What lessons will you take from this?

So much is unknown.

Do we reopen or wait?

Are we past the peak? Or just over the first summit of a mountain range?

Are we safe yet?

After weeks of restrictions, it’s easy to feel that we’re swirling in a maelstrom of uncertainty, helpless to make decisions when so much remains unknown and out of our control.

The uncertainty, the personal losses many have experienced, and the everyday challenges of socially distant life can shake our foundation and cause us to lose touch with what’s most important.

I think that’s normal. We’ve traded a trip on the highway for an off-roading adventure. And we don’t know where it’s going to take us this year.

So let’s lean into the uncertainty. Let’s embrace it and use it as a wake-up call to explore and appreciate what really matters.

Our health. Our family, friends, and loved ones. Our home. Our community. Our compassion and creativity. Our resilience as human beings.

As for me, I have some moments of frustration, but I’m staying grounded by playing outside with our kids and working in the yard.

I’m also learning a lot about myself. I’ve learned that I really enjoy sitting face-to-face in the same room with clients, friends, and colleagues. I’ve learned that I’m not “camera ready” for Zoom meetings nor remote TV interviews, but I’m humbly trying to get better.

I’m working on gratitude and enjoying simple things like dinner-time conversations, our weekly visit with my parents, and fresh air.

I’m grateful to have a wonderful family, a comfortable home (aka The Bunker) and deeply meaningful work.

I’m grateful to have you.

On the professional side, I’m focused on what we can control on our clients’ behalf and staying abreast of what might come next. Our mantra right now is: “one day at a time.”

How are you? I’d love to hear how you are coping. What lessons are you learning about yourself? What have you had the courage to try for the first time? Hit “reply” and let me know.

This pandemic is scary. But it’s also a once-in-a-lifetime chance to hit the “reset” button and connect with the creativity, joy, and good old human ingenuity that can flourish within the limitations of pandemic life.

Eventually, we’ll recover from the pandemic. It’s not clear yet what that will look like, and we’ll likely see more hard days before we get there. Businesses will reopen, people will go back to work, the recession will pass, and the country will rebuild.

We will heal. But some marks will remain as reminders of our experience.

The Great Depression taught people to clip coupons and “make do or go without.” 9/11 upended our travel rituals and awareness of terrorism.

Some lessons from the pandemic will stay with us long after the immediate crisis fades. Some will be unconscious; maybe we’ll become a society of dutiful hand washers and social distancers.

Others will be lessons we consciously take with us about our values and ability to adapt to circumstances far beyond our control.

I’m hopeful and excited to see what we learn. Let’s make it good.

How has the pandemic changed your perspective? What new values and priorities will you bring out of your experiences?  Email me at chrismullis@nstarcapital.com and let me know.

Be well,
Chris

 

Chris Mullis, Ph.D.
Founding Partner
NorthStar Capital AdvisorsFinancial Planning.
Wealth Management.
Since 2006

AskNorthStar.com
(704) 350-5028


P.S. Do you know someone who is having a hard time and could use some financial advice? We’re holding a few spots open for folks who could use a professional’s help. If you can think of someone, please reply to this email or call (704) 350-5028 to let me know.

P.P.S. And don’t forget about our special COVID-19 pro bono planning we created to support individuals and families who can’t afford fiduciary advice and financial planning.

V, W, L, or Swoosh? (no, it’s not a meme)
Everyone you and I have ever met has been affected by the coronavirus.

My childhood friends in Charlotte, strongman Kristofer Hivju, and the folks I met in Lesotho, Africa.

And it’s Day #18 in the hospital for my father-in-law fighting the disease. He’s now in a federal field hospital and hopefully coming home very soon.

It’s likely that every human on the planet has been affected by COVID-19.

I’m not sure that this kind of event has ever happened before in human history.

Though it’s sad that it took a disease to bring us together, it reminds me of how deeply connected we all are and how much our daily existence depends not just on our community, but on people we’ll never meet in far-flung corners of the world.

That very interconnectedness is what’s making this pandemic so dangerous to us and the economy.

Economists believe we entered a recession in March, and the latest data continues to show the economic damage:1

  • Retail sales dropped 8.7%, the biggest drop since the government started tracking the data in 1992.2
  • Spending on travel, restaurants, and shopping overall is way down (though grocery sales and delivery are up).3
  • The number of new unemployment claims skyrocketed to 22 million, erasing the job gains since June 2009.4

Despite the ugly economic data, stocks just wrapped their best performance in decades.5 What gives?

“Irrational exuberance,” to quote Alan Greenspan. Stocks are famous for rallying in the face of bad numbers, and it’s clear that investors are expecting government stimulus to lead to a quick recovery as states emerge from lockdown and business picks up.

Are bullish investors right? Will the economy recover quickly?

