Why Fiduciary Responsibility Matters To You.....

After years of debate and refinement, a Department of Labor ruling was signed last year and ready to go for April 1st.  This ruling was to expand  the “investment advice fiduciary” definition under the Employee Retirement Income Security Act of 1974 (ERISA) – the rules governing all retirement plans and the investment advisors to the plans. On February 3, 2017, President Trump signed a Presidential Memorandum directing the Department of Labor to examine the Fiduciary Duty Rule, delaying the implementation.

The delay is set to be released as of June 9th.  At least that is how it looks today. 

What does the ruling mean to you? This ruling would mean that all retirement advisors would have to act by Impartial Conducts Standards, which is: providing best interests advice, for reasonable compensation, and make no misleading statements. 

I hear you…What do you mean? They are not acting on my behalf now?  Maybe.  Depending who is advising you.  Here is the low-down:

·         Registered investment advisors regulated by the Securities and Exchange Commission or state securities regulators are already held to a fiduciary standard of conduct under which they must act in their clients' best interests.

·         Securities brokers, however, are regulated by the Financial Industry Regulatory Authority under a "suitability" standard. The investments they recommend must be suitable for investors, but they are not required by law to act in their clients' best interests.

·         Certified Financial Planners, CFPtm   have been required to maintain this fiduciary standard since 2007.

So because every advisor follows different rules, depending who you talk to, the regulation is either long-overdue or going to cause all sorts of expenses and problems. Proponents of the fiduciary rule believe it is needed to protect retirement savers from conflicted advice and reign in high commissions and kickbacks in sales of retirement products.  The naysayers say the problems will include more expensive litigation and will limit retirement options.

Knowing who your investment advisor works for and what standards they follow is critical.  And knowing that as the ruling stands, this fiduciary standard requirement will only apply to retirement advising.  Your money outside of retirement may still be advised by the suitability standard.  This leaves you needing to ask lots of questions of your advisor so that you know not only the investment, the fees and the rules they follow.

If you like the small print and want to read here : http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=28806

What is the bottom line on Fiduciary Responsibility? Whatever company the professional represents, you want to be sure they have your best interests in mind. If the advisor has fiduciary responsibility legally, there will be no conflict of interest when working with you.

Ask the question.  Maybe even get the answer in writing to protect yourself and your financial interests no matter how many times the ruling gets delayed.  You want to know that the advice you are getting is in the “best interest” for you.

 

Olympic Mania

I Love the Olympics!

The games, the amateur nature of the sporting events, the faces of the athletes who train four years to get there. 

This year’s Olympics in Brazil is a special treat because I get to watch more events; both because my schedule allows and the wonderful television coverage on several stations, thanks to my husband’s insistence that we pay to get his favorite sports stations. 

I have been thrilled to watch sports that typically I would not see on TV; sculling, shooting, archery, sailing.  I have learned that trampoline is an Olympic sport, and why that is so. What a tough task these aerial gymnasts have to face--the twists, the turns and moving surface. It is challenging and tough to watch. 

Are these games so enticing because I am watching with a new interest, or am I watching at such a fever pace because I can flip through the stations, record programs and then speed past the commercials?  Contributing to the intensity, I know that at age 54, I cannot do what these athletes do. I no longer train hard and never did at that level. Nor do I have the athleticism. I realize that there are sports that have older participants – from shooting to archery to equestrian. However, it's doubtful that they took up the sport in their 50’s, as I would have to do. 

I‘ll keep watching to share the athlete’s joy and their tribulations and trials too.  The stories are fabulous... from what they have given up to train, to who their coaches as are. One young crew recently graduated from medical school. Her Dad, who was a former Olympic qualifier, is her coach. She is now an Olympic Silver medalist. Other athletes have family members as coaches or have been with their coaches for decades.

Michelle Carter, the gold medalist in the shot put, has the Olympics in her blood. Her father also medaled in the shotput in 1984.

These stories ignite my interest, and the surprise winners do too   Maya Dirado and her gold ... a woman with a quiet faith, as it turns out, who already is married with a home and fabulous job to go back to after the Olympics. Will her medal change her mind? Will she want to ride her gold to glory, perhaps to the next Olympics, taking advantage of the promoting and marketing potential of her gold status? Her quiet, vibrant ways are in direct contrast to the Great Britain male team of synchronized divers who medaled and proudly said, "We have our faith in God that carried us through the event. It is His plan."

