Good. Good. What is the latest by you? What are you paying attention to nowadays?
Oh, man, paying attention. Everything kind of enjoying this. I feel like the last time around
I didn't really enjoy the all-time highs as much as I do now. I feel like I have a newfound appreciation for them
compared to last time around.
Why would you say that is?
I feel like coming out of college, that's really when I started paying attention to markets, probably my junior and senior year
after COVID happened and stuff, I was in it and I was paying attention during the COVID sell-off, and we obviously
rebounded within six months we were making new all-time highs, and I feel like after our peak, I think that was the first week
of 2022, you know, it was a grind down and it can get to you, you know, and I feel like
it's kind of nice when we post these new all-time highs. It feels great.
Do you think people are more cautious this time around?
Cautious in what sense as far as like the markets as far as they went through 2022?
I mean, in my personal opinion, I think that there's just a plethora of bad news that comes out every day.
I'm trying to prove why people should be cautious and, you know, I mean, you're familiar with our client base and the people
that we work with. We have such long time horizons that it's usually that the media is covering a daily change or a weekly change.
They're not talking in years or even decades, which is what our target is.
Hey, guys, I think millennials, older millennials particularly, that have gone through the great recession at the beginning of their careers
and adult lives have become relatively more conservative and cautious than maybe even younger millennials or folks who haven't gone through that.
You know, that recession was so deep and drawn out. I think its impact is greater than, you know, 2022, which is simply, you know, a bad year in the markets.
I don't know if it carries the same, like, emotional, traumatic weight that 08 and 09 does, but, yeah, if you kind of were starting your investment journey
as a young person, you know, let's say it's Gen Z or very young millennial in 2020 and 2021, and you're like, wow, this is how the market works, you know, to the moon every year.
And then, boom, you're hit with 2022 and you didn't, you know, and you kind of face the full impact of that.
Then, yeah, I think you might come out with some trauma there. How long that trauma would last?
I don't know, but, you know, then you're greeted with 2023, where it swings back the other way. It's a really confusing environment for, I think, new investors.
And for older investors, you know, on the younger side of things, again, back to the older millennials, like, that trauma from 08, 09 kind of carries through.
So you see higher allocations to cash, maybe a little bit more of an electency to deploy cash into the markets, things along those lines.
What about, well, I guess we can talk about the all-time highs then for a second. What's the data show, you know, investing at all-time highs, and then are there ever times, Doug, where, you know, despite the time horizon, you make shifts in the portfolio based on where the market is?
No. I mean, Nick Majulie, who writes of Dollars and Data, had a great piece on just that this week. Highly recommend his writing.
And he'll go through the data and the history of it. Typically, yeah, I agree with him, which was a conclusion that, like, market events will never dictate investment strategies.
All-time highs doesn't mean I'm going to stop investing at the same time every month like I normally do.
And all-time highs don't necessarily mean, in fact, they usually bring on more all-time highs. Usually there's momentum there.
So this notion that, wow, we're at highs, it better take risk off the table, you know, if that's what you're doing, it's probably more a setup to be making a bad move or disappointment than just sticking to your strategy.
But let your goal, you got to let your goals and time horizon related to that money really dictate how aggressive or conservative you are, not market forces. That stuff's just so far outside of your control.
Yeah, no, it's definitely a good point. I like what you're saying about it with momentum especially. So, Doug, we are last day of January here.
By this point in 2024, what's a good little checklist for people that they should have had XX and X either done, set up, or planning to do it to take care of their personal finances this year?
Great question. I'd like them to obviously start with the fundamentals, which is everything around cash management. You want to make sure you're tip-top for the year.
So what does that mean? That means having as much control around money in and money out of your life as possible.
If you ended last year after the holidays having spent money and you're feeling like, you know, you're not in control around spending, this is a really good time to audit yourself and take a look at, you know, what you should know things like what's your average monthly expense?
You know, what's the target here and budget around that, right? You should know if not have a good expectation of what you're going to make this year so you can do the top line of your financial life and then take a look at the expenses, the bottom line.
It's also maybe take a look at, you know, how you're doing on cash. Your reserve is a function of not just having one, but also knowing how you feel about things going on in your world and in your life.
You know, if you feel really secure at your job right now, maybe you don't need to be as a conservative on holding cash. You know, I still think six to nine months of your living expenses and cash is a good rule of thumb, even though the real rule of thumb is three to six, a little lighter on cash.