It’s impossible to say right now. How long the downturn lasts and how soon the economy recovers depend on answers to some critical questions:

  • When will widespread testing, tracing, and treatment allow lockdowns to ease? Reopening America too soon and igniting a fresh wave of the pandemic will prolong the pain.
  • Will employers maintain relationships with their laid-off staff? You can’t just flip a switch and reopen a closed business without skilled workers. The longer the shutdowns continue, the harder it will be for companies to staff up.
  • How soon will consumer spending return? “Deferred” demand that’s pent up and just waiting for restrictions to ease could cause spending to surge; “destroyed” demand that’s not coming back could cause spending to remain depressed for longer. Here’s a simple example: deferred demand would be rescheduling a canceled vacation. Destroyed demand would be deciding to skip it entirely.

V, W, L, or Swoosh?

The “shape” of the eventual recovery is being hotly debated because it gives us insight into what would need to happen (and how long it could take).6

“V-Shaped” Recovery: A short, sharp decline and then a quick rebound is the best-case scenario. In this case, lockdowns lift soon and spending surges, driven by pent-up demand and government stimulus.

“W-Shaped” Recovery: A “double-dip recession” is a worst-case scenario that could happen if the easing of restrictions leads to another wave of infections and lockdowns, or the economic damage causes a second downturn.

“L-Shaped” Recovery: An L represents a sudden plunge and fitful recovery if lockdowns continue through the year and growth is slow to return.

“Swoosh-Shaped” Recovery: A tick or swoosh is a sharp downturn followed by a gradual recovery as lockdowns are eased cautiously across the country.

We can’t predict what the road ahead will hold, but I think it’ll look less like a return to “normal” and more like a way to live with the way COVID-19 has overturned ordinary life.

What do you think? Will your life be back to normal this summer? Will we be riding waves in the warm Atlantic Ocean and romping down the Appalachian Trail relatively soon?

Be well,
Chris

 

Chris Mullis, Ph.D.
Founding Partner
NorthStar Capital Advisors

Financial Planning.
Wealth Management.
Since 2006

AskNorthStar.com
(704) 350-5028


P.S. Now that stimulus money is going out, the scam artists are slithering out to get their piece. Here’s what you need to know:

  • Scammers are impersonating the IRS and contacting folks by mail, email, phone, and text to ask for personal information.
  • The IRS is not contacting taxpayers about stimulus checks. If you receive a call from someone asking for information, hang up. Do not click links in emails or text messages purporting to be from the IRS or the Treasury Department. If someone asks you to pay an upfront fee or to confirm your bank details to receive stimulus money, it’s definitely a scam. Contact your bank or our office at (704) 350-5028 if you’re not sure.
  • Please share this information with those you love, especially parents, grandparents, and elders who may be at higher risk of being victimized.

1https://www.cnbc.com/2020/04/15/us-retail-sales-march-2020.html

2https://www.msn.com/en-us/money/markets/coronavirus-delivers-record-blow-to-u-s-retail-sales-in-march/ar-BB12FaEi

3https://www.nytimes.com/interactive/2020/04/11/business/economy/coronavirus-us-economy-spending.html

4https://finance.yahoo.com/news/coronavirus-covid-weekly-initial-jobless-claims-april-11-192401571.html

5https://www.wsj.com/articles/the-stock-market-is-ignoring-the-economy-11587160802

6https://www.weforum.org/agenda/2020/04/alphabet-soup-how-will-post-virus-economic-recovery-shape-up/
Practical advice (and Frodo’s lesson)
Nerd alert ahead. Practical tips to follow.

I think it’s safe to say that 2020 is not turning out like any of us expected or hoped. When difficult times are upon us, it’s the most human thing of all to wish it had all happened differently (or to someone else).

There’s a quote from the last Mullis family movie night that sums up the feeling pretty well.

In Tolkien’s The Lord of the Rings, Frodo (the unlikely hero) must lead a small group to overcome an extraordinary threat to the world (sound familiar?).

When he despairs of the dangerous journey ahead of him, Gandalf (the wise wizard) responds with a valuable lesson:

“I wish it need not have happened in my time,” said Frodo. “So do I,” said Gandalf, “and so do all who live to see such times. But that is not for them to decide. All we have to decide is what to do with the time that is given us.”


Click to view
I feel like Frodo some days. Wishing I didn’t live in such times. Do you?

But here we are. All we can do is decide what to do with what we can control.

We are in uncharted waters and it’s increasingly clear that this is an economic downturn that could rival the Great Recession in its severity.

I don’t say this to be alarmist, but to share the information we’re using to plan for our clients and help you use it effectively. The labor market is giving us a near real-time view of how the coronavirus is affecting the economy, and we can see that more disruption is likely as businesses lay off workers.


