Year: 2017

Shakespeare on Finance 3

Written by Minich MacGregor Wealth Management on November 28, 2017. Posted in Minich MacGregor Missive.

For centuries, people have studied Shakespeare for his wit and his wisdom. Over the past few months, we’ve been sharing some of that wisdom in a series of articles called:

Shakespeare on Finance

Shakespeare never actually wrote about finance, of course. But we’ve found many of his lines contain important financial lessons. In this article, let’s look at one such line from one of Shakespeare’s most controversial plays, The Merchant of Venice:

Quote #3:
“How far that little candle throws his beams!”
The Merchant of Venice, Act 5, Scene 1

Imagine a dark room containing a single burning candle. A candle is a small thing, and its flame even smaller. But it still shines brightly – and its light casts large shadows. So, in this case, the candle is a metaphor for an important truth:

Even small things can have big effects.

This is certainly true in finance. Let’s take a (very) hypothetical scenario:

John is 30 years old. He has $5,000 saved up for retirement. John decides to invest that money, achieving a 7% return every year. (Again, this is hypothetical.) Furthermore, John vows to invest an additional $100 every month, which he does for the next thirty years.

These days, one hundred dollars isn’t exactly a lot of money. But let’s look at what the result is:

By the time John turns 60, he’ll have accumulated $162,529 for his retirement.

I don’t care who you are. $162,529 isn’t chump change.

Now let’s imagine John invests $150 every month – just fifty dollars more.

By the time John turns 60, he’ll have accumulated $223,578.

How about $200 a month…for thirty-five years instead of thirty?

By the time John turns 65, he’ll have accumulated $417,741.

Now, you may be thinking, “Sure, that’s all well and good, but it’s just hypothetical.” And that’s true, it is. But the principle is what matters here. Small things can have big effects, especially over time…and especially when done consistently.

This doesn’t just have to be about investing, either. Taking that small tax deduction or applying that tiny tax credit can be a significant savings boost, over time. Taking ten minutes to check your credit score every year can make life a lot easier down the road, if you ever want to buy a new home, car, or even start a business. Creating a stronger password rather than just using “password123” can save you countless hours and money if it protects your identity from ever getting stolen. Shopping around for cheaper car insurance, looking for unclaimed money in old insurance policies, even turning off the lights…all these things add up over time.

We’ve worked with all kinds of people over our careers. Some were already wealthy. Others were just getting started on their way to wealth. But for everyone, the same rule applied: little things have big effects. They add up. They make a difference.

We promise you: when you look back on your life, adding up all those small, seemingly insignificant decisions you made along the way, it’s not uncommon to think:

Look how far that little candle threw its beams.

So, as you work toward your financial goals, always remember: it’s the little things that matter!

In our next article in this series, we’ll move away from plays and into poetry, examining a line from the first thing Shakespeare ever published.

Check out other articles on Finance
Shakespeare on Finance 2 – Avoid Impulsive Decisions	The Tip of a Lifetime
Shakespeare on Finance 4	Trump Tax Plan 2017
Shakespeare on Finance 5	Tweets & Tariffs

Trump Tax Plan 2017

Written by Minich MacGregor Wealth Management on October 19, 2017. Posted in Minich MacGregor Missive.

Since President Trump’s election, the markets have climbed to record heights, partially thanks to investor enthusiasm for Trump’s policies.

One of those policies is tax reform. After months of behind-the-scenes talks between the White House and Capitol Hill, Republicans have at last released their plan to update the tax code.

Tax law is murky, and rarely much fun to read about. But because taxes have such a big impact on your finances, we think it’s important to look at the Republicans’ plan so that we can do some planning of our own.

First, a word of warning. The Republican tax plan is just that – a plan. It’s not yet a bill, and certainly not a law. The overarching goal seems to be to cut and simplify the tax code, and while that sounds great on paper, it’s proven extremely difficult to do in the past. A lot may change as Congress labors to get an actual bill onto the president’s desk.

Now, without further ado, some particulars:

The plan makes these changes for individuals¹

Currently, there are seven tax brackets. The plan changes that number to three, with rates of 12%, 25%, and 35%. (The current top rate is 39.6%, while the lowest is 10.)
Standard deductions for individuals and families increase to $12,000 and $24,000 respectively.
The current child tax credit of $1,000 increases as well, though no specific number has been released.
Introduces a new $500 tax credit for non-child dependents, like an elderly parent.
Removes the estate tax, as well as many common itemized deductions. However, the plan reserves deductions for mortgage interest, charitable giving, and retirement savings plans.

The plan makes these changes for businesses²

The current corporate tax rate is 35%. The Republicans’ plan would lower this to 20%. Small businesses, meanwhile, would pay 25%.
Companies can write off business investment expenses, though only for five years. A company’s overseas earnings will no longer be taxed, although a new foreign minimum tax would be introduced to “prevent businesses from moving abroad to avoid U.S. taxes altogether.”¹

There are some clear winners from this plan. On the surface, it appears many Americans will enjoy a tax cut, and the abolition of the estate tax would be welcome news to many investors.

