For the investor that loves a high degree of uncertainty, these are the best of times. More volatility offers more opportunity to make money. For the investor that prefers calmer more predictable markets, these are stressful times indeed.
Yet the truth is that even the most detailed, well thought out investment plan I could possibly develop for a client could go kaput next week due to a million reasons beyond our control.
On Thursday, I watched in shock and horror as the US House of Representatives failed to approve a bill that would have authorized additional insurance for the long-term unemployed. The unemployed do not have lobbyists in DC fighting for them. They are in fact politically disempowered. Yet against this backdrop of events, there’s wide agreement among most economists that UI insurance helps the economy and provides many a chance to barely keep their head above water.
But think about what’s going on here. According to the Center for Responsive Politics, 237 members of Congress are millionaires. That’s 44 percent of the body-compared to (CRP) about 1 percent of Americans overall. CRP says California Republican Rep. Darrell Issa is the richest lawmaker on Capitol Hill, with a net worth estimated at about $251 million. And in the Senate, it’s even more out of whack with 60 out of our 100 Senator’s multi-millionaires. Out of touch much?
Before I write about a must have insurance policy, let me make it clear that I do not sell insurance. I’m a fee-only financial planner and never sell anything, period.
Upon engaging a new client, one of the first steps in our financial planning process is to assess your current risk management plan. Playing devil’s advocate, I simulate worst case scenarios. What I’m looking for is your current exposure level to risk or put another way, what’s your asset protection strategy. Do you have an asset protection strategy that’s bullet proof? Can you withstand an aggressive attorney’s attack on your hard earned assets or are you vulnerable and exposed?
Is it just me, or does it seem that lately there are an abundance of investment professionals that have suddenly been gifted with a crystal ball? Why do I say that? Because every time I turn around there seems to be another “expert” predicting where the economy will be two, four, ten years from now, where the stock or bond market will be or where the price of gold, other precious metals, wheat or oil will be in the future. How can so many so called “experts” have such a diverse set of predictions? The answer is simple-being quoted with a prediction is good for business. So please…take these predictions with a heavy dose of salt.
Before I go much further, let me distinguish between those seeking press for the sake of boosting their business vs. the investment professionals that are truly adding value and knowledge to the community of interested and financially intelligent investors.
As a fee-only financial planner, lately some new clients have asked if I could use a different word besides budget when discussing their cash flow plan. Words do matter and for many reasons, the word budget congers up all sorts of negative thoughts and feelings. So for that reason and many others, lose the word budget and replace it with two words - spending plan.
Before you decide on a spending plan, keep one major goal in mind - your savings plan. Paying yourself first, meaning, putting your savings and investments to work by automatically funding these accounts first before paying your bills is the key to long-term financial success.
Visiting clients at their home is old school, I know that, but I still love it. Sometimes I feel like the small town doctor making house visits. At a recent client meeting in Sebastopol, CA, before we moved into the discussion about financial planning, my clients shared pictures of baby grey foxes that set up home right in their front yard.
Another local client always wraps up our meetings by opening a bottle of his own estate grown wine. Living in wine country feels like a movie set as we sip and chat while overlooking his beautiful vineyards.
