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Monday, November 16, 2015

How to Live a Happier Financial Life

I recently came across this article written by Jonathan Clements from the final edition of Wall Street Journal Sunday this past February. It’s a simple list of five notions that he’s witnessed in his numerous years as a financial writer. Thought provoking and basic, yet some good words of wisdom. Enjoy.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

No strategy assures success or protects against loss.

Investing in mutual funds and stocks involves risk, including possible loss of principal.

Monday, November 2, 2015

Why the New Chip?

I recently received a new credit card in the mail with one of the little computer chips on it. With all of the press about “skimming” at gas pumps, including a few here locally in Grand Rapids, I thought this was good news as maybe I wouldn’t have to slide my card at gas stations anymore. After doing a little research, I found this article from Money that helps clear it up a little bit. The bottom line is that fraud will continue to exist. The frustrating part is the types of fraud will evolve as technology expands. Be careful, pay attention to your statements, and alert the bank immediately of any suspicious activity.

Friday, September 25, 2015

The Money Marathon

Rule #1: Know how to win
Imagine you’ve signed up for your first marathon. You’ve trained hard, prepared. Fueled yourself for the journey. Imagine the multiple-hour long suffer fest, with the focus on doing things right, just putting one foot in front of the other. Imagine, after hours of running, finally crossing the finish line. Would you keep running, once you’ve crossed? What if you didn't know where the finish line was? Would you keep running, or stop?

Too many people (people who don’t actively plan) refuse to ever find their financial finish line. Some believe that they could never cross it, if they knew where it was. Some people are blindly confident that they will be alright on their own merits, planning their own training, and training when they want to, doing whatever feels good to them on that day. But marathons are long. 

Thankfully, there is no one forcing us to run a marathon - we have a choice. But when it comes to finances, we all must run the financial race. 

When it comes to money, we all set our own finish lines. We all can choose how much is ‘enough.’ But until we give ourselves an end, we won’t be able to know if we are using the best directions. 

Rule #2: Know the players
For better or for worse, there are other people on the course when you run. Some are others running their own race, some will help guide you along the way, and others yet will slow you down. The last category is the most dangerous – they are the ones that will upend your race plan. And these villains are different for everyone. For some people, these gremlins show up as debt payments, for others, unplanned emergencies or expenses. Some of the cleverest gremlins are the small expenses that drain us over time, subscriptions to services we never use, or habits we no longer enjoy. 

From an early age, we are trained how to buy. And we are very good at spending. Every time we turn on the TV, we are inundated with ads for the latest must-haves. But how can we succeed in sticking to our race plans when millions are spent every month to get me to veer off course? We must see the companies, products and services we buy for what they are, and plan for them accordingly. 

There is nothing wrong with spending. And I think we should all aspire to improving the quality of life for our families and ourselves. The challenge is when we mortgage our financial futures for today’s entertainment. And we are tempted to do so with the flashy ads, or the news segments signaling the end of the world. But when we realize that the marketing company’s job is to make you buy, and the newspapers job is to sell newspapers, we can then stay focused on finishing our own race, our own job of working towards financial independence. 

Rule #3: Have a strategy
What we leave up to fate, gravity tends to decide. 

One of the most important tools we have in our financial lives is simply to make a plan. This plan should be written. It should be based on facts, not opinions. It should outline a path to pursuing your most important goals. And it should be reviewed on an ongoing basis. 

But why?

To put it simply, every business, service and corporation discussed in Rule #2 already has a plan for you. They have spent countless dollars figuring out just how to part you with your hard earned money. And the less planning you have done for yourself, the easier it will be to get you to spend. Remember, wealthy behaviors are 80% emotional, and a big part of that comes down to how we spend. 

The purpose of a financial plan is best summed up with a sales axiom: “People love to buy, but hate to be sold.” We are trained to buy, and we love that feeling of gratification. But we also need to protect ourselves from being sold – and our best defense is by having a plan. 

We are forced to run the financial race. For those who run intentionally, with a plan, and with practice, the financial marathon can be rewarding and fulfilling. Having a plan along the way helps give us confidence, and allows us to enjoy the scenery as we go.

Wednesday, September 16, 2015

Socially Responsible Investing: How Capitalism Can Save the World

Today it seems that everything is divided into two camps, left and right, conservative and progressive, Pepsi and Coke. This seems especially true when it comes to the world of finance. Either you are a believer in the merits of capitalism, and believe that the Market will correct all wrongs, or you believe that big business is the root of all evil and social injustice. But is there a third way – a way that can use the power of the market to save the world around us?

The trouble with the status quo
For need of an example, let’s take the environment – specifically the creation of waste/trash. Leaving aside the debate on the climate, I hope that we can all agree that as a rule of thumb, our love of consumer goods has led to an incredible surge of production, leaving us with mountains of stuff. Now, if wanted to address that issue, the general consensus is that we should (1) start a grassroots movement, (2) lobby our government representatives, who will (3) make laws/regulations that (4) constrain the activities of business or the public which finally (5) reduces waste. The challenge in this approach is threefold. 

