Month: January 2023

There are two ways to climb a world class mountain, heavy and slow, which is laborious and time consuming, but safe, and light and fast, which is relatively easy and requires a fraction of the time, but it is extraordinarily dangerous. I’d call the former a principle for successful mountaineering, and the latter, a rare exception pursued by the reckless. Accumulating the wealth required to fund a lengthy retirement and leave a meaningful inheritance to one’s children and grandchildren isn’t easy, but it isn’t complicated, either. Only the consistent application of tested financial principles over time brings reliable success to a feat precious few Americans ever attain. Perhaps this is because we weren’t taught financial principles in school, but the deficit needn’t prevent our careful apprehension, and practice of the principles! Do more than consider the following:

• Don’t place too high a value on money or it will betray you and leave you empty and broken. It’s not the end; it’s only a means. Hold it loosely and give it generously, especially to those who can’t pay you back. Wealth building is simply the right thing to do, nothing more.

• Torch your excuses and take responsibility for your financial life. You are a distinct financial entity, and your family, a micro-economy. Your success or failure is the result of nothing more or less than the sum total of your decisions. Purpose to consistently make wise decisions, and gain the knowledge fitted to the venture.

• Climbers who don’t launch from a base of strong conditioning suffer, and often die for the mistake. The financial world is no different. Begin by building your foundation: 1) adequate emergency savings, 2) a specific schedule of payments to pre-retirement debt freedom, and 3) term life insurance sufficient to give your family opportunity to carry-on the mission in your absence.

• Maintain a strict budget to maximize net positive cash flow (net income exceeds gross expenses). This reveals your potential for investing and giving. Purpose to make prudent decisions with this critical resource.

• Invest in a primary career consistent with your talents and abilities. Work hard, place honor above gain, and advance yourself with specialization in your field. This is the bread and butter of your financial life; don’t forfeit it without deep consideration.

• Allow compounding returns to build your investment portfolio for you. This is the most important wealth building principle. Own primarily boring businesses with steady cash flows, and reinvest dividends for decades. Seldom invest in non-income-producing ventures, and require speculations to be tiny and infrequent.

• Apply the logistical trio of dollar cost averaging, diversification, and maintaining an exit plan on all non-forever holdings (from the date of purchase). The most conditioned climber in the world needs to frequently eat and drink. Feed your portfolio with automatic purchases, try to keep each holding to less than 5% of the whole, and confidently run with your winners while cutting your losers with ruthless expediency. Keep unproductive capital on the same leash you would a spastic puppy.

Financially speaking, the world consists of two types of people, wealth producers, who apply the above (and other) principles and practices, and wealth consumers, who don’t. Determine to be a wealth producer, practice the principles, and be thankful to the One from whose hand every good thing comes. Think about it. Shaun

“A wise man leaves an inheritance to his children’s children.”

~Proverbs 13:22

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.

Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities.  An investor should consider their ability to continue purchasing through fluctuating price levels.  Such a plan does not assure a profit and does not protect against loss in declining markets.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.  Diversification does not protect against market risk.

All investing includes risk including possible loss of principal.

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.

We’ve all heard the cliché “if you fail to plan, you are planning to fail”. Many former mountaineers can attribute their unnecessary demise to this simple truth. At Old Forge Wealth Management, we seek to teach investors how to apply financial principles towards effective wealth building, and then help them teach their children how to retain and grow that wealth multi-generationally. While the planning required to accomplish such high goals is noteworthy, it’s also true the consequences of failing to plan rivals those presented to negligent mountaineers, albeit in the financial realm. What are the issues and best practices of late life financial planning, and how might you improve your own family’s financial plan?

• Teach your heirs to become wealth builders (see Financial Planning Principles). Test beneficiaries with small advance gifts, use your observations as teaching opportunities, and either control distributions, or allocate small portions to gluttonous individuals. One wealth consumer can devour what it took you a lifetime to build in a few short years, and even destroy them-self in the process. Be careful not to enable this tragedy unwittingly.    

• Be a meticulous record keeper. Store an updated and comprehensive summary of your financial life (and other important documents) in a safe place, notify executors and trustees of its location, and include a brief mission statement to reiterate purpose. Feel free to request a copy of our Estate Tax Information Checklist here: Jennifer.carreiro@oldforgewealth.com.