Corporations, meanwhile, would also pay less tax, which could have a significant effect on their bottom lines. This, in turn, may drive the markets up even higher.

But there are still many things we don’t know…and that could cause major headaches for Republicans down the road as they try to hammer out an actual bill.

What We Don’t Know

First, we don’t know how much these cuts will cost, as neither the White House nor Republican leadership have released any estimates. It’s worth noting, however, that previous studies of similar plans estimated costs stretching into the trillions. In fact, “a preliminary estimate from the nonpartisan Committee for a Responsible Federal Budget found that the policies in [the plan] would cost between $2 trillion to $2.5 trillion over a decade.”¹

And that leads to the second thing we don’t know: how will all these tax cuts be paid for? As it stands, these cuts would lead to a dramatic increase in an already sky-high deficit, something neither party wants. But Republicans have not released any details about the payment question yet, though President Trump claims that economic growth stemming from lower taxes will do the job.¹

For these reasons, it’s an open question how much of this plan will actually make it into the final bill (assuming there is one). However, if Congress truly can pass significant tax reform, it will be the first since 1986…and it will undoubtedly have a major effect on investors and retirees.

We don’t believe there are any actions we need to take right now. We just want to make sure you understand some of these potential changes. The secret to healthy finances is good planning, which is exactly what we’re here for. While we do not provide tax advice, we can certainly confer with you and your tax advisor should any changes to the tax code take place.

In the meantime, rest assured that our team will keep an eye on Washington. If you have any questions, you can always reach us via phone at 518-499-4565 or toll free at 866-998-7331. If you prefer email, please contact us at info@mmwealth.com. In the meantime, have a wonderful week!

¹ Alan Rappeport & Thomas Kaplan, “Trump’s Tax Plan Cuts Rates for Individuals and Corporations,” The New York Times, September 27, 2017. https://www.nytimes.com/2017/09/27/us/politics/trump-tax-cut-plan-middle-class-deficit.html?mcubz=0

² Brian Faler, “Everything you need to know about the Big 6 tax plan,” Politico, September 27, 2017. http://www.politico.com/story/2017/09/27/everything-you-need-to-know-about-the-big-6-tax-plan-243205?lo=ap_d1

Shakespeare on Finance 2 – Avoid Impulsive Decisions

Written by Minich MacGregor Wealth Management on October 3, 2017. Posted in Minich MacGregor Missive.

For centuries, people have studied Shakespeare for his wit and his wisdom. Last week, we started sharing some of that wisdom in a new series of letters called:

Shakespeare on Finance

Shakespeare never actually wrote about finance, of course. But we’ve found many of his lines contain important financial lessons. This week, let’s look at one such line from perhaps the most famous play he ever penned:

Quote #2:
“Go wisely and slowly. Those who rush, stumble and fall.”
Romeo & Juliet, Act 2, Scene 3

In this scene, Romeo asks his mentor, Friar Laurence, to wed he and Juliet as quickly as possible. In response, the friar counsels Romeo to “go wisely and slowly. Those who rush stumble and fall.”

You can probably guess the lesson here: avoid the temptation to rush into rash, impulsive financial decisions.

Have you ever noticed how often people act on impulse? Advertising companies sure do. So do car dealerships, banks, and your local gym. In fact, every time you go to the checkout counter at a grocery store, take a moment to look at all those candy bars and tabloids strategically placed to take advantage of people’s impulsiveness.

Entire industries are built on capturing the human impulse. Most of the time these impulses are harmless enough, but the worst of them can have grave consequences. In fact, one of the greatest dangers to our financial health is that we don’t always think before we act. We rush into things.

Now, if you rush into buying a candy bar, it’s no big deal. It probably won’t have an impact on your overall financial health. But some decisions do have a major impact, and when people rush into them, it’s quite easy to stumble and fall. Here are some examples:

Major Purchases

Whether you’re buying real estate, a new car, or even that fancy new gadget that just came out, it’s so easy to be impulsive. To let the sensation of “want” override all other concerns. The result is often buyer’s remorse … or worse, debt.

Taxes

Everyone hates filing their taxes, and everyone wants the process to be as quick and painless as possible. Unfortunately, quick and painless in the short term often leads to drawn-out pain in the long. Rushing through your taxes can lead to mistakes, and it usually takes much longer to correct mistakes than to avoid them in the first place.

Investing

When making investment decisions, it’s easy to get excited about a hot new stock tip and decide to buy before the price goes up. It’s also easy to get spooked at the first sign of market volatility and decide to sell.

Both can be very risky decisions.

Whenever you make an investment decision, it’s important you put in your due diligence first. Take time to research the investment you have in mind. Talk to an expert and get a second opinion. Read the fine print. The media often portrays investing as a frenzied sprint, but for most investors, slow and steady wins the race. Making consistent, unemotional decisions will serve you far better in the long run.

