Blog

3Q24 Market Insights | Beyond the Numbers

duda@levitateapp.com — Mon, 14 Oct 2024 19:58:35 GMT

Author

Chris McCall

Major market indexes had a strong showing in the third quarter as “economic activity has continued to expand at a solid pace,” to use the words from the September 18 ^th federal reserve meeting. At that meeting, the fed announced a 0.50% cut in the federal funds rate while acknowledging that inflation is trending down towards its long-term target.

Stock market leadership seems to be broadening out beyond large, US technology stocks (Microsoft, Apple, NVIDIA, Alphabet (Google), and Amazon). US large cap companies outside of these largest names, US small/mid cap companies, and international companies all outperformed the S&P 500 Index for the most recent quarter.

Bonds rallied along with stocks with the broad bond benchmark (Bloomberg US Aggregate Bond Index) gaining 5.2% for the quarter and the Bloomberg Municipal Bond Index gaining 2.7% for the quarter. High yield bonds also saw a 5.3% increase and are now up 8% for the year as corporate balance sheets remain relatively healthy.

Research Highlight: Market Extremes Might Be Starting to Ease . Last quarter, we mentioned how high valuations in a narrow group of large, US technology stocks could present the opportunity for other parts of the market to play catch-up. That played out in this most recent quarter. Markets are healthier when there is broader participation, so it would be encouraging to see this trend continue.

2024 Market Performance (Through 9/30/2024)

Journey Beyond Wealth (“JBW”) is an Investment Advisor registered with the SEC. All views, expressions, and opinions included in this communication are subject to change. Registration of an investment advisor does not imply a certain level of skill or training. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. Please contact us if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions.

The True Meaning of Legacy

Mon, 09 Sep 2024 15:28:24 GMT

Author

Jessica Stembridge

The True Meaning of Legacy

According to Merriam-Webster's dictionary, Legacy (noun) is defined as:

A gift by will especially of money or other personal property.
Something transmitted by or received from an ancestor or predecessor or from the past.

When I read the textbook definition of legacy, I was pretty underwhelmed. It felt both transactional and materialistic, and was far removed from the understanding of legacy that I've had for most of my professional life. It made me wonder if others hold the meaning at such a low bar, and if perhaps Merriam-Webster should consider a revision.

When I think of legacy, it encompasses one's life work. Sure, there's an aspect that relates to assets and possessions, but what truly makes up a legacy is values, one's character, family, traditions, and the mark that we leave on the world around us. It can be professional impact, intellectual property, the way we serve others, or the art we create. I believe it's also the ripple effect of kindnesses big and small, making others feel seen and heard, and our love for the people around us.

For most of us, we grapple with the idea of legacy as we age and start to face our own mortality. We begin to question how we will be remembered and what kind of mark we will leave on the world. It can be quite a daunting exercise in self-reflection, especially when the great majority of our life is behind us and the time left to right the ship feels short.

Seven years ago, when I was in my mid-thirties, I was diagnosed with Stage 3 breast cancer. Married with three small children, it's safe to say that at that point in my life I had not taken a hard look at what my own legacy would be when I was gone. As you might imagine, being faced with a life-threatening diagnosis has a way of cutting through the trivial aspects of one's life and putting a spotlight on what matters most. I became acutely aware of the implications of the life I had lived to that point, and thought hard about how I might be remembered if I did not survive. Was I a good wife? Was I a good mom? Did I put my faith on display? Did I create enough positive memories with my family to sustain them? Would they know my heart and the "real" me by how I treated them and those around me? Did I live out my values in a way that my children could learn from them? As I reflected on these types of questions, there were some areas I was proud of, and some that I wasn't. One of the positive takeaways from my cancer journey was the awareness of how precious life is and how waiting until one day when you're older to think about your legacy is a luxury that we are not guaranteed.

It was through this experience that what mattered most in my life became crystal clear. I remember that, a day or two after my diagnosis, I had an epiphany about all the things I had on my plate, and how only a small few were actually important. I was forced to slow down, to take stock of how I was showing up for my family, and I was given the gift of time to be able to start intentionally writing my legacy.

It's important to start thinking about your legacy today because despite popular belief, we are not guaranteed tomorrow. Whether you're in your 20's or 80's, now is the right time to give thought to your values, your priorities, your relationships, and the mark you want to leave on the world.

Below are a number of questions to prompt some intentionality about creating your legacy.

What do I value most? List the top 3-7 values. Are my priorities in line with what I value?
How do I want my family to remember me? Am I living in a way that would create those impressions? If not, what are some ways I can start doing so?
Do my family and friends know my life story? Do they know how I was raised, how I met my spouse, started my career, places I've traveled, things I enjoy doing, etc.?
Do I have any life lessons or guiding principles that I live by? Have I shared those?
What traditions are important to me? What traditions do I wish I had set in place? (PS - it's not too late to start that tradition!)
Examine my closest relationships - am I treating them like they are precious? Do my actions towards them reflect how much they mean to me?
Have I been generous with my time, talent and/or treasure? In what ways can I show generosity to the people and causes that mean the most to me?
Are there mementos from my life that have significance and/or a story? Have I shared those with anyone?
If I had one day left to live, would I have any regrets? Are there ways I can heal those regrets now?

While considering your legacy might feel heavy, remember that it is a privilege to be able to think about it proactively. Rest in the fact that you are in charge of building your legacy. If you are reading this, then it is not too late to find clarity about what matters most, get intentional about the kind of legacy you want to leave, and start enjoying your journey by living out that legacy every day.

One tangible way that we help our families think intentionally about their legacy is by having them create a Legacy Letter. If you're interested in documenting aspects of your legacy, take a look at our Guide to Writing a Legacy Letter.

Markets Finish Strong in 2023. Now What?

Mon, 29 Jan 2024 12:00:00 GMT

Author

Chris McCall

I grew up watching John Elway of the Denver Broncos pull off several thrilling 4th quarter comebacks to come out ahead by the end of the game. Last year, financial markets looked shaky in the 4th quarter. By late October, international stocks were flat, most US stocks were down, and bonds were also down. Just when it looked like we might have a losing year, a powerful rally began driving markets higher in the last two months of 2023 to end the year with gains across the board.

A Review of 2023

The average gain for stocks within the S&P 500 Index was just shy of 14% (as measured by the S&P 500 equal weighted index) while smaller US companies and companies internationally were up in the 15-20% range. Two of the big stories from last year were technology companies performing better than the markets due to positive developments around artificial intelligence (AI) and the Federal Reserve keeping interest rates high, which led to continued stress in the bond market. However, inflation numbers came down considerably towards the end of the year and a rally in bonds led to a gain of 5.5% for the broader US bond market (as measured by the Bloomberg US Aggregate Bond Index). Volatility was high, but it was a good year overall for those who remained disciplined.

What’s Ahead?

Looking ahead to 2024, many factors went into our thinking for how to best position portfolios. Below are just some of the questions we considered:

Will inflation continue to moderate?
When will the Federal Reserve begin to lower rates and by how much?
Will corporate earnings justify the market gains we’ve seen in recent months?
Will AI continue to fuel excitement and provide real growth?
How will elections impact market psychology?
What surprises might there be?

With history as our guide, we weigh these questions along with current market expectations to ensure we make thoughtful and prudent investment decisions. By most measures, the market overall looks fairly valued to perhaps slightly overvalued. There are some areas that are cheaper than others and could be a source of above average gains. Smaller companies and those abroad are cheaper than large US companies. Bond yields are still attractive and can provide nice mid-single digit yields, which we’ve not seen in over a decade. Then there’s AI, where technological advances could provide a nice tailwind for growth in the years to come.

When it comes to the final quarter of a game, it’s tough to beat the thrill of seeing a team come from behind to win. With investing, there will also be ups and downs with excitement when things go well and disappointment when things don’t go our way in the short-term. Like sports, you can monitor investments quarter-by-quarter or even year-by-year. However, it’s the long-game that counts and applying a thoughtful and disciplined strategy is what yields results in the long-run.

5 Simple Tips for a Stress-Free Thanksgiving

Wed, 15 Nov 2023 12:00:00 GMT

Author

Jessica Stembridge

So you plan to host Thanksgiving this year? For a lot of folks, the thought of hosting can be quite overwhelming! I've found that the key to keeping it low-stress (regardless of the size of the gathering or how many dishes you're preparing) is having a plan! Tackling the things that can be done ahead of time prior to Thanksgiving day will go a long way towards lightening the load!

1. Decide what kind of gathering you'll host.

Asking yourself these questions in advance will help you adequately plan for the day. It will determine if you need to design a tablescape, need more plates, or more seating. It will also determine how many dishes you need to prepare.

Size : Small and intimate or large and feisty?
How Formal : Will you being eating on paper plates or special China?
Who's Cooking : Is it a pot-luck or are you preparing the whole meal?

2. Decide on your menu 1 to 2 weeks out.

Specifically, what you plan to make. Print off your recipes and start your grocery list. Make sure you have all the kitchen tools you'll need: enough casserole dishes, roasting pan, a meat thermometer, and plenty of measuring spoons and cups! Not sure what should go on your menu? My typical lineup includes (but not limited to ��): Turkey, Gravy, Mashed Potatoes, Cornbread Dressing, 4 or 5 casseroles (Sweet Potato, Squash, Broccoli, Green Bean and Macaroni and Cheese), Rolls, and 2 or 3 desserts (Pumpkin Pie, Pecan Pie and Apple Crisp are some favs).

3. Buy your turkey a week in advance.

Most turkeys are sold FROZEN so make sure you give yourself 5 - 7 days to let your turkey defrost in your refrigerator.

4. Create a food prep schedule.

No matter how many dishes you're preparing, it can be helpful to make a schedule for what you're cooking and when. Here's my tried and true formula for the week of Thanksgiving:

Monday : Grocery shop (for everything but the turkey - since you already got that! ��) and make the cornbread for the dressing

Tuesday : Make the desserts, chop the onions or other vegetables

Wednesday : Assemble the casseroles (don't bake them though), and peel and cut the potatoes (keep them in a pot of water in the refrigerator until you're ready to cook them)

Thursday : Roast the turkey, make the gravy, bake your casseroles, cook and mash your potatoes, and heat your rolls

Friday : Kick your feet up and eat leftovers all day!

