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Most Valuable Retirement Assets

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“Retirement is like an iceberg, where 90% of what’s really taking place lies below the surface, absent from traditional financial plans and conversations” Robert Laura

For a long and fulfilling life in retirement, you need much more than financial resources and financial security. Consequently, there are more valuable retirement assets than financial.

Retirement planning is typically related solely to financial planning, all about numbers. It centers around one question: Do your financial assets — pension, 401(k)s/IRAs, Social Security, property, sale of a business, etc. — provide enough income to fund your desired retirement lifestyle?

5 Tips to Help You Stay Motivated to Exercise poster

You’ll need enough money to get by, of course, but you don’t have to be super wealthy to be happy. In fact, life satisfaction tops out at an annual salary of $95,000, on average, according to a study by psychologists from Purdue University. Enough money to never have to worry about going broke or paying for medical care is important. But financial freedom is not the only or even the most important piece of a fulfilling retirement.

Once you have a retirement plan in place, it is essential to focus on all those things money cannot buy. There are non-financial assets that studies show can improve life satisfaction in retirement. According to Kiplinger Magazine, they include:

  1. Good Health (Health is Wealth) – Good health is the most important ingredient for a happy retirement, according to a Merrill Lynch/Age Wave report. Studies show that exercise and a healthy diet can reduce the risk of developing certain health conditions, increase energy levels, boost your immune system, and improve your mood.
  2. Strong Social Connections (Emotional Well-Being) – Happier retirees were found to be those with more social interactions with friends and family, according to one Gallup poll. Further, social isolation has been linked to higher rates of heart disease and stroke, increased risk of dementia, and greater incidence of depression and anxiety. A low level of social interaction is just as unhealthy as smoking, obesity, alcohol abuse and physical inactivity.
  3. Purpose – Retirees with a sense of purpose or meaning were three times more likely to say “helping people in need” brings them happiness in retirement than “spending money on themselves.” Purpose can fall into three buckets, which means getting involved with your place of worship or spiritual pursuits, using your talents in service to others, and doing what you’ve always wanted to do.
  4. Learning and Growing – Experts believe that ongoing education and learning new things may help keep you mentally sharp simply by getting you in the habit of staying mentally active. Exercising your brain may help prevent cognitive decline and reduce the risk of dementia.
  5. Optimistic Outlook – Optimistic people tend to expect that good things will happen in the future. A fair amount of scientific evidence suggests that being optimistic contributes to good health, both mental and physical and may lower risk of developing cardiovascular disease and other chronic ailments and a longer life, and people with higher levels of optimism lived longer. Optimism is a trait that anyone can develop. Studies have shown people are able to adopt a more optimistic mindset with very simple, low-cost exercises, starting with consciously reframing every situation in a positive light. Over time, your brain is essentially rewired to think positively.
  6. Gratitude – People who counted their blessings had a more positive outlook on life, exercised more, reported fewer symptoms of illness and were more likely to help others. Gratitude enhances people’s satisfaction with life while reducing their desire to buy stuff.
  7. Dog Ownership – Older dog owners who walked their dogs at least once a day got 20% more physical activity than people without dogs and spent 30 fewer minutes a day being sedentary, on average, according to a study published in The Journal of Epidemiology and Community Health. Research has also indicated that dogs help soothe those suffering from cognitive decline, and the physical and mental health benefits of owning a dog can boost the longevity of the owner.

Retirement is major transition made up of many financial as well as life decisions. This is why it is important to create and to adhere a retirement plan as early as possible. That way you can spend more time focusing on everything else that equally matters.

References:

  1. https://www.kiplinger.com/retirement/happy-retirement/601160/7-surprisingly-valuable-assets-for-a-happy-retirement

Believe in Yourself and Know What You Want

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“If you don’t know what you want, it’s difficult—often impossible—to create or to get what you want in life.” Paul J. Meyers

People generally think they know what they want, but in practice, they do not. Generally, they don’t know what they really want in life or want to do. Additionally, they don’t know where to start, don’t have a plan, and don’t where to look for help to change that.

American author Mark Twain said he could teach anyone how to get what they want; he just couldn’t find anyone who truly knew what they wanted. Being unclear on what you want is one of the biggest stumbling blocks to getting what you want and success. Paul Meyer, founder of Success Motivation Institute, says if you’re not achieving the success you desire, it’s simply because your objectives are not clearly defined. Your goals need to be written, specific and measurable.

Hundred of thousands of people live there lives without purpose or goals. If you don’t want to spend your life wandering aimlessly, you should dedicate your waking hours determining exactly what you want in life and making plans to achieve those goals.

“Crystallize your goals. Make a plan for achieving them and set yourself a deadline. Then, with supreme confidence, determination and disregard for obstacles and other people’s criticisms, carry out your plan.” Paul J. Meyer

Knowing what you want.

