Archive for Financial Planning

September is College Savings Month – A Look Back at Education Planning

Financial Planningon August 23rd, 2018No Comments

Written By: Zach Bennedsen, CFP®

September – the month when summer gives way to fall, when we’re all supposed to stop wearing white, and when the NFL gets back underway. September also marks National College Savings month. As schools from Kindergarten through College begin their fall terms, now is as good a time as any to highlight the importance of preparing for college – both academically and financially.

College is a time of robust learning in all facets of life. This education spans far beyond the breadth of any curriculum and encompasses lessons learned about life, love, responsibility, and self-discovery. All of these lessons are almost impossible to put a price tag to. We can, however, put a price tag to the financial benefits of a college degree. According to collegeboard.org, the median earnings of bachelor’s degree recipients age 25 and older with no advanced degree working full time were $24,600 (67%) higher than those of high school graduates [1]. Of course, that boon to future earnings comes at a large upfront cost. In 2017-2018, the average annual cost of tuition and fees spanned from about $10,000 for in-state public college to almost $35,000 for a private school [2]! Given these astronomical (and always rising) sticker prices, the importance of saving for college cannot be stressed enough.

In honor of College Savings month, we’ve compiled a list of previous articles that we’ve published about education savings and other related topics – we hope you find these resources helpful.

For Parents

To start off, Yusuf wrote an excellent piece explaining 529 plans in 2017. He also touched on Yeske Buie’s preferred 529 plan, Utah’s my529 (formerly known as UESP). Read on to learn more about pre-paid tuition plans, 529 savings plans, and our investment strategy for education savings accounts.

Next, we share a piece that examines the balance of saving for both your child’s education and your own retirement. As the saying goes, there are no scholarships for retirement! For this reason and others, it is important to maintain a strategic balance between your retirement savings and your education savings. Read on for our full thoughts.

Yeske Buie held a Q&A session with Tony Sutphin of YesToCollege.org. In this piece, Tony shares why you should complete the FAFSA even if you don’t think you qualify for financial aid.

For Students

In this article, the Yeske Buie team provides advice for incoming college freshmen. As mentioned before, there’s a lot more to learn in college than the curriculum. The piece shares some words of wisdom that the team has gleaned over the years.

Yeske Buie knows that financial planning is not just for boomers. Do you? Here, we share our original announcement of Senior Financial Planner, Yusuf Abugideiri’s and former Yeske Buie resident Russell Kroeger’s article on a Financial Planning Framework for the Millennial Generation. Read on to learn about how this framework addresses generational worldviews, the balance between instant and delayed gratification, and collaborating authentically with millennials.

Lastly, Ryan Klemm wrote an article about post-college challenges. No, not jobs and apartment hunting, but student loan repayment. While this topic can be daunting, Ryan’s piece does an excellent job at explaining the ins and outs of student loans.

For Everyone

Inspired by the back-to-school season, we hosted a webinar where we shared our thoughts on some of the most common questions related to the education planning journey. You can watch the recording of the webinar below.

**Correction: The non-profit referenced on slide 21 is called YesToCollege.org

The Ins and Outs of Identity Theft

Cybersecurity, Financial Planningon August 7th, 2018No Comments

Written By: Ryan Rasmussen

August is Fraud Awareness Month – the perfect time to spark conversations about how vital fraud prevention is to you personally and to society as a whole. In late 2017, the credit monitoring service Equifax experienced a significant data breach. After all was said and done, 147.9 million consumers were affected, most having their Social Security Number revealed. This rupture of sensitive data has put consumers at a heightened risk for identity theft.

According to a 2018 survey by The Harris Poll, approximately 60 million Americans have been victims of identity theft. That same survey indicates nearly 15 million consumers experienced identity theft in 2017. With data breaches and phishing attacks becoming more and more common, the question on many of our Client’s minds is: what can we do to protect ourselves? In this space, we share information from industry experts on the methods that identity thieves use to steal your personal information and what you can do to make yourself a less attractive target.

How do identity thieves obtain your personal information?

Identity thieves continue to grow stronger at stealing sensitive data such as Social Security Numbers, driver’s licenses, birth dates, and credit card information. Once they have your information, they can apply for credit cards, open bank accounts, drain bank accounts, take out loans, file tax returns, apply for government benefits, and/or receive medical services. These actions can destroy your credit, cost ample amounts of money, and take countless hours to make your life whole again.

Below are the top methods identity thieves utilize to get ahold of your information according to the Center for Identity Management and Information Protection:

  • Data breaches: Major organizations are big targets for thieves because they hold massive amounts of consumer data. When data leaks from these organizations, the damage is extensive and affects millions of consumers.
  • Phishing: Scammers often use emails, telephone calls, or text messages to fool consumers into providing personal information by pretending to be someone you trust, such as a bank, the IRS, or major retailer.
  • Hacking: Computers and smartphones are at risk of being hacked. Cybercriminals can install malware that uses keyloggers and screenloggers to record your keyboard strokes and the sites you visit leaving your app logins and website passwords vulnerable.
  • Dumpster Diving: Yes, you read that right – thieves look through garbage to find bills, checks, receipts, and credit card offers containing personal information.

How can I make myself a less attractive target?

