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Dealing With an Investing Blind Spot

Dealing With an Investing Blind Spot

By Carl Richards

Psst. Excuse me. I’ve got a secret.

I feel like I should be talking really quietly right now, but first I need to warn you. This secret is going to seem incredibly obvious. You may even wonder why I’m going to tell you about it at all.

The secret comes in two parts:

1. We all have blind spots.

2. By definition, we can’t see them.

See what I mean about being obvious? They’re called blind spots for a reason, because you can’t see them. But here’s the real tragedy: We’re often totally uncoachable when it comes to dealing with this secret.

I know this is true because I’ve experienced it myself. For months, my trainer was trying to help me solve a stomach issue. He suggested I keep a food journal to see if my symptoms pointed to an allergy. For months, I refused. I already know what I’m eating. I don’t need to write it down in a journal. Sound familiar?

Trust me. You have blind spots, and it’s really hard to be objective about our own behavior. But there is hope, and the solution is simple, if not easy to do.

We need to be coachable. We need to find, and then listen to, other people who can see our blind spots.

A friend of mine, a retired investment banker, did just that himself. This guy knew his way around money and definitely knows how to invest. But he was looking for help with his money. I said to him once, “Of all the people I know, you’re in the best position to deal with your investments. Why do you need help?”

“Carl,” he replied, “I could invest my own money, except for the ‘I’ part.”

He understood that when it came to his own money, he had a blind spot. And he recognized the value in having someone else help him see the mistakes he might make. Again, the solution is simple, but not easy. We need to be coachable.

Like my trainer, there are other people experienced in seeing blind spots, and they’ve seen our type before. Often when we walk in the door and start talking, they can see what we don’t. And because they care about people like us for a living, they want us to succeed.

Maybe it’s our ego that keeps us from asking. Maybe it’s fear. Maybe it’s something else entirely. But whatever the reason, we don’t like asking for feedback. In part, it’s because we tend to internalize what we’re hearing. It becomes about us, not our behavior, triggering an instinctive and negative reaction. We say to ourselves, “Who do these people think they are?”

But if we take a different approach and make the feedback only about our behavior, we can shine a flashlight on our blind spots. This feedback is crucial if we want to change our behavior.

It starts by addressing the biggest blind spot of all: admitting we have any. The next step can be a little trickier. Finding someone you’ll trust and listen to can be a challenge. We won’t take and act on feedback from just anyone. We certainly need to trust and respect this other person, who might be a spouse or business partner. But whoever you identify, make the commitment to pay attention when this person provides coaching about your blind spots.

Finally, don’t make excuses when you hear the feedback. Listen carefully and add this information to what you already know about yourself and your behavior.

Imagine telling a friend that you wish you could save more money each month. This friend knows you well and asks you how much you spend each week eating out. You do the mental math and come back with, “Not much.” Remember, your friend knows you well, so she suggests it might be more than you think. She says, “Why don’t you sit down with your receipts and figure out what you actually spent?” The instinctive response might be, “I really don’t eat out that much. And what does my eating out have to do with saving more money?” The smarter response would be, “Huh, maybe I could save more money if I ate out less. I should look at the numbers.”

Sometimes the feedback will be subjective if all the facts aren’t known or knowable, but if the advice points to something you hadn’t considered, there are few reasons not to test it. Turns out I eat quickly and may not be chewing my food well enough, which is not something I would have easily figured out on my own. After all, we’re oblivious to blind spots until someone helps us see what we’ve been missing.

By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.

The opinions expressed by myself and other featured authors are their own and may not accurately reflect those of Lifeguard Wealth. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.
© 2018, Lifeguard Wealth
As always, if you have any questions please contact Lifeguard Wealth.
Important To-Do’s Before Sending Your Child Off to College

Important To-Do’s Before Sending Your Child Off to College

By Ken Rosenbaum

The day has come. Your little baby has grown up and is now ready to leave the nest. He or she has graduated high school and the next big step is awaiting. Whether it’s college, a gap year, a year abroad or any other life adventure lies ahead, this time can be filled with much emotion for you and your child.