First of all – this process takes time, often years, in order to grow support, change government thinking, enact new legislation, and see results. And while each next step is being taken, support can fade into the background. 

The second sad reality is the political sway that businesses can have on legislation. Simply put, lobbyists can be well-funded by corporations who have a vested interest in the status quo.

Lastly, even if legislation is passed, businesses have the option to simply off shore waste-producing activities to other countries with fewer regulations. 

So at the end of the day, what have our efforts accomplished? Unfortunately, it hasn’t accomplished nearly as much impact as we hoped it would for the effort and man-hours that we put in.

But if you’re feeling helpless, there’s good news. 

Socially Responsible Investing: An alternative
The good news is that there is an alternative way to effect change, and more directly. The industry term for this sort of morally-motivated approach is “Socially Responsible Investing” or “SRI.” This is a method that allows investors to leverage the markets to reflect our values. More than just Risk versus reward, SRI adds an additional layer by evaluating companies on any number of different impacts – from environmental concerns (green companies, organics), treatment of employees (child-labor, wages), to consumer safety (avoiding alcohol, tobacco, etc) just to name a few. 

So how does it work? 

There are two basic ways that SRI can work – what I call ‘activist’ and ‘exclusivist’ methods. 

The activist method involves building a group of like-minded shareholders that use their collective ownership of the company to propose changes to the board of directors. This is where we see direct interaction between business and those striving for change. This isn’t to say that change will be easy, but with time and persistence, the same skills needed to build support for change on a political level can be used directly within a business. 

The exclusivist approach is much less demanding. Instead of organizing people and directing support, you can let your portfolio do you talking for you. By leaving out companies that violate ethical standards, a large mass of people can cumulatively send a message via the marketplace to corporate executives. Coincidentally, seeing that often times executives pay largely based on stock price, with enough support from investors, businesses can realize the need to for change long before legislation can be passed. 

Either of these models can help the average investor align their dollars with their values, and can supplement any action taken in the community as well.

Risks
One of the big risks to keep in mind with Socially Responsible Investing is that when you elect to avoid investing in companies by industry or other metric, your pool of possible investments diminishes. In investment jargon, this lowers your portfolios diversity, which can have on the overall amount of risk and volatility that you may see over time. 

If SRI is interesting to you, make sure you consult your financial advisor to make sure it can reasonably fit into your overall plan. 

If you would like to continue learning about SRI, a great resource is Investing for Change, by Landier and Nair. 


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The return may be lower than if the advisor made decisions based solely on investment considerations.

Investing involves risks including possible loss of principal.

Thursday, August 20, 2015

Investing In Yourself

When we think of “investing” often what comes to mind is the stock market, ‘Mad Money’ or the Wall Street Journal. If we think a little deeper (or impart wisdom on the next generation) we may think of college education. But I would say that most people never spend much time even thinking about their overall direction in life, much less investing in the assets that will get them to their destination. 

In broad terms, I hope to define some specific assets we all have, that go a bit deeper than simple finances. 

Human Assets
At the end of the day, Human Assets are the most important, though we hardly treat them as such. The most important above all? Time. Dr. John Izzo puts it succinctly in The Five Secrets You Must Discover Before you Die: 
“There are two fundamental truths of a human life. The first is that we have a limited and undefined amount of time—it may be 100 years, it may be 30. The second is that in that limited and undefined amount of time we have an almost unlimited number of choices of how to use our time—the things we choose to focus on and put our energy into—and these choices will ultimately define our lives.”
Human assets are internal. They are the skills and abilities we spend time mastering. Human assets are the knowledge and wisdom accumulated by experience. And finally time is the Human Asset that we can choose to spend on the things we deem worthwhile. How do we invest in human assets?
  1. Educate ourselves. Often the purpose of education is to build up knowledge that we can trade for money (via a job). But deeper than that, wisdom has no price tag, and it improves our lives both at the office and at home. 
  2. Improve skills and abilities. These skills are limitless. From skills that produce joy (surfing, cooking) To skills that are useful, (fixing a car, repairing a wall, or roofing a house) these skills can directly improve our lives. 
  3. Make time. Often we get carried away with whatever is in front of us, be it Netflix or Facebook. We are always hurrying, from work to practice to home again, but we never arrive. 
Social Assets
It’s interesting to watch the evolution of social assets – on one hand, we are told professionally that business depends on relationships, to build soft skills, and to build your network. Yet on the other, I wonder if we have ever been so alone. Glued to a screen, we have let our social skills deteriorate in the wake of individual entertainment (hello Netflix binging). 