5. Plan out your oven usage.

If you only have one oven, it is super important to plan out when you will bake each of your dishes. Making your desserts ahead of time is one way to free up space, but those sides and turkey can take quite a while to cook! I always cook my turkey first, starting it early in the morning since most turkeys take at least 4 hours to roast. Next up I bake my casseroles! Regardless of time and temperature suggestions, I've found that baking all of my casseroles together at 350 for around an hour will do the trick! Keep the oven light on and stay close by making sure they are baking evenly. You can also use a meat thermometer to check that the internal temperature has reached 165 to be sure they are done. When my casseroles are fully baked, I PLACE THEM IN A COOLER. That's right - the same cooler that keeps your drinks cold will keep your casseroles warm! Using casserole dishes with lids will help you stack them up. Keep the cooler closed until you're ready to serve! Lastly (and right before it's time to eat), I heat my rolls.

Here's a sample baking schedule:

8:00 am - Start roasting your turkey

12:00 pm - Turkey done (make sure the internal temp is 165) - cover with aluminum foil to keep warm

12:15 pm - Start baking your casseroles

1:15 pm - Casseroles done - place in cooler to keep warm

1:45 pm - Heat up rolls

2:00 pm - Time to eat!

Looking for a few new recipes for your Thanksgiving table? Here are a few from our team!

From Jessica:

From Amanda:

From Seattle:

No matter how big or small your Thanksgiving meal, adding a measure of intentionality and planning can help you host with ease!

We wish you all a stress-free Thanksgiving!

The Age of AI: Ready or not, here we go!

Mon, 17 Jul 2023 12:00:00 GMT

Author

Chris McCall

A golden age of innovation is upon us. Beginning in the late 1700s, we saw the Industrial Revolution transition manufacturing from creating goods by hand to using machines. More recently in the 1990s, the Internet started to transform the way we learn, transact business, interact with friends and loved ones, and so much more. We’re about to experience another seismic transformation of our economy and world as we know it with the advancement of artificial intelligence (AI). Microsoft co-founder, Bill Gates, had this to say about AI in a recent blog post titled, “The Age of AI Has Begun”1:

“It will change the way people work, learn, travel, get health care, and communicate with each other. Entire industries will reorient around it.”

BILL GATES

To provide a sense for the expected growth in AI, Grand View Research projects the global artificial intelligence market size to grow to $1.8 trillion by 2030—growing at 37% a year from 2023 to 2030!2 When you consider the potential impact on the broader economy, it’s even more staggering. Economists from Goldman Sachs estimate that US economic growth as measured by GDP could be about twice what the Congressional Budget Office is forecasting for the coming decades. Rather than an economy struggling to grow more than 1.5% (net of inflation), we could see a robust economy growing at 3% a year.3 There are vast implications for economies around the world and life as we know it.

What AI is and how it might it impact you

The technology behind AI has been around since the 1950s when Christopher Strachey of the University of Oxford developed a program that could play checkers.4 Advancements were made from there, but they have been limited by computing power and available data. Fast forward to today, computers are much more powerful, and companies have been collecting massive amounts of data. AI has been found in simple applications such as rudimentary chatbots within help sections on websites, navigation applications such as Google or Waze, and digital assistants such as Google, Siri, and Alexa. Then just last year on November 30th, OpenAI (a company with a substantial investment from Microsoft) released a free prototype of ChatGPT that demonstrated to the world a sophisticated chatbot capable of responding with more natural language than we’ve ever seen before. In addition to text, it’s also able to generate new content in the form of images, audio, and more. This new form of AI is called generative AI, which means new ideas and thoughts can now be generated from existing data.

Below are just some examples of how AI might be used today or in the near future:

Write speeches or memos with a certain tone you specify along with a target audience in mind
Create images (or art) after you describe what you want to see
Help authors or song writers push through writing blocks by generating storyline ideas or lyrics
Give chefs ideas for dishes based on available ingredients
Enable drug manufacturers to accelerate and improve the research and development phase for new life-saving drugs
Help doctors to more quickly and accurately diagnose conditions and prescribe treatments based on all available medical research data
Accelerate the advancement of autonomous driving of cars
Plan out possible itineraries for your next family vacation based on ages within your family, where you want to go, and what you want to do

Essentially, AI is like an assistant with vast knowledge and the ability to save time and improve products, services, and life experiences. There are countless applications for the use of AI, but hopefully you’re starting to get a sense of what’s possible.

How AI might affect financial markets and your investments

It is difficult, if not foolish, to prognosticate how something like AI will impact financial markets. There are too many variables at play and so many unknowns to make reliable predictions. However, there are some trends and likely outcomes we can suggest based on history that I’ll attempt to summarize below.

Valuations of stock markets are likely to be higher in the future than we’ve seen historically. The stock market’s valuation should be viewed considering the historical weightings of various sectors and industries. Technology has become a larger percentage of the stock market over time. In fact, it has grown from 5% of the S&P 500 Index in 1992 to over 28% at the end of the first quarter of this year.5,6 Technology companies command higher valuations than others that produce (for example) household products such as cleaning supplies or toilet paper. We all love toilet paper as we were reminded during the pandemic, but there’s only so much growth potential and excitement that can come from toilet paper compared to AI, electric vehicles, or other segments within technology.
The worries about inflation today are likely to subside as AI continues to progress. Inflation during periods of technological revolution tends to be subdued when we realize meaningful productivity gains and become more efficient with time and resources. Simply put, technology helps to contain or even reduce inflation over time.7 We saw labor disruptions because of the pandemic, which contributed to a spike in wages and overall inflation. However, advancements from AI are expected to lead to less demand (not more) for human labor, which is expected to alleviate pressure on wages to increase in the years to come. This is a double-edged sword and it’s difficult to predict the full ramifications. This will probably play out gradually at first and while there will be disruption within labor markets, we’ll ultimately adapt as human capital gets reallocated to where it’s needed most.
There’s a good chance we’ll end up seeing a bubble down the road. Those old enough to remember the days of the late 1990s and how crazed everyone was for the latest internet IPO can certainly appreciate where we’re going with this. Unfortunately, emotions within financial markets swing to both extremes—greed in up markets and fear in down markets. Alternatively, you might even say that it’s always fear—fear of missing out in up markets and fear of losing in down markets. We’re very early in the advancement of AI, so a potential bubble isn’t likely to happen for some time yet. Nonetheless, investors need to proceed with caution and be sure to not get carried away with reaching for risk beyond what their emotions or financial situations can handle.

A thoughtful approach to portfolio positioning today

One of our beliefs is that you should view the holdings in your portfolio as if you’re making a conscious decision to purchase your investments anew each day. Forget yesterday or last year. All that matters is what happens from here, although you can allow history to guide your thinking about tomorrow. Investors often like to quote the great Wayne Gretzky when emphasizing this point.

“I skate to where the puck is going to be, not where it has been.”

WAYNE GRETZKY

We are convinced that AI is going to be transformational and have wide-ranging and long-lasting implications for all of us with both benefits and risks. AI is likely to disrupt labor and many industries. These disruptions will force global citizens to grow and adapt like we have done in the past with new technologies. As with many tools, AI will likely be a powerful tool in the hands of those wishing to inflict harm on others. Government officials around the world are working on ways to regulate AI. As for feelings about AI, they are all over the map. Some feel anxious, others excited, and some in between. Regardless of how you feel, the process of AI adoption has begun.

The upside potential for AI is incredibly high, and we are hard at work positioning portfolios for the years ahead. We have been revisiting our investment strategy with regard to the underlying exposure to secular growth sectors such as technology and healthcare, how to diversify beyond the concentration of the largest companies to benefit from the emergence of new leaders, and how to take advantage of yields in today’s fixed income markets given the expected disinflationary impact of technology. As always, those who exercise a thoughtful approach to investing should do well. By thoughtful, we mean intentional positioning of geography, asset class, sector, and security type with an appreciation of risk and opportunity for return. There is so much to consider during this exciting time. Ready or not…here we go!

Sources:

https://www.gatesnotes.com/The-Age-of-AI-Has-Begun

https://www.grandviewresearch.com/industry-analysis/artificial-intelligence-ai-market

https://www.aei.org/articles/why-goldman-sachs-thinks-generative-ai-could-have-a-huge-impact-on-economic-growth-and-productivity/

https://www.britannica.com/technology/artificial-intelligence/The-Turing-test

https://blogs.cfainstitute.org/investor/2021/01/26/is-technology-a-new-asset-class/

https://www.thebalancemoney.com/what-is-the-sector-weighting-of-the-s-and-p-500-4579847

https://www.richmondfed.org/press_room/speeches/thomas_i_barkin/2022/barkin_speech_20221003

SECURE Act 2.0

Tue, 24 Jan 2023 12:00:00 GMT

Author

Andy Avera

On December 29, 2022, SECURE Act 2.0 was passed into law. The SECURE Act 2.0 has many more provisions than the original SECURE Act, portions of which do not take effect until next year or later. Some of the provisions still need clarification from the IRS and some will need to be implemented by company retirement plans and/or custodians before they can be utilized.

The Original Secure Act

Let’s first review the two major provisions that came from the original SECURE Act, which was passed into law in December of 2019.

Age for Required IRA Distribution - The age for required distributions from retirement accounts was increased from 70.5 to 72.
Inherited IRA Distributions - The ability for beneficiaries of inherited retirement accounts (from those who passed away in 2020 or later) to stretch distributions over their expected lifetime was eliminated. The law now requires the account to be distributed within 10 years. We are hopeful that clarity will be provided as to whether distributions from those inherited retirement accounts are required annually. There were no penalties for not taking distributions in 2021 and 2022

Major Provisions of SECURE Act 2.0

Retirement Account Distribution Age

The starting age requirement to take distributions from retirement accounts increased to 73 (from age 72). For those born in 1960 or later, the age to begin required distributions is 75.

The age to begin making QCDs (qualified charitable distributions) remains at 70 ½. The $100,000 per year limit will be indexed for inflation beginning in 2024.

Roth Contributions

There are more options for making Roth contributions in employer-sponsored retirement accounts.

