Part 8 – A Year of Lessons on Money Matters for your Children and Grandchildren

Contributed by: Matthew E. Chope, CFP®

What motivates you? You might get out of bed in the morning and go to work because you want shelter, nutrition and safety. You might do it because you love your job and can’t wait to get to the office. Understanding what incentivizes you can help you accomplish what is most important and help you prioritize to do the hardest things first.  These are important – yet sometimes overlooked – lessons to share with your children, whether they are tackling tough assignments in school or facing obstacles at the beginning of their career.

Rewards = Results

Try figuring out how to motivate yourself to get results suggests Charlie Munger, Vice Chairman of Warren Buffett’s Berkshire Hathaway Corporation. He calls it the “reward and punishment super response tendency” in his book On Success.  Great employers have managed this for their key employees; but you can do this for yourself.  When you achieve the results you want, reward yourself.

Early in my career, at age 25 I needed to make calls to people I did not know and ask them to considering doing financial planning with me.  This was a difficult task, but I knew it was necessary to build a business.  At the time I enjoyed coffee so it became my reward. If I made my calls each day and achieved the results I needed to succeed, the next morning I treated myself to a coffee.  At the end of the week, if I meet my weekly goal, I bought myself a Twix candy bar to enjoy. Your personal rewards may be different, but they should be motivating. And expect them to evolve over time. Maybe that Twix becomes a vacation if you reach your quarterly goal or new car if you meet your annual goal.

Setting Your Priorities

If you have 5 projects or jobs and one is going to be the most difficult (but also the most important), where do you begin? I suggest if you are having a difficult time in a certain aspect of your business, begin by tackling a portion of the problem first.  Then go to something that’s easier and come back to the subject that is troubling before ending your day. Back to me at age 25, I didn’t like making calls to people I didn’t know but needed to make 20 a day.  I found if I started by doing the difficult part – I wasn’t looking at that list all day. 

If you can determine what motivates you to accomplish your daily tasks, you can reach your work goals. As a bonus, linking incentives to challenging tasks and prioritizing your time can also lead to personal growth and accomplishment.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Matthew Chope, CFP® and not necessarily those of Raymond James.

Part 6: A Year of Lessons on Money Matters for your Children and Grandchildren

Contributed by: Matthew E. Chope, CFP®

When it comes to keeping track of finances, my advice for the young is to keep it simple and straightforward and get qualified help if needed. That starts by finding a way to track your money without making it an obsession. Begin by tracking your finances at least once a month.  To do this, simply add up what’s coming in and then look at where it’s going. Once you’ve established that you are indeed living within your means, it is time to establish two kinds of savings accounts that you contribute to each month:

1. Build a “Save to Spend” account

2. Build a long-term financial security account (i.e. 401k or IRA)    

The Save to Spend account is where you park money for the short term to be spent on things that lead you toward the 100 things you want to accomplish in life (read this blog if you don’t have your 100 things list yet).  The long-term security account is for financial independence, which will eventually allow you to work because you want to not because you have to.

Investing does not need to be overly complicated either. For some good reading to help you build knowledge about investing, here are a few books I recommend:

• The Wealthy Barber by David Chilton

• A Random Walk Down Wall Street by Burton Malkiel

•  A Little Book of Common Sense Investing by John C. Bogle

• The Investment Answer by Daniel C. Goldie & Gordon S. Murray

• The Millionaire Next Door by Thomas J. Stanley & William D. Danko

Once you understand the basic principles -- like diversification, pay yourself first, don’t miss a match, maximizing deductions and credits, and dollar costs averaging -- and if you have the interest to follow those principles, then do it on your own but keep it simple.  Remember to review my previous blog about using time to your advantage (start early – start now!). It might make sense though, to consider getting qualified help managing your money, especially if this is something you’re not interested in doing. If you’re looking for help, here are 7 key components to help you find the right person.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Matthew Chope, CFP® and not necessarily those of Raymond James. Investing involves risk and investors may incur a profit or a loss.

