April, 2022 | Live a Life By Design

Work to Live, Not Live to Work

Posted on April 28, 2022April 28, 2022 by Shelby Heflin

According to NC State University, the Gen Z motto is “Work to live, not live to work”. As we get older, we are taught that your job should be your number one responsibility, but why? If you work a full-time job, you work around 40 hours a week and 8 to 10 hours per day. Only giving you 16 to 14 hours to commute to work, eat balanced meals, take care of yourself, complete household chores, enjoy family time, and sleep. Most of those who work have a “second shift” when they get home. Some are even trying to complete higher education, so adding in the time it takes to work on those projects takes away a few more hours.

The ideal work week became a law in the United Stated in 1938. This created a 40-hour, five-day work week with overtime pay for any hours worked beyond that. During this time, it was the norm for one person in a family, usually the woman, to stay home and look after the household chores and children. Since there was someone doing all the household work, it was not that big of a deal for the other person to work so many hours. Now that both parties of the household usually work full-time, this no longer makes sense.

Although the work week hours have been reconsidered many times, the reality of work during COVID-19 showed that reduced work hours not only benefits the employees, but also the employer. Iceland conducted a trial from 2015-2019 and found some not so surprising results. Having a four-day work week increased the employees productivity and well-being, improved the balance between work, health, and home life, and reduced burn out. Being at work 8 hours each day, does not mean you are working at your best for those 8 hours. Shortening the work week may lose work hours but increases the amount of productivity. Working less hours means less burnout. When you have time off to look forward to, you are more likely to get your work done so that you can enjoy your weekend.

How does the work week successfully get shortened? The work culture will have to be changed as a whole. Overworking is glamorized and the employee who works the most is the one that stands out, but that is not how it should be. Being a good worker is not about proving yourself individually but making sure that you are playing your role in your team. To make this clear, each employer should have ground rules on employee work hours to prevent the overwork culture.

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Balance In All Things Is Success

Posted on April 23, 2022April 23, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

You may have heard that life is a marathon and not a sprint. That statement is particularly true when it comes to saving for your future. Many people have found themselves ensnared in debt and living beyond their means to the point it requires them to continue their career longer than desired.

Like any good track coach would advise an elite runner, the focus should be straight ahead and the pace consistent. When approaching the finish line (retirement) kick it in to finish strong! One of the most effective methods of saving for retirement is to maximize the amount of time you have available in your life. Starting early allows you to save smaller amounts each year while compound interest does the heavy lifting.

To illustrate the previous point, let me introduce you to Ronald Read. His story is so inspiring. Mr. Read didn’t earn a significant amount of money in salary as a janitor but was disciplined in his spending. His lifestyle is not for everyone but serves as an excellent example to those who earn far more in annual income and can’t accumulate the level of wealth of this WWII veteran.

Mr. Read was frugal beyond anyone’s expectation. His life of austerity is not for everyone. He drove a second-hand car, used safety pins to hold his coat together and cut his own firewood well into his 90s. The catalyst to his success was that he was a knowledgeable investor and exhibited emotional control to hold his stocks during market contractions. Most of his individual securities were held for decades as discovered at his death.

No one suspected the lowly janitor to amass a fortune by the time of his death. His generosity benefited his local hospital and public library. The total amount of wealth contributed to these two organizations was $6,000,000!

How did this happen? By remaining calm during tumultuous market corrections and retaining his investments for the long-term, Mr. Read benefitted from years of growth on blue chip companies that paid good dividends. This approach combined with a lifestyle in which he seldom incurred debt and always “paid himself first”, created a multimillionaire on a very limited income.

This is the American Dream for many of us. Work hard, save money, make sound decisions and you may experience a similar story for your family to regale in the community. It is very admirable to leave a nice bequest to charity. However, I believe it is balance in your life that truly brings you happiness for a lifetime. By living within your means and saving for your future, you can enjoy family vacations, nice things and send your children to college. Balance is the ultimate key to a lifetime of cash flow and enjoyment.