If you don’t know what you really want in life, you’re not alone. While most people may think they know what they want, they’re often wrong.

Positive mindset, attitude and focus are vitally important attributes. The attributes are required to reach your goals and to realize your dreams. Thus, you should have a real understanding that you are responsible and capable of creating your reality regardless of the various obstacles you might encounter along the way. According to Inc. Magazine, here are six steps to help you achieve what you want:

1. Make a decision to have what you want, even if you don’t know how to get it. Most people are tentative when it comes to being specific. Instead, be confident in declaring what you want and be comfortable with the fact that you don’t yet have a plan, but you do know what you want.

2. Be clear about the details of the outcome. You should focus on what you do want, not what you don’t want. Practice visualizing yourself in the situation you want to create. You must be clear about what you want, like financial freedom, finding the perfect partner or a happy life. You must imagine the look, feel and sound of the perfect situation for you in your life.

3. Detach from the process. Not knowing “how” to do something holds many people back. The “how to do it,” instructions will appear after you have clearly defined what you want.

4. Believe in yourself and expect that it will happen. You need to believe in yourself and in the creative process. Winners expect to win. A shortage of belief causes many people to give up or never begin in the first place. Believe and set an expectation that what you want will, in fact, appear. It may not appear in the way you thought or at the precise time. You may even experience frustration, anxiety or impatience trying to control the outcome.

“When you believe in yourself, others tend to believe in you.” Paul J. Meyers

5. Be open to possibility when things don’t go your way. The path to the outcome may show up in ways you never imagined before. Suspend judgment of how things should be done and consider that the very thing you think is a deterrent may be the very thing you need to get what you want. Many times, people, circumstances and resources will show up, but you’ll miss the connection. This is where not knowing how, while keeping your eye on the goal, is important.

6. Practice gratitude. Be thankful for the things you have in your life right now. Look at your challenges as opportunities to grow. When you practice being thankful for specific events in your life, even when you don’t understand why they appear in your life, your ability to manifest accelerates almost to the speed of thought.

Getting what you want is not always simple and easy. Challenges, emotions, other people’s negative views and comments can set you back. But in the end, it all comes back down to your choice, commitment, effort and most of all…attitude. It’s essential to choose what you want, believe in your abilities, trust the process, have faith that it will happen and embrace the right attitude.

That is why “attitude is everything”.

“Attitude is everything,” according to Meyers. “It doesn’t matter where you are or what you’re doing, it all has to do with attitude. And then I have an I will-not-be denied attitude. And that’s an incredible thing to have. I don’t look to my weakness; I look to my strength. I don’t look to my problems; I look to my power. It’s all about attitude.”

“When winners choose a goal, their commitment to achieving it is firm and steadfast,” says Meyers. “When winners are confronted with hurdles or run into stumbling blocks, they go over them or turn them into stepping stones. Winners pursue their goals persistently until they succeed.”

Every day, you should strive for increased clarity around your goals and knowing what you really want. Having clarity about what you want keeps you moving toward it.

References:

  1. https://ninaamir.com/the-importance-of-knowing-what-you-want/
  2. https://www.lifehack.org/articles/communication/7-ways-find-out-what-you-really-want-life.html
  3. http://successnet.org/cms/goals/top-ten-reasons-people-dont-achieve-their-goals
  4. https://www.psychologytoday.com/us/blog/the-second-noble-truth/201711/you-dont-know-what-you-want
  5. https://www.inc.com/stephanie-frank/6-steps-to-get-anything-you-want-even-if-you-dont-know-how.html
  6. https://www.success.com/paul-j-meyer-what-it-takes-to-be-a-winner/

Determining Your Net Worth

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Net worth is the most important number in personal finance and represents your financial scorecard.

What Exactly Is Net Worth?

Net worth is what you own minus what you owe. Or, you can think of net worth as everything you own less all that you owe. “Net worth is what’s yours, really yours. First, add up the value of everything you own, then subtract the total amount of any debts that you have. What’s left is your net worth”, explained Robert LeFevre Jr., a certified public accountant and certified financial planner.

Calculating your net worth requires you to take an inventory of what you own, as well as your outstanding debt. And when we say own, we include assets that you may still be paying for, such as a car or a house. Start with what you own (assets): cash, retirement accounts, investment accounts, cars, real estate and anything else that you could sell for cash. Then subtract what you owe ( liabilities]: credit card debt, student loans, mortgages, auto loans and anything else you owe money on. Then boom—you’ve got your net worth.

The average net worth for U.S. families is $748,800. The median — a more representative measure — is $121,700, according to the Federal Reserve Board’s Survey of Consumer Finances.

Financial planners point out that the actual value of your net worth is less important than its growth over time. Tallying up your net worth every three to six months can help keep you on track and alert to potential problems.

