Should You Hire a Professional to Manage Your Trust?

Trusts are a common feature of estate plans. Whether you want to preserve wealth for the future, bypass the probate process or simply ensure your wishes will be upheld, a trust can help. Often, individuals setting up a trust might wish to name a relative or close friend as the trustee. But sometimes there isn’t a viable individual trustee option or families are concerned about maintaining harmony. In addition, the appointed individual must possess the rare combination of skills and experience to ensure complex financial assets are managed prudently. In many cases, the solution may lie in hiring a professional trustee.

What are the benefits of having a professional manage your trust?

Employing a professional to take on the trustee duties can help ensure a more seamless implementation of your estate plan, such as transferring assets to heirs and protecting your legacy. Their knowledge of legalities, financial matters and compliance regulations, skill in judiciously delegating investment management responsibilities and ability to handle administrative duties can bring peace of mind knowing your assets are protected.

How do I determine what is the right path for my situation?

Deciding whether to name a professional trustee or an individual to steward your trust – either presently or as a successor – depends on your specific needs, preferences and the complexity of the trust. Considerations include:

  • Complexity of the trust and trust assets. For situations involving operating businesses, multi-faceted assets, intricate legal requirements or significant financial transactions, a professional trustee may be more suitable to handle these complicated issues and protect the beneficiaries.
  • Size of the trust. The resources, scalability and risk management capabilities of a professional may be better equipped to handle larger trusts.
  • Ongoing care. If you are looking for continuous trust management spanning generations, a professional trustee’s perpetual existence can provide stability.
  • Keeping the peace. Sometimes family and friends don’t mix well with money. Appointing an impartial and neutral third-party professional trustee may help avoid conflicts among relatives and beneficiaries.
  • You get what you pay for. The fees of professional trustees may be justified by the benefits and services they provide. And the cost of mistakes can be high.

Which trust company should I work with?

It’s vital that you partner with a reputable professional trust company that operates in a collaborative, collegial environment. A wealth advisor can help you search for one that:

  • Best fits your needs based on the size of the trust and level of service needed.
  • Accommodates any special needs and circumstances that may exist when executing the trust.
  • Follows a data-driven investment strategy for trust assets and provides continuity in working with your other professionals.
  • Navigates the complexities and seizes the opportunities across various state laws.
  • Helps you understand the trust company’s fee structure and other potential costs.

 

The decision to hire a professional to manage your trust should be based on your specific needs, preferences and circumstances. Consulting a wealth advisor can help you make an informed decision about the trustee options available that best fit your situation.

 

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third party data and may become outdated or otherwise superseded without notice. Third party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. Please be advised that Buckingham only shares video and content through our website, Facebook, LinkedIn page, and other official sources. We do not post investment advice on WhatsApp, Telegram, other interactive applications, or other similar platforms. Rather, Buckingham provides investment advice only through individualized interactions with clients with any other information being for educational purposes only. If you ever have a question about the authenticity of a video or content claiming to be produced by Buckingham or its associates, please reach out via the contact us button on this site for verification. R-24-7186

How Much Cash Should You Hold in Your Portfolio?

In this episode of Buckingham Perspectives, Chief Investment Officer Kevin Grogan provides insight into a common question from investors – what’s the right amount of cash to have in my portfolio? As cash is the safest investment and can easily be used for other needs, it makes sense that it has historically provided lower returns than stocks and bonds. To make sure your portfolio will outpace inflation over the long term, a good rule of thumb is to hold between one to six months of living expenses in cash and allocate the rest to stocks and bonds based on your comfortable level. Speaking to a wealth advisor can also help determine the amounts that make sense for your financial goals.

If you have any questions, please drop us a note.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third-party data and may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. The time frame was chosen because of the dates of available data. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. All investments involve risk, including loss of principal. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this information. Please be advised that Buckingham only shares video and content through our website, Facebook, LinkedIn page, and other official sources. We do not post investment advice on WhatsApp, Telegram, other interactive applications, or other similar platforms. Rather, Buckingham provides investment advice only through individualized interactions

3 Common Investing Mistakes

Many people start out managing their own investments. But as their earnings and assets grow, their financial needs and challenges become more complex—and continuing to go it alone could prove costly in terms of investing miscues. Consider three common mistakes that can reduce returns and increase anxiety:

1. Trying to Time the Market

Investors may be tempted to cash out of the stock market to avoid a predicted downturn. But accurately forecasting the market’s direction to time when to buy and sell is a guessing game. Missing only a brief period of strong market performance can drastically affect your lifetime wealth.