Friar Laurence’s advice isn’t just for star-crossed lovers; it’s for all of us. The fact is that when it comes to your finances, being hasty and impulsive can lead to missed opportunities, mistakes, debt, and other negative consequences. But those who “go wisely and slowly,” who take their time, who look before they leap, are well-positioned to achieve their financial goals faster than they ever thought possible.

As Shakespeare might say,

“For never was a story of more woe,
than of the investor who made a financial decision too fast instead of slow.”

In the next Shakespeare article, we’ll move away from tragedy by examining a line from one of his comedies.

Check out other articles on Finance
Shakespeare on Finance 3	The Tip of a Lifetime
Shakespeare on Finance 4	Trump Tax Plan 2017
Shakespeare on Finance 5	Tweets & Tariffs

Shakespeare on Finance – Don’t Procrastinate

Written by Minich MacGregor Wealth Management on September 26, 2017. Posted in Minich MacGregor Missive, News.

William Shakespeare, as everyone knows, is the most famous playwright in history. His plays have been translated into every major living language, and it’s said his works have been studied more than any but the Bible. For centuries, people have loved him for his wit and his wisdom.

We’d like to share a bit of that wisdom in a new series of letters called:

Shakespeare on Finance

Shakespeare never actually wrote about finances, of course. But we’ve found many of his lines contain important financial lessons. So, over the next few months, we’d like to share a few quotations and the lessons they impart. Hopefully, the Bard’s words will make these lessons even easier to remember.

Quote #1:
“Better three hours too soon than a minute too late.”
The Merry Wives of Windsor, Act 2, Scene 2

In this scene, a jealous husband is planning to take revenge on another man who intends to seduce his wife. He resolves to start early rather than wait, reasoning, “Better three hours too soon than a minute too late.”

The lesson here is on the importance of not procrastinating.

Procrastination is one of the most common mistakes people make with their finances. Here are some areas where people often procrastinate:

saving for retirement,
creating a will,
filing their tax returns,
rebalancing their investment portfolio,
checking their credit score, and
purchasing life insurance.

It’s easy to put off basic, every-day activities, too. Balancing checkbooks, paying bills…even using that $20 gift card you got for your birthday before it expires.

What’s the harm in procrastinating? Because when done too much, for too long, it’s easy to end up “a minute too late.” When that happens, you

don’t have enough for retirement,
don’t have your affairs in order after you pass away,
pay more in taxes than you must, or even incur penalties because you waited too long, and
miss out on investment opportunities, or leave the door open for more investment risk.

You get the idea. On the other hand, being “three hours too soon” creates the opposite effect. When you start planning, start saving, and start acting long before required, you end up with more money for retirement, less money paid in taxes, more protection for your family, less headaches for yourself. More free time, less stress … the benefits are almost endless.

If there are any financial decisions you haven’t made yet, or any phases of your life you haven’t planned for, don’t procrastinate. Start now. We promise it’s worth it.

Borrow from the Bard. It truly is “better three hours too soon than a minute too late.”

Next month, we’ll look at a quote from one of Shakespeare’s most famous plays: Romeo and Juliet!

How to Protect Yourself—and Your Money—From Hackers

Written by Minich MacGregor Wealth Management on September 19, 2017. Posted in Minich MacGregor Missive, News.

You’ve probably seen headlines like this over the past couple of weeks:

Equifax^® Says Cyberattack May Have Hit 143 Million Customers¹

Every year, it seems more and more companies are falling victim to hackers. Even large organizations like Verizon^®, Walmart^®, and Target^® aren’t immune. But the recent cyberattack on Equifax is especially noteworthy. As one of the three largest credit-reporting companies in the United States, Equifax stores a lot of private information. In this case, names, addresses, birthdates, Social Security numbers and even driver’s license numbers were stolen.

What can hackers do with someone’s name, birthdate, address and Social Security number? The answer is chillingly simple: take the victim’s identity and use it for themselves.
Fortunately, there are steps you can take to protect yourself.

What to Do After a Data Breach

In a situation like this, there are both reactive and proactive steps to take. Let’s cover reactive steps first.

You may be asking yourself, “How do I know if I have personally been affected by Equifax’s data breach?” Equifax has created a website, www.equifaxsecurity2017.com, where you can check if your personal information has been compromised. You can also enroll in a free credit-monitoring service provided by Equifax.

However, we would exercise caution before going there. The website asks you to provide the last six digits of your Social Security Number to perform the check. Given their recent history, it’s reasonable to be wary of providing Equifax more personal information.