Assessing Your Assets

Start with what you own — your assets. The biggest ones might be your home and your car. You will want to write down your best estimates of what these items would sell for today rather than their original purchase prices. Add in other big-ticket items you own — a motorboat, shop machinery, musical instruments, jewelry, art and any other objects worth $500 or more. Next, add in your financial assets, such as cash, bank accounts, certificates of deposit, brokerage accounts, individual retirement accounts and any other investments. The tally represents your total assets.

Listing Your Liabilities

Liabilities are what you owe. Start with your biggest debts first. Your mortgage balance and remaining student loans might top the list. You also may be paying off one or more vehicles. Next, add in your current balances for credit cards, revolving home improvement loans and other types of consumer debt. Finish up with any medical bills, liens, court judgments or back taxes that you currently owe. Figure the sum of all your liabilities, and then subtract it from your assets, giving you your net worth.

What the Number Means

Net worth is the value of the assets a person owns minus the liabilities they owe.

When it comes to net worth, it’s not the number, but rather what you do with it that matters most. If you have a negative net worth, you’ve already taken a great first step by identifying the problem. Net worth is one way to check your financial well-being and spot strengths and weaknesses.

By inspecting your debts, you can develop ideas to modify your spending habits. Your list of assets will help show you if you need to increase your savings and investments. Most of all, be realistic with your numbers — an accurate number is a lot more valuable than a “feel good” one.

Examine the trend of your net worth over time. If it’s not growing as fast as you would like, consider putting together a budget that will help get you moving in the right direction. The payoff will come when you find you have enough net worth to do the things that are important to you, such as traveling or engaging in hobbies that were once too expensive to afford.

There are many tactics you can use to build net worth. Start with a few basic steps:

  • Choose a debt payoff strategy. Create a plan for shedding burdensome liabilities. We recommend paying down debts with the highest interest rates first, an approach known as the debt avalanche. Another option you may consider is debt consolidation: rolling multiple debts into one payment.
  • Grow your money. Set up automatic savings, take advantage of competitive account interest rates and explore other ways to build wealth.
  • Be patient. The trend for most people is that net worth increases as they get older. Do your best to get on the right track and allow time for your efforts to pay off.

Your income is not included in a net worth calculation. Although, a drop in income can impact your net worth, which is essentially a calculation of all of a person’s assets — including cash in checking and savings accounts, minus liabilities.

A person can earn a big paycheck but have a low net worth if they spend most of the money they earn. On the other hand, even people with modest lifetime incomes can accumulate significant wealth and a high net worth if they buy appreciating or income producing assets and are prudent savers.

References:

  1. https://www.nerdwallet.com/article/finance/average-net-worth-by-age
  2. https://www.quicken.com/adding-it-all-determining-your-net-worth
  3. https://www.nerdwallet.com/article/finance/net-worth-calculator
  4. https://www.federalreserve.gov/publications/files/scf20.pdf

Successful Investors and Financial Literacy

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Investing is all about: Putting your money to work for you making more money.

One of the most glaring failures in the U.S. K-12 education system is the lack of even basic education in the areas of personal finance, budgeting, saving and investing. We’re becoming a nation in crisis with regard to our schools’ failure to prepare and educate K-12 students in personal finance and decision-making.

Financial illiteracy is an American epidemic and the crisis is growing, according to the non-profit American Public Education Foundation’s national report card on K-12 personal financial education: Vision 2020 Financial Literacy Report Card, 2019-2020. The 50-state review points to a nation in crisis with regard to our schools’ failure to prepare and educate K-12 students in personal finance and decision-making.

“America is facing a growing epidemic,” observed David A. Pickler, J.D., CFP®, ChFC®, CDFA®, an award-winning wealth advisor and education leader and one of Financial Times’ 400 Top Advisors. “Our nation is rapidly sinking into a sea of debt and financial dependency. We have created a collective culture where it is acceptable to pursue bankruptcy as a solution to irresponsible financial behavior and decision making. Each of us has a responsibility to change this culture, to become accountable partners in preparing our children to make sound financial choices, or face the consequences that will undermine America’s future and threaten our economic and national security interests.”

According to The Aspen Institute, 16% of suicides in the US occur in response to a financial problem. Further, a USA TODAY report states that less than one-fourth of young Americans ages 18 to 26 are “very optimistic” about their financial futures.

Financial literacy

One of the most successful traders in history once remarked, “If I’d only been taught in high school what I later managed to learn on my own about investing, I likely could have retired wealthy by age 35.”

Anyone can potentially reap massive financial benefits from simply taking the time to learn the basics about investing as early as possible in life. It’s not too late to begin building a fortune through investing, and the sooner you start, the sooner you’ll achieve your financial dreams.

