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 […]
financial planning
5 Ways to Avoid Overspending for the Holidays
Tis the season! With just over three weeks until Christmas day arrives there’s still plenty of time to get your Christmas shopping done and be able to do so without breaking your budget. To help individuals manage their Holiday spending, here are five tips to keep your Holidays budget from exceeding your limits. Set a budget. This can be done by setting a budget per family you are giving to, or per child in your home. In addition, you could also set a budget regarding how much you’ll give to charity as well. Stick to your budget. A budget is not any good if it’s not adhered to. Avoid using credit cards to make your Christmas purchases. This gets a lot of folks into trouble and is truly the gift that keeps on giving in the form of excessive interest on the credit card balance. Only use your credit card […]
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Our Investment Philosophy
One of the most important parts of your overall financial plan is the investment plan. The investment plan is made up of three distinct parts: present value, projection of future inflows and outflows, and allocation. It is allocation that we’re most interested in with this article. Allocation is the process of determining the “mix” of your investment assets: stocks, bonds, real estate, etc. as well as domestic and international categories. Allocation is determined by the philosophy that you choose to follow with regard to investment management. Our philosophy is summed up as follows: Diversify Reduce Costs Pay Attention to Economic Signals Maintain Discipline – Stick To Your Plan Now, there are three primary schools of thought that are often relied upon to develop an Investment Philosophy: technical analysis, fundamental analysis, efficient markets hypothesis. Technical Analysis is the review of charts of stocks and funds, with the belief that patterns within the […]
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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 […]
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Inter-Family Loan Topics
Often, the topic of Inter-Family Loans comes up in my discussions with clients. Many times a parent wishes to help out a child with the purchase of a home, or some other financial goal – but they don’t want to just hand over the money with no responsibility attached. Inter-family loans can be a good way to approach this topic – the child continues to have fiscal responsibility, and the parent is able to earn a bit on the loan, while still feeling as if they’re in a “helping” position with the child. Below are a few items to think about, along with the additional topic of co-signing loans with family members. Should I lend money to a family member? Lending money to a family member may seem like the right thing to do. After all, what could go wrong? Your son, sister, father, or cousin really needs your help, […]
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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 […]
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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 […]
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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 […]
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An Emergency Fund for Retirement
Many individuals have heard about having an emergency fund while working and saving for retirement. Generally, the rule of thumb has been to keep 3 to 6 months of non-discretionary living expenses on hand in case one loses their job, becomes disabled, or an unforeseen emergency occurs. But what about those individuals who are nearing or already retired? What should their emergency fund look like? Do they even need one? One of the bigger risks that pre-retirees and retirees face in retirement is sequence risk. Sequence risk is generally defined as the risk of even lower portfolio returns due to making withdrawals from a retirement account when the market has experienced a downturn. In other words, a retiree experiences sequence risk when their retirement account drops in value due to market volatility, and they make a withdrawal (or withdrawals) after the account has dropped in value. Another way to put it […]
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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 […]
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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 […]
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Personality Influences Financial Decisions
The recent volatility in the stock market has everyone a bit uneasy – even folks who have worked with a trusted financial adviser for years. But if you’ve never worked with an adviser before, you may be surprised to find that one of the first things he or she will do is ask you to fill out a risk analysis questionnaire. This questionnaire is designed to help you understand your financial decisions and the process of making decisions. It’s all tied to your personality, your own unique world-view. Why is risk analysis important before you make decisions with your money? Risk tolerance is an important part of investing – that should be understood at the outset. But the real value of answering a lot of questions about your risk tolerance is to tell you what you don’t know – how the sources of your money, the way you made it, how outside forces […]
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Book Review: The Opposite of Spoiled
Last week I had the opportunity to read Ron Lieber’s book, The Opposite of Spoiled. The book centers on raising kids that are well-rounded and responsible when it comes to money. As a father of two kids myself (and supposedly a financial planner), the book offered many insights to me as a father and as a planner. After all, even I have questions about how to get my kids to think about the way money works and the family finances. Mr. Lieber’s book does an excellent job of how to answer the money questions kids ask. Naturally, kids see the world through different lenses and it’s in their nature to ask question. Such questions about money Mr. Lieber covers range from the “Are we rich?” to handling what kids see their friends have that they do not. Taken right from the cover is Mr. Lieber’s take on how to teach […]
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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 […]
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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 […]
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Have You Saved Enough for Retirement?
One of the reasons that retirement funding is a mystery to most folks is the uncertainty that comes with trying to determine how much is enough – enough savings set aside so that we don’t run out of money during retirement. The answer to this question begins with an understanding of your day-to-day living expenses, and how those expenses may change in retirement. This is a simple enough process, although it does take some effort. The difficult part is to determine what the funding requirement is in order to provide the income you’ll need to cover your living expenses – for as much as forty years or more! There is a rule of thumb (more on this later) that you can use to come up with a rough guess – but without using sophisticated computer modeling and analysis, your level of assuredness is limited. According to a recent survey by […]
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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 […]
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The Second Most Important Factor to Investing Success
On these very pages not too long ago, I pointed out the most important factor to achieving investing success, which is consistent accumulation. The second most important factor? Asset allocation. Asset allocation is the process of dividing your investment “pile” into various different types of investments in an effort to maximize your exposure to the unique benefits of each type of asset class – while at the same time utilizing the risk as efficiently as possible. When it comes to asset allocation, there are two primary factors which help to determine how you might allocate your investment assets: risk tolerance and time horizon. Risk tolerance deals with whether or not you can sleep at night knowing that your investment could fall (or rise!) by 15%, for example. If you’re a person who feels compelled to monitor your investments every day and can’t stand it when you see a loss, you […]
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Why Financial Planning?
I am always advocating creating a plan for your financial life – but why plan? Maybe we can identify some factors which may motivate you to develop plans for your life, incorporating financial factors with the rest of your life. Following are some of the more important factors that you may want to think about: It is a way to prepare for the inevitable future. This fits in with one definition of planning, which is “intelligent cooperation with the inevitable.” Planning identifies problems and points the way to solutions. Taking a systematic, thorough look at the situation and thinking about the future possibilities can bring these things to light. It helps us to do first things first. In other words, it provides a rationale for assigning priorities. Should we save more for retirement, or for college? Should we pay off our home mortgage? Planning helps to coordinate your various goals […]
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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”.