Do You Have a Financial Plan?
Financial planning is for everyone, not just people with a lot of money. A robust financial plan can set the path for your retirement savings, children’s college education, large purchases like a new home or rental property, and legacy planning. Most people don’t plan to fail; they fail to plan.
CREATING A PLAN
Everything starts with a plan. When Honda wants to build a car, their engineers come up with a plan. When the Jayhawks have a game, they develop a plan. A good financial planner will help you develop, execute, and modify your financial plan. Many people think financial planning just involves saving money and making it grow. The real value of the financial planning process is to help clients avoid making a big mistake and to articulate what goals are important to them.
The good news is a financial planner can help you create a workable, flexible, and reasonable plan. The even better news is we have Certified Financial Planners at McDaniel Knutson Financial Partners who average over 24 years of experience. You are only going to retire once, but we have retired hundreds of times. We know what could work and what might not.
Whether you choose to work with us or not, we recommend you start by creating a household budget. Be honest about what you spend each month. Several apps and websites are available to help track your spending. Your bank or insurance companies probably have something too.
Once you know how much you have, then determine what you want to do with it. Retirement, tuition, travel, philanthropy, and building an emergency fund all require careful planning. Even if you cannot save a lot, begin by saving whatever you can each month. From there, you might be able to boost those savings by reducing some of your less critical expenses.
Budgeting is where it all starts. The critical component of creating a financial plan involves tracking where your money goes each month. This is where technology is your friend. You or your spouse may not remember how much you spent eating out, but VISA will. This has an added benefit of you looking at the computer and addressing expenses—not blaming your spouse or your kids. Spending money on braces is not much fun, and even though braces aren’t fun nor a wasted expense, it still counts as an expense. Whether you spend a dollar on braces or new golf clubs, every dollar you spend on X means you can’t pay a dollar on Y. If you don’t know where your “money” is going, it will be hard to know where “you’re” going.
2. Retirement Planning
Do you know how much money you will need to save so you will enjoy retirement? Funding thirty years of unemployment will be expensive. Don’t think you can start a $50 per paycheck contribution to your plan at work and think it will be enough. Did you know we have several calculators on our website that can help you determine how big the elephant is? Once you know how big it is, then you can figure out how to address it. If you have a plan, you have a chance. Without a plan, you are less likely to succeed.
3. Plan for Major Expenses
Just like establishing a budget, a financial plan will allow you to set aside the money you will need for the big-ticket items. Things like a down payment on a home, or a furnace, or a new car, or saving money to help your children graduate from college without debt can be expensive. By the way, the time to address college is when the kid is born. If you wait until they graduate high school you will not have enough time to make the plan work.
Insurance is the base of the financial planning pyramid. Do you have the right amount of life insurance or disability insurance to protect your family? Buying insurance is about as fun as going to the dentist (no offense, dentists.) All the financial goals you and your family have will fail if you die early or become disabled. Insurance can be an enormous game changer.
You have a plan. You have a good plan. It’s working. Then life happens. We’ve all been there. It’s frustrating when your plans get torpedoed by an unforeseen emergency. With proper planning, you can be prepared for the unexpected. They’re not very sexy, but: buying insurance, staying on top of preventive maintenance, going to your annual physicals (MEN, I’m talking to you too), establishing a rainy day fund, etc. are great ways to make sure bad days don’t become bad months or years. Most of financial success has to do with avoiding the big mistakes. You can save money in your retirement plan all you want, but if you have to take all that money out to pay for a furnace, you’re not getting ahead.
I hope you’ve enjoyed reading this. There is more than one way to get ahead, but most people succeed by having a plan first; planning for contingencies second, and not panicking (or having to panic) when you hit a rough patch. Generally speaking, success is not an accident. There is a small component of luck, but our experience is luck/chance make up a tiny part of your success. Thinking things through and deciding where you want to go is the first step and we can help you with that.
Market Commentary: Is a Trade War a Real Threat?
Written March 23, 2018
What an interesting time to be alive. Although watching the global stage is fascinating, some “boring” for a while would be nice. It is like a soap opera out there! But I wish it was like a soap opera, not real life and didn’t affect us. We’re all in this together. So let’s take a look at what’s rattling the markets.
This week was the biggest slide for U.S. stock indices since January 2016. Thanks to the Facebook scandal and President Trump’s new round of tariffs on China, we are seeing a retest of the lows set in February.
The president announced on March 22nd that his administration had found ample evidence for intellectual property theft by China and therefore would impose $60 billion of tariffs on Chinese imports. He added that this would be the first of many. Mere hours later, China retaliated with a list of their tariffs on US imports which amounted to $3 billion.
Trump did not list any specific products that the $60 billion in tariffs would apply to (although he’ll come up with those later). It’s an almost off-the-cuff number to get closer to his goal of reducing our trade deficit with China by $100 billion. That deficit currently stands at about $370 billion. Decreasing the deficit is not a bad idea, but economists think there are better ways than to impose tariffs. Tariffs have a way of boomeranging on the thrower – in the long run; they increase inflation and decrease GDP. Not a good combination.