Yet the relationships with those around us tend to be some of the most powerful forces we have in our tool belt today. Whether it’s to hold us accountable to a diet, or to find a potential spouse, or even to find an identity, our social assets are the relationships that we turn to for help. But how do we even measure our Social Assets?
  1. Spouse/Immediate Family. Your family is probably your most important social asset. They are the ones that know you the best, and for the longest time. They are often the ones who are there unconditionally, and want the best for you. 
  2. The Inner Circle. These are deep – the ones you go to for guidance. They could be family or friends, mentors or accountability groups. 
  3. Outer Circle. These are your friends and family that are in your life, but you might not consider going to for guidance. 
  4. Professional Network. Colleagues, partners and acquaintances – these relationships are resources for personal and professional growth. 
The methods of expanding your network and deepening your relationships is far beyond the scope of this post. But if there was hope I could convey for you, it is that you might be intentional with your relationships. That you invest in them, nurture them and care for them. I’ll leave you with this gem from Mitch Albom’s Tuesdays with Morrie:
“In the beginning of life, when we are infants, we need others to survive, right? And at the end of life, when you get like me, you need others to survive, right? But here’s the secret: in between we need others as well.”
Capital Assets
I’d like to separate the word capital from the idea of money. Instead of dollars, Capital Assets are the things that we own that help use produce. A capital asset would be a lawn mower, an egg beater, or even a pen. These are the items that we own that we use to produce. Owning a lawn mower allows us to achieve our end goal – a pristine looking lawn. A solar panel is even better – it provides us value that we would otherwise have to work and pay the energy company for. 

However, not everything is a capital asset. And the difference largely depends on how it gets used. A fishing boat, for the fisherman, is a capital asset. It allows him to provide fish to make a living. On the other hand, a fishing boat, in the hands of a widget salesman, not so much.

By investing in the things that help us produce or save increases our level of real wealth. 

Financial Assets
Simply put – this is the money we have. The cash in the checking account (or under the mattress), the change in your pocket, and the stocks in your investment portfolio. The tricky part about financial assets is that they have no value in and of themselves. Money has value simply because we agree it has value. 

The hardest thing to remember about financial assets is that they are a means, not an end. They are a tool. If you were starving you couldn’t eat your money. You couldn’t build your home out of it. But since we agree that it has value, we trade it for the goods or services of another. 

Financial assets, though they may give a sense of peace and security, really cannot be appreciated until they are converted into one of the other assets – into the freedom to pursue the career you love, to spend time with those you love. 

Real Wealth
What I hope to convey is that Real Wealth is not just the number on your bank statement. But just because Real Wealth isn’t just financial wealth doesn’t mean we cannot intentionally build it. That we can’t plan for it, and work towards it, or even (in some ways) measure it. 


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

Wednesday, August 12, 2015

The Income Challenge

When it comes to what I focus on with my clients, I admit that I often make a mistake. Often I focus on what I (as the financial planner) can control. Asset allocation, investment selection, risk management are all tools I use to help pursue the goals of the families I work with. But what can easily fall through the cracks is a conversation regarding one of the most important pieces of financial independence, and what the client controls – income.

Without income, the rest of the financial plan is toothless. Expenses won’t be paid, there can be no savings, there can be no financial security. Financial independence starts with income. But not all income is created equal. 

Earned Income
When we talk about our income, we are generally talking about our ‘earned income’ or, the income that is produced by our daily work. For some people this is employment or salary income – reported on your form W-2 or 1099. For others it is self-employment income or partnership income. But the biggest thing these all have in common – we trade our time for money. Simply, we are working for our money. 

I address earned income first, because in most cases, this is the primary income source for families. Whether we are salaried, hourly, or self-employed, we can reduce our income to how much time we spend earning it, Vicki Robin and Joe Dominguez call this your ‘Real Hourly Wage,’ in their seminal book Your Money or Your Life. Increasing your real hourly wage, increases your income. 

The tradeoff that earned income demands is that when we spend time making money, we are by definition not doing the other things that are important to us. This is easy when we are passionate about the work that we do. But there are costs that cannot be defined in dollars or cents, when it comes to time spent with our family, our friends, time in nature, or in pursuit of our dreams. 

Passive Income
Passive income, in contrast to earned income, does not demand our time. It is income we receive without needing to work – it is money working for us. While we sleep. While we play with our kids. While we read. Even while we work for our earned income. It is the tool we have to help us pursue our dreams, even if the dreams don’t pay a financial reward. 

Passive income can be rent from an investment property. Passive income can be dividends paid from investments, or interest on loans. It can be royalties from books written, apps designed, or businesses owned. This income will come in whether you are there or not. 

The tradeoff passive income demands is lifestyle. It demands an up-front investment. In the case of stocks, bonds or real estate, you must invest money that has already been earned – savings. That means spending less than what comes in – in order to increase income. Writing books, songs or programs also demand an upfront investment of time, the time spent creating. And without pay. 

The power of passive income is that it is often cumulative. Once you turn on the spigot, it may stay on indefinitely. You can then turn your attention to the next spigot. After time, your expenses could potentially be paid without the need to work at all, and you are free to pursue what matters most.

