Free Online Wealth Summit – Vanguard Senior Analysts on Active vs. Passive Investing

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Free Online Wealth Summit – Vanguard Senior Analysts on Active vs. Passive Investing

 The stock and bond markets can be a fearful and terrifying place, especially considering their effect on your financial portfolio. No one wants to see red numbers on their account statement after all. Unfortunately, that’s part of investing.

On average, the stock market enters bear market territory (a drop of twenty percent or more) about one in every four years. We’re eight years into a bull market now without really coming close to bear market territory.

I found some insight from two of Vanguard’s senior analysts over at the Wealth Summit.  The Wealth Summit is a collection of interviews and panels with thirty or so money experts. Companies like Vanguard, TIAA, and Dimensional Fund Advisors have speakers at the Summit. There’s a New York Times bestselling author as well.

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Meet Your Life Partner – Your Credit Score

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When you reach adulthood, you automatically get a new life partner.  Tall, dark, and handsome? Or, tall, blonde, and beautiful?  Keep dreaming, you won’t meet this one on Tinder.  This alter ego determines where you work, your standard of living, and what you can buy.  Basically, it runs your life. It hides behind your couch, if it allows you to have one, and can edge you out of your bed.  This friend shows up uninvited to cramp your style in countless ways.

Meet your credit score, your ethereal mate.  Just about every area of your life is impacted by this relationship.  And talk about being pushed around.  You can get much more flexibility out of a human.

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FINANCIAL HAPPINESS

financial satisfaction

I like reading the latest financial tips as much as the next person, but sometimes it’s redundant.  I know how to budget, save, and spend responsibly.  I don’t need a daily article telling me to do all those things, I can write a book on that.  (Oh wait, I did.)  Anyways, instead of dwelling on the next money crisis or offering another seven-point list on how to side-hustle, let’s celebrate some financial success.

 

Yes, things are tough when you’re young because, like most, you may have started with zero, or negative zero, if you had student loans. After some time goes by, the small actions count.  Little by little, the emergency fund gets funded, the necessities are bought, then the pleasures can follow.  One day, going to work may not feel so bad and your life won’t depend on your next paycheck.  It’s when you realize that you have money left over from your last paycheck.  You get a few raises and promotions and there’s finally more money than month with a small checking account buildup.  The money gods have smiled on you and you can start moving on to bigger and better.  This is what’s known as financial satisfaction.

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Investing and Behavioral Risk

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So, you bought that stock and expected it to return a pile of cash to pay your current debt.  How long has it been, four months?  You watch it every day.  It’s a good day when it goes up, if it goes down, it clouds your mood.  Today, it’s down 12%, maybe it’s time to sell?  You sell the loser and put the diminishing dollars into the bank or, worse yet, into another stock that you expect to skyrocket.  Within a few months, you’re disappointed again.  The cycle repeats.

 

Here’s a sobering thought.  If you’re not happy with your investment returns, it’s your fault.  If you’re new to investing, you would best follow research-based advice – it will alleviate future regrets.

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Self-Evaluating Your Financial Behavior, Part II

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THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

 

This is a continuation on evaluating your financial behavior.  See Part I for identifying your goals, gathering your financial records, and getting real with money attitudes.

The backdrop for each step describes what a financial planner would direct you to do; the self-study action is included.

These last three points put the plan in motion.

4)Develop and Present a Recommendation

Financial Planner Action: Communicate a plan, make recommendations, and identify alternative options.  At this phase, the financial professional may sense resistance and ambivalence from their client.  Financial psychology* suggests engaging the client in dialogue that fosters the client’s positive changes.  This method of conversing provokes the client to recap their goals and why the goals are important.  Instead of being directed by an outsider, which is typically not well-received, the client feels a sense of empowerment and autonomy.

Self-Evaluation:  This is where you decide what changes you’re going to make and is most likely the part where your well-intentioned launch could lie like an unhatched egg.  You’ve reached this segment, but your avoidance may kick on.  Vacuuming dust bunnies and pulling weeds might look exciting compared to figuring out how to manage your wallet.  If you sense hesitancy, acknowledge it, but don’t judge yourself.  Identify your resistance and figure out ways around it.  You should be sitting on that egg like a stubborn hen, not avoiding it.

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Self-Evaluating Your Financial Behavior, Part I

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THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

Self-Evaluating Your Financial Behavior, Part I

If you were to sit down with a financial planner, you might expect to state your goals and come away with directions for allocating your money.  You might expect to be sold a life insurance policy or have your money transferred to accounts that are under the control of the advisor.

A CFP® follows specific steps to align the client with a sound financial plan.  These steps involve establishing a relationship, gathering data, analyzing the current financial status, developing a recommendation, implementing the suggestions, and monitoring the plan.

A comprehensive evaluation of your financial status should integrate your underlying money motives and help you understand how you are managing yourself and your money.  This is critical knowledge because you are the only person that will take the necessary actions.

Dr. Brad Klontz is my hero on this topic.  Dr. Klontz combines behavioral finance and financial psychology into standard financial planning procedures. He’s the Dr. Phil of finances.  If you need help getting real with your finances, Dr. Klontz has your remedy.  In case you haven’t made the connection between your behavior and your financial status, read below where I’ll translate Dr. Klontz’s recommendations for conducting client meetings into self-evaluative introspection and actions.   If you understand your motives and harness that energy, you will be better empowered to make smarter financial decisions.

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Mid-Year Financial Checklist

financial checklist

Usually I wait until December 31st or January 1st to assess my financial condition.

I ask myself the following  questions:

  • How much have I saved?
  • Is my money in the right accounts?
  • Is my retirement account percentage enough?
  • Do I have a balance in my Flexible Spending Account?
  • Have I contributed enough to my IRAs (deductible or non-deductible)?
  • Have I donated as much as I wanted to?

With the blur of the holidays fuzzing out my faculties, I decided that halfway through the year is probably a better time to check my financial diagnostics.  By December I don’t remember anything and I don’t have time to fix anything to fall within the calendar year.

This weekend’s activities involved conquering a mountain of laundry and getting to my fiscal monitoring.  Here’s a list of things I took care of and recommend:

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