In addition, a report by the Washington Post suggests that “enrolling in the Equifax checker program … potentially restricts your legal rights. Buried in the terms of service is language that bars those who enroll … from participating in any class-action lawsuits that may arise from the incident.”²

It’s not our place to tell you whether to use the website or not, and indeed, the Federal Trade Commission’s official position is that “if a company responsible for exposing your information offers you free credit monitoring, take advantage of it.”³ But whether you choose to use Equifax’s checker website or not, there are additional steps the government suggests you take:³

Get a free credit report from www.annualcreditreport.com. Check for any accounts or charges you don’t recognize.
Consider contacting your financial institution and placing a “credit freeze.” This makes it harder for someone to open a new account in your name.
File your taxes as early as possible—before a scammer can. Tax identity theft happens when someone uses your Social Security number to get a tax refund or a job.
Don’t believe anyone who calls and says you’ll be arrested unless you pay for taxes or debt—even if they have part or all of your Social Security number, or say they’re from the IRS.
Watch for signs of identity theft. Warning signs include withdrawals from your bank account you can’t explain, failure to receive expected bills, and merchants refusing your checks.

Changing your online passwords and signing up for a third-party credit-monitoring service are also prudent steps.
For more information, we recommend visiting www.identitytheft.gov.

Proactive Steps to Take

Whether your personal information was exposed or not, there are some basic steps everyone should take to protect their identity. Here are just a few:

Delete your saved payment methods from online shopping sites. You will have to reenter your billing information each time you make a purchase, but it will protect your payment information if your account is breached or someone gains access to your login.
Review statements and credit reports regularly. Look for unauthorized charges or small amounts appearing on statements. Check your credit report regularly. Federal law allows you to get a free credit report every 12 months to review. Make sure all information is correct.
Don’t make impulsive decisions based on fear. If you receive an email or phone call stating that it’s from your bank or the government, and that you’re in trouble, don’t provide the sender with any personal information. Typically, the government will not contact you by email or phone. They will contact you by mail. Your bank will never ask you to provide information through email either. If you’re concerned about the credibility of a call or email from your bank, contact the nearest branch and ask them.
If someone contacts you saying they’re a relative in trouble and need your help, ask them something that only your relative would know. Or ask a trick question that reveals they’re lying, such as “How’s your dog Scruffy? Did he get better?” when you know that relative doesn’t have a dog. If they say, “Oh he’s doing much better,” then you know they’re a fraud and you should immediately hang up.
Keep all personal documents in a safe place. Don’t carry them around with you, especially not your Social Security card.
Don’t open emails from senders you don’t recognize, no matter how interesting the subject line.
Choose a different way to pay. Many merchants accept alternative ways to pay for goods and services, including Google^® Wallet, Apple Pay^®, or PayPal^®. These services provide an extra layer of protection because they keep your credit card information stored but do not actually provide it to retailers when you pay.
Don’t use your bank cards online unless the site is secure and reputable. Make sure you are purchasing from a reputable company and website. Don’t trust a site just because it claims to be secure. Use credit cards so you can dispute the charges if something goes wrong. You can still be reimbursed for fraud on a debit card but the process often takes longer and your money is already gone.

None of these steps are foolproof, but by taking concrete steps to protect yourself, your identity, and your money, you make it much, much harder for hackers and scammers.
As always, please let us know if you have any questions or concerns. Our team are always happy to be of service in any way we can.

¹ Brian Womack, “Equifax Says Cyberattack May Have Hit 143 Million Customers,” Bloomberg, September 7, 2017. https://www.bloomberg.com/news/articles/2017-09-07/equifax-says-cyber-intrusion-affected-143-million-customers
² Brian Fung, “By signing up on Equifax’s help site, you risk giving up your legal rights,” The Washington Post, September 8, 2017. https://www.washingtonpost.com/news/the-switch/wp/2017/09/08/what-to-know-before-you-check-equifaxs-data-breach-website/?utm_term=.de9d4617d81f
³ “When Information Is Lost or Exposed,” Federal Trade Commission, accessed September 8, 2017. https://www.identitytheft.gov/Info-Lost-or-Stolen

North Korea News – Geopolitics and the Markets

Written by Minich MacGregor Wealth Management on August 22, 2017. Posted in Minich MacGregor Missive.

There once was a time when the threat of nuclear war hung over America’s head like a storm cloud that just wouldn’t go away. Those days, thankfully, are long over—but the sky turned a little bit grayer lately.

As you probably know, tensions have surged recently thanks to news that North Korea has “produced a miniaturized nuclear warhead that can fit inside its missiles.”¹ President Trump fanned the flames even more when he stated that any attack by North Korea “will be met with fire and fury.”²

Since we are financial advisors, we’ll leave military concerns to the generals. The question we’re most interested in—and the question many people have asked us—is how all this saber rattling will affect the markets. Since we don’t have a crystal ball, there’s no way we can know for sure. But history would suggest that it won’t have much effect at all.

The financial services industry often likes to stress that “past performance is no guarantee of future results.” The reason is because we’ve seen time and time again that just because something happened a certain way before doesn’t mean it will automatically happen that way again. On the other hand, there’s another saying that’s equally valid: there’s nothing new under the sun. In this case, international crises are nothing new. That means we have a lot of history to turn to when trying to gauge just how tensions with North Korea might impact the markets.