Multiple Streams of Income
One of the big topics in the personal finance blogoshere is the concept of ‘multi-streaming’ your income. As you probably guessed, this is simply the idea of having not just one, but multiple sources of income. In generations past, individuals only needed to focus on their craft – they stayed at the same company for their careers, earned a gold watch, and retired on a pension. The next generation, the ‘free agent economy,’ saw massive employee turnover as the loyalty between company and employee (and vice versa) diminished. 

The next development has been the rise and impact of technology. Not only have previous computer models been replaced by tablets and smartphones, but entire departments of companies have been reduced to robots or computer archives. In order to stay relevant, employees must specialize in a small niche of the industry, stay current on advances, and continuously better themselves to earn their paycheck. 

By having multiple streams of income (diversification in financial jargon), families can both potentially reduce the impact of catastrophes, as well as increase the odds of financial freedom. When streams of passive income meet our expenses, we can afford to pursue dreams, spend time with family, or travel. Families can also reduce the risk of suffering from a job or economic change, knowing that their eggs aren’t all in one basket.

Resources
Everyone’s situation is unique, and no one strategy is appropriate for everyone. When looking at options to increase your Real Hourly Wage, or start building passive income, consult with your financial advisor. Additionally, you can check out the following great books:
  1. Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Revised and Updated for the 21st Century Paperback by Vicki Robin, Joe Dominguez, Monique Tilford 
  2. Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert T. Kiyosaki (Author)
  3. Early Retirement Extreme: A Philosophical and Practical Guide to Financial Independence by Jacob Lund Fisker


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. 

The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Thursday, July 30, 2015

Don't Let Pizza Put You in the Red

Believe it or not, summer is almost over for college students. For many incoming freshmen, college represents their first opportunity to live on their own with adult responsibilities. It seems like only yesterday that you were teaching them to tie their shoe. Now, they will be studying calculus and Descartes. Amid all of the preparation and emotion, don’t forget some important financial considerations.

First of all, set a budget for spending money. By now, you have probably recovered from the shock of the big ticket items such as tuition, room and board, and books. Equally as important are all the little things that can quickly add up into hundreds if not thousands of dollars. Pizza on the weekends, Starbucks every day, movies, concerts, and other social expenses can be difficult to control for a student just learning to make financial decisions on their own. Throw the convenience of a credit card and some peer pressure into the mix and you have a recipe for overspending. Establishing a weekly budget for these items helps students make rational decisions. Why weekly? Because that is about the limit of what these young folks can track.

Secondly, put a “banking plan” together. What does this mean? This means establishing a plan on how your student will keep and spend their money while they are at school. It is best that they do not keep much cash on them or in their dorm room or apartment. Somehow it tends to disappear.

You want them to be able to use ATM’s frequently for cash needs. Make sure there are ATM’s conveniently located that can be used without fees. At $3-$5 per transaction, ATM fees can add up quickly. If this is a problem for your current bank, consider opening an account with a local bank that has convenient ATM’s on campus.

Strongly consider a debit card instead of a credit card. Set up the account so that you are able to electronically transfer funds to your students account as needed. Also, insist that you have the ability to view the account online. They won’t like it but as long as you are providing funds, it is reasonable to monitor spending. Be sure not to micromanage the account. This is a great opportunity for them to learn money management skills. That being said, I once had a client who saw online gambling charges on their college student’s account.

Establishing a budget and banking plan for college students is a great way to control spending and learn fundamental money management skills. Now is the time to begin working on the plan with your student. This will allow them to concentrate their time and efforts on their classes once school begins.

Thursday, July 23, 2015

Insurance for Your Life Stage

Coming off the July 4th holiday I read a few articles about some incredibly unfortunate choices that were made with fireworks and alcohol. One article I read was about a man who lit a firework off of his head and died. In the end of the article it stated that his family had set up a GoFundMe account to pay for funeral expenses and I quote, “because sadly there was no life insurance.” I am sympathetic toward this family, however I hope we can all learn from this situation. If we have money for alcohol and fireworks, don’t we have a few dollars a week to get some basic life insurance coverage? The article did not say that the man was underinsured (which many people are), it stated that he had no insurance. The article below is a good read about people’s insurance needs shifting based on their stage in life. As always please reach out to your Argus advisor for customized conversations to your situation.

Read Full Article Here

Monday, June 22, 2015

The Generational Communication Gap

Every parent knows that starting at about age 12, the communication with your children changes dramatically. That smiling face that always laughed at your silly jokes and asked you questions about everything now just rolls their eyes and gives you that dreaded “nuthin” to your inquiries. It is just part of growing up. Over time they mature and communication improves again as they become adults. One common exception to this improved open communication is personal finances.

Parents often are uncomfortable having their adult children know their personal business. The parents of Baby Boomers, in particular, are a generation where the father of the house handled all the finances in a private manner. Often the wife or mother wasn’t even involved in many personal financial decisions. The children are afraid to introduce the subject for fear of seeming greedy or insulting to their aging parents. Unfortunately, this communication gap can lead to some poor financial planning decisions and in some cases damage some otherwise healthy family relationships.


