Inflation and Your Portfolio: Navigating the Choppy Waters of Rising Prices

Inflation. It's a word that sends shivers down the spines of investors, and for good reason. When prices rise, the purchasing power of your hard-earned savings erodes, leaving you with less real wealth than you started with. 

Today, we find ourselves facing this very challenge.  Inflation, while cooling, is still a concern. I feel it every time I go to the grocery store. So how can you protect your portfolio from its insidious effects? 

Diversification: Your Life Raft in a Sea of Uncertainty

Imagine this: you pour all your money into a single stock, only to watch it plummet in value when the market takes a downturn.  Devastating, right? Diversification is about avoiding that scenario.  Anyone with a concentrated stock position should be thinking about this right now.

Just like you wouldn't put all your eggs in one basket, you shouldn't put all your investment hopes into a single asset class. Spreading your investments across different asset classes – stocks, bonds, real estate, and even commodities – can help mitigate risk and potentially enhance returns.

Think Global, Act Global: Broadening Your Investment Horizons

The world is a big place, teeming with investment opportunities.  Limiting yourself to your home country's market means missing out on potentially significant growth in other regions.

In reading analysis from Vanguard, it can be argued that the way we will see alpha (growth and return) in a portfolio these next 10 years will be through international markets. Does anyone really feel 100% confident about forward looking returns in the U.S. markets? Global diversification is key.

The Takeaway? Be Proactive, Be Informed, Be Prepared

Inflation is a fact of life, but it doesn't have to decimate your wealth.  By diversifying your portfolio, embracing global opportunities, and engaging in open communication about finances, you can weather the storm and come out stronger on the other side. Remember, knowledge is power, and in the world of investing, it's the key to securing your financial future.

Crushing Debt, Chasing Dreams: A Millennial's Guide to Financial Freedom

Let's face it, being a millennial is a trip. You are told to chase our passions, but then student loan bills hit harder than a double shot of espresso. You are the "invest early and often" generation, yet figuring out avocado toast and a diversified portfolio feels like a financial puzzle.

But hey, here's the good news: you're not alone.  And with the right strategies, you can totally rock your finances and build the future you deserve. I love this generation so much. You demand autonomy, transparency and want the education - my favorite kind of client!

Student Loans: Taming the Beast

First things first, let's tackle the elephant in the room: student loan debt.  It's a heavy burden, but there are ways to manage it effectively:

• Know Your Loans:  Understand the different types of loans you have (federal, private, etc.) and their respective interest rates. Do not defer. Pay something every month.

• Explore Repayment Options:  From income-driven repayment plans to refinancing, there are strategies to make your monthly payments more manageable.

• Budget Like a Boss:  Get real about your spending habits. Creating a budget isn't about deprivation – it's about freedom to achieve your goals!

• TALK IT OUT: Talk to your friends about your goals. They want to help and more than likely they have the same concerns. You can support one another though it.

Investing: Starting Your Journey to Financial Freedom

Now, for the fun part – investing! It might seem intimidating, but even small contributions can make a BIG difference over time:

• Start Small, Dream Big:  You don't need a fortune to start investing. Apps and robo-advisors make it easy to invest with as little as $5. My kids have them. They use them every month. They are a great way to invest and purchase fractional shares of companies with small dollars.

• Embrace Diversification:  Don't put all your eggs in one basket (unless we're talking about a diversified basket of stocks, bonds, and global investments – then, go for it!).

• Think Long-Term:  Investing is a marathon, not a sprint. Ride out the market fluctuations and stay focused on your long-term goals.

You've Got This!

Navigating the financial landscape as a millennial can feel overwhelming, but remember, knowledge is power. By taking control of your student loans, investing wisely, and having open conversations about money, you can build a future filled with financial freedom and the opportunity to chase your wildest dreams. 

Ready to take control of your finances? Let's chat!  Schedule a free consultation, and let's create a plan tailored to your unique goals. We have special programs for people just starting out.