If your family wishes to create its future in a manner that is balanced, contact a CERTIFIED FINANCIAL PLANNER^TM professional. The key is to start early, keep a consistent pace and focus your eyes on the future ahead of you, it will be here before you know it. See you on the jogging trail!

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Staying Focused is the Key

Posted on April 14, 2022April 14, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

Ask any all-star athlete the secret to their success and they will tell you – focus. This past weekend at The Masters in Augusta, Georgia, Tiger Woods initiated his triumphant return to professional golf. During his post-round interview after he finished the tournament, Woods used the word “focus” several times to describe to the interviewer what his secret was in returning to competitive golf after such a devastating automobile accident.

Life is similar to a sport, perhaps a marathon race. It is difficult for many of us to see the long-term impact of initiating and maintaining a savings plan from age 20 to age 67. As my dad often used the “stick and carrot” analogy, the younger investors can’t taste the carrot due to the overwhelming length of the stick. For those that can maintain the zeal for living a life prepared for unexpected instances that require substantial resources, success is often the outcome.

Younger people look at me with disbelief when I explain the power of compounding to them. To paint the picture in a manner that “shortens the stick and sweetens the carrot”, I ask them to look at their investment account every six months. One of the first statements they utter is “Wow! Look how much I saved and I didn’t miss the money.” Albert Einstein, the great physicist, was credited with a quote about compound interest: “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”

To create a system of focus pertaining to your finances, it is critical that you automate as much of the process as possible. For example, if you are participant in an employer-provided retirement plan, your investment funds will be automatically deferred from your paycheck and invested in the manner you direct your employer. This is a simple method of automating your savings and also receiving consistency in the process.

If you work in a company that does not provide an employer plan, you can accomplish the same automation with an ACH (automated clearing house) election. This process works very similarly to that of your employer election. By filing a form with your wealth advisor to transfer a certain amount of money at a fixed frequency, you will not be required to physically write a check, prepare an envelope or worry about finding a stamp to mail the deposit. Your life will be much simpler from an investment standpoint and you can worry about things such as fishing, golf or running.

If you wish to automate your savings for retirement, it is critical that you have a plan in place to accomplish your goals. See the advice and create a plan for your future by visiting a CERTIFIED FINANCIAL PLANNER^TM professional. Take control of your future and you will enjoy less stress in life. See you on the pickleball court!

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Know Where You Will Land Before You Jump

Posted on April 8, 2022April 7, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

What if you purchased an investment that the insurance salesman informed you would give you annual payments for your lifetime? What if you were 83 years of age? The reasons for the preceding questions are due to the factual case of a client that came to our office.

One of our retiree clients began asking questions about an insurance product that paid annual lifetime payments and earned an unusually high rate of return the first two years. Puzzled by the initiation of the conversation on this topic, I asked her why she was interested in this product. What transpired was a conversation that both shocked and irritated me.

The client’s mother is a widow and 83 years of age. She began to regale me with a story of her mother and a friend attending a free luncheon where they were introduced with a story about “guarantees” and “lifetime income”. Of course, with no understanding of what she was buying, her mother was informed by the salesperson, or she understood him to state the fact, that her money was insured.

We asked the daughter to bring her mother to our office to personally discuss the matter and confirm the facts of the purchased investment. After a few minutes of her mother describing the event and “nice young man” that spoke, she provided a copy of the contract for our review. Quickly I noticed the product came with a 12-year surrender period. Keep in mind, the lady was 83 at date of issue.

Complicating matters was that she had placed all her liquid cash except for $50,000 in this investment. After our discussion, she was quite upset and acknowledged that she and her friend had made a mistake buying the long-term, illiquid product.

The story doesn’t end with our conversation. Due to the recent purchase of the product, we informed her that she was in her 20-day Free Look Period and that she could cancel the product purchase with proper notice given the insurance company. We assisted her in the cancellation process, and she thanked us for helping her understand the investment more comprehensively.

