The United States has elected Joe Biden to be its next President. Despite there being a last-ditch effort by President Trump to muddy the waters with claims of massive voter fraud, the country is beginning to move ahead. The S&P 500 has rallied 6.04% as of the morning of this writing (November 18th) from the day after Election Day (November 4th) and is pricing in a smooth transition of power. This transition of power is what separates the United States of America from other countries in the world and is the backbone of what makes our country so strong. President Trump has displayed that he has no intentions to concede, and will fight the results of the election until he has extinguished every option. This uncertainty may provide some market volatility in the short term, but I expect that volatility to be short-lived.
As Regis Philbin once asked, “Who wants to be a millionaire?”
You’re might be saying to yourself “I do, but I don’t want to go on a game show to do it.”
With a combination of patience, persistence, and self-control…you too can be a millionaire without having to answer any multiple-choice questions.
Here’s how you can do it.
We are halfway through 2020 and it feels like we are at a crossroads. The first 6 months of 2020 have been a whirlwind, to say the least.
Strictly speaking of the stock market, we saw the S&P 500 decline by an unprecedented fall of -33.92% in the span of a few weeks quickly followed by a slingshot rebound in the market of 44.47%. At the halfway point of the year, the S&P 500 was down -4.84% as of the close on June 30th. With everything that has happened this year, being down -4.84% feels pretty good.
This post isn’t going to have much to do with personal finances at all. I tell my clients that financial planning is really planning for when life happens. Well, life happened to me in the past year. I was born on Father’s Day in 1985 so it’s always been a holiday I had a connection with, yet I never gave much thought to it and what Father’s Day actually meant until now (unfortunately, in my family, we didn’t pay much attention to “Father’s Day” in its own right-- even though my Dad was one of the best).
COVID-19 and the call to flatten the curve has wreaked absolute havoc on the United States economy. GDP shrank -4.8% in the 1st Quarter of 2020 and the 2nd Quarter is looking to have a large contraction with an even larger recovery in the 3rd Quarter. Total first-time unemployment claims since mid-March have grown to 36.5 million, which represents a 22.4% unemployment rate. The S&P 500 closed at an all-time high of 3,386.15 on February 19th and closed at a low of 2,237.40 nearly a month later on March 23rd. That means the S&P 500 fell by -33.92%. Since the end of WW2, over the past 75 years, there have only been four instances where the S&P 500 fell greater – assuming the worst is now over. This was, by all means, an epic drawdown in the market. However, had we not social distanced the economic repercussions would have been even worse.
That is the bad news.
As Regis Philbin once asked, “Who wants to be a millionaire?”
You’re might be saying to yourself “I do, but I don’t want to go on a game show to do it.”
With a combination of patience, persistence, and self-control…you too can be a millionaire without having to answer any multiple-choice questions.
Here’s how you can do it.
A river cutting through sedimentary rocks throughout millennia can create something mind-blowing like the Grand Canyon. Just like the Grand Canyon wasn’t created overnight, your investments need consistent contributions and decades of appreciation to build generational wealth. Too often, we invest for a couple of years into a 401(k) or IRA thinking our few thousand-dollar investments should be a hundred-thousand dollars. And when that isn’t the case, we give up contributing altogether.
In short…probably not.
According to a study by Northwestern Mutual, 21% of Americans have zero retirement savings and 33% have less than $5,000 saved for retirement. Also, 33% of Baby Boomers have less than $25,000 saved for retirement. According to the same study, the average amount Americans have saved is $84,821 and only 25% have more than $200,000 saved for retirement. What’s more crazy is almost 75% of Americans believe Social Security will “not at all likely” or “somewhat likely” be available when they retire. A study by Provision Living states Millennials would like to have $687,000 saved for retirement, but will likely only have $357,000. At least Millennials have time to change investing contributions. Baby Boomers are right at the doorstep of retirement and are in bigger trouble as their ideal retirement would have $574,000 savings but realistically will have $228,000. The dichotomy between fantasy and reality is great for all generations. We know there is a problem but are not taking the necessary precautions to deal with that problem.
Investing for first-time investors can be pretty overwhelming. There are so many variables out there and they can be pretty confusing. There are different retirement accounts, investment accounts, some account let you invest in different things, etc. But perhaps the most overlooked item is not knowing what your tolerance for risk is. And not only that, making sure your investments actually reflect how much risk you are willing to take on.
When it comes to your own personal finances there are no dumb questions; however, many people are intimidated by the industry jargon, or things they don’t know much about, and thus are very self-conscious to not ask questions for the fear they may come off as unintelligent. I’ve made it my mission to make my company as inviting as possible because I understand how complicated many of these topics can be. So, today’s post is about one of the fundamental building blocks for personal finance. To make this as simple as possible, this post is part dictionary, part examples. The concept is the difference between a stock and a bond.
The purchase of your home could easily be one of the largest transactions you will make in your life. Buying a home can be an emotional process-- one where you are tempted to think more about what you want right now and therefore lose sight of what is best for you and your family in the long run. The decision to choose a 15 year mortgage or a 30 year mortgage may end up affecting your personal finances more than any other decision you'll make. Unfortunately, many people don’t look much further than the larger monthly payment of the 15 year mortgage, so they instinctively choose the 30-year mortgage. This is a decision that can cost them hundreds of thousands of dollars.
One of the easiest things to overlook during changing of employers is what to do with your old 401(k). And sometimes you get another 401(k) when your company is acquired or merged with another company. And in today’s job market, it’s likely at some point in your working years you are going to have more than a single 401(k). It’s rare an employee spends their entire career at a single company anymore.
