Realistic Returns

Ray’s Take: It’s common among investors to fall into the “short-term mindset” with investments. The financial media tends to make things worse. If you do not see the returns you want on cue, you decide to move your funds around to the ones that are showing higher short-term returns.

The danger of short-term thinking is that you might have gotten restless when you didn’t see big returns and decided to part with your stake. The daily quote makes it seem like the value is staying the same. This business is getting better and better behind the scenes in a way that’s not reflected in the short-term returns you’re obsessing over.

There are always going to be fluctuations – that’s just the way the investing world shakes out. The behavior of the stock market is inherently so complex that no single variable – or person – can predict how the market is going to behave next or what would be its future returns – at least not on a regular and consistent basis.

The market swings like a pendulum from optimistic to pessimistic, and sometimes overshooting the mark can cause a panic or greed reaction. Be wary about promises of big returns. They usually turn out to be for the person promising them and not for you.

Think about and settle on a long-term portfolio. Once you’ve done that via a good financial adviser, it’s best for your accounts if you stop looking at them. Delete the bookmark from your web browser. Limit yourself to one peek per quarter and only one or two changes per year. Check it at the one-year mark and rebalance it. Move the amounts around in such a way that the money is back at the percentages you want.

Allocating your assets across financial markets is always a smart decision. But being realistic about your expectations is the most important step in achieving success in the financial markets.

Dana’s Take: Being realistic about finances is something we all need to be aware of. Not only about returns on our investments, but about finances in general.

Having ideas of living the life of your dreams in your golden years is great. You may want to retire in five years. But, you only have enough money put aside to last you 10 years.

Is it realistic to think you can save enough money in five years to last for 30? You need to be realistic about where you stand right now, and about what actually needs to happen if you want to make your financial dreams come true.

You may still be able to live the life of your dreams; you’ll just have to save a bit longer to make it happen.

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Keeping Up With The Joneses Can Be a Financial Catastrophe

Ray’s Take: There’s nothing quite like the feeling of seeing your neighbor drive up in their beautiful new car or hearing about their fabulous planned vacation. It can make you forget about every other plan or goal you’ve made for yourself. Keeping up with the Joneses can eat away at your financial dreams.

According to dictionary.com, the phrase “keeping up with the Joneses” means to try to own all the same things as people you know in order to seem as good as them. But when you’re making purchases that have no value beyond impressing others, you’re shortchanging your future.

For starters, it takes away your joy in life. Nothing is ever quite good enough anymore. There’s always a nicer, newer something that’s siphoning off your money. Houses, cars, electronics. The list is endless. And none of it makes you happy because it’s a continuous cycle.

Financially, it’s a catastrophe. Trying to keep up with those around you who appear to have it all is devastating financial accounts all over the country. Many times, those others you are trying to keep up with are in crippling debt themselves. It’s all a house of cards.

Taking a good, hard look at previous expenditures is a key way to determine if you’ve fallen into spending based on others vs. your own plan. As you look at those expenditures, ask yourself if you’d buy them if you had the opportunity to do it over. Keep a list of purchases you regret and review regularly as a reality check on where you’re putting your money.

Next time you’re about to make a big purchase, especially one that will put you into debt, take some time to examine your motives. Ask yourself if you truly want or need to buy that expensive item that will be replaced in a few years, or do you want to retire early? If your real goal is financial freedom, keeping up with the Joneses is not the way to achieve it.

Dana’s Take: In today’s FOMO (Fear Of Missing Out) world, it’s easy to fall into the “keeping up with the Joneses” mentality. No one wants to be perceived as being “less than.” But that kind of thinking can not only eat away at your long-term dreams, it’s teaching your kids a lot of bad habits. Overspending on material things can, and eventually will, drag down your financial stability. Which will only make you more stressed out and unhappy in the long run.

It’s time to take some pressure off yourself and stop trying to keep up with the Joneses. As a class="learn" href="http://www.memphisdailynews.com/Search/Search.aspx?redir=1&fn=Will&lnRogers" rel="

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Name SearchWatch Service" style="color: #7d0200; text-decoration-line: underline;">Will Rogers once said, “Too many people spend money they haven’t earned to buy things they don’t want to impress people they don’t like.”

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Create an Investment Policy Statement

Ray’s Take: Financial professionals have long used an investment policy statement for their clients. It’s a guiding set of principles, of sorts, to help make decisions along the way. It’s an excellent tool for anyone to use to keep themselves on track when it comes to financial planning.

By putting things down in writing, you are making a clear statement of what your goals are and how you plan to reach those goals. Write down the key reasons why you’re investing and your expected time horizon for your goals. Like when you plan to retire. Include any big-ticket items that will affect your plan along the way, like buying a home or saving for college. Want to spend six months touring Europe once you retire? Be sure to include it, or any one-time big expenses that are part of your intended retirement.

Once you have your goals and major expectations mapped out, take a look at your investments and determine what funds will be available to cover these big-ticket items along the way and make investment decisions that will support them.

Include a Plan B, just in case life happens and you need Plan A to go. One day you will likely be tempted to make a major purchase or change. As you consider the options, pull out your IPS and reread it. If it isn’t consistent with the IPS, it’s time to slow down.

