CARES Act and Tax Update

Blog post #438

The IRS, Federal Reserve, Congress and the President have enacted various measures in response to Covid-19. The goal in this post is to provide you with a summary of key information that could be most relevant to you.

Income Tax Return and Payment due dates delayed

The normal Federal tax deadline of April 15, 2020 for filing tax returns and making payments has been moved to July 15, 2020. Most states have made the same change.

  • You do not need to file any extension.
  • You don’t need to make payments that would have been due on 4/15/20…until July 15, 2020, if you owe money or would have needed an estimated payment for 1 Qtr. 2020.
  • The due date for funding a 2019 IRA or Roth IRA is now July 15, 2020.
    • Key point: If you intend to do this, you should make your deposit now…while the market is low (maybe it will be higher in July, we don’t know).
  • However, the 2nd quarter estimate due date of June 15, 2020 still applies….. so yes, that is now due before the 1st quarter due date of 7/15/2020. Leave it to the IRS!
  • If you usually have withholdings from IRA Required Minimum Distributions, you may not need to take the RMD in 2020, so you may need to pay estimated taxes in 2020. Discuss this with your CPA or tax preparer.
  • For more information on these changes, see the following link for a more detailed Q&A.

CARES ACT

The CARES Act was signed into law about a week ago and will impact almost everyone in the US. We are trying to provide a summary of the most relevant information of wide-ranging legislation, that impacts businesses, individuals, and others.

Within a day after the bill passed the Senate, one of the thought leaders of our national firm, Jeffrey Levine, produced a 25-page detailed summary (if a 25-page article can be both detailed and a summary!). We are providing a link here to the website, where you can find a PDF of Jeff Levine’s article. Jeff is the Director of Advanced Planning for Buckingham Strategic Partners, our national back office firm. Jeff is one of the country’s top financial planning’s experts. The link is at Kitces.com, where Jeff and his partner, Michael Kitces, write lengthy articles on financial planning. Michael is one of the top national speakers on financial, tax and estate planning, and both are great additions and resources to our firm, as they are now part of our national alliance partner firm.

As each topic is addressed below, if you want more detailed information, please see the instructions at the bottom of the post on how to access the PDF article* to view the appropriate page within the PDF.

Recovery Rebates for Individuals:

  • Married joint filers to receive $2,400, other filers receive $1,200, increased by up to $500 per child under age 17.
  • However, high income taxpayers will not receive any money at all.
    • Phaseouts are based on your AGI (adjusted gross income) for 2018, or 2019, if you have filed a 2019 income tax return, beginning at the following levels:
        • Married Joint: $150,000
        • Head of Household: $112,500
        • All other filers: $ 75,000
    • The exact amount of the phaseout depends on how many children you have under the age of 17.
    • See chart on top of page 8 of the PDF, for more details on the refundable tax credits.
  • The initial “recovery rebate amount” will be based on whatever income tax return you have filed, either 2018 or 2019, subject to when the IRS processes your return, and when they process/review whether you are eligible.
    • The rebate amount will later be adjusted based on your actual 2020 federal income tax return.
    • Unfortunately, if you earned $200K in 2018 and 2019, but expect to earn only $75,000 in 2020 due to this outbreak, you will not get a recovery check until mid-2021. However, if you make more in 2020 than in prior years, you won’t have to pay back the excess.
    • Key point: If you earned significantly less in 2019 than in 2018 or would fall below the above threshold levels for 2019, but not in 2018, it would make sense to file your 2019 Federal income tax return as soon as possible. 
    • Key point: If you had a baby or adopted a child in 2019, you should file your 2019 Federal income tax return as soon as possible, if you think you will qualify for a recovery payment.
    • See pages 6-10 of the PDF for more information on the refundable tax credits.
  • No one knows the exact date of when these payments will be issued. They may not be issued until May.
    • If the IRS has a bank account on file that was used for a 2018 or 2019 direct deposit refund or withdrawal, they will use that bank account.
    • If the IRS does not have a bank account on file, and you are eligible, it will be mailed to your last address of record.

Required Minimum Distributions are Waived in 2020:

  • Key point: If you are subject to taking a Required Minimum Distribution (RMD) from a retirement plan, such as an IRA or 401(k), which is generally those over age 70 ½, you don’t need to take an RMD for 2020.
    • We will discuss this with each of our clients as 2020 progresses. 
    • Key point: If you don’t need the RMD money for living expenses, this can substantially reduce your 2020 income taxes and allow you to keep the RMD amount in your IRA.
    • If you have already taken your RMD in the past 60 days, there are ways to return the funds, if you don’t need them. Contact us to discuss this!
    • Key point: If you will not be taking an RMD for 2020, but in past years you have used the RMD for your federal or state withholdings, you should contact us or your tax preparer, to discuss paying tax estimates, the first of which will be due on 6/15/2020.
    • This also applies to those who are beneficiaries of stretch distributions, for IRAs you received upon an inheritance.
    • For more information, see pages 11-15 of the PDF.

Business provisions:

  • Key point: If you have a small business and have been impacted by Covid-19, you should carefully review these provisions as soon as possible. Time is important.
    • Business owners should likely contact their CPA for guidance, as these programs interact, and you cannot do all of them. 
  • There are several different programs.
    • Today, April 3, the Paycheck Protection Program and forgivable loan program is scheduled to begin accepting applications via SBA approved banks. As of now, this is to be handled on a first-come, first serve basis. The final loan application has not been released as of Thursday am. These loans are forgivable if a business keeps their workforce largely intact and use the loans for eligible expenses such as payroll, rent and utilities. There is no guidance as to how fast these loans will be processed and funded.
    • If you have a business of less than 500 employees, you should review the provisions on pages 20-24 of the PDF, and evaluate which of the following makes the most sense for your situation, with your advisors:
      • Paycheck Protection Program,
        • If your business get this loan, it is not eligible for the next two items.
      • Employee Retention Credit for Employers,
      • Deferral of payment of payroll taxes, and
      • Net Operating Loss rules changed
  • Due date for funding pension plan contributions for calendar year 2019 plan year is extended to January 1, 2021.

Unemployment Compensation Benefits Expanded:

  • Key point: Self-employed individuals and others who are generally not eligible for unemployment, will now be eligible for up to 39 weeks of benefits.
    • This is a major change and can benefit many individuals who have been impacted, who run their own businesses. Think of independent contractors, consultants, hairdressers, massage therapists, people who own small retail stores, etc. 
  • Unemployment benefits can be increased by states by up to an additional $600 per week, for up to four months, to be funded by the federal government. This will be in addition to whatever state benefit you would be eligible for.
  • If you are now unemployed or have no revenue due to the state mandated shutdowns, you should check online with your state unemployment website. They may not yet be updated to provide for the self-employed provisions (MI was not as of a few days ago), but you should try to apply as soon as possible.
  • Unemployment compensation has been extended to 13 weeks.
  • See pages 19-20 of the PDF.