Geopolitics and the Markets

Think back on all the major international events you’ve lived through; terrorist attacks and wars; economic recessions and elections; the Cuban Missile Crisis; the JFK assassination; the 1973 Arab oil embargo; the fall of the Berlin Wall; the 9/11 attacks; and Brexit. Unless you’re very young, you’ve probably witnessed many periods that seemed full of tension, drama, and importance.

But they rarely have much effect on the markets. Or rather, they rarely have a sustained effect.

Take the Cuban Missile Crisis. The world has probably never been closer to nuclear war than during those nerve-wracking thirteen days in 1962, yet during that time, the Dow^® only fell 1.2%. By the end of the year, the Dow was up 10%.³

More recently, look at Brexit. When the UK voted to leave the European Union, it took most analysts by surprise, and many predicted it would lead to a major drop in the markets. At first, it did. The vote took place on a Thursday. The next day, the Dow fell over 600 points, and then another 250 points the Monday after.⁴

But less than a month later, the Dow climbed to a new record high.⁵

A couple of weeks ago, the business with North Korea prompted the S&P^® to fall about 1.3%, its worst week in months.⁶ But last Monday, the S&P rose 1%, suggesting investor fear was short-lived.⁷

Of course, major events will sometimes cause a larger, longer drop. When World War I began, the Dow fell 30%, then closed for six months.³ After the 9/11 attacks, stocks dropped almost 15% over a two-week period.³

But even then, the markets recovered with amazing speed. For example, during the second year of World War I, the Dow rose more than 88%.³ And only a few months after 9/11, both the Dow and the S&P returned to normal.³

That’s a lot of numbers. So, what’s the takeaway from all this?

There are a few things we can learn from history.

First, we can learn that while geopolitical events often seem scary, their impact on the markets isn’t necessarily huge. That’s because many things impact the markets. Even something as big as the threat of war is only one ingredient in the dish, and it’s often buried and forgotten when the next headline hits.

If you think about it, the markets are essentially like giant aircraft carriers. It takes a lot to make them swing one direction or another, especially over a lengthy period of time.

Here’s the second thing we can learn. We said a moment ago, that geopolitical events often seem scary. We believe that’s why you often see a brief drop after they occur—because they seem scary, prompting the most jittery investors to sell.

But as you know, we must always strive to avoid making emotional investment decisions. That’s especially true when it comes to headlines and geopolitical events. Do they matter? In the grand scheme of things, yes. Do they matter to the markets? Again, yes—but not nearly as much as people think.

Remember, it’s impossible to predict what the markets will do. So, we’re not predicting here about whether the markets will climb or fall. We’re saying the recent news about North Korea shouldn’t prompt us to make assumptions one way or the other. Nor should it change how we invest.

Instead, we’ll keep doing what we always do. We’ll keep our heads and hold to our long-term strategy. In our experience, the ability to do that is far more valuable than any crystal ball.

If you have any questions about the markets, or your own portfolio, never hesitate to ask. Our team is here for you. In the meantime, enjoy the rest of your summer!

Sources

¹ Joby Warrick, Ellen Nakashima, Anna Fifield, “North Korea now making missile-ready nuclear weapons, U.S. analysts say,” The Washington Post, August 8, 2017. https://www.washingtonpost.com/world/national-security/north-korea-now-making-missile-ready-nuclear-weapons-us-analysts-say/2017/08/08/e14b882a-7b6b-11e7-9d08-b79f191668ed_story.html?utm_term=.0d2f43723e39

² Bryan Bender and Jacqueline Klimas, “Trump’s ‘fire and fury’ threat to North Korea sparks new fears of war,” Politico, August 8, 2017. http://www.politico.com/story/2017/08/08/trump-north-korea-warning-241409

³ Ben Carlson, “How markets reacted to geopolitical crises,” The Economic Times, April 13, 2017. http://economictimes.indiatimes.com/markets/stocks/news/how-markets-reacted-to-geopolitical-crises/articleshow/58158842.cms

⁴ Jethro Mullen, Ivana Kottsaova, Patrick Gillespie, “Dow plunges over 600 points as U.K. ‘earthquake’ crushes global markets,” CNN Money, June 24, 2016. http://money.cnn.com/2016/06/23/investing/eu-referendum-markets/index.html?iid=EL

⁵ Matt Egan, “Stocks have never been higher,” CNN Money, July 12, 2016. http://money.cnn.com/2016/07/12/investing/dow-stock-new-high-record/index.html

⁶ John Ydstie, “North Korea has markets neverous but not panicked,” NPR, August 11, 2017. http://www.npr.org/2017/08/11/542856313/north-korea-has-markets-nervous-but-not-panicked

⁷ Sue Chang and Ryan Vlastelica, “U.S. stocks gain 1% for the first time in 3 months as geopolitical fears ebb,” MarketWatch, August 14, 2017. http://www.marketwatch.com/story/dow-futures-flirt-with-100-point-gain-as-north-korea-fears-put-on-back-burner-2017-08-14

Newton’s Third Law

Written by Minich MacGregor Wealth Management on August 14, 2017. Posted in Minich MacGregor Missive.