Part 5 – A Year of Lessons on Money Matters for your Children and Grandchildren Contributed by Matthew Chope

Contributed by: Matthew E. Chope, CFP®

If you know where you’re headed, then you have a better chance of getting there.  This applies in money matters and in life. To help you chart your course, try making a list of the top 100 things you want to accomplish in your life.  The idea here is that if you know what you want to accomplish and what’s important to you, it might help you start on the path that will get you there.

Finance Your Goals

Along that path, I don’t think you should be concerned about spending money, especially if it’s towards these 100 things.  This is what money was meant for.  Money is not an end, but a means to an end.  Part of your money is a temporary store of value to be used towards the goals in your life.

Do you think you could become president if you don’t intentionally set that goal? In my own life, I’ve seen how writing down my goals has helped me find the path to achieving them since I already know the end. Writing down goals will also help you invest in things that will lead them toward that end. You’ll be able to make choices differently than someone who has not considered what’s important to accomplish in life.  Feel comfortable spending money alone this path.  This is what is important to you.

Focus on What Matters

I think Oliver Wendell Holmes said it best:

“Most of us go to our grave with our music still inside us.” 

I have seen many clients get to the end of their lives with much of the music still buried within them.  Their time was spent focused on saving money to build wealth for financial independence.  Or they felt that money should not be used unless necessary.  Financial independence is very important, but so is finding a balance to pursue your interests along the way. 

If you don’t have a list of your own, maybe you’ll get inspired by mine. I started this list in my early 20s and have tweaked it over the years. Here are some of my goals:

Fun – Travel

• Paint a beautiful picture

• Swim with a dolphin

Generosity – Giving

• Be someone’s mentor

• Make it possible for my niece to go to college

 Education

• Achieve Master’s degree

• Give many motivational and inspiring speeches

Personal Achievement

• Own a home in a warm sunny climate to escape the winter gray

• Practice meditation and yoga daily

Professional Life – Career

• Contribute to a healthy financial planning practice for 40 years

• Help 1,000’s of people reach their financial objectives in life

Family

• Earn the right to marry someone special.

• Visit my grandparents and find out about their life as much as possible

Health / Fitness

• To practice meditation and yoga daily

• Exercise with a trainer every month to stay doing things correctly

Financial – Monetarily

• To never be a burden to anyone else

• To be financial independent by age 60

Maybe some of these categories or ideas will spark you to start your own list. I believe when you choose something (make a decision) you should put your full potential behind it. But remember nothing is set in stone. My list has evolved since I started it. After a good try, be open to changing your mind. 

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any opinions are those of Matthew Chope, CFP® and not necessarily those of Raymond James.

Part 4 – A Year of Lessons on Money Matters for your Children & Grandchildren

Contributed by: Matthew E. Chope, CFP®

Try it all and be prepared to make some mistakes.

That’s a good reminder to everyone, no matter the generation. But when it comes to passing on lessons about money matters to your kids or grandkids, I say try to keep those mistakes small and learn from them. Many of us like to have firsthand experience (I know I do) rather than just taking someone’s word for it. But if I could offer advice from my own experience, here’s what I’d say:

Start with Diversification

In my opinion, diversification is probably the number one most important rule in investing.  It will not make you rich but it can help keep you from going poor. You want to diversify your experiences greatly in your 20s because it’s easy to invest a lot of time and energy in one area and end up not liking where you get to.  Imagine climbing a ladder for 5-10 years only to find that it was leaning against the wrong wall! Use this time in life to literally and figuratively invest your time and money in anything that you’re curious about. Try things that make you uncomfortable.

Along the meandering path, realize you are going through this learning curve.  Try to take it all in. Notice your senses, your happiness and fulfillment relating to the different activities you invest in.  Most people get to the last quarter of their life seeking greater fulfillment and happiness from their life.  They never paid attention during the first quarter to the path they were on or the wall they were climbing. 

