ACP Member Blogs

ACP Member Blogs

  • Today I might be crazy. I signed up for the 2017 CrossFit Games. I have only been participating in CrossFit since last July, I am not a top athlete, I am not highly competitive, I have no hope of making it to the regional games for my age group, I will have to scale almost every movement and I will not even rank highly in my gym. So, why sign up and participate?  Because, without hurdles to overcome or goals to achieve life becomes complacent. It’s lose track of where you are heading based on where you wanted to go in the first place. This morning’s MET-CON at “the box” was a cardio killer, our trainer said it was the hardest of the week because the first Games workout is on Friday. Yikes, that’s coming up fast.  I’ll be the first to say, I’m probably not ready, but will I ever be? Each week for the next 5 everyone participating in the games will compete at their box with the same workout and then log our results. The top scores will move on to additional events until the elite from across the country (maybe the world?) will gather this summer to compete in the finals. If there isn’t hope of any substantial outcome, why compete? I decided to compete because I made a commitment last July to give CrossFit a one year opportunity to see what it could do for me. I made the commitment, so I will give it 100% until the end of my evaluation period. If that means pushing myself to do more than I thought I could than that is what I will do. I’m already stronger than I’ve ever been. But, I can do more. I could workout at the local gym or in my home. Would I push myself as hard? No, absolutely not. Unless you have crazy determination and focus, it’s important to seek outside guidance to move beyond where you are today. The best will always tell you they have had a coach or a mentor and they wouldn’t have gotten where they are without their guidance. In my practice, I push clients to set goals, break them into small bites and develop timelines toward completion. Unfortunately, I don’t receive much feedback that the clients are taking advantage of power of goal setting. Dr. Gail Matthews, a psychology professor at Dominican University in California, did a study on goal-setting with 267 participants. She found that you are 42 percent more likely to achieve your goals just by writing them down. So why not write them down? My uneducated guess is a fear of failure. But, if you wrote down a goal, be it financial, lifestyle, personal growth, career, health, etc. and did anything toward achieving the goal, wouldn’t you be further toward the end than if you didn’t take any action? How is that failure? It’s not, you should praise yourself for the progress you’ve made. Then, reassess the goal, redefine the interim steps and recalculate the goal date. Forbes reports a remarkable study about goal-setting carried out in the Harvard MBA Program. Harvard’s graduate students were asked if they have set clear, written goals for their futures, as well as if they have made specific plans to transform their fantasies into realities. The result of the study was only 3 percent of the students had written goals and plans to accomplish them, 13 percent had goals in their minds but haven’t written them anywhere and 84 percent had no goals at all. Think for a moment which group you belong to. After 10 years, the same group of students were interviewed again and the conclusion of the study was totally astonishing. The 13 percent of the class who had goals, but did not write them down, earned twice the amount of the 84 percent who had no goals. The 3 percent who had written goals were earning, on average, 10 times as much as the other 97 percent of the class combined. People who don’t write down their goals tend to fail easier than the ones who have plans. So, what does competing in the CrossFit Games have to do with financial planning? Absolutely nothing, for someone at my level. But it has everything to do with living my best life. What commitments will you make to live your best life? Will you write them down? Will you share them with your financial planner, life-coach, mentor, trainer so you have your own personal cheerleader in your corner?
