Investment & Balance Sheet Roundup
It’s a new year and time to build our foundation for the next eleven months to get stuff done with the least amount of friction possible.
This month’s topic focuses on getting your balance sheet together and thinking about your priorities.
The Cliff Notes:
Create your family Balance Sheet
Income, Assets & Liabilities
Know where your money and investments are and how they are working together
Know what you’ve got and why you have it. If something isn’t serving you anymore, be done with it
Have an idea where you want to go/be. Otherwise, what’s it all for?
Your Questions:
Is there a place you can see your families Balance Sheet? An app, accounting software or excel? Your Financial Planner can help bring it all together and has an app for quick viewing.
When you put that Balance Sheet into a chart, are there places that look heavy? Are you heavy on real estate but light on cash & investments? Heavy or light in any sector of the market such as Large Cap Growth, cash, oil, etc? Do you have more in retirement than non-retirement accounts (it’s a different strategy!)?
2022 was a rough year for most investments. Did you lose sleep at night?
Have you considered where you and your family want to be? Are you actively designing your life or letting life come as it may?
Even if we do not manage an account for you - seeing it all together is important for whole-life investment advice. As we go through the topics, understanding your specific situation will allow us to help you think about what needs to get done and whom would be the group to handle it. We will also be able to consider possible tax scenarios such as timing of income or strategic investments.
Next month, we’ll focus on Tax Planning, gathering documents and getting you and your accountant lined out so you can be prepared for quarterly payments or that one in April.
The Balance Sheet:
Having an idea (the clearer the better) of where you’re wanting to go is one of the many tools in your toolbox to create a life well designed for you and your family. Being able to see your financial life all together and understanding how your puzzle pieces can strategically support your dreams is a great place to begin tidying up in a new year.
Here are a few things we find helpful to jot down as your starting point. Remember, this is a point in time, so pick the end of the year or the end of a month so it’s easier to find statements with values. Excel or pen and paper will work just fine.
Income - Month or Annual, whichever is easier for you!
What is your pre-tax and actual take home pay?
Any other income coming in? Social security, pension, child support, etc.
Assets - What is it and what’s the current value?
Taxable Accounts - Checking / Savings at the bank, CD’s, Annuities, etc.
Retirement Accounts - 401(k)’s at work (or previous jobs you never rolled)
529 Education Accounts
Health Savings Accounts
Life Insurance with cash value
Private investments you made
Loans you made (even if you doubt you’ll see the money again)
Homes / Real Estate
Vehicles including trailers, rv’s, boats, etc.
Jewelry
Household items, guns (ignore if you just rolled your eyes)
Anything else you would list with value (even if it’s just to you)
Liabilities - Even if you don’t know the balance, write it as a reminder to find it.
Home Loan
Vehicle loans including trailers, rv’s, boats, etc.
Outstanding capital calls remaining on private investments
Money you owe someone else
Credit card totals
Anything else that you would list as owed?
If you’re interested, I have an excel spreadsheet that I can send you to start with. This is not an exercise meant for you to make comparisons or dig up guilt over not having done more saving, giving or ______ (Insert your guilt of choice.) It is meant to:
1. Tell you what the state of the union is today
2. Help you have a good conversation about what you want that to look like in the future
3. Have a better conversation with your CPA and
4. Give you a head start for when we get to the estate planning month.
The Investment Roundup:
Here’s an interesting fact for you - the average household has around seven or more “financial” accounts holding cash and investments and are held at least at two different banks, usually three or more. Have you seen all of those cash/investment accounts on one page with a detail of what those investments look like? If your 401(k) is invested in a target date fund and your investment accounts have the S&P 500 index or has a heavy position in domestic Large Cap Growth stock, the odds are pretty high that your total exposure to Large Cap Growth is overweight. Did you buy something because a friend told you it was a ‘great time to buy it’ and you’ve not looked at it since (and that was two years ago)? It’s not a matter of good or bad, but in a challenging market knowing what your exposure is (and where it is) can help you understand why your balances are moving the way they are.
2022 was a rough year for investments with the S&P 500 down over 18% and the NASDAQ down over 34%. The treasury yield curve has been inverted for months (a leading indicator that a recession is coming). Whether you are in the camp of ‘this will pass soon and we’ll be back in business’ or ‘the wolf is at the door’ or somewhere in the middle, the likelihood we are in for a roller coaster this year is high. What has worked the last 10-15 years is likely to be challenged. Even if we don’t manage it, let’s talk about that mix so adjustments can be made.
