How to Share Your Values with Legacy Letters


In wealth planning, it’s important to consider not just tangible assets but also the impact you hope to make on your community and family. This is often called one’s legacy, and a big component of that is intangible assets: your values and life lessons that can be passed down to future generations.

As families and friends gather for the holidays, it’s a good time to reflect on your values and the principles that guide your life and financial decisions. One way to articulate these is to put pen to paper and create a legacy letter. This exercise is a chance to express your gratitude, share wisdom or make amends. It can also be a meaningful gift to your loved ones and yourself.

Why are legacy letters important?

Legacy letters communicate our love, values, beliefs, life lessons and wishes for future generations. These types of letters have been around for over 3,500 years. They originated with the Jewish faith and became popular in the Renaissance period but faded from use in the 1800s. Recently, they’ve re-emerged as a popular way for people of all faiths to share their life story. Several technology services have been developed to help people draft their stories on their own or with professional help.

A legacy letter offers a level of authenticity and truth that enables our loved ones to embrace our story and live and grow from it. It becomes a living document. A survey by Oxford University found that 81% of U.S. respondents want their heirs to have this intangible wealth.

When do I write a legacy letter?

You may be inspired to write, or update, a letter at milestones such as births, graduations, marriages, religious events or holidays. At three of my grandchildren’s baptisms, their parents and godparents wrote letters to the baby. Recently, at the oldest grandchild’s confirmation celebration, the letters were opened and read. For his eighth-grade graduation, his mother gave him a book that included written notes from all his teachers since pre-school. All of these would be considered legacy letters since they discuss wishes and values.

How do I write a legacy letter?

A legacy letter can take many forms — written, video, audio. Written is typically the best option since it will not rely on future technology to replay a recorded version. Nevertheless, I highly recommend you make the decision based on which format you are most comfortable in expressing your thoughts.

How long should my legacy letter be?

Making sure you know what you want to say and how you want to say it is more important than the length. Rather than focusing on word count, make sure the letter reflects your voice and answers questions your family would like to know. Often, that can be achieved in only a few pages, or you may feel compelled to write more. However, it does not need to be the length of an autobiography or memoir.

What should I include in my legacy letter?

Some questions you might want to consider when you sit down to write:

  • What in your life are you most grateful for?
  • What are your most treasured memories?
  • How are you involved with your community?
  • What are your plans for the future?
  • What is your hope for your family’s future?
  • What are you passionate about? And what about it excites you?
  • Do you have any regrets up until this point in your life?
  • What type of person would you like to be remembered as?

Is there anything I should not include in a legacy letter?

It’s important to understand that a legacy letter is not a legal document. Therefore, it is likely not appropriate to explain all the legal details of your wealth transfer plans. That’s what your estate documents and living trust are created for. However, you may choose to add greater context to your wealth plan so that your family understands what factors motivated your choices. Try to keep the tone positive and to share your story constructively.

What resources exist on writing a legacy letter?

Here are a few good book recommendations I share with my clients:

Your advisor’s role in legacy planning

Wishing you the best of luck on your writing journey; I hope that it helps you plan with a purpose. If you are looking for additional resources, your advisor can help to discuss how to define your goals and values and, of course, translate those into your wealth planning decisions.


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Buckingham Connects Webcast: December 2022

In our final webcast of the year, Managing Director of Investment Strategy Kevin Grogan shared his perspective on the recent market optimism. He attributed the change to markets becoming more hopeful that the Federal Reserve will be able to bring inflation under control without causing a recession. He also answered clients’ most pressing questions about investing, including the differences between mutual funds and exchange-traded funds (ETFs) and an explainer on why diversification is still a winning strategy.

On the planning side, Chief Planning Officer Jeffrey Levine gave a rundown of his year-end checklist as we look toward tax season. Some notable to-dos include reviewing Roth conversions, tax-loss harvesting opportunities and estimated tax payments and withholdings. He also fielded questions from clients about tapping into home equity, the impact of midterm elections on financial plans and the upsides and downsides of annuities.

President Wendy Hartman ended with a positive note for 2023. She reminded clients that Buckingham’s team of advisors strive to bring clarity and education for any event – be it a personal development or pending legislation – that may change their financial plan. And Kevin reminded clients that whether a recession happens or not in the year ahead, it’s important to keep in mind that the markets have already priced in this risk. Find out more on what he expects for the bond market next year in his year-in-review video.