Employer Contributions – Whether it is a matching contribution or a non-elective contribution (i.e., the company contributes 3%/year automatically), those contributions can now go into the Roth side of your retirement account. Note that the company gets a deduction for any contribution to the employee’s account. If the employee elects to have it go into the Roth side, the contribution will be taxable income to the employee.
Catch-up Contributions (for those age 50 and older) – Beginning in 2024, if an employee’s prior year’s wages were over $145,000 (adjusted for inflation), the company will be required to put all employer contributions into the Roth side. This does not affect profit sharing plan contributions.

Roth Accounts

SEP-IRAs and SIMPLE IRAs can now be a Roth version of those accounts. As mentioned in the introduction, the custodians have to create the necessary forms to allow the accounts to be opened and funded, but they are now allowed.

Roth IRAs from 529 Plans

For those individuals that have excess funds in a 529 Plan, starting in 2024, there will be the opportunity to use funds from the 529 Plan to fund a Roth IRA for the named beneficiary.

The account has to have existed for at least 15 years and you cannot use contributions made within the past 5 years (or earnings on those last 5 years of contributions), but otherwise, those funds can be used to fund a Roth IRA.

The ability to contribute to a Roth IRA is the same regardless of where the funds come from and you can use up to $35,000 (lifetime limit; indexed for inflation) from a 529 Plan to fund a Roth IRA.

Additional Catch Up Contributions (age 60-63)

Beginning in 2025, in the year you turn ages 60, 61, 62, or 63, you may make a larger catch-up contribution.

401(k) or similar plans - at least $10,000
Simple IRAs - at least $5,000
If your prior year’s wages are over $145,000 (as described earlier), those additional catch-up contributions have to go into the Roth side.

Spouses Inheriting Retirement Accounts

A surviving spouse can treat the inherited retirement account as if the decedent is still the owner. This could help delay distributions from the account.

Ability to Take Distributions from Retirement Accounts with More Favorable Tax Treatment

Generally, you cannot take a distribution from a retirement account before age 59.5 without incurring a 10% penalty. Below are some new/updated provisions to allow early distributions without penalty under certain circumstances:

Qualified Disaster Recovery Distributions – Similar to the recent Covid-related distributions (and other natural disaster distributions), up to $22,000 can be distributed from a retirement account during a lifetime. The distribution can be paid back within 3 years and if not, the income can be spread over 3 years. This is relevant if someone lives in a natural disaster area. The amount one can borrow from a retirement plan (such as a 401(k)) increased and loan payments can be delayed up to one year.
Domestic Abuse Victim Distributions – Beginning in 2024, victims (self-certified) can take out the lesser of $10,000 or 50% of the vested retirement account balance.
Terminal Illness Distributions - If a doctor states you have a condition or illness which can reasonably be expected to result in death within 7 years, you can take retirement plan distributions without penalty. Distributions are repayable for up to 3 years.
Long-term Care Distributions - Beginning on December 29, 2025, you can take money out for long-term care expenses at the lesser of $2,500/year (indexed for inflation) or 10% of your retirement account balance.
Public Safety Workers - Currently they can make penalty-free distributions upon turning age 50. This has been expanded to those that have 25 or more years of service.
Private-sector Safety Workers - Similar to public safety workers, private-sector firefighters and state and local corrections officers will be able to take distributions without penalty once they reach age 50.

Other Provisions of SECURE Act 2.0

Below is a high-level summary of additional provisions, however it is not an exhaustive list.

Missed Required Minimum Distribution Penalty

Historically, the penalty for failing to take a required distribution from a retirement account was 50% of the required distribution. That has been lowered to 25% and further lowered to 10% if fixed in a timely manner.

Student Loan Payments

Beginning in 2024, employers can make matching contributions based on employee’s making student loan payments.

Military Spouses

In looking at their retirement account, companies with under 100 employees will be incentivized to treat military spouses as if they had been with a company for a longer period of time. This means:

They must be eligible for retirement account participation within 2 months of joining the company
They are treated as having 2 years of service once they start
They are immediately vested in all employer contributions

Disabled First Responders

Beginning in 2027, instead of their tax-free disability income becoming taxable income when their pension begins, the amount of the disability income will continue to be tax-free in retirement.

In Summary

While there are many more provisions in the SECURE Act 2.0, we provide this summary based on what we believe to be the most relevant information for the families we serve. The application of these rules depends on each family or person’s unique situation and it is important to discuss how the changes impact you with a trusted advisor.

Click below for a printer-friendly version

SECURE Act 2.0 - High Level Summary

Charting New Waters: 2023's Investment Landscape

Fri, 20 Jan 2023 12:00:00 GMT

Author

Chris McCall

Predicting what the stock market will do is easy. It’s getting the prediction right that’s difficult. If you could tell me what corporate earnings (or net profits) will be for this year and what investors would be willing to pay for those earnings, I could tell you with great precision where the market would land by the year’s end. Unfortunately, there are so many unpredictable variables that impact corporate earnings. Even if you could get reasonably close, it’s practically impossible to know what investors’ appetite for risk will be at any given time. People’s emotions play a large role in determining the price of stocks and what valuation gets attributed to corporate earnings. So as a professional, what am I doing writing this paper and what’s the use in attempting to draw any conclusions about current market conditions and what the future may hold? Being informed hopefully gives you a little more confidence having your hard-earned money invested for the long-term. We can also put current conditions into context given historical norms and make reasonable judgments about near-term risks and long-term opportunities. After all, Mark Twain once said that “History never repeats itself, but it does often rhyme.”

First, what happened last year?

Last year, stocks and bonds both saw double digit losses as inflation surged higher, the Russian/Ukraine conflict raged on, and China struggled to open its economy due to the pandemic. Below is a quick snapshot of how various parts of the market performed.

The Federal Reserve caused a lot of uncertainty with seemingly being out of touch with the reality of inflation and having to play catch-up with interest rate increases and an ongoing balance sheet runoff — letting bonds mature and not providing support for new purchases. It was a year to invest more in defensive companies, maintain bonds with shorter maturities (they tend to hold up better when interest rates rise), and have an allocation to gold. Doing all three helped to mitigate the downside.

We must adapt to a new investment landscape.

For the last several decades, we’ve had powerful tailwinds propelling stock and bond markets to new heights. The federal funds rate, which impacts lending and money market rates, was a whopping 20% in 1980 and got down to zero during the ’08 Great Financial Crisis. Rates remained at or near zero until recently when the Federal Reserve started a campaign to fight inflation during the spring of last year. The S&P 500 Index rose from 102 in August 1982 to 4,796 at the beginning of 2022 (a compounded average return of over 10% per year). A declining interest rate environment has probably been the single biggest tailwind for stock and bond markets over the past 40 years. Globalization and technological advancements also played a role. The Federal Reserve could certainly reduce rates once they feel they’ve conquered inflation, but rates can’t come down by 20% again over the next 40 years. We must get used to a new environment where interest rates aren’t persistently dropping.

Globalization has been a boon to global commerce over the years and a benefit to keeping inflation low by enabling companies to procure lower cost materials from other countries and manufacture abroad where costs of property and labor might be lower. With Brexit, the pandemic, and increased global conflict pushing countries to feel the need to become more self-reliant, we have likely seen the peak of globalization. We are now moving in the direction of shifting back to domestic procurement and manufacturing, and tax breaks even incentivize deglobalization. This initially could lead to higher inflation until domestic manufacturing capabilities advance and economies of scale are realized.

Technology is the one major bright spot that continues to be a driving force for growth and helps to bring costs down, thus keeping a lid on inflation. The U.S. has been and continues to be a leader in technology and the possibilities are endless for advancements in mobile computing, internet of things, and health sciences among other things. Technology, for better or for worse, is dramatically changing the way we work and experience leisure. Change only seems to be accelerating.

So, what's the outlook from here?

The mainstream view on Wall Street is for the Federal Reserve to cut interest rates by year-end and that the U.S. economy will likely enter a brief recession during the first half of the year. This seems reasonable given recent data. The Consumer Price Index (CPI) showed inflation under 2% on an annualized basis for the last six months of 2022, and wholesale prices as measured by the Producer Price Index (PPI) just showed a decline of 0.5% for the month of December alone compared to estimates of a 0.1% decrease.

Inflation seems to be cooling off quickly, although keep in mind that it’s not uncommon for such a deceleration after a quick spike like what we’ve seen. The real question is where inflation settles as we move into the next year and beyond. At this point, market expectations for 5-year, forward-looking inflation are hovering between 2.0-2.5%.

If we enter a recession this year, the usual imbalances are largely nonexistent at this point. There does not appear to be speculative asset bubbles since we’ve already seen assets such as crypto currencies and high-flying growth stocks come down significantly last year. Banks are well-capitalized, businesses have healthy balance sheets, and many consumers still have plenty of excess savings to spend.

Home prices remain elevated despite recent weakness, but a shortage of homes resulting from years of limited construction should help to support home values and soften the blow of a downturn.

Still, the economy has risks as it always does. The Russian/Ukraine conflict could worsen. The Federal Reserve could have a misstep in setting interest rates or managing the runoff of bonds from its balance sheet. China might continue to struggle with Covid-19, or tensions with Taiwan or the U.S. might boil over. Then there’s high government debt levels that the U.S. and other nations have, which become harder to service with higher interest rates.

Even though there are unknowns, and we don’t quite have the investment landscape we had in the early 1980s, there are opportunities for solid returns going forward. We have much more attractive stock and bond markets today than we’ve had in quite some time, which is a great benefit to long-term investors. Despite the potential for continued choppiness in the markets, those who remain committed to a properly diversified portfolio should ultimately be rewarded.

Click below for a printer-friendly version

Charting New Waters: 2023 Investment Landscape

Journey Beyond Wealth (“JBW”) is an Investment Advisor registered with the State(s) of GA, TN, LA. All views, expressions, and opinions included in this communication are subject to change. Registration of an investment advisor does not imply a certain level of skill or training. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions. Please contact us if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions.