There are two truths:

  • Taking the time to acquire investing knowledge and skills, whether at sixteen or sixty, will put you well ahead of your peers in terms of financial literacy and in terms of financial success.
  • An important “secret” about investing and wealth – “You can make a lot more money a lot faster by sending your money to work for you every day, rather than just sending yourself to work every day.”

The best, most successful investors are continually learning and continually honing and expanding their skills at making money in the financial markets.

Stocks, also known as equities, represent fractional ownership in a company, asset, or security. The stock market is a place where investors can buy and sell ownership of such investable assets.

References:

  1. https://www.theapef.org/post/vision2020
  2. https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/investing-beginners-guide/

Price-to-Free Cash Flow Ratio (P/FCF)

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Free Cash Flow (FCF) – The cash left after making investments in capital assets

The price-to-free cash flow ratio (P/FCF) is a valuation method used to compare a company’s current market share price to its per-share free cash flow.

Free cash flow (FCF) measures a company’s financial performance. It measures how much cash a business can generate after accounting for capital expenditures such as buildings or equipment. In other words, FCF measures a company’s ability to produce what investors care most about: cash that’s available to be distributed in a discretionary way.

FCF is calculated with the formula below:

Free Cash Flow = Operating Cash Flow (CFO) – Capital Expenditures

Most information needed to compute a company’s FCF is on the cash flow statement. As an example, let Company A have $22 million dollars of cash from its business operations and $6.5 million dollars used for capital expenditures, net of changes in working capital. Company A’s FCF is then computed as:

FCF = $22 – $6.5 = $15.5m

Free cash flow relies heavily on the state of a company’s cash from operations (CFO). The cash from operations deals with the cash inflows and outflows directly related to the company’s primary activity: selling a good or service. Cash from operations is heavily influenced by the company’s net income (excluding depreciation).  

The presence of free cash flow indicates that a company has cash to expand, develop new products, buy back stock, pay dividends, or reduce its debt. High or rising free cash flow is often a sign of a healthy and growing company that is thriving in its current environment.

For investors, free cash flow measures a company’s ability to generate cash, which is a fundamental basis for stock pricing. This is why some people value free cash flow more than just about any other financial measure out there, including earnings per share or book value per share.

Investors should understand that companies can manipulate their free cash flow by lengthening the time they take to pay the bills (preserving their cash), shortening the time it takes to collect what’s owed to them (accelerating the receipt of cash), and putting off buying inventory (preserving cash). Also, companies have some leeway about what items are or are not considered capital expenditures, and the investor should be aware of this when comparing the free cash flow of different companies.

Since FCF has a direct impact on the worth of a company, investors should hunt for companies that have high or improving free cash flow but low correlated market share prices.

Low P/FCF ratios typically can mean the shares of the underlying company are undervalued. Thus, the lower the P/FCF ratio, the “cheaper” and better value the stock remains. 

The best, most successful investors are continually learning and continually honing and expanding their skills at making money in the financial markets.

References:

  1. https://investinganswers.com/dictionary/p/price-free-cash-flow-ratio-pfcf
  2. https://corporatefinanceinstitute.com/resources/knowledge/valuation/what-is-free-cash-flow-fcf/
  3. https://investinganswers.com/dictionary/f/free-cash-flow

Avoid 5 Foods that Weaken Memory and Focus

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We are what we eat!

Across America, people are struggling with mental health issues. Nearly one in five Americans are living with a mental health condition, and the number of people seeking help for anxiety and depression is skyrocketing, reports Mental Health America. According to the organization’s 2021 State of Mental Health in America Report, “suicidal thoughts are increasing among both adults and children, and 9.7 percent of youth is experiencing severe major depression compared to 9.2 percent last year”.

Accumulating scientific research shows that a standard American diet rich in refined sugar and highly processed foods may increase the risk of developing or worsening various mental health conditions. But a nutrient-based diet rich in fresh fruits and vegetables; omega-3 fatty acids; nuts, seeds and legumes; whole grains, fresh herbs and spices; fish and olive oil, may help to support and enhance mental health.

Source: https://mhanational.org/issues/state-mental-health-america

A Harvard nutritionist and brain expert implores Americans to avoid 5 foods that ‘weaken memory and focus’, and increase the likelihood of depression and mental health issues. Dr. Uma Naidoo, a nutritional psychiatrist, brain expert, and faculty member at Harvard Medical School, studied how gut bacteria can trigger metabolic processes and brain inflammation that impact memory.

In her book “This Is Your Brain on Food”, Dr. Naidoo explains which food contributes to our mental health and “how a sound diet can help treat and prevent a wide range of psychological and cognitive health issues, from ADHD to anxiety, depression, OCD, and others”.

Refined sugar is well known for creating chronic inflammation in the body which can cause dysfunction of the immune system.