Buckingham’s Leadership Team’s Book Recommendation

This holiday season, if you are looking for a book recommendation for your favorite bibliophile, yourself, a family member, friend or colleague, Buckingham’s Leadership Team is spreading the cheer by sharing a few of their recommended reads.

“My father shared a copy of one of Larry Swedroe’s books at the beginning of my career, and it forever changed my path in life. My hope is that his book on retirement will inspire you as well.” – Adam Birenbaum, CEO Buckingham Wealth Partners

Preparing for retirement is more than putting money into a 401(k). Written by Buckingham’s own Larry E. Swedroe and Kevin Grogan, “Your Complete Guide to a Successful and Secure Retirement,” breaks down every important aspect you need to think about as you approach retirement. They dive into often overlooked issues that may affect your golden years such as Medicare, Social Security, elder financial abuse, challenges faced by women in retirement, heir preparation and more.

“Whether it’s fitness or finance, instilling healthy habits at a young age is a gift of a lifetime! As a parent, I want to install values in my children around money and finance. This book is a great gift, a way to leave behind a legacy and to teach empowerment of impactful decision making.” – Wendy Hartman, President, Buckingham Strategic Wealth

When you decide to start investing is just as important as the amount you invest. In “One Decade to Make Millions: A Strategy to Maximize the Power of Your Twenties,” author, speaker and Buckingham Strategic Wealth advisor Jeff C. Johnson shares why it’s so important to start investing in your future earlier rather than later. Even if an investor doesn’t have a high-paying job or an advanced degree, with proper saving and spending habits they can set themselves up to retire with a comfortable nest egg.

“This book has not only provided me with practical steps to become a more effective leader, but it has also helped me positively resolve personal decisions logically and effectively.” – Jeffrey Levine, Chief Planning Officer, Buckingham Wealth Partners

Whether it’s due to emotions, preconceptions or ill logic, as humans we have all struggled with making a decision at some point in our lives. In “Decisive: How to Make Better Choices in Life and Work,” authors Chip and Dan Heath introduce readers to an evidence-based four-step process to make better decisions in both their personal and professional lives. Their powerful, practical and effective strategies and tools can help readers get on the path to leading a happier, more productive life, no magic eight ball required.

“I love Clint Haynes’ positive viewpoint and advice on making the most out of retirement.” – Alex Potts, President, Buckingham Strategic Partners

There are two types of people in the world – those that dream of saying farewell to their 9-to-5 lives and those who dread not having the daily routine that comes with being in the workforce. No matter which side of the fence someone is on, retirement can be scary. In “Retirement the Right Way: How to Retire with Pleasure, Purpose and Peace of Mind,” independent Buckingham Strategic Partners advisor Clint Haynes explores the bigger picture of retirement, including finding a balanced perspective, reimagining life, learning to mind your money and more.

“I love how ‘The Founders’ brings the reader into the ground floor of the two Silicon Valley startups that would eventually merge to form PayPal. The book is filled with lessons on entrepreneurship and provides insights into the personalities that are still making headlines today.” – Kevin Grogan, Managing Director of Investment Strategy, Buckingham Strategic Wealth

For many, PayPal is a convenient, cashless option to pay for online purchases. But did you know many of the creators and original employees of this controversial startup went on to become an integral part of some of the world’s most famous companies? They landed at Facebook, Tesla, YouTube and SpaceX, to name a few. In “The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley,” author Jimmy Soni shares the triumphs, trials and innovations of this groundbreaking company and how it has forever changed the way we live.

“‘Enlightenment Now’ offers a refreshing viewpoint to our modern world. In our work at Buckingham, we often counsel our clients away from the daily fads, new hot trends and shiny pennies. Instead, we use science and data to educate and inform solid financial plans that are designed to stand the test of time. This book is filled with long-term perspectives (and many examples) that result in wisdom that will serve you well throughout life. I hope you enjoy this book as much as I did.” – Justin Ferri, President, Buckingham Wealth Partners

Despite constant news of gloom and doom, research shows people around the world are living longer, happier and healthier lives. In Steven Pinker’s “Enlightenment Now: The Case for Reason, Science, Humanism, and Progress,” he dispels the recency bias we are all susceptible to and replaces it with a refreshing perspective based on reason and science. The author illustrates through dozens of data rich graphs how our lives are being enriched through the gift of enlightenment despite the obstacles we face daily.