3 Considerations for a Meaningful Giving Strategy

Tue, 13 Dec 2022 12:00:00 GMT

Author

Chris McCall

In our Insights piece last month titled, “Do You Feel Called to Philanthropy,” we talked about how someone who is philanthropic sacrifices out of love for mankind. Giving of our time, talent, and treasure can bring about tremendous happiness in life and it can be even more impactful on our children than any professional success we may enjoy. If you’ve determined that giving is important to you but you’re not sure where to begin, we’ve outlined three considerations when establishing a charitable giving strategy.

1. How much can I afford to give?

There are different ways to approach this question. Some decide to give a certain percentage of income to a church and/or charities each year. This certainly is an effective way to give, but what if you could afford to give more or what if you’re no longer working and still want to give from assets you have? It’s helpful to first determine how much you need to live your life as you want to live it. Consider thinking through your cost of living such as housing, travel, medical, education, insurance, food/entertainment, and any other recurring expenses you have. Next identify your existing assets, consider future income such as Social Security, pensions, or any other expected income, and project the effect your core living expenses would have on your assets and future income. There are many important assumptions that go into an analysis like this, so unless you have experience making such projections, it’s best to get help from a good financial planner. The result of this exercise is it will start to become clear if you have enough to support your ongoing financial needs. Provided that you do and you appear to have more than you need, you can adjust your projections by reducing the initial assets you have to see what you actually need to meet your goals. The level of assets you have beyond what you really need could be considered excess capital and used today (rather than at death) to have an impact now while you can see it and appreciate it. We’ve seen families become clear on how much of their wealth is truly excess and then decide to:

Help family members in need
Fund education for grandchildren
Take family on trips to create memories
Give to charitable causes important to them
Start scholarships at a school
Start a business
Consider new aspirational goals they might not have pursued otherwise

There is much to consider in a core-excess capital analysis, but the important thing to note is many don’t go through this exercise and will go their whole life without truly having the impact they want (and can afford) to have now, and they might even hold back on experiences they could be enjoying. We don’t want this to happen to you. It’s all about having the clarity you need to make intentional decisions along your journey to fulfillment.

2. I know I want to give, but to where?

Once you know you have more than you need, it’s natural to want to be prudent with how you spend the “excess” dollars to do good. Some families know right away where they want to have an impact while others take time to determine what’s important or what feels right. Here are some practical ways to identify where you might give charitably.

Consider setting up a giving fund at a local community or faith-based foundation. Community and faith-based foundations are a wealth of information regarding local charities or causes that align with your values. These charities may not get the publicity other larger, more well-known organizations do, thereby allowing your dollars to have an even greater impact.
Meet with the director of a charity of interest. Request a tour of their operations or ask to see examples of their work if it’s something like a neighborhood built by Habitat for Humanity. Ask them questions to help you gain comfort and feel inspired to support their cause.
Visit the school if you’re interested in helping them or promoting education. Determine how you want to have an impact whether it’s helping fund someone’s education through a scholarship, a project the school would like to embark on, or a project you think the school would benefit from.
Volunteer with an organization. Volunteering will give you an inside look at how the organization operates and how it benefits those it serves.
Play the card game. If you’re just getting started or still unsure about where to give, there are card decks available online ( 21/64 motivational values and picture your legacy ) with virtual/electronic formats as well that can help you explore what’s important or meaningful to you.

3. What’s the best way to give?

We wrote an Insights piece last November titled, “6 Ideas for Charitable Giving in 2021,” that is still conceptually relevant today. As an update, standard deductions are higher now ($25,900 for married filing jointly, $12,950 for single, $19,400 for heads of households, and an additional deduction of $1,400 if you’re at least 65 years old or $1,750 if using the single or head of household filing status). It’s easy to simply write a check, but there are usually better ways that can minimize taxes and maximize your gifts to charity. If you’ve held an appreciated investment for more than a year and you plan to itemize deductions on your tax return in the current year, then donating the investment allows you to avoid realizing the capital gain. You can always repurchase the investment if desired and you’ve essentially reset your cost basis. Given how high the standard deduction is today, it’s harder to get a full deduction for charity if even one at all. Some will pre-fund multiple years’ worth of gifting by giving to a donor advised fund, which allows you to get the tax deduction in the current year and give from the fund over time as you deem appropriate. For those age 70.5 or older, you can give up to $100,000 per person from your IRA without it counting as a taxable distribution for income tax purposes. It’s especially beneficial at age 72 or older since this can count towards the required minimum distribution that the IRS mandates. There are also charitable trusts you could consider establishing for large one-time gifts with flexibility to have an income stream to you over time or elect for a lump-sum remainder distribution to beneficiaries. If benefiting yourself or family isn’t important, then you could always fund large charitable gifts to the donor advised fund we mentioned.

For those who have been blessed with financial resources beyond their needs, giving back is often a main driver of fulfillment. Stephen Covey is credited with identifying 7 habits of highly effective people, one of which is to begin with the end in mind. Giving comes down to ultimately leaving something behind that people will either remember us by or benefit from. When we get towards the end of our life, we want to know we made a difference. We want to know our life mattered. Those who give of their time, talent, and treasure get to experience the joy of giving and build a meaningful legacy that will last for generations to come.

Do You Feel Called to Philanthropy?

Wed, 26 Oct 2022 12:00:00 GMT

Author

Chris McCall

Have you ever sat down and really thought about the purpose of money? What are we supposed to do with it? The world tells us our money is ours to do with it as we please. While we do have free will to make choices, our life will be judged and our legacy will be defined by those choices. At the point of death, it won’t matter how much money you accumulated. It will matter how you used it and how you impacted others with the time you had.

“We make a living by what we get. We make a life by what we give.”

WINSTON CHURCHILL

I recently attended a gala in downtown Atlanta. It was a beautiful evening of learning about how a particular organization is helping to develop youth within the greater Atlanta area. What really struck me was when a local philanthropist spoke about how our children will remember us for our sacrifices rather than our achievements. Think about that for a minute. Our society puts such an emphasis on achievement. While achievement can be good, our children will remember and cherish us for the sacrifices we made for them and others—not because of how much money we made, businesses we built, or awards we won.

When we give our time, talent, or treasure, we’re making a sacrifice for the good of others. While all three ways of giving are good, I’m going to focus on the giving of our treasure. This brings to mind words such as charitable giving and philanthropy. The word “philanthropy” in its purest form means love of humanity. “Philos” means love and “Anthropos” means mankind or humanity. A philanthropist is someone who acts or sacrifices out of love for mankind. By sacrificing for the benefit of others, philanthropists grow in virtue—assuming their motivations are pure and not for personal gain or recognition. Doesn’t it feel good to grow in virtue when you put others before yourself? An example is when you give a gift for the first time in your life instead of receiving one, and you discover the joy of giving. As a father, it has been incredible to see the excitement in my children shift from receiving gifts to wanting to give them.

“Happiness doesn’t result from what we get, but from what we give.”

BEN CARSON

We work with a number of families blessed with financial resources beyond their needs who want to have an impact on others, whether it’s family or charitable causes important to them. The questions we commonly hear are:

How much can I afford to give?
I know I want to give, but to where?
What’s the best way to give?

We will address these points in a Part II next month. For now, just enjoy the excitement of potentially giving if it’s something you are considering. It doesn’t matter whether you’re just getting by or have more money than you’ll ever need. Anyone can give something and what we sacrifice with love will be remembered.

“It’s not how much we give, but how much love we put into giving.”

SAINT (MOTHER) TERESA

How to Manage a Large Inheritance: 7 Considerations

Tue, 16 Aug 2022 12:00:00 GMT

Author

Chris McCall

You might be grieving the loss of a spouse, parent, or relative who’s recently passed away and left you an inheritance. What do you do with the money? How do you manage it well? If you feel overwhelmed by the responsibility of making smart decisions with the financial wealth you now have, you're not alone. I’ve been there myself and know the challenges and mixed emotions that come with inheriting money from a loved one. It can be difficult. We’re going to explore 7 considerations for how to be a good steward of sudden wealth. By the end of this article, hopefully you can breathe a little easier and feel empowered to move forward with greater confidence.

#1 Keep Things Private and Pause

You might be tempted to tell others about the inheritance you’ve received. We have found that it's typically best to keep your new wealth private at least until you process what it means for you moving forward. Sharing your news openly sometimes sparks the idea in friends and family to ask you for money. Such requests can be challenging to manage. It also might be tempting to spend the inheritance right away. You will have plenty of time for that, so take a moment to get organized and gain clarity about what’s most important to you before making any major decisions about what to do next. If you’ve already splurged a little, it’s okay. Make the effort to be prudent with the rest so that you use it intentionally.

#2 Understand Potential Tax Implications

This is where things start to get a little complicated, so it’s beneficial to start working with your trusted financial professionals—a financial advisor and/or an accountant. Inheritances come to individuals in different ways. Some examples might include real estate, bank accounts, a valuable possession, annuities, life insurance proceeds, taxable investment accounts, or retirement accounts (401k, IRA, etc.). No one wants to lose someone they love and then shortly thereafter receive an unexpected "tax surprise". This is why working with a professional who can help you understand the tax implications of your new uncharted territory is important. As an example, a good advisor could help you see that receiving $5 million in retirement assets such as an IRA is more like receiving an account worth $3.5 million after accounting for the deferred taxes that will need to be paid on those assets over time (assuming a tax rate of 30%). Not to mention there are IRS rules you must follow regarding when an inherited IRA needs to be fully distributed. This is a very different scenario than if you were given $5 million of real estate or a bank account. Additionally, there might be appreciation or gains on the asset you’ve inherited since the date your loved one passed away. You’ll be responsible for taxes on these gains if you’ve sold and realized the gains. If you are a widow or widower, you can use the married filing jointly tax rates for up to two years following the death of your spouse. Afterwards, your tax status changes to single and you'll likely have a higher tax bill to plan around. You will want to get a handle on your tax situation so you can arrange for tax payments to be made if needed and understand how taxes impact your inheritance up front and over time.