Such a diverse host of stories and people. That is the draw of the Olympics for me -- nations coming together. From seeing a woman from Saudi Arabia in her hijab run the 100-meter dash to watching Estonia's female triplets participating in the marathon. From knowing a 35-year-old got a medal in swimming to the O’Donovan brothers winning a silver in light weight sculling--Ireland’s only medal so far in the games. All these hardworking individuals who not only have talent but work hard to accomplish much, now sharing on the larger stage. 

The Opening ceremonies were beautiful.  Brazil did an incredible job with the event with a far smaller budget than London, demonstrating that creativity does not cost money and the budget of the Olympics is far from the point of the races.

The beauty of the night was highlighted by the standing ovation given to the refugee team.  That is the true nature of the power of the Olympics. There is a space for all athletes, even these ten without a country. The Olympic committee made a statement opening up the competition to these refugees at a time when refugees are marginalized.  These athletes fought to get here beyond what anyone can imagine.

The coming together for greater good and sportsmanship are the point. These events are the focus on the positive that the world needs.  

I am delighted to get the reminder every two years. The Olympics may be an inspiration to train but for now, I am doing my share of experiencing the thrill of the game. My back hurts from sitting, yet I will keep on watching.

Getting Good Value

Last month I wrote my newsletter about cost versus convenience.  There is so much we pay for in the name of making our lives easier in this fast paced world.  Time is money is the often repeated mantra.

Many times we know the added price of purchases we make for convenience.  The already cooked chicken at the grocery store or the take out meal rather than making dinner.  Sometimes the added cost is more subtle - a few dollars extra to fill up at the local gas station or two dollar fee at the nearest ATM.  

Other times we just feel pressured or have no time to do a bit of footwork to find a better price - whether it be a shoe store with our size, the book on-line or the cell phone insurance better covered by our home owners policy.  The fact of the matter is these costs do add up.  For those who are moving fast, the $80 a month in extra costs means close to a thousand dollars less in our pockets at the end of the year. 

The next time you feel the push of time, ask your self:  Can this wait?  Is there another way to pay?  The secret to good financial management is conscious spending.  Slow down and spend wisely.

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College is Coming: How do you help your College Senior?

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Here is a great article on college and how to help your child before they are committed to a school.  Help them understand their financial decisions.

The important thing is to start this conversation early - like freshman year in high school for they are saving and preparing for the responsibilities of college.  In my role as college instructor, I see too many graduating Seniors not ready to take on their financial loans because they do not know even how much they have.  

http://www.reuters.com/article/us-money-education-college-idUSKCN0XM1EZ

 

April 15th is Tax Day...Breathe and Relax...Or Not?

Today is April 15th.  Well known in our country for tax day.  By now, your taxes are done and you are relaxed.  However, if they are not done, this year you have a weekend extension.  Due a Washington DC holiday which falls on Saturday, you have until Monday April 18th to file.  So those procrastinators out there get a couple of extra days.

What if you have filed?  Should you rest and relax?  Not yet!  Studies show that the average tax payer takes 16 hours to gather information before income tax forms can be prepared.  So while the time and energy you used to get organized is still in your mind, set aside two or three hours this weekend.

Then, use this time to review your filing system and checkbook to see where you can simplify for next year.  You may want to start by gathering your tax deductible information from January 1st to March 31st of this year.  Then consider these tips:

Use one checkbook and one credit card for all tax deductible expenses.  These include real estate taxes, medical expenses and charitable deductions.  Then, when time comes to total the numbers from 2016, everything is in one place.

Make all your charitable donations in a designated month, say November.  Gather all solicitations and requests in a folder and review at that time.  No more wondering if you already gave, your donations are recorded and predictable.  Knowing how much you have to give and giving it all at once, assures you have a plan and are more conscious in your giving.

Set up a financial filing system.  You want to do this in hard copy and on your computer to make it easier to access the information when you need it next year.  No need to recreate the wheel each time.  When tax documents show up, you want to have a designated place to put them.  No more digging or calling for copies of documents misplaced.