Coronavirus-Related Distributions:

  • You can take up to $100,000 in distributions from an IRA, employer-sponsored plan (like a 401(k) or 403(b) or a combination of both, during 2020, if you have been significantly impacted by Covid-19 (definition is broad, but there are guidelines).
    • These are exempt from the 10% penalty, for those under age 59 ½.
    • The distributions are not subject to normal 20% federal withholding rules.
    • They can be repaid within 3 years, if you want to. If you pay tax on a distribution and then repay the distribution within 3 years, you can go back and claim a tax refund.
    • They are subject to taxable income, either all in 2020 (if you estimate that this would be the lowest income year) or spread evenly over tax years 2020, 2021 and 2022.
    • See pages 11-12 of the PDF for more details

Loans from Employer Sponsored Retirement Plans:

  • You can borrow $100,000, increased from the normal $50,000. Payments can be delayed for up to one year. See page 13 of the PDF for more details.

Charitable Contributions:

  • If you no longer can itemize, you can now deduct $300 of cash charitable contributions beginning in 2020.
  • If you can afford to make major charitable contributions, and are so inclined to do so, you can deduct up to 100% of your AGI for “qualified charitable contributions” in 2020.
    • If you contribute more than your AGI, the excess can be carried forward 5 years.
    • Contributions to donor advised funds and family charitable foundations are prohibited.
    • Key point….we all know there is great need at this time….if you are so charitably inclined, please contact us or your tax advisor to discuss this impact.

Student Loan Borrowers:

  • Provisions include payment deferral until September 30, 2020, for which no interest will accrue, but it appears you must contact your loan provider, as well as employers can pay up to $5,250 of student loan obligations and that will be excluded from compensation. Please review pages 16-18 of the PDF.

Medical and Healthcare Provisions:

  • The items for “qualified medical expenses” for HSAs, MSAs and FSAs have been expanded, to include over the counter medications and female care products.
  • Other items, such as Covid-19 related expenses and telehealth services are considered covered. See pages 18-19 of the PDF.

For a chart and overall summary, see top of page 4 of the PDF, which covers rebates, IRA distributions, other provisions, unemployment compensation, and small business benefits.

There are likely to be changes to some of these items and this article does not cover all provisions of the CARES Act. Please consult with us or your tax professional before making any decisions.

Please forward this to others who may find it helpful, especially small business owners and those who can benefit from the new self-employed unemployment compensation, as those people may not be aware of these new provisions.

Source:

*Click on article link above.  Once you reach the article, click the printer and then choose PDF.  After choosing PDF, a box will pop up and you will click download your PDF.  Then you will want to save the PDF to your desktop.  After saving to your desktop, you will see a PDF saved as kitces.com… The CAREs….  Click on this to view the PDF.

Tax Relief Q&A

The IRS recently released answers to some commonly asked questions about the tax relief provisions designed to help taxpayers and investors dealing with economic fallout from the COVID-19 pandemic.

The primary benefit of this relief is an extension of time to file and pay your taxes. Specifically, what
would have been due on April 15, 2020, is now due on July 15, 2020.

Here are updated answers to the questions we’ve been tracking:

Question: Do I qualify for this relief?
Answer: Any individual, trust or business (incorporated or otherwise) is eligible for relief. If the return or payment is due on April 15, 2020, the new due date is July 15, 2020. If the return or
payment is due on a date other than April 15, 2020, this relief doesn’t apply.

Question: Is the $1 million maximum the same for everyone?
Answer: No, income taxes owed by individuals, trusts, corporations and other non-corporate
businesses that are due on April 15, 2020, regardless of the amount, are now due on
July 15, 2020.

Question: I will not be able to file my 2019 income tax return by April 15, 2020. What do I need to do?
Answer: Simply put, nothing! Your new due date for payment and filing is July 15, 2020.

Question: What about my first quarter estimated federal tax payment, normally due on April 15, 2020? When do I pay that?
Answer: Because it is a payment due on April 15, 2020, it is now due on July 15, 2020.

Question: What if I am still unable to file my 2019 income tax return by July 15, 2020?
Answer: You can request an automatic extension of time to file your tax return, which would
extend the final due date to October 15, 2020. To avoid any interest and penalties, you
will need to pay any remaining tax that you estimate is due with the extension request
filed by July 15, 2020.

Question: Does this mean that I can wait until July 15, 2020, to make my 2019 traditional IRA, Roth IRA and/or HSA contribution?
Answer: Yes. The deadline for making contributions to IRAs and HSAs is also extended to July 15, 2020.

Question: I own a business and have payroll taxes due in April. Does my business get relief?
Answer: No, normal filing and deposit due dates for payroll taxes continue to apply.

Question: My business owes the employer contribution for our company retirement plan. When is this due?
Answer: If payments would have been due on April 15, 2020, they are now due on July 15, 2020.

Question: If I’m not mistaken, my second quarter 2020 estimated tax payment is due on June 15, 2020.  Are you saying that, if I take advantage of this relief, I’m going to have to pay my second quarter 2020 estimated tax payment before I pay my first quarter 2020 estimated tax payment?
Answer: That’s correct.

Question: What if I’ve already filed my taxes and have a payment scheduled to be automatically deducted from my account on or before April 15, 2020? Will this payment automatically be rescheduled to July 15, 2020?
Answer: No, the payment will not be automatically rescheduled to July 15, 2020. If you do nothing,
the payment will be made on the date you chose. If you scheduled your payment as part of
filing your tax return by authorizing an electronic funds withdrawal from your account, call
IRS e-file Payment Services 24/7 at 1-888-353-4537 to cancel and reschedule your payment.

Question: I’m expecting a refund. Is there any reason for me to wait to file my tax return?
Answer: If you expect a refund, it is generally better to file your tax return as soon as
possible. Nothing associated with this relief changes that equation.

 

It’s important to note that this relief only applies to 2019 federal income tax liabilities. If you owe
state taxes as well, be sure to check with your tax preparer to see if any additional relief is available
at the state level.

This information could change quickly and without much or any notice if additional guidance
becomes available, so we will continue to monitor it and keep you informed.

 

© 2020 Buckingham Strategic Partners. All rights reserved.

The New World-Part 2

Blog post #437

As I write this Wednesday evening and early Thursday, global stock markets have had 2 very good days in row, and Thursday is starting out well.