As departure day gets closer, you’re probably focusing on last-minute shopping lists and feeling overwhelmed with trying to get everything done in time. Of course, you have already visited Walmart, Target and IKEA for the dorm room basics, purchased the new computer (yes, that is a 529 College Savings Plan qualified expense), figured out the move-in logistics, and coordinated with the roommate about who will bring what.

Congratulations, you are well on your way. However, you might not be finished just yet. The following are six important tasks you may have overlooked.

  1. Make an appointment with your attorney to create a durable power of attorney document for financial matters and a health-care proxy.

Without them, in most states, you, as a parent, don’t have authority to make health-care decisions or manage money for your children once they turn 18. That’s true even if you are paying the tuition, have your child on your health insurance plans, or claim your child as a dependent on your tax returns. Without such documents in place, if your child is in an accident and/or becomes disabled, even if only temporarily, you might need court approval to act on your child’s behalf.

  1. Establish a monthly budget for your child.

The precise amount agreed upon in said budget is a personal discussion. However, it is especially important to set clear expectations about who will pay for what expense. Maybe you agree to pay for all school-related expenses and it’s your child’s responsibility to pay for all or some of the social expenses. Don’t spring this conversation on your child as you arrive on campus. Discuss it early enough to allow your student time to find a good summer job to earn and save money for the upcoming year.

  1. Determine whether your child will receive a credit or debit card and set rules around when to use each.

Educate your child on the difference between the two and, based upon your child, decide which is the better option. There are advantages and disadvantages with each. If your child is just starting to learn how to budget and balance a checkbook, beginning with a debit card may be best, especially for general daily expenses. Leave the credit card for larger expenses, such as travel arrangements, and emergencies.

Two important benefits of using a credit card are the ability to create a credit history and its better security. Building a credit history can work two ways – you can create a positive credit record or a negative one – so it’s imperative you educate your child on the proper way to use a credit card. Pay off the balance every month, don’t overspend, don’t assume mom and/or dad will bail you out every time, and understand how interest charges and late fees add up and are cumulative. Frank Abagnale, of “Catch Me If You Can” fame, explains that consumer protection law treats debit and credit cards very differently. Under federal law, your personal liability for fraudulent charges on a credit card might not exceed $50. But, if a fraudster uses your debit card, a direct line to your bank account, you could be liable for $500 or more, depending on how quickly you report it.

Some simple steps you, as a parent, can take:

  • Co-sign on the card.
  • Start with a low credit limit.
  • Ensure you have online access to the card.

Get ahead of the onslaught of credit card solicitations your student will receive. Advise your child simply to ignore and discard them.

In just a few years, your child will begin life fully on his or her own. Your child will need to sign an apartment lease and perhaps buy a car. While you can and will probably need to co-sign, how much better will your child feel if he or she already has established some positive credit history?

  1. Once on campus, make sure you and your child know where the closest hospital, urgent care and 24-hour pharmacy are located.

Ask your regular doctor or a trusted family member or friend familiar with the school or town if they know a good physician in case your child needs medical attention above what the college health center can provide. Make sure your child carries his or her health insurance card and you have reached an agreed-upon way to pay for any medical expenses. Does your child know when to use the credit card versus the flexible spending or health savings account (HSA) card? Remember to pack your child a simple medical kit with the essentials (bandages, anti-bacterial cream, cold and flu medicine, etc.).

  1. Have your child write down all passwords to any digital profiles, including financial and social media accounts.

Keep this in a safe place at home. Your child may not like this, but explain that you are not doing it to invade privacy, but to protect it in case of an emergency. I recommend you review this list with your child before each new school year in case any passwords have changed. On a related but separate note, have you and your spouse shared this information between yourselves? You probably should.

  1. Talk to your insurance agent and ask about covering your child’s belonging while they are living on or off campus.

The premiums associated with a dorm insurance policy or a renter’s insurance policy vary, but affordable options generally are available. Make sure the coverage amount and deductible of any policy you consider are appropriate for your and your child’s specific circumstances.