But I don't know. See, and look, kind of tying what I just said about, you know, trauma from 0809. You know, the textbook rule of thumb for a reserve is three to six months of cash on six to nine months of cash because of specifically because of what I had experienced at the beginning of my career and the beginning of my adult life.
So just kind of putting that out there. You know, there's there's plenty of plenty of news out there about jobs and layoffs. You know, today's even today's numbers were a little were a little disappointing on private payrolls.
But it seems like tech is going through a little consolidation as well on the job front. So if you're feeling like this is the year where there's consolidation at your company, layoffs could be happening. You'll want to bulk up on cash.
You know, you might you might need a little bit more here. So think of that. And then have a plan in place for investing and what you hope to put away, not just savings when I say savings, I mean, cash, but also investment.
It's the beginning of the year. What are what are the goals? So assess, assess, you know, and revisit what it is you want to accomplish. And I don't think we talk enough about the top line and how to get our income up.
What are our goals for for increasing income? You know, whether that's through your current job and seeking promotion or performance to get a bonus or whether or not, you know, you're entrepreneurial and hustling out there on your own.
What are your goals? How are you going to get there? How are you going to develop that? So a lot of planning here at the front end of the year so you can execute and get it done.
Anything you don't add on to that, Cliff?
Yeah, definitely. I think you had a great tweet the other day about, you know, building skill sets and such, especially when you're when you're younger. And I know, like, we all want to be putting money away into the market. But sometimes it's not as traditional as that, especially when we're young, you know, what goals do you have in mind or how are you going to be able to invest in yourself over the course of 2024?
It's not as traditional as expecting, you know, whatever percent return over the long run as you would if you were putting money in a 401k or Roth IRA. But I mean, usually those are those are the greatest investments that you can make is how are you going to improve yourself? How can you, like Doug said, how can you increase the top line, increase income, because that's really, you know, where the bread and butter is for your investments, the more money you make, the more you can save, you know, and the way to do that is by increasing skill sets, increasing your knowledge, seeking
designations or higher education, things like that.
Certainly important pieces investing in yourself, having some cash raised. One question I've been getting more and more lately is some of the alternative investments, real estate or, you know, investing into a hedge fund or investing into, I don't know, VC or something like that. I'm curious how you guys go about, you know, evaluating those types of opportunities for clients.
It's a great question. So I generally like to see more focus on building up a strong foundation. And now I'm talking about from an investment front, I think there's always room for alternatives in a portfolio, whether that's your, you know, friend's company that he's doing some friends and family fundraising on over to private placements and venture capital, you know, we don't, we're pretty agnostic when it comes to how good it is.
People choose to grow their wealth. But I rather you see, I rather see you build discipline and a strong foundation or a strong base of, you know, long term assets before you start wrapping yourself up in, you know, the alternatives. It's a lot of fun to go explore these, you know, types of instruments or investments.
I think clearly people invest in them because, you know, let's take venture capital, for example, you know, you had a home run and the opportunities for making money, you know, are really high, but also the ability to do that's very low, you know, you got to invest in a bunch of them just to, you know, hit one of them.
So, you know, 20, 20 companies, 19 of them are never going to make it and one of them does you and you hope you get that one. So, for example, you know, if you if you just got into regular investment, or you're now able to contribute to your retirement plans or a brokerage account, and you're able to do that consistently on a monthly basis and start to grow those accounts, I want to see that behavior.
I want to see that discipline and your ability over, you know, a long period of time to stick with that before you start saying, hey, I'm going to go do some due diligence on a hedge fund or something in a VC portfolio or a private placement or anything like that.
Also, you know, think about position size for a moment, a lot of subscriptions to these things are larger dollar amounts, whether it's 25 grand, 50 grand, sometimes 100,000 or more, you know, allocating could be could be difficult until you actually build a portfolio.
I mean, I don't talk to clients about taking a 25 or $50,000 position and something like that till they have maybe half a million dollars, you know, tucked away, you know, in a in a pretty vanilla, what we call risk adjusted portfolio.
It's just not the priority. But there is a room for it. Excuse me, there is room for it.
Hey, another question, phone question that I've got since I have you guys on stage. This is one that I get often. What does a financial advisor actually do?
Charge 1%. No, just kidding.
So the way we lead our practice is with financial planning.
We like to engage our clients by first understanding what their goals are and creating a roadmap and a plan to get there. And any good CFP will be able to clue you into what specific areas of financial advice like what are they actually going to give advice around.