For example, the chart below shows a hypothetical investment in the Russell 3000 Index, a broad US stock market benchmark. Over the entire 25-year period ending December 31, 2023, a $1,000 investment in 1999 turned into $6,449. But what if you pulled your cash out at the wrong time? Missing the best week, month, three months, or six months would have significantly reduced the growth of your investment.

 

The Cost of Missing the Best Consecutive Days

Russell 3000 Index total return, 1999-2023
 

 

Past performance is no guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. 

 
 
 

Rather than trying to predict when stocks will rise and fall, investors can hold a globally diversified portfolio—and by staying invested, be better positioned to capture returns whenever and wherever they occur.

2. Focusing on the Headlines

Investors may become enamored with popular stocks based on recent performance or media attention—and overconcentrate their portfolio holdings in these companies. One example is the rise of the large US technology companies known as the Magnificent 7 (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla). But the chart below shows that many fast-growing stocks have stopped outperforming after becoming one of the 10 largest stocks in the US. On average, companies that outperformed the market on the way up failed to outperform in the years after making the Top 10 list.

 

Stocks on the Way Up, and After

Average annualized outperformance of companies before and after the year they became one of the 10 largest in the US, 1927-2023
 

 

Past performance is no guarantee of future results. This information is intended for educational purposes and should not be considered a recommendation to buy or sell a particular security.

 
 
 

The lesson? Rather than loading up on a handful of stocks that have dominated the market, you can own many stocks through mutual funds or ETFs. Diversifying across industries and global markets can help reduce overall risk and position investors to potentially capture the returns of future top-performing companies.

3. Chasing Past Performance

You might be inclined to select investments based on past returns, expecting top-ranked funds to continue delivering the best performance. But can they maintain that outperformance? Research shows that most funds ranked in the top 25% based on five-year returns didn’t remain in the top 25% in the next five years. In fact, only about one in five equity funds stayed in the top-performing group, and only about a third of fixed income funds did. The lesson? A fund’s past performance offers limited insight into its future returns.

 

Percentage of Top-Ranked Funds that Stayed on Top

 

 

Past performance is no guarantee of future results.

 
 
 

Working with an Advisor

Avoiding these mistakes can improve the odds of reaching your long-term investment goals. But, as a do-it-yourself investor, you’ll have to manage the challenge alone. A qualified financial advisor can offer deeper expertise and insights that lead to better financial habits.

But the potential benefits go beyond just helping you avoid a bad decision. An advisor can design a diversified, research-backed investment strategy based on your long-term goals and comfort level with risk. Equally important, you can look to a seasoned professional for guidance through different markets. By walking with you on the journey, an advisor can encourage the discipline essential to building wealth over time.

DISCLOSURES

Percentage of Top-Ranked Funds that Stayed on Top Data Sample

The sample includes US-domiciled, USD-denominated open-end and exchange-traded funds (ETFs) in the following Morningstar categories. Non-Dimensional fund data provided by Morningstar. Dimensional fund data is provided by the fund accountant. Dimensional funds or subadvised funds whose access is or previously was limited to certain investors are excluded. Index funds, load-waived funds, and funds of funds are excluded from the industry sample.


Percentage of Top-Ranked Funds that Stayed on Top Methodology

This study evaluated fund performance over rolling periods from 2004 through 2023. Each year, funds are sorted within their category based on their previous five-year total return. Those ranked in the top quartile of returns are evaluated over the following five-year period. The chart shows the average percentage of top-ranked equity and fixed income funds that kept their top ranking in the subsequent period.


Percentage of Top-Ranked Funds that Stayed on Top Morningstar Categories (Equity)


Equity fund sample includes the following Morningstar historical categories: Diversified Emerging Markets, Europe Stock, Foreign Large Blend, Foreign Large Growth, Foreign Large Value, Foreign Small/Mid Blend, Foreign Small/Mid Growth, Foreign Small/Mid Value, Global Real Estate, Japan Stock, Large Blend, Large Growth, Large Value, Mid-Cap Blend, Mid-Cap Growth, Mid-Cap Value, Miscellaneous Region, Pacific/Asia ex-Japan Stock, Real Estate, Small Blend, Small Growth, Small Value, Global Large-Stock Blend, Global Large-Stock Growth, Global Large-Stock Value, and Global Small/Mid Stock.