#3 Protect New Assets and Revisit Insurance

Depending on what you’ve inherited and how much it impacts your net worth, there may be insurance considerations to make to protect the assets you now have. If you inherit valuable jewelry or artwork, you may need to revisit your homeowner’s policy to ensure they are properly covered. Your umbrella policy, which is an overall liability coverage that sits on top of your home and auto policies, should also be revisited. If this is new financial wealth for you, you’ll want to protect this wealth against potential lawsuits from a car accident, incident at your home, or something else. If you’re a widow or widower, this may not be necessary if you’ve had sufficient coverage prior to the passing of your spouse. There are also other forms of insurance you could review to see if they are still necessary. Maybe you no longer need life insurance if you have plenty of financial resources for the remainder of your life. The same could apply to a long-term disability or long-term care policy.

#4 Clarify Your Goals and Priorities

Now that you understand the tax implications and have taken steps to protect this wealth, it’s time to get clear on what really matters to you. Give yourself some time and a quiet space to think through what's important to you. It's amazing what people do with their lives when faced with mortality. Survivors of cancer, accidents, or other traumatic events often have much greater clarity and go on to make life-altering decisions. Imagine your own mortality. What changes might you consider with only so much time to live? What regrets would you have if you knew today was your last day? The main point here is to explore what actually matters to you and then to align your actions with what you value. Often times, life gets in the way of being intentional. Time and resources are finite for all of us. The best investment you can make is to take time to truly figure out what’s most important and move forward with intention. The clarity that comes from this will allow you to develop more meaningful goals so that you can live a more fulfilling life. Just know that there are financial advisors who are qualified to facilitate such discussions, which can be incredibly valuable as you look to make important decisions.

"When your values are clear to you, making decisions becomes easier."

- Roy E. Disney

#5 Revisit Your Financial Plan

Hopefully by this point, you better understand your goals and have a vision of what you want out of life. It’s now time to develop a plan for bringing this vision to reality. Consult with a trusted financial advisor to see what’s financially feasible. If you have debt, should you pay it off now? If you’re still working, do you now have the freedom where work is a choice rather than a requirement to provide? Do you need to prioritize your goals? Do you have far more financial wealth than you need? If you have more wealth than you need, it may open the door to other possibilities such as charitable causes, taking family members on trips to create memories, funding education for grandchildren, or simply enhancing your lifestyle. The possibilities are endless, so working with your advisor can help you determine what’s financially possible so you can feel empowered to move forward and hopefully live an intentional life.

#6 Revisit Your Investment Portfolio

Additional financial wealth changes your circumstances, so you’ll want to consider if changes to your investment portfolio are warranted. For starters, you may not need to take as much risk if you have sufficient assets to meet your financial goals with a lower expected return. Or you might decide to target more growth with your portfolio if you can afford downside risk without it impairing your ability to accomplish your goals. The question then becomes, what is the growth for? Another more specific consideration is whether you should switch the type of bonds you are invested in because of your new anticipated tax rate. If you’ve been investing in taxable bonds, it might make sense to switch into municipal (tax-free) bonds.

#7 Update Your Estate Plan

Just when you think you’re all set, don’t forget to think about your own estate plan. Put things in order so that if something happens to you, your assets can be passed along according to your wishes. Your financial advisor or attorney should be able to illustrate how your assets will eventually flow to your heirs. With all the financial wealth you now have, do your heirs stand to inherit more than you’d like? Is charity something you might want to consider if you haven’t already? If your children or other heirs are young or perhaps someone isn’t financially savvy, a trust might make sense to protect the assets and ensure they provide for your heirs for an extended period of time. Depending on your level of wealth, you might want to consider strategies for minimizing or eliminating potential estate taxes. The current estate tax exemption amount is just over $12 million per person, but it is scheduled to drop by 50% in a few years. If you haven’t revisited your estate documents in a while, you might need to change the people you have chosen as executor, trustee, or agents for your financial power of attorney or healthcare directive. And remember to verify all the beneficiaries for your life insurance, investment accounts, and retirement accounts to ensure they work with your will to accomplish your overall estate planning goals.

Losing a loved one is hard and receiving a windfall can be a big responsibility. If you address the seven considerations we’ve covered, you should be in a good position to manage your inheritance well. Managing all the considerations here may seem a little daunting, which is one reason many seek out the assistance of a trusted financial advisor to help them make sure they manage all the facets of obtaining new wealth. If you manage your inheritance well and have the clarity to know what your priorities are, you are better able to make intentional decisions and live a life without regret.

Journey Beyond Wealth is an Investment Advisor registered with the State(s) of GA, TN, LA. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. Please consult legal or tax professionals for specific information regarding your individual situation.

Reflecting on 2021 as Markets Stumble in 2022

Wed, 26 Jan 2022 12:00:00 GMT

Author

Chris McCall

At the beginning of this month, I watched the Disney movie Togo with my family. It’s an incredible story of a Siberian Husky who saves the small Alaskan town of Nome from the onslaught of diphtheria among children in quarantine. Togo leads a team of dogs 261 miles through an epic snowstorm to help deliver diphtheria anti-toxin so the children can be saved. Although Togo is the ripe old age of 12 during this time, his relentless determination carries him through all the trials he and the team endure. What strikes me about this story is how Togo keeps his eyes forward and pursues his goals despite almost falling off a mountain, nearly drowning in the Bering Sea, and several other gut-wrenching, near-death moments where you find yourself cringing and holding your breath.

Investing in the stock market can at times feel a lot like the challenging adventure Togo went through, and the year of 2022 is certainly beginning with a little more excitement than we probably want. Let’s first start with a review of last year when the days were calmer, and we were breathing a bit easier.

A Review of 2021

The S&P 500 index, a prominent benchmark of larger US companies, finished 2021 up nearly 29%. This caps off a 3-year period of a 100% cumulative gain. Yes, the S&P 500 index doubled over the prior 3 years, which is the best 3-year stretch for the index since 1999. The strong performance came in a year that included a $1.9 trillion stimulus package signed in March of last year, a reopening of the economy, global supply chain challenges, labor shortages, and high inflation. Thankfully, corporate profits were surprisingly strong as well.

On the surface, it looks like 2021 was a great year. Digging a little deeper reveals that not all parts of the market performed quite as well as the S&P 500 index. The Russell 2000 index, a benchmark of smaller US companies, gained 15%. In fact, the Russell 2000 Growth index was only up 3%. The MSCI EAFE index, a benchmark of companies in developed countries abroad, was up 11% while the MSCI Emerging Markets index, a benchmark of companies in emerging countries abroad, was down 2.5%. Also, the Bloomberg US Aggregate Bond index, a broad US bond benchmark, was down 1.5%. Big technology companies were a large driver of the S&P 500 index’s stellar gain as 5 of the largest companies finished with incredible performance (Apple +34%, Microsoft +52%, Alphabet/Google +65%, Tesla +50%, and Nvidia +125%).

Something interesting started happening throughout 2021 that’s worth noting. The first quarter was a broad rally with smaller companies leading the way. After the first quarter, smaller companies began to lag significantly. The Russell 1000 index is a benchmark like the S&P 500 index except it’s the largest 1,000 US companies rather than the 500 of the largest US companies. When comparing it to the Russell 2000 index for the last 3 quarters of the year, large companies outperformed smaller companies with a gain of 19% versus 2%.

With all the concerns that arose last year between the pandemic, supply chain challenges, labor shortages, and inflation, larger companies can be a safer haven since they’re usually able to better weather the storms over time. More specifically, large technology companies can be attractive when such challenges arise and economic growth is questioned because they have strong balance sheets, high profit margins, and persistent growth. Not only did smaller US companies languish for the remainder of the year, but most of the other indexes also underperformed as did crypto currencies such as Bitcoin (down 21% from the second quarter through the end of the year). While markets looked very strong in 2021 on the surface, they looked a little less impressive when you dig below the surface.

The Markets So Far in 2022

Stocks are starting to lose their footing this year as interest rates rise and markets worry about the Federal Reserve potentially having to play catch-up in their effort to tame inflation. Below, we show 3 investable funds to give a sense for how the markets are doing so far this month through January 25th. Large US stocks as measured by Vanguard’s S&P 500 Index Fund (VOO) are down 8.5%, bonds as measured by the iShares US Aggregate Bond Index Fund (AGG) are down less than 2%, and gold as measured by the iShares Gold Trust (IAU) is up nearly 1%. Interest rates rising at the beginning of this month hurt bond prices initially, although bond prices stabilized when stocks really started dropping in the middle of the month. Gold, typically a safe haven during declines and periods of uncertainty, has provided investors a refuge as volatility picks up. If we drilled down even further, you would see that technology and other high valued stocks have fallen the most.

When a bull market has lasted as long as this one has, it needs a breather so it can digest the gains and set up for a new bull market. Part of the reason bull markets don’t last forever is gains usually outpace profit growth. Consequently, valuations become abnormally high leaving little-to-no room for the expansion in valuation to continue. At that point, stock returns become more dependent on the ability of companies to grow profits and distribute dividends.

Through the end of last year, the S&P 500 index had gained over 800% since March 9th of 2009 (the bottom during the Great Financial Crisis of 2007-2008), which is an average annual return of nearly 19%. You can see in the graph below how valuations have doubled over the last nearly 13 years and how high they are relative to the last 25 years.

Markets don’t go down because they’re expensive. Nonetheless, consider Togo and his team of dogs climbing a mountain during a snowstorm. If they were to lose their footing and fall, it would obviously hurt more the higher up they are. As the market climbs the mountain of valuation, there’s potentially more room to fall if it loses its footing.

As we look at the conditions we have before us this year, some of the factors to consider are:

The Federal Reserve is expected to raise interest rates this year while reducing the size of its balance sheet.
Tensions are rising between Russia and Ukraine, China and Taiwan, and North Korea and South Korea.
Corporate profit growth is expected to slow from over 45% last year to 8% this year.1
Supply chain challenges and labor shortages are still impacting inflation.
Mid-term elections will be held on November 8th.

What to Do

No one knows how any of the factors mentioned above will materialize this year. Furthermore, it’s impossible to know how they’ll affect the markets since markets always look forward and try to anticipate 6-12 months into the future. This is the part where we offer some words of wisdom for how to navigate the markets this year. Spoiler alert…we’re not going to offer any jaw-dropping suggestions. We follow a disciplined and time-tested strategy while focusing more on managing expectations and behavior along the way.