These types of incidents occur too frequently to the elderly in our communities. Without knowledge of the products in which money may be invested, the elderly are prime targets for unscrupulous salespeople.

I should point out that the person selling the long-term investment to the elderly lady had a proper insurance license and wasn’t a CERTIFIED FINANCIAL PLANNER^TM professional.

The lesson learned is that nothing in life is free. This has been borne out from my father’s teachings when I was a little boy. There is always someone paying the bill for the service or product you supposedly receive for free.

Want to know how the story ended? The elderly lady received her sizeable amount of investment back and was provided a plan for her future that addressed cash flow, estate, and tax matters to empower her to make good decisions. She has a reasonable amount of reserve for potential emergencies and no longer eats free meals offered her by strangers. So, as the storybook always reports, all lived happily ever after.

Investing requires understanding, education, and awareness about the strategies you employ for your future. Don’t invest your money in sophisticated strategies that are incomprehensible. Consistent investing over a period of time in a fully diversified portfolio that is easily monitored and rebalanced gives you greater comfort and confidence in your future. Seek out the advice of a CERTIFIED FINANCIAL PLANNER^TM professional to help you understand your investment portfolio. One of my favorite quotes of Abraham Lincoln applies in this situation: “The best way to predict your future is to create it.”

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How Geopolitical Risks Affect the Markets

Posted on April 1, 2022April 1, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

Today, we live in a global economy. Although appearing insulated to the disagreements between countries on the other side of the globe, U.S. markets are negatively impacted nonetheless. How could a political conflict between Taiwan and China create market disruption in the U.S.? This type of risk to markets is called Geopolitical Risk.

One of the most critical factors of any economy is the ability to maintain a steady flow of capital through the production and sale of goods and services to respective markets. When this flow becomes interrupted by governmental policy, military action or social interaction, markets become concerned that buyers and sellers of these goods can continue to make profits, hire employees, obtain raw materials, etc. Recently, political relations deteriorated between China and the United States. Differences in economic goals and outcomes, fair treatment of workers and use of natural resources, or the lack thereof, can impact the flow of goods and services in a significant manner.

Diversification of a portfolio requires far more than simply allocating your assets among different styles of investments such as large capitalization and small capitalization companies. To properly diversify your portfolio, it is critical you analyze the inherent risk in foreign markets including developed and emerging countries. An investor would be required to understand and accept greater risk involved with investing in an emerging market country where transparency and lack of efficient trading occurs more so than a sophisticated and developed efficient trading country.

Based on the World Economic Forum’s Global Risks Report 2020, economic confrontation between major powers is the most concerning risk for 2020. Most recently, the invasion of Ukraine by the Russian Federation presents significant attributes of market disruption. The markets for fertilizers and other natural resources located in Ukraine, in substantial quantities, have been disrupted in the past month. Fertilizer prices rose due to continued high demand and supplies were lowered by the political disruption caused by war.

The pandemic caused by Covid-19 continues to disrupt the free flow of goods from manufacturers in China and the Far East destined for the United States. How does the pandemic affect the flow of goods and materials? In China, a zero-tolerance policy exists in the manufacturing sector. This simply means that the discovery of one case of Covid-19 diagnosed in a worker requires the entire closure of the facility. Let’s assume a plant in China manufactures automobile replacement parts. Demand for these parts remains very high in the U.S. economy. By closing the plant for a period of a week (or for a month as done during the Chinese New Year) will generate less supply for consumers and greater demand for the parts. The result of this imbalance between demand and supply is inflation.

Investing requires an understanding of the functions of foreign and domestic markets, taxation of international imported goods and the impact of geopolitical risks. Most individuals feel ill equipped to make such investing decisions or where to research the matter. Seek out the advice of a CERTIFIED FINANCIAL PLANNER^TM professional to help you analyze the risk in your portfolio and provide you opportunities and guidance to reach your lifetime goals. Matt Haig said it best, “Never underestimate the big importance of small things.”