Existing studies indicate that you “may be able to reduce the possibility of dementia by avoiding foods that can compromise our gut bacteria and weaken your memory and focus”.

The standard American diet (SAD) foods “to avoid or cut back on to fight inflammation and promote brain health, sharp thinking and good decision-making” are:

  1. Refined sugars – a high-sugar or ‘high fructose corn syrup’ diet can lead to excess glucose in the brain, which studies have linked to memory impairments and less plasticity of the hippocampus — the part of the brain controlling memory. Consuming unhealthy processed foods like baked goods and soda floods the brain with too much glucose. And, be aware that refined sugar is “secretly added” to many popular food items like fast food french fries. Furthermore, sugar consumption triggers a cascade of chemical reactions in the body that promote chronic inflammation, according to Psychology Today. A little inflammation can be a good thing, since it can increase immune activity and blood flow to a wound. But in the long term, inflammation is a big problem. It disrupts the normal functioning of the immune system, and wreaks havoc on the brain.
  2. High-glycemic-load carbohydrates – your body processes high-glycemic-load carbohydrates in much the same way it does with refined or high fructose sugar. That means they can also raise your risk for depression. “Better-quality” carbohydrates were defined as whole grains, foods high in fiber, and those ranked low on the glycemic index (GI). The GI is a measure of how quickly foods convert to glucose when broken down during digestion; the faster a food turns into glucose in the body, the higher its GI ranking. Researchers discovered that people who were eating better-quality carbs, were 30% less likely to develop depression than those who were eating high-GI carbs. Low-GI carbs include green vegetables, most fruits, raw carrots, kidney beans, chickpeas and lentils.
  3. Fried foods – for brain health, it pays to reduce the amount of fried foods you eat. In fact, one study found that a diet high in fried foods was linked to lower scores in learning and memory. The likely reason is that fried foods can cause inflammation, which can damage the blood vessels that supply the brain with blood. Another study found that those who consumed more fried foods were more likely to develop depression in their lifetime. If you’re eating fried foods, try enjoying them just once a month.
  4. Alcohol – Archana Singh-Manoux, a research professor and director at the French Institute of Health and Medical Research, and her colleagues reported in the British Medical Journal that “people who had abstained from alcohol completely or who consumed more than 14 drinks per week had a higher risk of dementia compared to those who drank alcohol in moderation”. Thus, the key is moderation.
  5. Nitrates – nitrates are used as a preservative and to enhance color in deli slices and cured meats like bacon, salami and sausage. Nitrates may be also connected with depression.

What you eat does matter. Thus, by avoiding or eliminating these 5 foods from your diet, and by serving healthier, nutrient-rich food options, you can help to alleviate anxiety and depression, stabilize mood and promote mental health and wellness.

“The gut/brain connection helps us understand the food/mood connection,” explains Dr. Naidoo. “The enteric nervous system—that is, the nerves supplying the gastrointestinal tract—totals over 100 million neurons and communicates directly with the brain, or central nervous system, by way of the vagus nerve, which is responsible for our ‘rest-and-digest’ response. 

“It’s also vital to note that the gut contains the highest number of serotonin receptors, and the gut itself produces all the neurotransmitters that are also made in the brain, including serotonin, often called the happiness hormone. In turn, these neurotransmitters are implicated in sound mental health or potential problems when they are deficient.”

Bottomline, cleaning up your diet and eating healthier, nutrient-rich food, in most cases, will only help your mental health and emotional well-being.

Healthy diet, exercise, mindfulness, gratitude and sleep are all holistically important for your brain and mental health.

  1. https://www.nachicago.com/2021/10/29/372020/eat-well-to-feel-well-thanksgiving-fare-that-boosts-mental-health
  2. https://mhanational.org/issues/state-mental-health-america
  3. https://www.psychologytoday.com/us/blog/the-depression-cure/200907/dietary-sugar-and-mental-illness-surprising-link
  4. https://www.cnbc.com/2021/11/28/a-harvard-nutritionist-and-brain-expert-avoids-these-5-foods-that-weaken-memory-and-focus.html
  5. https://umanaidoomd.com

Retail Investor Inflation Strategy

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Inflation refers to an aggregate increase in prices, commonly measured by the Consumer Price Index (CPI).

The federal government has pumped trillions of dollars into the economy through deficit spending and stimulus measures since the COVID-19 pandemic began. Meanwhile, the central bank of the United States, the Federal Reserve, has dropped interest rates to near zero and has committed to keeping them there through 2023.

The Federal Reserve’s mandates are to manage the money supply and set the federal funds interest rate in an attempt to keep inflation within a reasonable limit. This reasonable level of inflation is maintained because it encourages people to spend now, thereby promoting economic growth, rather than saving, as a dollar today is worth more than the same dollar tomorrow on average.

