Given the start of the New Year it seems almost cliché to write a blog post about resolutions to make for 2016. While making resolutions is not a bad thing, I thought I’d spend some time talking about an arguably more important aspect to resolutions; and that is taking action. To help make some sense with the article I thought I’d share a personal experience. When I was in college I was considerably overweight. Between my junior and senior year I lost quite a bit of weight – about 75 pounds. I was never overweight growing up; I had just let poor eating habits and a sedentary lifestyle get the best of me. After the weight came off, several friends and family members asked me what I did and what my secret was. Really, there was no secret. It was simply eating less and exercising more. However, I became infatuated […]
fee-only
Three Year-End Financial Moves
As 2015 comes to a close here are a few things to consider so you can make the most of your money for 2015. Take full advantage of your IRA contributions. For those age 50 and over, you’re allowed $6,500 and if you’re under age 50, $5,500. It may also be of benefit to see if you qualify for a deductible IRA contribution or if contributing to a Roth IRA makes sense. Make the maximum contribution to your employer sponsored retirement plan. Granted, there may not be much time left in the year to do this, but there is plenty of time to do so for 2016. Many companies have access to their plans online and employees can change contribution amounts when necessary. If you’re not already doing so, consider saving at least 10 percent of your gross income. Aim for 15 to 20 percent if you can. Pay yourself […]
Share, tweet, print, email, like or pin this post:
The Power of Compounding
Many individuals understand the power of compound interest. They understand that compound interest means money or interest earned on interest received. That is, if I earn 5 percent interest annually on one dollar, in one year I’ll have $1.05, but in two years, I’ll have $1.1025, not $1.10. Granted, this may not seem like a lot; and it isn’t. But on several thousand or hundred thousands of dollars it really starts to add up. This post is mainly for those individuals who haven’t heard of this concept or haven’t started utilizing it to their advantage. Mainly, I’m addressing millennials and college students. Those individuals in the cohort I’m address have one powerful thing on their side: time. We’ve written before on this blog about the power of time and starting to save early. We showed the comparing of someone starting right away either during or right after college and another […]
Share, tweet, print, email, like or pin this post:
Your Year End Financial Checklist
As 2015 winds down it may be an ideal time to consider wrapping up (pun intended) some loose ends regarding your finances and getting ready to welcome 2016 financially prepared. Here’s a list of things to consider as 2015 comes to an end. Have you made your maximum IRA contribution for 2015? If you have yet to contribute the maximum to your IRA there’s still time. Individuals under age 50 can contribute $5,500 while those 50 and over can contribute $6,500. Individuals have until they file their 2015 taxes or the 2015 tax deadline (whichever comes first) to make their 2015 IRA contributions. Expecting a Christmas bonus? Your IRA is a good place to put it. Consider increasing the amount you contribute to your 401(k). If you’re not already maxing out your employer plan contributions ($18,000 if you’re under 50 and $24,000 if you’re 50 or older) consider increasing the […]
Share, tweet, print, email, like or pin this post:
What Do Minimums Really Mean?
Some financial planning firms require clients to have a certain amount of money before the firm will work with them. Common minimums may range from $250,000 to over $1 million. Generally the reason why firms have minimums is to either attract a certain clientele, provide economies of scale or both. But what do minimums really mean? To answer that question, think of it this way. Is a minimum really saying “You’re not important until you have a certain amount of money to invest.”? Additionally, is the firm really concerned about their clients if the firm has minimums? It would appear that they are more concerned with money first, clients second. Granted, I may be being a little hard on firms that have minimums. But what about the folks just starting out? Who is teaching them how to get to their first $250,000? How do they become educated to increase their […]
Share, tweet, print, email, like or pin this post:
Buy Term and Invest the Difference?
A topic often argued in the financial service world, especially in the life insurance sector, is whether or not an individual should buy term and invest the difference or buy a cash value life insurance policy. How this argument generally goes is on one side you’ll have someone arguing that an individual should buy a cash value life insurance policy. This individual (generally a commissioned salesperson) will argue that buying a cash value life insurance policy (such as whole life) is a better option for a client since it generates cash value over time and “forces” the client to save. Often they’ll argue that the client wouldn’t save for retirement otherwise. On the flip side of that argument you’ll have someone (perhaps from our office) suggest the client should buy term life insurance and invest the difference in price from the whole life policy and the term life policy in […]
Share, tweet, print, email, like or pin this post:
Advice I Would Give My Younger Self
Last week marked the 30th anniversary of the date Marty McFly traveled 30 years into the future, from 1985 to 2015. A lot has happened in the past 30 years. Smartphones are part of our regular vocabulary, millions of individuals do their shopping online, and markets are still unpredictable. Naturally, I’ve changed over the last 30 years. And if I had a DeLorean that could take me back in time I’d try to impart some wisdom on my younger self. Unfortunately, the closest thing I have to a DeLorean is a silver mini-van (with sliding rather than gull wing doors) lacking a flux capacitor. My hope is that younger readers can benefit from what I am about to tell my younger self. From the moment you start earning money, save 10% of what you make. Whether it’s mowing lawns or stocking shelves you have the gift of time to […]
Share, tweet, print, email, like or pin this post:
The Hot Stove Analogy
We’ve all been there. Cooking dinner around the stove and mistakenly touch the burner or element with our finger. Instantaneously and instinctively our hand immediately withdraws from the heat and we quickly look to see if we need to run it under cold water or worse, grab the bandages. Individuals can have a similar instinctive reaction when they are burned by the market. When the market is highly volatile they’re gut reaction may be to pull their hand away quickly and easing the pain by selling and getting out. It would seem almost malapropos to keep a hand on the hot stove knowing that doing so will result in further pain and injury. And it would be unthinkable to place the other hand on the stove so both are feeling the heat. Naturally, no one likes to lose money. When markets go down it is perfectly understandable for individuals to […]
Share, tweet, print, email, like or pin this post:
Are You Biased? (Hint: Yes, You Are!)