I want to be positive and optimistic, as that is my nature, but I think we are far from out of the woods yet. The patient (unfortunately, far too many real patients, as well as the US and global economies) are still on life support.

Just to be clear….my first concern is for everyone’s health. But as a financial advisor, and not a scientist or medical professional, these thoughts are only about the financial implication of the crisis we are now in. All of us.

The strong stock market this week was due to the positive news that the US Congress and President are “close” to reaching an agreement on the largest fiscal stimulus / bridge loan / corporate financing package in the history of the world. They have been close to getting this done for days, but as of my writing, the Senate, but not the House, has passed the legislation and the President still has not signed it.

Note to clients….when the final legislation is enacted, we will send out an update. Our back- office firm’s national Direction of Education (tax and financial planning expert) sent out 56 tweet thread late last night….we are on this!)

This legislation is vital and necessary, along with the strong action and quick responsiveness by the Federal Reserve to keep the financial markets flowing well, especially the corporate and municipal bond markets.

Ever heard the saying “progress not perfection?” This is the case. The legislation and Federal Reserve actions are to save the US economy and to try avoiding an economic calamity….not all the details matter…preventing an economic catastrophe during or after the health crisis is what matters. These programs are intended to provide various forms of liquidity, or bridge loans/financing, so as many people and businesses can remain afloat through the health crisis.

Without these actions and programs, companies large and small, as well as individuals and small businesses, could face horrible liquidity and financial problems.

Let’s be realistic. This may not be the bottom for the stock market. We just don’t know.

  • Historical financial data teaches us that when markets begin to be very volatile, they tend stay volatile for a while.
  • This is important information that you need to understand, internalize and get used to. 

With this much uncertainty….and there is a lot of it, markets will likely continue to be very volatile for a while. We have planned for this. We are acting accordingly, on your behalf. You need to continue to be mentally prepared for the possibility of worse health and financial news, and stock market declines, especially if the health news worsens or does not get better within the next month or so.

This is just a guess, but I don’t think this will be the final major legislation that will be necessary before this crisis is over. There were many programs and legislative acts during the 2008-09 crisis. This legislation and Federal Reserve liquidity steps are already way larger than all the 2008-09 actions, by multiple times (per CNBC this morning). The markets were wanting good news this week and traded higher on it. That’s how markets function. Financial markets react quickly to news, good or bad, as we have clearly seen in recent weeks.

We just want you to be realistic and prepared for either outcome, good or bad. And this is the basis of our investment strategy right now.

  • We can’t predict the timing of any of this, which is why we are recommending to gradually rebalance, to gradually buy stocks at these levels.
  • We know it makes sense to follow the discipline of buying low and selling high… and we will continue to do that, but with caution, for most clients.

What the world is experiencing is far from normal. It has affected our everyday lives in many ways. Companies and health professionals are innovating. Ford will be producing ventilators. I read last night that anesthesiology machines may be able to be converted to ventilators with a simple change in parts, which could provide tens of thousands of ventilators very quickly. Solutions will be found. Hopefully those with knowledge and expertise in many areas (medicine, leadership, technology, supply chain, manufacturing, etc.) will adapt, be creative and resilient.

But in terms of the stock market, this is normal. Yes, fortunately and unfortunately.

  • Stock markets annually go down temporarily (peak to bottom) on average about (14%) most years.
  • And one in every 5 years or so, stocks temporarily go down much more, sometimes 20% – 30%, or way more, which is called a “bear market.”

Since the end of World War II, in 1945, there have been 16 bear markets in the S&P 500, which I am defining for this purpose as declines of around 20% or more (there were a few that were almost 20%, so I’m counting those…a temporary loss of 19.5% feels almost like a temporary loss of 20%, right?).

That is an average of 1 bear market every 4.7 years, which is around the long-term average.

But this is the key…and thank you for those of you who are still reading…

The bottom point of the S&P 500 at the end of some recent bear markets….

Do you see the clear long-term trend? The losses are temporary on the long upward trend of our society. Stocks have far outperformed cash, or other types of fixed income, over the long term. Stocks have provided more than 7% annually over the long-term inflation rate.

With rewards, comes risk. Keep the faith. Buckle in for more volatility. And stay healthy and  safe!!

As always, we are here for you, and family members or friends who could use our guidance and assistance during this crisis.

 

 

Note: The S & P 500 Index is an index of companies, of which the companies in the Index has changed dramatically over the years. It is composed of 500 of the largest publicly held companies in the US. Our firm believes in global diversification as well as holding small and medium sized companies, both in the US and Internationally. Using the S & P 500 Index is for educational and illustrative purposes, and the trends explained above are generally representative of global stocks.

Responding to a New World

Blog post #436

The world financial markets have been crushed by the Covid-19 outbreak.

But we are here for you and working hard, taking actions, thinking about the future and relying on rational thinking.

As I write this Wednesday night and Thursday morning, I will try to explain a few things and tell you what we have been doing and how we are proceeding, on behalf of our clients.

We are not panicking. We have all been calm, rational and dealing with this day by day….talking, planning, coordinating and communicating with each other and with you, our clients. Please contact us if you need to talk to us. That is what we are here for.

We have been through financial crises and other large market declines before, and we will have to deal with other crises again in the future. This time feels very different, because of its health-related cause. But every past and future problem that becomes a financial crisis just starts with a different event. This time will not be different….we will recover.

The health concerns and reality may worsen before they get better. The personal, economic and stock market toll may continue to worsen, as well, before they improve. Positive signs are out there, as it seems like federal, state and health leaders, as well as the corporate community, have realized the seriousness of the situation, and creativity and leadership are becoming more effective. Examples are that drug testing and medical solutions are occurring at a more rapid pace, and companies in the auto industry may begin to produce much needed ventilators.

Be safe.  Be healthy. Be responsible for yourself and your family.

We have been doing tax loss selling and will continue to do so, as warranted. As discussed last week, this will save you money in the future, when taxable dividends or capital gains are recognized, and they will be offset by the tax losses that we are recognizing very aggressively right now. These are important actions that will save you real money in the future.

We are beginning to purchase stocks, in a gradual and disciplined manner, in accordance with your Investment Policy Statement (IPS) asset allocations. We are beginning to rebalance client accounts, and will be reaching out to you, regarding these steps. We talk about this discipline with every client, before we start to invest for you. We don’t know where the bottom will be, so we do not plan to rebalance client accounts all at once, unless someone wants to, at this time. We will most likely do this in a gradual, disciplined and unemotional manner, over a period that will be based on future market movements.

