THE MONEY MINUTE – Christmas gift idea: give them an experience

by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

Wow. Look at all the advertising. Look at all the products for sale. Look at all the money being spent on stuff—stuff that will soon be obsolete, no longer the “next-best-thing,” and most likely, thrown away, worn out, or placed on a shelf or in a box to sit in the dark for years.

Millennials (I am one of them), as annoying as we can be to some older generations, have reminded the world of something important: There is more value in memories from life experiences than can be found in most tangible products.

In 1993, my grandparents took my mother, my sister, and myself to Disney World, Epcot, Sea World, A Hawaiian Luau, and other major attractions in Orlando. We rented a small silver car. We stayed at Summerfield Suites in Buena Vista. The breakfast buffet at the resort had a cereal lineup that made me very excited (I love my cereals). We sat together for every meal. I did cannon balls into the pool. So did my grandfather, which made him even cooler in my book. I tried wrestling with my sister in the pool. She wasn’t a fan of that. My grandfather got on stage at the Luau in front of hundreds of people and danced in a way that left us all in stitches. We watched movies together on the planes. We did it all.

My family has reminisced about these moments many times, and each time we do, we smile, we laugh, and we comment how we wish we could go back and do it all over again.

To me, those memories are the best gifts in the world. I carry them with me every day. They will never be put on a shelf. They will never become obsolete. They will always be the “best-thing.”

This year, regardless of your budget, consider giving experiences. Some do not cost a dime. Be creative in the experiences you create. More than anything, the energy behind your intent will determine how the experience is well, experienced.

Here is what I promise: You can give the gift of a lifetime without spending a penny.

See you all next month.

Jac Arbour CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management and can be reached at 207-248-6767. Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

THE MONEY MINUTE: Enjoy every age, they’re all good

by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

Something I enjoy in life more than most things is sitting and chatting with a voice of experience. I recently had a conversation with a friend who is going strong at 91 and certainly has that voice. She was blessed to share a marriage with the love of her life that lasted up until his death earlier this year; they had celebrated 73 years together.

My friend keeps a calendar with important dates, and I felt fortunate when she mentioned that I had a birthday coming up (which let me know I made the cut). “How old will you be this year, Jac?”

“Thirty-five,” I responded.

She sat back in her chair and, with a big smile, reminded me that I have a whole lifetime ahead of me. “Oh, to be 35,” she said. She reminisced for a few moments, and joked about how all the women in her friend group use to lie about their age in an attempt to stop the aging process altogether. She looked at me (just a bit more seriously, but not really), then came the voice of experience: “There is no reason to hide your age,” she chuckled. “They are all good, and you should enjoy every age.”

Later, we were going through a bunch of old things in my friend’s basement, each with a vivid memory attached to it, and she asked if I would carry a number of things upstairs. So, without hesitation I picked them up and, taking two steps at a time as I always do, ran up the stairs to place them where she had asked. When I was halfway up the stairs, I heard her say, “Oh, to be able to go up the stairs like that.”

It’s amazing how much we take for granted or don’t think about simply because we have never been older than we are right now. We don’t know what we don’t know, as they say, or what we haven’t yet experienced. Life itself is clearly one of the greatest teachers, but so too can be those who have been there already.

I hope that, wherever you are on your journey, you stop to acknowledge where you are now. Every point is good. No matter what.

Here is what I promise: There is a difference between communicating and connecting. Aim for the latter, and the voice of experience is something you might get to hear.

See you all next month.

Jac Arbour CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management and can be reached at 207-248-6767.

Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

THE MONEY MINUTE: Attention retirees: How much are you paying for investment advice?

by Jac M. Arbour CFP®, ChFC®, President
J.M. Arbour Wealth Management

For the most part, people know what they pay per month for their mortgage, their car, property tax, etc. However, the same does not seem to hold true for their investments. We always ask the attendees at our monthly educational workshops (and our clients in personal meetings) if they are aware of their exact costs. It is extremely rare that someone does.

There are clearly reasons why 99 percent of the people we ask don’t know, and I believe the main reason is quite simple. Investment costs, management fees, expense ratios, loads on mutual fund, and other internal costs are not always the easiest to identify, nevermind understand.

If you own mutual funds or are considering purchasing some, be sure you know the “load” on each. The load is essentially a commission you are going to pay. Some mutual funds don’t have a load, and others have load fees averaging almost 6 percent. In addition, mutual funds come with what is called an “expense ratio.” This is an internal fee that helps pay the money managers and their teams to manage the fund.