Time is money.  Take the time now to save money and even more time in the long run.

Happy Spring! 

 

Feeling Overwhelmed with Retirement?

Retirement is a large concept.  Even retiring at 65 means you are probably planning for the next twenty-five years.  This is difficult to do.  Think about the past twenty-five years.  Could you have planned on everything that happened in your life? No one knows the future. 

However, when it comes to retirement, you can put money aside to build up the chances of a very good retirement.  Do not compare yourself to others.  Everyone is different.  Various needs, spending habits and dreams mean different money needs.

Also, do not compare your savings to others.  As you can see by the research, the average person nearing retirement has only $12,000 saved for retirement.  We all need to beat the average to have a retirement that has strong underlying financial support.  Start saving now. 

http://www.nirsonline.org/index.php?option=com_content&task=view&id=768&Itemid=48

 

 

Financial Myths: The Car Lease

Just found this article on-line regarding buy versus lease a vehicle.  This has lots of great information. The steps at the end to calculate the cost of leasing against buying I found a bit difficult to follow.  But even if you do not want to run the numbers, review the comments as they have more good information.

http://www.boston.com/cars/news-and-reviews/2016/02/14/buy-lease-the-math-make-the-call/8A30TNLK43oyPq4hMYHTjI/story.html?p1=story_hp#comments

 

Personal Finance Tips from Bernie Sanders Campaign

None of us can avoid the attention the election is commanding on the television, radio or social media.  With the results reported, analyzed and criticized yesterday, I could not help but reflect on the winners and their financial strategies.  So Trump and Sanders won big in the New Hampshire primary.  What can they teach us?  

No matter what political stances you have, I believe they are demonstrating solid financial principles in their campaigns.  Some of their money principles we know.  Some we need reminding.  

Trump has the money to finance his campaign.  The reminder: Money can buy you what you want. Or think you want.  This is no news in our society.

Bernie beat out Hillary Clinton.  His financial strategy?  Build a campaign treasure chest from small donations from individuals. This demonstrates two financial principles immediately. First, he is using the cash mentality.  Have cash, spend cash and reap the benefits.  Second, he is taking the slow but steady approach to make big change.  

This principles are so important to us all.  Whether we want to get out of debt, save for a home or get ready for retirement, Bernie's campaign financing is a good reminder that complicated strategies are not needed.  

Want to learn other lessons from Bernie's Campaign?  There are several more life-long money lessons he is demonstrating.    Stand by here for more or sign up for next week's newsletter to understand more: www.moneypeace.com/email-newsletter-archive

 

 

Unexpected Benefits

With this new behavior of not entering stores, I realized that I use stores to kill time.  I do not call this activity shopping persay.  This is unplanned time in stores because I am early to get somewhere or I need a mental break on my way to a meeting.  More times than not, I do not spend money but there are times I do.  And the real issue is that I find things I did not want before I entered the store.  So I may go back to get them.  Or think I “need” because I saw something new. 

The truth is the less time I spend in the stores, the better off I am – financially and mentally.  There is nothing rolling around in my mind or making it to my shopping list that I think I just have to get. 

There is an additional benefit as well and I discovered last Wednesday.  I was downtown Burlington after a meeting and had an hour before a class I was taking that night.  A short walk around town without going into a store was lovely, but I was not going to push my luck with the temptation around me.  I got in my car and headed up to UVM campus still arriving more than a half hour early.  As I headed to our meeting place, I figured I would have some quiet time to read alone. 

Instead I was met by another student who was arranging the classroom.  As I helped her set-up the chairs, we had a wonderful conversation.  When another student joined us, the conversation even got better.  When the fourth member of our class came in lamenting her need for a new job and struggle with a cover letter, we all offered to help review it for her.  The connection was fun and light and engaging.  Best of all the time flew. 

What I discovered was that that this time was so, so much better than the quiet time of walking aimlessly through a store.  I felt much more recharged and engaged in the world.  And I did not have the feeling that I was missing something or in need of something.  I had found something.  In the time that I had opened up, I had come to realize the personal connection that is very much needed to maintain my balance in the world.

I may just consider arriving early to a few more places in my life.

