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August is National Wellness Month, an entire month where we can focus on self-care, managing stress and promoting healthy routines on our way to a lifetime of wellness. And while we all intuitively know that simple, daily actions can have a big impact on our health, sometimes a few reminders can prove helpful.
For example, we know that we should:
But one of the most important financial journeys we can take is the path to financial wellness. Building financial security and independence, while certainly important, makes up only one slice of the whole financial wellness pie. Financial wellness also incorporates the ways that wealth and income affect our emotional and physical well-being.
The journey to financial wellness is far different than the path to becoming rich. But achieving financial wellness cannot be done in a vacuum, as it requires developing a degree of emotional and physical wellness as well.
Searching for one inherently will expand to a search for all three. And we should remember that the journey does not really have a final destination – and it’s one that too few people choose to make.
If you are considering a journey to financial wellness, here are a few suggestions to help:
1. Remember, it’s your journey.
It doesn't work to follow the path to financial wellness because a spouse, parent, friend or financial planner recommends it. If your motivation is a should or an ought, you might as well save yourself a lot of frustration and pain by stopping before the journey starts.
2. Don’t attempt to guilt, shame or manipulate anyone else to come along with you on the journey.
We can’t find financial wellness for anyone else but ourselves. We certainly can join with others for mutual support and learning along the way, but all those on the path need to be there for themselves regardless of whether others are on it.
3. Be prepared for the naysayers.
Not everyone in your life is going to support your quest for financial wellness. Many will try to convince to stop before you start or to turn back once you’ve begun. Often, the closer a person is to you and the more dependent they are on your financial choices, the more threatening your journey may be to them and the more they will resist you changing.
4. Lower your expectations of how quickly your attitudes and behaviors around money and finances will change.
Chances are it has taken you a lifetime to get to where you are with your relationship with money. Unlike the journey that Ebenezer Scrooge took to financial wellness, your relationship won’t be miraculously transformed overnight.
5. In the early stages of your journey, resist the urge to substitute getting more practical and logical information about money and finances instead of looking at the emotions and feelings you have around money.
Most of the journey to financial wellness is not about the money. It’s about the thoughts, beliefs and emotions you have about money and wealth.
6. Find one or more trusted guides to help you along the journey.
Seek out those who are traveling the path ahead of you and who appear to practice at least some of the financial wellness you want. Learn from their missteps. Benefit from their experience and wisdom.
7. Open yourself to new awareness and knowledge.
Be prepared to let go of your most deeply held “truths” about money. The more stubbornly we cling to strong beliefs about how systems work, or people function around money, the more likely that those beliefs are not serving us well.
8. Be gentle with yourself when you get off the main path and need to retrace your steps.
Everyone on the journey to financial wellness takes wrong turns. Mistakes and dead ends are inevitable and are not failures. They are opportunities to learn, to make course corrections and to continue your journey.
It is said that small, daily acts of self-care can lead to a lifetime of wellness. The same is true as you seek financial wellness.
When a company announces bankruptcy, employees usually lose their jobs and benefits. But what happens to former employees who were promised pensions or other benefits?
Well, a federal judge ruled that the Westmoreland Coal Company – one of the largest coal companies in the country – could end the health benefits for its former miners and families. And the decision has many retirees worried about their own health care and pensions. And rightly so.
Defined benefit pensions, long on the decline, continue to disappear. In fact, according to the Department of Labor, since 1983 US companies have eliminated over 125,000 defined benefit plans.
If you are in one of these traditional pensions, odds are that, sooner or later, you won’t be.
With traditional plans, called defined benefit, employees don’t contribute and companies put away the money for retirees to draw on. Under defined benefit plans, you get paid a specified amount, usually monthly, calculated based on your final salary and your years of service. The onus is on the employer to keep the plan funded, even though the amount needed is fluid and unpredictable, which is one big reason for companies to abandon them.
Why are company pensions evaporating? Partly because the Pension Protection Act of 2006 established new accounting rules under which companies with pension plans must recognize their plans’ funded status on their balance sheets each year.
Since analysts and investors scrutinize those balance sheets and lots of pension plans are underfunded, companies decided to take action - because underfunded plans constitute a corporate finance headache.
