Be Boring

Ray’s Take: Sometimes, it’s tempting to try to beat the market through the excitement of stock picking or by choosing riskier investments with the promise of a higher return. It seems like everyone has a friend of a friend with a great investment story.

Maybe he bought a high-flying tech stock that tripled in price within a week. Or maybe she put a huge chunk of money in some stocks near their bottom during the banking crisis and rode the rally all the way up to today.

It’s tempting to believe these stories. But they are rarely true – or complete.

The truth is usually a bit more boring. Starting early and investing consistently is the key to maximizing investment gains over time. Choosing investments with consistent, realistic returns that manage risk, rather than looking for those get-rich-quick stocks, is the way to obtain consistent results in the long run. Having a good plan and sticking to it is essential.

The stock market will rise and fall, and recessions will come and go, but if you invest steadily over the course of years, your overall return will likely be a good one. If you observe life, you’ll notice we’re all out spending money on goods and services. By investing, we’re acting as owners of the same companies we’re buying stuff from. Owners tend to be compensated better than loaners. Fear and greed are your enemies. Your long-term plan is your shield.

In many ways, our society conditions us to think that anything that is boring is undesirable. Investing isn’t supposed to be exciting. Any stock that can rocket to the moon today can crash and burn tomorrow. Set aside some money in a play account if you feel the need to get your blood pressure up from trying to time the market.

But, when you’re planning your retirement, steady, well-thought-out plans will get you where you want to go. If you need more thrills, go to Vegas – at least you’ll get dinner and a show.

Dana’s Take

It may be boring, but it’s true: Habits can move mountains, especially with money. Our children and teens witness our habits and will probably follow them – both good and bad.

A habit where I could improve is checking the budget before going shopping. Usually I head out shopping and hope it works out in the end. If, however, our kids saw me stop and go to the computer and say, “First, let me see how much we have saved for clothes/camp/patio furniture.”

If I did that before every trip to the grocery, Target and Home Depot, we’d have extra money for that trip to France I want to take and our children would learn more disciplined habits with money. Sounds like a win-win to me.

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Keys to Great Financial Planning

Ray’s Take: It would be nice if you had a magic formula or an easy trick that made it so you never had to worry about money again, but life doesn’t work that way. You need a plan to help you reach your goals, and the plan should have multiple steps.

Starting young is key. The earlier you start, the more money you will accrue. Compound interest and return on investments have a much longer timeframe to grow the younger you start planning. Plus, you have time for false starts and poorly considered plans. The biggest mistake you can make in financial planning is not to plan at all.

Communicating with your spouse is another key. Discussing the future you want and how each of you envisions it will open the door to merging your vision and making the right decisions to create it. Discussing your retirement strategy may not be your idea of a dream date, but it’s also not something couples can afford to put off.

Set priorities. At its most basic level, financial planning is about effective prioritization. Prioritizing in financial planning is about more than just allocating financial resources; it’s also about allocating time, attention and effort toward making the changes necessary to implement those goals.

Review regularly. Your priorities may change over the years, or your road to reaching your existing priorities may change. The key to staying on track is to make the time to ensure you’re doing everything right to make it happen.

The market will go up and down, and there’s nothing you can do about that. There will always be events that pop up and rattle you. Focus on what you can control. Saving for retirement is a long-term goal that requires years of planning and an understanding of deferred gratification. With a solid plan, you can feel better about your future.

Dana’s Take: Plan with a purpose and do your best at every stage of your life. Take into account your retirement horizon, your needs and your family’s needs, and your goals and dreams for yourself and your family. We all dream of a stress-free retirement with oodles of time to do the things we love and the funds to make it happen.

If you’re trying to get to retirement, or you’re already there and you don’t want to fail, you have to have a plan that makes sense for you. Not your friends or co-workers. Not the pro at your golf club. Not the friend who always knows the latest thing to invest your money in. Just you.

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Boomerang – When Adult Children Come Home

Ray’s Take: A changing economy, a sluggish job market and student loan debt have created a perfect storm for delaying the empty nest parents have expected, and had, in the past. According to a recent Census Bureau report, 30 percent of young adults ages 18 to 34 live with their parents. That’s a big number, and the trend is driven in part by unemployment or underemployment of millennials.

If this happens at your house, there are a lot of things to consider because caring for adult children for longer than expected, with no exit plan in sight, could easily lead to emotional and financial chaos. Some questions should be answered at the beginning: How long are they staying? What are the expectations? Do we charge rent? What stuff do we still pay for? And how do we navigate all this?

Clear communication is key. Get as much as possible on the table up front to minimize frustrations and clarify expectations and boundaries. Adult children need to understand that when they move back home, it increases their parents’ cost of living and it impacts their lives and finances.

Have an exit strategy for when the adult child will move out once they locate a job. Immediately? Once a specific amount of money has been saved? How can you monitor that a reasonable percentage of earnings is saved?