Being proactive and staying informed are great ways to stay protected against fraud. Below are twelve proactive tips to help you fight identity thieves as shared by The Federal Trade Commission and consumer.gov:

  1. Credit Freeze or Lock: Credit locking or freezing is considered the gold star in Identity Protection. As of September 21, 2018, there is no cost to freeze or unfreeze your credit file. When your credit is frozen, only the companies that have extended credit to you can view your credit.
  2. Establishing Fraud Alerts: A fraud alert notifies creditors to contact you to confirm your identity before opening new accounts. To establish fraud alerts, simply call any one of the three major credit bureaus listed below. As soon as one credit bureaus confirms your fraud alert, the others are notified to place fraud alerts, as well. These alerts are good for one year at which time they can be renewed again.
  3. Enroll in a Credit Monitoring Service: Credit monitoring services, such as IdentityForce, are great resources because they monitor your personal information in areas beyond the credit bureaus and notify you if your information is being misused.
  4. Review Your Credit Report: Reviewing your credit report ensures the information on file with the credit bureaus is accurate. Since you’re entitled to one free credit report every year from each of the three major credit reporting bureaus, request one report every four months to monitor your information throughout the entire year. To request yours, visit annualcreditreport.com. Identity monitoring services, like IdentityForce, also often provide credit monitoring services that can help you keep on top of your credit scores in between reviewing any reports.
  5. Opt Out from Receiving Pre-Approved Credit Offers: Identity thieves snatch intercept new credit card offers sent via mail. To discontinue the delivery of pre-approved credit cards, you must opt out of prescreened offers. To do this, call (888) 567-8688 or go online at https://www.optoutprescreen.com.
  6. Use a Shredder: It is the best practice to shred documents with sensitive information in them before throwing them out. If you don’t have immediate access to a shredder, you can sometimes find community shredding events in your local area.
  7. Don’t Download Unknown Software:  Avoid opening unknown attachments or using software downloads from unknown websites. These programs may include spyware or malware which act as a portal for phishers and hackers to take your information.
  8. Be Aware of Common Phishing Techniques: Watch out for emails, links, texts, phone calls or mail asking for your personal information. Never give personal information to people who contact you and ask for it.
  9. Password Protection: The most recent reports on best practices for passwords is simple – the longer the better. At Yeske Buie, it is our policy to use passwords that are 18 or more characters. Additionally, Two-Factor Authentication is a great way for implementing another security “hurdle” for phishers and hackers to have to jump over in order to obtain your information. These password management strategies can make it more difficult for hackers to crack your online account passwords and therefore make you a less desirable target.
  10. Practice Browser Safety Habits: Using encrypted sites with “https” in the URL is more secure than browsing non-encrypted sites. Be aware of the differences and take extra precaution when using non-encrypted sites.
  11. Limit Social Media Data: Don’t leave personal details, such as your birthday, place of birth, family members’ full names or addresses on your social media. Strengthen your privacy settings and be cautious about whom you accept as a connection.
  12. Secure Your Phone: Lock your phone with a password or fingerprint, turn off Bluetooth when you’re not using it, and be wary when connecting to a public Wi-Fi, and be cautious when downloading apps which could contain malware.

If you have an identity protection service, such as IdentityForce, contact them immediately to notify them and get them working on your case. We also encourage you to contact us if you learn that your information has been stolen so that we can act as an additional layer of security by monitoring your accounts for suspicious activity – as we like to say, we want to be your first call!

When it comes to the theft of personal information, the sooner you detect a problem, the sooner it can be fixed. A combination of awareness and prevention is the best way to protect yourself against identity theft. And finally, rest assured that we at Yeske Buie are always researching industry best practices and training our team so that we are doing our part in keeping your information safe.

Avoid Surprise – Get Organized!

Financial Planningon July 26th, 2018No Comments

Written By: Ryan Klemm, CFP®

Think about your answers to the following questions: Where is your Last Will and Testament? How about your auto insurance policy? Last year’s tax return? For many of us, our answers are skewed more towards “I don’t know.” And while it’s likely that, if given time, you could unearth all of these financial documents, it is also likely that this quick exercise has uncovered an opportunity for you to better organize these important documents.

WHAT DOCUMENTS TO KEEP

Making sure your financial documents are organized and readily accessible can help reduce stress, simplify any financial requests, and ensure you are adequately prepared when you need to access any important documents. When it comes to the setup of your financial organization, we suggest being mindful of the following categories:

  1. Personal Financial Management
    • Credit card statements, student/personal loan statements, mortgage information, bank account statements
  2. Investment Statements
    • Brokerage account statements, retirement account statements, stock certificates
  3. Estate Documents
    • Wills, trusts, powers of attorney, advance medical directives
  4. Legal Documents
    • Birth certificates, social security cards, passports, marriage/divorce certificates
  5. Home Documents
    • Appraisal documents, deeds, renovation receipts, lists/photos/videos of home contents
  6. Income Tax Information
    • Tax returns, charitable gift documentation, property tax information
  7. Medical Information
    • Primary care physician contact information, medical specialist information, important medical documentation, insurance cards
  8. Insurance Documents
    • Original policies and recent statements for homeowner’s, auto, umbrella, life, disability, long-term care, etc.

While the collection process may require some initial investment of your time and test your organization skills, the peace of mind in quickly knowing where everything is located will pay dividends.

HOW LONG TO KEEP THEM

The second piece to organizing your financial documents has to do with how long you should keep them. If you kept every statement or piece of information for the categories we listed, you’d probably need to dedicate an entire room just to ensure there was enough space! A general recommendation is to keep all important information (what has been listed above) for seven years or until updated. After this point, it is no longer necessary for you to hold on to the documents; they may be safely destroyed. This means that it is also important to make a habit of revisiting your organized documents on a regular schedule. You can use specific yearly events like tax preparation time, the start of daylight savings, or the start of the new year to trigger your reminder to review the information.

WHO TO TELL

The last step is to inform someone else as to where these documents are kept. This is a crucial step in case of an emergency, someone other than yourself may need to access the information. If they can’t find it, all your hard work and meticulous record keeping will be wasted!

As always, the Yeske Buie team is available to help, whether that means helping you think comprehensively about all of your financial documents, keeping an extra copy of your documents on file for safekeeping, or reminding you to update your documents regularly. Don’t hesitate to contact us if we can be of assistance.

Sailing the Financial Seas

Financial Planningon July 12th, 2018No Comments

Written By: Daniel Tripp

Ambiguity about the future seems to be at an all-time high. Technology is rapidly changing. Politics are divisive. War, disease, natural disasters, and stock market volatility fill our nightly headlines. At Yeske Buie, we have a heightened awareness to this apparent state of flux as ambiguity and how Clients respond to it is critically important to long-term financial success. In this space, we explore the research behind human behavior in the face of uncertainty and how we at Yeske Buie look to be your experienced sea captain during these times.