According to a Towers Watson survey, many companies with pension plans are trying to limit the effect of those plans on their financial statements and cash flows, as well as trying to reduce the overall cost of their plans. And to do that many are simply ditching their plans and giving employees lump sums.
Here’s what to know about your options.
Why should you object to a wad of retirement cash all at once? Lump sums make sense if you expect to die soon without a surviving spouse who will need lifetime income. They also work if you already have another secure source of retirement income or are trained in handling such amounts of money at once.
In many other cases, accepting a lump sum payout rather than income from a pension may significantly affect your retirement funding unless you take proper steps.
Tips to consider:
As you might after any large windfall, plan with a good financial advisor.
While pension plans are heading toward the same fate as the Dodo bird, your retirement benefits don’t have to.
After the Great Recession from 2007 to 2009 hit, far too many Americans found themselves without any savings to get through the hardships of unemployment, falling house prices, dwindling 401(k)s and increased financial anxieties. Don’t let this happen to you.
Getting into some simple saving habits now can really help you down the line. Social Security and unemployment checks are a lifeline to many, but usually not enough to maintain a decent living standard. The rule of thumb for emergency savings is three to six months’ worth of living expenses.
In light of our current economic slump, most financial advisors will tell clients to save even more – at least six to 12 months of expenses. One way to do this is to set up an automatic deduction program through your employer or through your bank.
You can set up a program that transfers a certain amount from your checking account to your savings. Once established, you can change it, but you probably won’t because we are all busy and it’s easier to keep things as they are. Also, once you learn to plan your finances around the remainder of your paycheck not transferred into savings, you won’t miss the money you saved.
You can also start an automatic increase if you get a raise. This simple strategy is also helpful when saving toward any goal, such as retirement.
With a 401(k) or similar program, you can automatically put money away, sometimes with an employer matching contribution.
The government uses this system by withholding taxes. It takes taxes from your paycheck, and you live on the remainder. If you pay into your retirement fund automatically, you can save without feeling that pinch of dread when you pay monthly bills.
Write down how much you want to save every month. It helps if you also tell someone about your goal. These two steps greatly increase the likelihood that you will achieve your goal. When you have a set goal and a partner to hold you to it, you stay more focused and are less likely to spend money on things that you don’t need.
When on a dubious shopping spree, for example, ask yourself, “Is this purchase going to help me or hurt me?” Americans often boast that they are number one in lots of things, but saving the money that we earn would probably be our worst event at the Olympics. American households save only about 4% of their disposable incomes, far less than other developed countries and far less than we should.
We are far better at spending money that we haven’t earned yet. The same lack of fiscal probity is evident on the national level. Our national debt is over $30 trillion – which is more than $91,000 per citizen and almost $250,000 per taxpayer!
If there is a silver lining to the black cloud of the Great Recession from more than 15 years ago, it is that it helped Americans to be more thrifty, put off gratification and think more about the long-term financial health of their family and community.
People were forced to decline needless, unwise purchases because they didn’t have the access to credit they had before. As a result, Americans were paring down debts and saving more money.
Let’s get back to that. Before the next recession hits.
Saint Agnes Men's Club is a dynamic group of philanthropic men, whose fundraising efforts have benefited the Medical Center and its special programs since 1983. Since its inception, Saint Agnes Men's Club members have generated more than $3.8 million to support Saint Agnes patient care services and community outreach programs.
Since 1929, Saint Agnes Medical Center has been known for delivering high quality, compassionate care to meet Central California’s growing and diverse health care needs.
Each dollar raised goes to support many Saint Agnes programs and services that benefit our community. Some include (but not limited to):
Strong Valley was pleased to support the recent Saint Agnes Men’s Club Golf Tournament fundraiser by sponsoring a hole for the longest drive. It was a great time for all as well as a successful source of finances for a very worthy organization.
“Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.
The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and are weighing on global economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1‑1/2 to 1-3/4 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.”
From the Federal Reserve press release dated June 15, 2022.
This rate hike – as the previous hike earlier this year – was one of the most predictable and predicted rate movement the markets have ever seen. What was not predicted until recently, however, was the magnitude of the rate hike.