Exchange traded funds (ETFs) and index funds tend to have lower costs than mutual funds; many people seek out such types of investment for this reason alone. With ETFs, which are passively managed, you do not have the active oversight given by fund managers, so it makes sense that the costs are lower.

Most people are coming to the conclusion that it is kind of important to understand what they pay for investment advice, and they want to know. I would encourage you to ask your advisor how much you are paying (or have already paid).

The fee-only investment advisory model is currently gaining major traction. It has been around for a long time, but after the Department of Labor made some noise a couple years ago about investment costs, advocating that advisors should have a fiduciary responsibility to their clients, many more people are now paying attention.

In the fee-only model, you simply pay one, flat, easy-to-understand annual fee that is equal to a percentage of your assets being managed. There are no hidden fees or expenses with this model, and it also ensures that you advisor is incentivized to grow your money, and to protect it when the markets cycle the other way.

Here is what I promise: When you have all the information, you will be able to make better decisions.

See you all next month.

Jac Arbour CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management and can be reached at 207-248-6767.

Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

THE MONEY MINUTE: Attention retirees! Will you outlive your money?

by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

What is your largest concern about retirement? According to the Wall Street Journal, the number one fear/concern of a retiree is outliving his or her money (the second is requiring Long Term Care due to chronic illness). I have to admit, I understand both of these concerns.

According to most sources available to us today, the average amount of money a retiree has in investable assets the day he or she walks into retirement, is approximately $126,000. It is also estimated that someone retiring today will live an average of twenty five years in retirement. Couple these stats with the uncertainty one can experience in the form of market returns and it is no wonder why people are concerned about how long their money will last. So, what do you do?

In my opinion, the first thing you need to do is run the numbers and do the math. We must run our households like a business and know exactly how much is coming in and how much is going out each month. Second, take a hard look at upcoming capital expenditures and any potential changes in monthly cash flow. The idea here is to derive an accurate number as to how much money will be needed from investable assets in order to pay the bills. The smaller the amount needed, the longer your money will most likely last.

Some people have the ability to tolerate market risk and can stomach some losses when they occur. The contrary is also true. Some households cannot afford to lose five or ten percent of their account balances, never mind thirty-eight percent (which the S&P500 lost in 2008) in a single year.

What is more important to you at this point in your life: Return on Investment or … Reliability of Income? Maybe, just maybe, it is a combination of the two.

Call your advisor and ask questions that directly address your concerns. Determine your probability of success with regard to how long your money should last based on factors such as its current investment allocation and your annual withdrawal rate. Determine which safeguards should be considered and most important, which should be implemented.

Here is what I promise: When you have a clear idea about where it is you are going, it is more likely you will reach that destination.

See you all next month.

Jac Arbour CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management and can be reached at 207-248-6767.
nvestment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

THE MONEY MINUTE: Lions, tigers, and bull markets, oh my!

by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

Markets crashed from October of 2007 to March of 2009. Since then, it has been a great ride to record highs. The Dow has skyrocketed and the S&P 500 recently crossed 3,000. The big question is, how long can this thrill ride last?

Bull markets are fun, especially when they last ten years or more like this current one. Such markets build public confidence and increase account values. However, everyone knows that markets are cyclical—our world is governed by certain rules, such as “what goes up, must come down.” So, the question that remains is not if, but when it will drop?

If I knew that answer, I might not be writing this little missive, but rather floating in the Mediterranean somewhere or maybe fly-fishing in a remote and untouched paradise.

I can tell you there are a few things that make me nervous about today’s financial landscape, and the events that surround these things started a long time ago. To be brief, the dollar has not been tied to the gold standard (or any official standard at all) since 1971, financial derivatives are in full swing and mask the extreme over-leveraging of dollars, the Fed has printed trillions of dollars since 2008, and we haven’t yet seen the type of inflation one would expect after this type of increase in the money supply. There is also Brexit and the shaky ground on which numerous world currencies kneel, as well as geopolitical unrest, inverted yield curves, the Fed’s fear of deflation, the roll up of debt to Central Banks and the IMF, and the list goes on.

What’s my point? As basic as it sounds, I believe this is a great time to review your asset allocation models and the diversification within your portfolios. This doesn’t mean diversifying just amongst sectors, but amongst the types of assets you own such as hard assets and physical gold and silver. I believe they could serve as strong hedges in the years to come.

Here is what I promise: The tides will turn and when they do, you will want to know where you stand. You will want to be able to wade it out.

See you all next month.

Jac Arbour, CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management. He can be reached at 207-248-6767.

Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

THE MONEY MINUTE: The new American Dream

by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

The dream has shifted. It used to be a house, a picket fence, a new car, two healthy kids, job security, and maybe a family trip once or twice per year.