Loving relationships between brothers and sisters often turn sour when they are forced to be “partners” in businesses or vacation homes through the estate planning of their parents. Another common mistake is leaving all of the assets to one child with instructions to divide it up. This scenario, compounded by the emotion of the loss, has a great potential to drive a wedge between otherwise happy siblings. No parent wants this to be their legacy.

Ten Common Mistakes:

1. Procrastination: Don’t wait for a crisis.

2. Thinking that financial and estate planning is only for the wealthy.

3. Outdated or improper beneficiary on insurance and retirement plans: Will an ex-wife inherit an old 401(k) plan?

4. Leaving too much in IRA’s and other tax deferred accounts: This could create more taxation for next generation. Mom and Dad are often taxed at lower rates.

5. Forcing siblings to be business partners or to own property together for long periods of time.

6. Leaving everything to one child and letting them split it up: Almost guarantees misunderstandings and tension between siblings. Also, could create gifting problems.

7. Using joint ownership to transfer assets: More gifting problems and the loss of potential tax benefits. Also, more family disharmony.

8. Not putting special wishes in writing: Family heirlooms and valuable household items can become the source of major family squabbles. Once it is in writing, discuss it with everyone so that there are no misunderstandings.

9. Not discussing financial and estate decisions with other members of the family: More misunderstandings and hurt feelings.

10. Not properly using professional advice: Financial, tax, and legal professionals have experience with most family situations. They can also ask questions that might be uncomfortable for family to ask.

So, now you want to have this discussion with your parents. How do you approach them? When is the right time? Unfortunately, there is no perfect answer. Obviously, signs of forgetfulness or evidence that keeping up with household tasks is becoming overwhelming indicate that now is the time. It is a mistake, however, to wait for these signs. The best planning is done well in advance of needs.

Do not try and have a family meeting over the Thanksgiving turkey or other social event. Schedule a special time, have someone bring a homemade dessert and serve coffee with the good china. This will put everyone in the right frame of mind to have a loving, productive discussion. Enlisting the help of a qualified financial planning professional to help bridge the generational gap is a great way to minimize the emotion and anxiety over this type of planning.

A financial planning professional will meet with you, your siblings, and your parents individually to gain an understanding of each financial situation. Everyone’s financial situation is considered as plans are developed which focus on income, healthcare, and estate planning needs.

Monday, June 1, 2015

Enough

How much is ‘Enough’? [Hint: ‘More’ is not the answer]

One of my favorite client’s came into my life wondering if they had enough to retire. Upon reviewing their statements, I found they had enough to retire years ago! Which made me think – how many people go through their daily routine, without realizing they had already crossed the finish line? How much different would work feel if you knew that you no longer had to work, that it was a choice? Too often, we are told how much we should be saving but never have an idea of what the finish line is.

Below are four steps for setting and using financial finish lines to improve the quality of your life. 

Step One: Enough for Me

How much money do I need to take care of myself in retirement? If I become disabled? 

How much will I need to start my business? Buy the house? Get a new car?

The first step in the process is having a goal-setting conversation with your advisor. Any financial planning firm should be able to give you “Your Number,” whether it’s for education, retirement, or that shiny new toy. 

What are you looking for? You want one number for each goal that you set. Whether it is a purchase, retirement, or something else. 

Unfortunately, too often the conversation stops here.

Step Two: Enough for My Family

How much will it take to provide for my spouse? To leave something for my children?

The next layer of “Enough” comes in the form of what you leave to those you care about. Making sure their dependents are protected in the event of death or disability is a priority for many. But unless you define the ways in which you want to leave a legacy to your heirs, planning is nearly impossible.

What are you looking for? Again, you want one number for legacy that you want to leave to your family. Work with your advisor to have a full conversation on what your hopes are for your loved ones. 

Step Three: Setting a Finish Line

Add up your numbers. This is your finish line. 

These should be single, lump sums. Not how much you should be saving, but an end goal. 

One of the most depressing beliefs I encounter is that we MUST work eight hours a day until we hit “retirement age,” where we then get the privilege to start hoping that we won’t outlive our money. 

But let me ask you this: what would you do if you already had crossed your “retirement savings” finish line? If you knew you already had “enough”? Would you work less? Would you give more?

The Purpose of Finish Lines

The purpose of financial finish lines is to give us the confidence to do the things we’ve wished for. Knowing that we have “enough” lets us do the things we’ve wished for ourselves, and especially the things we’ve wished for others.

Tuesday, May 26, 2015

Where is Everything?

A family member recently had a health procedure done that made us all step back and think: “what would happen if that person was not around?” As part of the financial planning process we regularly run clients through “what if” scenarios. These “what if” scenarios create the demand for health insurance, disability insurance, life insurance, long term care insurance and regular beneficiary audits on all insurance policies and investment accounts. But what if we all took it a step further? We may have all of the necessary planning tools in place, but what if no family member knows where all of this information is? What if no other family member knows who the financial advisor is or how to contact him/her? What if no other family member has access to accounts? Here are a few things to remember and include as part of the financial planning process:

1. As previously mentioned, review beneficiaries on all accounts annually. Life happens and sometimes beneficiary changes can get lost in the shuffle.