When we see sensational rallies in certain parts of the market, whether it's technology stocks, crypto currencies, or something else, it’s easy to get swept into the euphoria and want to “bet big” on what’s been doing well. This is the time to have a plan and follow it despite the noise out there. If you’re long-term focused, expect bumps and scary downturns along the way. From an investment standpoint, growing your capital to exceed inflation in the long run should be your main concern. Stick to your long-term plan whatever it may be. If your time horizon is shorter, then don’t take more risk than you need to because losses in value should be your main concern.

Togo’s story is nothing short of amazing. He encounters moments of valiantly trotting along with ease as well as frightening moments where you’d wish you could just blink your eyes and be back to safety again. Last year was a year where most of us probably felt good about the progress in the markets. We need to be grateful for that and know that it can’t be that easy every year. We’re going to experience periods like what we’ve seen so far this year, and we should expect more scary moments as we venture forward. The key to success is having a plan and not giving up when things get tough. When you lose your footing or even if you fall, get back up and keep moving forward in pursuit of your goals.

https://www.yardeni.com/pub/yriearningsforecast.pdf

Is Your Ladder on the Right Wall?

Thu, 13 Jan 2022 12:00:00 GMT

Author

Chris McCall

We’ve rung in a new year with new possibilities and the best of intentions. Some of us might want to eat better, exercise more, work on relationships, or something else. Whatever your resolutions may be, the start of a new year marks a point of new beginnings that holds the promise for a better life. Isn’t that what we ultimately want…a better life?

Many spend a lifetime searching for joy, peace, and fulfillment, only to find their path led them to pursue prominence, possessions, and pleasures. Why is it that we sometimes get off track? Thomas Merton, an American Trappist monk and writer, once said, “People may spend their whole lives climbing the ladder of success only to find, once they reach the top, that the ladder is leaning against the wrong wall.” Dr. Stephen Covey, author of The 7 Habits of Highly Effective People, commented on how sometimes you can find yourself achieving success that has come at the expense of other things far more important or valuable to you.

“People may spend their whole lives climbing the ladder of success only to find, once they reach the top, that the ladder is leaning against the wrong wall.”

–THOMAS MERTON

I once knew a man who spent much of his life being a doctor. He was a good doctor. One day when he decided to retire, he told me that he never really wanted to be a doctor. He went into the medical field because his father had been a doctor and thought he should too. “If I could have done anything, I would have been a pilot,” he said.

What is important to you? And perhaps more importantly, why? If exercising and eating better are important goals for you, why? Do you want to fit into a smaller pair of jeans, or do you want to be healthy enough to be there for your family, creating memories for years to come? If saving more money for retirement is an important goal for you, why? When you drill down into the reasons for doing something, you discover a more enduring and motivating purpose that will lead to goals being accomplished and progress towards a better life.

We’re all on our own unique journey. You might follow a path someone else has laid out for you. You might follow a well-traveled path because it seems safe. Or you might blaze your own trail if you’re confident you know where you want to go. Whatever your choice, you will experience life in your own way.

This year when you think about your financial goals, try asking yourself…Why is money important to me? Does it afford me the freedom to spend time with those I care about? Does it allow me to give to causes that can change the lives of others? Or is it something else? There are no wrong answers here.

Once you know what’s important to you, you can begin to view all decisions in your life through that lens. This “statement of financial purpose,” or whatever you'd like to call it, can be an enduring thing that helps inform all decisions. You can then come up with meaningful goals in support of this purpose that lead you to a more intentional life. Allowing your why to guide you helps you get to the top of your ladder and experience joy, peace, and fulfillment, knowing you've put your ladder on the right wall.

6 Ideas for Charitable Giving in 2021

Thu, 11 Nov 2021 12:00:00 GMT

Author

Chris McCall

Can you recall the joys of Christmas as a child? There’s the excitement of seeing packages under the tree and then we open them with great anticipation. It's not until later in life that we appreciate the even greater joy of giving.

"For it is in giving that we receive."

– ST. FRANCIS OF ASSISI

Research has shown that happiness is much more sustainable after regular giving than after regularly receiving. ¹ We’re going to review 6 ideas for charitable giving this year and how to maximize the tax benefits of doing so.

#1 Make Larger Cash Gifts in 2021

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 allows you to deduct cash gifts to charity up to 100% of your adjusted gross income (AGI) if you itemize deductions. This will revert back to the normal 60% of adjusted gross income next year. ² The donation must be made to a public, qualified charity and not to a donor advised fund, private non-operating foundation, supporting organization, or split-interest giving entities such as charitable remainder trusts, or charitable lead trusts. If a donor gives more than they are allowed to deduct on their income tax return, excess deductions may be carried forward for up to five subsequent tax years.

#2 Give Appreciated Assets Instead of Cash

The stock market has rewarded investors with significant gains over the past dozen years. It’s quite possible you’re holding a position with large unrealized capital gains (meaning the value has increased since you purchased it). It may also be a larger percentage of your portfolio than you intended, which potentially increases portfolio risk. Rather than trim the position and pay taxes on the sale, you could give a portion to charity. If you’ve held the asset for more than a year, you can deduct the full market value of the asset and avoid realizing the capital gain on your tax return. The charity can then sell the position and avoid paying tax as well. You could also give entire positions and simply buy them back if you want to retain the position in your portfolio. The main point here is that giving appreciated assets (such as stocks, real estate, etc.) allows you to avoid realizing the capital gain AND get a tax deduction provided you itemize deductions. If you take the standard deduction, you still benefit by avoiding the capital gain.

#3 Bunch Deductions with a Donor Advised Fund

The standard deduction in 2021 is $25,100 for married couples filing joint, $12,550 for single taxpayers and married individuals filing separate, and $18,800 for filing as head of household. For those age 65 and older or who are blind can claim an additional $1,350 ($1,700 if using the single or head of household filing status). These high levels make it difficult to receive much of any deduction for your charitable giving. Tax benefits should not be a primary driver of giving to charity, but what if you could structure your giving so that you can benefit charity and lower your tax bill? One such strategy, commonly referred to as bunching deductions, calls for donating multiple years’ worth of charitable giving to a donor advised fund. This fund is an account you set up to hold assets or cash for charity. The idea is that giving 2, 3, or even more years’ worth of gifting allows you to exceed the standard deduction, itemize your deductions for that year, and get more of a tax benefit for the giving you’re doing. You can then invest the fund or keep it in cash and direct gifts to charity out of the fund over time as you see fit. You can establish a donor advised fund at Schwab, Fidelity, or a local community foundation for those that offer them, and either give cash or appreciated assets (the latter is more advantageous as we mentioned in #2 above).

#4 Give from Your IRA

For those who are age 70.5 or older, you have an opportunity to give from your IRA assets and save on current and future taxes. When you give from regular (non-IRA) assets, you likely won’t get a full deduction for it due to the standard deduction being so high. For example, if you’re married, have $17,800 in other deductions, and give $20,000 to charity, you’ll only benefit from half of the charitable donation since $27,800 is your standard deduction ($25,100 plus $1,350 additional for each of you assuming you’re both 65 or older). The first $10,000 of your charitable donation counts towards getting up to your standard deduction and then you can itemize your deductions and benefit from the other $10,000 of your charitable donation. Instead, you could simply take the standard deduction, give from your IRA, and that full amount will be deemed a qualified charitable distribution (QCD). Such IRA distributions for charity are not taxable for amounts up to $100,000 per year for each IRA owner. This is especially beneficial for those age 72 or older with required IRA distributions and who don’t need those distributions from their IRA. This takes what would have been taxable income (regular IRA distributions are taxed as ordinary income) and essentially turns it into non-taxable income if it’s for a qualified charity. Reducing your taxable income may also result in additional benefits, such as reducing your Medicare premium surcharge or increasing other deductions that are based on your income. Giving from your IRA is a great way for retirees to give to charity and many custodians also allow you to have a checkbook for your IRA, which makes giving easy. Just be sure to keep records of your gifts and provide this information to your tax preparer so they can properly record your non-taxable distributions to charity.

#5 Unique 2021 Opportunity for Those Taking the Standard Deduction

Just like the increased adjusted gross income limit opportunity mentioned in #1 above, there is another option for giving that is set to expire after this year. For those who plan to take the standard deduction for 2021, you can still deduct up to $600 for married individuals filing joint or $300 for other filers if you give a cash gift to a qualified charitable organization. It does not qualify for non-cash gifts such as securities or household items. There are currently no plans to extend this into next year.

#6 Charitable Trusts

If you want to give to charity, but also benefit yourself and/or your family, then a charitable trust may make sense. Given the extra administrative expenses of a trust, the gift should be larger ($500,000 or more might be large enough to consider a trust). There are generally two kinds of charitable trusts. A charitable remainder trust allows you to receive an income stream over a number of years and then whatever is remaining gets distributed to the charity (or charities) you’ve selected. A charitable lead trust provides ongoing payments to charity with the remainder being distributed to individuals (usually family). Without getting too much into the mechanics, this may be a great year for the charitable lead trust as low interest rates right now allow you to get a higher charitable deduction. Like a donor advised fund, you can also donate appreciated assets and reduce your tax bill.

Giving to charity, your church, or your children’s school can be rewarding and fulfilling, and it affords you the opportunity to align your capital with your values. Having the financial means to improve the lives of others is a blessing. Giving in a tax-smart way allows you to be a good steward and make the most of the resources you have.

Journey Beyond Wealth is an Investment Advisor registered with the State(s) of GA, TN, LA. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. This content may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

Is your estate plan in good order? Consider these 6 things.

Tue, 05 Oct 2021 12:00:00 GMT

Author

Chris McCall

Death is an unpleasant topic to talk about, which is why most people either don’t have an estate plan in place or what they do have needs updating. In fact, only 55% of those 55 and older have a will and a mere 18% have all the recommended essentials—a will, healthcare directive, and durable power of attorney. ¹ Many don’t know where to start and for those who have documents that might be outdated, reviewing them can feel daunting. It’s easy to defer giving this the proper attention until we (or someone we know) experience a health event. And sometimes…it’s too late. Below are 6 important considerations when determining if any updates are needed.

#1: Life Changes

The most common reason to update your estate plan is a major life change. The following are just some examples.