Behind each point in this chart are actual people who have lost their jobs or seen their income cut dramatically. Like the folks at The Crunkleton who make the best Old Fashioned in Charlotte, and the owner of the lovely hotel we stay at in Honolulu when we visit old friends in Hawai’i, and the workers on the production line at Carrier Corp. manufacturing heating and air conditioning equipment here in Charlotte.

They’re all real people facing income shortfalls and dreams deferred. While the shutdown is necessary to stem the tide of infection, it’s really going to hurt.

Fortunately, there are signs that coronavirus-related legislation (like the CARES Act) will help blunt the worst effects by giving support where it’s needed. And I think it’s likely that further aid will follow once policymakers see the depth and breadth of the economic damage.1

Now on to the practical advice you can use (and share) right now.

More layoffs and furloughs are coming. If you think you might lose your job or face a reduction in income in your family, let’s plan ahead for it and revisit your emergency funds and cash flow. The CARES Act opened up some additional options that we can discuss together.

RMDs have been waived for 2020. If you don’t need the cash this year, consider skipping the distribution or turning it into a Roth Conversion. If you already took some or all of your 2020 RMD after February 1st, you may be able to return it to your account as a rollover through July 15th (as long as you didn’t complete another rollover within the last 12 months).2 There’s some fine print to this, so please reach out if you’d like guidance.

Tax and IRA contribution deadlines have been extended to July 15th. The IRS extended the 2019 tax filing deadline for any taxpayer who had to file by April 15th. The extension also covers 2019 IRA contributions.3 Very important: if you’ll be making a last-minute 2019 contribution on your own, make sure the check or deposit is clearly marked 2019 to avoid an administrative error.

Stimulus checks will start arriving soon. If you had direct deposit information on your last tax filing, the IRS should send your check to your account. If you didn’t (or the account is closed), the check would go to the address the IRS has on file for you.

Small business owners should act fast on loans. The Paycheck Protection Program is offering forgivable, collateral-free loans through June 30, but the money is going quickly. SBA Express Loans and Economic Injury Disaster Loans are also options to consider.4 Though it’s not yet clear how long it will take to actually receive the loan funds, it’s smart to get your paperwork together and file quickly. Please reach out if you need help reviewing your options.

Some student loans can be deferred. Under the CARES Act, no payments are due on federally held loans through September 30th, and no interest will accrue. Unfortunately, private student loans (or those held by a lender other than the Department of Education) are not currently eligible.5 Very important: we’re seeing mixed information on whether payments will pause automatically, so check in with your servicer.

You could get more from Medicare. Medicare has made some important updates to its coverage due to the crisis. Telehealth benefits are expanded, so you may be able to see your doctors over the phone or online. Many plans have relaxed their definition of “in-network” providers, so it’s worth checking with your plan. Part D recipients can now request 90-day supplies of medication instead of the usual 30-day supply to help avoid trips to the pharmacy.6

We can’t control what happens next, but we can control some things: our choices, our behavior, and our mindset.

I’m no Gandalf, but I hope we can help lighten your load in these troubling times. I don’t know what the coming weeks and months will bring, but I do know this: we’re in it together. And we’ll get through it together.

If you’d like help acting on any of the tips above, or just want to talk through some strategic moves, please reach out. We’re here.

Be well,
Chris

 

Chris Mullis, Ph.D.
Founding Partner
NorthStar Capital Advisors

Financial Planning.
Wealth Management.
Since 2006

AskNorthStar.com
(704) 350-5028

1https://www.foxbusiness.com/economy/coronavirus-stimulus-cares-act-economic-impact

2https://www.financial-planning.com/news/cares-act-tax-relief-as-irs-says-some-rmds-can-be-undone

3https://www.schwab.com/resource-center/insights/content/tax-deadlines-extended-due-to-coronavirus

4https://www.sba.gov/funding-programs/loans/coronavirus-relief-options

5https://www.natlawreview.com/article/cares-act-relief-borrowers-eligible-federal-student-loans

6https://www.nytimes.com/2020/03/24/business/coronavirus-medicare-elderly.html

Chart source: https://www.cnbc.com/2020/04/03/this-chart-shows-which-industries-saw-big-job-losses-in-march-2020.html
https://www.epi.org/blog/nearly-20-million-jobs-lost-by-july-due-to-the-coronavirus/

 
This is why I’m an optimist

“The toilet paper had armed guards.”

“We celebrated my birthday with a dinner party over Zoom.”

“My officemate jumped on my desk and drooled on my keyboard during a meeting.”

One day, we’ll look back on these strange days and tell stories about the COVID-19 pandemic of 2020.

But right now, we’re getting through it. One day at a time.

How are you doing? What stories can you share with me about your life right now? Email me at chrismullis@nstarcapital.com and tell me. I’d love to hear about them.

In difficult times, it’s easy to think we are alone. Especially when our loved ones and support system are far away or reduced to virtual connections.

