Tuesday, May 26, 2015

Enjoy your freedoms responsibly this Memorial Day

Earlier this month I took my mom to a public park with a beautiful, peaceful river setting. It was a special place for mom because she and my late father spent a lot of time there together.

When we arrived and pulled into the busy parking lot, I was fortunate to find a parking spot just a stone’s throw away from a bench with a breathtaking view.

When I turned the engine off, my mother became upset because she forgot her handicapped-parking permit. Since the car was parked next to the bench, I wasn’t overly concerned. We were close enough to the spot that I would see any law enforcement, and I couldn’t imagine them writing a ticket, seeing my mom with her walker.

Fortunately, my mother enjoyed her short stay at the park, which I’m certain rekindled memories of my father, who was a veteran. We eventually left without incident.

I bring this up because it’s Memorial Day weekend. Households throughout the nation are sharing memories of their loved ones. Sometimes we forget about those that gave their lives for our nation. Their dedication and commitment is the backbone of our culture today.

The dedication of military personnel is the reason we have the freedom to elect the officials that make and enforce our laws. The freedoms that many died for and continue to defend, including our financial freedom.

By that I simply mean the ability to make our own financial decisions. As with all other aspects of freedom, there is responsibility, and that includes fiscal responsibility.

What exactly does fiscal responsibility encompass? Each and every day you’re faced with countless decisions that impact your financial well being. Responsibility means being prudent with every paycheck and understanding its boundaries. It begins when you jump out of bed in the morning and leave for work.

For many, the first financial decision of the day is whether to brew your coffee at home or make an expensive stop at the coffee shop. Do you bring your lunch or spend a few dollars every day at a nearby restaurant or fast food place?

While at work, do you ever find time to check your benefits? In other words, how much time do you allocate to your retirement plan? Are you taking full advantage of any employer match? And don’t forget to see if your employer offers a menu of other benefits, including healthcare choices and supplemental life insurance.

As you go through your daily routine, are dollars falling from your pocketbook just because of that routine? Again, being smart and prudent is a choice; a freedom that should not be taken for granted. Credit cards might make it easy and tempting for impulsive spending, but fiscal independence puts the responsibility to avoid overspending squarely on your shoulders. The stress of outstanding credit card debt has ruined many lives. Don’t let yours be one of them.

As we salute our military and those that have previously served, keep in mind that they are the ones that have maintained the entire foundation that allows us to live the lifestyle we enjoy. It’s too easy to take our freedoms, including financial freedom, for granted. You are free to choose how to save or invest or spend or spend your money. Please do so responsibly.

Monday, May 18, 2015

May your launch be successful, college graduates

This is the time of year when many of life’s transitions are launched. There are a lot of young adults graduating from high school who will soon be leaving home for the very first time. Similarly, there are a lot of young men and women who are graduating from college, ready to step out into the world and hoping to become self sufficient.

In a perfect world, all of them would either be launching their professional careers or continuing their education in a specialized program such as medical or law school.

But the world isn’t perfect. Yes, the economy may be improving, but far too many young adults will be returning home to mom and dad, still seeking their destiny.

May is also what I refer to as the beginning of the wedding season. In fact, it was exactly one year ago that one of my sons got married. And whether or not the bride and groom have matriculated through college, they too, are making a major transition.

So, we have high school grads, college grads and newlyweds, each of them embarking on lifelong journeys and all beginning in and around the month of May.

To all those young men and women graduating from high school or college or beginning their lives together with a significant other,

I offer a tip of my hat — and some advice.

At many graduation ceremonies the speaker encourages the graduates to change the world in a positive manner. I agree that this is a wonderful and compelling message, but I offer something more specific. I want to encourage all young adults to be fiscally responsible.

What exactly do I mean by fiscally responsible? First and foremost, keep your debt under control. If you borrowed money to get through college, simply pay it back.

Unfortunately there has never been more college debt than there is today, but loans should be repaid. You can always rationalize why repaying your debt should be put on the back burner. But, at the end of the day, your debt is your responsibility, not your fellow taxpayers.

Another piece of advice is simply to live within your means. In this world you can quickly run up sizeable debt with a visit to Amazon and a few clicks. I’m not suggesting that you don’t spend, but, just as with investments, balance is the key.

Finally, develop good savings habits. Don’t just save what’s left over, but rather become a disciplined saver. For example, start saving $50 per month and stick with it no matter what. A year later, increase the amount to $100. This is just an example, but making savings a habit is important.

I include newlyweds in the ‘major transition’ equation because, in financial terms, marriage is somewhat of a financial merger. You might be marrying into a large college debt or marrying someone who can’t save a nickel.

Unfortunately, money disagreements are often cited as a reason why marriages don’t succeed. My suggestion is talk about money prior to tying the knot. Both parties should be aware of the circumstances.

I believe it’s important to develop proper money skills and habits. Over the years, I’ve observed that those who have a grasp of their finances turn out to be more responsible, generous and confident in their future.