“Ben Westhoff’s joy and heartache as a mentor in the Big Brothers Big Sisters program, along with his exploration of the two vastly different world’s he and Jorell inhabited, made this the hardest book for me to put down this year.” – Jeff Remming, Buckingham Strategic Wealth Chief Transformation Officer

St. Louis transplant Ben Westhoff was a 20-something college graduate from an affluent family. When he was paired up with eight-year-old Jorell Cleveland through the Big Brothers Big Sisters program, they quickly became inseparable. They weren’t just mentor and mentee – they were brothers. Tragedy struck in 2016 when Jorell was murdered in the middle of the street at close range. In “Little Brother: Love, Tragedy, and My Search for the Truth,” Westhoff shares his personal story of heartache, the realities of impoverished communities and the truth about the man he considered family.

Why Businesses Should be Treated as Investments

A business is typically its owner’s largest and most complex investment. It is also a fundamental piece of their personal retirement plan. But what if the business owner’s perceived value of the company does not reflect its true value? This could derail their personal retirement plan and their future lifestyle.

Unfortunately, this happens often because businesses are rarely evaluated properly for several reasons:

  • Business owners may not know their company’s true cash return because of tax planning or other techniques that disguise its true performance.
  • Investments in the business are often considered as amounts the owner paid years ago. In addition, most investments are shown at the book value of assets or shareholders’ equity. For a profitable business, this does not consider any intangible assets or goodwill value, which may represent a significant amount of the overall value.
  • Many business owners may not fully understand how to translate their company’s risk into a commensurate rate of return on their investment.
  • When business owners fail to correctly calculate their expected returns and quantify risk, it’s difficult to know the current fair market value of the business. As a result, they may make decisions based on incorrect or incomplete information or miss major opportunities.

The value of a business can also vary depending on its owner’s circumstances and goals. If selling the business to a third party, the owner would expect to receive a maximum purchase price. However, the sale of that same business to a family member or employee might need to be structured so that the company’s cash flow can support the purchase price and make payments to the owner.

Many business owners have heard the rule of thumb that sales of companies are typically three to five times its earnings before interest, taxes, and depreciation (EBITDA), though many don’t investigate why. By taking steps ahead of a potential sale, they may discover the business is actually worth twice its EBITDA or—much better for the owner—seven times its EBITDA. Knowing this can help business owners focus on techniques to boost earnings and reduce risk, which would justify a higher EBITDA multiple.

To create value, business owners should consider the various value drivers of profit margin and asset turnover, shown in the tables below. In addition to focusing on these value drivers, business owners should benchmark their company against similar-sized companies within their industry—as investors do when making investment decisions. Proper comparisons can drastically improve a company’s operations and cash flow.

While many investors have close to instant access to the value of their personal investments, this is not available to most business owners. It takes time to understand the value of a business, what drives and impacts value, and how to enhance it. In addition, too many business owners tend not to treat their business like an investment. For example, if a part of your personal portfolio fails to accomplish what you intended it to do, you’d adjust that investment accordingly. But what if your business isn’t generating an adequate return? Similarly, business owners can explore their options for adjustments that will lead to greater value.

Fortunately, really understanding what your business is worth can be easily accomplished through regular business valuations. Conducting one each year can help identify the true value of the business, track the performance over time, and identify critical factors and techniques that have a direct impact on enhancing its value.

Regular valuations also help a business owner’s financial team—including wealth advisors, accountants, and attorneys—design a streamlined, holistic plan that accurately incorporates their personal and business finances. Of course, planning for the disposition of the business itself will add clarity to their overall roadmap for retirement.

This commentary originally appeared August 17, 2022 on

About the Author: Chuck Laverty
As Director of Business Solutions at Buckingham Strategic Wealth, Charles “Chuck” Laverty, ASA, CBA, CVA, MAFF, CEPA, works in tandem with the firm’s advisory teams to help business owner clients understand and enhance the value of their business and its role in their holistic financial life plan.