In the long term, it is best to buy stocks when others are scared. We can’t predict the bottom. We may be far from the bottom. But we know that stocks are much cheaper than they were a month ago. If you believe that we will survive and recover, then history teaches us to gradually start buying at times like this.

If you have excess cash, consider a gradual program of purchasing. If you participate in a work related 401(k) or similar retirement plan, you should consider accelerating your funding, as long as you have ample cash reserves.

We have reviewed the fixed income holdings of our client accounts. This is one area that this crisis is very different than past ones, as most businesses are facing almost a complete loss of revenue for future weeks or months. Strong government and Treasury Department action will be needed to provide bridge funding for many large corporations. Similar creative vehicles will be needed to be established for small and medium sized businesses. At the time of purchase, all fixed income securities were investment grade, as well as FDIC guaranteed CD’S, government and municipal bonds. We are carefully monitoring these. We have strict diversification guidelines in place, which we have again reviewed, to ensure that each client only holds a very small amount, generally not more than 1-2%, of any one issuer. While it is possible that some bonds may be sold prior to maturity, due to economic stress or difficulties, we are being conservative and pro-active in our actions. We do not purchase any junk or below investment grade securities, if they are not investment grade at the time of purchase.

We do not invest in funds or products that limit liquidity in advance. Some investment managers utilize funds that restrict when you can sell or get out of an investment. We have never recommended these types of products. While we cannot guarantee that every security will be able to be sold in a distress-type situation, we have designed your portfolio to be able to be as liquid as possible, within the investment objectives that were agreed upon.

We have reviewed all our client accounts who regularly withdraw funds, to ensure that there is adequate money (at least 6 months of withdrawals) in money market funds. This has been a cash management practice, to maintain ample cash reserves, so we are not forced to sell, for regular withdrawals. We reviewed these types of accounts again in the past week, to ensure that we have taken the appropriate steps so you will have adequate liquidity, as desired.

Make sure you have ample, or extra, cash on hand….either in your bank account or in the fixed income portion of your accounts with us. If you are not sure, contact us. This is very important during times of uncertainty.

Diversification is working, even though you may not realize it. Yes, the stock funds that we invest in are down significantly. However, there are other investment styles that may be facing much greater losses, which were preventable and controllable. For example, if you had loaded up on dividend paying energy stocks or certain other stocks, your losses over the past years would be huge and more than double the decline of the S&P 500 this year alone. Energy stocks such as Exxon-Mobil, Enterprise Products Partners and Chevron are down 60-70% over past years, and Boeing is down almost 80%. This is why we believe in diversification and do not recommend owning individual stocks for the majority of your investments.

What you should NOT be doing:

  • Do NOT invest short-term money into the market.
  • Do NOT take more risk than you can stomach or handle, for your long-term financial plan.
  • Do NOT borrow money or invest on margin.
  • In general, do NOT prepay very low interest rate loans, especially if you are concerned about your job, income or cash reserves. In the longer term, we will review these issues with you individually, based on what happens with interest rates.

We have a disciplined philosophy and one that we are confident in. We are adhering to our long-term plans and reviewing what we think needs to be modified. We encourage you to do the same. We know that it is not always easy, but those who can be resilient and patient will get through this.

We made it through 2008-09. We are doing our best to help you make it through this crisis.

Again, please contact us by phone or email if you want to reach us. 

Please do what you need to….. to be healthy, both mentally and physically.

 

Dealing with this situation

Blog post #435

 

The world has changed significantly, which has affected health concerns and investors’ finances.

What has happened?

The coronavirus outbreak was the first negative to impact global, then US stock markets, in past weeks.

On Monday, US and International stock markets were dramatically impacted by the unprecedented steps taken over the weekend by Saudi Arabia, to both increase oil production and reduce the price they charge for oil. These actions, along with the already reduced global demand for oil due to the coronavirus, caused the price per barrel of oil to plummet from $63 per barrel at the beginning of 2020 to around $33 at mid-week.

As this week has progressed, stock markets continued declining sharply as the reality of the Covid-19 outbreak and the lifestyle changes that will be required, have taken hold.  The economy will slow dramatically and many economic sectors will be greatly impacted.

Interest rates, which were already at historic lows, have fallen even further. Credit markets are concerned about weakening economies, companies that may have difficulties due to lack of demand due to coronavirus, as well as energy companies and their lenders, due to the huge decrease in oil prices.

What do we think going forward?

Clearly the world has changed significantly over the past few months, and even over the past week.

We do not know when financial markets will stop failing, when the coronavirus outbreak will be contained or mitigated, or when oil prices will return to rationale levels.

What we do know is that we must focus on key things…such as what we can control and what matters to each of us.  I will be blunt, the health issues are very concerning. I have tried to keep this mantra in mind, as I try to focus on what we can control, and not control. Our everyday lives are going to be disrupted for a period of time…and none of us know for how long. The health issues have now been compounded with financial concerns, due to the drop in stock values. Hopefully, our federal, state and local leaders, both medical and political, as well as those leaders across the globe, take serious, appropriate and necessary actions in the immediate future.

In terms of your portfolio, the pain of losing money is not pleasant for anyone. I am invested in similar or identical stock funds and fixed income securities as our clients, so my family has lost money in stocks and been cushioned by fixed income, just like you have.

To be a successful long term investor requires resiliency, which nearly every client we have has shown over the past weeks.  The coming weeks and months may continue to be very challenging. To reap the long-term rewards of the stock market, you need to remain invested during both good and bad markets.  No matter how difficult, this will be temporary.  There will be medical solutions and an economic recovery from this health outbreak.

When we meet with clients at or near retirement age, we frequently discuss their allocation to fixed income and their withdrawal rate. We remind them that their fixed income assets should last them for many years, and in many cases, for 10 or more years.  We call this your foundation. This means that if you can live off of your fixed income assets for a long time, you have a strong foundation and you don’t need to be as worried about what the stock market is doing today, or even over the next few years.

The reality of living through a sharp and scary decline like we are experiencing can still be difficult, so let’s go through the scenario and then some history. These are important concepts.

For example, if someone has a $3 million portfolio and is allocated 50% to stocks and 50% to fixed income, they would have $1.5 million of fixed income investments. If this hypothetical client was withdrawing $150,000 per year from this portfolio, that is a 5% withdrawal rate. That is realistic. The $150,000 per year is 10 years of their fixed income assets ($150,000 / year x 10 years), not including any interest earned on the fixed income. Thus, they don’t need to actually use the stock market investments for at least 10 years. There will be time for the stock investments to recover from periods of decline, such as we are incurring now. This is the type of portfolio and mentality that we want to develop with all of our clients.