Defining Ambiguity in the Age of Uncertainty

The role that ambiguity plays in our lives is a topic that many in the financial planning world have been talking about lately. The Yeske Buie Financial Planning Team in San Francisco recently attended a presentation delivered by behavioral finance expert, Shachar Kariv, and the presentation provided great insights as to what science says about how humans make decisions when faced with unknown choices and how we as financial planners can better serve our Clients to help them make grounded financial decisions.

Before discussing the role a financial planner plays in navigating ambiguity, let’s look at what science says about how human beings react when faced with choices that have unknown outcomes. I’ll use myself as an example. I, like most people, am not comfortable with uncertainty. I tend to stick to the people, places, and things I know best. I am human, and a creature of habit. I have a strong bias to avoid unknowns, such that I will often choose outcomes that are known to me rather than outcomes that have the potential to be tremendously beneficial. I can’t quantify the risks or benefits of these unfamiliar choices, so I simply avoid them.

This pattern of human behavior is known as an ambiguity bias. According to behavioral finance experts, ambiguity bias is the tendency to favor choices with a known outcome, rather than “taking a chance” on an opportunity with unknown probabilities. Biologists theorize our early ancestors may have developed this bias as a protection method against their hostile and deadly evolutionary environment. If you were a bipedal ape living on an African Serengeti 1.3 million years ago, avoiding unknowns wasn’t just a matter of preferred choice, it was a matter of survival. Our brains are literally hard-wired to stick what we know at the expense of what we don’t.

Ambiguity Bias and Investing

The problem with applying this cognitive bias in the modern world, particularly as it relates to investing, is that it can lead to poor decision making and unfavorable long-term outcomes. An example of this bias is how investors tend to choose to invest their money in “safer” investments like government bonds or CDs, at the expense of investing in stocks that have higher expected returns. Because stocks are often associated with higher risk, many investors avoid including a healthy allocation of stocks in their portfolio.

Other examples of investors favoring “known” versus “unknown” investment vehicles include disproportionally favoring real estate, heavily investing in individual employer stock, or investing a single stock sector – their perceived familiarity can make them more attractive to the mind. Finally, perhaps one of the most compelling illustrations of ambiguity bias is how individuals over-allocate to home country markets at the expense of foreign investments. For example, US investors hold roughly 80% of their equity exposure in US stocks, even though the US market capitalization is only 50% of the global economy. Ambiguity bias may be one explanation for this phenomenon.

Sailing the Unknown Sea

Overcoming the ambiguity bias is an enormous part of the value financial planners can provide to Clients. One of my favorite analogies to describe how financial planners can help Clients overcome this bias is to imagine the world of investing and finance as the ocean, and your financial life as a ship on that ocean. Somewhere over the horizon is your ideal financial future, but the way to that future is full of storms, pirates, and hidden shoals. As a ship alone, you are unsure of the dangers ahead, and you’re hesitant to cross the sea. With the help of a financial planner, however, you can feel confident that you have a co-captain on your financial ship. We have studied the risks ahead, the best routes to take, and the most favorable winds to sail. We can help build your financial confidence and encourage you to overcome the tendency to stay close to familiar shores while acting as your financial compass. The list below describes six ways that Yeske Buie can help Clients navigate the sea of financial uncertainty.

  1. Bringing organization and clarity to our Clients’ financial ship
    • Whether it’s through cataloging insurance documents, monitoring account beneficiaries, keeping track of estate planning documents, or helping pay taxes, we can help bring order to our Clients’ financial lives so they can focus on other priorities.
  2. Offering accountability to help Clients follow through on financial commitments and goals
    • During our Discovery Process, for example, we help Clients prioritize goals and outline the steps necessary to achieve those goals. We then review their progress and support them as they strive to reach their desired objectives.
  3. Providing objectivity and insight into issues that help keep our Clients from making emotionally driven decisions
    • We apply analysis and experience to financial matters to assist Clients in making the best possible choices with all the information available.
  4. Proactively anticipating our Clients’ life transitions and assisting them to become financially prepared for periods of change
    • We assess the impacts of those transitions and anticipate what may be needed to manage change and thrive financially.
  5. Educating Clients to understand and evaluate complex financial topics
    • We help assess and analyze the situation at hand and we provide knowledge so Clients can feel confident that they are making objective, accurate, and reasoned financial choices.
  6. Forming a lasting partnership with our Clients by seeking to understand them as a people so they can live the best life possible
    • We work on their behalf as stewards of their money, time, and resources so they can go about their lives, knowing there is always someone there to help should they need it.

As we all know, life can be chaotic and complex – most especially in regards to finances. Here at Yeske Buie, we view our job as being a partner and a guide to help Clients navigate through turbulent financial seas. So next time you are faced with one of life’s transitions, or if you are feeling uncertain about a financial decision, know that we are here to help you manage this ambiguity, and we are available to provide the information you seek to make the best possible choices and achieve all your Live Big goals.

Money in Movies

Financial Planningon June 28th, 20182 Comments

Written By: Lauren Stansell, CFP®

Watching movies – it’s something we’ve all done and likely continue to do periodically (if not frequently). Whether watching at a drive-in theater, in the park on a summer night, at a movie theater with comfy lounge chairs, or from the comfort of your own home, movies can be a great way to spend a couple hours. And whether you prefer to watch movies alone, with your special someone, with your family, or with total strangers, movies have a unique way of bringing us together in support of or defense against a certain character or outcome.

All movies have some common characteristics –

  • Characters: Humans, robots, aliens, animals, money (yes, we said money and we’ll return to this later), and more.
  • A Plot: Straightforward, boring, thrilling, full of twists and turns, etc.
  • A Beginning, Middle, and End: And sometimes a cliffhanger that leaves you anxiously awaiting the next movie in the series.
  • And the Ending Credits: Usually with a great song you try to remember to look up and add to your playlist.