Getting Easier...Or Did I Forget My Wallet?

Not going in stores is getting easier.  Yesterday I found this commitment easiest to keep.  I had left my pocketbook with my money and credit and debit card at home.  Yes, given I was going to a ski area to ski, not shop.  However, the absence of these tangibles meant that there was no dilly dallying on the way home.  No reason to stop anywhere. 

At the ski lodge, there is a wonderful little ski shop.  I literally stood at the entrance and walked in two steps when I remembered my commitment.  Two steps out and I was back on track.  How does one spend a day without a spending while skiing?  Well, since I was volunteering for Vermont Adaptive - a fabulous program - I did not need to pay for my ski day.    But also keeping snacks and a water bottle in the car makes it manageable.  The water bottle can be refilled in the cafeteria and one really can survive for a day without money, especially if they are doing something fun.

The weather was fabulous, the snow soft and the people wonderful.  I will treasure all week the smile on the lucky young man I got to ski with yesterday.  He loves to go fast, do bumps and enjoys the gates.  He will be ready for the Special Olympics next month.

Money had nothing to do with yesterday.  How would you survive a day without money?

Financial Myths: Your 401k Loan

The financial myth around 401k loans is purely based on emotions and not facts.  Yes, sounds good if you are going to take a loan I hear, "May as well take it from yourself."  Yourself being your 401k.

However, what employees miss is that the money in your 401k is pre-tax money.  When you pay the loan back, you use after tax money.  So you have paid taxes on that money already and will pay taxes again when you withdraw the money in retirement.   

So before you calculate in the potential growth of investments or the downside risk of not being able to pay the loan back, consider simply the tax issue.  A loan is a loan.  But who and where you take it from matters.  

Listen to the numbers not your co-worker.  Even if the new fun car is calling.....

Stopping Shopping...More Time

Okay so it has been three days since I have entered a store.  This plan of mine does not include groceries stores, as our family has to eat.  But I will not cheat and buy things more than the food we need when I am grocery shopping for the next 28 days.

What have I learned just this weekend without shopping?

Time saved: I do not need to read the advertisements in the Sunday paper.  They can go right to recycling.  I am not entering a store because there is a sale.  This includes the flyer I had already put in my car because there was a good deal.  I recycled that flyer and took stopping at that store off my list of things to do.

Key Found: Since I had a bit of time and was in my car without driving to grab and dispose of the dangerous store flyer, I decided to clean it up a bit.  To my surprise, I found a key under the seat that I had been looking for during the past month.  Yes, I had already looked under the seat.  I was about to get another one made.  As it was my business post office box key, I saved $9 because of yesterday's discovery.

Web Browsing:   Yes, Internet shopping is shopping to me.  Without shopping and browsing on the web, I have found several great sites on my other interests.  So fun to read more about genealogy and Irish history - all for free.

Stop Shopping to Save Money

Pondered today what I heard about not going into shops.  This was on the radio by a behavior psychologist.  When we go into shops we see things that we did not know we needed.  Then we increase our wants and desires.  The psychologist suggested we do not go in stores to curb spending. I have done this successful at different times.  Maybe I will try this again now.  I had already slowed down the process by taking both my credit cards out of my wallet – the one for business and for personal.  They sit home in my office.

Why not revisit this idea?  I decided on Friday the 23rd of January to not shop for a month. 

I can do my one month without shopping at stores.  Without going into stores.  I can do that.

Standby for an up date...Or join me in the pledge!

 

Myth: Winning the Lottery Will Solve My Problems

The lottery is a game.  A game to play for fun.  The odds are not great for anyone.  As with the stock market, there are winners, but there are many more losers. Playing and having fun are great for the spirit.  We want to bring more fun into our lives. What we are looking for is truly to have more financial stability in our lives.

Think you will wait until you win the lottery to be financially solvent? You're more likely to die from a bee sting (one in 6.1 million), be struck by lightning (one in 3 million) or have conjoined twins (one in 200,000). And once typical lottery winners have their money, they are more apt to go bankrupt, according to one study of Florida lottery winners. 