Percentage of Top-Ranked Funds that Stayed on Top Morningstar Categories (Fixed Income)


Fixed income fund sample includes the following Morningstar historical categories: Corporate Bond, High-Yield Bond, Inflation-Protected Bond, Intermediate Core Bond, Intermediate Core-Plus Bond, Intermediate Government, Long Government, Muni California Intermediate, Muni California Long, Muni Massachusetts, Muni Minnesota, Muni National Intermediate, Muni National Long, Muni National Short, Muni New Jersey, Muni New York Intermediate, Muni New York Long, Muni Ohio, Muni Pennsylvania, Muni Single State Intermediate, Muni Single State Long, Muni Single State Short, Muni Target Maturity, Short Government, Short-Term Bond, Ultrashort Bond, Global Bond, and Global Bond-USD Hedged.


Percentage of Top-Ranked Funds that Stayed on Top Index Data Sources

Index data provided by Bloomberg, MSCI, Russell, FTSE Fixed Income LLC, and S&P Dow Jones Indices LLC. Bloomberg data provided by Bloomberg. MSCI data © MSCI 2024, all rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. FTSE fixed income indices © 2024 FTSE Fixed Income LLC. All rights reserved. S&P data © 2024 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.


Indices are not available for direct investment. Their performance does not reflect the expenses associated with management of an actual portfolio. US-domiciled mutual funds and US-domiciled ETFs are not generally available for distribution outside the US.

This information is intended for educational purposes and should not be considered a recommendation to buy or sell a particular security. Named securities may be held in accounts managed by Dimensional.

Fama/French Total US Market Research Index: The value-weighted US market index is constructed every month using all issues listed on the NYSE, AMEX, or Nasdaq with available outstanding shares and valid prices for that month and the month before. Exclusion: American depositary receipts. Source: CRSP for value-weighted US market return. Rebalancing: monthly. Dividends: reinvested in the paying company until the portfolio is rebalanced.

The Fama/French indices represent academic concepts that may be used in portfolio construction and are not available for direct investment or for use as a benchmark. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment.

Results shown during periods prior to each Index’s index inception date do not represent actual returns of the respective index. Other periods selected may have different results, including losses. Backtested index performance is hypothetical and is provided for informational purposes only to indicate historical performance had the index been calculated over the relevant time periods. Backtested performance results assume the reinvestment of dividends and capital gains.

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Protecting Your Portfolio in a Presidential Election Year

The 2024 presidential election is set to be a repeat of the Biden versus Trump contest of 2020. With both houses of Congress up for grabs, the stakes are high for either party, so it is understandable for the U.S. public to be nervous. Regardless of how the election plays out, political tensions will likely remain elevated throughout the next president’s term, adding to an already contentious global political climate. Against this backdrop, many investors are anxious about the possible impact on financial markets. Here’s what to keep in mind this election season.

1. Geopolitical risks are already priced into markets

For financial markets, geopolitical risk is not new. While there have certainly been periods when geopolitical risks were perceived to be more elevated, global markets are continuously pricing in these risks. For as long as markets have existed, stock prices have endured the risk of world wars, regional conflicts, revolutions and countless other geopolitical events. The historical record helps investors understand the risk in most traditional stock and bond allocations. However, it’s still possible that new events may reshape the historical record. When investors begin to worry that political risks are rising, we encourage them to think through this question: Setting aside the upcoming election, are you comfortable with the historical risks that your allocation has exhibited? If you aren’t sure, a good first step is speaking with your financial advisor to better understand the historical risk profile of your asset allocation. This can help you decide whether you are exposed to more risk than you’re comfortable taking.

2. Election outcomes have little impact on stock markets, and the U.S. economy is better poised to withstand a global slowdown compared to other economies.

For the U.S. stock market, there is abundant evidence that the outcome of a presidential election has not systematically impacted the market one way or the other. What matters more are the federal policies pursued during the next administration’s term. However, just like with geopolitical risks, the markets price in how such policies could impact economic growth, inflation and other indicators.

bar chart with red and blue bars

Source: Ken French Data Library for U.S. stock returns. Party information sourced from Office of the Historian and the Clerk of the House’s Office of Art and Archives.