Along your journey consider that data is not information and information is not knowledge and knowledge is not experience and experience is not wisdom (as you’ll see in the diagram below).  Reflect on where you might be in each investment.

Digging Through the Data to Make Decisions

To take this idea a little deeper, we are continually inundated with data; the internet, TV, radio, people -- some with facts and some with opinions.  A key to financial success for many is being able to distinguishing useful data and information from nonsense. Knowing how to gather a collection of measured data that can be extrapolated into information is the cornerstone of constructive decision-making. 

Knowledge requires thoughtful discernment of information, combined with known truths founded on logic based proofs.  Notice I went far with math from the last statement.  So this is how my thoughts are structured and it works for me.  There may be other ways to get to constructive decision making also, but I believe this will determine a great deal of your financial success in life.  

Facts can strengthen beliefs to formulate knowledge, but this is where you will find disagreement.  My experience has been that a combination of well-formulated beliefs with accepted knowledge provides a basis for openness and understanding.

Throughout the coming years you will go through interpretations of knowledge gaining first-hand experience as events almost seem to repeat.  These experiences might not be exact but understanding the patterns over decades can eventually lead to wisdom.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Matthew Chope, CFP® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Diversification does not ensure a profit or guarantee against a loss.

Is a Market Correction Coming Soon?

Contributed by: Matthew E. Chope, CFP®

I’ve said before that I believe market corrections are as natural as the day is long. That’s why, in my last blog, I shared 3 steps to prepare for market volatility. But how do you know if the winds of market change are about to blow? These are some indicators I like to watch.

The Bigger Picture: The Fed & Price Ratios

Beyond the US equity markets, there is more going on behind the scenes that can come into play. In my opinion the Federal Reserve has been keeping money extremely cheap for an extended period of time.  The Fed wants to stimulate the economy and encourage job growth. Recently low inflation has allowed the Fed to stay on this path.  This works very well for the US treasury also since low interest rates keep the US Government balance sheet solvent and interest expenses manageable.  It has also allowed banks the time needed to replenish balance sheets and squeeze out the bad debt on their books. 

Earnings are usually necessary to allow equities to sustain long-term values.  Generally, the price of a security today is the sum of all future discounted cash flows into perpetuity.  When earnings are stable and getting better and money is cheap this allows for higher price multiples like we are seeing today.  We are at or near the highest price ratios ever witnessed in the US equity markets.  The following chart is measuring the price to many other gauges of earnings cash flow and book value over the last 65 years.  It’s not much different if you view it over the last 200 years.

Ratios of various equity valuations

We are at this point in history because of cheap money, cheap labor and now even cheap energy (which is more of a positive shock).  Money, Labor and energy are the 3 main expenses that go into every income statement of most companies in the country. The next two charts give a valuation of corporate equities values to nominal GDP (price of publicly traded companies/gross domestic product)  the important thing to see here is that the chart is indicating very high prices compared to output from a historical standpoint.

The next chart below is very similar depiction of valuation. Each point on the chart is the price of S&P 500 stocks at that point in time divided by the previous 10 years of earnings for the S&P 500.

Shiller P/E for the S&P 500 Chart

More Indicators to Watch

From a historical standpoint, these 3 expenses for companies are close to, if not at, the lowest they have been for a generation or two.  It’s hard to see how it can get much better. On top of that, we have moderate energy prices again.  That indicates that earnings should be fantastic (and they are), but what's next?  When the cost of money increases and labor costs rise again (as projected for later this year or early 2016 in the chart below) we could see the earnings improvements slow and possibly fall.  And what if there is any type of energy shock the other way (and there always is eventually)?

The following chart from GMO provides some understanding of the last 50 years of initial unemployment claims.  When initial claims are high, we are usually deep into a recession. When they are rising, we are usually entering a recession. And when they are near the level we see today, the labor force is beginning to tighten, which typically leads to wage inflation and motivates the fed to increase interest rates and slow the economy down from overheating.