Most of these characteristics become clear as we watch the movie; the good guy achieves a goal, the bad guy perishes, the fish finds his son – it all seems to become clear as the movie unfolds. For a more complex movie, however, identifying these characteristics requires turning to the reviews to interpret hidden meanings, hidden characters, and hidden messages. Similar to the selective attention experiment done in this video, sometimes we don’t even realize everything that is happening.

With all this in mind, let’s return to the idea that money can play a role in a movie. Just like in life, money is everywhere in the cinematic universe! In some movies, money is obvious and unavoidable. For example, anyone who has watched Wolf of Wallstreet knows that money was the ultimate character in that film. For other movies, it isn’t quite as clear that money plays a role, but just like in life and relationships, it may show up as an underlying driver, motivator, or issue and is only discovered to be so upon deeper reflection.

Today, we’re sharing a list of movies that have money as a character and we include a brief note with our thoughts about the role money plays. We’ve also included links to the IMDB page for the movie if you’d like to read more about it. And now, we want your input! What movies have you seen where money was a character? Did money play an obvious role? Or was it hidden in the relationships and discussions throughout the movie? Take a look at our list and let us know what you think!

  • A Christmas Carol
    • Scrooge measures all things in terms of money, thus severing his human connection to those around him. When he learns again to connect with the world through his own humanity, he is freed from the bonds of soulless money worship (and learns to Live Big).
  • It’s a Wonderful Life
    • A massive financial loss due to theft by a money-grubbing business rival causes a man to despair that his life has any meaning or value. An angel shows him that his value to the world could never be measured by money and ultimately his many friends come to his rescue by sharing their own money.
  • The Shawshank Redemption
    • Banker goes to jail after being unjustly convicted of murdering his wife and her lover.  Uses his money skills to help fellow inmates and ultimately engineers his escape by using those same money skills to leverage the greed of the evil prison warden.
  • Jerry Maguire
    • Ambitious sports agent allows his humanity out for an instant and it gets him fired, forcing him to form his own firm and pin his hopes of financial survival, let alone success, on his one remaining client. Most famous line in the movie: “Show me the money!” Rod Tidwell (Cuba Gooding Jr.)
  • Pursuit of Happyness
    • Man keeps swinging for the fences in his pursuit of money and success (and “happyness”) and is thus always teetering on the precipice of ruin, eventually spending time homeless with his young son. Somehow he pieces together the resources to complete an unpaid internship which leads to success as a stock broker.
  • Office Space
    • Money becomes a character after the unhappy employees create and implement a plan to put a bug that allows them to steal $300,000 from their employer
  • Limitless
    • Money helps the main character reach his highest highs and his lowest lows.
  • Ocean’s Eleven
    • Money is the apple of the characters’ collective eye; it’s being lusted after, hunted, and chased.
  • Wall Street
    • Thinking that money is the sole measure of success in life, a young man comes under the spell of someone who has made money his god and abandoned all moral structures in his worship of Mammon. The young man eventually recovers his moral compass and helps bring down the evil money master. The most famous line in the movie: “Greed is good” (“Greed, in all of its forms — greed for life, for money, for love, knowledge — has marked the upward surge of mankind”).
  • Citizen Kane
    • In his last moment, a man who has spent his entire life in pursuit of money and the power that goes with it thinks only of his lost boyhood snow sled.
  • The Italian Job
    • Money is being lusted after and used as a tool to extract revenge.
  • Double Indemnity
    • The pursuit of money leads an unhappy wife and fast-talking insurance salesman to plot a murder. At first fooling themselves that they’re doing it for love, money comes between them with disastrous results.
  • Trading Places
    • For their amusement, two brothers run an unethical experiment to determine whether financial success is a matter of nature or nurture.  The two men whose lives are manipulated as part of the experiment eventually bring the brothers down by preying on their greed.
  • The Sting
    • In order to avenge the murder of a mutual friend, two men invent a financial sting to rob the man responsible, using his greed and avarice against him.
  • The Hustler
    • Small time pool shark pursues money as a way to heal his emotional wounds, though intuitively knowing that it offers no real redemption, he ultimately fears winning as much as losing.
  • Slumdog Millionaire
    • Money provided freedom.
  • Rounders
    • Money is the cause of a character’s downfall, and, later, his savior.
  • Boiler Room
    • Money played greed; it incentivized decisions that made one side rich and the other side worse off.
  • Fast 5
    • Money is the focus of the movie’s plot; the characters plan a bank heist and literally drag a vault of money across Brazil during the final scenes.
  • The Big Short (Submitted by Mike K)
    • A group of investors bet against the US mortgage market and discover how flawed and corrupt the market is.
  • For a Few Dollars More (Submitted by Mike K)
    • Two bounty hunters with the same intentions team up to track down a Western outlaw.

Beyond the Crypto Craze: The Rise of Blockchain Technology

Financial Planningon June 14th, 20182 Comments

Written By: Daniel Tripp

Hardly a day goes by where we don’t see headlines about Bitcoin, the rise of cryptocurrencies, and the emerging technologies fueling the craze – we shared a post on the topic earlier this year titled “What is Bitcoin actually worth?”. In this post, we’d like to take a deeper dive into the technology that supports Bitcoin and cryptocurrencies known as blockchain. The emergence of blockchain technology may be reminiscent of Buffalo Springfield’s famous song lyrics; “There’s something happening here. But what it is ain’t exactly clear.” Our hope for this post is to share a deeper look at what that something is, and why we as financial planners are paying attention to this disruptive technology.

What is blockchain and why should we be paying attention?

Technologically speaking, a blockchain is a digitized, decentralized, public or private ledger of transactions or records. Blockchain is steadily growing as ‘completed’ blocks (the most recent transactions or records) are added to it in chronological order. What makes a blockchain system innovative is that it doesn’t run on just one computer like a regular database. Rather, it runs over many distributed processing nodes. Every node has a full copy of the blockchain, and the system requires all the nodes to establish a consensus about its contents; thereby verifying the authenticity of the database and its contents. The consensus among technology experts is that it’s difficult, if not impossible to change the blockchain without others finding out and correcting it.1

What makes blockchain different?