This article is for general information and educational purposes only and is not intended to serve as specific financial, accounting, legal, or tax advice. Individuals should speak with qualified professionals based upon their individual circumstances. The analysis contained in this article may be based upon third-party information 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, confirmed the accuracy, or determined the adequacy of this article. R-22-4086

© 2022 Buckingham Strategic Partners®

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What Should I Be Thinking About When Making a Capital Investment in a Rising Rate Environment?

Whether you want to upgrade to the newest technology, need to replace worn equipment or give your lobby a facelift, what should you consider before making a capital investment in your business? Unlike recent years, business owners now face increasing costs to carry debt. How do you make improvements to your business while still remaining financially solvent? I have outlined five key factors to consider before committing to a capital investment:

Will your current cash flow support new debt? Any recent debt will need to be structured in a way that is not burdensome to cash flow and allows you to obtain advantageous lending terms.

Know your targeted cash reserves. COVID-19 taught many practice owners that navigating business interruptions is a crucial piece of a strong and healthy financial plan. Knowing your targeted cash reserves is critical. It’s important to take into account your current debt picture if you are carrying any loans that should be paid down first. If you do not know your cash reserves target, take a moment to work with a financial service specialist to determine that amount.

Make sure you are getting competitive loan offers. If you decide to move forward with your capital investment project, how do you structure the loan in a rising interest environment? While the banking industry is continuing to offer competitive terms for borrowers, working with multiple banks to secure the best loan is something that should not be skipped. Do not settle for one bank’s offer without checking what competing banks are willing to do for you. Letting banks know they are in a competitive bidding process will help to drive the best possible terms.

Optimize the mix of down payment and amount borrowed. Now that you have spoken to multiple banks about your borrowing needs, how much money do you want to put down for the project? For many years when rates were suppressed, it made good sense to finance as much of the project as possible. Today, that may not always be the case and the impact on cash flow of a new loan should be tested. Financial service professionals can stress test your cash flow, determine the impact to your bottom line and create a financially responsible path to move forward. You do not want to sacrifice retirement savings or necessary cash on hand to complete a project if you do not know how it may impact your business.

Know the short and long-term cash flow impact and profit contribution of each capital investment. In the past, practice owners would make a purchase with the mindset they will refinance the debt later and secure better terms. New equipment purchases were a common item to be bought directly through the seller to secure incentives for the deal. In many cases, the buyer planned to refinance the debt in six to twelve months. This is no longer a guarantee and makes the initial terms of the loan more important.

There is no hard and fast rule for how much money should be put down when securing a loan. The bank will have its requirements, but should you consider putting more dollars down for the project? Or is it more advantageous to elect a different loan that has a higher interest rate, but helps to protect your cash reserves due to a lower capital requirement at the time of the purchase?

Practice improvements are commonly made to increase production, streamline your business operation or to update an office space to create an optimum patient experience. All of these projects can be good investments over the course of your lifetime as a business owner but determining the short and long-term impact on your cash flow and profitability should not be left for chance. Know before you commit your dollars to the project. As you navigate this process, it is important that you have a fiduciary advisor supporting you along the way and not someone who stands to collect a commission for closing the loan.

The practice integration advisors at Buckingham help dentists achieve financial success by incorporating a thought-out and customized approach to managing your practice. We are happy to help you understand how a capital investment in your practice fits into your business and can help support your professional and personal financial plan. Schedule a conversation a conversation with us today!

About the author:
Brian Roemke, Buckingham Strategic Wealth Practice Integration Advisor

As a practice integration advisor, Brian provides comprehensive financial planning services to clients. He appreciates the importance of a well-rounded team working collaboratively to develop, implement and monitor a plan that helps clients achieve their distinct goals.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information may be based upon third party information 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-22-4166

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Why The Location Of Your Investments Matters

Most investors have a process for deciding which investments to buy in their portfolio—with different objectives for building wealth over time. But once you’ve selected your investment mix, have you considered how the account that holds your investments affects what you ultimately earn?

A potential game changer for your expected returns is the amount of tax you’ll need to pay, which may be annually or when you make withdrawals depending on the account type. The type of account also makes a big difference in the amount of tax owed. Thinking about asset location—or being strategic about which account holds each of your investments—can help investors keep more of their income.

Leveling the Playing Field Among Accounts

If you have ever received a Form 1099 from the IRS for investment gains or losses, or if you’ve paid income taxes after taking money from your retirement account, you know that Uncle Sam is your investment partner. Just like you, the government wants these accounts to grow because bigger returns generally mean more tax dollars to collect.