While my list of must-do items can help ensure you meet certain financial and other important needs before the first day of new student orientation, don’t let prioritizing the emotional aspect of dropping off your child at college for the first time get lost in the commotion. Indeed, this event can be a special opportunity to connect with your child.

Marshall Duke, a professor at Emory University, offers some wonderful advice on this topic. He writes: “It is a moment that comes along once in a lifetime. Each child only starts college once.… Such moments are rare. They have power. They give us as parents one-time opportunities to say things to our children that will stick with them not only because of what is said, but because of when it is said.

“Here is what I tell the parents: think of what you want to tell your children when you finally take leave of them and they go off to their dorm and the beginning of their new chapter in life and you set out for the slightly emptier house that you will now live in. What thoughts, feelings and advice do you want to stick? ‘Always make your bed!‘? ‘Don’t wear your hair that way!‘? Surely not. This is a moment to tell them the big things. Things you feel about them as children, as people. Wise things. Things that have guided you in your life. Ways that you hope they will live. Ways that you hope they will be. Big things. Life-level things.”

Duke suggests writing your child a special note, starting it with something like, “When I left you at the campus today, I could not tell you what I wanted to say, so I’ve written it all down.” Mail it, the old-fashioned way. He writes: “It will not be deleted; it will not be tossed away; it will be kept. Its message will stick. Always.”

It may take time for you and your child to adjust to this new stage of life. At the beginning, it may help to think of your child as a high school student now in college. Your child will need to learn how to become a college student – how to study, how to eat, how to handle money – and thrive amid the greater independence. So don’t be too hard on your student. This is a time to experience new things, and remember that your child will learn many of the most important lessons to prepare for life ahead outside of the classroom.

To view original article click here.

By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.

The opinions expressed by myself and other featured authors are their own and may not accurately reflect those of Lifeguard Wealth. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.
© 2018, Lifeguard Wealth
As always, if you have any questions please contact Lifeguard Wealth.
The Top 10 Places Your Next Dollar Should Go

The Top 10 Places Your Next Dollar Should Go

By Tim Maurer

There is no shortage of receptacles clamoring for your money each day. No matter how much money you have or make, it could never keep up with all the seemingly urgent invitations to part with it.

Separating true financial priorities from flash impulses is an increasing challenge, even when you’re trying to do the right thing with your moola — like saving for the future, insuring against catastrophic risks and otherwise improving your financial standing. And while every individual and household is in some way unique, the following list of financial priorities for your next available dollar is a reliable guide for most.

Once you’ve spent the money necessary to cover your fixed and variable living expenses (and yes, I realize that’s no easy task for many) consider spending your additional dollars in this order:

1. Create (or update) your estate planning documents. Your estate planning, or lack thereof, is unlikely to make headlines like that of the rich and famous. But the frightening implications of not planning for your inevitable demise lands it in the top financial priority slot, especially for parents of minor children. With extremely rare exceptions, every independent adult should have the following three documents drafted, preferably, by an estate planning attorney: a will, durable powers of attorney and advance directives (health care power of attorney and a living will).

2. Ensure that insurance needs are met. Don’t become the next heart-wrenching 20/20 segment because your family was left destitute after you died or became disabled without adequate insurance for such catastrophic events. Please note, however, the difference between insurance needs and wants. Surprisingly, most insurance needs — especially regarding life insurance— are sufficiently covered with policies that are less expensive than the all-inclusive, bell-and-whistle products often recommended by insurance agents.

3. Pay off any high-interest consumer debt. It’s hard to build assets when you’re dragged down by liabilities. A new report out from the Urban Institute indicates that nearly one-in-three Americans have debt in collections — you know, that’s when you get nasty calls from unforgiving call centers that purchased your debt for pennies on the dollar from credit card companies and medical care providers, among others. 71 million people! The economic and emotional toll of consumer debt, especially at astronomical rates, makes it financial enemy number one (or, in this case, number three).