Decide if you will provide cash for the needs of your adult child, how much and for how long. It can lead to problems if you are resentful of paying for cellphone bills and your adult child is spending evenings out with friends funded by you.

Write all the parameters down and revisit them within an agreed-upon timeframe to see if everything is still on track and working for all parties. Don’t leave an open invitation on the table that confuses everyone involved. A well-thought-out plan can save a lot of headaches (and heartaches) before they happen. Always remember that the best gift you can ever give your children is to protect your own independence.

Dana’s Take: The phenomenon of boomerang kids returning home isn’t easy for parents. Finances can be tight as we save for retirement, and the added expense of taking care of adult children can sabotage plans. Then there’s the other part: Who takes out the trash? Am I back to doing everyone’s laundry and putting dinner on the table every night?

When you fly, flight attendants instruct you to put on your own oxygen mask first. That’s because it’s difficult to help others if you’re unconscious. The same is true financially and emotionally. Parents should take care not to let their desire to love and nurture their children irreparably damage their own financial and mental well-being.

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Estate Planning – It’s Not Just Taxes

Ray’s Take: Many people think estate planning is only for the super wealthy, but that’s not the case. Do you have a home? Children or grandchildren? Elderly parents? Bank accounts or other assets? If you have any of these, you need an estate plan. And it’s about more than just taxes.

An estate plan helps protect your family when – not if – you pass away. There are a number of things to include in estate planning.

A big item is a last will and testament. According to a Gallup poll, only 44 percent of Americans had a last will and testament in 2016. This is the document that tells everyone your final wishes and yet over half of Americans have not made a will. That leaves a lot up to chance, court fees and possible legal battles.

You can name beneficiaries on tax-deferred accounts, and those will pass directly to the specified individual outside of the will. Things like life insurance and retirement accounts fall into this category as well. But you can’t name minors. Further, a pile of cash with no strings attached falling into the hands of a college student may not be in their best interest. Without a named beneficiary on these accounts, they will pass into probate, and if you don’t have a will, your state will write one for you, and you might not like it.

It’s important to review your estate planning documents regularly to make sure you’ve designated people where needed and want to keep the same beneficiaries. For example, if your executor, trustee or guardian has moved across the country, you’re likely better off naming someone local. You’ll also want to review your estate plan every time there’s a major life event, such as the birth of a child or grandchild, the death of a parent or a divorce.

These are only a few of the items in a good estate plan. An attorney or financial expert can help you set up your estate plan so that your assets go where you want rather than where a judge designates.

Dana’s Take: Estate planning is planning what to leave behind and to whom. But what about the impressions and memories you will leave with family and friends?

I read about a retired CEO who made a mission to thank all of the people in his life who helped him along the way. First, he wrote to each person and asked to meet face-to-face. Then he flew or drove to meet each one. Imagine the joy he spread by expressing his gratitude.

Ray’s father, Denby Brandon Jr., also made a lifelong habit of expressing appreciation to clients, friends and loved ones.

It’s never too late to create a legacy of gratitude.

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Match Game: Employer Matching Funds

Ray’s Take: I am amazed at how many times when I ask people how much they are contributing to their 401(k) the answer comes back, “Whatever the match my company gives is – I love free money!” There’s a much better way to make that decision, but that is a topic for another column. There are a number of reasons companies offer some form of match and they may not all be charitable.

While it’s good advice to never leave money on the table, you should always do a financial plan that includes all investment options first to get a truer picture of where you are in relation to where you want to be.

401(k) matching funds are touted as “free money,” but there usually are strings attached. As a general rule, employer-matching funds are not fully vested for a specified period of years. On average, five. So, what happens to those funds if you leave your job before you’re fully vested? They don’t all go with you.

With the trend away from spending your career in one company, you shouldn’t count your chickens before they are hatched. But don’t worry about your own money that you have deferred. It’s yours from day one and goes with you when you go. According to the Bureau of Labor and Statistics, workers between ages 25 and 34 have been in their jobs, on average, less than three years.

Take a close look and be sure you understand the particular 401(k) plan you are thinking about investing in so that you understand the vesting schedule along with when the company matches. It could be with each paycheck – or it could be once a year. That can also make a big difference in gains.

Contributions to a 401(k) lower your taxable income. A point for a 401(k) investment, but calculate the actual value of that over time to be sure you make the correct decision for you. It’s harder to be tempted to spend money that never hits your checking account.

Depending on your personal circumstances, the company matching funds might be a good fit up to the amount that the company matches, but it’s best to look at all your options and have a clear picture of your long-term plans before signing up.

Dana’s Take: Saving with a 401(k) account can pave the path to financial security. I’ve been reading the book “Everything That Remains,” by two young men who call themselves “The Minimalists.”

In their popular social media sites, they advocate giving away possessions and even leaving non-fulfilling jobs in order to experience life more fully. They point to the vicious cycle of consuming and then working to pay for our excessive consumption.

Our time is actually more valuable than money, they say, because we can always make more money but we can never make more time. Ouch.

Become conscious of the balance between spending money and spending life.

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