Regardless of who’s in power, we believe the biggest long-term economic challenge for future administrations is the U.S. government’s growing size, both from a fiscal and regulatory perspective. With both parties divided on how to address the government’s growing debt, this will likely lead to slower global economic growth. Keep in mind, however, that the U.S. economy is much better positioned than virtually all other developed governments and should still be more resilient to fiscal risks compared to most economies.

3. Investors benefit from favorable stock market pricing conditions.

While we covered how markets price in a range of political and economic risks, investors should also consider how a company’s stock price compares to the earnings it generates. Across most asset classes, the news is positive. Although U.S. stock market valuations are above their long-term averages, most other broad asset classes — including the U.S. bond market, global developed stock markets and emerging stock markets — are relatively close to historical valuation levels. Even for the U.S. stock market, while large-cap stocks are mostly above their historical valuation levels, smaller and more value-oriented companies have valuation levels closer to their historical averages. This leads to our final point: the importance of diversifying and avoiding the temptation to chase the investments with the highest returns.

4. Diversification is your friend – especially during uncertain times.

While elections have the potential to reshape policies and legislation, it’s difficult to predict which sectors or industries could benefit. The most effective way to manage risk, whether geopolitical or otherwise, is broad diversification. In the current environment, U.S. large-cap stocks have made a comeback after struggling in 2022. Because of that recent strong performance, some investors may be tempted to lower their allocation to other types of stocks, like foreign stocks and smaller-company stocks. The outcome of the election will not influence whether these trends for stocks continue, and no one can successfully predict which stocks will outperform over the next year. That’s why we believe investors should maintain their allocations across global stock markets, as well as to high-quality bonds with relatively short maturities. They might also consider some allocation to inflation-protected Treasury bonds. Finally, depending on their risk profile, some investors may want to consider allocating to alternative investment strategies. While alternatives may not be appropriate for all investors due to their complexity, some strategies are less exposed to geopolitical risks than broad stock and bond markets.

If you still feel concerned about how the 2024 election could impact your portfolio, speak to your financial advisor about lowering your risk exposure and making sure your portfolio is well diversified. It doesn’t hurt to take a break from following the election coverage either.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third-party data and may become outdated or otherwise superseded without notice. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. All investments involve risk, including loss of principal. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. R-24-6959

Quarterly Outlook: Economic Momentum Continues

Main Takeaway

Although markets had a strong first quarter, inflation has been stickier in some key areas of the economy. The services industry continues to be resilient, with employment rising and inflationary pressures increasing, while more interest rate sensitive areas, such as manufacturing, are weaker. The optimistic tone from the Fed has improved the outlook for interest rate cuts, though less liquidity in the banking industry, plus continued fiscal deficits, may keep rates higher for longer.

Top Risks

Rising geopolitical tensions and rate cut predictions have been the main themes this presidential election year. Low office occupancy rates have renewed concerns about the banking sector’s stability, contributing to tighter lending conditions. Municipal finances are coming under pressure in large cities. Government debt levels in most developed nations and China are at all-time highs. Inflationary pressures in the services sector could keep inflation above the Fed’s 2% target for some time.

Sources of Stability

While the Fed’s battle against inflation may not be over, it has made some progress in interest rate sensitive areas of the economy. House prices have stabilized and show signs of rebounding, and businesses are still increasing wages, suggesting a strong economic undercurrent. The S&P 500 has continued its upward climb, credit spreads have tightened, and IPO and M&A activity has picked up. The likelihood of a recession has fallen, barring an unexpected event.

Quarterly Outlook PDF Download

For our latest perspectives on markets and economic conditions, view our Quarterly Outlook for Q2 2024.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal or tax advice. Certain information is based upon third party data, which may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article.

© 2024 Buckingham Wealth Partners. Buckingham Strategic Wealth, LLC, & Buckingham Strategic Partners, LLC (Collectively, Buckingham Wealth Partners). R-24-7068

The Value of a Financial Advisor: How to Consider the Costs and Benefits

In a world of do-it-yourself home improvement programs and YouTube repair videos, it can be tempting to manage your own money. So, why might one consider working with a professional? And how should you think about the costs and benefits when selecting a professional to work with? Here’s what individual investors should know when assessing the value of working with a financial advisor.

Why Partner with a Financial Advisor?