Over the last two months, we’ve discussed something called Newton’s Laws of Finance. They’re our spin on Sir Isaac Newton’s famous “Laws of Motion” that you probably learned about in school.

This month, let’s look at the third and final law. The original is probably the easiest for non-scientists to remember:

For every action, there is an equal and opposite reaction.

This law is easy to understand. Imagine shooting a cannonball. The ball will fly in one direction, while the cannon will roll backwards in the opposite direction. The same principle applies when firing a gun. The “kick” you feel is just Newton’s third law saying hello.

So how do we apply this to finance? Like this:

For every financial action, there is an opposite reaction.

Or, to put it another way: for every financial decision you make, there is the potential for an unintended consequence.

Here’s what we mean. Let’s say you own 100 shares of XYZ Corporation. The value of your shares has gone up recently, so you decide to sell. You’ll make a nice profit, and have a quick infusion of cash that you can use however you want.

You’ve also triggered a capital gains tax.

Or, let’s say you decide to allocate more of your investment portfolio to bonds instead of stocks. Bonds are traditionally thought of as providing more safety than stocks, and who doesn’t want more safety?

But you also miss out on next week’s stock market rally.

In the first scenario, you turned a profit, but also generated taxes. In the second scenario, you traded in growth for safety.

For every financial action, there is an opposite reaction. One aspect of your financial life goes in one direction, a second aspect goes in another direction.

Of course, you could flip these scenarios around. Maybe you decide to hold onto your XYZ stock, because you don’t want to trigger capital gains taxes. But next week, the stock falls sharply in price. You avoided taxes, but not losses.

Maybe you decide to allocate most of your portfolio to stocks and have very little in bonds. You’ll give yourself more opportunity for growth … but take on more risk, as well.

The point of all this, is that when people make a financial decision, they often make it without truly thinking about the consequences. They act without understanding the inevitable reaction. They want something, so they decide to get it. They fear something, so they decide to avoid it. It’s not that those decisions are necessarily bad. It’s that they’re made without seeing the whole picture.

Put it this way: an experienced gun owner always braces for the kick before he or she fires.

Whatever financial decisions you decide to make, it’s critical that you brace for the kick. Every decision has consequences. Some are positive, some are negative. Some are intended, some aren’t.

For every action, there is an equal and opposite reaction.

Financial advisors like us often use the word holistic when we describe what we do. For instance, holistic financial planning. Holistic investment management. “Holistic” simply means that we understand that the individual parts of something are interconnected, and they must always be seen that way. They are parts of a whole. Newton’s Third Law of Finance shows exactly why the word “holistic” has meaning. Whenever you make a financial decision, you must make it with the whole of your financial situation in mind.

Example: when you make a decision regarding your investments, it can also affect your taxes. Your estate. Your cash flow. Everything.

So, how do you obey Newton’s Third Law? Well, whenever you need to make a financial decision, always ask yourself: what are the pros and cons of this decision? What are the benefits? What are the risks? How will this decision affect my entire financial life?

It sounds simple. But it’s also the best way to brace for the kick.

Scientists have long used the original Laws of Motion to better understand and control the world around them. By understanding the Laws of Finance, you can better understand and control your finances.

Good luck!

“Truth is ever to be found in simplicity, and not in the multiplicity and confusion of things.”

– Sir Isaac Newton

If you can dream it, you can do it.

Written by Minich MacGregor Wealth Management on August 8, 2017. Posted in Minich MacGregor Missive, News.

Our friends and our clients (sometimes they’re the same person) often ask us: “What’s the most important thing I need to do to prepare for retirement?”

We usually tell them there’s no one thing that’s most important, but rather a lot of things. For example: securing retirement income, managing your tax situation, or ensuring your investment portfolio keeps ahead of inflation. These are just a few examples. But when it comes to your retirement, here’s a piece of advice that all too often goes unheeded:

“If you can dream it, you can do it.”

Retirement is about finally having the opportunity to focus on living. It’s no longer about getting ahead in life, but about experiencing life itself. For that reason, retirement should be fun. It should be enlightening. It should be rejuvenating. Above all, retirement should be … whatever it is you want it to be!

However, there are many people who never take the time to dream. They never create their bucket list; never ponder their deepest, sweetest desires. It’s quite possible to spend too much time worrying about how to retire and not enough on why you’re retiring, or what you want to do in retirement. People who make this mistake run the risk of experiencing the worst scenario of all:

Boredom.

To prevent that from happening, all you need is a plan. All you need is to dream. So what’s your plan for retirement? What’s your dream? Here are a few suggestions:

Write the next Great American novel.

Raise horses on your farm.

Start an entirely new career as a standup comic.

Learn how to cook Italian food … in Italy.

Work as a tour guide at the Guggenheim.