We are all learning how to adjust to a new world and stay grounded when headlines are blaring and our very health and well-being are under threat.

I’m working on being grateful for the great things in this life.

I’m grateful for my wife.

I’m grateful for our children.

I’m grateful for our family, friends, and neighbors.

I’m grateful for work that allows me to help people in my community get through times like these.

I’m grateful for you.

What are you grateful for?

Like WWII and 9/11, we’re living through days that will define future generations and change the very fabric of our society.

I don’t envy the policymakers making grim trade-offs between life, death, and the economy. How long do we socially distance? What about the 10 million+ who have lost jobs?1 Or the businesses that have been forced to close?

I hope with all my heart that each one of them has a financial plan and someone they can go to for advice. But my head knows better. I know that most Americans can’t survive a $1,000 emergency and only 17% have a financial adviser to help them.2

What trade-offs are we willing to make to protect those at greatest risk from the disease? We can’t put a dollar figure on human life. But we can put a dollar figure on the human cost of jobs lost and businesses closed.

The next few weeks are going to be tough for all of us. And I want you to know that I’m here for you.

Layoffs and furloughs are happening and I’m helping affected clients create a game plan to get through the next few months. If this happens to you or someone you love, please let me know immediately so I can help you determine if you’re eligible for special assistance. And, also please remember our COVID-19 pro bono program that we’ve launched to serve people who don’t normally have access to fiduciary advice.

How do we make good decisions with so much uncertainty and mixed information?

We make a choice:

We can choose to crumble under the weight of fear and uncertainty…

We can choose to simply hunker down and endure…

We can choose to grow, flourish, and come out stronger on the other side. We can be grateful for our blessings and focus on what’s within our control: our mindset, our behavior, and the actions we take.

I am fundamentally optimistic about humankind’s ability to weather this crisis and use it to grow.

I’m optimistic about how our society will adapt and change due to this crisis. Some of the greatest changes and innovations in history grew out of frightening, pessimistic times.

I’m optimistic about the heroes fighting the disease on the front lines.

I’m optimistic about the people helping friends, neighbors, and strangers stay safe and comfortable.

I’m optimistic that those with jobs will continue working to keep this country going while we wait and heal.

I’m optimistic about the innovators staying up late in labs, workshops, factories, and offices around the world to create vaccines, treatments, and tools to beat the virus.

I’m optimistic about the new inventions and technologies that will grow out of necessity.

I don’t know what challenges the world will throw at us in the coming days and weeks. I do know that I am grateful to be surrounded by smart, motivated people who push me to do better.

How can you show up for the people around you? How can you be your best self in these times?

How can I help you do it? Email or call and let me know.

Be safe and be well,
Chris

Chris Mullis, Ph.D.
Founding Partner
NorthStar Capital AdvisorsFinancial Planning.
Wealth Management.
Since 2006

AskNorthStar.com
(704) 350-5028

1https://www.marketwatch.com/story/the-us-officially-lost-701000-jobs-in-march-but-in-reality-millions-vanished-2020-04-03

2https://www.bankrate.com/banking/savings/financial-security-january-2019/
https://www.cnbc.com/2019/04/01/when-it-comes-to-their-financial-future-most-americans-are-winging-it.html

 
WCCB TV Interviews Dr. Chris Mullis

Source: WCCB TV / Local Financial Advisors Say “Stay the Course” Following Historic Market Drop

Dr. Chris Mullis,  NorthStar’s Founding Partner, did an on-air interview with WCCB TV news anchor Drew Bollea discussing how people should think about their investments in the midst of a global panic induced by the coronavirus. (click image to watch video)

Ironically, this interview was recorded on March 9, 2020 — exactly 11 years to the day since the crescendo of global panic that marked the bottom of the 2007-09 bear market.


Here’s the memo that we sent clients and friends ahead of this interview that elaborates on the points made during the news report: 

March 9, 2020

At this morning’s opening level of 2,764, the S&P 500 is down over 18% from its all-time high, recorded on February 19. Declines of that magnitude are fairly common occurrences — indeed the average annual drawdown from a peak to a trough since 1980 is close to 14%. But such a decline in barely a month is noteworthy, not for its depth but for its suddenness.

As we all know by now, the precipitants of this decline have been (a) the outbreak of a new strain of virus, the extent of which can’t be predicted, (b) the economic impact of that outbreak, which is equally unknown, and (c) most recently, the onset of a price war in oil. (That last one is surely a problem for everyone involved in the production of oil, but it’s a boon to those of us who consume it.)

The common thread here is unknowability: we simply don’t know where, when or how these phenomena will play out. And in my experience, the thing in this world that markets hate and fear the most is uncertainty. We have no control over the uncertainty; we can and should have perfect control over how we respond to it.