2. Have all accounts written or typed on one sheet of paper and accessible to at least one other family member. The last thing people want is for family members to “go digging” for account information upon death. Have it all summarized in case of tragedy.

3. Keep all of the financial information in one spot. Whether it’s a safe or safety deposit box try and keep everything together.

4. Share with at least one more family member how to access this safe place. What’s the purpose of a safe place if no one else can access it in a time of need?

5. Keep your financial advisor’s contact information in this same safe place. Most experienced financial advisors have been through these difficult situations and can be a huge asset when tragedy strikes. They can help make phone calls and gather the necessary paperwork.

We may never be able to fully prepare for the unknown, but we can simplify the transition process by making sure our financial house is in order.

Monday, May 18, 2015

Keeping Good Records in a Digital/Email Age

In an effort to reduce paper waste by “going green” many people have gone to electronic statements for their bank accounts, investment accounts, and pension accounts. In fact, we have helped many clients go paperless with the accounts they maintain with us. In recent planning however, I have discovered an overlooked aspect with going paperless - It often seems that when the person who created an online accounts passes away, spouses or family members who don’t have access to their usernames and passwords, have no way to obtain information on their accounts. I recently met with a client who knew her deceased husband had a Roth IRA, but she could not produce any statements. While going through her piles of paperwork I noticed a document that indicated her husband had enrolled in electronic statements back in 2009. In this particular case we were able to call the company and find his account. To avoid these kinds of situations, my recommendation is to print out all your statements on an annual basis and add them to your tax file. Make sure that your family members know where that file is if something were to happen.

Tuesday, May 12, 2015

Children in Our Eyes Only

It’s their 18th birthday!  What an important life event.  They will soon make decisions about career and education.  Of course, they think they should come and go as they please.  As parents, we find it difficult to see them as adults.  It was only yesterday that we were reading them their favorite children’s book and covering their boo-boos with Barney band aids.

The State of Michigan sees it more clearly.  They are adults.  While they likely do not have any money, there are some wise steps that you should take so that you are able to help them in an emergency.  You want to be prepared to step back into “Mom and Dad mode” in case they are incapacitated due to accident or illness. You should consider having an estate planning attorney prepare two documents.  One is the Durable Power of Attorney.  This would allow you to handle financial transactions for them.  A second important document is the Designation of Patient Advocate.  This document would allow you to make medical decisions and discuss medical care with providers if necessary.  Without these documents, you may be required to seek these powers through the probate court. 

Even though they still seem like children to us, it is important to understand the new risks and responsibilities that they face as adults.  It is a good idea to consult your estate planning attorney to discuss this type of planning.

Friday, May 8, 2015

How Do I Teach My Kids about Money?

Having been in the financial services field for almost 15 years, in addition to having four children of my own, I get the following question multiple times a week: “How do I teach my kids about money?”

I wish I had the right answer.  My oldest is only 10 so I can only hope that my strategy will work in the long run.  I have adopted a few things though that I am confident will help the situation as my children mature.  First of all, I have an investment account for each of my kids that is their long term money.  Every time one of my children receives a financial gift, a portion of the gift goes to this account.  Second, each child has a small bank account where they park their more liquid money.  Again, a portion of each gift goes here.  Third, I encourage my kids to take 10% or so of each gift and tithe.  This usually goes to church, but I am more than willing to listen to their ideas of where they would like their money to go.  And last, I do want my kids to enjoy life a little, so they take a portion of their gift and buy a toy for themselves.  I also enjoy incorporating the math they are learning in school to real life experience so we typically will look at their quarterly investment statements together to see additions to the account and market gains or losses.

Again, it is difficult to have all of the answers when it comes to kids and money.  My strategy is to lead by example and have a process we follow each time there is income.  In the end, I hope this takes some of the emotion out of money decisions, which in turn, should lead to better financial decisions later in life.

Monday, April 27, 2015

Beneficiary Reviews

Everything was going wonderful with life. Archie and Veronica had just celebrated the one year birthday of their first child, Amber. Archie had received a promotion at work for a Fortune 500 company. Due to his new income, Veronica would be able to quit her part time job and be a full time mom.

Archie and his colleagues were working extra hours on an important new product. One evening after a long strenuous day, Archie and his team decided to stop for dinner on the way home. After a quick dinner, Archie was excited to see his family and play with his daughter before her bedtime. Unfortunately, he never made it. His life was taken by a drunk driver.
While you can imagine the traumatic effect on his loved ones, it was made worse by the fact that he had never updated his beneficiary form for his company group life insurance or his company retirement plan. As a young, single college grad, Archie had named his sister as his beneficiary and never thought to make the change as his situation changed. His sister was happy to accept the benefits. This is a true story.

