Are you ready to get a jump on 2019? I for one am getting pretty excited about swapping out my wall calendar. Here are six financial best practices for the year ahead. Pick a few of them or take on the entire list. Either way, you’ll be that much further ahead by the time 2020 rolls around.
1. Do nothing. Seriously. If you have a well-built investment portfolio in place, guided by a proper investment plan, your best move in hyperactive markets is to let that plan be your guide. That often means doing nothing new with your holdings. I am listing investment inaction as a top priority, because “nothing” can be one of the hardest things to (not) do when the rest of the market is in perpetual motion!
2. Double down on your planning. That said, a “do nothing” approach to turbulent markets hinges on having that relevant plan in place, guiding your appropriately structured portfolio. A fresh new year can be a great time to tend to your investment plan – or create one if you’ve not yet done so. Have any of your personal goals changed, or will they soon? How might this impact your investment mix? Have market conditions put your portfolio ahead of or behind schedule? Are you unsure where you stand to begin with? It’s time well-spent to periodically ensure your plan remains relevant to you and your personal circumstances.
3. Prepare for the unknown with a rainy-day fund. Time will tell whether 2019 markets are friendly, foul, or (if it’s a typical year) an unsettling mix of both. Having enough liquid, rainy-day reserves to tide you through any rough patches is a best practice no matter what lies ahead. Knowing your near-term spending needs are covered should help with both the practical and emotional challenges involved in leaving the rest of your portfolio fully invested as planned, even if the markets take a turn for the worse.
4. Redirect your energy to contributing financial factors. While you’re busy staying the course with your investments, you can redirect your attention to any number of related financial and advanced planning activities. While you don’t necessarily need to act on everything at once, it’s worth reviewing your financial landscape approximately annually, and identifying areas in need of attention. Maybe you’ve got a debt load you’d like to reduce or an estate plan that’s no longer relevant. Perhaps it’s been too long since you’ve reviewed your insurance line-up, or you’d like to revisit your philanthropic goals in the context of the latest tax laws. Refreshing any or all of these items is likely to contribute more to your financial success than will fussing over the stock market’s daily gyrations.
5. Perform a cybersecurity audit. Protecting yourself against cybercriminals is another excellent use of your time. With the new year, consider revisiting a few basic, protective steps, such as: changing key passwords on your most sensitive login accounts; reviewing your credit reports (using AnnualCreditReport.com); and placing a freeze on your credit file, to block unauthorized access (now free, based on recently enacted federal law). Especially with child identity theft on the rise, these actions apply to your entire household. Unfortunately, even minor children are now at heightened risk.
6. Have “that money talk” with your kids, your parents or both. Speaking of your kids, when is the last time you’ve held any conversations about your family wealth? It’s never too soon to begin preparing your minor children for a financially literate adulthood. As they mature, their financial independence rarely happens by accident, with additional in-depth conversations in order. Then, as you and your parent’s age, you and your kids must prepare to step in and assist if dementia, disability or death take their tolls. There also can be ongoing conversations related to any legacy you’d like to leave as a family. For all these considerations and more, an annual “money talk” can be critical to successful outcomes. Increasingly, I have been facilitating these kinds of family discussions with the family patriarchs and grown children. It is gratifying to see families work through and discuss issues there were never very clear on how to handle.
So, there you have it: Six creative ways to bolster your financial well-being while the stock market does whatever it will in the year ahead. While this list is by no means exhaustive, I hope you’ll find it an approachable number to take on … with two critical caveats.
First, I have a bonus “financial best practice” to add to the list:
Above all else, remember what your money is for.
Money is meant to fund your moments of meaning.
So, be it resolved for the year ahead: Next time you find your stomach tightening at the latest frightening or exciting financial news, tune it out. Walk away. Go do something you love, with those whose company you cherish. Circling back to our first call to inaction, not only will this feel better, it’s likely to be better for your financial well-being.
Second, I recognize that each of these “easy” best practices aren’t always so easy to implement. I could readily write pages and pages on how to tackle each one.
But instead of writing about them, I’d love to help you do them. At Merit Wealth Management, we work with families every day and over the years to convert their dreams into plans, and their plans into achievements. If you are not already a client, I hope you’ll be in touch in the new year, so we can do the same for you.
I have had a few conversations recently about the possibility of a “Government Shutdown”. Enough clients wanted to discuss the potential ramifications so I thought I’d comment on it in this email as well.
We are told that one reason stocks have been going down lately is the threat of a government shutdown, which seems almost probable if the President’s recent statements are to be taken at face value. The U.S. President is on record as embracing a government shutdown tomorrow, Friday, December 21 unless he receives full funding for his border wall with Mexico. This seems unlikely, so it might be time to ask: If the government shuts down, what is actually likely to happen?
Some statistics that might surprise most of you: First: government shutdowns have been more common than we might realize. In all, there have been 20 government shutdowns since October 1, 1976:
October 1-10, 1976
October 1-12, 1977
November 1-8, 1977
December 1-8, 1977
October 1-17, 1978
October 1-11, 1979
November 21-22, 1981
October 1, 1982
December 18-20, 1982
November 11-13, 1983
October 1-2, 1984
October 4, 1984
October 17, 1986
December 19, 1987
October 6-8, 1990
November 14-18, 1995
December 6, 1995 – January 5, 1996
October 1-16, 2013
January 20-22, 2018
February 9, 2018
Congress can avoid a partial shutdown by passing another continuing resolution—following the continuing resolution in September that temporarily funded 7 out of 12 total appropriations into December. If the President were to veto that resolution, then a two-thirds majority in both the House and Senate could override the veto.
What about the other five of the 12 appropriations? Those—Energy & Water; the Legislative Branch; Military Construction and VA; the Department of Defense; and Labor, Health & Human Services—represent 75 percent of discretionary government spending—basically 75 percent of the money spent that is not related to Social Security, Medicare or other entitlement programs. Those programs are fully funded through September 30, 2019.
So what appropriations would the shutdown actually impact? The seven that still have to be authorized are Agriculture; Commerce, Justice and Science; Financial Services and General Government; Homeland Security; Interior and Environment; State and Foreign Operations; and Transportation and HUD.
What would be the economic impact of this potential partial shutdown? The report estimates that for every day of a full shutdown, American GDP is reduced by 2.4 basis points, or 0.024 percent. But since only 25 percent of the government would be inoperable, the impact in this case would be about 0.008 percent per day.
Put another way, each month would reduce American economic growth by about half a percent. That, of course, is unlikely to happen.
What have the markets done during past government shutdowns? The data show that the average market move for the S&P 500 index, in the week of a government shutdown, is down 0.06 percent—which I think most of us would regard as virtually unchanged. The two weeks during and after a shutdown, the markets averaged down 0.13 percent. More interesting is the fact that the one-week data shows that only 47 percent of the time did the market go down. More interesting still, in the month after the shutdown, the average price move was UP 0.25 percent.
I am certainly not saying that a government shutdown is good for stocks, or that shutting the government down is a great way to shake the market out of its current gyrations. But it probably isn’t a good idea to panic about the market impact of a shutdown either.