Getting rich quick through the stock market, lottery or professional success is not a guarantee of financial stability. According to Sports Illustrated, within five years of retirement, 60 percent of NBA players are broke,  Kim Basinger and Mike Tyson filed for bankruptcy.

Spending Consciously is as Important as Saving...

I am thrilled this month to be mentioned in the professional journal Investment Advisor.  

This article on behavior and money may make you think as you plan for your future.  

 

http://www.thinkadvisor.com/2015/11/02/advisors-give-your-clients-permission-to-spend

 

What If?!??!

With many folks thinking about the stock market ups and downs this past month, I began to wonder...

What If you knew the stock market was going to plunge tomorrow, what would you do?

Many people would want to react and take their investment money out of the stock market. They would feel better if they had money in the bank rather than watch the media report the drop in investment value across the board.  They would want to know their money was safe.

What if you knew the stock market was going to go up tomorrow? Now what would you do?

Many people would want to add more money. They would figure they could make money. Taking on more risk would be okay because after all the returns would be worth it.

The truth of the matter is, no one truly knows when the market will go up or down. If anyone tells you they know, be very surprised and very cautious. The market goes up and down on a regular basis. Yet, when it goes up for years, people get complacent, as we have since the 2008 declines. We have a new round of declines that may last a long time. Or they may not.

What is one to do? The answer is a middle of the road strategy. See the answers above to what you would do if the market was going up: Have some cash in the bank so that no matter what happens, you feel your financial life is safe. 

For those times when the market is going up and you want to be buying investments, continually invest. Contribute monthly to your 401k, IRA or other retirement vehicle. A little bit on a regular basis makes a big difference in the long term. 

There is no get rich quick scheme and no crystal ball. We all have to ride the wave of ups and downs. In the meantime, we can make balanced choices to control what we can. No matter "what if" scenario plays out, you will not be reacting.  

Act in a balanced long-term way and think long-term.

Want to see or listen to more? http://www.moneypeace.com/online-videos

What Makes A Great Day?

Sometimes a great day is when a planned event goes smoothly and well.  Sometimes having no plan creates just what we need. Time to wander.  Follow your intuition.  Or just not be accountable or responsible to the clock.  For others the perfect day is having time alone.  Or even an afternoon alone. 

Yesterday I took my day off in the "Smallest City in the Country.". Vergennes also happens to be a short drive from me.  After a leisurely lunch, I headed slowly for a strong coffee I was craving to write and sit inside from the sun. 

This took awhile as I wandered through every store without a need, care in the world or clock to follow.  When I finally arrived, the coffee shop was closed for an extended vacation.  Disappointed, I headed to the clock shop for an update on our clock being repaired while I thought of it.  After my short but lovely walk there, I found they had also chose to take the day off.  Who was I to comment or be disappointed?  I was doing the same. And after this stop is where my afternoon perked up so to speak. 

There was the chocolate shop.  I had never been in, though I had tried and found the place closed on other days.  Today the sweet smelling and cozy shop was a delight.  With my two pieces of dark chocolate in hand, I sat outside and reveled in the wonderful day writing and savoring the smoothness of my treat.

Sometimes the simple things can feed us if we allow the time.

 

Time for Panic? Or Peaceful Action?

Monday.  China is calling it Black Monday.  What will happen this week in the stock market?

Everyone is watching and wondering.  There is plenty you can read on the market being overvalued.   And you can watch the real time numbers of a falling US stock market.  The conversations are fueled as much by the media as the facts.  You can stand by and watch.  Or you can stand by and panic.  Or you can take another route.

Review where you and your family are at financially today.  Look at your credit card statements. Take a deeper look at where your bank accounts stand.  Do you know what you are investing in for your monthly 401k or IRA investments?  Write it all down and keep it where you can see it.  This is your current reality.  The market will always change moment by moment.  

Cash for your current needs is what is most important.  If you get antsy and feel you must do something, then be sure your income and dividends are not reinvested.  Continue your retirement contributions into something safer.  No need to be adding more to the market when you feel insecure.  

This is a reminder that if you have been rebalancing and reviewing every year, there is no need to react.  If you are investing long-term, there is no reason to panic in the short-term.  Changes need to be made thoughtfully.

Then, turn off the television.  Stop watching on-line.  The market does not control your life.