Or, ideally, how we don’t respond. Because the last thing in the world that long-term, goal-focused investors like us do when the whole world is selling is — you guessed it again — sell. Indeed, I welcome your inquiries around the issue of putting cash to work along in here.

On March 3, the erudite billionaire investor Howard Marks wrote, “It would be a lot to accept that the US business world — and the cash flows it will produce in the future — are worth 13% less today than they were on February 19.” How much more true this observation must be a week later, when they’re down 18%.

Be of good cheer. This too shall pass.

Mortgage Rates Hit All-Time Low (time to refi? let’s do the math)

Growing your wealth is a combination of making money and saving money. Today we’re focused on the latter half of that equation. Current trends in the debt market could save thousands of dollars per year for mortgage borrowers.

Mortgage rates fell to their lowest level on record today, pulled down by fears that the spread of the coronavirus could weigh on the U.S. economy.

The average rate on a 30-year fixed-rate mortgage fell to 3.29% from 3.45% last week (see chart). This is its lowest level in its nearly 50-year history. The 15-year fixed-rate mortgage dropped to 2.79% from 2.95% the prior week.

Mortgage rates are closely linked to yields on the 10-year Treasury, which this week dropped below 1% for the first time following an emergency Federal Reserve rate cut on Tuesday. Expectations are that the 30-year fixed rate could even drop below 3% in the next few weeks.

These historically low interest rates represent a special opportunity to potentially save thousands of dollars per year by refinancing your mortgage.

Whether it makes sense to refinance depends on a host of factors.

We want to help you do the math and decide if you should refinance. We invite you to share the key parameters of your mortgage loan confidentially and securely using this link:

We will dig into your data and make a detailed evaluation. We will come back and advise you on how much you could save now, or what’s your future trigger point for capturing significant savings as rates continue to evolve.

We’re strong believers in the abundance cycle. Please share this offer to family & friends and share the wealth!

Coronavirus

Last Saturday night, Master Eric Sbarge opened the Chinese New Year banquet celebration at The Peaceful Dragon with a moment of silence for those impacted by the coronavirus outbreak. Our hearts and thoughts go out to those dealing with this crisis.

(Incidentally, my family trains in Chinese martial arts, yoga and meditation at The Dragon. It is a uniquely special place of learning and development available to those of you in the Charlotte area.)

But I write to you from the perspective of your investments.

On Friday, January 17 — after a spectacular 40% run-up that started the day after Christmas 2018 — the S&P 500 index closed at 3,329.62.

Two weeks later to the day — last Friday, January 31 — the S&P 500 index closed a little over 3% lower, at 3,225.52. (Indeed, more than half that damage was done on Friday.)

We have therefore been invited by financial media to suspect that the blended value of 500 of the largest, best financed, most profitable businesses in America and the world has “lost” 3% — with more “losses” to come — due to the outbreak in China of a new strain of coronavirus.

Permit me to doubt this, and to suggest that you — as goal-focused long-term investors — join me in doubting it.

I do not claim to have any idea how far this outbreak will spread, nor how many lives it will claim, before it is brought under control. I’m reasonably certain that many (or perhaps most) of the world’s leading virologists and epidemiologists are working on it, and I believe that their efforts will ultimately succeed. Clearly, this is nothing more (or less) than my personal opinion.

But if the rich history of similar outbreaks in this century is any guide, this would seem to be a reasonable hypothesis.

I draw your attention to:

  • SARS in 2003-2004, also originating in China
  • The bird flu epidemic in 2005-2006
  • In 2009, a new strain of swine flu
  • The Ebola outbreak in the autumn of 2014
  • The mosquito-borne Zika virus outbreak in 2016-2017

Without belaboring the point: the super-spreader of SARS — a fish seller — checked into a hospital in Guangzhou on January 31, 2003, basically infecting the whole staff. The epidemic exploded from there.

On that first day of the litany of epidemics cited above, the S&P 500 closed at 855.70. Seventeen years and six epidemics later (including the current one), this past Friday the S&P 500 index closed fairly close to four times higher. I’m confident that you see where I’m going with this.

As always, I welcome your inquiries around this issue. In the meantime, I think the most helpful — and certainly most heartfelt — investment advice I can offer would be that you turn off the television set.

—
Chris Mullis, Ph.D.
Financial Planner & Founding Partner
704-350-5028 | AskNorthStar.com

Better Conversations. Better Outcomes. Since 2006

The most valuable holiday gift for 2019?

(Holiday decorations & countdown courtesy of a very excited 11-year-old named Benjamin Mullis)

Let’s face it. Buying meaningful gifts for our family and friends is really, really hard. If you want to give something that has a larger impact long after the holiday season has passed, why not give the gift of financial education and wisdom for living a fulfilled life?

