Finance Made Simple

“Buy low and sell high. It’s pretty simple. The problem is knowing what’s low and what’s high.” - Jim Rogers, Chairman of Rogers Holdings and Beeland Interests, Inc.

Buy low, sell high, four words that make the idea of investing in the stock market seem exciting and simple. The reality, however, can be overwhelming and frustrating, particularly if your investments aren’t performing as well as you expected in the markets. Maybe you heard the latest buzz about a new and upcoming technology that had you jumping at the chance to be a part of the action – only to realize later that you purchased high and now their stock price is dropping. You’re not alone.

Blackrock reports, “The average investor, over a 20-year span ending in 2015, underperformed the S&P 500 by six percent.”

Below are a few key reasons that uninformed investors don’t make more money in the stock markets.

In our previous article, we reviewed five tips that parents could teach kids on being ethically responsible with money. This week, we’ll continue our financial education discussion with how we can teach kids about budgeting and saving from an early age.

How many of us wish we were taught more about money during our childhood? One of the best ways to help our kids avoid financial mistakes in the future is to teach them to manage money.

According to an EverFi, Inc recent survey, “More than a quarter of students believe they will be unprepared to manage their finances upon high school graduation. In addition, students surveyed demonstrated that they do not understand basic financial facts and concepts.” Teaching kids basic financial tasks like developing and sticking to a budget will result in strong habits that they can carry into the future. So, now the question is, what financial skills do you teach them? Well, it really depends on how old they are.

Truth, responsibility, respect, compassion and fairness tend to be the global understanding of the values we associate with ethics. But what about financial ethics? How do we teach our children to be ethically responsible with money?

Research shows that the best way to teach children morals and ethics is through example. From an early age, children observe their parents spending, saving and discussing money. They pick up on their parents’ views regarding money just by watching them.

Last week, we discussed two types of funds – lifestyle funds and lifecycle funds – that aim at simplifying investment strategies for individual investors who may be choosing their employer retirement plan investments with limited options, or just beginning to invest. Lifestyle funds blend stocks, bonds and other investments in order to maintain a consistent level of acceptable risk. Lifecycle funds on the other hand, focus on managing your investments towards a target end date. This week, we will look at whether or not these are options that will best help you meet your financial planning goals.

Do you find the idea of creating a plan for allocating your assets overwhelming? How about choosing a mutual fund? Or designing your investment portfolio? If you’re like many people, investing in your future can be confusing.

In Part I of this series, we provided a basic definition of deferred compensation plans and introduced questions to ask your financial advisor.

We said a deferred compensation plan is one in which a portion of an employee's pay is held until a specified date, usually (though not always) retirement. A deferred compensation plan:

Congratulations! You’re an executive and you now qualify for deferred compensation plans. But what does that mean?

You might have heard the term “deferred compensation plan” before. If not, you might be more familiar with the idea than the term, so this definition might ring some bells when you put it in context: A deferred compensation plan is one in which a portion of an employee's pay is held until a specified date, usually (though not always) retirement.

Go onto the IRS website or any financial planning site and start looking up retirement plans. Assuming you don’t work in investing or human resources, we can almost guarantee you will be tilting your head and asking, “What the…?” by the time you hit the second or third paragraph. No, it’s not just you. The way this information is presented is daunting at best.

Welcome to A Deeper Look series. One of the ways of understanding finance is understanding many of the terms you are not used to hearing every day. These terms may sometimes be confusing, so it helps to get some background and perspective.

Today, I would like to share the term “asset allocation.” Asset allocation is an investment strategy that incorporates the risk tolerance and investment time horizon of the investor. It may sound simple, but there are many ways to allocate assets within an investment portfolio. Most approaches consider three main sets of asset classes: equities, fixed-income and cash or cash equivalents. Each class has a different level of risk and expected return, and each will generally perform differently than the other. There are additional classes such as “alternatives,” real estate and precious metals that can also be considered as part of an allocation.

Years ago, in many junior and senior high schools, our youth attended classes about basic budgeting and finances. And often, the only classes were part of a Home Economics track as Life Skills. Sadly, along came budget cuts, and these classes were removed. During my career, I have spent some time in classrooms as a guest teacher, sharing insights and tips for students to become more financially savvy.

One of the many facets of my financial advisory services is helping clients evaluate and choose to participate in their employer’s executive benefits. Many of these benefits supplement an executive’s overall income, now and in the future. But there are pros and cons as well as tax considerations that go along with them.

After every national election cycle, the world of financial planning changes in some way. It may be big changes coming down the pike, or changes in the details. Advisors work to field through the changes to make sure clients are getting the best advice they can offer. This election cycle is no different and looks to have big changes coming your way. The first area targeted for change is the Healthcare Law. With reference to Health Savings Accounts being proposed as a significant component, it may help to refresh our memories on what these are and how they’re used.

Health Savings Accounts (HSAs) were introduced in 2004 and were coupled with High Deductible Health Plans (HDHPs). It’s always important to verify that the insurance plan is HSA-eligible. The HSA is a separate account that an employee, employer or private policy holder contributes money to during the year. The premise of these accounts was to help curb the growing cost of health insurance and to put the insured patient more in control of their healthcare. The pre-tax contributions are much like a traditional 401(k) or IRA. The account can then be tapped to pay for qualified medical expenses. If money is used to pay for non-qualified medical expenses, it will be taxed and will include a 10% penalty.

In order to make a living wage today in the U.S., employees are required to have at least a four-year degree. At the same time, the cost of tuition has been on a continuous rise. So for generations X and beyond, student loan debt makes up a large chunk of their total debt. Four short years at college could potentially take decades to pay off if you’re just making minimum payments.

There is hope, however. There are options to pay off debt quickly, get lower interest rates or in some cases, have the debt forgiven. Here are some of your options to chip away at student loan debt so that you can have a little more breathing room in your budget.

We know each generation is unique, and that doesn’t change when it comes to money management. Technology changes, the economy changes and attitudes change. It makes sense, then, that Generation X (ages 35-50) and Millennials (ages 18-34) sometimes think differently about finances. Here are some trends we’ve seen with these two younger generations.

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