4. Build at least one month’s worth of living expenses in emergency savings. Savings is the first line of defense against cancerous consumer debt. Yes, of course I’d like you to have more than a month saved, but the next priority is just too good to put off …

5. Earn free money by taking advantage of your company’s 401(k) match. Many companies offer to incentivize employee retirement savings by matching, up to a certain amount, the percentage of your salary that you contribute to the company retirement plan. They may match 100% of the first 3% of your salary that you elect to save, or 50% of the first 6%. In any case, give yourself a guaranteed rate of return by gobbling up those matching contributions from your employer. If not, you’re leaving money on the table.

6. Contribute to a 529 plan for education savings. Education should not be prioritized over retirement, and merely contributing the matched amount to your 401(k) is not likely to secure your future retirement. But once you have checked off numbers one through five, it’s time to consider opening up 529 accounts for children you intend to help through college. Contribute what you can and invite loving relatives to do the same.

7. Contribute the maximum possible to your Roth IRA(s) if your income level allows you to. Nothing’s better than free money, but tax-free money comes close. By contributing to a Roth IRA, you’re filling a bucket of money that should never be taxed (as long as you wait until after age 59.5 to take gains). And, if you are hit with an emergency that runs through your reserves, you can take your principal contributions back out of your Roth IRA at any age for any reason without taxes or penalties. In 2018, you can contribute $5,500 per person or $6,500 per if you’re age 50 or older. The ability to contribute to a Roth IRA goes away entirely, however, if your income level is above $199,000 for married filers in 2018 ($135,000 if you’re single).

8. Return to strengthen your emergency reserves. If you really want to sleep well at night, I like to see most households with stable jobs amass three months of reserves, households with more volatile income sources put away six months of savings and the self-employed stockpile a year’s worth of expenses.

9. Come back to your 401(k) and cap it off. If you still have money left after taking advantage of numbers one through eight, you probably have a fairly high income. Maxing out your 401(k) or other corporate retirement plan will not only further pad your retirement savings, but will also reduce your taxable income for every dollar contributed. You may contribute up to $18,500 per person — and a whopping $24,500 for investors 50 or older — in 2018.

10. Set aside excess savings in a liquid, taxable investment account for mid-term needs and projects. Emergency savings helps protect you in the short-term. 401(k) and Roth IRA investments help secure your financial future. But if you’re only taking care of the short- and long-term, it leaves nothing for the mid-term. Therefore, opening a regular, taxable investment account will help you set aside money for a boat, excess education costs, a closely held business investment or the down payment on a second home or a rental property. This money should be invested in accordance with the time horizon for its use.

Conspicuously missing from this list are non-deductible Traditional IRAs, annuities, all forms of permanent life insurance and hundreds of other marketed repositories for your money. These products have their uses, but they simply don’t take priority over these ten financial initiatives. In all, I estimate the “cost” of checking off each of the listed priorities to be more than $70,000 annually, surely requiring combined household income of $250,000 or more. That means you can likely free yourself from worrying about any of the additional pitches that come your way until you’ve mastered each of these.

A version of this commentary originally on Forbes.com

By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.

The opinions expressed by myself and other featured authors are their own and may not accurately reflect those of Lifeguard Wealth. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.
© 2018, Lifeguard Wealth
As always, if you have any questions please contact Lifeguard Wealth.
The Unique Retirement Issues Facing Women

The Unique Retirement Issues Facing Women

By Larry Swedroe

Women continue to fight unique financial and life headwinds in planning for a secure retirement. Larry Swedroe and Wealth Advisor Katie Keary explore the impact of 12 specific challenges that women face, and offer financially empowering solutions to them.

Find it on AdvisorPerspectives.com

By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.

The opinions expressed by myself and other featured authors are their own and may not accurately reflect those of Lifeguard Wealth. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.
© 2018, Lifeguard Wealth
As always, if you have any questions please contact Lifeguard Wealth.
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