Follow the voyage of Darwin’s Beagle through the Galapagos.

Listen to jazz in a smoky bar in Paris.

Have the freedom to do what interests you versus what needs to be done.

Design and build your own house.

Compete in AAU Masters swimming at 80.

Spend a year in Rio.

Restore an old sports car and drive to car shows.

Work for human rights for people in third world countries.

Build a log cabin from the ground up.

Retrace the Endless Summer surf odyssey.

Drop anchor at every island in the Caribbean.

Build your collection of fine wines.

Spend time with your grandchildren.

You want more? You can definitely do more. Like:

Create a beautiful garden. Give your spouse a chance at a career. Ski for 100 days a season. Volunteer. Finally, finally use all of your frequent flyer miles. Create a world that consists of nothing but a hammock, a pitcher of lemonade, and a stack of novels. Return to your family’s farm and try to make a go as a farmer. Participate in guided tours of all the ancient wonders of the world. Open your own bed and breakfast. Finally get your college degree. Trek to the Himalayas. Visit all 50 states. Start another career. Scuba dive all over the world. Visit every major-league ballpark. Relax. Go on a Safari in Africa. Write movie reviews for the local weekly. Climb a 20,000 foot mountain. Rent a barge for a canal tour in Europe. Invest in startup companies. Coach youth soccer, baseball, and basketball. Drive from Alaska to Patagonia. Run the Boston and New York marathons. Play as many of Golf Digest^®’s top-100 courses as possible. Play in a garage band. Play bridge for money. Just play! Go on at least three cruises a year. Act in Community Theater. Dinner and a movie … every night! Learn to play the piano. Be a couch potato. Fix the sink. Take a trip down the Nile. Read Russian novels. Run for local political office. Absolutely nothing. Give back to all of those who helped you. Do all of the things you’ve been afraid of—skydiving, bungee jumping, and hang gliding. RV along Route 66 with your spouse and your dogs.

Finances are more than just numbers and concepts. Maintaining your finances is about living the life you always wanted to live. If your retirement is coming up, it’s time to start planning. More than that, it’s time to start dreaming.

So if there’s one piece of advice we can give you, it would be this:

“If you can dream it, you can do it.”

America’s Best Girl

Written by Minich MacGregor Wealth Management on July 31, 2017. Posted in Minich MacGregor Missive, News.

Records are made to be broken, standards are met to be surpassed, and the world is full of “firsts.” But sometimes a new record comes from an unlikely source, and it’s in those instances that something truly remarkable happens.

The remarkable happened ninety-one years ago. On August 6^th, 1926, Gertrude Ederle became the first woman to swim across the English Channel.¹ Her feat set an amazing example for other women to follow, but it did more than that. Despite swimming in terrible conditions, Ederle smashed the records of the five men who had gone before her.

In the 1920s, few people took female athletes seriously. Even in the Olympics, female athletes were treated far poorer than their male counterparts. During the 1924 Olympics in Paris, female competitors had to stay in hotels far away from the city. The US swim team, which included Ederle, “had to travel five to six hours each day just to practice in the Olympic pool.”¹

But from a very young age, Ederle knew she wanted to swim, no matter the cost. When Ederle was five she came down with the measles, which severely affected her hearing. “The doctors told me my hearing would get worse if I continued swimming,” she once said, “but I loved the water so much, I just couldn’t stop.”¹

So swim she did, setting both American and world records in the process. In the aforementioned Olympics, she won both the gold and bronze medals in different events … all while suffering from an injured knee.¹ But it was the Channel swim that provided the greatest challenge of all.

It didn’t come easy. To cross the Channel, Ederle started at Cape Griz-Nez in France. The goal was to come ashore at Kingsdown in England. In a straight line, it was a 21-mile swim. But the distance was the least of Ederle’s worries; she also had to contend with choppy seas, cold water, and boats. Of the five men who had already swum the Channel, the fastest had done it in a little over 16 hours. The slowest required 26 hours and 50 minutes … over one full day in the water.

Ederle’s first attempt, in a slightly different location, ended in failure. She did not get along with her trainer, a man who had tried, and failed, to swim the channel himself over twenty times. Nevertheless, she got off to a torrid start, swimming 23 miles in less than 9 hours. But at one point, her trainer, who was following along in a boat, thought she was drowning and ordered that she be recovered from the water. The result was immediate disqualification. Furious, Ederle fired her trainer and vowed to try again.²

Her second attempt came a year later. Now Ederle had something new to worry about—competition. Several other women, including three Americans, were all trying to become the first to swim the Channel. Instructing no one to interfere this time, Ederle ventured into the water at 7:00 a.m. on August 6^th and started to swim. The boat that accompanied her held up signs along the way, reminding her that she had been promised a new car if she made it.¹

But the ocean was very rough, with wind and waves impeding her every stroke. At one point, her new trainer was so worried that he shouted, “Gertie, you must come out!”

