3rd Quarter 2017

The positive stock market continues. It is hard to worry when your portfolio rises each quarter. The longest expansion on record was 1991 to 2001—120 months.

Negative headlines often cause a market downturn but so far, investors ignore the clash with North Korea, Trump Administration’s potential trade wars, tight immigration rules that might lead to labor shortages, and the continuing gridlock in Washington.

Our economy continues to grow. The economies of the world are currently growing in lockstep, which is unusual. The dollar decline has helped improve performance of international funds. The U.S. market is considered to be overvalued and international companies undervalued.

Inflation increased slightly and wage growth is up modestly. The Fed signaled an interest rate hike by year’s end and plans on three more increases in 2018. The central banks of Europe and Japan forecast interest rate increases as well.

To put interest rates into perspective, four increases of ¼ of 1% (25 basis points) would increase the 10-year Treasury only from 2.3% to 3.3%. In March 2000, the 10-year Treasury was 6.2% and in October 2007, it was 4.7%.

We continue to anticipate a market decline but don’t know when. If you would like to review your financial plan, portfolio, or investment strategy, please don’t hesitate to contact us.

Most of us, whether young or not so young, are on websites requiring passwords. We have one or more email addresses, accounts with online companies, bank online, phones, social media, etc. Beyond the difficulty of remembering all that information, what happens if you can’t access the information and need someone to do it for you?

You can utilize a Password Manager. Set up all your accounts requiring passwords in the software. Most of them also allow you to input your credit card number, general   information, bank account number, safe/vault code, and other items. For further   information, below is a link to a Consumer Reports article.

https://www.consumerreports.org/digital-security/everything-you-need-to-know-about-password-managers/

At the office we use SplashID and 1Password.

It is important that the person you designate to handle your affairs in case you are not able to do so knows the password to access this software.

Some people write everything down and lock it in a drawer. Your designate needs the key!

There are companies that allow you to upload estate documents, instructions, photos, videos, letters to family, etc. Again, make sure the person standing in for you knows how to access it.

For Financial Connections’ clients, your portal allows you to store this information securely. We don’t replace a Password Manager, but you may upload documents and information.

Many people have difficulty tracking where their hard-earned dollars are going. But if you want to save for a house, for retirement, for a second home, or for a special vacation, for example, it is important to know how much you can afford to save.

To get you started, below are a few rules of thumb.

Pay yourself first
It is an old adage and unfortunately few people subscribe to it. With each check, transfer some money into a savings or investment account. Making an automatic transfer from your paycheck will reduce the temptation to spend it before you can write a check to savings.

Categories
You can make this information as basic or as complex as you want. We suggest you divide your overall spending into three   major categories: Fixed, Discretionary, and Savings.

Fixed Expenses
These expenses are what might be called survival expenses. They include your rent, mortgage, utilities, auto insurance, medical insurance, etc. Sometimes fixed expenses are referred to as “must spend.”

Discretionary/Lifestyle Expenses
Expenses in this category are largely your choice. They might include entertainment, vacation, or clothing. Don’t forget to track cash received at the ATM or store, which can add up quickly.

Savings
Your company retirement plan contribution is deducted directly from your paycheck. As mentioned above, you can have a transfer to your savings account made directly through payroll.

The goal is to save—whether for your emergency fund (six to nine months of expenses), or for a child’s college education (e.g., a 529 plan) or investment account. Contributing only to a 401(k) will not provide enough funds to retire for 20 or 30 years.

When you add up your fixed expenses, discretionary expenses, and savings, you should have your total outflow of money. If it is more than your take-home pay, look for ways to reduce the discretionary expenses. Going into debt is never a good idea. Or if you have a surplus, then you could be saving more.

Tips and Tools

The many tools include use of paper and pencil, simple Excel spreadsheets, apps, or software and online budget tracking. Try to find something that allows you to track your spending at the level that feels comfortable without frustrating.

For example, if you prefer to have an account for each goal, you could set up a vacation account, a monthly transfer to your Roth IRA, and so on. Use as many “buckets” as you need to continue saving.

Chances are your spending plan will not be exactly right in the beginning. Build on a base and adjust it as time goes on. Try to stay flexible since not all expenses occur in the same month; some are quarterly.

When you get a raise, pretend you didn’t. Put the additional income into a savings bucket you want to increase but splurge a little to congratulate yourself on a job well done.

Try to get in the habit of reviewing and adjusting your spending plan. Perhaps at the same time every month? What is important is the routine of tracking your spending.

If you would like a sample of basic categories, click on Sample Spending Worksheet and scroll down to Resources.

Jill recently became a Certified Professional Retirement Coach (CPRC), in a 28-unit   program that includes presenting 12 hours of Retirement Coaching Workshops.

The conference, held in Ann Arbor, MI, was interesting and very different from Jill’s usual conference. Two-thirds of the attendees were from life coaching, had PhDs in   counseling and organizational behavior, or were social workers.

Presentations ranged from Coaching Couples, Coaching Women in Transition, to Coaching Entrepreneurs, and the New Face of the Work Environment.

Jill is offering Retirement workshops for singles, couples, and groups. If you’d like to know more please call or go to: Retirement Workshops and scroll down to Retirement Coaching.

Gobankingrates.com published an article looking at a theoretical $1 million to see how long it would last, based on your state of residence. The “average” expenditures included groceries, housing, utilities, transportation, and health care.

The money lasted the longest in Mississippi—26 years, 4 months. Below are some other states.

#4       Michigan: 25 years
#24     Arizona: 23 years, 2 months
#32     Nevada: 22 years
#37     Washington: 21 years, 1 month
#43     Oregon: 17 years, 7 months
#46     Massachusetts: 17 years, 4 months
#47     New York: 17 years, 1 month
#48     Alaska: 17 years
#49     California: 16 years, 5 months
#50     Hawaii: 11 years, 11 months