Planning for Retirement: How Much is Enough?

Retirement. It's the golden carrot dangling at the end of our careers, promising relaxation, travel, and newfound freedom. But achieving that carefree vision requires careful planning, especially when it comes to figuring out "how much is enough."  It's a question that keeps many of us up at night, and rightfully so.

You're not alone in this quest for retirement certainty.  Just like navigating the global stock market, planning for retirement involves understanding the vast landscape of options and potential pitfalls. Let's break it down:

1. Defining "Enough" - It's Personal:

"Enough" isn't a one-size-fits-all figure.  It's about crafting a retirement plan as individual as your fingerprint. Start by imagining your ideal retirement lifestyle. Are you picturing exotic travels, pursuing long-forgotten passions, or simply enjoying quiet mornings with a good book? 

Once you have a vision, translate those dreams into a concrete budget.  Factor in everyday expenses like housing, food, healthcare, and transportation, but don't forget about the fun stuff – leisure activities, hobbies, and potential travel plans. Remember, just like countries rise and fall in the global market, inflation can erode purchasing power over time, so factor that in too!

PLEASE THINK ABOUT MEDICARE PREMIUMS AS WELL

2.  Playing the Numbers Game - Calculate Your Savings Needs:

With a clear picture of your retirement aspirations, it's time to crunch some numbers.  Thankfully, we live in a world of handy online calculators that factor in inflation, estimated rates of return, and life expectancy.  Think of them as your financial GPS, guiding you towards your savings goals.

For a more personalized approach, consider partnering with a Certified Financial Planner (CFP®). They can provide tailored advice and help you navigate the complexities of retirement planning, just like a seasoned investor diversifies their portfolio for optimal returns. If not our firm, find one that is fee-only and your fiduciary.

3. Supercharging Your Savings: Every Bit Counts:

The key to reaching your retirement goals?  Consistent savings and strategic optimization.  Maximize your contributions to retirement accounts like 401(k)s and IRAs.  Explore the potential of "side hustles" or part-time work to inject an extra dose of funds into your savings plan.  And don't underestimate the power of paying down debt – reducing interest payments frees up more cash flow for your golden years.

4.  Developing a Withdrawal Strategy: Protecting Your Nest Egg:

Accumulating savings is a remarkable feat, but it's equally important to have a plan for withdrawing those funds responsibly.  The "4% Rule" serves as a helpful guideline, suggesting an annual withdrawal of 4% of your retirement portfolio, adjusted for inflation.  In down markets, put enough cash aside so you can leave your accounts alone and not withdraw at that 4% rate.

Think of it like diversifying your investment strategy. Explore options like annuities or other investments that generate a steady stream of income, providing a safety net for your finances.  And just as market fluctuations require adjustments to an investment portfolio, be prepared to adapt your withdrawal strategy as needed.

5.  Managing Healthcare Costs: A Crucial Piece of the Puzzle:

Retirement planning extends beyond finances; it encompasses your well-being too.  Healthcare costs represent a significant aspect of retirement budgeting, particularly as we age.  Estimate potential healthcare needs, including long-term care possibilities, and investigate options like tax-advantaged health savings accounts (HSAs) or long-term care insurance. 

Remember, planning for retirement shares similarities with planning a wedding. Both involve careful consideration, open communication, and a focus on long-term security. Just as a prenuptial agreement protects individuals entering a marriage, a well-crafted retirement plan protects your future well-being.

A Final Thought:

Retirement planning is a journey, not a destination. It requires ongoing evaluation and adjustments along the way. Life, much like the global markets, is unpredictable. Embrace the journey, stay informed, and enjoy the peace of mind that comes with knowing you've taken control of your financial future.

Ex-Husband Ordered to Pay $3,000 Monthly Spousal Maintenance: A Cautionary Tale

This blog post explores a recent Texas divorce case highlighting the importance of protecting your financial interests, even when a prenuptial agreement isn't an option. The case, Rue v. Rue, involved financial mismanagement and serves as a stark reminder of what can happen when one spouse abuses the trust inherent in a marriage.