A financial planner can create a comprehensive, tax-efficient wealth strategy based on your goals, risk tolerance and current financial situation. Knowing you have a trusted professional helping to navigate your needs and make informed decisions also brings peace of mind.

While there are many ways to weigh the benefits of working with an advisor, one way is to explore the main costs you might face in your financial planning journey.

  • Economic costs: There is an opportunity cost for choosing one investment over another. How do you know which one is right for you, for your plan and for your family? Which one will give you the greatest likelihood of achieving your financial goals?
  • Tax cost: Depending on which investments you choose, there are tax costs based on the titling of the asset, the investment type, the account type and the time when you buy and sell. How do you measure the time spent navigating the different tax treatments and consequences for your investments?
  • Emotional cost: What are the trade-offs between managing your priorities, and are there strategies to reduce emotional costs? What is that worth and how do you begin to quantify it?

Along your journey, an advisor can help you assess these decisions and build a financial plan that aims to address your biggest needs, as well as uncovering those you may not have considered before.

An Advisor’s Advice Should Be Unique to You

Participating in an exploratory meeting specific to your needs, wants and wishes is the best way to identify if a relationship with an advisor may be beneficial and if there is value. It’s important to get a sense of the advisor’s standard of care, level of detail in their planning, how much they value building a relationship, and how they will coach you on financial behavioral decisions. When valuing an advisor, it’s best not to compare our experience with those of others. Although the relationships our parents or friends have with their advisors can shape our impression and outlook on the industry, what may be important to them and what drives their decisions may not be the same for us. Make sure your advisor is building a plan designed specifically for your needs and goals.

Assessing the Value for the Advisor’s Services

As we think about how to measure the value of an advisor, it is important to understand the evolution of the financial advice industry. The industry started as a way for wealthy individuals to gain access to financial markets. In fact, in the early 1970s, the top 1% of earners in the U.S. held over 50% of all outstanding stock. At that time, individuals looking to make an investment in a listed security, such as a stock or bond, could only do so through stockbrokers who would earn a commission for executing the buying and selling of a listed security. Thus, individuals were optimistically paying for high investment performance as brokers would buy securities in the hope of appreciation that would also serve their own needs via commissions. Very rarely would an individual buy a security solely because of how it fits into their larger plan. This is how the financial advice industry has evolved today, as the fee-based industry began taking off.

The Transition to a Fee-Based Industry

The rise of the internet in the early 2000s paved the way for disruptors to enter the financial services market, giving the public greater access to information on pricing and investments. This drove down what were once tremendously high trading fees. Discount brokers such as online trading platforms emerged, making it easier for investors with less money to make trades. Today, with discount brokerage firms offering broader access to financial markets, trading fees are zero in some cases.

However, these services do not offer the investment selection guidance that stockbrokers offered. That’s where the present-day, fee-based advisor enters the picture. Although there are several models for paying for financial advice, charging a fee based on assets under management has become one of the most common.

graphic with blue and white text

The Future of Paying for Financial Advice

We believe that paying a retainer to ensure you are on the right trajectory and for access to knowledge and advice that is specific to you and your circumstances is the future of the financial advice industry. It is not just paying for the answer to a specific problem but paying for the advice for unknown problems that only come through working with an objective, third-party advisor that has the professional competency, stays current, pays attention and creates the confidence that working with them will create the future you want.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third party data and may become outdated or otherwise superseded without notice. Third party information is deemed to be reliable, but its accurcy and completeness cannot be guaranteed. 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 websites. Buckingham is 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. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article.

Can an Actively Managed Mutual Fund Beat its Benchmark?

When it comes to selecting an investment fund manager, should investors simply try to find ones that can beat their benchmark? Unfortunately, studies show that looking at past performance doesn’t tell you much about what’s likely to happen in the future. In fact, it’s rare for actively managed mutual funds to consistently outperform the major market indexes, like the S&P 500. In this episode of Buckingham Perspectives, Chief Investment Officer Kevin Grogan explains what an actively managed mutual fund is and how these funds track their performance against indexes. He also shares why looking at their past performance isn’t the best strategy for investors when making investment decisions.

If you have any questions please feel free to drop us a note.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third party data and may become outdated or otherwise superseded without notice. Third party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. The time frame chosen because of the dates of available data. The inception of the AIEQ ETF was 2017. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. All investments involve risk, including loss of principal. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this information.