  • Stocks Break Record On Trump Tax Talk, As Fitch Issues Warning In this week’s news for long-term investors, remarks by President Donald Trump boosted hopes of a major tax cut for corporations. Also with new job openings near a record high, this signals that the economy is approaching full employment and the job market is tightening. Stock indexes closed for the week by hitting record highs on Thursday and Friday, but the warning from Fitch is a reminder that stocks are volatile. If you've enjoyed this blog Join Our Weekly Newsletter, or want more information Please email us at fulbrightteam@moneyful.com
  • Most financial planners and counselors advise their clients to maintain emergency savings of somewhere between 3 & 6 months’ living expenses.  As I’ve mentioned in a previous article, saving 3-6 months’ expenses sounds so daunting that many people don’t know where to begin.  When you throw in paltry returns on savings accounts, some folks might not even try.  In fact, why bother when you can use a HELOC & tap into your home equity?  After all, it’s pretty easy to tap into, and you can put your money to work in other ways, right? Before you start, you might to think about what liquidity actually is and how to use it in emergency situations.  You should also understand why having emergency savings still matters.  While having access to a HELOC isn’t necessarily a bad idea, it’s important to understand that having one can be detrimental if you dont use it properly.  First, let’s discuss what liquidity is. What does liquidity mean? According to Investopedia , liquidity describes the degree to which an asset or security can be quickly bought or sold in the marketplace without affecting the asset’s price.  The implication is that we’re discussing an asset that can be quickly sold in order to meet an emergent financial need.  If you keep your emergency savings fund in a checking account, you don’t even need to sell anything.  That’s as liquid as it gets.  On the other end, being house-rich and cash poor means that most (or all) of your wealth is tied up in your house’s equity.  Since you cannot quickly sell a house, most people do not consider a house to be a liquid asset. Conversely, a HELOC is nothing more than having access to extra debt associated with your home’s equity.  It might be prudent to use a HELOC to meet that same emergent financial need.  However, it’s important to distinguish the difference between responsible use of debt and believing that the debt itself is an asset.  Moreover, there are several things you should think about when it comes to home equity loans. HELOC Point #1:  You’re paying extra on that debt.  When you obtain a HELOC, you’ll most likely pay an origination charge.  It might be a nominal amount, like $50 for a $10,000 line of credit.  In terms of percentages, that’s still .5% for that first year…even if you don’t use it. Also, you’ll pay a higher rate than your primary mortgage.  That’s because your HELOC is a secondary debt to your primary mortgage.  In other words, if your home goes into foreclosure, your primary lender is first in line to be reimbursed.  Your HELOC lender will be repaid only after the primary loan is paid off.  They charge extra for that additional risk. In addition, HELOCs are usually tied to the prime interest rate .  In other words, as interest rates rise, so does your HELOC rate.  This is important to keep in mind…you cannot assume that you’re paying today’s interest rates for tomorrow’s emergency.  If you’re the type of person who likes to run the numbers, you might find that this change alone could throw you off.  Big time. HELOC Point #2:  It might not be there when you need it. HELOCs are tied to…home equity.  This may sound intuitive, but it’s an important consideration when you’re planning for the future.  Although home values generally increase over time, they don’t do so in a straight line.  When prices take a hit, that hit directly impacts home equity. Let’s take an example of a hypothetical couple, Pat & Morgan.  Their numbers, directly from a Bankrate article, are below: Pat and Morgan bought a house in September 2009 for $172,000. They made a 20% down payment and refinanced 3 years later. In July 2014, they applied for a home equity line of credit. Heres how the bank calculates how much they can borrow: Homes current appraised value:                             $190,000 80% of appraised value:                                             $152,000 ($190,000 x 0.8) Amount Pat and Morgan owe on mortgage:        $128,633 80% of homes value minus amount owed:          $23,367 The bank will give them a credit line of $23,367 or less. What would happen if home prices went down 10%? Homes current appraised value:                             $171,000 ($190,000 x 0.9) 80% of appraised value:                                             $136,800 ($171,000 x 0.8) Amount Pat and Morgan owe on mortgage:        $128,633 80% of homes value minus amount owed:          $8,167 That 10% dip in home prices erased $15,200 in borrowing power!  Note:  The HELOC decrease isn’t the same as the decrease in home value because you’re only borrowing against 80% of it ($19,000 x 0.8 = $15,200). HELOC Point #3:  Easy come, easy go. Doesn’t it seem that if you work really hard and save up for a big purchase, then you appreciate it that much more?  Conversely, if you don’t have to work as hard, then you don’t value it as much? Imagine having to save $500 per month for 60 months to reach a $30,000 savings goal.  You’re probably going to take really good care of the money that you accumulated over 5 years.  At least, you’ll likely be pretty conservative in terms of what defines an emergency.  And the good habits that you formed while reaching your savings goal will keep you on the right track. On the other hand, imagine signing some paperwork, and a month later, you’ve got access to that same $30,000.  Now, ‘emergencies’ pop up a lot more.  Paying off the credit cards becomes something you’ll want to do as a matter of interest-rate arbitrage.  If you dont have a fixed budget, you pay ‘what you can’ each month.  