Betrayal of Trust and Financial Ruin:

Robert and Alicia Rue, married for 26 years, seemed to have a solid foundation. However, Alicia's world unraveled when she discovered Robert's financial infidelity. He had depleted their children's savings, amassed credit card debt, taken out a secret second mortgage, and even failed to file taxes for years, leaving them in significant debt to the IRS. 

While attempting to salvage the marriage, Alicia uncovered Robert's relationship with another woman, funded by their joint account. This ultimate betrayal led to their divorce in 2022.

Justice Served, but at What Cost?

The court, recognizing the gravity of Robert's actions, sided with Alicia. It found Robert guilty of constructive fraud for disposing of marital assets without Alicia's consent. To remedy the damage, the court "reconstituted" the estate, adding back the misappropriated funds. Alicia was awarded 55%, along with a substantial judgment to compensate for her losses.

Furthermore, the court awarded Alicia $3,000 per month in spousal maintenance for ten years, the maximum allowed in Texas. This was deemed necessary as Alicia, a stay-at-home mother for a significant portion of their marriage, faced an uphill battle to achieve financial independence comparable to Robert's.

Protecting Yourself When "Prenup" Isn't an Option:

This case emphasizes that even without a prenuptial agreement, measures can be taken to safeguard your financial well-being.  Documenting assets and maintaining separate accounts, as suggested in "When a Prenuptial is Not an Option," can provide a degree of protection. 

Open Communication is Key:

Perhaps the most crucial takeaway from both the Rue case and the advice given in the prenuptial article is the importance of open communication about finances.  Robert's deliberate concealment of his financial actions ultimately eroded the foundation of their marriage. 

Remember, if you cannot discuss financial matters openly and honestly with your partner, it raises serious concerns about the viability of the relationship itself. Trust, once broken, is difficult to rebuild, especially when it comes to finances.

When a prenuptial is not an option, or it makes your QUEASY at the thought.

I often advise clients on prenuptial agreements when they find love again. I stand by my assertion that it's the right way to start a new marriage. Far from impoverishing a spouse if the marriage doesn't work by having accounts titled and access in one spouse’s name, the right prenup can reassure that new spouse that they will treated fairly, even generously, in the event of a divorce.

Prenups prompt questions. Prenups clarify unspoken questions. This is good.

But some very religious people cannot have a prenup because their religion doesn't allow it. Other people just get queasy at the word "prenup," as it if will jinx the marriage.  I can understand the feeling it illicts from all the negative stories we hear from friends and media.

If you are one of those people, please pay attention.

There is an alternative to prenups. It is to structure accounts so that money can be accessed by both partners, while protecting other funds.

Lea is a perfect example. I served as her financial fiduciary in her divorce. She negotiated a good settlement, went back to work after sixteen years after her role ended as stay-at-home mom, developed new interests, made new friends - and fell in love. She came back to me because we'd agreed that if ever were she remarry, we'd sit down first.

She felt strong the pre-nup was direct conflict of her religious beliefs.

We developed an alternative - a way to protect her assets while honoring her religion and personal beliefs in love and commitment.

Jean wanted to fresh start with her new husband, to build a good life together. So the income she earns—about $80,000/year—goes into the couple’s joint checking account. Combined with his income, they will have a plentiful life.

We kept her brokerage accounts entirely separate from money used to finance marital life. None of her savings and investments go into their joint checking account. She uses money from her brokerage accounts to do things on her own—buy gifts, take vacations with her daughters, and pay for anything she would like to share.

She can even buy gifts for her husband with those funds. Her gifts to him would remain his, and they would be considered separately in the event of a future divorce.

Before the wedding, I documented her entire marital estate and archived it so that she will always have a baseline of what she owned on the day she married. What is solely hers will remain hers as long as she sticks to the plan. I did this at the guidance and advice of her attorney as well.