Ederle raised her head. “What for?”²

Fourteen hours and thirty-one minutes later, Ederle reached England. Because the sea was so turbulent, her 21-mile swim had turned into a 35-mile one. Yet she made it, breaking the previous record by two hours and two minutes. When she emerged onto the shore, the first person to greet her was an immigration officer. He requested her passport.²

Back home in New York, a ticker-tape parade was waiting. Over two million people greeted her. Men sent proposals to her in the mail. Musicians wrote songs about her. President Coolidge invited her to the White House and called her “America’s best girl.”¹

That’s why we still remember her to this day. Not simply because she broke a record. Records are broken all the time. But because she broke a record when so many obstacles—her gender, her health—stood in her way.

And that is truly remarkable.

Sources:

¹Richard Severo, “Gertrude Ederle, the First Woman to Swim Across the English Channel, Dies at 98,” The New York Times, December 1, 2003. http://www.nytimes.com/2003/12/01/sports/gertrude-ederle-the-first-woman-to-swim-across-the-english-channel-dies-at-98.html?pagewanted=all&src=pm

²“Gertrude Ederle,” Wikipedia.org, last modified on May 29, 2013. http://en.wikipedia.org/wiki/Gertrude_Ederle

Newton’s Second Law

Written by Minich MacGregor Wealth Management on July 18, 2017. Posted in Minich MacGregor Missive, News.

Last month, we introduced Newton’s Laws of Finance. They’re our spin on Newton’s famous “Laws of Motion” that you probably learned about in school.

This month, let’s look at Newton’s Second Law. Here’s how a textbook might describe the original:

The acceleration of an object as produced by a net force is directly proportional to the magnitude of the net force, in the same direction as the net force, and inversely proportional to the mass of the object.

Yuck. While that’s probably as simple as 1+1 for someone with a physics background, it’s not exactly easy to remember, is it? That’s why most of us opt for this handy little equation:

F=ma, or force equals mass times acceleration.

Basically, the greater the mass of an object, the greater the amount of force needed to accelerate the object. If you hit a baseball with a bat, the ball will go flying. But if you hit a car with the same bat, the car won’t move at all. You need a much greater force to cause the car to accelerate.

This law is a little tricky to apply to finance, but here’s our version:

Retirement potential equals amount of savings & investing times length of saving & investing.

First off, let’s define some terms.

Retirement potential means the type of retirement you could potentially enjoy. After all, not all types of retirement are equal. Some people retire from their main jobs, but still must work part time to make ends meet. Others won’t have to work anymore, but don’t have the means to travel or spend time on anything but the most inexpensive hobbies. But some people, of course, will be able to enjoy the type of retirement they always dreamed about.

Savings, of course, equals how much money you have set aside specifically for retirement. Essentially, it’s the portion of your income reserved for tomorrow rather than today.

Length of saving & investing is the amount of time spent saving and growing your money for retirement. In other words, did you start investing for retirement at age twenty-five … or did you wait until age forty-five?

What this law says is that your retirement potential is based off the amount of money you save and invest multiplied by how long you have saved and invested. In other words, you can personally control the type of retirement you’ll enjoy by maximizing the amount of money you save for retirement and by investing those savings as early as possible.

Now, some caveats. Obviously, there are other factors we must contend with. How the markets perform, for example. Unexpected expenses, health care costs, loss of a job … life has many curveballs to throw, and each can have an impact on your retirement potential. But when it comes to planning for retirement, or any financial goal, it’s best to focus primarily on what we can control. And what we can control is how much we save, how much we invest, and when we start doing both.

Basically, a person who saves $5,000 a year for retirement, and starts investing at age 30, has far greater retirement potential than someone who only saves $1,000, or someone who starts investing at age 40. You can play with the numbers as much as you want, but the fact remains that retirement potential goes up the more you save and the longer you invest.

Another way of looking at it: just an object with greater mass needs more force to get moving, a retirement with greater potential needs more savings and investing to get moving.

Remember, retirement is about more than just picking a day to stop going to work. It’s about where you want to live, what activities you want to enjoy, and how much money you’ll need to accomplish both while still taking care of basic needs and expenses. It’s about what dreams you want to fulfill.

So, to increase your own retirement potential, ask yourself: should I be saving more than I am? Should I be investing more than I am? Should I be doing more than I am? And if you have any friends or loved ones—especially younger folks who may not have even started saving or investing yet—be sure to tell them about Newton’s Second Law of Finance.

Next month, we’ll look at the Third Law of Finance. In the meantime, start accelerating your own path to retirement. Start doing what you can to increase your own retirement potential.

Start following Newton’s Second Law.

Year: 2017

Equifax® Says Cyberattack May Have Hit 143 Million Customers1

What to Do After a Data Breach

Proactive Steps to Take

Listen to jazz in a smoky bar in Paris.

Build a log cabin from the ground up.

Build your collection of fine wines.

Spend time with your grandchildren.

Equifax^® Says Cyberattack May Have Hit 143 Million Customers¹