Some think Trump is trying to create a stage for negotiation, using big rhetoric to see how his opponent will respond to strike a deal ultimately. Answer they did, swiftly and specifically. China had a list prepared in anticipation of the president’s move. I wager they have thought ahead of every possible contingency, starting with a relatively low number was their way of sending a warning shot across the bow. China is willing to come to the table and talk. They do not want a trade war but they have made it clear that if push comes to shove, they will deliver one.
The ball is now back in the president’s court and what he does next will be critical. If he adds more tariffs or targets imports of significance, China could deal the U.S. a punch by adding tariffs on three key areas: aircraft, soybeans, and semiconductors. All three of those U.S. industries depend on China heavily, and tariffs would be a substantial blow. It would be altogether worse if China decided to buy those goods elsewhere. Moreover, it is that worry that has sent those critical sectors of the market spiraling this past week.
Might this turn into a trade war? Perhaps, but I think it’s premature to put significant odds on it. We haven’t had a full-on trade war since the Great Depression. We have had skirmishes here and there. Every president has placed tariffs on something to insulate a subsection of U.S. workers. It was steel for President G.W. Bush and for President Obama, it was tires. But what we are experiencing today has already escalated beyond those minor historical scuffles.
Let’s say this does turn into a trade war. Are there any solutions? Yes. U.S. companies hurt by the tariffs here could go to the federal court for help to try to overturn them. Affected countries have already said they will appeal to the World Trade Organization for help. However, that would take time, a couple of years most likely and a lot of damage can be done in that span of time.
Specifically, global economic growth might grind to a halt just when the entire developed world was experiencing accelerating growth. Inflation could rise because of increased costs and that would be enough to push the global economy into a recession. There are enormous implications and ramifications of an all-out trade war. This is why there hasn’t been one in almost 100 years. No one wins.
Wow, that sounds dire. Is now a good time to move out of stocks? When I look at objective data and take personal biases out of the equation as much as anyone can, my opinion is no. The fundamentals of the economy are still intact. It’s too early to say what the worst case scenario is what’s going to play out. If this resolves, the market may rocket past prior highs and leave anyone sitting in cash in the dust. At this point, it would be both an effort to try to time the market and an emotional decision - not a decision made on rationality.
This is far from the first “freak out” moment investors have had to deal with in the past nine years. There’s always a possible worst-case scenario and this time is not any different. Looking at the chart below I am reminded of the European debt crisis in 2011. Remember when the market fell 19%, and people were afraid the EU was going to break apart? How about the Chinese bear market of 2015 when the market lost 12%, and people were fearful China was heading into recession and dragging the rest of the world down with it? That is just to name a couple. Stay the course. Don’t panic.
As always, if you want more specific advice, we’re happy to help. Give us a call or send us an email. The first meeting is on us.
Disclaimers and Notes
Registered Representatives offering securities and advisory services through Cetera Advisor Networks, LLC, member FINRA/SIPC Advisory services also offered through McDaniel Knutson Financial Partners. Cetera is under separate ownership from any other named entity.
The views are those of Victoria Bogner and should not be construed as investment advice. All information is believed to be from reliable sources, however, we make no representation as to its completeness or accuracy and is not a complete summary or statement of all available data necessary for making an investment decision. Any information provided is for informational purposes only and does not constitute a recommendation. Economic and performance information is historical and not indicative of future results.
Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into accounts the effects of inflation and the fees and expenses associated with investing.
For Inspiration and Recognition of Science and Technology (FIRST) Robotics
As a high school student, I participated in FIRST and I believe it helped me develop who I am today. While I was in college, I became a mentor with FIRST and am fortunate to remain active with the organization. I am proud that McDaniel Knutson Financial Partners shares my passion and not only sponsors FIRST, but encourages me to participate today.
The mission statement of FIRST is essential to today’s young people. FIRST serves to inspire young people to be science and technology leaders and innovators. As a FIRST Robotics mentor, I am lucky; I get to witness students discovering passion and inspiration in math and sciences.
We recently participated in the 2018 FIRST Robotics Competition. High school students and mentors - people like me - are given an opportunity to work together to solve a common problem. The challenge is to design and build a robot using a standard “kit of parts” within a set of rules and to play a sophisticated field game - in just six weeks.
FIRST uses robots as a vehicle to foster excellent life skills including self-confidence, communication, and empowerment developing tomorrow’s leaders. By engaging in challenging competitions, students are pushed to use innovation and thinking outside the box. I am proud to be a part of FIRST Robotics.
Working once again with Theatre Lawrence, McDaniel Knutson Financial Partners is pleased to be co-sponsoring a special production of Camelot. We will be hosting a limited seating opening night event for our clients to attend on June 8, 2018. The Arterra Event Gallery will cater this event.