Doing this might not ever get you to pay off your debt.  If you don’t take the time to learn where your money goes, a HELOC is probably not going to help you in the long run. Why emergency savings still matter You can summarize this statement with one point:  Triple whammy.  As discussed in my previous liquidity article , a triple whammy is when three external factors hit you in a relatively short period of time.  This can be any three things that involve your money:  family death or injury, accident, losing a job, long-term illness, etc.  In the military, we usually don’t have to worry about losing our income until we transition.  However, transitioning while moving and not having a job lined up…that’s two parts to a triple whammy.  All you need is an accident or unplanned emergency to throw you off track.  That’s where the difference between having savings and a HELOC really matters. Let’s imagine you’re transitioning and trying to find a job.  You’re relocating from overseas.  While you’re on terminal leave, you end up in a car accident and have to replace your car.  You’re now in a triple whammy.  Let’s assume that six months later, your situation has stabilized.  You spent $30,000 in relocation costs, living costs, and to buy a new car (insurance proceeds helped).  However, your income is higher than when you were in the military, and things are generally trending up. If you had a $30,000 savings account and zero HELOC:  Your account is now zero.  However, you’ve got a stable job, and you’ve done this before.  You’ve got the confidence that with some fiscal discipline, you’ll be able to rebuild your emergency savings even faster than before (5 years at $500 per month). If you had a $30,000 HELOC and zero savings:  Your account is now zero.  However, while you’ve got a stable job that’s paying more than before, you’re not sure where to begin.  Is $30,000 in debt a ‘new normal?’  If so, at 4%, you’re paying $100 per month just to keep your balance from going up.  Even if you wanted to pay it down, that $500 per month will get you back to zero in 67 months.  That’s assuming a lot, to include: No annual charges No rise in interest rates Using Bankrate’s calculator , if this HELOC had a nominal $50 annual fee and there was a .5% annual increase in interest rates, you’d still have a $4,099 balance.  You wouldn’t pay off the HELOC until month 70, almost a year later.  During this time, you’d have paid $3,921 in interest. More importantly, unless you’re able to get your arms around your savings habits, you might not have the fiscal discipline to keep on this track. Does this mean that having a HELOC is a bad thing? Not at all.  Used responsibly, a HELOC can be a very powerful tool.  Having access to a HELOC while maintaining a zero balance can be a positive factor in your credit score calculation.  HELOC interest is (usually) tax-deductible, which can lower your after-tax interest rate.  This could be a factor in financing a large purchase, such as a car.  Most importantly, it can serve as an additional cushion against unexpected emergency situations.  However, since a HELOC isn’t an asset, you should not see it as a primary form of ‘liquidity.’ The post Back to Basics: Why a HELOC Does Not Equal Liquidity appeared first on Military in Transition .
  • New Retirement

    The definition and expectations of a working life and retirement have shifted through the years. They continue to shift, both out of our changing desires and out of necessity. When the safety net of the Social Security system was introduced in the US, unreduced benefits were available at age 65, but life expectancy was only a few years beyond that. The changes in that system, at least partially, reflect the broader shift in retirement. People are living longer, which is good. But that means that we need resources to support us for a longer period of time. That means we either need to work longer, save more, or a combination of both. An important issue that’s related to the financial issues is what to do in retirement. If you’ve got a stressful job or work in an unpleasant environment, you’re probably saying to yourself that you’ll have no problem deciding what to do with all the time you’ll have on your hands in retirement. But, like many aspects of life, sometimes we tend to romanticize things. Barry LaValley, founder of Retirement Lifestyle Center, has noticed some trends in the emotional reaction people have to retirement. The two or three years immediately prior to retirement are full of excitement, but often the first year of retirement is stressful. Work gives structure to our daily lives, a sense of identity and purpose, and often a social network. After the first year, people find things to do and develop new structure resulting in a honeymoon phase with retirement that lasts a few years. They’re still healthy and have found things they enjoy doing. The retirement activities become routine after a while and after a few years of the new schedule, people tend to be disenchanted.  After a few more years, people re-orient over several years, then become content. One wild card that impacts many people is poor health. For this reason, doing many of the desired retirement activities in the early years makes sense. Travel, golfing, and being with young grandchildren might not be possible if there are health concerns. The spending patterns in retirement tend to follow these stages. The first few years tend to be big spending years. Then spending declines for several years, but increases again when the cost of declining health become an issue. Consider a new retirement approach. Phasing out of the workforce rather than an abrupt end to working – what financial professionals sometimes call a “cliff retirement” – can be a less stressful transition and ease the financial burden. It can enhance the sense of fulfillment, keep ties with professional people, and allow a flexible schedule for travel, golf, and other retirement activities. If you’re interested in reading more about a phased retirement, look at The New Retirementality by Mitch Anthony. Open your thought to the possibilities of changing the way people retire.