If you are younger, and in the accumulation and savings phase of your life, you should continue to invest and save for the long term.  You should want to buy when others are scared and are selling. Keep adding to your retirement and regular savings plan. Make contributions now, for retirement plan contributions that may be due later in 2020 or even 2021.

We don’t know when global stock markets will recover, but we are confident that they will. We are quite confident that 3-5-10+ years from now, diversified holdings of global stock markets will be higher than they are today.

Some facts and history….

Since 1979, the US Russell 3000 Index (the 3,000 largest US traded companies) has averaged about a 14% decline at some point during each year (called an “intra-year” decline). While we invest in a globally diversified portfolio and the 2020 intra-year decline has now far exceeded 14%, this data is still instructive.

  • About half of the years since 1979 have had declines of more than 10%.
  • About 1/3 of the years had declines of more than 15%. (Significant declines are not fun, but more normal than most of us realize).
  • However, calendar year returns were positive for 34 of the 41 past years.**

This shows that intra-year declines are normal, but positive years and recoveries are even more the norm. While the cause for the steep decline is different this time, as it is health related,  we don’t think the long-term effect will be different….there will be a recovery.  You will need to be patient and are advised to adhere to your asset allocation plan.

From July, 1926 until December 2019, for almost 100 years, the broad US stock market has returned around 9.6% per year, before fees and trading costs. Obviously, there has been great year-to-year variability (many up and down years) to reach that 9.6% per year average.

As the chart below shows, after declines of 10%, 15% and 20%, the broad US stock market (comparable to the Russell 3000 Index) has generally performed better than average in the 1, 3 and 5 year periods following such declines. Stocks generally show strong returns after steep declines.*** This is the reward for the risk and volatility you need to endure.

What are we doing and recommending?

Most importantly, we are here for you, if you want to talk to us. Please call or email us. We know this is a difficult time, and may likely continue to be, especially with both health and financial concerns.

To save you future taxes where possible, we have placed trades all week to recognize tax losses, especially for newer clients and those that have added money to their accounts this year and in recent years, depending on the specific investment. We are not waiting until later in the year or until year end to do this. We aggressively monitor your taxable accounts for these opportunities…..providing a silver lining to the market turbulence, whenever possible.

We will be reviewing client accounts for stock purchasing opportunities, by rebalancing or if you add new money to your investments. For the long term, the coming weeks and months offer times to buy. We can never know when the market bottom will be. But just as investments were very profitable for those that had the courage to buy during the declines of 2008-09, we expect those that buy over the coming days and weeks will be rewarded in the long term. We call this rebalancing, as your fixed income allocation has increased and your stock allocation has decreased in the past month, we would recommend to sell fixed income and buy stocks.

As interest rates have dropped, if you have a mortgage that is above 4-4.5% and you plan to stay in that home for at least 3-5 years, you should consider refinancing. If you want to discuss this with us, please contact us.

If other tax or financial changes are enacted in response to this situation, we will update you on those as they occur.

We are prepared to work remotely, if that is recommended or required. If that becomes a reality, we will provide clients with the necessary contact information. We have procedures in place and each member of our firm has worked and done business remotely many times in the past, within a secure technological environment. We have also discussed these scenarios with our business partners and are confident that we can function property and be able to provide you with excellent service, remotely.

We hope each of you and your families stay in good health.

Sources:

** Recent Market Volatility, Dimensional Fund Advisor’s, Issue Brief, March 4, 2020.

***US Equity Returns Following Sharp Downturns, Dimensional Fund Advisors, March 9, 2020.

Berkshire Hathaway Annual Letter thoughts

Blog post #434

Warren Buffett’s Berkshire Hathaway Inc.’s 2019 Annual Shareholders Letter was released Saturday, February 22nd, before the coronavirus outbreak had a major impact on US stock markets.

This letter has been required reading for me for as long as I can remember. There are always lessons to be gleaned from Buffett’s letter which can help all of us to be better investors and smarter financially.

Due to the additional market volatility caused by the coronavirus outbreak, we wrote about that last week. If you have not read it, the link is HERE.

Below are my comments, followed by selected portions of Buffett’s writings (in italics)from the 2019 Berkshire Hathaway Annual Letter.

WWM: Buffett stresses the value of long term investing every year, and this year he emphasized this point through the importance of compounding…how money grows in value over time by compounding.

Buffett: He cites a book review written by economist John Maynard Keynes, of a book written in 1924, Common Stocks as Long Term Investments, by Edgar Smith. “…Thus there is an element of compound interest operating in favour of a sound industrial investment. Over a period of years, the real value of the property of a sound industrial is increasing at compound interest, quite apart from the dividends paid out to the shareholders…

Buffett: “…when business ownership was sliced into small pieces – “stocks” – buyers in the pre-Smith years usually thought of their shares as a short-term gamble on market movements. Even at their best, stocks were considered speculations. Gentlemen preferred bonds.

Though investors were slow to wise up, the math of retaining and reinvesting earnings is now well understood. Today, school children learn what Keynes termed “novel”: combining savings with compound interest works wonders.”

WWM: The following are Buffett’s thoughts on investing, interest rates and the future. THE FOLLOWING PARAGRAPHS SHOULD BE REQUIRED READING. He feels that in the long run, stocks will far outperform fixed income investments, but you must be prepared to handle huge declines in stocks along the way. If you can do that, he feels you will be well rewarded. We agree with this analysis.

Buffett: Buffett does not view Berkshire’s vast stock holdings “as a collection of stock market wagers – dalliances to be terminated because of downgrades by “the Street,” an earnings “miss,” expected Federal Reserve actions, possible political developments, forecasts by economists or whatever else might be the subject du jour.

What we see in our holdings, rather, is an assembly of companies that we partly own and that, on a weighted basis, are earning more than 20% on the net tangible equity capital required to run their businesses. These companies, also, earn their profits without employing excessive levels of debt.

Returns of that order by large, established and understandable businesses are remarkable under any circumstances. They are truly mind-blowing when compared to the returns that many investors have accepted on bonds over the last decade – 2.5% or even less on 30-year U.S. Treasury bonds, for example.

Forecasting interest rates has never been our game, and Charlie and I have no idea what rates will average over the next year, or ten or thirty years. Our perhaps jaundiced view is that the pundits who opine on these subjects reveal, by that very behavior, far more about themselves than they reveal about the future.

What we can say is that if something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low level businesses now enjoy, it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments.