Life insurance, IRAs, 401Ks, and annuities all transfer directly to the named beneficiary regardless of your what your will or trust says. Also, there are important tax and benefit considerations to understand when naming your beneficiaries. The relationship of the beneficiary to the account owner or insured is often a factor in determining the distribution options and taxes.
Beneficiaries should be reviewed on a regular basis and each time there is a significant life change. It is a good idea to keep all beneficiary forms or a review summary with your important estate documents. At Argus Financial Consultants, we are incorporating a beneficiary review into our ongoing review process.

When I heard the story above, it was a wake-up call on the critical importance of this for our clients. While we proactively discuss the beneficiary designations on accounts that you have with us, we need to also review those accounts that you have at work and your insurance beneficiaries. It would be a good idea if we maintained a record of these also. Do not hesitate to contact our office to discuss this further.

Friday, April 24, 2015

Financial Values in Divorce

When a couple is going through a divorce, it can be one of the most emotional and stressful times for both spouses. In addition to their own personal feelings, they are often dealing with the emotions of children or other family members. Unfortunately, this could create much vulnerability to costly financial mistakes.

One example is in the establishment of values for marital assets. It is easy to just take the current face value of an investment account. In many cases though, what you see is not always what you would keep. For example, prior to spending money withdrawn from an IRA account, you would have to pay state and federal income taxes. In addition, if those funds are needed prior to age 59 1/2, there may be penalties on withdrawals. Other assets may have considerable transaction costs associated with converting them to cash such as real estate or collectibles. A minority interest in a small business may be almost impossible to convert to usable cash. 

It is important to take the tax consequences, transaction expenses, and marketability of the assets in consideration when dividing marital assets in divorce.

Monday, March 30, 2015

Successful 401k Investing

Hi All, I want to pass along a brief third party article about successful 401k investing, http://www.cnbc.com/id/102516366. To summarize the article, there are three lessons we can learn from 401k millionaires:

1. Start early
2. Save 10 percent of your salary
3. Stick to your plan. 

The most important item we see for our clients is sticking to the plan. Life can throw us many curve balls, but sticking to the plan is vital for long term success. Please see your Argus advisor for any questions.

Monday, March 23, 2015

How Much Death Benefit Do I Need?

How much death benefit do I need? What type of insurance should I buy-term or permanent? How long do I need life insurance for? How much does it cost? 

Many times people get too caught up in all of the questions of life insurance, put off buying and then forget the most important thing is to have some death benefit coverage. I was told when I started in this business 15 years ago that the average person buys life insurance 7 times in their lifetime. Now, whether that number is accurate or not is irrelevant. The fact of the matter is, the first time someone buys life insurance in their lifetime is probably not the last time. Typically, people start off with a small death benefit policy when they buy a first house, then maybe do a new policy with a larger death benefit once they have a child, then maybe a larger policy two kids later, etc. Now why not just wait to buy until I need that larger policy when I have 3 kids? Well, there are two obvious answers. One, no matter how immortal we think we are in our 20’s and 30’s tragedies do happen. We have all heard stories of the young parents dying too soon. Secondly, we can continue to purchase new life insurance policies throughout our lifetime assuming we can qualify for the new life insurance policy. Bottom line is, we need to be healthy enough to qualify. And maybe just as important, we would prefer to be healthy enough to qualify for life insurance at a reasonable rate. Prices of life insurance policies are dependent upon age, sex, death benefit amount, length of premium payments and health.

Another factor many people don’t realize is the conversion option available on many term life insurance policies. Conversion provisions vary among insurance carriers, but in general, a conversion provision allows the insured to convert a term policy to a permanent policy within a certain window of time without a medical exam. 

So what does all this mean? Make sure you have enough death benefit inventory. Buy enough death benefit to fill your needs and worry less about the kind of life insurance you buy. You may purchase more as needs change or convert your term policy if your health changes, but make sure you own the correct amount of inventory as part of your financial plan.



Insurance policy guarantees are based on the claims paying ability of the issuing company.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Tuesday, March 17, 2015

Writing It down

I want to lose some weight. I want to eat better. I want to take more time off. I want to get out of debt. These are just a few of the many phrases I hear once the clock strikes midnight on January 1 each and every year. And what’s wrong with these statements? Well, absolutely nothing if a person wants to stay the same. Because, despite the thought of desired improvement, these statements stay just that-thoughts-until they are put into action. So how do we turn a thought into a reality?  We start by making specific goals: I am going to go to the gym 4 days a week, I am going to eat 1800 calories or less a day, I am using all of my allotted vacation time this year, I am going to pay off my student loans in 2015. These are specific goals that are more likely to be accomplished. Secondly, the goals need to be written down in a place that can be seen each and every day. Writing down goals and stuffing them into a drawer to never be seen again will probably not help. Write them on a notecard and put them on your bedroom mirror, in your car or on your desk. What better way to hold yourself accountable than to have to read the exciting goals you wanted to achieve at the beginning of the year? As you accomplish each goal put a little check mark by it. You would be amazed by the happiness felt when you glance at your goal list and notice a few check marks. I would hazard a guess that seeing a couple of check marks might just motivate you that much more to strive to complete another agenda item or two. Notice a pattern here? 

