The last two years have included several challenges. This has led to uncertainty about the present and concern for the future. That can create a feeling of inertia when it comes to how we think about our money. When you think about your finances, is your spending in alignment with what’s important to you? If not, you may want to think about how to change that. Doing so can help you improve your Return on Life (ROL). ROL represents an ongoing process. It can allow you to balance in-the-moment enjoyment with your family’s long-term security.
We ask clients a series of life-planning questions. These questions help them (and us) understand their priorities and identify what matters most to them.
Here are three ways that you can leverage your financial plan to find your balance and start enjoying your money more.
1. Allow yourself to spend.
Old-fashioned financial planning often emphasizes the saving and investment goals you need to reach on your way to retirement. Folks who follow this model are often focused on “hitting a number” above all other financial considerations. Often that means living more frugally and working longer than necessary.
A healthier approach might involve paying yourself first by making automatic monthly contributions into your retirement accounts, budgeting for the month’s expenses … and then having a little fun! Yes, a solid financial plan includes setting some limits and monitoring your progress. But within those boundaries, you should still have room to replace your old car, build a backyard swimming pool, or take a family vacation you’ve been putting off for too long.
As a parent, some of my fondest memories involve the regular family vacations we’ve taken and the experiences we’ve had. I wouldn’t trade them for anything. I also hope we can continue this tradition even after our children start their own families.
2. Build up reserves.
One of the golden rules of financial planning is: “Plan for what you know is coming and prepare for what you can’t see.”
To that end, we often advise our clients to create an emergency fund, ideally in a separate bank account. These are the funds you will rely on if you or your spouse suffer an unexpected job loss, if you have a sudden medical emergency, or if your home needs a repair that insurance doesn’t cover.
If you expand the potential use for these accounts, they could even cover other more positive situations that will make you appreciate having this reserve even more. For example, you may need a little extra support as you transition to a new career. It was the savings we had that allowed me to launch Apprise from scratch. Your reserve funds could also help if you decide to retire early and need to pay health care premiums before you’re eligible for Medicare at age 65.
Your reserves should be able to cover 3-6 months of living expenses. Setting a long-term goal and filling that bucket with a year’s worth of salary can provide real peace of mind, especially once you retire.
3. Prioritize.
If you have the resources to improve your Return on Life now but you don’t feel free to enjoy yourself more, you might need to reassess your relationship to your money.
One topic we discuss with our clients is, “What is your money for?” The ultimate purpose of money isn’t to keep earning more of it. Your money is supposed to be a vehicle that helps take you from where you are right now to where you want to be. And, hopefully, along the way, you use your money to take some pitstops where you can enjoy the sites, people, and activities that make your life worthwhile. Too many people who wait for “the right time” to enjoy the rewards of a lifetime of hard work find that “the right time” never comes.
Are you having trouble connecting your time and your money to your top priorities? Schedule a call. Let’s start planning to make every stage of your life as fulfilling as possible.
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This week’s first article takes a look at the impact of war on stocks.
Here are the links to this week’s articles as well as a brief description of each:
1. Stock Market Returns Following Military Conflicts.
Earlier this week, I posted an email I sent to clients discussing the market’s recent activity on the Apprise website. This article includes a table of market “shock” events and the S&P 500’s move over the next day, as well as three, six, nine, and 12 months. It also shows the total drawdown, the number of calendar days it took for the market to bottom, and how long it took to recover.
2. Best and Worst States to Retire in 2022: WalletHub.
It’s often not easy to decide where to live when you retire. Based on this research by Wallet Hub, Florida, Virginia, and Colorado are the top three states to retire in 2022. They used three criteria to reach this conclusion: affordability, quality of life, and health care. They evaluated these criteria using 47 relevant metrics. Check out the article to learn more. This video blog also shares some tips that can help you decide where to live when you retire.
3. Berkshire Hathaway Annual Letter.
Many value investors eagerly await the release of Berkshire Hathaway’s annual letter. It provides Warren Buffett’s thoughts about the markets, investing, and his company. The letter comes out as part of Berkshire’s annual report on the last Saturday in February. This timing allows investors time to digest the company’s performance while markets are closed. Over time, the letter has gotten shorter, but it still includes some pearls of wisdom. This post provides the letter’s highlights. It also includes a summary of the company’s historical share repurchase activity.
4. New Study of 1 Million People: Happiness Makes You Dramatically More Successful.
Would you like to dramatically increase your success at work? According to the research cited in this article, those soldiers who were initially the happiest won four times as many awards as those who were un-happiest to start. It also says that our genes help determine how happy we are. Some are wired for gloom. Others for smiles. But that doesn’t mean we can’t take steps to make ourselves happier. We can move around more, get outside, help others, spend time with friends, and practice gratitude. The article states, “The science is now pretty definitive: Being happier will make you more successful.”
5. 4 Ways to Spend Your Retirement Savings — And Make Sure It Lasts.
What could be harder than saving money for retirement? For many, spending that money – and ensuring it lasts through old age – can be even harder. Why? Consider the unknowns: how long you’ll live; how much will healthcare cost; will you need long-term care; what level of returns will stocks and bonds provide? The article shares some suggestions that can help. The suggestions center on flexibility. In other words, be willing to adjust your spending based on what happens. Financial plans are meant to be flexible – they should be updated – periodically. Actual results can differ from the projections in your plan.
Please note that effective with my next blog I will be changing the schedule for my weekly blog. You will begin receiving my blog in your inbox on Tuesdays rather than Fridays. That means you won’t receive a blog in your inbox again until Tuesday March 15.
Our practice continues to benefit from referrals from our clients and friends. Thank you for your trust and confidence.
We hope you find the above posts valuable. Please complete our contact form if you would like to talk to us about financial topics, including your investments, creating a financial plan, saving for college, or saving for retirement. We will be in touch. You can also schedule a call or a virtual meeting via Zoom.
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For firm disclosures, see here: https://apprisewealth.com/disclosures/
Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.