That rosy prediction comes with a warning: Anything can happen to stock prices tomorrow. Occasionally, there will be major drops in the market, perhaps of 50% magnitude or even greater. But the combination of The American Tailwind, about which I wrote last year, and the compounding wonders described by Mr. Smith, will make equities the much better long-term choice for the individual who does not use borrowed money and who can control his or her emotions. Others? Beware!

WWM: Berkshire has owned energy / utility companies for 20 years, starting with an Iowa based utility. Their use of converting wind to electricity and how Berkshire Energy has gone from a traditional to a wind-based utility, while keeping rates far lower than their competition, which benefits the residents and users of this utility, is quite instructive. This Iowa based utility will be wind self-sufficient by 2021 (a feat he says no other investor-owner utility located anywhere can state)….and profitable and providing huge cost savings to their client base. Sounds like win-win to me. Required reading!

Buffett: We’ll start with the topic of electricity rates. When Berkshire entered the utility business in 2000, purchasing 76% of BHE, the company’s residential customers in Iowa paid an average of 8.8 cents per kilowatt-hour (kWh). Prices for residential customers have since risen less than 1% a year, and we have promised that there will be no base rate price increases through 2028.

In contrast, here’s what is happening at the other large investor-owned Iowa utility: Last year, the rates it charged its residential customers were 61% higher than BHE’s. Recently, that utility received a rate increase that will widen the gap to 70%.

The extraordinary differential between our rates and theirs is largely the result of our huge accomplishments in converting wind into electricity. In 2021, we expect BHE’s operation to generate about 25.2 million megawatt-hours of electricity (MWh) in Iowa from wind turbines that it both owns and operates. That output will totally cover the annual needs of its Iowa customers, which run to about 24.6 million MWh. In other words, our utility will have attained wind self-sufficiency in the state of Iowa.

In still another contrast, that other Iowa utility generates less than 10% of its power from wind. Furthermore, we know of no other investor-owned utility, wherever located, that by 2021 will have achieved a position of wind self-sufficiency. In 2000, BHE was serving an agricultural-based economy; today, three of its five largest customers are high-tech giants. I believe their decisions to site plants in Iowa were in part based upon BHE’s ability to deliver renewable, low-cost energy.

WWM: A huge portion of Berkshire Hathaway’s profits and growth has come from their massive insurance business. Buffett states that while they have had underwriting profits in 16 of the last 17 years, he does not expect that to repeat. The risks are massive and he is prepared for huge negative outcomes. He knows catastrophes will occur….he (and we) just don’t when or why.

Buffett: “Danger always lurks. Mistakes in assessing insurance risks can be huge and can take many years – even decades – to surface and ripen. (Think asbestos.) A major catastrophe that will dwarf hurricanes Katrina and Michael will occur – perhaps tomorrow, perhaps many decades from now. “The Big One” may come from a traditional source, such as wind or earthquake, or it may be a total surprise involving, say, a cyber attack having disastrous consequences beyond anything insurers now contemplate. When such a mega-catastrophe strikes, Berkshire will get its share of the losses and they will be big – very big. Unlike many other insurers, however, handling the loss will not come close to straining our resources, and we will be eager to add to our business the next day.

WWM: Berkshire Hathaway pays billions of dollars a year in Federal corporate tax….and hopes and expects to pay even more in the future. Incredible statistic for a company that started 55 years ago and generated losses for many years.

Buffett: In 2019, Berkshire sent $3.6 billion to the U.S. Treasury to pay its current income tax. The U.S. government collected $243 billion from corporate income tax payments during the same period. From these statistics, you can take pride that (Berkshire Hathaway) delivered 1.5% of the federal income taxes paid by all of corporate America…In most future years, we both hope and expect to send far larger sums to the Treasury.

Source: 2019 Berkshire Hathaway Annual Shareholder Letter, released Saturday, February 22, 2020. See Berkshirehathaway.com.

Disclosure: Brad Wasserman, author of this blog post, owns a small number of Berkshire Hathaway shares, which were purchased to enable me to attend Berkshire’s annual meeting. All my other stock investments are in DFA mutual funds, which is one of the primary mutual funds companies that we recommend to our clients.

Coronavirus: Update 2

Blog post #433

Since we first wrote about the coronavirus two weeks ago, the virus has spread to more countries including the US, and global stock markets have declined significantly this week.

However, even with the declines of the past week, clients should remember that your fixed income allocations have increased in value (as interest rates have declined) and provide a strong foundation of stability for your portfolio and any near term cash needs.

Talk to us if you have concerns: We want to emphasize that if you have specific financial concerns or want to discuss the impact of this situation to your portfolio or financial future, please contact us.

While we stress a long-term approach to investing, if you have short-term concerns, now is the time to talk to us about that. That is what we are here for.

Keeping things in perspective: please remember that point drops in stock market indices can sound much worse than the percentage changes. As we wrote about a few weeks ago, a 1,000 point decline in the Dow Jones Industrial Average (DJIA) may sound worse than a 3-4% decline.

The future? We cannot make any predictions or forecasts of what the future will hold or what the full impact of the coronavirus will be. As global health officials are not able to do this, we certainly cannot anticipate what will occur in the coming weeks or months.

There are a wide range of possible impacts and outcomes. It is very possible that the short term (the next 3-6 months) financial impact to companies and stocks may be far greater than the actual health issues or number of deaths caused by the coronavirus.

It is possible that the the spread of the coronavirus to the US and other parts of the world will cause much greater disruptions to supply chains and every day lives and economic activity than was generally anticipated only a week or two ago. If this were to be the case, then it is possible that US and global stock markets may decline much further in the near term. There is no way to know this.

However, we think this issue is quite different than what occurred in 2008-2009, as that was a material economic decline that took years to recover from. If government and health officials act efficiently and pharmaceutical companies are able to promptly develop vaccines and other treatments, the coronavirus should not be a long lasting disruption to consumers, countries and companies…..and stock markets would likely bounce back before the coronavirus matter is fully resolved.

We do not recommend making any specific investment changes due to the coronavirus outbreak. As we have discussed in the past, to try to “trade” or “time the market” based on a specific event, you must be correct in your timing…twice. As markets react to news and information so quickly, as well as rumors, this is not likely to be a successful strategy.

While it is very possible that global stock markets may continue to incur losses and be much more volatile due to the coronavirus in the short term, we feel a strategy of adhering to your long-term investment plan and asset allocation makes the most sense.

Stock prices are most directly impacted by current and future earnings. Companies based in the US and globally will be impacted, but to varying degrees. Most companies thus far have not determined what the financial impact will be and very few companies have released specific statements or changed their future earnings guidance. We presume that many more companies will be announcing reduced short-term earnings guidance in the coming weeks or months, which is what prompted part of the market sell-offs this week.