• Have a formal plan to fund the high expense of late life care. Whether it includes payments to an unskilled healthcare provider while at home, self-funding from your large estate, payments by a Long-Term Care insurance policy or annuity, or devoted care from your loving children, have a specific plan, and share it with immediate family members.

• Name primary and contingent beneficiaries on every asset that affords it (cars and homes do not). It’s easy, free, and carries comparable legal authority to an expensive trust. Store a beneficiary list with other important documents, and update it periodically.

• Have a specific plan to fund final expenses. Whether it be pre-payment to a funeral home, a small permanent life insurance policy, or a designated portion of your estate, make sure your kids are on board, and that they don’t get stuck with the tab contrary to your wishes!

• Plan for the management of your estate in your incapacity or absence. Health proxies, POA’s, and trustees should be selected according to trustworthiness and ability over age or proximity. Make sure they understand what will be required of them and agree to it, and then incorporate them into the process early.

• Make sure there is sufficient liquidity immediately accessible to your executors and trustees at your passing, so they can manage the distribution of your estate with your money and not their own, which could greatly complicate matters. The above practices should help in this.          

I hope these practices bless your family. Shaun

“A wise man leaves an inheritance to his children’s children.”

~Proverbs 13:22

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.

Guiding principles are vital in that in any endeavor they maximize the probability of survival, even in threatening circumstances, and when consistently practiced over time, typically add success to the experience. These principles are applied positively, with actions to execute, and negatively, with mistakes to avoid. Three of my close friends started kayaking in the last couple years, and all three have already experienced dangerous capsizes; I’m not familiar with the principles of kayaking, but I hope to be before trading my crampons in for a small boat! What powerful principles can maximize the probability of your financial success, and supply wonderful things to impart to your children?

Financial planning involves having a plan, so begin by putting your goals to paper. Secondly, understand how your numerical assumptions flesh-out over time, given conservative estimates on variable factors, like Social Security, rates of return, and inflation. You are unlikely to modify your approach if you’re unaware you are off-track. Thirdly, realize financial planning is really “a way of living financially”, so don’t place too much emphasis on the goal; do apply the principles and enjoy the process. Sadly, some of the members of our Denali climbing team considered our effort a failure because we didn’t summit. The truth is we just enjoyed the grand adventure of our lives! And to the three, add these:

• Know who your Provider is and avoid placing too high a value on money, for money can “sprout wings and fly like an eagle toward heaven”.

• Have a detailed budget, including incomes and expenses. You must know the cost of running your household, and your potential for saving, investing, and giving.  

• Identify your Net Positive Cash Flow, or the extent to which net income exceeds gross expenses, and determine to appropriate this valuable resource wisely.

• Be vigilant with debt. Maintain a low debt/equity ratio. Avoid unproductive debt, especially consumer debt, and never fully retire while in debt.

• Use insurance for protection against catastrophic risks only. Avoid being “insurance poor”. Never think of insurance as an investment. Use temporary insurance to cover temporary risks (and permanent insurance to cover permanent risks). Always price shop.

• Build your financial foundation first: a) ample emergency savings, b) ample term insurance to protect your loved ones and give them a fresh start in your absence, and c) a specific plan to become debt free, including a scheduled mortgage burning party!

• Make wise investment decisions. Keep expenses low. Never miss an employer-matched contribution to a company retirement plan. Buy great businesses when they sell at reasonable prices. Avoid catastrophic losses by investing in different industries, keeping individual positions to less than 5%, never buying aggressively into a bull market peak, never capitulating near a bear market bottom, and having an exit plan on every non-forever holding.

• Start dollar cost averaging immediately, and never stop unless you have to, even in retirement. Remember, reinvesting dividends also constitutes dollar cost averaging!

• Put your affairs in order with proper estate planning. Why should only the rich enjoy the benefits of multi-generational wealth building?

In short, when the weather allows you to kayak, KAYAK! Regarding money, this means earning it, spending it, saving and investing it, holding it loosely, and giving it away freely. Teach these things to your children while they are young. Think about it, Shaun.   

“A wise man leaves an inheritance to his children’s children.” ~Proverbs 13:22

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

All investing involves risk including the possible loss of principle. No strategy assures success or protects against loss.

Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.

Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.

Asset allocation does not ensure a profit or protect against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.