Since we’re talking investments, I’m going to take the opportunity of having your attention to say this - I’m in the middle camp, I believe we have a challenging road ahead of us and we will continue pulling in stops on stocks and protecting remaining gains as opportunities present itself as well as moving into less volatile areas of the market.
If you are in one of the other camps, that’s ok, we just need to know so we can be more proactive or opportunistic on protection. This market action is not new - pullbacks, recessions, bear markets happen. In fact they happen often in varying degrees. Are they fun? No. Is anyone excited about the unknown future? No. Well, maybe. There’s always a few out there. Bottom line, this too shall pass. Let’s see if we can get our drink and find a comfy chair for the show rather than get stuck with the metal folding chair at the front where we’re going to have a crick in our neck by the end!
We now have the ability to manage your 401(k)’s, 403(b)’s, etc. Please ask us if you are interested!
Bonus Reading:
Quiz question:
Q: What’s the one thing that cannot be created and you’re not guaranteed any more of?
A: Time. (But you knew that.)
There are so many ways you can invest your time, talent and resources. As we go through the planning topics it is important to keep in mind that investments are broad and wide in nature.
Investment1 [in-‘ves(t)-mant]
An asset or item acquired with the goal of generating income or appreciation over time.
Appreciation refers to an increase in the value of an asset over time. When an individual purchases a good as an investment, the intent is not to consume the good but rather to use it in the future to create wealth. An investment always concerns the outlay of some resource today - time, effort, money, or an asset - in hopes of a greater payoff in the future than what was originally put in.
Cool drawing CVR, where ya going with it? (no, I’m not quitting my day job)
Ever stepped into the salon or barber shop, heard the question “what would you like today?” and shrugged your shoulders? I bet you received an exasperated look from the person standing in front of you, wanting to make you happy with their service and yet having no idea what to do with that shrug. (Perhaps that’s only Amanda’s reaction when I shrug my shoulders to this question.)
Nevertheless, if you don’t know the answer, how’s anyone else supposed to help you get there? In the absence of information, we tend to insert our own. You better hope that guy/gal really knows you if you’re going to shrug and let them decide that next haircut!
You’re not the Jones’! (ok, if your last name is Jones, then you are) but for the rest of us, there is no one to keep up with! This is your life, your ride, your haircut. You’re the only one who knows what makes you happy. Walk a mile in someone else’s shoes and you better have Band-Aids on hand.
Knowing your priorities and where you want to be is more than a flippant comment. It’s a meat and potatoes question - what do YOU really want? Take out the ‘Mom /Dad said I should’, ‘that won’t make you money’, ‘how the H$$L do you do that with a 7 & 4 year old’, ‘because that’s not how the world works’ kind of thoughts. Did I get most of them?
What do YOU want? Travel the world? Retire at ___ age? Work from a beach? Change careers, learn to surf, sell it all and travel the USA in an RV? Love stability or crave adventure? Leave money to the kids or to charity? Spend it all and let the last check bounce?
Have you given it enough thought to really say? You can go in one of two directions - put your head down, work hard and hope what you want comes to you OR consider what it’s all really for and design your life around it. You might be surprised; decisions get easier when they do or do not fit inside your priorities. Knowing where you want to be and what you’re doing it all for will automatically create a set of filters to help you along the way.
Will it be quick and easy to make it all happen? Maybe. Probably not. Can it be done? Absolutely - full stop. Just because you don’t think you can full-time travel the world because the kids are in school, or the always good backstop - money doesn’t grow on trees is NO EXCUSE to not put some thought into this question.
If you’re thinking to yourself - but I’m retired Christi, I’m in coasting mode and have all I need. I love you for it! You still need a plan and if you have one - make sure it’s still doing what you intended. Also, be kind to your kids or the people around you who will be handling your affairs at some point. Messy documents mean mistakes can be made!
Want some help with this potential brain bender? Do you know the answer or did it slap you over the head as you were reading? Call us!! We want to know what it is so we can support you. While not everything has a financial component, we are your thinking partner and might just be able to connect you with someone in our network who’s done it or can help. Designing your life can take time, years sometimes - but wouldn’t you rather know you’re making decisions along the way that are getting you closer to that dream? If you’re missing dinner with the kids, writing rain checks and working on vacations, I invite you to re-read a few paragraphs up. Life is short and you’re not guaranteed tomorrow.