We want our clients to know that they have very little direct exposure to companies that are actually based in China. For example, if you have a 60/40% stock/fixed income allocation, Chinese-based companies account for approximately 2-3% of the globally diversified portfolio that we recommend.

However, it is important to note that the impact of the coronavirus now appears to be impacting globally beyond Chinese companies or those that have historically relied upon Chinese consumers, Chinese tourism and spending for a significant part of their revenue and profits. The virus may lead to consumer and supply chain disruption issues on a global basis.

There may be further short-term declines, which could be significant, and stock market swings based on health reports, either positive or negative, due to the coronavirus. Volatility may continue to increase if the coronavirus outbreak persists in China, continues to spread in a more significant manner to other parts of the world, and if the real or perceived impact affects every day lives in the US.

Interest rates have continued to drop in the US, due to the coronavirus. This has created another opportunity for mortgage refinancing, or low rates if you are looking to purchase a house, as mortgage rates for 15 and 30 years are extremely low.

The price of oil and some other commodities have dropped significantly due to the reduced demand, because of the major shutdowns occurring in China and reduced economic activity elsewhere.

We again encourage you to talk to us if you have concerns about these current conditions.

If you know of family or friends who could benefit from this type of advice and guidance, please share this post with them, and let them know we are available to help them as well.

Being prepared

Blog post #432

We strive to design a financial plan for you.

We recommend and build a portfolio for you, that will help you reach your financial goals.

But sometimes the unexpected happens.

A crisis. A health emergency. A death in your family.

Are you and your loved ones prepared?

We are not talking about whether you have life insurance…we are focusing on the more mundane, but critically important ability to handle basic financial tasks, in our high-tech society.

Are you and your family adequately prepared?

If something were to happen to your parent or spouse, does someone know how to access bank accounts and pay bills?

Do you know how to log into all of their devices, such as their cell phone, tablet (iPad), and/or desktop or laptop computer?

As we talk to clients, there are a significant number of families where one person handles all the financial matters….and the other person or children would not know how to handle these important tasks, or does not know the logins and passwords needed to get access or pay bills.

We want to stress to you the importance of talking to your spouse or other family members (children or even grandchildren) about these things so they are informed and prepared, in advance.

We know that many of you are resistant to using password manager programs, even though we have strongly recommended these many times in the past. The issue we are addressing here goes far beyond using a program.

It’s about information…..whether you or others know how to do things, and do multiple people that are close to you have the knowledge, ability and data (logins and passwords) to handle important financial tasks, if you or another family member are not capable of doing these things?

Do a practice drill. Spend 15 minutes with your parents or loved ones. Talk about this. It will be beneficial.

Can your close family members access your computer or cell phone, your primary bank account, pay some bills and view your credit card accounts?

Do you each have credit cards in your own name? Every couple should have at least one major credit card that is not a joint credit card account.

Just the opposite, every couple should have at least one bank account that is joint, or have an individual bank account that can be accessed in an emergency with at least $10,000 in it.

We plan for you. We help to build your wealth.

But you must take responsibility to do these things, for you and your loved ones.

The 15-30 minutes that you spend now to do this could save you a lot of problems one day in the future.

Talk to us about your family. We want to help you, your children, (and even your grandchildren), with any financial matter that is important to you and your family.

If you know of family or friends who could benefit from this type of advice and guidance, please share this post with them, and let them know we are available to help them as well.

Investing implications of Coronavirus outbreak

Blog post #431

As of now, the coronavirus has not had a material impact on the investments of our clients.

US and global stock markets have generally been quite resilient and have held up well so far, despite the ongoing health issues, which have led to various consequences in China and are impacting other parts of the world.

We cannot make any predictions or forecasts of what the future will hold or what the full impact of the coronavirus will be. As global health officials are not able to do this, we certainly cannot anticipate what will occur in the coming weeks or months.

We do not recommend making any specific investment changes due to the coronavirus outbreak. As we have discussed in the past, to try to “trade” or “time the market” based on a specific event, you must be correct in your timing…twice. As markets react to news and information so quickly, as well as rumors, this is not likely to be a successful strategy.

While it is very possible that global stock markets may incur losses or more volatility due to the coronavirus, we feel a strategy of adhering to your long-term investment plan and asset allocation makes the most sense.

Companies based in the US and globally will be impacted, but to varying degrees. Companies are not able to anticipate or determine what the impact will be, or very few companies have released specific statements or changed their earnings guidance. It is likely that some firms, and their stocks, could be affected, such as companies that have major businesses in China (such as Starbucks and luxury retailers), companies that rely on travel to or from China (such as certain airlines, hotels, luxury retailers and the gaming industry), or companies based in China or that rely on China for the manufacturing and supply of products (Apple, for example).

We want our clients to know that they have very little direct exposure to companies that are actually based in China. For example, if you have a 60/40% stock/fixed income allocation, Chinese-based companies account for approximately 2-3% of the globally diversified portfolio that we recommend.

However, it is important to note that the impact of the coronavirus may globally extend beyond companies that have historically relied upon Chinese consumers, Chinese tourism and spending for a significant part of their revenue and profits. The virus may lead to issues for companies on a global basis that rely on Chinese companies as part of their supply chain. These companies would be held throughout a typical portfolio and the impact cannot be determined.

There may be short-term impacts and stock market swings based on health reports, either positive or negative, due to the coronavirus. Volatility may increase if the coronavirus outbreak persists in China or spreads in a more significant manner to other parts of the world, or the US. The stocks of individual or groups of companies may begin to be impacted more as they are better able to assess and report changes in revenue and future earnings expectations due to the impact of coronavirus on their business.

Interest rates have dropped in the US, due to the coronavirus. This has created another opportunity for mortgage refinancing, or low rates if you are looking to purchase a house, as mortgage rates for 15 and 30 years are extremely low. The price of oil and some other commodities have dropped significantly due to the reduced demand, because of the major shutdowns occurring in China.

We want to emphasize that if you have specific financial concerns or want to discuss the impact of this situation to your portfolio or financial future, please contact us.

While we stress a long-term approach to investing, if you have short term concerns, now is the time to talk to us about that. That is what we are here for.

Are you improving your habits?

Blog post #430

For most of us, wealth or a successful career does not happen overnight.

Growing your wealth or accomplishing almost anything, such as improving your health or building a business, takes time. Success in these types of endeavors rarely happens quickly. Massive success does not always require massive action. In reality, most successes are usually the result of changes that seem small and incremental, which accumulate over months and years and then compound into remarkable results…..if you’re willing to stick with good habits for years.