In our society, we rely on trusted third-party organizations such as courts, banks, financial institutions, and governments to process and keep official records of transactions. These third-parties are trusted because we rely on them to maintain the databases necessary to store our most sensitive data and to facilitate business. The integrity of their databases is only as strong as the physical and cyber security protection they provide. If they fail, we suffer; a recent example of this failure is the Equifax data breach in September 2017.2

The blockchain is exciting because the integrity of the contents of the distributed ledger does not rely on any specific individual or organization. So, rather than leaning on trusted third-parties to facilitate record keeping and transactions, we would depend on blockchain systems. As such, blockchain technology has the potential to decrease reliance on third-parties, reduce the frictional cost of doing business, increase financial transparency and efficiency, lower the risk of cybercrime, and decrease the ability of cybercriminals to exploit sensitive personal data for gain.3

Three Ways Blockchain is Shaping the Financial World of the Future

1. Financial Service for Clients

Blockchain technology is drawing investments from major financial institutions; many of them are involved in the asset management profession. Large financial service companies such as Goldman Sachs, JP Morgan Chase, and Citi Bank have all seized on blockchain’s potential to both disrupt and enhance the financial service sector. Even the U.S. Government is exploring the use of blockchain to improve transparency and efficiency.4

One area drawing a lot of attention is client onboarding and account servicing. In today’s world, clients must provide a host of personally identifiable information for each separate financial institution they wish to do business with. Financial companies must comply with reporting requirements including anti-money laundering regulations, information security procedures, ongoing account monitoring, and a cumbersome transfer of asset systems known as ACAT. All these functions require meticulous record keeping, and separate databases maintained by each financial institution. This increases the frictional costs for consumers, creates a potential cybersecurity hazard, and can add days or weeks to accomplishing routine financial actions. 4,5

Enter the blockchain. Imagine you have a single profile with all the required personally identifiable information necessary to facilitate financial transactions stored on a central blockchain ledger. Trusted parties such as financial planners, banks, custodians, mortgage companies, insurance and loan companies would be granted access to your profile using highly secure cryptology. The system would enable a tamper-proof audit trail which would track changes to the blockchain, allowing instant verification of your identity. The consumer could apply for credit, an insurance policy, open accounts, transfer assets, or service existing accounts nearly instantaneously. Because the system is predicated on highly secure cryptology, many technologists believe blockchain can provide this level of security because of its unique characteristics.

2. Reducing Global Poverty

According to a World Bank report, three-quarters of the world’s poor are “Unbanked,” either because reliable banks don’t exist, they don’t serve poor populations, or those in poverty are reluctant to use banks due to high costs, distances to travel, or bureaucratic barriers. Seeing that there is a direct relationship between access to banking services and poverty, a host of startup companies are attempting to solve this problem by using blockchain to provide essential banking services to the world’s poor. These services include imagining new and more secure payment processing methods, using mobile phones for banking functions, microfinancing for small business, digital identity methods to help banks verify customer information, and cheaper currency conversions services.7,8

Another way blockchain has the potential to reduce poverty is to combat corruption. Because blockchain technology builds tamper-proof databases, the technology is being used to increase transparency within emerging countries’ government and financial systems. An example of this effort is to use blockchain to store property ownership records. Land grabbing or the illegal seizure of land by corrupt officials using falsified documents is a significant issue exacerbating global poverty. Because of blockchain’s unique characteristics, officials in emerging countries are looking to store property records on blockchain ledgers. This method of record keeping has the potential to make property records tamper-proof and transparent, thereby enhancing the property rights of the world’s economically vulnerable.9

3. Impact on Global Stock Exchanges

Stock exchanges around the world are exploring how best to leverage blockchain to improve costs and efficiency and to lower risks and improve security. Not surprisingly, NASDAQ, the world’s largest technology stock exchange, is leading the way in adopting blockchain. NASDAQ is implementing a series of projects exploring the potential of blockchain to support the trading of private stock, payment remittance, and mutual fund settlement. Experts believe the efforts by NASDAQ and others will create a faster, more reliable, effective marketplace with the net result being increased security and lower trading costs for investors.10

Blockchain May Come, But Some Things Will Stay the Same

As financial planners, we like to see ourselves as standing at the intersection between the global financial system and our client’s lives. The security of our client’s data, how the financial system functions, and what that means for our clients is crucial to us. As the financial system develops, how we interact with you and the ways you interact with us will also change. Much of the change coming is due to the advent of blockchain that will occur in the background of our lives. However, one day shortly, if the potential of blockchain comes to fruition, we will worry less about our data, spend less time servicing our financial lives, and have more time to pursue our Live Big lives. On the other hand, no matter how much technology changes, your team at Yeske Buie will always be here, as human beings, ready to help you navigate one of the most powerful forces in your lives – your finances.

CITATIONS:

  1. (ICFAI), P. B. (2018, March 18). Blockchain. Retrieved April 25, 2018, from https://www.investopedia.com/terms/b/blockchain.asp
  2. Staples, M. (2018, April 23). Blockchain is useful for a lot more than just Bitcoin. Retrieved from https://theconversation.com/blockchain-is-useful-for-a-lot-more-than-just-bitcoin-58921
  3. Tkatchuk, R., Minkus, K., McClarty, I., & Berg, B. (2017, October 18). Is blockchain the ultimate weapon against cybercrime? Retrieved April 27, 2018, from http://dataconomy.com/2017/10/blockchain-ultimate-weapon-cybercrime-2/
  4. Ozelli, S. (2018, April 27). US Government Implements Blockchain Programs to Improve Transparency and Efficiency: Expert Blog. Retrieved April 27, 2018, from https://cointelegraph.com/news/us-government-implements-blockchain-programs-to-improve-transparency-and-efficiency-expert-blog
  5. Blockchain innovation in wealth and asset management Benefits and key challenges to adopting this technology. (2017, July 07). Retrieved April 04, 2018, from http://www.ey.com/Publication/vwLUAssets/Blockchain_in_wealth_and_asset_management/$FILE/ey-blockchain-innovation-wealth-asset-management.pdf
  6. Bendor-Samuel, P., & IDG Contributor Network. (2017, May 04). Is blockchain technology secure for your company’s transactions? Retrieved April 27, 2018, from https://www.cio.com/article/3194586/it-industry/is-blockchain-technology-secure-for-your-companys-transactions.html
  7. Three Quarters of The World’s Poor Are “Unbanked”. (2012, April 19). Retrieved April 27, 2018, from http://www.worldbank.org/en/news/feature/2012/04/19/three-quarters-of-the-worlds-poor-are-unbanked
  8. Hyland, J. (2016, March 15). Unlocking blockchain for the underbanked. Retrieved April 27, 2018, from https://techcrunch.com/2016/03/14/unlocking-blockchain-for-the-underbanked/
  9. Kuznetsov, N. (2017, July 26). How Emerging Markets And Blockchain Can Bring An End To Poverty. Retrieved from https://www.forbes.com/sites/nikolaikuznetsov/2017/07/24/how-emerging-markets-and-blockchain-can-bring-an-end-to-poverty/
  10. How Stock Exchanges Are Utilising Blockchain Technology. (2018, January 09). Retrieved April 27, 2018, from https://internationalbanker.com/brokerage/stock-exchanges-utilising-blockchain-technology/

Grounded Investing

Financial Planningon May 30th, 2018No Comments

Written By: Ryan Klemm, CFP®

At Yeske Buie, we believe there is a science to investing. Unfortunately, much of what passes for investment activity has little connection to this science. To some degree, this comes from the natural human desire to “beat the system,” to gain some special advantage, to find the secret short-cut. But at the end of the day, we believe success in investing is more about discipline than it is about beating the system by picking hot stocks or timing the market. With this in mind, we share eight common investment habits to avoid to maintain a grounded and disciplined approach to investing. We feel that having an awareness of these habits can help the overall health of your portfolio and investment journey.

  1. Failing to Diversify
    Diversification is an important strategy to lower the overall risk of an individual portfolio by investing in stocks and bonds that are categorized in different asset classes. Combining investments with low to negative correlations is a technique that reduces risk by having positions invested in different sectors. Arming your portfolio with securities that perform well when others perform poorly, and vice versa, allows gains and losses to offset each other therefore reducing the magnitude of volatility within a portfolio.
  2. Buying High and Selling Low
    It can be tempting to buy something that is doing well and to sell something that is doing poorly. However, this leads to “buying high and selling low” which inevitably results in realizing losses for a particular investment. This “trap” usually results from emotional investing and can be avoided by following your investment policies.
  3. Using Past Performance as a Measure for Future Returns
    There is a reason that it is a requirement for an investment vehicle’s prospectus and advertisements to have a disclaimer, in some variation, which says “past performance is not indicative of future results.” Just because something performed well during the prior year does not guarantee the same type of success in the current year.
  4. Having Unclear Investment Goals
    Not knowing why you are investing can cause unclear motives over your investment journey which often leads to buying and selling erroneously and not in service of a specific goal. Having clear goals while investing allows you to “stay-the-path” and avoid many of these mistakes mentioned in this piece.
  5. Ignoring Your Risk Profile
    Having a portfolio allocation that is too risky or too conservative for your risk profile can lead to severe emotional volatility. Aligning the level of risk you are willing to take with an investment allocation chosen is an important strategy to the overall wellness of your portfolio and your mental state.
  6. Trying to Time the Market
    Attempting to time the exact moment when the market is going to peak or dip is seemingly impossible. It is better to invest when you are ready to, rather than trying to wait for the perfect moment. Remember, hindsight is 20-20.
  7. Buying Last Year’s “Winners”
    Investment performance is based off many different interconnected factors and may lead to varying results year-to-year. The highest performing stock in the previous year could very well become the lowest performing stock in the current year.
  8. Making “Trendy” Investment Decisions
    Buying and selling based off headlines is often a result of emotional investing. Again, identifying your investment goals will allow you to stay steady through your investment journey and help keep you from making many of these mistakes.

At Yeske Buie, we mitigate these common investment habits by applying our evidence-based investment philosophy to each of our Clients’ accounts. This philosophy is rooted in a foundation of research and years of practical application and is monitored by our Financial Planning Team to ensure nothing slips through the cracks. We also emphasize the importance of financial literacy and spend a portion of our annual update meeting with our Clients reviewing our investment philosophy to keep them informed. As always, if you ever have a question regarding investments or our investment philosophy, please do not hesitate to contact someone on our team.

The Science of Spending

Financial Planningon May 17th, 2018No Comments

Written By: Daniel Tripp

What if there was a way to increase your happiness and satisfaction without much work, energy, or effort? Would you want to find out more? Science supports that it is, indeed, possible to achieve more happiness by taking an objective look at how you’re spending your money. In this piece, we share insights from the emerging field of positive psychology that suggest ways we can increase our happiness by simply changing how we view and how we spend our money.

We’re all familiar with the old saying “money can’t buy happiness” – we’ve written about this saying in a previous post. As it turns out, scientists have been studying the question of whether money can buy happiness for decades. The evidence they’ve found suggests that money can indeed buy happiness, but only up to a certain point. They believe that the relationship between the possession of wealth and happiness is positive, but modest. In their studies, scientists have found that often times, money allows people to live longer and healthier lives because it buffers them against worry and harm, increases leisure time, and allows them to control the nature of their daily activities—all of which, science says, are sources of happiness.