From a tax perspective, taxable brokerage accounts, traditional individual retirement accounts (IRAs) and Roth IRAs are not created equal. To level the playing field, it’s important to consider the after-tax expected return of any investment—the amount we keep. Knowing how an investment is taxed within different types of accounts is critical in determining where to own each of your investments.

Non-Qualified Accounts (Taxable)

  • In taxable accounts, such as a brokerage or joint account, you pay taxes each year you receive dividends and interest payments or when you sell investments for more than you paid for them.
  • Qualified dividends and the capital gains on investments held for at least one year are generally taxed at a preferential rate. This is also known as the capital gains rate, and it is either 0%, 15% or 20% depending on your income bracket.
  • Interest income—such as from bonds—and gains from selling investments held for less than one year are taxed at the ordinary income rate, which ranges from 10% to 37% depending on your income level. So, if you don’t plan to hold your investments for very long in a taxable account, you could wind up paying much more in taxes than if you held them for at least one year.
  • The government bears some of the risk of each investment since it receives a portion of the income in taxes (unless your tax rate is 0%).

Traditional IRAs (Tax-Deferred)

  • Traditional IRAs are tax deferred—there is no immediate tax consequence when you buy or sell investments within the account or when you receive dividends or interest payments.
  • Although you have the benefit of only paying income taxes when taking funds out, you do so at ordinary income tax rates.
  • A good way to think about your traditional IRA is to imagine it is split into two identically invested accounts: one owned by you and the other by the government (the portion of which would equal your tax rate). You’ll receive all of the income from your portion, but you also take on all the risk. Likewise, the government will receive all of the income from its portion and take on all the risk.

Roth IRAs (Tax-Deferred)

  • In Roth IRAs, you make contributions with after-tax dollars, and you don’t pay income taxes on any earnings or when taking funds out as long as you meet certain conditions.
  • Therefore, you can expect to receive all of the income from your returns on investments in these accounts. However, this also means you bear all of the risk on the entire balance.

Deciding Which Accounts Should Own What Is a Game of Prioritization

When making investment decisions, the first step is to decide what type of investments will meet your personal goals—the accounts you already have should not dictate those decisions. Only after deciding on your overall allocation target can you review your existing accounts to determine the optimal location for each of your investments.

When considering location, it’s helpful to view all of your accounts as one household portfolio, rather than separately. Although exchanging investments between accounts may lead to differing returns in one account compared with another, the goal is to create more after-tax wealth overall through tax efficiency.

To make the most of tax treatments, it’s generally favorable for most investors to prioritize tax-inefficient investments in IRAs, either traditional or Roth. As you move these investments to tax-deferred IRAs, you’ll have room in your taxable accounts to take advantage of the preferential rates for tax-efficient investments. Some examples below illustrate how to think about these decisions.

When deciding whether to place your investments in a taxable account or IRA, it’s also important to give the greatest consideration to those investments with higher expected returns—and therefore generally higher risk. For example, it may seem like simple logic to hold investments with the highest expected returns in a Roth IRA because your income won’t be taxed. However, you aren’t always better off taking all the investment risk.

Additionally, there are some instances when the placement of your investments requires more consideration, such as if you anticipate using any of your traditional IRA funds for future qualified charitable distributions because there could be greater tax advantages in doing so. Ultimately, deciding which account should own which investment will depend on each investor’s circumstances. Working with a financial advisor can help you navigate your specific case and help you set up a plan to maximize your after-tax returns.

If you are not currently working with a financial advisor, Buckingham would love to help you reach your wealth goals. Please visit our website for more information or connect with us for a short introductory conversation.

About the author:

As a wealth advisor, Patrick Kuster believes a financial plan is only as good as its implementation, and seeing the plan through is one of the most rewarding parts of his job. He loves helping clients solve their financial puzzle, pulling apart plans and discovering concepts that question industry norms. He also likes educating clients and providing them insight that keeps them on track toward achieving their financial goals.