In the book Atomic Habits by James Clear, he explains how very small changes in your habits and routines can have a significant long-term positive impact on your life. Although I have only started the book, I highly recommend it already.

Clear explains his title….” atomic” means an extremely small amount of a thing which is the source of immense energy or power. “Habit” is a routine or practice performed regularly.

Improving by 1% per day or per year does not seem like much, and may not even be noticeable at the time, but over the long run, can be very meaningful.

Likewise, small declines or mistakes here and there hinder progress and can eventually lead to a problem. Think of your daily food decisions, fast food visits or poor financial decisions, such as if you tried to time the stock market and failed at it. Did you ever get out of the market and then miss a huge recovery before you got back in?

If you are working and trying to build your retirement, are you increasing your retirement plan contribution % every year, when you get a raise?

  • If you did that, you would be saving more every year, and still taking home more money.
  • If you increased your retirement contribution every year, say from 5%, to 6%, to 7% and continuing each year…..that would have a huge impact on your savings and wealth accumulation over 5-10-15 years.

When my three children were young, we saved a few hundred dollars per month for each of them for college. Along with the habit of saving gift money they received from relatives, such as grandparents, and sacrificing some trips to ensure that we continued to save, we were able to save enough for each of their college costs. The growth of these accounts did not happen overnight….it was the result of starting at birth and continuing to save for more than 15 years for each of them. Also, we were disciplined and stuck with the investments, regardless of the ups and downs of the stock market.

In his bookClear stresses that “habits are the compound interest of self-improvement. The same way that money multiplies through compound interest, the effects of your habits multiply as you repeat them. They seem to make little difference on any given day and yet the impact they deliver over the months and years can be enormous. It is only when looking back two, five, or perhaps 10 years later that the value of good habits and the cost of bad ones becomes strikingly apparent.” **

If you save money each month or regularly, you don’t become a millionaire overnight. If you go to the gym or workout a few days in a row, you are not suddenly in great shape. For most of us, we make a few changes, try to change our habits….but don’t see quick results, so we don’t make the change a permanent habit for the long term.

Clear empathizes over and over that success is the product of daily habits that you stick with, not a once in a lifetime transformation, such as one great stock pick or starting the latest fad diet for a few days or weeks. You should be more focused on your trajectory. Are you moving in the right direction? We can help you with your financial planning, financial habits and trajectory. A personal trainer can help you with your health trajectory.

  • Are you spending less than you are earning?
  • Are you saving regularly?
  • Are you exercising regularly, doing both aerobics and strength training?

Your outcomes (results) are a lagging measure of your habits (what you have done in the past for many years). Your net worth is a lagging measure of your financial habits (which we can help you with). Your weight is a lagging measure of your eating habits. Your clutter (and mine) is a lagging measure of your cleaning habits and organizational skills (and mine). You get what you repeat.

Clear introduces two concepts that I found very instructive late in the first chapter. He said we all go through a “Valley of Disappointment” when we adopt new habits. We start exercising and don’t see quick results. It is frustrating. So, we get disappointed and don’t stick with it long enough to see the compounding benefits. Most of us quit the new habit when we are in the Valley of Disappointment. We want to see the results and impact, but the key of the compounding process is that the most powerful outcomes and changes are delayed into the future. And this is part of the reason that so many new habits are started and not adhered to for the long term, let alone for weeks or months.

To see a meaningful difference, we must adhere to new habits and practices long enough to reach the breakthrough, or what he calls the “Plateau of Latent Potential.” When you are saving monthly for college or retirement, the account may not grow much month to month, but then you realize at some point, which may be years into the future, that your monthly or quarterly habit of savings is becoming real money. The account has grown to a significant level. The habit is/was worth sticking to!

While I didn’t know about the “Valley of Disappointment” or the “Plateau of Latent Potential” until this week, I experienced exactly these feelings over the past few months. I hurt my back, which also caused pain down one leg and behind my knees in mid-November. After seeing my internist and a physical medicine doctor, I began physical therapy in mid-December. He prescribed a series of exercises I was to do three times daily, which took 20-25 minutes each time, as well as go in for physical therapy visits 2-3 times per week.

I started the exercises and was very frustrated around Christmas and New Years. I was spending about 60-75 minutes per day doing the exercises, plus office visits….and was not feeling much improvement. In Clear’s terms, I was in the “Valley of Disappointment.”

Fortunately, I am disciplined. I wanted to feel better. I didn’t give up. I made these exercises a new habit. Three times a day, almost every day, regardless of whatever other activities and early morning meetings I had, I did these exercises and went to see the physical therapist as directed, 2-3 times per week. (If anyone needs a great PT recommendation in the Southfield, MI area, I will gladly provide you his name).

Then it happened. All of a sudden, I started to see real improvement. I hit the “Plateau of Latent Potential.” The daily exercises showed signs of paying off. My legs felt better. My back pain was progressively diminishing. That was even more motivating. So, I have continued doing all these new habits, the regular PT exercises and office visits, and the progress has continued.

And unexpectedly, I realized that I was also getting stronger, which was a great side benefit. This is another benefit of adhering to good habits. Sticking to good habits leads to continual improvement, which leads to self-improvement in other parts of your life.

For me and our firm, we have always been dedicated to self-improvement and continual learning. I have been a member of a study group for over 15 years that meets with other financial advisors from across the country a few times a year and have monthly peer telephone calls.

This dedication and habit of self-improvement had another benefit last week. I decided to begin reading Atomic Habits after a Q & A session I participated in last week in Austin, Texas, with the co-CEO of Dimensional Fund Advisors. I had heard of the book previously, but had not read it. Dave Butler, the co-CEO was asked about his habits, as a successful leader. He said he is a huge believer in the power of habits and that successful people develop small habits on a regular basis. And they are successful because they stick to them as long-term habits.

I have a habit of listening to others I respect, and Dave Butler is one of those people. When someone like that recommends a book, I usually go directly into my Amazon app and put the book into my cart. Habit. It then becomes an immediate reminder to consider reading that book. Another habit. Then I read a lot. Habit.

We want to help you develop and continue to have good financial habits.

If you spend less than you earn, you can save.

If you save and invest wisely over the long term, you can have financial success.

You can retire in a comfortable manner. You can travel if you choose. You can provide financial assistance to your children and grandchildren, as well as charitable causes.

A lifetime of good things can come from having good financial habits.

Talk to us about your family. We want to help you, your children, (and even your grandchildren), with any financial matter that is important to you and your family.

If you know of family or friends who could benefit from this type of advice and guidance, please share this post with them, and let them know we are available to help them as well.

** Source, Atomic Habits, James Clear, page 16 (italics added for emphasis)