An IPS doesn’t need to be, nor should it be, complicated. The idea is to establish a set of guidelines so you’ll know if you’re on course or veering off the road.

Like any important part of life, an investment policy statement needs regular attention, maintenance and rebalancing. It should be flexible enough to accommodate changes in your life like caring for aging parents, children returning home and inheritance.

Once you get the map drawn, a financial planner can help refine it in the beginning and adjust it as time goes by.

Dana’s Take: While we’re on the topic of writing down plans, how about a life plan? It may seem a bit ridiculous to write down the things you want to do in your life. After all, it’s all right there in your head. And your heart. But like an investment strategy plan, having it in writing makes your life plan more concrete and real.

When you’re writing out your plan, use first person. Writing “I will,” followed by your goals makes them more concrete and gives them more power.

Dare to dream outside the box as you write your plan. Our world has changed since the market crash in 2008. At a time when so many established options no longer appear to exist, it’s a perfect time to envision and create and try something new.

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Catching Up In the Home Stretch

Ray’s Take: There aren’t a lot of benefits to getting older, but when it comes to saving for retirement, there are a few. If you’re 50 or older and feel like you haven’t saved quite as much as you would like for your retirement plan, you could be in luck when it comes to contributions.

This savings bonus is called catch-up contributions. These are special provisions that allow you to contribute additional funds to your retirement accounts as you get closer to retirement. These contributions have the double benefit of helping beef up your retirement savings while deferring taxes.

The IRS allows those who will turn 50 or older by the end of the 2017 calendar year to make an additional $6,500 in elective contributions. And you can make those contributions each year as you move closer to retirement. The amount of catch-up contributions, historically, has increased approximately every 24 months. Catch-up contributions can really add up over time to a tidy additional amount of funds in your retirement accounts.

There are – of course – some rules relating to what kind of accounts you can use to make these catch-up contributions, and there are specific amounts that can be contributed to each type of account. Additionally, catch-up contributions only come into play if you max out the elective deferral amounts in your 401(k) or reach the contribution maximums in your IRAs. Aiming to meet maximum deferral amounts is a good starting goal.

If you have a Health Savings Account-eligible insurance policy that meets deductible requirements, that HSA is also eligible for catch-up contributions at age fifty-five and older. This can be an asset for saving additional money for health care expenses.

A financial adviser can assist you with determining the best plan for your circumstances. Time is a non-renewable resource and a critical factor to successful retirement planning.

Dana’s Take: Having the opportunity to get caught up on any of the important things in life is a great opportunity. Funding our retirements dreams are just one of those things. What about getting caught up on you? Are there things in your life that you’ve always wanted to accomplish? Or at least try?

Many of us come up with too many activities and pressures on ourselves in an effort to be everything to everyone in our lives and somehow never reaching our goals of perfection.

Take a little extra time to get to know you. When you get caught up on yourself, you see the best way to get the life you want for yourself and your family. Not just now, but all along the road of life.

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Retirement Worries to Tackle Ahead of Time

Ray’s Take: A long, happy retirement is one of the great American dreams.

Maybe you’ve watched as friends and family have stepped into that long awaited golden time. Watched as they traded in the daily grind of working for a more leisurely lifestyle on their terms. At least, that’s what it looks like on the outside.

But looks can be deceiving because there might be more lurking behind this rosy picture. Without careful planning, retirement can come with some really big surprises. A recent AICPA survey of financial planners found that running out of money in retirement was the top concern of their clients. A close second was health care. Retirement includes creating an entirely new identity, and that’s a lot harder than you may think.

Retirement planning would be a lot easier if you had a magic eight ball that could tell you how long you’ll live. That way, you’d know how many years you’ll need to support yourself without income from a job. We have 12 clients in their 90s and three over 100, and most are in very good health. That wasn’t on their radar when they retired.

The high cost of health care in retirement can be a surprise. Medicare doesn’t cover everything. The cost of health care is soaring and projected to keep going up. Do you have the reserves to pay for those rising health care costs? It’s a big thing that may change the age at which you decide to retire. And be sure to factor in long-term care in the mix. According to the Department of Health and Human Services, 70 percent of people who reach age 65 will need some form of long-term care in their lives. Often my clients think I’m planning for their kids when I try to slow the spending rate in retirement. I’m just trying to make sure they don’t have to move in with them.

Since people are living longer, not having enough money in retirement is a legitimate concern. So is the possibility that a catastrophic illness will drain retirement funds. And these worries can become obsessive, robbing you of your well-deserved retirement. So take some time to plan for the later stages of retirement long before you reach them.

Dana’s Take: There’s an old saying that proper preparation prevents poor performance. But being prepared takes time and commitment. All too often, we end up “winging it” rather than putting in the time necessary to be prepared.

Start by knowing what you want to accomplish. Focus on those things that you’ll need to do to be successful. Understand what you are preparing for so that you’re not doing extra work later to correct errors. Take your time and do it right. Success isn’t about how fast you accomplish your plan. Life is a journey. And it’s one worth taking the time to make the best we can have.

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