Given the academic background of our firm, I know the following is going to be a big shocker. Here at NorthStar, we love reading books and we love giving books as gifts! Below you’ll find the NorthStar Guide to Gifts That Pay Off. It’s full of our favorite book and money-related gift recommendations for those ages 4 to 94!

So what’s the most valuable holiday gift of 2019? A fun lesson in financial literacy and living your best life!

Happy shopping,
NorthStar Capital Adivsors

2019 NORTHSTAR GUIDE TO GIFTS THAT PAY OFF
Ages 4 to 10

Money Savvy Pig
The piggy bank for the 21st century!
http://www.moneysavvy.com/assembled/money_savvy_pig.html

Ages 11-16

Cash Cache
The award-winning personal finance organizer for teens!
http://www.moneysavvy.com/assembled/cash_cache.html

Ages 13-18

O.M.G. Official Money Guide for Teenagers
How to turn pocket money into power and freedom
http://www.moneysavvy.com/assembled/omgt.html

What Color Is Your Parachute for Teens
Career guide for teens to help zero in on their favorite skills and find their perfect major or career
https://www.parachute4teens.com/

High School Graduates (plus Recent Retirees and New Entrepreneurs)

5 Book
Where will you be five years from today?
https://www.live-inspired.com/catalog/product/books-by-kobi-yamada/5-where-will-you-be-five-years-from-today/

College Students

O.M.G. Official Money Guide for College Students
Don’t send your student off to college without first tucking this essential reading into their book bag!
http://www.moneysavvy.com/assembled/omgc.html

They Don’t Teach Corporate in College
A twenty-something’s guide to the business world
https://www.alexandralevit.com/books

College Graduates

Generation Earn
Young professional’s guide to spending, investing, and giving back
http://www.kimberly-palmer.com/

Parents with Young Children

Raising Financially Fit Kids
Help prepare your children for a lifetime of smart money decisions
https://www.amazon.com/Raising-Financially-Fit-Kids-Revised/dp/1607744082

The Opposite of Spoiled
Raising kids who are grounded, generous, and smart about money
https://ronlieber.com/books/the-opposite-of-spoiled/

Adults

Happy Money
Are you getting the biggest happiness bang for your buck?
https://www.amazon.com/Happy-Money-Science-Happier-Spending/dp/1451665075

The One-Page Financial Plan
A simple way to be smart about your money
https://www.amazon.com/One-Page-Financial-Plan-Simple-Smart/dp/1591847559

50+ Adults

Life Reimagined
The science, art, and opportunity of midlife
http://www.barbarabradleyhagerty.com/life-reimagined

The Charles Schwab Guide to Finances After Fifty
Answers to your most important money questions
https://content.schwab.com/web/retail/public/book/

Caregivers

Being Mortal
Medicine and what matters in the end
http://atulgawande.com/book/being-mortal/

On Living
An uplifting meditation on how important it is to make peace and meaning of our lives while we still have them
https://www.amazon.com/Living-Kerry-Egan/dp/1594634823
What Issues Should You Consider Before the End of the Year?

The end of the year provides a number of financial planning opportunities and issues. These include tax planning issues, issues surrounding investment and retirement accounts, charitable giving, cash flow & savings, and insurance & estate planning issues.

We use the checklist below to proactively scan for many actionables to help serve our clients. In this checklist, we cover a number of planning issues that you need to consider prior to year-end to ensure you stay on track, including:

  • Various issues surrounding your investment and retirement accounts including matching capital gains against any investment losses in taxable investment accounts and ensuring that all Required Minimum Distributions (RMDs) are taken.
  • Tax planning issues including moves dependent upon your prospects for higher or lower income in the future. You will also want to review where you sit relative to your tax bracket as this is a good time to make moves to fill out your tax bracket for the current year that also might prove beneficial down the road.
  • For those who are charitably inclined there are several strategies that will also help reduce your tax liability that can be considered based upon your situation.
  • For those who own a business, tax reform has created some opportunities surrounding pass-through income from your business to your personal return. Accelerating or deferring business expenses presents another solid planning opportunity.
  • It’s wise to review your cash flow situation as you near year-end to see if you can fund a 529 plan for children or grandchildren or to see if you can save more in an HSA or employer-sponsored retirement plan like a 401(k).

This is a comprehensive checklist of the types of year-end planning issues that you should be discussing with your financial advisor to ensure you maximize cash flow and tax opportunities in the current year and beyond.

Issues You Should Consider Before the End of Year

ASSET & DEBT ISSUES

Do you have unrealized investment losses?
If so, consider realizing losses to offset any gains and/or write off $3,000 against ordinary income.

Do you have investments in taxable accounts that are subject to end-of-year capital gain distributions?
If so, consider strategies to minimize tax liability.