There are several behavioral heuristics and biases that can lead to poor financial decisions. For brevity, we will focus on a few; mental accounting, the endowment effect, loss aversion and status quo bias. For each bias, we will provide a definition and then provide examples of how the biases can lead to poor financial decisions. Mental accounting is the way individuals code and evaluate transactions, investments and other financial outcomes. An example is when employees with access to company stock have 50 percent of company stock in their retirement plan and the remaining money split evenly between stock and bond funds. These employees make the mistake of owning too much company stock (not enough diversification). Mental accounting puts company stock into its own “asset class.” The endowment effect, developed by Richard Thaler is the tendency to place more value on an object once an individual owns it; especially if it’s […]
Share, tweet, print, email, like or pin this post:
Advice to the Masses May Not Apply to Individuals
Last week on my ride home from a meeting I had the opportunity to tune into a nationally syndicated talk show regarding personal finance. The host is very popular among listeners and has written several best sellers. Many churches and schools follow the financial program designed to educate individuals on how to set a budget, get out of debt and save for retirement. Generally, the advice given is applicable to many individuals. Sometimes it’s not. A listener called into the show and explained that she had approximately $100,000 in an annuity in an IRA. The annuity paid an interest rate of 2% and had a current surrender charge of 4% – just over $4,000. The caller was asking the host whether or not she should surrender the annuity and roll it over to a non-annuity IRA invested in mutual funds. In a matter of seconds the recommendation was to surrender […]
Share, tweet, print, email, like or pin this post:
A New-Hire Checklist
Starting a new job can be very overwhelming. Often, new-hires go through a barrage of training, information overload and multiple booklets covering procedures, processes and application. Somewhere in that mix is the benefit package. Here is where the new employee can sign up for important health insurance coverage, retirement savings plans, and other benefits such as life insurance and disability. In the stress and whirlwind of the on-boarding process, sometimes benefits can get pushed to the side, and then after time, forgotten about. Here’s a checklist of what a new employee can do to make sure they sign up for these precious benefits and some information on how to move forward. Select the appropriate health coverage. Some employers have one carrier that provides coverage with different options from that carrier. Options may include HMO, PPO or HSA plans. The premiums the employee pays will depend on the deductibles in the […]
Share, tweet, print, email, like or pin this post:
How to Interview Your (Potential) Financial Adviser
As individuals need help with their finances and investments they will likely turn to the help of a qualified professional. Their future financial adviser may come via referral from a trusted friend or family member, or through an extensive Internet search. The following is a list of questions (and answers to look for) that individuals can ask their potential adviser to see if he or she is likely to be a good fit and more importantly, act in the client’s best interest. Are you a fiduciary? If yes, move to question 2. If no, thank them for their time and move to the next adviser on your list. Advisers that are fiduciaries are legally bound to put their clients’ best interests first. In other words, regardless of compensation, products offered or company affiliation, fiduciary advisers must act in the best interest of their clients. Everything else is secondary. How do […]
Share, tweet, print, email, like or pin this post:
How to Prioritize Your Time and Money
Sometime ago I wrote about needs versus wants. Along those lines I’d like to talk about priorities. It’s pretty common that we heard our friends or family say “I don’t have the time” or “I don’t have the money” (of course, we’ve never said these words). And periodically, I’ll hear these words uttered by my students (no time to study), generally after a not-so-good exam score. But what these folks are really saying is “It’s not a priority right now.” For many of us, it’s not about having more time or more money. It’s really about prioritizing the time and money we have. When we reprioritize what’s important to us, it’s amazing the things we can accomplish and the money we can save. Here are some tips to prioritize your time and money. In fact, for many folks time is money. Prioritize your savings. This can be done by paying […]
Share, tweet, print, email, like or pin this post:
Correlation, Risk and Diversification
Many investors understand the importance of asset allocation and diversification. They choose among various assets to invest in such as stocks, bonds, real estate and commodities. Without getting too technical, the reason why investors choose different asset allocation is due to their correlation (often signified by the Greek letter rho ρ) to the overall stock market. Assets with a correlation of +1 (perfect positive), move identically to each other. That is, when one asset moves in a particular direction, the other moves in the exact same fashion. Assets with a correlation of -1 (perfect negative), move exactly opposite of each other. That is, when one asset zigs, the other asset zags. Generally, the benefits of diversification begin anytime correlation is less than +1. For example, a portfolio with two securities with a correlation of .89 will move similar to each other, but not exactly the same. Thus there is a […]