This chart is initial claims for unemployment 1965 to present.

Winds of Change?

The wind, which has been blowing behind us for so long, has allowed us to feel confident, but it’s beginning to slow considerably from some of the indicators I watch.  Over the next year we could see the economic winds actually begin to blow at us.  On top of that some don’t see a lot of room for upside in US equities over the next 7 years as shown in the chart below.  Those at GMO have forecast for US equities to have negative returns after counting for inflation.  So, if you haven’t recently, now may be the time to review your portfolio allocation, time frame and risk tolerance with your advisor.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Matthew Chope, CFP® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

3 Ways to Prepare for a Market Correction

Contributed by: Matthew E. Chope, CFP®

Markets need to correct from time to time – I believe it’s as natural as the day is long. We may even be past due. I attend a lot of conferences and lectures about everything related to finances, financial planning, investments and economics – All the fun stuff!  Well, fun to me.

Recently, I heard the presenter talk about this chart, the “S&P 500 Growth/Value index Ratio”.  He actually said the S&P 500 still has a ways to go - like 25% before it's at the same peak of 2000. My thought was: Why anyone would want to get back to the type of silliness we had in 2000? 

Three years ago I did not see excesses in the market valuations and most economic indicators were still getting better, and rightly so.  I believe today valuations are rich.

Economic Cycle in Extra Innings

Someone asked me recently what inning we’re in for this economic cycle. I responded: Probably the 13th inning! The average lifespan of a US economic cycle is 4.9 years and we are almost at our 6th year.  However, there may be time left. We could see the rest of this inning, maybe more, before a 10% downturn or more.  A 10% downturn is a very normal annual event, historically speaking. And we have not had a 10% downturn in the Dow or S&P 500 since the 3rd quarter of 2011 -- almost 3 ½ years.

3 Steps to Prepare for Volatility

At The Center, we strongly believe in a philosophy of investing, not attempting to time the market.  So I’m not here telling you this a market top.  No one is smart enough to do such a thing with any consistency and getting in and out can be more detrimental than staying put over the long haul. These are the 3 steps I suggest to my clients no matter the market cycle:

1. Make sure your long-term allocation is still appropriate

2. Double check that your time frame is correct for the investments in your portfolio

3. Review and consider your risk tolerance for those investments

If there is money you need in the next 12 months for a project or money invested for less than 5 years, discuss with your planner where to put this so that it has less volatility. In my next blog, I’ll take a look at the bigger picture and what to watch for signs of a potential downturn. 

Matthew E. Chope, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Matthew Chope, CFP® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

Part 3 – A Year of Lessons on Money Matters for Your Children & Grandchildren

Contributed by: Matthew E. Chope, CFP®

Get the big things right!  Don’t miss the forest through the trees.  Some young people can get lost in their 20s choosing to hang around the wrong crowd, not exactly sure what they believe in, ignoring facts or historical truths or getting trapped in a dead end job. I consider these 4 ideas as significant steps toward gaining greater financial security and strength in your future:

1. Know what you believe in (see more about writing a belief statement below).

2. Choose a career you’re passionate about, one that interests and excites you.

3. Keep the right company.  Surround yourself with people who help you grow and encourage your dreams and ongoing success.

4. Read the right books – understand a little about all the main areas of knowledge.

On Understanding your Beliefs 

Differentiate between truth and beliefs and know that knowledge can be found in the overlap.  Many times our beliefs can be unreasonable and sometimes unrealistic.  So, we need to have a good grounding in what is real, true, and factual vs. just belief. To help you summarize your beliefs, consider writing a belief statement. Here’s a sample:

I believe in myself, 
in the pursuit of happiness, 
the rule of law, 
and building moral wealth.

