) – time matters. And, compounding most certainly does too.


Time Value of Money


Compound Interest

These two concepts are both fundamental, foundational and most certainly essential. The sooner you learn them and the sooner you apply them – the better off financially YOU WILL BE!

Whether you realize it or not, time and compound interest are powerful. Time allows for potential. Compounding allows for growth. Both concepts are simple, so let’s analyze why time and compound interest matter.

What is Time Value of Money?

Time Value of Money. You may have never drawn the comparison that time and money have a mutualistic relationship - it does. Money not only has a monetary value; it has a time value too. Let’s look at a quick example:
You completed a service for a client, and you are owed $10,000 dollars. The client calls you to let you know that he is ready to give you a check for the bill. He gives you a choice to swing by his house to collect the $10,000 before he goes out of town for a month. You have a choice. Do you wait for a month or do you go by his house to collect what he owes you?

Some may say it doesn’t matter as long as they get paid, but time value of money says it does matter. Why? Because receiving money today is worth more than receiving that same $10,000 dollars at any given point in the future. Yes, even if you had the option to receive it tomorrow. Your money has potential earning capacity. This means that the $10,000 you received today; you have the potential to earn money on that $10,000 today. So, if you took the $10,000 a month from now instead of today, you would miss out on all the potential earning capacity of each day you did not have the funds.

Simply put:
• If you receive the money today – you can make money on your money today.
• If you receive the money tomorrow or at any given point in the future but had the option to receive the money today – you lose out on the potential earnings of today and every day in the future that you delay receiving the money.

What is Compound Interest?

Formula: FV = PV (1 + r)^n
(FV): Future Value
(PV): Present Value
(r): Interest rate earned per year (%)
(^): Exponent – the number of times a number is multiplied by itself
(n): Number of periods

Said to have been described as “the eighth wonder of the world” by Albert Einstein, compound interest can be simplified from the formula above. Yes – FV, PV, R, and N are each important in making your money grow, but where you capture the most growth is often the most overlooked piece of the formula. The “upside-down v” or exponent allows for compounding. It allows you to exponentially grow the present value (PV) to a greater future value (FV). To get from PV to FV the compound interest accrues - this means that not only will you earn interest on the principle (initial amount), but also you will earn interest on your interest.

Yes, you read that right. You can earn money on the money you’ve earned.

Let’s take the previous example above and say you decided to swing by your client’s home to receive the payment of the $10,000. Let’s also say you immediately took those funds to the bank and put it in a savings account. It also turns out that the savings account at your local bank is yielding 10% (for simple math – FYI, most savings accounts yield less than 1% unless it’s an online bank). Here’s what that would look like if you deposited the $10,000 and did not touch the funds for the following years:

Year One: $10,000 x (1+0.1) = $11,000
Year Two: $1,100 x (1+0.1) = $12,100
Year Three: $1,210 x (1+0.1) = $13,310
Year Four: $1,331 x (1+0.1) = $14,641
Year Five: $1,464.1 x (1+0.1) = $16,105.10
Year Ten: $1,610.51 x (1+0.1) ^5 = $25,937.40
Year Twenty: $2,593.74 x (1+0.1) ^10 = $67,275

After year one, you would have made $1,000, because you earned 10% on your principal ($10,000). In year two you would have earned $1,100, because you earned 10% on your principal ($10,000) and the interest you earned from year one ($1,000). This is what compounding looks like.

How does time value of money and compound interest work together?

In the compounding example above, let’s assume you put the $10,000 under your mattress for ten years, then decided to put it in that same savings account that was offering a 10% yield. Instead of turning your $10,000 into $67,275, your $10,000 would only be worth $25,937.40. This is due to the fact that you decided not to make the choice to utilize time, you would have lost out on $41,337.60. That’s why time matters and coupling it with compound interest amplifies its importance.

Key takeaways:

• Money grows, but you must have it to receive the potential of growth. If given the option, ALWAYS take the money NOW.
• Compound interest is perhaps the 8th wonder of the world. You can earn money on the money you’ve earned.

Are you Psychologically Fit?

It’s the day you’ve dreamt of. The day that has caused your imagination to run like a stallion. You’ve watched others experience it many times over only wishing it was you in their place. This day, the day you’ve been working for is here.



So, you’re good financially? Great! But, what about psychologically? Asking the question, “Do I have enough?” is not the only question that you should be asking. Although it is important and can be liberating, having enough is just one of many steps along the path of a having a successful retirement.

Think back to the very first day you began your career. The excitement, the newness, the possibilities. Retirement is like that! Now think back to the day you began your seventh year. The normalcy, yet you're filled with questions and new roles. Retirement is also like that.

Change occurs early and often. Unfortunately, many retirees do not think practically past the first day of retirement or even the first year. The questions of worth, purpose and identity may creep in. What you must realize is that you are a creature of habit and when change occurs, you deal with it differently than someone else. Below are some questions/strategies to spur thought as you begin that transition into retirement and if you're already to that point - start where you are now.

  • Do I have enough?
  • Am I ready to retire or am I just retiring because that is the natural progression?
  • Will I miss the relevancy that my job provided? If so, what can I get involved in to fill the void I may experience?
  • What will I be leaving behind?
  • What is my purpose in life? In what ways can I go about accomplishing that?
  • Realistically, what will my lifestyle look like? Have I put off activities or interests that I want to pursue?
  • Who has transitioned into retirement that I know? Call them and talk about the transition they had.
  • What tasks will I implement to stay active, healthy and keep my mind sharp?
  • Just like your career goals, formulate retirement goals. Set short-term, intermediate and long-term goals.
  • After the bucket list items are checked off and the grandkids have been visited, what will my day-to-day look like?
  • If I am social, what organizations or clubs are available for me to join?
  • What type of legacy do I want to leave?

Final Thought: There is no one-size-fits-all solution to retirement. Everyone has different desires and different circumstances. What everyone can do is take those desires and circumstances into consideration before and during retirement and apply serious thought to them. Each decision creates complexities. Keep in mind that life happens, so remain adaptable just like you are in your career. Keep an open mind and surround yourself with people you trust and can have tough ongoing conversations with. This is where we want to end up:



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