5 Budgeting Myths that Prevent People from Saving

Few people say they love budgeting. However, budgeting is a critical part of the financial planning process. You can have the perfect financial plan, but it won’t work unless you have enough money left over at the end of the month to fund your goals. Budgeting is the way to ensure that you have that extra money and stay on track.

So, what keeps people from creating an effective budget? Many find budgeting boring and time-consuming, or they think they don’t need to have one because of their income level. Budgeting can be especially difficult for couples who struggle to get on the same page. And many traditional budgeting techniques can actually create more obstacles to overcome.

The good news is that using different and more effective budgeting techniques can make the process simpler while also bringing couples closer together. Let’s dispel the top five budgeting myths that get in the way of our relationships and financial goals.

1. Budgeting is about giving up fun.

As a family budgeting professional, I often hear families say, “We know we need to budget, but we don’t want to give up our lifestyle.” This is common because people often start their budgeting process by making a list of things they need to give up, or worse yet, what they think they should give up.

Instead, I suggest you start by prioritizing the items you want to keep spending money on rather than what you want to cut. This technique makes it much easier to identify where to reduce expenses because you won’t feel like you’re sacrificing what you care about most.

2. You need to track everything.

Nothing makes budgeting harder than trying to categorize and track dozens of budget categories. The good news is that you don’t have to.

The only thing that truly matters is how much you spend each month. It doesn’t matter if you spent money going out to dinner, buying something on Amazon, or going to a concert. All that matters is that the money has been spent. Simplify your process to look at your total spending rather than getting caught up in tracking many budget categories.

3. We can’t budget because we don’t see eye to eye on spending.

This may seem like a huge barrier to budgeting, and it certainly can be. But budgeting can bring couples closer together if done in the right way.

Start by finding common ground. Pick just one financial goal you agree that you want to reach. It could be saving for an investment property, paying off credit card debt, or taking a nice vacation. Then, keep your conversation about the goal short. It shouldn’t go for more than five to 10 minutes. Set a timer and end the conversation once it goes off. You’re better off having a short, positive meeting than having a long, drawn-out one.

Finally, leave the judgement behind and appreciate each other’s perspective. Someone who is too structured may benefit from a little more spontaneity. Someone who is spontaneous might do better with a little more structure. Use your differences to your advantage.

4. It takes a lot of time to keep up with a budget.

We’re all busy, and the last thing we want to do after a long day of work and family logistics is to have a budget conversation. To keep your time spent on budgeting short and sweet, I suggest having a “five-minute weekly spending review.”

Use this time to accomplish three activities: Scan your transactions over the last week, look at your total spending month to date, and select two or three budget categories that you want to review. This will give you four opportunities each month to check in and make sure you’re on track for the month, and it helps keep the meetings structured.

5. We earn a good living, so we don’t need to budget.

I admit that I believed for a long time that people who make “enough” money don’t need a budget, but that is far from the truth. I’ve worked with couples earning six-figure and sometimes seven-figure incomes who never thought they would need to budget. Then, as they moved into their 40s and 50s, they started to feel behind on their goals. I often heard them say, “I’m not sure how we got here.”

Instead of waiting until that point, budgeting along the way will help you stay on track and even get ahead faster. I suggest using the 50/50 rule as your income grows. As you get raises, promotions and bonuses, take at least half of that increase and add it to what you’re putting toward your financial goals. You’ll not only increase your savings, but you’ll increase your savings rate, which is key to reaching financial success.

Who can help with budgeting?

Budgeting is key to reaching your financial goals, but these five myths might be getting in the way of you starting to budget and sticking to it. Remember to start with the things you want to keep spending money on before getting to the things you want to cut, focus on total spending rather than dozens of budget categories, use your different perspectives to your advantage, keep it short, and just get started!

If you’re looking for a team that has the budgeting tools to help you be successful, ask how your financial advisory team can help. Your team can help you figure out how to overcome your biggest challenges and add a layer of accountability to make sure you stick to it.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third-party data and may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. R-24-7139

5 Financial Planning Tips for Welcoming a Baby

The birth or adoption of a child is an exciting time. But while you are picking out the perfect name, assembling the crib or buying onesies, it’s equally important to start preparing financially for your new bundle of joy. In this article, I have outlined five key considerations that can help keep your overall financial plan on track.