However, if money does indeed increase happiness, why doesn’t a whole lot more money equal a whole lot more happiness?3 The answer to this question may be found in an emerging field of psychology popularly known as positive psychology, or as some people call it, the science of happiness. Positive psychology is the scientific study of the strengths enabling individuals and communities to thrive and flourish. The field is founded on the belief that people want to lead meaningful and fulfilling lives, to cultivate what is best within themselves, and to enhance their experiences of love, work, and play.2

An important term in the field of positive psychology is PERMA. PERMA is an acronym for the belief that for human beings to flourish, they must:

  • Experience Positive Emotions
  • Be Engaged in Life
  • Cultivate Relationships
  • Have a Sense of Meaning and Purpose, and
  • Experience Feelings of Accomplishment5

The following sections will share additional insights on each of these areas.

P: Experience Positive Emotions

The first part of the PERMA framework is to increase the feeling of positive emotions. What constitutes a positive emotion is different for each of us, but some universal activities that elicit positive emotions are spending time with loved ones, spending time outdoors, attending sporting events, listening to music, dining out, travel, or experiencing new and novel things. We also feel positive emotion when we engage in healthy risk-taking activities or purchase new clothing, jewelry, or other material items.

E: Be Engaged in Life

The second element of the PERMA framework suggests that individuals can change their spending patterns to increase their happiness by seeking ways to be more engaged. Activities that increase engagement include spending money on hobbies such as reading, playing music, doing art, gardening, exercising, hiking, or practicing mindfulness. Other ways individuals can induce a sense of engagement is by seeking experiences which positive psychology calls entering a state of flow. Flow is defined as a mental state of operation in which a person performing an activity is fully immersed in a feeling of energized focus, full involvement, and enjoyment in the process of the activity. In essence, flow is characterized by complete absorption in what one does and a resulting loss in one’s sense of space and time. Scientists have determined that people who experience more flow in their lives, tend to be happier.4

R: Cultivate Relationships

The third word of the PERMA acronym focuses on an individual’s desire to cultivate relationships, sometimes in a way that involves spending money. This may include making gifts for others, planning travel together with friends or family, visiting loved ones, spending money to connect with one’s significant other, participating in community activities, or seeking new relationships around shared hobbies. Another way to cultivate relationships may be to outsource household tasks or chores that take time away from connecting with others or from pursuing activities we genuinely enjoy.

M: Have a Sense of Meaning and Purpose

The fourth way individuals can increase their happiness is by spending money on experiences that enhance a sense of meaning. Having a sense of purpose and meaning to why each of us is on this earth is essential to living a life of fulfillment. These fulfilling activities could include volunteering, becoming involved in a charity, participating on a board, developing and sustaining meaningful work, cultivating a sense of wonder, deepening spiritual practice, or seeking new opportunities to engage in self-growth.

A: Experience Feelings of Accomplishment

The PERMA framework is rounded out by the fifth element which is to seek ways to increase a sense of accomplishment. We can improve our sense of accomplishment by setting goals and taking actionable steps to achieve those goals. Other ways to build a sense of accomplishment might be to embark on educational endeavors that challenge us mentally or to set personal benchmarks requiring self-discipline and self-regulation.

Keeping these elements of the science of happiness in mind, financial planners have the opportunity to help Clients engage in personal spending habits that align with the PERMA framework. The framework offers a “Spending Inventory” that helps Clients and Planners work together to classify a Client’s spending habits as they relate to each of the PERMA categories. Once these habits are identified, both parties can brainstorm new ways to alter spending patterns to bring more of the elements of PERMA into one’s life in pursuit of increasing happiness and well-being.

Next time you are in a reflective mood, we encourage you to take a few minutes to think about how you’re spending your money and ask yourself;

  • Are the things you’re spending your money on bringing more elements of the PERMA framework into your life?
  • Are there ways you could change your spending habits to increase your happiness and life satisfaction?

We invite you to explore your spending questions and habits so we may think together about ways you may be able to use your money to enhance your well-being and to improve the happiness of those you share your life with.

REFERENCES:

  1. Authentic Happiness. (n.d.). Retrieved January 17, 2018, from https://www.authentichappiness.sas.upenn.edu/learn/wellbeing
  2. Asebedo, S. D., & Seay, M. C. (2015). From Functioning to Flourishing: Applying Positive Psychology to Financial Planning. From Functioning to Flourishing: Applying Positive Psychology to Financial Planning, 51-58. Retrieved from https://www.onefpa.org/journal/Pages/default.aspx.
  3. Dunn, E. W., Gilbert, D. T., & Wilson, T. D. (2011). If money doesnt make you happy, then you probably arent spending it right. Journal of Consumer Psychology, 21(2), 115-125. doi:10.1016/j.jcps.2011.02.002
  4. Finding Flow. Reviews the book ‘Finding Flow,’ by Mihaly Csikszentmihalyi. Retrieved January 17, 2018 from https://www.psychologytoday.com/articles/199707/finding-flow
  5. Positive Psychology Center. (n.d.). Retrieved January 17, 2018, from https://ppc.sas.upenn.edu/

Can I Take a Rain Check?

Financial Planningon May 17th, 2018No Comments

Written By: Ryan Rasmussen

It’s likely that at some point you’ve had to ask someone for a rain check when it’s been more desirable to accept an offer at a later date rather than in the present moment. In a similar way, when you set aside money for a rainy day, you are serving your future self by being prepared for unexpected financial hurdles including layoffs, medical emergencies, unexpected home and car repairs, and more. These funds collectively make up your emergency fund. In this piece, we share our thoughts for determining an adequate emergency fund, creative ways to save, where to keep your emergency fund, when to utilize the funds, and how your relationship with money can change as a result of having an emergency fund.

How much should you have in your emergency fund?

As you may have heard us say before, the answer is “It depends!”. The “right” emergency fund  is very specific to each individual’s situation and there are numerous factors to consider. First, the expenses to be considered include all essential living expenses like housing costs, debt payments, utilities, insurance premiums, and food costs. Other factors that may need to be considered include risk tolerance, savings ratio, and job security. The following questions can help begin determining the most appropriate emergency fund:

  1. How secure is your job?
  2. If you were to lose your job, when would you expect to find a similar position that is as good or better than your previous position?
  3. How many people depend on you for monetary support?
  4. Do you have a partner that could contribute more to expenses, if needed?
  5. Do you have additional means of financial aid (i.e. disability insurance)?