Monday, May 11, 2015

Annual report: We need to pay attention to Generation Y

Every year in late April, I attend a conference with some of the most respected financial advisers from around the country. In many ways, the conference reminds me of my college years. That’s because I continue to learn a great deal in the conference’s classroom. And the interaction, thoughts and ideas from my peers are just as valuable as the items on the conference agenda.

One focus of the agenda was Generation Y, often referred to as the Millennials; those born between 1977 and 1995. Keep in mind, for the first time in our nation’s history, there are actually four generations in the workforce. In addition to Generation Y, there’s Generation X (1965-1976); my generation, commonly called the Baby Boomers (1946-1964); and the Traditionalists (pre-1946).

Virtually every day, you can come across someone from each of the various age groups in the workplace. The crowded demographics make it easy to see why it’s so difficult for high school age kids to find summer employment.

The financial services industry needs to pay more attention to Generation Y. After all, there are 80 million people in Generation Y, virtually the same number as the Baby Boomers. Like the Boomers, Generation Y is going to need financial advisers to guide them through the complexities of the investment world.

Every generation has a defining moment. For Baby Boomers, it was the assassination of JFK. It appears that 9/11 will be the defining moment for Generation Y. And while Generation Y will have more college graduates than any generation, they will also have more college debt. Far more.

The financial services field is a graying field. It’s in need of Generation Y advisers to help their peers with the financial decisions they need to make throughout their lifetimes. As Baby Boomer advisers, my generation needs to train, educate and eventually pass the torch on to the younger advisers. It’s beginning to happen and I’m confident that Generation Y will understand the importance of financial issues. I’m somewhat embarrassed, nonetheless, that they’ll need to tackle some financial issues that Baby Boomers are currently kicking down the road.

Finally, I have to say that our keynote speaker, Condoleezza Rice, is one of the brightest people I’ve ever encountered. From her tenure as Secretary of State she has a great understanding of the many hot spots throughout the world.

Today, besides teaching, she also serves on the NCAA college football playoff selection committee where she was in charge of evaluating our own Big Ten Conference. Whatever your politics may be, there’s no questioning her considerable knowledge. Her comments and opinions were always respectful; a rare trait in today’s political environment.

Summarizing, the classroom information was great and I think perhaps this should be the “discussion of or with my peers.” Our featured speaker spent years trying to make the world a safer place, and we spent a fair amount of time trying to get our arms around Generation Y and their finances.

Our world will always need quality people like Condoleezza Rice. People who try to make the world a better place for the generations to come, each of which will need some sort of financial advice. I believe that Generation Y is no exception and I have every confidence that they are up to the challenges that lie ahead.

Tuesday, May 5, 2015

Don’t abandon ship yet — one day does not make a trend

Time and time again I have emphasized that diversification is a key ingredient in the recipe for long-term investment success. I have also made readers aware that the current uptrend in the financial markets is now more than six years old. In other words, it’s one of the longer bull markets in our nation’s financial history.

To go six years without a 10 percent correction is quite remarkable. To a certain degree, the investment world is like a living being in that it periodically inhales and exhales. So, after six years of exhaling, seeing the markets stop and take a breath shouldn’t be a surprise — or cause for alarm — for anyone.

There’s no question that the world is facing some serious issues. Some of them so serious, in fact, that they could potentially light the fuse and ignite global warfare.

Here at home, even though most investors have seen their account values appreciate over the past six years, I sense that many feel the economy still hasn’t totally recovered from the recession.

In a recent column I made readers aware that a dollar dominated world currency is currently being challenged. Although the effort is being led by China, even some of our close allies have lent support, including France, Germany and the United Kingdom.

I won’t go into the ramifications of the U.S. dollar losing its status as the world’s reserve currency. Suffice it to say that it’s quite worrisome. That being said, however, there has always been something to worry about.

There’s an old saying that successful investors must be able to climb the wall of worry. I have often referred to it as needing an iron stomach. Considering the many serious issues around the world, I think we can add “nerves of steel” to that list of requirements.

Remember, bad news sells. When you turn on the TV or radio, the lead story is seldom about some great philanthropic event. More often than not, it’s about a tragedy, crime or some controversial political issue.

I noticed that immediately after the markets plunged on April 17, the Internet and my email were flooded with disturbing solicitations that preyed upon fear. I personally was warned of “the coming economic collapse,” to “cash out now and buy gold,” and to “buy this report to avoid doomsday.”

Stating the obvious, nobody has a crystal ball. As a financial adviser, when I work with a client to develop a diversified well-balanced portfolio, I design it with them for the long term.

Of course there are periodic reviews that may result in the plan being modified or tweaked. It’s essential to follow that course of action rather than eventually hitting the panic button and changing everything.

Unfortunately, I’ve seen that happen. People abandoning their strategy and letting emotions take over. Emotions are a dangerous thing for investors. They often lead to impulsive decisions that seldom work out. Long-term investors understand that setbacks occur and don’t let emotions take over.

A lot of money is made off of a person’s fear. I’m sure that many people responded to the Internet and email warnings after the market drop on April 17. The fear mongers may have cashed in, but abandoning ship rarely works out well for long-term investors.