Marriage
Divorce
Death
Birth of child
Diagnosis of a child’s special need
Substance abuse or incarceration
Move to another state

Any such changes warrant revisiting your documents. Part of estate planning is reviewing the beneficiaries you have for life insurance policies, IRAs and other retirement accounts, annuities, payable or transfer-on-death (POD or TOD) accounts, as well as revocable trusts. Contrary to what many believe, these assets do NOT go through your will. So, your beneficiary elections ultimately govern who gets what.

One quick note on moving out of state. Each state has its own laws whether it’s the number of witnesses required to validate a will or how much a spouse must inherit. Some have inheritance or estate taxes, although most do not. State laws vary on powers of attorney, advance medical directives, living wills, and more. Make sure your estate plan complies with local laws and regulations.

#2: Named Persons/Roles

Do you remember who you’ve selected for all the important roles in your estate plan, both as primary and successor to the primary, to carry out important decisions on your behalf? Are they still the right people?

If you have children who are minors, the guardian(s) will be entrusted to raise them and pass on values that are important to you. The executor will carry out the terms of your will and see to it that all your assets get properly distributed. If you have a trust set up either during life or through your will, the trustee will be responsible for enforcing the terms you’ve set and make decisions on certain distribution requests. If you are incapacitated, agents for healthcare will be responsible for medical treatment or life decisions while a durable power of attorney enables someone to make legal and financial decisions such as manage bank accounts, bills, and investments, file tax returns, and buy or sell property.

It’s important to revisit these roles regularly as people age, move away, relationships change, or someone else simply becomes better suited to serve. If you don’t maintain updated documents, you run the risk of a less than ideal person serving or the courts appointing someone you would not have chosen.

#3: Changes in Assets or Liabilities

Do you have a significantly higher or lower level of financial assets than when you last finalized your estate documents? Is the composition of those assets materially different such as the value of your retirement accounts, other investments, or property...or maybe you’ve started or sold a business? Have you paid off a mortgage or bought or sold property, which may result in certain beneficiaries ending up with more or less than you intended? It’s a good idea to regularly update a diagram of what assets flow where and what the ultimate disposition looks like.

#4: Intentions

They say a picture is worth a thousand words, and we just talked about illustrating where your assets go. This picture gives you a chance to make sure your plan is intentional and aligns with what’s important to you. Do you want your children to receive equal inheritances, or do you feel one should receive more than another because of financial need or some other reason? If you’ve amassed more financial wealth than anticipated, do your children or other beneficiaries stand to receive more than you’d like? Have your charitable intentions changed? There are many intentions we have that can and often do change over time.

#5: Tax Law Changes

Legislative changes to tax law can also result in unintended consequences. For example, Congress could lower the federal estate tax exemption amount and your estate could either be subject to more estate tax than you planned for or it could affect the funding of certain trusts through your will. In such a scenario, you might want to reevaluate the trusts you have set up for your beneficiaries. You might also consider giving more to charity if you’re charitably inclined and want to reduce your potential estate tax liability. There may be estate planning considerations both before and after any such legislation is enacted to ensure your estate gets passed on the way you want.

#6: Post-Mortem Letter or Letter of Intent

One of the most helpful documents for your heirs is something that technically isn’t even part of your estate plan, although it’s highly recommended. Wills and trusts have legalese and do a good job conveying the what, but not the why. You might have left uneven bequests to your children but want them to understand your thinking. You might have certain provisions in a trust for your beneficiaries and want the trustee to better understand how you’d like certain decisions carried out. In addition to terms of your will or trust, you might want your beneficiaries to know where certain documents are kept, login information for your computer or to various financial institutions, or simply how you hope their inheritance might benefit them and/or future generations. A comprehensive document such as this is referred to some as a Post-Mortem Letter, and a document specifically for trusts is called a Letter of Intent. Your beneficiaries are going to have a tough enough time as it is with your death. Leaving behind such instructions makes it much easier for your executor, trustee, and beneficiaries to all carry out your wishes and potentially your legacy.

https://mlaem.fs.ml.com/content/dam/ML/Articles/pdf/ml_LegacyStudy_Final.pdf

Journey Beyond Wealth is an Investment Advisor registered with the State(s) of GA, TN, LA. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. This content may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

7 Ways to Help Protect Your Data and Financial Assets

Tue, 24 Aug 2021 12:00:00 GMT

Author

Chris McCall

The "olden days" used to be simpler when it came to protecting your sensitive information. You'd store your documents in a safe place and keep your doors locked. Now, everything is digitally stored online and you have to implement different measures in an effort to protect your data. An estimated 87 percent of U.S. adults feel that the risk of becoming a victim of a cybercrime is growing. ¹ We see this concern firsthand from families we work with when we're asked about ways they can safeguard their data. The following is a list of 7 actionable items you can implement now with a little time and effort.

#1: Use a Password Manager

Passwords are the first line of defense, so make them strong. Avoid simple ones like “Password123”, birthdays, and anniversaries. They should have a combination of capital and lowercase letters, numbers, and special characters. Some sites are great about forcing you to use some or all of these, but the best way to create and maintain your passwords is to use a password manager. LastPass and Keeper are just a couple of examples, and they create truly random passwords that even you could never remember or guess. They allow you to securely maintain all of them in one place and easily populate your passwords when logging into sites. A good password manager will also offer "dark web" monitoring and alert you if any of your passwords have been compromised in a data breach, prompting you to immediately change your password. Even if your passwords have not been compromised, you should still regularly change them.

#2: Use Two-Factor (2FA) or Multi-Factor Authentication (MFA)

In addition to strong passwords, using two-factor (also referred to as multi-factor) authentication adds another strong layer of protection in case a hacker gets your password. Many sites, especially financial and social media, offer two-factor authentication where you receive a code via text message to enter in addition to your password. Security experts recommend you receive these codes via a smartphone authenticator app such as Google Authenticator or Authy. Two-factor authentication is a must for sites that contain your financial data such as bank or investment accounts. It's also great to enable it on your e-mail, which makes it virtually impossible for bad actors to access your e-mail.

#3: Manage E-mail Carefully

Never send sensitive information such as social security or account numbers through e-mail unless it's encrypted. E-mail is a common access point for criminals and you don't want to make it easy for them to get your most sensitive information. And when you receive wire instructions from a business such as a bank or closing attorney, always call to verify. Last year, an estimated $1.8 billion was lost due to sophisticated scams targeting both businesses and individuals performing transfers of funds. ² Also, always remain vigilant of potential scam emails either by unknown addresses or scammers posing as people or businesses you know. If a message or request seems the least bit out of the ordinary, question it. Review the e-mail address and look to see if there's a misspelling or added hyphen. If you’re unsure about the validity of a link, try typing the URL directly into your browser’s address bar. Once a scammer tricks you into clicking on something and injects an undetected virus, they may try to steal important information such as passwords, account numbers or your Social Security number. ³

#4: Invest in Quality Cybersecurity Software

If you don’t have it already, seriously consider installing cybersecurity software on your computer. This software can help identify and prevent viruses, malware, and ransomware from infecting your computer system. While there are free programs available, they don’t always provide the latest updates. There are low-cost cybersecurity options to choose from, and their small upfront cost can be worth it to help safeguard your personal information.

#5: Use a VPN (Virtual Private Network)

Much like encrypting an e-mail message, using a VPN allows you secure your connection to the internet from your device by creating a virtual encrypted "tunnel". Experts say this is a great way to help keep your internet activity private from snooping or prying eyes. ⁴ This is especially important when it comes to using Wi-Fi in public places such as a coffee shop or hotel room. A VPN is often part of a good antivirus program or there are stand-alone options available such as NordVPN and ExpressVPN.

#6: Consider a Firewall

While antivirus software looks for viruses and bad files, a firewall inspects each packet of data and is designed to keep malicious network traffic from getting into your network or computer. It can also alert you to intrusion attempts. You can implement a firewall in the form of software or hardware whether it's a stand-alone firewall device or router with a built-in firewall. Many antivirus programs also include a firewall. When used in conjunction with the other protective measures we've discussed, this can meaningfully strengthen your defenses against potential attacks. ⁵

#7: Freeze and Monitor Your Credit

The ultimate line of defense against preventing thieves from opening credit in your name is to freeze your credit with all three major credit bureaus--Equifax, Experian, and Transunion. You can temporarily lift the freeze if you need to apply for a credit card, take out a loan, apply for utilities, or something else that requires a credit check. Regardless of whether you freeze your credit or not, it's always a good idea to check your it regularly. The 3 bureaus allow one free credit report each year, which you can access via https://www.annualcreditreport.com .

Potential Resources

There are a number of resources online you can search to find good software and hardware to protect your computer and data from cyber criminals. One resource that's been around since 1982 is PC Magazine . You could start here ( https://www.pcmag.com/picks/the-best-security-suites ), which takes you directly to reviews of software that can address multiple security elements. The top of the page has links where you can review specific products such as "Best Antivirus", "Best Password Managers", and others. There are other resources online such as CNET and TechRadar or you could also ask your employer's IT department what they'd recommend.

Cybercrime is scary, but it's an unfortunate part of modern-day life. Taking precautions like those above can help you protect your sensitive information and safeguard your financial assets.

Journey Beyond Wealth is an Investment Advisor registered with the State(s) of GA, TN, LA. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. This content may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

The Second Most Important Thing You Can Teach Your Children or Grandchildren

Wed, 04 Aug 2021 12:00:00 GMT

Author

Chris McCall

We all want our children and grandchildren to do well in life. The most important thing we can teach our youth is some sort of value system to help them make sense of life and orient them in the right direction. But what else? How do you spend your time with your little (or not so little) ones? You might help them with reading or math homework. You might take them fishing, work on a puzzle or craft, or play catch in the backyard. These are all great, but what if there’s something else that could change their life?

The number one problem in today’s generation and economy is the lack of financial literacy.

– ALAN GREENSPAN

Only 18% of students in US schools are required to take a personal finance course before earning their high school diploma. ¹ Increasing financial literacy helps students have higher credit scores, less debt, and more savings. Most of our young people are going out into the world woefully unprepared for the financial challenges of life. None of us would ever send our children out into the wilderness without some amount of instruction on how to pitch a tent, the importance of finding a water source, how to build a fire, what’s safe to eat, which plants are poisonous, what to do if they come face-to-face with a bear, mountain lion, or other predator, and much more. Yet, that’s exactly what most of us do when we send our children off into the world without any instruction in personal finance.