And those six areas are cash management. So cash flow and liquidity. They're going to get into risk management or insurance planning, helping you understand where risk lies in your life and how to protect that or mitigate that risk.
That's typically by showing you how insurance can help you do that. Like we don't even sell insurance, but it's our job to show you where risk lies and help you get policies if necessary.
Then you have investment planning. So putting together something that's more comprehensive than just, oh, I'm going to put money into my 401k.
So helping you account for the first and last dollar of available investment, where those investments go, how much, how to allocate that money, which buckets to fill up first, whether that's your 401k or to focus on Roth IRAs, brokerage accounts, things like that.
Also help you understand what you have currently invested and the risk you're taking. How much inequities versus bonds should you have? What's that long-term portfolio look like?
Fourth area is retirement planning. This is where we can show big context. How do we actually get to financial independence? Running scenarios that show what level of savings and investment under what assumptions will allow you to work if you want to.
I like to describe financial independence as when work is optional and not working is affordable.
Then the last two areas are tax planning and estate planning, making sure that a client or someone doesn't spend more on taxes than they have to.
So mitigating not just tax bill in the current year, but into future years, depending on what strategies or vehicles are available to them.
And then estate planning is making sure at the very basic level, legal, medical, or financial decisions can be made if that person can't make them for themselves due to death and incapacitation at a very high level.
It's reducing estate tax. So very good problem to have on your hands is you're so wealthy that you need to reduce the estate tax bill.
So these are the areas that a financial advisor, a good CFP, a certified financial planner, are going to want to dive into.
That's why we call it comprehensive financial planning. This is all driven through a relationship, right?
So someone's going to design or build out this financial plan for you, show you what they've observed, provide you with recommendations on how to improve these areas, and then help you execute or make the changes that will get you in a better position to make decisions around your money.
So that's what financial planning is. That's what the financial planning process looks like, and that's what you'd be hiring a financial advisor for.
Most people have the connotation that working with a financial advisor is simply, cool, someone's going to manage my money for me.
And while we do manage money on behalf of our clients, that really becomes second to the financial planning and relationship side.
Clients have a choice as to whether or not they even want to be investing with us at all.
My experience, very busy, high achieving clients, they just don't have time for a lot of things in their life, even if that has been made simple by robo-advisors or they can invest for free, their time's too precious.
So they'll generally find themselves outsourcing that.
So if you're going to someone who just wants to manage your money, that's an investment advisor.
That's just a part of what a good financial advisor may offer.
I know plenty of financial advisors who don't even touch the investment piece.
And I know a lot of great advisors who do everything and then some like tax planning.
They'll do, you know, like real family office type services, things like that.
All right, now a harder question. What do consultants do?
Like financial consultants, that's usually more on the corporate side of things.
They're advising companies and businesses on how to be more efficient or increase their margin.
They charge retainer fees to come back and back again.
OK, no, I think those were all pretty helpful pieces.
I actually was also going to go over this.
So nowadays we have so many passwords to so many of our things that, you know, part of what it sounds like is having this emergency plan of like, hey, if something happens, where can people find all the passwords to get into my stuff?
While still not making it easy to find that someone can hack you and stuff like that.
So I know you've got like a shared safe with your wife and you got a death note and all that good stuff.
Can you walk through like for people how they should go about like, hey, I have all this assets and it may not just be enough to just say, OK, you know, court, go give it to someone because they actually need to still access it.
Yeah, thanks for like kind of touching on something we wrote about this week.
So if you're all interested in improving your relationship and conversations around money, go check out the link tree in my bio and subscribe to the joint account.
My wife Heather and I every week write a topic around helping couples with money.
And this week specifically wrote about something called a death note.
Not the anime death note is what fills in the gaps that your estate planning documents.
Don't God forbid something were to happen to someone.
So, for example, if I die, I'd want to make sure my wife Heather has access to think about how digital our lives have become like my whole life operates off my laptops and my phone.
She needs to be able to access my phone.
She needs to be able to access my laptop.
And then she needs to be able to access the password manager on either my phone or laptop, which would then unlock pretty much 95 percent of my digital life bank accounts services that we pay for online bill pay.
It's probably all on the computer there.
So the death note is a way to give someone that you love or your significant other or partner access to all the things that they would need in order to take action today.
Because in my experience, you know, do this, but be a financial advisor long enough and you'll go through all kinds of life events with your clients.
There's, you know, never a year now where someone unfortunately isn't passing away.
And, you know, there's a situation like that and it gets messy very fast.
You might need access right now and you can't get it till you're showing a death certificate to a financial institution, for example.