Today, younger people are not as interested in buying homes, and they’re starting families later than previous generations. Younger people seem to be more interested in experiences and are more averse to debt, probably due to the debt they already amassed by attending college. Can you blame them?

One thing hasn’t changed and probably never will. Whether it’s purchasing a house or a new sports car or traveling to explore new cultures, we are all looking for a certain something from the things we buy or in which we invest. I believe this certain something is a feeling.

Think of it this way: People don’t buy cars. They buy performance. They buy luxury. They buy a symbol of success or achievement. They buy the freedom to get out of the house and go somewhere, quickly. They buy convenience and safety. Similarly, people don’t buy vacations. They buy adventures. They buy discovery. They buy memories. They buy a stress-free environment. They buy excitement and joy. In reality, we buy the emotions we believe the car or the vacation will give us.

Before you spend a dollar, whether for an object or an experience, or before you invest one, I suggest you ask yourself: What am I really doing? What am I hoping to get out of it? Is it probable that the result of the purchase or investment will align with the way I want to feel?

When you invest, in what form do you hope to earn a return? Is the return in the form of more money, an object or experience that money can buy, or is it a feeling that you seek? At JMA, we believe in the value of experiences as well as the value of a dollar.

Here is what I promise: When you ask yourself the right questions about what to do with your money, you increase the probability that the results you seek align with the results you experience.

See you all next month.

Jac Arbour is the President of J.M. Arbour Wealth Manage­ment. He can be reached at 207-248-6767.

Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

THE MONEY MINUTE: Who will inherit your money?

by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

When you pass, who will inherit your assets? Will your assets be distributed via the probate process? (And will information about your estate therefore become public record?) What if someone should challenge your Last Will and Testament? Will the probate of your assets be an extended and costly process for your estate?

Truth be told, most of the pitfalls of estate distribution can be avoided. Your estate can be distributed to whomever you want, as efficiently as you want, and as privately as you want. What is the secret to making this happen? It’s what I call Proper Prior Planning.

When you choose your beneficiaries, think multigenerational: If the primary beneficiary you have listed should pass before you, whom do you want to be next in line? The answer to this question is your contingent beneficiary/beneficiaries. Have you listed one or more contingent beneficiaries as well?

Some of the questions involving beneficiaries can be difficult to think about, but answering them yourself and making your choices clear are gifts you can give your survivors.

What if you have listed two or more of your children as equal beneficiaries and one of them should pass before you? Do you want the surviving child (or children) to receive the deceased child’s share, or do you want the children of that deceased child to receive that percentage? Potential situations like this and many others must be spelled out in your Will or beneficiary designations on insurance contracts and financial accounts.

One of the common errors we see people make is leaving retirement accounts to children without educating them with regard to the tax ramifications. This is when accounts such as IRAs degrade into what I call “IOUs to the IRS.” The good news is, this too is avoidable.

To be prepared, ask yourself all the pertinent questions about estate distribution and develop a thorough plan. The pros at JMA will be happy to help you. And after you choose your beneficiaries, be sure to educate them about what they stand to inherit, people they will need to contact, and your personal preferences about how they will handle your assets.

Here is what I promise: If you do Proper Prior Planning, you will decrease the chances of Potentially Poor Performance!

See you all next month.

Jac Arbour, CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management. He can be reached at 207-248-6767.

Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

THE MONEY MINUTE: Want to make more money? Align with vibration of gratitude

by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

Work harder. Work smarter. Give it your all. Think outside the box. Be original. Never give up. Have you ever received any such advice? While most people have, and each piece is worth consideration, there are other, less frequently discussed paths of least resistance to all that you desire, including more money.

One of them is to align with the vibration of gratitude.

Everything is energy. Look at any object, pick it up and study it. Look at a tree, a sneaker, a car, a computer, a sandwich, or the paper you’re reading right now. It doesn’t matter (no pun intended) what it is; place it under an atomic microscope and you will see that everything is made of atoms, which is energy.

Your thoughts are energy as well. Therefore, we must be aware of our thoughts and more important, our vibration. Why? Because our vibration heavily influences our actions, habits, results, and our belief systems.

You can most easily align with the vibration of gratitude by being grateful for what you already have. When you consciously decide to live in this way, you immediately begin to attract more things for which you are/will be grateful. That’s all there is to it.

Try looking at the everyday things in your life through a lens of gratitude. After you do, shoot me an email and tell me what you see.

Here is what I promise: When you change the way you look at things, the things you look at will change.

See you all next month.