The same strategy can work when it comes to achieving financial goals. I want to retire at 60, I want to have no debt but my house or I want to leave a legacy to my grandkids. These goals don’t happen overnight. It must start with paying off a specific debt or two this year, maxing out a Roth or 401k this year and building on that momentum next year. Best way to get on track financially? Meet with your financial advisor to help comprise a financial plan. Then, meet with your advisor at least annually to make sure you’re on track and to hold yourself accountable. Before you know it, you’ll be on your way toward achieving your goals!

Tuesday, February 10, 2015

Important Information about Filing Your 2014 Tax Return

If you have a taxable investment account that invests in mutual funds, unit investment trusts, exchange traded funds, foreign securities, or municipal bond funds, you will receive a 1099 from LPL Financial that shows the reported income and classification of that income (ordinary dividends, qualified dividends, capital gains, etc.). It has become very common for the issuers of these securities to change the tax classification of dividend payments after the original 1099 tax statements have been issued. This has resulted in the issuing of corrected tax statements after the tax filing deadline.

In order to minimize the issuance of corrected tax statements, LPL Financial is going to delay the original statements until either mid-February or mid-March. Once completed, your statements will be available on AccountView, and they will also be mailed out.

Tuesday, February 3, 2015

Buying a House

In my over 20 years of helping my clients with their financial goals, I have had the opportunity to observe hundreds of home purchases. Many times I am able to continue to follow the financial impact of these transactions on the overall financial plan. Here are some of my observations:

· People often buy homes that they cannot afford. Stated another way, they forget to consider all of the costs of home ownership including remodeling, improving, and furnishing a new home. I have seen home affordability guidelines that recommend up to 36% of your monthly income going to your house payment. This is too high. If you overbuy on your home, you are more likely to use credit cards or your retirement funds to pay for unexpected expenses. This can be devastating to your overall financial plan.

· People do not save enough money for the down payment and closing costs. If you do not have enough cash to put 20% as a down payment along with the closing costs, you need to be more patient. If you find saving for a down payment to be difficult, you cannot afford the house. It would also be a good idea to have a couple thousand set aside for immediate furnishing and repair needs.

· People let emotions override good financial decisions. One of the biggest mistakes is to start looking at homes or going to open houses without first establishing your budget. After looking at homes that are much higher than your price range, the lower priced homes won’t look as good. All of a sudden you fall in love with walk-in closets, second floor laundries, and granite countertops. Unfortunately, these features are rare in your price range. All of a sudden you are raiding your retirement accounts and paying steep taxes and penalties to get these amenities. Not good.

Your home is probably your largest and most important purchase. It is also one of the few financial decisions that involve so many emotions. Ideally, you want a place that you can enjoy and feel safe and secure. This is better achieved by minimizing the financial stress of maintaining a home you cannot afford.

Monday, January 19, 2015

Social Security Statement

Does it seem like it’s been a while since you've received any mail from Social Security explaining your benefits? That’s because it probably has been a couple of years since you've seen a statement; the Social Security office stopped sending statements in mid-2011. They recently announced they will send statements to workers attaining ages 25, 30, 35, 40, 45, 50, 55 and 60 and over who are not receiving Social Security benefits and who are not registered for an online account. The office is encouraging everyone to create an account at http://www.ssa.gov/myaccount/. Having this online account allows workers to verify their earnings every year, estimate their future benefits and change their address among many other things. So get online and create your account, but make sure to pay attention as you are navigating the security questions. The access is secure and in order to create your account you will be asked some personal and potentially throwback questions!

Monday, January 12, 2015

Lead, Don't Chase

So you get your 401(k) information or go online to look at your account. While you’re there, you start looking at the investment choices. Wow! Some of these investments have some very high year-to-date returns. You notice that there are several investments with better returns over the last year or even three years. It makes sense to move your investments over to those better performing investments, right?

This is an example of a well-known concept in investor behavior called “chasing return”. 

We tend to take short term observations and assume they will continue for the long term. In investing this can be dangerous. Performance cycles of different asset classes can take many years. During that cycle, there are going to be times when the asset classes both over-perform and underperform. If we are moving our investments into choices that have over-performed in the short term, we are much more likely to participate in the underperformance part of the cycle. In other words, we are likely going to be buying high and selling low.

The challenge is that it is very difficult for us to have the courage to buy those investments that have underperformed. It works against our human nature. This is why using a diversified asset allocation that fits your risk tolerance and then rebalancing on a regular basis makes so much sense. Your asset allocation automatically shifts investments from the asset classes that have over-performed to those that have underperformed. You are now leading instead of chasing!


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Past performance is no guarantee of future results. Asset allocation does not ensure a profit or protect against a loss.