So you need access to a bank account or need to get out some money of your of your deceased spouse or partner.
You know, you're not going to be able to do that until certain things shake out or you can have access to their, you know, password or their bank account and get stuff done.
So I'd encourage everyone in a serious relationship to think about writing a one or two page letter of how your partner can access all the things that they don't have access to.
And as far as where to keep that, I mean, I print this out in a physical copy. I go over it. I revise it every year.
I go over it with my wife. I put that copy of that document in our safe. She knows how to access the safe.
And if God forbid, anything would happen. She knows who are the important people, how to access electronic devices and what and pretty much a summary on what to do.
So she's not totally left out there. I've seen some of the I've seen some great estate planning really just turn into a lot of work for individuals.
I had a friend just last year, her uncle, who is pretty much in charge of raising her, did a wonderful job estate planning.
But the amount of work to settle the estate and the burden of the administration of all of this, you know, fell on my friend, her his niece.
And she just became completely overwhelmed by it.
So even some of the best to say planning doesn't necessarily give you the access and, you know, ability to smooth, you know, to work through the process as easily as possible.
So, again, go check out the piece called the death note over on the joint account.
Nice. Cliff, you're working on that death note.
Yeah, I actually I do have a hard copy that my family has. They've had it for a while. Actually, I should probably update it.
So I feel like I just have a plethora of passwords and everything just in case I need to get into my ledger or such.
Nice. Yeah, that's definitely fair. Some fun pieces here.
Also, question for you, Doug, I constantly get asked, you know, because I talk about, hey, great place to get started is with ETFs and everyone asked me what ETFs.
And then like the constant three that I list are VTI, VOO and QQQ, not financial advice.
But I often notice financial advisors use a lot of other products outside of that that are index funds with a bunch of random letters and I shares and all different other types of stuff.
What's are these things all very similar? Are they different? Why are people using all these different products?
Yeah, because there's a lot of investment management shops that have products to sell you.
You know, there's a marketplace out there where people are willing to put all kinds of stuff in a portfolio.
I'm a real believer that the more simplistic you keep things, the better off.
Like when it comes to long term investing, you want to go with strategies that you can stick with for a long term.
But yeah, I mean, there's a lot of redundancy out there. You can probably get the same kind of S&P 500.
Let's use that. Like you mentioned VOO or VTI. So in all, you know, equity U.S. index, you want to invest in the entire U.S. market.
There's an ETF for that at Vanguard, at BlackRock, at Fidelity, you know, every kind of mainstay investment management shop has these ETFs or index funds available.
How do you choose one over the other? You know, it's pretty.
You always do your research and due diligence here, but you're talking about buying the S&P 500.
You would hope that buying the S&P 500 at Vanguard versus Fidelity.
Sorry, I had a call coming in. Can you guys still hear me?
Awesome. Sorry about that.
You think they'd be pretty ubiquitous and pretty and they do.
I mean, like if you're comparing the S&P 500 ETF from BlackRock to Fidelity, you're going to find that they're pretty much, you know,
they cost the same and they're structured the very same way.
So why, you know, again, why are there so many ETFs to choose from because there's so many things you can invest in?
Yeah, there's definitely a wide range.
You know, it doesn't make it easy for investors that are just starting out.
They're like, why, what do I do here?
You know, there's something to be said about offering too many choices creates paralysis.
Cliff, what's the latest update on that service that you're doing that we talked about?
The Young Money Plan is Young Money Planning right now.
I feel like this is kind of what we were chatting about before.
I wanted to chime in, but I didn't.
You know, Doug gave a great overview of what financial planners are providing, you know, working with a financial planner.
I feel like there's this this connotation where people assume that, you know, all financial planning is revolving around retirement.
And that's just not the case whatsoever.
Douglas and I have people come in all the time that need assistance with student loan debt management, people that want to save for a house.
People, you know, it's not just all about retirement and like boring, like, OK, keep doing this.
There's so much, you know, younger clients lives are so much more dynamic.
They're constantly changing.
Maybe they're going back to school, things like that.
But yeah, so the Young Money Plan that that bona fide wealth offers really targets a younger demographic with a lower price point.
And it limits the scope of engagement.
I know that Doug was just talking about, you know, estate planning and insurance planning.
Those things will definitely become relevant to younger clients.
But when you're just starting out fresh out of college, they're much less applicable.