I believe I am only human, in that lies my greatest strength and my greatest weakness. 
I believe in living for and developing an abundance of good physical and mental Health. 
I believe in playing Sand Volleyball for fun, exercise, camaraderie, and as one of my dearest passions in life. 
I believe in good and honest people - who I call my friends. 
I believe in living a life well lived with meaning and intension. 
I believe in all basic freedoms and human rights 
I believe in the 7 UU principles. 
I believe that most people need to believe in fairy tales; that the harsh reality of this world is too flat, monotonous and dreary.
I believe most people are good.

On Choosing the Best Career

Many people choose careers because someone else thought it would be a good idea for you or because it’s connected to a large paycheck or it has prestige.  Instead choose a career that feeds you and your soul.  If you love what you do each and every day – it won’t feel like work and you can figure out how to make a good living from that. And if you want prestige become that best at what you do!

On Keeping the Right Company

Surround yourself with people that share your values and drive you to be the best person you can be. This can be very difficult. People can’t choose their family and many times feel trapped in long-term relationships that have been built up over their lifetime.  This is where we need to stop and reflect.  Take some time to find the new people that you want to surround yourself with.  I typically choose smarter people, selfishly always wanting to be learning from my peers or mentors.  I choose people that have similar beliefs and values, people that are auspicious! It does not mean we agree on everything and that is ok.  We find comfort in people we agree with, but  we find growth in those you don’t.   

On Finding the Right Books

When it comes to reading the right books, I suggest asking people you look up to who seem to know a lot about the big subjects of mathematics, ethics, natural sciences, human sciences, history and the arts.  Ask them how they came to know so much about these subjects and consider learning more about them over your lifetime. I like taking the approach guided by the chart below, created by international teacher of history, theory of knowledge and humanities Edwin M. Van Olst. He suggests that when you encounter what he calls Knowledge Issues, you can use the chart to identify the challenges and guide your way to greater knowing.

Any opinions are those of Matthew Chope and not necessarily those of Raymond James. 

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Part 2 - A Year of Lessons on Money Matters for Your Children and Grandchildren

When I was just starting out in the investment business, one of my mentors said over and over, “Accumulation of wealth is about time, not timing.”  If you start early and invest appropriately, you don’t need to try to time the market.  Timing the market is a fool’s game and leads to many troubling mistakes.  Most people, even the pros, can’t time the market correctly with a high percentage of success.

The chart below from Fidelity is a simple but dramatic example of accumulating greater wealth by starting early. 

The “Leave it Alone” Approach

There are more steps to starting early. They begin with understanding your risk tolerance and then sticking to it by finding the appropriate portfolio allocation.

Next, set up a dollar-cost-averaging monthly investing discipline in your 401k or IRA program.  And leave it alone!  Obviously, if your employer matches your contributions to a 401k plan, than max that out before any other type of investment program.  A match is the same as free money that will help to build a nest egg. Why not let someone contribute along with you?  

Unbelievably over 30% of participants don’t contribute to their employer plans and miss the match.

This suggestion sounds simple but there will be periods of your life when time seems slow and dull and your investments are not making the headway you expect. People around you are getting wealthier it seems.  You start to think maybe you should be more aggressive.  You will be tempted to change stride and do something different to keep up with crowd.  Don’t mix brains with a bull market!  Occasionally individual markets (like the S&P last year) will trounce a diversified portfolio.  This temporary outperformance by one asset class generally will not persist for more than a year or two. 

Tips for Staying the Course

There may be other periods when the economy or financial markets seem to be falling apart and you cannot believe the extent of losses in markets and even your portfolio.  When you feel regret and loss, it may not seem easy to stay the course.

My advice, when the pain threshold becomes overwhelming at first  breathe and then consider doing the opposite of what your stomach is telling you.

This is when your brain needs to take over.  If you are sad because of losses and feel the need to change direction because, consider buying a little more. When it’s so exciting that you are looking at your portfolio value every day and twice on Saturdays (BTW prices don’t change on Saturdays), slow down your purchases or be slightly more conservative. It’s not always easy to ignore your gut, but historically starting early and staying the course is the advice I give my clients every day.

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Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors may incur a profit or loss.  