Yet while the markets and traders were expecting this hike, the announcement did contribute to the DJIA, NASDAQ and the S&P 500 all rallying by more than 1%. But within a few hours after markets closed, the futures market suggested that those gains would be wiped out the following day.
Keep in mind that’s only one trading day and one futures “night” – long-term investors should think about the risk that the Fed continues moving rates higher and faster than expected throughout 2022, because then we could see some longer-term challenges for the stock market and consumers. And higher rates are all but certain to happen for the remainder of the year. The magnitude, however, depends on a number of factors.
“Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common,” said Fed Chair Jerome Powell. And Powell also said that decisions will be made “meeting by meeting.”
Interestingly, as of the day after the Fed’s historic announcement, Wall Street assigned a probability of more than 80% that the Fed would raise rates by another 75 basis points at their next meeting at the end of July.
So, will there be implications of this announcement? Sure. But enough to make most investors change allocations or courses of action? Maybe. Maybe not.
The most important tool available to the Fed is its ability to set the federal funds rate, or the prime interest rate. This is the interest paid by banks to borrow money from the Federal Reserve Bank. Interest is, basically, the cost to the banks of borrowing someone else’s money. The banks will pass on this cost to their own borrowers.
Increasing the federal funds rate reduces the supply of money by making it more expensive to obtain. Reducing the amount of money in circulation, by decreasing consumer and business spending, helps to reduce inflation.
Any increased expense for banks to borrow money has a ripple effect, which influences both individuals and businesses in their costs and plans.
These broad interactions can play out in numerous ways.
This one is a bit trickier because intuitively stock prices should decrease when investors see companies reduce growth spending or make less profit. The reality, however, is that the Fed typically won’t raise rates unless they deem the economy healthy enough to withstand what should – at least in textbooks – slow the economy. But the reality is that stocks often do well in the year following an initial rate hike. But after multiple and large rate hikes in the same year? Much tougher to predict.
If the stock market declines, investors tend to view the risk of stock investments as outweighing the rewards and they will often move toward the safer bonds and Treasury bills. As a result, bond interest rates will rise, and investors will likely earn more from bonds.
Obviously, many factors affect activity in various parts of the economy. A change in interest rates, although important, is just one of those factors.
Call us if you have questions or want to discuss additional repercussions that this Fed rate increase will likely have.
Waking up early in the morning before the sun is up and heading to the gym comes hard. Once your workout ends, though, you often begin the day with the payoff of a tremendous energy boost. Can the same process apply to your finances?
If you’re like most people, you exercise for many reasons but expect to benefit from your sweat equity in the future, not in the current moment. We will all encounter health issues at some time and the medical world assures us that we’ll deal better with problems if we get – and stay – physically fit. Preparation matters.
What does exercise have in common with financial planning and investing? The answer: Very few individuals prepare to invest, except maybe when selecting from choices in a retirement plan.
Or not: Studies showed that even in the teeth of the Great Recession and perhaps the most volatile market year in history – most 401(k) retirement plan participants made no changes to their contributions.
Getting back to the fitness analogy, exercise’s greatest benefits come from the stress we intentionally place on our muscles so that when a health problem arises, our bodies are in better condition to deal with the situation. Regarding investments, you need a methodical (and regularly visited) regimen for taking in and processing market data. You also need a strategy to accommodate unforeseen yet inevitable future events, such as market downturns.
Don’t let random financial news clips guide your decisions. Filter out market noise when determining how to act. For the record, you need not re-allocate asset classes or otherwise change your portfolio just because something in the market changed. You do need to be prepared to consider adjustments when the information dictates that conditions shifted, such as stocks increasing to a higher portion of your portfolio than you want.
Financial advisors call this as an investment policy statement. Or you might prefer the term “investment playbook.” The playbook outlines your holdings and specifies how you intend to respond to change with a disciplined approach aimed at particular objectives – as opposed to the usually heated emotions most of us feel in a suddenly rough market.
How are your holdings doing against benchmarks such as the Standard & Poor’s 500 Index? At specifically what point will market shifts make you re-allocate percentages of stocks and bonds in your portfolio?