1. Start planning for your first-year expenses.

Caring for a new baby can be expensive. From setting up a nursery, purchasing a car seat and stroller, feeding costs, diaper duty and other necessities, there are many first-year cash flow considerations you must incorporate into your overall budget. I suggest using a Baby Budget Calculator to estimate your expenditures.
Unfortunately, emergencies happen. It’s wise to build up a backup fund in case of an unexpected event. A good rule of thumb is to have three months of non-discretionary expenses set aside in a two-income household and six months of expenses in a single income household.
Review your maternity and paternity leave options. What are your choices to take leave and how does this impact the cash flow of the family? Are you eligible for a government-provided parental leave or benefits if your employer does not offer them?
From babysitters, nannies and day care costs to preschool and educational fees, there is a wide range of childcare expenditures. Determine your options and what the expenses are related to each.
Review the options and benefits through your workplace. Through a flexible spending account such as a dependent care flexible spending account (DCFSA), you can set aside up to $5,000 per year tax free for eligible childcare expenses, such as an after-school program. For more information on what is included, visit the IRS website.

2. Review your insurance coverage.

Prenatal care, visits to the doctor and out-of-pocket health insurance costs can add up quickly. To be better prepared, check with your insurance provider. Many will give you an estimate of the total cost of routine care.
Typically, you have 30 days following the birth or adoption of a child to add them to your health care plan at work. If both spouses are working, review coverage options with each employer and determine which provides the most cost-effective, comprehensive services.
Take advantage of tax-free programs by opening a health savings plan (HSA) or flexible spending account (FSA). They can save you a lot of money on health care products you use every day.
Review your life insurance coverage. Have your needs and goals changed since your new addition to the family arrived, and do you need to update your policy?
Consider if you need additional disability coverage in place.

3. Take advantage of tax considerations.

To ensure you are as tax efficient as possible, it’s best to partner with your accountant or tax professional. Here are some general things to consider:

Don’t forget to update your withholdings at work and claim your child as a dependent.
The child and dependent care credit provides up to $2,000 per qualifying minor under the age of 17. The credit amount decreases if your modified adjusted gross income exceeds $400,000 filing jointly or $200,000 for single taxpayers.
A provision in the Secure Act 2.0 allows parents to withdraw up to $5,000 penalty free from retirement accounts within a year of birth or adoption for qualified expenses.
The Child Tax Credit reduces taxes due on a dollar-for-dollar basis. For 2023, the credit provided the maximum of $2,000 per qualifying dependent child under age five and $3,000 for children ages 6 to 17. To qualify, income thresholds are $200,000 for single filers and $400,000 for joint filers.

4. Evaluate your estate documents.

Update and share your legal and financial documents, including powers of attorney, health care powers of attorney, wills and trusts.
Decide who will be named in your documents as your child’s guardian. While this may be difficult, determining who would be a good fit and having a conversation with them is an important part of the estate planning process.
With the direction of your estate planning attorney, you will want to update the beneficiary designations on your accounts and insurance to include your new child.

5. Set savings goals for your child’s future.

Determine how you want to handle your child’s cash gifts and how you will fund future savings goals for them.
Consider if a custodial account such as the Uniform Transfer to Minors Act (UTMA) or Uniform Gifts to Minors Account (UGTA) is a tax-efficient strategy for savings outside of future education expenses. If you want to start saving birthday money or cash gifts for your children, a UTMA account can be a great place to invest the funds for the future. Your child will have flexibility on how they spend the funds, including big purchases such as a downpayment on a home or a new vehicle.
Now is the perfect time to begin saving for higher education. A 529 plan is a tax-efficient way to pay for qualified K-12, college or apprenticeship expenses.
It can be easy to lose sight of your own personal retirement and savings objectives. While you may borrow money to pay for your child’s education, make sure your goals are still on track for retirement.

Plan, review and modify

It takes time to adjust to a new member of the family and that goes for the financial side of the equation as well. Be sure to revisit your family’s financial plan and needs with your advisor as your goals and priorities change.

For educational and informational purposes only and should not be construed as specific investment, accounting, legal or tax advice. Certain information is based on third party data and may become outdated or otherwise superseded without notice. Third party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. R-24-6677

The birth or adoption of a child is an exciting time. But while you are picking out the perfect name, assembling the crib or buying onesies, it’s equally important to…Read More…

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The New Year Brings Big Questions for Markets

As we pack away the holiday decorations, we’re reminded that every new year brings fresh opportunities and challenges for our lives and our portfolios. And 2024 is no different — with uncertainty surrounding future monetary policy and a looming presidential election. Let’s look at the biggest questions ahead and the implications for your portfolio.