A constant level of inflation helps maintain price stability and is thought to maximize employment and economic well-being. Investors expect returns greater than this “reasonable,” average level of inflation, and workers expect wage increases to keep pace with the increasing cost of living.

The Consumer Price Index tracks prices for a broad range of products such as gasoline, healthcare, and groceries. The CPI rose 6.2% in October from the same month in 2020, the biggest spike since December 1990, according to the Labor Department.

High and variable inflation is considered bad for both investors and the wider U.S. economy because it can eat away at the value of financial assets denominated in the inflated currency, such as cash and bonds, particularly longer term bonds with more interest rate risk.

The prospect of variable or high inflation introduces uncertainty to both the economy and the stock market, which doesn’t really benefit anyone. This uncertainty or variable inflation distorts asset pricing and wages at different times. Prices also tend to rise faster and earlier than wages, potentially contributing to economic contraction and possible recession.

“Cash is not a safe investment, is not a safe place because it will be taxed by inflation.” Ray Dalio, Bridgewater Associates

In an inflationary environment, “cash is trash” since inflation operates like a tax which causes saved dollars lose value over time. High inflation rates decrease the purchasing power of money and it discourages people from holding cash assets and saving. “Cash is not a safe investment, is not a safe place because it will be taxed by inflation,” Bridgewater Associates’ Ray Dalio, the founder of the world’s biggest hedge fund said on CNBC Squawk Box.

Here are several suggestions for investors to consider to counter the risk and derisive impact of inflation on assets and the economy.

  • Consider buying equity stocks like bank stocks or consumer goods companies that will benefit from higher inflation or higher interest rates. Banking, consumer staples, energy, utility, and healthcare equities are likely to perform well. Banks would come out ahead if the Federal Reserve eventually raises interest rates to combat inflation, and banks’ spreads between loans and deposits widen. Also, look for companies that benefit from rising labor costs and be very attentive to how much you pay for (e.g., the intrinsic value) of risk assets.
  • Consider buying TIPS, or Treasury inflation-protected securities, which are a useful way to protect your investment in government bonds. These U.S. government bonds are indexed to inflation, so if inflation moves up, the effective interest rate paid on TIPS will too. TIPS bonds pay interest every six months, and they’re issued in maturities of 5, 10 and 30 years. Because they’re backed by the U.S. federal government, they’re considered among the safest investments in the world.
  • Avoid fixed income assets such as corporate and government non-TIP bonds. If rates rise sharply, their principal value will take a major hit. If rates climb, then certificates of deposit, fixed annuities, bonds, and bond funds purchased today will look less attractive in the future. Similarly, buying a lifetime income annuity is less enticing in an inflationary environment. The monthly check you get for the rest of your life will lose value more quickly with high inflation.
  • Keep the right sort of debt. Don’t pay off that home mortgage or real estate investment mortgages early, you’re better off paying it off over time with watered-down dollars. Homeowners carrying fixed mortgages with low interest rates are in a great position. It’s highly recommended to refinance your mortgage to lock in low rates. If inflation takes off, homes prices are likely to climb and your fixed monthly payment may appear like a real bargain in a few years.
  • Consider commodities or gold. Investing in oil, natural gas, wheat and corn can be good hedges against inflation. Gold has traditionally been a safe-haven asset for investors when inflation revs up or interest rates are very low. Gold tends to fare well when real interest rates – that is, the reported rate of interest minus the inflation rate – go into negative territory. Investors often view gold as a store of value during tough economic times.
  • Make essential purchases and charitable giving. If consumers expect to spend money on home goods, renovations, car repairs, or other products and services, they might be better off doing so now, before prices climb even higher.
  • Expect rising health costs. Health costs have risen faster than inflation for years. The pandemic, which is driving some health professionals out of the field, could accelerate that trend.

Keep in mind that inflation is always happening within the economy, but hopefully at a relatively low and steady rate, and kept under control by the Federal Reserve. Investors with a long time horizon, a high tolerance for risk, and a high allocation to stocks shouldn’t be worried about short-term inflation fears.

However, it’s perfectly suitable and even desirable for retirees, risk-averse investors, and those with a short time horizon to have some allocation to inflation-protected assets like TIPS, REITs and bank stocks.

Rising inflation is a big concern for investors, but it remains to be seen whether current high levels of inflation will persist or end up being due to “transitory” factors. Investors will likely come out ahead using assets like equity stocks, REITs, short-term nominal bonds, and TIPS to hedge against inflation.

