Investment Behavior | Confident. Returns.

Using The Money Management Tool: Connecting Accounts

By Michael Lecours, CFP June 24, 2016 In Investment Behavior, Investment Strategies, Personal Development, Rule of Thumb, Uncategorized

Recently we introduced The Money Management Tool to help clients better organize their financial lives. The tool has lots of features and we will occasional explain how some of the features are being used by our clients (or should be used) to help them reach their financial goals.

This post will deal with a prospective client who has many accounts and struggles to keep track of where they are located.

Situation: A prospective client approached us looking for help managing his investments. He had about 10 different accounts – multiple checking and savings accounts and a several different retirement accounts from current and previous employers. These accounts were held with several different financial organizations.

Problem: He struggled to keep track of all the accounts. He was constantly forgetting passwords used to view his balances online. He was spending hours trying to stay organized and reading the statements. The inconvenience grew to the point where he just ignored his accounts.

Solution: The Money Management Tool could be used to connect all the accounts together. After establishing the connections between the tool and his accounts, he would be able to see daily account balances for all the accounts from a single account. No more trying to remember multiple passwords or trying to read different statements each month.

If you or someone you know needs help getting their financial house in order, this tool can help.

Contact us today to get started.

Is Retirement Savings Being Crowded Out by Student Debt?

By Michael Lecours, CFP June 21, 2016 In Finding Confidence, Investment Behavior, Saving for College, Student Loans, Uncategorized

A recent study conducted by HelloWallet suggests that a dollar of student loan debt is associated with a 35-cent decrease in retirement account balances! That means, investors with lots of student loans are unable to save as much for retirement.

This is a big problem on a large scale:

60% of college graduates take on some form of student loan.
The average loan size has tripled over two decades form $9,400 to $27,300
There is more student loan debt than credit card debt.

You can read the study here

I take issue with this study in several areas:

The study assumes that people have a given number of dollars available and must split it between debt repayment and saving for retirement. In reality, I am seeing many people make significant sacrifices in their lifestyle in order to stay on top of their debts and retirement planning. People are living at home longer, avoiding more debt by not buying a house, or living a more modest lifestyle.
People I see coming out of college with significant levels of debt are going through a crash course in personal finance much faster than those with no student loans. They are experiencing a wake-up call in their 20s and 30s as opposed to their 40’s or 50’s. Smart financial habits that they develop now could lead them to a more prosperous future.
I’m working with many families on a more complicated dilemma. Not only do they need to weigh existing student loan debts and saving for retirement, but they also struggle to save for their own children’s education.

The final issue I take with this study is a line repeated multiple times: “There are few widely available tools to help individuals decide whether to prioritize student loan repayments or retirement savings.” In reality, there are lots of tools available to help people analyze that question, such as a Certified Financial Planner™ professional.

Do It Yourself Investors May Be Hurting Themselves Without Knowing It

By Michael Lecours, CFP June 10, 2016 In Investment Behavior, Rule of Thumb, Uncategorized

The last time I changed the oil on my car, I inadvertently drained the power steering fluid thinking it was engine oil. Then I added engine oil and thought I was all set. I proceeded to drive a car around town with no steering fluid and twice as much engine oil as I should have. It didn’t take long before I realized I really screwed up my car. It was an expensive mistake but I learned that maintaining my car should be done by the experts.

This same concept applies to investing as well. These two articles capture some of the biggest issues we come across when we talk with prospective clients:

Financial Illiteracy May Have Cost Investors 200 Billion Over 20 Years

20 Common Investing Mistakes

15 Mistakes People Make In Retirement

By Michael Lecours, CFP May 10, 2016 In Investment Behavior, Retirement, Rule of Thumb, Uncategorized

Mistakes in retirement can be costly and unfortunately very common. Money magazine’s recent article captures 15 examples.

While I have seen every one of these 15 mistakes actually happen, the most common issue I’ve seen this year is Number 7 on the list: Not knowing how much to withdraw.

This has become more pronounced as a result of the flat market. Investors who saw an 8-10% rate of return on their account could take out about 8-10% each year and end up with an account balance close to what it was at the start of the year. But with the markets flat to down slightly, investors who continue to take out 8-10% each year are seeing their account down by that amount.

The general rule of thumb is to take 4% per year. Take out more on a regular basis and you run the risk of depleting the account.

The Experts And Their Conflicting Predictions

By Michael Lecours, CFP February 9, 2016 In Economy, Finding Confidence, Investment Behavior, Uncategorized

It’s become comical to see and watch the supposed experts lay out such convincing rationales explaining what the future holds. In the reading of the tea leaves, some are seeing some pretty dark days ahead, while others think all of the market volatility is a normal correction. This became especially clear when I recently attended the InsideETF conference in Florida. None of the economists and experts were wishy-washy – They were either very bullish or very bearish. Their charts and arguments were very strong and they would even take shots at each other to try to poke holes in their arguments. It was like watching a presidential debate!

The final speaker, Liz Ann Sonders of Schwab, put up a chart that really stood out to me:

Liz asked “Have investors ever felt thrilled or Euphoric about the performance of the market at any point since the depths of the 2008 and 2009 recession? The answer is “No”. Despite some pretty impressive rates of return, investors have remained in the Hope and Optimism stage (maybe excitement). Every time the market corrects, investors are quick to move to safety. That’s a good thing! When the market becomes so hot that investors expect it to go up, then a problem is about to occur.

If you want to read the rest of her points, here is a good summary