So that we limit the scope of the engagement to really cover what, you know, a young professional is most concerned with, which is likely their income, how much cash they need to have on hand, their investments
and their first experience with employer benefits such as life and disability insurance.
There's usually not too much need for a younger person if there's no dependents to start looking for individual policies at that point in time.
So by limiting the scope of the engagement, we were able to charge less for it and really focus on what exactly the young professional needs
instead of doing such a holistic plan and building them into a place where they do need a holistic plan as their life evolves, as their earnings increase.
And all of those things start changing in their life.
Very nice. If you're a young person who needs such a thing, feel free to DM Cliff directly.
We got maybe a few more minutes here. Another question for yourself, Doug.
That is around the retirement account since that just got mentioned.
And that is I see some people like just maxing out their accounts.
They're, you know, they're off like day one of 2024 and, you know, getting as much as they can as the 401K.
Is there a difference between, you know, doing it throughout the year, getting it on in the beginning?
You know, it's funny, dollar cost averaging can work if you're going to do that, say, throughout the month or if you're going to do it consistently year to year.
Technically, you know, investing or maxing out, let's say you're doing your Roth contribution or your IRA contribution January every year.
And you've been doing that over the last five years. Technically, you've been dollar cost averaging.
You've just been spacing it out over 12 months instead of monthly.
I think it's really about style. Often, you know, we will dollar cost average over a monthly basis on, you know, large amounts.
So if a client had $100,000 they wanted to invest, I'd probably say, all right, given where markets are right now in psychology, more psychology driven than really anything.
We're going to want to spread that out over the next 12 months. Clients are like, hey, you know, I want to make my Roth IRA contribution here in January.
Because it's January and you can now do that. Probably just do it lump sum.
Data supports that lump sum investments tend to outperform dollar cost averaging over the really long term.
So it's really a combination of the amount of money that's being invested as well as so size being factored into, you know, psychology.
You know, people aren't going to feel as bad if they invest $6,000, generally speaking, and it goes down 10 or 20 percent, then, you know, they invested $100,000 and it goes down 10 or 20 percent because of something called bad timing.
Meaning, hey, I invested this money in the market, just took a crap, you know, the following week or year.
So absolutely nothing wrong with getting your contributions done, you know, right at the beginning of the year and maxing out a little bit of a different story for 401ks.
I know some clients get paid their bonuses in the first quarter of the year and sometimes are like, hey, I'm just going to max out my 401k right then and there.
There potentially is an issue with that. It could, depending on how your employer and if your employer is offering a matching contribution, you might rob yourself of getting more of a match
by having not spread it out throughout the year. It really comes down to how and if your employer is doing that.
But, you know, back to your question, it's really fine if you want to go ahead and max out your Roth at the beginning of the year.
It's good behavior there. Get it done. Don't have to think about it. Don't have to chop up $7,000 into 12 different pieces here. Just get it done.
Sounds good. All right, guys, I got to wrap up here for 12. Cliff, you had any other comments you'd like to share with the audience?
No, I think we're all good. That was a great space. Love being on. Wolf, thank you.
Yeah, man. Cliff writes an awesome newsletter himself called Yield to Macharity to put out a great piece today.
Highly, highly recommend you subscribe to that as well. I know we're really pushing the newsletters.
Help with your own finances. If you're a young professional looking to get started, you got questions, go hit up Cliff.
If you need financial planning or anything like that, don't ever hesitate. And then lastly, I'd say this.
I'm currently writing a book with my wife about relationships and money, similar to our newsletter, kind of ramping up to a more comprehensive book on that.
If you have a money story with your partner, particularly ones that aren't necessarily great, we keep you anonymous. We're interested.
We want to hear your story. We want to know about your relationship with money.
You can hit me up in the DMs or find the merge book at gmail.com. You'll remember that.
But if you have a story around money, particularly something you and your partner have gone through and have come out the other side of or are dealing with, hit me up.
Awesome. Thanks, guys. I always appreciate you coming out and doing these. I feel like they are super helpful for the audience.
Just the basic stuff, right? It goes a long way to get that foundation in place. And if you want to hear more, obviously, feel free to get these guys up to the DMs, take it to the next level.
That's going to be it for this space. We have a big space coming up later today in an hour and a half.
We have Jerome Powell talking about the FOMC meeting and things like along those lines.
So we'll provide live coverage with a panel of experts, 1 30 p.m. Eastern. I'll be hosting from the Stocks on Spaces account. And this account will be in there as a speaker.
Looking forward to it, everybody. Take care. Enjoy your day. Thanks, Doug.