References:

  1. https://www.barrons.com/articles/protect-finances-from-inflation-51637782342
  2. https://www.optimizedportfolio.com/inflation/
  3. https://www.bankrate.com/investing/inflation-hedges-to-protect-against-rising-prices/

Wealthy Mindset

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“Training and managing your own mind is the most important skill you could ever own, in terms of both happiness and success.” – T. Harv Eker

The right mindset can help you on the road to wealth. And, your mind–which refers to your subconscious thoughts and beliefs–represents the biggest obstacle to your financial success and freedom.

The human mind has evolved over the centuries as a self-survival mechanism. It’s not designed to make you happy, or to help you build wealth and achieve financial freedom, it’s designed to protect you and look for and respond to things that are perceived to be wrong or life threatening.

Develop a wealthy mindset

If you want to be wealthy and achieve financial freedom, you have to stop thinking (and acting) like a broke person! It’s that simple.

A starting point in this process is to observe each thought as it comes into your mind and determine if it is supportive or non-supportive thought.

When you change the way you think about money, success, wealth, and financial freedom, you can create the life you’ve always wanted.

“Understanding your past attitudes towards money and changing them if need be”, according to T. Harv Eker. “The only way to permanently change the temperature in the room is to reset the thermostat. In the same way, the only way to change your level of financial success “permanently” is to reset your financial thermostat. But it is your choice whether you choose to change.”

At the end of the day, becoming successful in business is more about your mindset, passion, and determination than it is about your product or service. Mindset is what separates those who are truly successful from the people who are struggling to get by.

It is important that you discover what you’ve been conditioned or taught to believe about money that keeps you from having more of it, according to T. Harv Eker. By assessing your subconscious beliefs about money, you can finally break through the barriers to your financial success and freedom.

Anyone can create financial freedom if they have the right money mindset.

A true measure of your wealth is not your income, but your net worth. Your net worth grows with your selfworth. There is no time better than now to open yourself to receive massive amounts of financial success in your life.

It’s no secret that the wealthy tend to be frugal with their money. While they excel at saving and spending wisely, they also know that one of the best ways to grow their money and accumulate wealth is to invest some of what they earn in buying assets. 

If you aren’t doing what you want to do and you’re not where you want to be, there’s something you don’t know.

Three things involved to create wealth:

  • The right vehicle
  • The right knowledge (generalized knowledge, specific knowledge)
  • The right you (mindset, attitude, belief, habits & character)

Determine how good you are at what you do and get paid for the results your produce instead of your time.

Financial freedom

“It’s been proven time and time again that long-term investing can produce significantly more wealth than short term trading, yet many Americans fail to make the most of their best long-term investment vehicle: their workplace retirement plan,” writes Todd Campbell, author of Your Guide to Better Stock Picks, in a piece for The Motley Fool.

Top advice for developing a wealthy mindset, explains T. Harv Eker:

  • Do not to listen to the negatives in your life and believe in your own convictions.
  • Training and managing your own mind is the most important skill you could ever own, in terms of happiness and financial success.
  • If you aren’t doing what you want to do and you’re not where you want to be, there’s something you don’t know.
  • Enjoy every aspect of what you do: how you do anything is how you do everything in life.

References:

  1. https://www.harveker.com/blog/6-steps-for-wealth-in-business/
  2. https://www.forbes.com/sites/danschawbel/2012/02/06/how-to-master-the-inner-game-of-wealth/
  3. https://www.shortform.com/pdf/secrets-of-the-millionaire-mind-pdf-t-harv-eker
  4. https://www.millionairemindworld.com

Investing in China

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Ray Dalio, founder and chairman of the world’s biggest hedge fund firm, Bridgewater Associates, on CNBC Squawk Box.

Dalio has long been vocal in support of Chinese investments and Bridgewater Associates is among the largest foreign asset managers operating in China, according to Forbes. 

However, much of Wall Street disagrees and many American investors fled after China’s recent regulatory crackdowns on the technology and education sectors. 

Source: https://www.cnbc.com/2021/11/30/ray-dalio-says-cash-is-not-a-safe-place-right-now-despite-heightened-market-volatility-.html

Comprehensive Financial Planning

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Financial planning is an essential part of creating the life you want. Since failing to plan for the many inevitable financial challenges and problems that arise while living your day-to-day life is planning to fail.

To successfully face an uncertain financial realities and an uncertain retirement landscape requires careful planning. Unfortunately, far from planning with care, many Americans fail to make any plans at all — perhaps due to the complexity of calculating the money needed, the confusing array of information and resources, because they incorrectly anticipate that they will continue to work indefinitely, or simply due to fear.

A comprehensive financial plan must be customized to your long- and short-term life and financial goals. Financial planning is an essential part of creating the life you want today and in the future, protecting those you love and reaching your personal goals.

Today you might be concerned with:

  • Protecting your family from unforeseen issues arising from illness or disability
  • Funding a child’s education
  • Leaving a legacy for your family, a charitable cause or organization that is meaningful to you
  • Ensuring a stress-free and financially free retirement

Whether you’re focused on financial goals or need detailed wealth planning, a comprehensive financial plan should reflect your retirement savings and investing plan, specific needs like children’s education, as well as protection for your family in the event of death, disability or critical illness.