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. 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. 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 featured authors are their own and may not accurately reflect those of Buckingham Strategic Wealth®. R-22-4212

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Economic Brief: All Eyes On Inflation For The Remainder Of 2022

Larry Swedroe economic brief all eyes on inflation

While there’s always uncertainty in the outlook for the economy and financial markets, a confluence of events has pushed the level of uncertainty to high levels, namely the Federal Reserve’s battle against inflation, Russia’s invasion of Ukraine and ongoing supply chain struggles. The markets have already priced in these risks, explaining why stocks and bonds have performed poorly this year.

Top Risks

We believe the two biggest risks to the economy are the war in Ukraine dragging on and inflation running hotter than markets expect. In addition, the effects of reduced fiscal stimulus, significantly tighter monetary policy and the stronger U.S. dollar are likely to result in slower economic growth, with in our opinion, the chance of recession in the next 12 months increasing to 30%-50%.

Sources of Stability

Although GDP growth is expected to slow, the unemployment rate should stay low through 2023 at around 3.6%. Monetary policy is still loose, with negative real rates of interest; there is still some fiscal stimulus; and both corporate and consumer balance sheets remain strong.

In The Spotlight

As the year began, many pinned their hopes on the economy shaking off the worst impacts from the COVID-19 pandemic—with expectations that reopening economies would ease supply chains and inflation. However, by midyear, it became clear that the ramifications aren’t abating as quickly as anticipated. In June, the consumer price index rose 9.1%, the fastest pace since 1981. Gasoline, housing prices and food were the largest contributors to this increase. The core index, which excludes food and energy, only fell slightly in June to 5.9% from 6.0% in May and well above where it was last June at 4.5%.

The Fed has responded to the sharp rise in inflation by hiking interest rates, though the June numbers may mean that the bank will speed up the pace of increases. Both stocks and bonds tend to perform poorly during high inflation regimes, like the one we are experiencing now. As such, financial plans should consider that there might be a negative impact on future economic growth, leading to lower equity returns.

consumer price index chart

Monetary Policy

The Fed has a difficult task in fighting inflation. The risk that the Fed is behind in tightening policy enough to slow inflation is growing, which could lead to the bank raising rates higher than the market expects. The Fed will also begin reducing its balance sheet by almost $100 billion a month in September, an unprecedented amount that could push rates higher than currently priced into the market—a negative for both stocks and bonds.

War in Ukraine

Economic sanctions on Russia have created further supply and inflation problems. Global supply chains rely on Russia for its oil and gas, wheat, and semiconductor exports. Russia is the main supplier of gas to several European countries, with Germany and Italy at greatest risk if Russia cuts off gas shipments to them. This would have a significantly negative impact on their economies, almost certainly producing a recession with global implications.

Supply Chains

The pandemic disrupted supply chains, leading to inflationary pressures. This has implications for markets because the globalization of supply chains had a deflationary impact on prices. Innovations like just-in-time inventory management—which provides the minimum amount of inventory to meet demand—led to improved productivity, profits and economic growth. Supply chains have yet to recover, which could lead to more onshoring, resulting in higher prices for consumers and lower corporate profits.

Labor Market

The tight labor market is contributing to inflation and could pressure corporate profits. The U.S.’s strong economic recovery since the pandemic downturn contributed to a tight labor market: almost two jobs are posted for every unemployed person, and the unemployment rate is down to 3.6%. Many workers also retired early during the pandemic, raising pressures on wages. The move to onshore jobs will add further tightness to the labor market, and higher wages could squeeze corporate profit margins.

Strength of U.S. Dollar

The stronger dollar has negative implications for global economic growth. As the Fed has raised interest rates faster than other central banks, the dollar has strengthened against other currencies. A stronger dollar makes U.S. exports more expensive for foreign buyers. Corporate profits may also take a hit because the stronger dollar weakens the earnings of U.S. multinationals. That could lead to lower earnings forecasts and lower price-to-earnings (P/E) ratios.

Consumer Confidence

There has been a sharp drop in consumer confidence. The Conference Board’s expectations index—based on consumers’ short-term outlook for income, business and labor market conditions—fell to 66.4 in June, the lowest level since March 2013, from 73.7 in May, signaling increased risk of a recession. The University of Michigan consumer sentiment index also reached a record low of 50.0 in June. Lower consumer confidence could slow spending and economic growth.