Your playbook also describes what you’re trying to achieve as an investor – pay for retirement or for college tuition, for example – and how you’ll react to market changes. You might plan to sell or buy only if the S&P 500 hits a certain number or invest in oil if the cost per barrel drops to a pre-set price. A well-designed playbook keeps you from panicky decisions or from freezing up during Wall Street roller coasters.
Your playbook needs to clearly document your investment information sources, the technology involved in your investing and why you bought a particular investment.
Remember: Great stock or mutual fund opportunities may arise and shimmer, but if they don’t match your playbook, you pass.
At the gym, you can wander among the clanking weights or plan exactly how to invest your energy. You know which method works better.
Investing is no different.
Talking with a financial advisor can help you get into a consistent financial fitness plan for your unique situation.
Sometimes we forget just how fragile a nest egg can be.
When the economy tanked in 2008, retirees watched in horror as U.S. markets suffered historic losses. The Dow declined by more than 50%, its biggest drop since the Great Depression of 1929.
The oldest Baby Boomers, who were closing in on retirement age just as things were at their worst, watched as their nest eggs cracked wide open and lost thousands of dollars – in some cases hundreds of thousands.
Most were left with two choices: Either keep working past the age they'd planned to retire (Boomers started turning 65 in 2011) or retire with a lifestyle that was substantially downsized from what they once had envisioned.
Under both scenarios, they could struggle to piece back together the plans they once had. But we all know how that goes. Time was not on their side.
Pre-retirement is one of the worst times to experience significant market loss, because there is often little time left for recovery. You need that nest egg you accumulated to generate income when the paychecks stop. If it shrinks, so will the amount of income you'll get.
That's why financial professionals talk so much about volatility and why you should start pulling back from risk as you get older. The markets will always move up and down. And given today's uncertainty -- both domestic and worldwide -- some loss seems almost unavoidable.
But there are distribution strategies that can help give you an edge in overcoming a loss.
For the average retiree, one way to help distribute retirement income is not by putting hope in the market, but by using an actuarial-designed product, such as an annuity. With an annuity, distribution amounts are, in large part, calculated based on your age and life expectancy; the older you are, the more you get paid.
Let's say you know a 70-year-old man who had a portfolio worth $500,000. He expected to generate about 3% in retirement income – about $15,000 per year.
But then he suffered through a serious market downturn, and his $500,000 portfolio was reduced to $300,000. At that 3% withdrawal rate, his annual income would decline drastically. In order to replicate the $15,000 per year he planned to pull from his portfolio, he would need to invest aggressively – meaning more risk and a greater chance of losing even more money.
Now, instead, let's say your friend purchased an immediate annuity with an A+ rated carrier. With a deposit of $209,375, he could generate the $15,000 per year in lifetime income he'd originally planned on. His purchase would be converted into regular payments that would last as long he lives. His annuity would guarantee him a 7.2% return, which could help reduce his fear of running out of money in retirement.*
Using an annuity to distribute income is a way to overcome market losses -- or to avoid them altogether. And it can offer you the confidence that you will be able to enjoy your well-earned retirement through protection of the principal and regular income streams.
It is important to remember annuities do have surrender charges, making them a non-liquid asset. Additionally, annuities do have fees and can limit your ability to participate in market gains, even with products such as fixed index annuities. However, some retirees enjoy the comfort of the steady income and the protection benefits offered by annuities.
Most traditional immediate annuities are pretty straightforward once you've made the purchase. But you'll definitely want to work with a financial professional to lock down what's an appropriate product for you, and to review any changes to your goals or financial situation as you age.
*Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.
These are hypothetical examples provided for illustrative purposes only; it does not represent a real-life scenario, and should not be construed as advice designed to meet the particular needs of an individual's situation.
It's important for you to talk to your financial advisor to discuss your specific circumstances and goals.
Through the support of nearly 1 million members, Ducks Unlimited is the largest non-profit wetlands conservation organization in the world!
For 85 years, DU has conserved, restored, and managed over 15 million acres of wetlands in North America, conserving nearly 800,000 acres in California alone. Strong Valley was a proud sponsor of the recent fundraiser dinner for Fresno Ducks Unlimited. $0.83 of every $1 raised goes directly back into conservation!