How do we know the lack of financial literacy is truly a problem? According to the American Psychological Association (APA), 72% of adults report feeling stressed about money. Ongoing stress about finances has been linked to migraines, heart disease, diabetes, sleep problems, and more. ² Those who experience significant financial stress are 13 times more likely to have a heart attack than those with minimal or no stress. ³ Money concerns don’t just affect our health. It’s the number one issue couples fight about and the second leading cause of divorce. High amounts of debt and lack of communication about money are major causes of stress and anxiety around household finances. ⁴

We all want our children and grandchildren to live a good and happy life. How can we do our part to help prepare them to make responsible financial decisions, even if we may experience some financial anxiety ourselves? I have a confession to make. As passionate about this topic as I am, even I got a late start on this. So don’t fret if your children are close to or at high school age. Remember, those who receive even some instruction in high school tend to have higher credit scores, less debt, and more savings. Here are 5 great resources to help your children learn about money and how to make smart financial decisions.

Practical Resources

Family-At-Home Financial Fun Pack (Click Here)

The Council for Economic Education tries to making learning fun with downloadable, age and grade appropriate packets for children. They contain learning activities, family activities such as stories and games, and additional suggested reading (books on Amazon, at the library, or ones you may already have on your bookshelf). The packets start at a kindergarten level and advance through 12th grade. This is a terrific place to start!

Financial Football (Click Here)

This is a fun, interactive video game from Visa and the National Football League teaching players good money management skills. You select the difficulty level based on ages 11-14, 14-18, or 18 and older. You pick your favorite NFL team and run plays, but the success of the play depends on if you answer a question correctly within the allotted time on the play clock. This game is a LOT of fun…even for adults! If you’re not a football fan or want something more instructional, the site also provides “Lessons”, which are downloadable packets on various topics.

Monetta Family Newsletter, Games, and More ( Click Here)

Monetta is a mutual fund family with a passion for financial literacy and educating kids about money. You can sign up for a quarterly newsletter designed to help kids learn about financial topics in a fun way. They’ll learn about important financial life skills, successful entrepreneurs, and there are jokes or puzzles to keep it light and fun. They also have links to various financial games online, a money guide for teens, and short stories. Everything is intended to help kids learn about money in a fun and practical way.

Dave Ramsey’s Financial Peace Jr. and Self-Study Programs for Middle and High Schoolers (Click Here)

Dave Ramsey has designed a kit for kids ages 3-12 that introduces the concepts of earning money, saving, giving, how to have fun spending within a plan, the dangers of debt, and the importance of integrity. The items are colorful and include an activity book, chore chart, give/save/spend envelopes and bank, story time book, and more. There are also online course materials for middle and high schoolers presented by Dave Ramsey and his team of experts.

Family Board Games

Board games offer another great way to incorporate money lessons while having fun. Here are 6 games you could consider for your kids or for when the grandkids come visit.

The Allowance Game by Lakeshore (Ages 5+) – Kids learn the basics of counting, earning, spending, and the importance of responsibility.
Pay Day (Ages 8+) – Teach kids about budgeting, monthly expenses, making payments on debt, establishing an emergency fund, and more.
The Game of Life (Ages 8+) – Kids learn about major life events such as going to college, working, marriage, having children, and retirement.
Monopoly (Ages 8+) – This classic teaches the importance of budgeting, planning ahead, and making smart investment decisions.
The Stock Exchange Game (Ages 10+) – Kids learn about the stock market, building a portfolio, and risk vs. return.
Cash Flow 101 (Ages 14+) or Cash Flow for Kids (Ages 6+) – The author of Rich Dad, Poor Dad created this game to teach kids about investing, real estate, and how to make passive income so they can “avoid the rat race”.

I mentioned earlier that I got a late start on educating my own children, who are 14, 12, 10, and 7. My 14-year-old started asking me this year about saving and investing and it hit me that my time to teach her and her siblings is limited. This summer, I started teaching a 30-minute “money class” during weekdays before dinner. We’ve all really enjoyed it and plan to do it each summer going forward. Summer is a time for fun, relaxation, and discovery. But it’s also a perfect time for kids to gain some practical knowledge that will help them live a long, healthy, and happy life…not to mention a long and happy marriage. Whether you’re a parent or grandparent reading this, it’s never too late to start and anytime is a good time. Just start and you’ll be glad you did.

https://www.montana.edu/urban/main_brief.pdf

https://www.verywellmind.com/understanding-and-preventing-financial-stress-3144546

https://www.eurekalert.org/news-releases/519780

https://www.ramseysolutions.com/company/newsroom/releases/money-ruining-marriages-in-america#:~:text=According%20to%20a%20new%20survey,cause%20of%20divorce%2C%20behind%20infidelity.&text=Almost%20half%20of%20couples%20with,a%20top%20reason%20for%20arguments

Journey Beyond Wealth is an Investment Advisor registered with the State(s) of GA, TN, LA. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. This content may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

The Less-Traveled Road to Financial Freedom

Thu, 01 Jul 2021 12:00:00 GMT

Author

Chris McCall

The Fourth of July is an exciting holiday that marks the independence of our nation with the signing of the Declaration of Independence. Little known fact...did you know that the Continental Congress declared freedom from Great Britain on July 2, 1776 when it voted to approve a resolution for the colonies to be free and independent with no allegiance to Great Britain? They then had to draft a document explaining what this meant to the public and it took two days to agree on the edits.

Achieving financial freedom or independence is a goal nearly everyone has. Many associate it with having the financial means to do what you want or even retire early. In fact, the FIRE (Financial Independence, Retire Early) movement has gained popularity in recent decades sparked by the best-selling book Your Money or Your Life by Vicki Robin and Joe Dominguez. The idea here is to save the majority of your annual income, retire far earlier than the traditional retirement age of 65, and live off of small withdrawals from your savings and investments. We're going to further explore what financial freedom is, the progression to intentionally living your values, and how this can change your life and the lives of others.

What is Financial Freedom?

Some might say financial freedom is not getting financially stressed out when there is an unexpected expense while others would say it's being able to pursue items on their bucket list without financial worries. Is it a number? Try Googling "what's your retirement number" and you'll find countless articles about the importance of finding your magical retirement number. Or is financial freedom a mindset? There are many families with significant wealth who have more assets than they'll every need during their lifetime and still worry about having enough.

To fully experience financial freedom, there is a degree of financial wellbeing. Nonetheless, there's also a mindset and conviction in living an intentional life according to what you value. If you're stuck in the rat race, keeping up with the Jones's, and imprisoned by a lifestyle that is beyond your means, is that freedom? This does not seem to be a values-driven, intentional way of life. If we can be good stewards of all that we're blessed with, the real freedom is in being content in life and having the clarity and conviction to live your values.

Be a Good Steward

We all have a finite amount of resources to live our lives, and we need to have a plan for how to make the most of these resources. Even Jesus himself in the Gospel of Luke uses the metaphor of building a tower, sitting down first to count the cost of materials, and making sure there's enough money to complete the project. It would be foolish to run out of money before the building could be completed, just as it would to prematurely deplete your financial assets due to lack of planning. Good financial planning is proactive, comprehensive, and ongoing--all the way until the completion of your life.

Good stewards tend to do the following:

Live below their means
Minimize or avoid lifestyle creep after financial windfalls or increases in income
Believe financial freedom is more important than status
Keep homes and cars for a long time
Invest wisely and with discipline
Hire smart help such as financial advisors, CPAs, and attorneys

As you build financial wealth, it becomes increasingly important to gain clarity about what you value so that decisions are intentional and you're on the path to live a fulfilling life.

Become Clear About What's Important to You

If you're not careful, you can end up feeling like life is controlling you. Some describe it like running on a hamster wheel, falling into a trap of routine without intentionality. Roy E. Disney of Walt Disney once said,

"When your values are clear to you, making decisions becomes easier."

– ROY E. DISNEY OF WALT DISNEY

What do you value? I once heard a story about a women who was upset about not being able to travel because she was always taking care of her elderly mother. She was asked why she wouldn't just hire a caretaker and go travel as she wanted. She thought about it and replied that her mother has done so much for her and she wants to be the one to take care of her mom. It was a way of expressing her love and appreciation for all her mom had done for her. Once she realized this, she was able to care for her mom with a greater joy and sense of peace about delaying her dreams of travel. Her mom was more important and she knew her time was limited.

Once we know what we value and what our priorities are, we can make intentional decisions. You don't want to look back on your life and regret spending too little time with your spouse or children, not taking that family trip you always wanted to, not giving more to charity, among other things. So take action now! Give yourself some time and a quiet space to think through what's important to you. It's amazing what people do with their lives when faced with mortality. Survivors of cancer, accidents, or other traumatic events often have much greater clarity and go on to make life altering decisions. Imagine your own mortality. What changes might you consider with only so much time to live? What regrets would you have if you knew today was your last day?

Align Your Resources With Your Values

After you understand what your values and priorities are in life, compare this with how you actually spend your time and money. Management guru, Peter Drucker, once said,

"Tell me what you value and I might believe you, but show me your calendar and your bank statement, and I'll show you what you really value."

– PETER DRUCKER

Aligning your capital with your values can help you reduce or eliminate certain spending and ultimately redirect resources to what is most important to you. This helps you to live a more intentional life.

The Power of Combining Financial Freedom With Intentional Living

Imagine feeling peace of mind knowing you have a financial plan you're continuously revisiting and you're on track to meet your goals. You're content in life and you have clarity of what you value and are living intentionally. We have seen this combination of financial freedom and intentional living lead to incredible life decisions such as:

Resign from a corporate job to start a business
Spend more time with family and friends
Substantially increase charitable giving
Fund education for grandchildren

What could it mean for you? If stewardship is important to you and you try to make wise financial decisions, there's a good chance you'll achieve some level of financial freedom. Many will stop there and unfortunately miss an opportunity to really live intentionally. If you can do both, you have a real opportunity to live your best life and make the world a better place.