For some, the three-to-six months’ worth of expenses “rule of thumb” may work. But we think it is important to consider all factors when determining the most appropriate emergency fund for your specific situation.

What are some ways you can contribute to your emergency fund?

Saving for an emergency fund does not have to be completed over night – the idea of saving for three, six, eight, or even twelve months can be intimidating! Instead, start building your emergency fund slowly. One method that Yeske Buie utilizes in order to help Clients achieve their savings goals is by establishing savings policies. For example, we may suggest that you try setting aside a comfortable percentage of your income and bonuses to help you reach your emergency fund goal. Eventually, we find that many Clients experience a shift in mindset from feeling that saving is painful to feeling that saving is empowering.

Where should I keep my emergency fund?

Your emergency fund needs to be safe, readily available, and easily accessibly for when you need it most. Online savings accounts offering higher interest rates can be a great place to hold your emergency fund because they provide an opportunity for your funds to grow without sacrificing liquidity. It’s the best of both worlds! Take a look at Bankrate.com to view banks that offer competitive rates of return.

Another potential vehicle to hold your emergency fund is your Roth IRA.  Roth IRAs permit withdrawals of the principal value (your contributions), tax-free and penalty-free, at any time. This is different than withdrawing earnings on investments, which can be subject to tax. Don’t pursue this strategy without making sure it’s right for your specific situation.

Finally, you could also choose to leave your designated emergency fund amount in cash. Then, once you have surpassed your emergency fund savings goal, you can begin investing the remaining deposits to take advantage of the opportunity for growth. This is a great way to establish your emergency fund and accomplish your planning goals at the same time.

When should I use my emergency fund?

Your emergency fund should only be used as a last resort in a true emergency. As was shared above, you want to use it only for serious circumstances that cause unexpected changes in income or expenses like a job loss, a medical procedure, or necessary home or automobile repairs. Furthermore, it is best practice to create policies that identify specific situations where you can or cannot take out money from your emergency fund before you actually need the funds. This will help you make a grounded decision in the moment and keep you from the temptation of using your emergency fund for a non-emergency. Another policy that can help you define your emergency fund spending is keeping the funds separate from your everyday checking account. This will help you take more time to reflect on when to spend your emergency fund savings.

In summary, an emergency fund is an essential component of a strong financial plan. We hope these tips provide you with some guidance on determining how to establish your emergency fund and encourage you to give yourself permission to take a rain check for your future self!

Do’s and Dont’s for Recent College Graduates

Financial Planningon May 3rd, 2018No Comments

Written By: Ryan Klemm, CFP®

We’d like to extend a big congratulations to all those who will be graduating in the coming months. For upcoming college grads, the notion of entering the “real world” can feel equally exciting and ambiguous. The reality of becoming financially independent means accepting a deepened responsibility for how you choose to manage your money and pursue a sustainable lifestyle. While you may never feel “ready” to take on this big responsibility when starting your first career, being aware of the positive and negative habits can help you build your financial foundation and be more comfortable in determining what your path looks like going forward.

For those embarking on this new chapter of their financial journey, we share a few do’s and don’ts of personal finance that may be helpful for ensuring your career starts off on the right foot:

DO’S:

  • Create a budget
    • Creating a budget can sometimes feel overwhelming. However it is one of the most important things to do when starting your own financial life. our budget not only tracks financial inflows and outflows, but can also be used as a starting point to create policies that you can fall back on when making financial decisions. Providing limits on what you can spend may take some of the temptation away for those “extra” purchases.
  • Take advantage of your employer provided benefits
    • Employer provided benefits offer a low cost option for insurance benefits. You may only select your benefits during the enrollment period and sometimes the language can be confusing; take advantage of your human resource department if you have any questions! Additionally, it is also a beneficial practice to direct a certain percentage of your paycheck to your employer provided retirement plan. This is a tax-advantaged way of saving for retirement and it encourages you to save money before it even reaches your bank account. If your employer provides a percentage match on contributions, take advantage of “free money” by contributing at least that percentage.
  • Build an emergency fund
    • An emergency fund is used for exactly what it sounds like: an emergency! The purpose of an emergency fund is to have an amount of fixed expenses set aside that will allow you to continue your lifestyle if you lose your job or something happens unexpectedly that impacts your finances. Ideally, this fund will have enough money to cover your expenses should something come up that requires you to look for a new job or have to pay off an unexpected financial outlay.

DON’TS:

  • Take on too much debt
    • It can be very enticing to purchase a brand new car or splurge on materialistic goods when you experience a salary for the first time. While it may be difficult to ignore these flashy goods, it is important to stick to your budget and not accrue unnecessary.
  • Develop bad money habits
    • Developing bad money habits early on in your career, while seemingly sustainable in the present, can have drastic effects on the future of your finances. Bad habits include not creating a budget, spending before saving, avoiding financial education, living above your means, etc. Bad habits are hard to break and therefore it is important that you build your foundation on positive ones at an early age.
  • Wait to save and invest
    • It can be easy to fall into the mentality that “there is plenty of time to save,” but this mindset can be very detrimental to the future of your finances. Saving at a young age provides more time for returns to compound, allowing your account value to grow at a faster rate in the future. Alternatively, waiting to save until you are older will require saving more to make up for the returns you are missing out on by delaying.

These are just a few of the do’s and don’ts that can help recent college graduates build a solid financial foundation. At Yeske Buie, we are invested in the financial success of our Clients’ entire family and are always willing to sit down with your recent college graduates if they would like to discuss their new financial independence further. Please do not hesitate to reach out to us with any questions you may have!


“Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourselves, Who am I to be brilliant, gorgeous, talented, fabulous? Actually, who are you not to be? Your playing small does not serve the world. There is nothing enlightened about shrinking so that others won't feel insecure around you. We are all meant to shine. And as we let our own light shine, we unconsciously give others permission to do the same. As we are liberated from our own fear, our presence automatically liberates others.” ~Marianne Williamson