Why is a financial plan important?

You may have financial goals, but having a plan in place can help you prepare for life’s surprises and face them with confidence. A financial plan doesn’t need to be complicated. It simply needs to cover everything that’s important to you at this specific stage of your life, while balancing your risk tolerance with your time horizon.

Your financial plan serves as a guide allowing you to make necessary adjustments along the way.

Start your financial plan

A financial plan begins with an inventory of your finances, and determining your net worth and cash flow. You must first know where you are financially before creating a plan to guide you to your destination. Consider all of your assets (including property), your income and your expenses—both now and in the long term.

Next, define in writing and prioritize your financial goals. Are you concerned about saving and investing enough for retirement? Funding a child’s or grandchild’s education? Leaving a legacy—either for your family or a charitable organization? Saving for potential healthcare expenses and long-term care? Knowing your goals will help drive your plan.

You may also want to think about tax planning, estate planning and life insurance, and you may explore how a trust or an annuity could factor into your plan.

It’s vitally important to get started:

  • Begin saving now. The more you save, the better prepared you’ll be for life’s inevitable emergencies, retirement or other life goals.
  • Set a budget and live within your means. But as your salary increases, so should your savings and investing.
  • Contribute as much as you can to your employer’s 401k or other retirement programs.

Everyone has competing financial priorities and expenses, but making a budget may help you manage your expenses and find extra money to save and invest for your goals. Start with your income, essential expenses, and then add discretionary expenses.

Think about what would happen if you made no changes to your plan or your rate of savings. Is there a gap between where you are now financially and where you want to be? If so, you may need to reprioritize your budget to accommodate for more saving, or re-evaluate your goals.

Helping to protect the ones you love is the ultimate way to show you care.

Planning for retirement begins with your vision for the future. Thus, it’s important to picture the life you want to live when you retire. Think about how old you’ll be, what you plan to do and how you’ll live.

Ask yourself:

  • Do you plan to retire from full-time employment as soon as possible, or wait until you’re fully eligible for Social Security?
  • What’s it going to take to maintain the lifestyle you want in retirement?
  • Do you plan to travel more—whether that means dream vacations or extended visits to friends or family out of state?
  • What if your health takes a turn, since medical expenses increase as we age?

Anticipating whether you’ll have 20, 30 or 40 years of retirement will help you determine how much to save. It’s important to assess what you’ve saved, the rate at which you’re currently saving, and how much more you need to meet your goals.

Retirement savings options

For many of us, there are two primary retirement savings vehicles: Employer-provided plans and self-directed savings. Employer-provided plans often allow pretax savings for retirement, as do self-directed IRAs. Based on your goals, and the limitations of those types of plans, you may want to explore additional options.

Retirement saving is a long-term proposition. With the right diversification approach, you may be able to help protect your savings against market shifts while balancing risk to help your savings grow. Periodic reviews can help you see if you’re on track to achieve your goals.

Staying the course with saving

Life is full of surprises that will impact your financial situation—from welcoming a new baby, to saving for a child’s education, to losing a job or facing an unexpected illness. These life events can all create disruptions in your savings that force you to reevaluate your plan, your goals and expenses.

Keep focused on the amount you want to save for retirement, and try not to be distracted by potential purchases that you may see as financial opportunities. Buying a new car that’s on sale now may seem like a good idea, but it could mean you’re compromising your goals – causing you to wait longer and save less.

Conduct an annual review of your comprehensive financial plan to monitor situations that may impact your retirement savings, such as market risk and taxes. You’ll also need to be attuned to inflation, healthcare costs and longevity, which can impact your post-retirement income.

Work with a financial advisor, if necessary. Competing priorities can be challenging. A financial advisor can provide an objective voice that can help you stay focused on your goals, while providing insight that may help you determine if you’ll want to fine-tune your plan.

And as your circumstances change, your financial advisor can help you assess your plan and financial situation, allowing you to confidently take charge of your financial future.

Life never stands still and as a result, planning is vitally important. In your comprehensive financial planning, you must try to strike the right balance between achieving your financial goals today, with an eye out for living the stress-free and financially free retirement you always envisioned.

References:

  1. https://www.lfg.com/public/individual/planyourfinancialfuture/createafinancialplan
  2. https://cdn1-originals.webdamdb.com/13193_123040807
  3. https://www.lfg.com/public/individual/planyourfinancialfuture/createafinancialplan/saveforretirement
  4. https://longevity.stanford.edu/failing-to-plan/

Investors are advised to consider the investment objectives, risks, and charges and expenses of any asset carefully before investing.