Share, tweet, print, email, like or pin this post:
How to Invest
Occasionally, someone will ask me a question in the following different ways: “Did you see what the market did today?” or “How did the market do today?” To be honest, I’d love to use the line that Charley Ellis has used from the movie Gone with the Wind; “Frankly my dear, I don’t give a damn.” Professionally, my response is more in line with “I couldn’t tell you.” or “I don’t follow the market really.” The response is not meant to be rude or abrupt, but more to simply say that for most investors (myself included); they shouldn’t be worried about what the market is doing on a day to day basis. This is especially true for the Dow Jones Industrial Average. A price weighted index of 30 stocks is hardly representative of the market, yet it’s what most people think and refer to as “the market” when they ask […]
Share, tweet, print, email, like or pin this post:
Perspective
A number of years ago while in my garden I was tending to my raspberry patch. It had been a long winter and I feared that many had not survived the cold Wisconsin winter. In the spring, the vigorous plants shot through the soil and in just a few months I had a glorious stand of robust plants. To my chagrin, the tall, leafy canes were lacking berries. I didn’t even see any flowers blossoming. For two weeks I would go out and check the patch to see if there were any signs of blossoms or berries and each time I went out, I can back in to the house disappointed. Had something happened? I began to question what the winter had done to them or if I had prevented their fruiting in any way. After all, this was a pretty easy variety to grow and ever-bearing nonetheless. Just as […]
Share, tweet, print, email, like or pin this post:
There is No Free Lunch (or Dinner)
A few days ago my mailbox was graced with the postcard you see at the top of this post. In case the print is too small it’s essentially an offering for a free dinner at a local restaurant while the dinner’s hosts plan to offer a seminar on achieving more retirement income. My initial reaction was to laugh at the card, and then my laughter changed to concern. How many individuals were sent this malarkey? Here are some of the “finer” bullet points from the list of discussion topics: Avoid the long delays and costs of probate Opportunities and solutions to help protect your assets for the future Avoid significant tax losses when passing on your assets It became apparent that this free dinner seminar was nothing more than a sales pitch for a company to sell life insurance and annuities to unsuspecting individuals. A search on the Internet provided […]
Share, tweet, print, email, like or pin this post:
Is a Reverse Mortgage Right for You?
As individuals near retirement there may be a need for additional income in order to support their living expenses in retirement. On this blog we have discussed creating income streams in retirement with annuities, Social Security optimization, and withdrawal strategies in qualified accounts. For some individuals these streams of income may not be enough. Another potential vehicle to assist with providing income in retirement is a reverse mortgage. Reverse mortgages are where an individual or couple uses the equity in their home to received monthly income payments. Generally, once the owners pass away or sell the home, the loan is paid off with the remaining equity in the home. There’s also a limit on the amount a homeowner can borrow. The most popular form of a reverse mortgage is the home equity conversion mortgage (HECM) offered by the Department of Housing and Urban Development (HUD). To qualify, individuals must be […]
Share, tweet, print, email, like or pin this post:
Should You Self-Insure?
At some point in our lives the question arises as to whether or not it makes sense to keep some of the insurance we have. Please understand that this post is not about encouraging the reader to drop any insurance coverage, but perhaps give some perspective on whether or not it makes sense to do so. Consider the case of life insurance. Generally, the younger we are the more life insurance makes sense. When we’re young we have many years until retirement and have high human capital; the ability to earn great amount over our working lifetime. Our financial capital is very small; we haven’t accumulated any assets such as retirement savings. As we age, our human capital decreases. Our financial capital increases and is high when we retire. Thus the need for life insurance diminishes. It’s at this point that an individual can consider letting their term insurance policy […]
Share, tweet, print, email, like or pin this post:
The Power of Dollar Cost Averaging
If you’re like most investors systematically saving for retirement through their employer or with an IRA chances are you’re taking advantage of dollar cost averaging. Dollar cost averaging is a method of investing a specific dollar amount, generally monthly, no matter how the market is reacting. It’s also a way for an investor to fully fund a retirement account without requiring the maximum amount allowed in one shot. For example, let’s assume that an investor under the age of 50 wants to save to an IRA. The maximum contribution to the IRA for 2015 is $5,500. Should the investor want to save monthly and still invest the maximum allowed for the year, he would simply divide by 12 and invest a sum of $458.33 monthly. The beauty of this strategy is that the investor takes advantage of market swings, whether high or low. If the market is considerably high (as […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.