Housing Costs

Housing costs, especially rents, keep rising. Housing represents about one-third of the CPI, and because of the way it is calculated, it works with a significant lag. Rents have been rising sharply and will likely continue to do so as housing supply is limited, and labor markets are strong. That will create upward pressure on rents and the CPI. Higher rents also could create a substantial burden on budgets and reduce consumer spending.

key economic indicators

Investment Planning Implications

Investors dislike uncertainty—when the risk of a negative outcome increases, they demand larger risk premiums, driving P/Es down. Although this means companies are expected to have lower earnings, lower stock valuations may provide opportunities for patient investors.

Empirical evidence demonstrates that buying stocks when investor sentiment is negative has led to much higher returns than when investor sentiment is positive. The logic is simple: negative sentiment leads to low prices, large risk premiums and high expected returns. Returns are likely to be poor only if predictions turn out to be worse than expected.

Unfortunately, since not even good forecasters can tell us what is going to happen, the best you can do is make sure your plan anticipates negative shocks appearing regularly and addresses risks you are most concerned about, reducing them to an acceptable level.

Investors should always build the risk of an unexpected “black swan” event into their plans.

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. 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.

© 2022 Buckingham Wealth Partners. Buckingham Strategic Wealth, LLC, & Buckingham Strategic Partners, LLC (Collectively, Buckingham Wealth Partners). R-22-4113

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The “4 Rs” of Behavior Finance

In his book, “Thinking, Fast and Slow” , psychologist Daniel Kahneman examines the two brain systems that drive the way we think while also shining light on the common biases that impact decision making. As it turns out, our brains are hard-wired to make fast, intuitive and emotional decisions shaped by our own biases and generalizations. These mental glitches, Kahneman proposed, make us feel like we are using good judgement even though the results of these impulsive decisions often get us into trouble. Without pausing to engage the rational area of the brain when faced with a big decision, especially financial ones, you risk causing more harm than good.

High levels of uncertainty about the economy, rising inflation, global supply chain disruption, soaring gas prices and expectations of increased market volatility can stoke fear in the minds of investors planning their financial futures. This may even cause some to consider sidestepping the risk of loss by making an impulsive change to their investment strategy. Building off Kahneman’s work and behavioral economics, strategies have been developed to help investors make better decisions during periods of instability.

A methodical framework for decision making can assist in slowing down responses, hopefully reducing the likelihood that emotions and irrational thinking will get in the way. The Kaplan Behavioral Financial Advisor (BFA) course has broken this process down into “The 4 Rs”:

R #1: Recognize the Situation

When you become overwhelmed, pause and take a moment to verbalize what you are feeling. Describe the reasons for these emotions and identify the actions you are considering. Think about any previous experiences that may be shaping your perception, such as the 2008 market crash. Try to assess whether you are in a clear state of mind and if your decision could derail a well-designed financial plan.

R #2: Reflect on Your Values

Do your best to zoom out your perspective and verbalize the big picture as well as your desired long-term financial outcomes. Consider if any biases are shaping your worldview and if those biases are potentially clouding your decision-making ability.

R#3: Reframe Your Viewpoint

Describe how this potential decision relates to your values, goals and moral principles. Bring the focus back to the long-term view and concentrate on what truly impacts the likelihood of success for your financial plan. Identify any instances where a market pullback creates opportunity such as investing cash reserves to “buy low”.

Think about how similar instances in market history played out:

  • Did markets recover?
  • Have you previously made a decision with your investments that didn’t pan out?
  • Is market volatility expected when invested for the long-term?
  • What would be the impact on your values and goals if you made this decision?

R#4: Respond Purposefully

Make an educated decision based on the overall picture, not the immediacy of a market drop or a perception that you know something about the market others do not. Seek counsel from your trusted financial advisor on the best decision for your situation.

The “4 Rs” approach is designed to help you make decisions that are emotionally reflective rather than emotionally reflexive. Remember, think SLOWLY! If you have questions about your portfolio, speak with your advisor about your concerns.

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About the author: As a divisional manager, Sean Brooks enjoys working with advisors in every area of their practice, from helping solve investment problems to sharing ways to run more efficient practices and build stronger client relationships. Prior to joining Buckingham, Sean was with AssetMark in a business development role, and he also worked as a banker and financial representative with JPMorgan Chase in Arizona and Illinois. Sean also spent time working as an estate planning consultant helping families avoid probate. He attended Loyola University of Chicago and earned a business degree in economics.

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