Part 1: A Year of Lessons on Money Matters for Your Children & Grandchildren

I’m starting this series written for parents and grandparents because I have been hearing from them for over 2 decades about how much more difficult the world may be for their children financially. This is the 1st of 12 blogs offering lessons you can share with your children and grandchildren. I’ll be focused on money matters and general principles about building financial security over a lifetime.  What I hear the most is that clients just want their family’s future generations to be financially secure. Today that means bracing them for a world where there aren’t pensions and where social security will have changed to stay solvent. These are lessons many of our children are just not taught in school.

Lesson #1: It all starts with investing in you

Investing in yourself may seem simple, but it’s not easy to implement for everyone.  How do you invest in you as an 18 year old? Start by investing your time in an education. Investing a reasonable amount of your time and money into a college education will most likely provide the most financial security in a person’s life, not to mention fulfillment.  

Only about 30 percent of Americans have obtained an undergraduate degree or higher according to the U.S. Census Bureau. At the same time an estimated 90% of Center clients’ children and grandchildren obtain an undergraduate degree.  The ability to open opportunities and maintain a steady paycheck is fundamental for financial security. 

The Value of Paid vs. Unpaid Internships

Everyone needs to be able to open the employment door.  To open those doors faster, consider doing a paid internship.  This takes planning at the start of college because many students only have 4 years to line up an internship and some opportunities can be competitive, but as the graph below shows, they can really pay off:

Also acquire an education that is commensurate with your expected pay. Don’t overdo it and go hundreds of thousands of dollars into debt for a job with a salary that will leave you paying off your college loans for 10-20 years.  Figure out how to do it inexpensively.  There are many online tools, including this one from The Chronicle of Higher education that lets you compare earnings, monthly student loan payments, and graduation rates.

Lifetime Earnings Impact of a Degree

There is a lot of research showing that the increase in lifetime earnings, on average, exceeds the cost of an education for people who earn a college degree.  The U.S. Census Bureau reports that a bachelor’s could provide up to $1 million more income over a lifetime than a high school diploma. If you invest $100,000 in college and you make $1,000,000 more over your lifetime, your return on investment is 10 fold or 1,000%.  Over a 30-year period, this is an annual return of more than 10% per year.  Click here to see a list of ROI rankings for various universities.

If you’re a parent or grandparent, start the conversation early. Build college in as a given and develop a way for to pay for it (even if only partially). Setting the expectation that college is ahead lays a foundation for financial security in the future.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The author’s opinions are subject to change without notice. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. Past performance is not indicative of future results. Investing always involves risk and you may incur a profit or a loss. No investment strategy can guarantee success. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. C15-001739

Giving Back: Partnering with the South Oakland Shelter

 For many, getting involved in the community and giving back is as much a gift to yourself as it is a gift to others. Over the last 15 years, my partner (is this the best word?) Kim and I really enjoy giving back to those less fortunate by helping the South Oakland Shelter.  SOS is located in Lathrup Village, MI and is dedicated to helping individuals and families who have fallen on hard times. Many are temporarily homeless or out of work and need a safe place to fall and to lift themselves back up.  SOS is a revolving shelter with over 50 local churches and synagogues helping to provide shelter at night, rides to work in the morning and 3 hot meals a day.

This year, for our part, we cooked meals and helped people get to work.  But we also helped with the annual conversion of our church, (Birmingham Unitarian Church), into living quarters for 30 guests for a week. At the end of the week, I received a card signed by all the guests, thanking us for an outstanding effort on their behalf. In my years working with SOS, I have never received a note with personal messages like this:

We truly felt at home”
“I am so grateful to have you on this portion of my journey”
“I love you BUC”
“Thanks for your precious time, I am truly grateful”
“You all were great”

We’re looking forward to partnering with SOS again in 2015. 

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed web sites or their respective sponsors. Raymond James is not responsible for the content of any web site or the collection or use of information regarding any web site’s users and/or members.