I created the best protection possible for her under the circumstances.

You can protect your assets even if you are if you don't have a pre-nup. But you need to start this before the wedding. it is imperative that you develop and record a complete and accurate picture of your financial circumstances. Ask a financial fiduciary how to structure this process for yourself. You'll need to be careful to stick to the rules developed so that what is yours remains yours on the chance that the marriage does not last forever and when it does… You have plenty more to work with in retirement.

* * *

            If you are nervous about bringing up the subject of money, or if you find your attempts to discuss it shut down by your betrothed, then something is wrong. It needs to be addressed, and don't marry until it is.

            I've seen people with significant resources and strong personalities shutdown when it comes to talking to their fiancées about prenups.

            They somehow think that talking about keeping their assets separate is a sign of distrust. But the truth is, fear of bringing up the subject is the ultimate distrust. That fear tells them that they don't trust their fiancées to have an honest conversation about something that is creating anxiety.

            If you can't trust that person to react reasonably to a discussion, why would you marry that person? What else will you not discuss because of fear of how they will react?

People who truly trust each other can talk about money.

* * *

            Prenups can demonstrate love and caring attention to how their partner can be honored in case it does not work out.  It is a great opportunity to craft your existence together honoring what you both already have or how to best title what you will build together. 

Veterans Can Take Advantage of a VA Loan

A VA Loan is a loan that is specifically designed for veterans or military personnel.  VA Loans make it easier for military personnel to either buy or refinance a new home.  The loans are easier to qualify for and are backed by the United States Department of Veteran Affairs.

A VA loan is more attractive for veterans because they are much more flexible than other conventional loans.  There is no down payment or mortgage insurance necessary which makes these loans very desirable.

Benefits of VA Loans

VA loans are also advantageous for veterans because there are lower closing costs and they are much easier to qualify for when compared to conventional loans.

Even though the funds don’t come directly from the VA, the VA will guarantee about 25% of the total loan from a bank.  Therefore, interest rates tend to be lower and there isn’t any private mortgage insurance required.

The VA does put a limit on the closing costs that the buyer is required to pay, which makes it more affordable than other loans.   You can pay off your VA loan early with no fear of getting hit with any prepayment penalties.  VA loans also offer many different refinance options and there is no appraisal required.

If you are a veteran and are looking to purchase your first home or refinance another home, a VA loan can be very beneficial with many significant savings.

VA loans Qualifications Today

Just as with any loan, there are a few things to keep in mind that can help veterans qualify for a VA Loan:

Certificate of Eligibility

In order to qualify for a VA loan, the following is required: having enough income, a healthy credit score, as well as securing a Certificate of Eligibility.

Qualifications for the certificate are usually offered to those serving in the armed forces, their spouses, and retired military veterans.  Make sure to have your Certificate of Eligibility approved before applying for a loan.

Credit Score

Not unlike other conventional loans, veterans must know their credit history to apply for a loan.  VA lenders usually look for a credit score around 620, which is actually a lot lower than most other loans.  Of course, a higher credit ranking can also help you get a lower interest rate.

Only Use A VA Loan for Your Primary Residence

The VA prefers that veterans and current military personnel use their loans only for buying or refinancing a primary residence.  A single-family home, a condominium, or even an apartment building (but you need to live in one of the units) can be used as the primary residence.

Stable Income is Necessary

Lenders for VA loans need to see reliable, stable income.  There is a standard debt to income ratio to qualify for a VA loan, which is essentially the amount of money you have each month after paying the bulk of your major expenses.

The typical debt-to-income requirement that most VA lenders require is around 41%.

VA loans are a great option for members of the military and like any loan, there are many different companies that offer VA loans.  It’s important to look for a lender that has experience with VA loans to get the best price and the most out of it.

This BLOG was posted by Outreach Specialists of Consumer Advocate. You can learn more about Consumer Advocate at www.consumeradvocate.org . Thank you to Consumer Advocate for their input and guidance in the posting of this BLOG.