Did you inherit an IRA or 401(k) from someone who passed away last year but have not split the account yet (assuming there were multiple beneficiaries)?
If so, consider splitting the account before the end of the year to avoid calculating the Required Minimum Distribution (RMD) based on the oldest beneficiary.

Are you over the age of 70.5, or are you taking an RMD (from an inherited IRA)? If so, consider the following:
– RMDs from multiple IRAs can be aggregated.
– RMDs from multiple 403bs can be aggregated.
– RMDs from an employer retirement plan must be calculated and taken separately. No aggregation is allowed.
– RMDs from inherited IRAs can not be aggregated with Traditional IRAs.

TAX PLANNING ISSUES

Do you expect your income to increase in the future?
If so, consider the following strategies to minimize your future tax liability:
– Make Roth IRA and Roth 401(k) contributions and Roth IRA conversions.
– If offered by your employer plan, consider after-tax 401k contributions.
– If over age 59.5, consider accelerating IRA withdrawals to fill up lower tax brackets.

Do you expect your income to decrease in the future?
If so, consider strategies to minimize your tax liability now, such as Traditional IRA and 401(k) contributions instead of contributions to Roth accounts.

Do you have any losses for this year or carryforwards from prior years?
If so, consider the following:
– There may be tax-loss harvesting opportunities.
– You may be able to take the loss or use the carryforward to reduce taxable income by up to $3,000.

Are you on the threshold of a tax bracket?
If so, consider strategies to defer income or accelerate deductions and strategies to manage capital gains and losses to keep you in the lower bracket. Consider the following important tax thresholds:
– If taxable income is below $160,724 ($321,449 if Married Filing Jointly [MFJ]), you are in the 24% percent marginal tax bracket. Taxable income above this bracket will be taxed at 32%.
– If taxable income is above $434,550 ($488,850 if MFJ), any capital gains will be taxed at the higher 20% rate.
– If your modified adjusted gross income (MAGI) is over $200,000 ($250,000 if MFJ), you may be subject to the 3.8% Medicare surtax on the lesser of net investment income or the excess of MAGI over $200,000 ($250,000 if MFJ).
– If you are on Medicare, consider the impact of Medicare’s Income-Related Monthly Adjusted Amount (IRMAA) surcharges.

Are you charitably inclined and want to reduce taxes?
If so, consider the following:
– If you expect to take the standard deduction ($12,200 if single, $24,400 if MFJ), consider bunching your charitable contributions (or contributing to a donor-advised fund) every few years which may allow itemization in specific years.

Will you be receiving any significant windfalls that could impact your tax liability (inheritance, Restricted Stock Units vesting, stock options, bonus)?
If so, review your tax withholdings to determine if estimated-payments may be required.

Do you own a business?
If so, consider the following:
– If you own a pass-through business, consider the Qualified Business Income Deduction eligibility rules.
– Consider the use of a Roth vs. Traditional Retirement plan and its potential impact on taxable income and Qualified Business Income.
– If you have business expenses, consider if it makes sense to defer or accelerate the costs to reduce overall tax liability.
– Some retirement plans, such as a Solo 401(k), must be opened before year-end.

Have there been any changes to your marital status?
If so, consider how your tax liability may be impacted based on your marital status as of December 31st.

CASH FLOW ISSUES

Are you able to save more?
If so, consider the following:
– If you have an HSA, you may be able to save $3,500 ($7,000 for a family) and an additional $1,000 If you are over the age of 55.
– If you have an employer retirement plan, such as a 401(k), you may be able to save more but must consult with the plan provider as the rules vary as to when you can make changes.
– For 2019 the maximum salary deferral contribution is $19,000, plus the catch-up contribution if over the age of 50 of $6,000 per year.

Do you have a 529 plan? If so, consider the following:
– You can contribute up to $15,000 ($30,000 if a joint gift is made) each year without filing a gift tax return.
– Alternatively, you can elect the Five Year Accelerated Gift of $75,000.

INSURANCE PLANNING ISSUES

Will you have a balance in your FSA before the end of the year?
If so, consider the following options your employer may offer:
– Some companies allow you to roll up to $500 in your FSA account over the previous year.
– Some companies offer a grace period up until April 15th to spend the unused FSA funds.
– Many companies offer you 90 days to submit receipts from the previous year.
– If you have a Dependent Care FSA, check the deadlines for unused funds as well.

Did you meet your health insurance plan’s annual deductible?
If so, consider incurring any additional medical expenses before the end of the year at which point your annual deductible will reset.

ESTATE PLANNING ISSUES

Have there been any changes to your family, heirs, or have you bought/sold any assets this year?
If so, consider reviewing your estate plan.

Are there any gifts that still need to be made this year?
If so, you can make gifts up to $15,000 ($30,000 if a joint gift is made) per year to an individual without filing a gift tax return.