1. Will rates stay higher for longer?

Now that the Federal Reserve appears to be finished with its rate hike campaign, investors are focused on where rates will go from here. After the Fed’s December meeting where rates were left unchanged, the federal funds rate futures markets were projecting that the Fed would start cutting rates this spring, ending in a target range of 3.75% to 4.00% by year-end 2024. But as the Fed concluded hiking rates in 2023, its official policy statement suggested that it was still premature to declare victory over inflation and that future rate hikes can’t be ruled out yet. Although history has shown that the future path of interest rates is highly uncertain, we can analyze what such a scenario would mean for the stocks and bonds in your portfolio.

2. Will the comeback for bonds continue?

In 2022, bonds suffered stomach-churning declines as the Fed raised interest rates by a whopping 4.25%. However, for those who were able to stay the course, there are tailwinds to ride as a result. First, interest rates have risen and appear to be resting firmly higher relative to pre-pandemic levels, meaning both the expected return and expected yield are now higher for most bond portfolios. Both should provide for more capital growth opportunities for your portfolio relative to the past because proceeds from maturing bonds can be reinvested at higher rates, and it’s more likely that portfolio withdrawal rates can be sustained over time.

3. Will stocks stay on a wild ride?

Interest rate movements also have direct implications for stocks. Even though the market was up almost 20% year-to-date through the end of November, we saw a 9% contraction over three months starting in August 2023 as the market accepted that the Fed will likely keep rates higher for longer. 1

What caused this autumnal pullback? The same factors that drove markets upward earlier in the year—a resilient U.S. economy and better-than-expected GDP growth—led the Fed to dig its heels in further on keeping interest rates elevated toward the end of the year and beyond. Although markets are now turning toward the possibility for rate cuts this year, which contributed to a December rally in stocks, rates will likely remain higher relative to pre-pandemic levels.

So, what would higher rates mean for stocks? It will increase the cost of financing for companies that need to issue new debt or refinance to support ongoing operations. This could have a negative impact on corporate earnings and stock prices. However, given how difficult future developments are to predict, altering your stock portfolio in response to this scenario is unwise because expectations of future performance are ever-changing. And even if stocks decline, research shows that gains can add up after big declines.

4. How unpredictable will the election year be?

In addition to potential monetary policy changes, the upcoming presidential election is also top of mind for many. With 34 Senate seats up for grabs along with all 435 House of Representatives, control of Congress also hangs in the balance. It’s important to remember that partisan control of Congress and the White House has had little impact on the economy and markets; U.S. GDP growth has continued to climb through each of the last 46 presidencies, and stocks have trended upward over the long term. 2

Markets can be susceptible to elections through policy changes. When a candidate’s proposed policies target specific market segments or regions and are expected to be impactful, affected company stocks will respond positively or negatively based on the likelihood of those policies being enacted. In 2024, candidates are likely to use the growing federal budget deficit as a platform to engage their constituents, but the likelihood of significant policies being enacted in any meaningful way is low because of competing spending priorities and prior failed attempts to raise government revenues through tax increases.

5. Will your portfolio be prepared?

As we become acquainted with the new year and the changes it brings, it’s important to view our portfolios through a long-term lens and not limit our decision-making to the next 12-month window. Like every year, one of the most important decisions you can make in 2024 is to ignore the noise and stay invested along the way to meeting your financial goals. If you’re still concerned that market events may affect your portfolio strategy and long-term plan, then you may want to have a conversation with your advisor to consider other options that would bring you more peace of mind.

1. Market returns represented by the Russell 3000 index.
2. J.P. Morgan. “2024 Elections: 3 thoughts on the year ahead.” Nov. 10, 2023.

For chart 2, the decline thresholds are defined as 1.) -10% or lower without exceeding -20%, 2.) -20% or lower without exceeding -30%, and 3.) -30% and lower. The 1-year, 3-year, and 5-year cumulative average return calculations begin in the month following the period in which the decline threshold was breached. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. Total return includes reinvestment of dividends and capital gains.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third-party data and may become outdated or otherwise superseded without notice. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. R-23-6580