 For additional resources, please visit

• https://loans.usnews.com/va-loans

• https://loans.usnews.com/va-loans#how-va-loans-work

• https://loans.usnews.com/va-loans#additional-va-home-loan-programs

Why Should You Diversify?

there’s a world of opportunity in equities

The global equity market is large and represents a world of investment opportunities. As shown in Exhibit 1, nearly half of the investment opportunities in global equity markets lie outside the US. Non-US stocks, including developed and emerging markets, account for 48% of world market capitalization[1] and represent thousands of companies in countries all over the world. A portfolio investing solely within the US would not be exposed to the performance of those markets.

Exhibit 1.       World Equity Market Capitalization

As of December 31, 2017. Data provided by Bloomberg. Market cap data is free-float adjusted and meets minimum liquidity and listing requirements. China market capitalization excludes A-shares, which are generally only available to mainland China investors. For educational purposes; should not be used as investment advice.

the lost decade

We can examine the potential opportunity cost associated with failing to diversify globally by reflecting on the period in global markets from 2000–2009. During this period, often called the “lost decade” by US investors, the S&P 500 Index recorded its worst ever 10-year performance with a total cumulative return of –9.1%. However, looking beyond US large cap equities, conditions were more favorable for global equity investors as most equity asset classes outside the US generated positive returns over the course of the decade. (See Exhibit 2.) Expanding beyond this period and looking at performance for each of the 11 decades starting in 1900 and ending in 2010, the US market outperformed the world market in five decades and underperformed in the other six.[2] This further reinforces why an investor pursuing the equity premium should consider a global allocation. By holding a globally diversified portfolio, investors are positioned to capture returns wherever they occur.

Exhibit 2.       Global Index Returns, January 2000–December 2009

S&P data © 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. MSCI data © MSCI 2018, all rights reserved. Indices are not available for direct investment. Index performance does not reflect expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

pick a country?

Are there systematic ways to identify which countries will outperform others in advance? Exhibit 3 illustrates the randomness in country equity market rankings (from highest to lowest) for 22 different developed market countries over the past 20 years. This graphic conveys how difficult it would be to execute a strategy that relies on picking the best country and the resulting importance of diversification.

Exhibit 3.       Equity Returns of Developed Markets

Source: MSCI country indices (net dividends) for each country listed. Does not include Israel, which MSCI classified as an emerging market prior to May 2010. MSCI data © MSCI 2018, all rights reserved. Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

In addition, concentrating a portfolio in any one country can expose investors to large variations in returns. The difference between the best- and worst‑performing countries can be significant. For example, since 1998, the average return of the best‑performing developed market country was approximately 44%, while the average return of the worst-performing country was approximately –16%. Diversification means an investor’s portfolio is unlikely to be the best or worst performing relative to any individual country, but diversification also provides a means to achieve a more consistent outcome and more importantly helps reduce and manage catastrophic losses that can be associated with investing in just a small number of stocks or a single country.

a diversified approach

Over long periods of time, investors may benefit from consistent exposure in their portfolios to both US and non‑US equities. While both asset classes offer the potential to earn positive expected returns in the long run, they may perform quite differently over short periods. While the performance of different countries and asset classes will vary over time, there is no reliable evidence that this performance can be predicted in advance. An approach to equity investing that uses the global opportunity set available to investors can provide diversification benefits as well as potentially higher expected returns.

Source: Dimensional Fund Advisors LP.

Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Diversification does not eliminate the risk of market loss.

There is no guarantee investment strategies will be successful. Investing involves risks, including possible loss of principal. Investors should talk to their financial advisor prior to making any investment decision.

All expressions of opinion are subject to change. This article is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their financial advisor prior to making any investment decision

[1]. The total market value of a company’s outstanding shares, computed as price times shares outstanding.

[2]. Source: Annual country index return data from the Dimson-Marsh-Staunton (DMS) Global Returns Data, provided by Morningstar, Inc.