OTHER ISSUES

Do you have children in high school or younger who plan to attend college?
If so, consider financial aid planning strategies, such as reducing income in specific years to increase financial aid packages.
Money Lessons for Professional Athletes

athletes“Many NFL, NBA and Major League Baseball players have a penchant for losing most or all of their money. It doesn’t matter how much they make. And the ways they blow it are strikingly similar.”
— Sports Illustrated

Barry Ritholtz gives a good run down on how professional athletes go broke:

Youth and inexperience: Most professionals see their salary gradually increase over the course of their career. By the time they are making the big bucks, age and experience has taught them (more or less) how to manage their finances.

Not so for the pro athlete. After being an unpaid student athlete in college, they suddenly have access to millions of dollars. I don’t know about you, but I am fairly certain that if someone gave me $2 million when I was 21, I would have died in a fiery Ferrari wreck or some other foolish thing. It is a simple formula: Youth plus inexperience with money equals bad outcomes.

Athletes have short careers: Injuries, trades and the sheer quality of competitive talent means a twenty-year sports career is the exception, not the rule. On the other hand, white-collar professionals enjoy careers that last 30, 40, even 50 years — more time to amass their wealth, as well as a much longer period to figure out how to manage it.

Young athletes spend too much money: Suffice it to say they spend lots and lots of money, often more than they actually have. Divorce, child support and the costs of an entourage all eat into the cash flow.

Dazzled by the lifestyles of veterans — whose longevity and endorsement deals put them way ahead of the average player in terms of income — these professional competitors may feel pressure to compete off the field. Trying to keep up is a recipe for disaster.

Everyone takes home much less than they realize: Holding aside the issue of unwise spending, let’s look at nondiscretionary spending. GQ analyzed the finances of the typical athlete making $5 million a year. Right off the top, Uncle Sam and the resident state where he plays takes a hefty share — about half for someone in that top tax bracket. Then you have the professional managers, lawyers, accountants, etc. The agent takes $250,000, while the manager may take up to twice that amount. Trainers, nutritionists, travel and courtesy tickets all eat into the net.

Before spending the first discretionary dollar, the typical $5 million player is already down about 70 percent of the gross, to $1.5 million. That sounds like a lot of money, but a naive kid who has a $5 million dollar budget in his head can quickly find himself way behind.

Barry’s five simple steps that athletes (and non-athletes!) can take to avoid financial crisis:

1 Be involved: It is important that a young investor becomes involved with financial planning from the beginning of a career. He should understand what his take-home pay is (after taxes and fees) — and know what he is spending money on.

Be aware of the other numbers involved: What your career expectancy is. How much you are likely to make. What it is going to cost to live a certain lifestyle.

2 Have a plan: A young athlete should plan for three phases of a career: rookie years, top earning years and the life after sports.

In the first part of a career, the emphasis should be on improving your game, and saving money. Don’t worry about indulging in luxuries; you have the rest of your life to do that. Once you enter your prime earning years, you can loosen up a touch and spend more — but always within your means.

The last part of athletes’ careers is often the longest: when they are no longer playing professional ball. Having enough saved to carry them for the next 40 years is important. So, too, is having a second career — whether as an entrepreneur or a color commentator on TV sports broadcasts or as a coach.

Mapping out a workable plan for these three phases is crucial to avoiding that “other” phase: Bankruptcy.

3 Keep your costs low early in your career: Investors learn that costs, taxes and excessive fees are a killer of portfolios over the long term. So, too, are all of the small costs that eat into a professional athlete’s financial pie.

It helps to find a more seasoned and experienced teammate to walk you through what you should and should not be paying for.

4 Avoid debt and leverage: Learning to live within your means is a crucial financial skill for anyone. It is especially valuable for someone earning big bucks for what is likely a few short seasons. Debt simply means you are living beyond your means, even at those big salaries.

The latest snare waiting to trip up the unwary and impatient young athlete is the payday loan. For a very large fee, professional athletes can get huge advances on their salaries. These loans can be usurious, with fees and interest adding up to annual rates of 25 percent or higher. These are to be avoided at all costs.

5 Keep your investments simple: What most people think is the hardest aspect of finance is in reality the simplest: Avoid complex (private placements) or expensive (hedge funds or private equity) investments. Don’t make loans to friends or family. Don’t back start-ups. Don’t invest in new technology. Never buy fancy financial “products.” And whatever you do, for God’s sake, don’t put money into a restaurant.

Instead, have a simple asset allocation model of broad indices (U.S. equities, emerging market stocks, corporate bonds and Treasuries). You are in your early 20s, so you should have a 40- to 50-year time horizon for these investments. Don’t waste your time stock-picking or timing, just let the markets work for you. Build a portfolio of high quality, tax-free municipal bonds (especially if you live in a high tax state). These will pay you an income as long as you hold them.

Source:
Barry Ritholtz / WP

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