Jac Arbour, CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management. He can be reached at 207-248-6767. Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

THE MONEY MINUTE: Do you work 9 – 5 for free?

by Jac M. Arbour CFP®, ChFC®, President
J.M. Arbour Wealth Management

Many people who earn a paycheck have never been paid. Sounds a little crazy, right?

When you hold your paycheck in your hand or view your electronic deposit, I’d like you to consider that the amount you see doesn’t represent what you actually earned. By this point, the amount you see has already had taxes deducted and the remainder will now go to pay for things such as your mortgage or rent, your electricity, water, sewer, cell phone, internet, cable, property tax, heating and cooling, your automobile, groceries, etc. When all of this is paid, how much remains for you? Do you get to keep any of it? If the answer is no, then YOU are not being paid.

Consider redefining what you are “paid” as what you “get to keep.” Consider opening an account for yourself that is earmarked for the “future you”—the person who might have a financial emergency someday and need cash or the future version of yourself who wants to retire with a solid nest egg. Either way, you are the person who determines your future capacity in both of these situations and many others.

If you have debt, consider the interest rates and terms of that debt and decide the best way to eliminate it. While eliminating debt, consider building an emergency fund equal to six to twelve months of expenses. After that, it’s time to start one or more investment accounts. Remember, you don’t need to invest much each month; it is amazing how a little bit of money over a long period of time can turn into something truly significant.

When you invest money in an IRA (Individual Retirement Account), 401(k), 403(b), TSP (Thrift Savings Plan), or some other pre-tax investment account, you are investing money before Uncle Sam gets his share. This is what I call paying yourself first. Before anyone, anything, or any monthly bill touches your paycheck, you put some away for yourself. Trust me: you’ll thank yourself later.

If you have questions about strategies to accomplish such goals, please reach out to one of the professionals at JMA or consult an advisor who has a fiduciary responsibility to you.

See you all next month.

Jac Arbour is the President of J.M. Arbour Wealth Management. He can be reached at 207-248-6767.
Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

THE MONEY MINUTE – Your 401(k): How should you be invested?

by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

The markets are volatile, interest rates are rising, both stocks and bonds were down in 2018, and an unprecedented 93% of asset classes experienced a loss. There was seemingly nowhere to turn to make a few bucks in 2018, and it’s no wonder that people want to be especially thoughtful about how they allocate money in 2019, specifically within their retirement accounts.

The most important thing to remember when allocating money in a retirement plan is exactly that: it’s a retirement plan, which means that the money is for later. Keeping this in mind, here are a few things to consider when allocating your funds.

Key Considerations

Time Horizon: There are two primary timelines to consider. The first is how many years until you will begin using the money in your retirement account. The second timeline is the income period. How many years do you expect to draw on this account? Also, in what fashion will you draw on it, meaning will you take random disbursements, or will you take a set amount each month to supplement other forms of income such as Social Security and/or pensions? The closer you are to retirement and the more you rely on these funds, typically the more conservative you should be when it comes to taking on market risk.

Investment Objective: Are you aiming for aggressive growth, slow and steady growth, an income portfolio, or will this be a legacy account designed for loved ones? Getting clear on the purpose of this account is important because it will dictate how the funds should be best invested.

Risk Tolerance: Any allocation you select is accompanied by numerical measurements of risk, including beta and standard deviation. If you are unaware of these measurements, ask your plan advisor to explain how each relates to portfolio expectations. Once you know, ask yourself if such expectations align with your needs and goals.

Target Rate of Return: The allocation you choose will dictate the returns you receive, and it is these returns, along with your contribution rate (see below), that will determine the value of your account when you arrive at retirement age. This means the rate of return affects the number of dollars you will be able to withdraw each month for the rest of your life. Be sure to speak with your advisor to make sure every decision you make will help to keep you within this target. The longer the time period you have until retirement, the more likely you will be able to hit your goals with small tweaks to the plan.

Contribution Rate: I can’t say it enough. Too many people choose an arbitrary percentage or dollar amount when contributing to their retirement plan. It is important to remember that, one day, you will stop receiving paychecks but will still need money, which means the important question to ask is, How much money will I need? When you are deciding on an amount to invest from your paycheck each pay period, be sure to learn what the account value is estimated to be at the time you retire, based on that contribution rate. Do your best to ensure it is enough to truly meet your retirement income needs.

There are many things to consider when investing in a retirement account, but these points are a great way to start the conversation. If you ever have questions, please reach out to one of the pros at JMA or discuss with your plan advisor.

See you all next month.

Jac Arbour is the President of J.M. Arbour Wealth Management. He can be reached at 207-248-6767. Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.