Creating a Charitable Giving Strategy

Whether you have $1,000 to give or $1 million, a charitable giving strategy can help you allocate your donations so they have the greatest impact.

Get Along, Little Market

The sixth article in our evidence-based investing series explains how proper diversification helps smooth out the market’s ups and downs.

Fun Facts Newsletter | December 2014

In the Spirit of the Holiday Season,
Here Is A List of Early New Year's Resolutions and Fun Things To Do in 2015!

1.         Remember, cash flow (income versus expenses) is the key to long-term financial success. If you are gainfully employed you should be saving 15% to 25% of your income. If you are retired or not fully employed and are drawing on your investment portfolio, your total annual withdrawals should be 3% to 5% of your portfolio value or less. If your savings rate is low or withdrawal rate high, review steps to increase your employment income or reduce your expenses.

2.         Insurance is the foundation of sound financial planning. Home and auto insurance, umbrella liability coverage, health insurance, life insurance, disability and long-term care insurance all require regular review and updating. Funding a Health Savings Account (H.S.A.) warrants consideration. If you own or are considering long term care insurance, pay particular attention to and understand the inflation protection options. 

3.         Are you maximizing your internet safety and protection by using different passwords, using long and complicated passwords and changing your passwords at least once a year? We highly recommend that you use a password manager program such as Dashlane, Lastpass or Roboform so you can have many different and complicated passwords but you only have to remember one password for your password manager program.

4.         Do your children or grandchildren have employment income that could be used for a Roth IRA or Traditional IRA contribution? If applicable, have you funded 529 college savings plans for the calendar year for children or grandchildren?

5.         Does a trusted person know where your website user names and passwords and answers to security questions are kept? Do your family members know where to locate important personal financial papers and how to contact your professional advisors in case of an emergency?

Have a safe and happy holiday season.  Take good care of yourself. 
Best wishes for a healthy and prosperous New Year in 2015!

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Managing the Market's Risky Business

The 5th article in our evidence-based investing series reviews how to manage portfolio risk and the difference between avoidable and unavoidable risks.

Retirement Plan Contribution Limits for 2015

The IRS has increased the amount you can contribute to your 401(k) in 2015. Income phaseout ranges for traditional and Roth IRAs have also changed.

Fun Facts Newsletter | November 2014

Berno Financial Management. The name says it all. Take the Berno out of it, and financial management is what our team is available to do for you. Any time you have any personal financial question or any personal financial issue, we want to hear from you. If we can’t help you, chances are we know someone who can. Okay, you say you already knew this, so why are we telling you now? Much to our surprise, we recently had a long time client ask if we could help with a basic financial planning question that wasn’t investment related. The answer was a clear and resounding yes. So, contact us any time you have a question about:

• Retirement Projection • College Projection • Social Security decisions • Medicare decisions • Exercising stock options • Employer benefit plans • Employer retirement choices • Estate plan documents • Minimizing income taxes • Expense tracking programs • Charitable gifting • Health Savings Accounts • Disability, life, long-term care, home/auto/liability insurance • Identity Theft protection • Beneficiary designations • Buying/Selling a home • Refinancing your home • Buying a car • Roth IRA funding for children/grandchildren • College funding for children/grandchildren • Attorney, accountant, insurance agent recommendations

Oops, and I forgot to mention developing an investment strategy and managing your investments. I’m sure I forgot a few other things. Most importantly, helping you achieve personal financial peace of mind!

Speaking of investments, the broadly diversified, multi-asset class investing strategy that we recommend requires real and genuine long-term patience. And by that, I mean years, not nano-seconds in our high tech world. Foreign large cap stocks have provided returns plus or minus 4% to 8% compared to their US counterparts since 1999, but since 2011 there have been 3 years of under-performance, including 2014, in the 11% to 14% range. Patience will be required until this cyclical pattern reverses itself. Same for commodities, which are very volatile and plus or minus US large cap stocks almost every year since 1999, but have had 5 years in a row of negative returns. Sell high, buy low, not the reverse! Investing is a contrarian process that constantly challenges our minds!

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Financial Gurus and Other Unicorns

While it may seem that some investment professionals can consistently outperform markets, all evidence suggests that such creatures are "rarer than rare."

Ignoring the Siren Song of Daily Market Pricing

Rather than trying to make investing decisions based on the day's headlines, stick to your investing plan.

Fun Facts Newsletter | August 2014

If it weren't for the fact that it represents real wealth, it would be nothing short of fascinating how the market reflects its human participants – in all of our enterprising glory as well as all of our quirky behavioral foibles, including herd mentality. Thursday, July 31st,  provided a picture-perfect illustration of the latter, in which a run of trades begat a larger run of trades for what The Wall Street Journal referred to as "no single catalyst for the stumble." That's a fancy way of explaining the panic by saying, "Who knows?" The global news hasn't really changed all that much.  All of the social, political and economic promises and threats that existed yesterday still exist in approximately equal measure at this time. There have been no asteroid crashes. So why is it that the market, in its collective wisdom, chose July 31 to stage a significant decline?

Even a brief scan of the financial news headlines yields any number of plausible explanations and a plethora of predictions on what is to come next. The truth is, we don't know. Nobody knows. Whatever is about to unfold – or not – does not change our recommended strategy for your investments.

We know it can be painful and hard, but market drops also serve as excellent, real-life illustrations of an important investing principle:  Withstanding market risk when it actually appears is easier said than done.

There are several problems to the alternative of succumbing to herd mentality and reacting to the bad news with active trades:

  1. By the time you're aware of good or bad news, the rest of the market knows it too, and already has incorporated it into existing prices
  2. It's unexpected news that alters future pricing, and by definition, the unexpected is impossible to predict
  3. Any trades, whether they work or not, cost real money

Rather than try to play an expensive game based on information over which we have little control, we continue to recommend investing according to market factors that we can expect to control, such as:

  1. Minimizing costs
  2. Forming an investment plan to guide your way – and sticking with that plan
  3. Capturing returns available by participating in expected long-term market growth
  4. Maintaining diversified holdings to dampen market risks

Enjoy these final summer days!

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Evidence-Based Investing vs. Indexing: Making a Good Thing Even Better

Evidence-based investing incorporates many of the strengths of passive investing or index investing while eliminating some of its inherent weaknesses.

Fun Facts Newsletter | June 2014

People are either savers or spenders.

While this behavioral trait may be planted in early childhood, the reality of making major financial decisions commences with high school and college graduation.

Last month we wrote about financial literacy for high school and college graduates, but the topic warrants more attention.  So here are some words of wisdom for new graduates.

Rule #1:  Live within your means.

  • Among many things, recognize that you don't have to keep up with your friends and co-workers.
  • You don't have to have a new car.
  • You can dress nicely without spending a fortune. Plan your wardrobe. Don't buy more clothes than you really need or will wear regularly.
  • Learn to cook. It is much less expensive than eating out and can be more healthy. Make cooking a fun social time.
  • Pay off your credit cards in full every month. Don't justify cash back awards or shopper rewards as a reason to use your credit card to spend.
  • Build up an emergency fund of at least 1 to 3 months of living expenses.
  • Contribute at least 5% to 10% of your income to your employer retirement plan or an IRA. At a minimum, contribute at least 3%.
  • Understand your student loan repayment requirements, if you have loans.
  • Buy adequate car and renters insurance.
  • Buy health insurance, even if only catastrophic coverage. Get in the habit of good, preventive care. Understand your deductible and co-payments.

Notice there is really only 1 rule? It makes everything else possible!

We are happy to meet with our clients' young adult children to help get them off to a good start.  Feel free to contact us if we can be of help!

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