Hello & Happy 2015!
I am having a hard time finding a starting point for this
recap of 2014 and outlook for 2015. My first thought is to write about
financial planning and how all the pieces work together to build and support
the other pieces. I am afraid that most people think that is boring and the
only way to keep their attention is to talk about stock and bond returns in
2014. But that is not who I am. From the start of my company in 2008 I have
always strived to provide advice and a perspective that is different from financial
sales people. The focus of my business is to be a trusted financial
professional who gives purpose to personal finances.
I can list a bunch of numbers and figures but what does it
really mean to you and did we have control over it? The S&P 500 was up 11%
in 2014. Great! Did we have any control over it? No. What we did control is
whether or not we added money to our retirement account to take advantage of
those gains and accomplish our long-term goals.
What if you had been consistently contributing $10,000 to
your retirement accounts over the past 5 years? We rerun your Money Guide Pro
financial plan and find that you can potentially retire two years earlier than
you planned. Now that means something!
Most people thought bonds were going to crater in 2014 and
the Federal Reserve would raise interest rates. Instead the U.S. aggregate bond
fund (symbol: BND) was up +5.87% and has had positive returns in 6 out of the
last 7 years. Did we control the bond market? No. Maybe we let fear overwhelm
us and we kept too much money in a savings account that earned next to nothing.
Or maybe, we controlled our fear and invested in stocks and bonds helping us
earn a decent return.
Over the past 5 years, would you have rather earned 11% a
year by investing in a balanced fund of 60% stocks and 40% bonds or 0.04% from
a savings account? Would you have rather bought $10,000 worth of stuff you
didn’t need or have earned an extra $7,000 to use towards a great family
vacation? That has meaning and a purpose.
Having a financial plan and a budget is something else we
control. They help us focus on what is important over the short-term and
long-term. What we didn’t control was an Ebola outbreak, that the stock market would
be a roller coaster, that oil prices would plummet at the end of the year, or
that international stocks would be down -4.6% in 2014.
As we get started in 2015 I am refocusing my thoughts and
actions on what I can control. Forget about the daily movements of the market, Wall
Street forecasts and what the government is doing. Focus on what you spend,
what you save, and what you invest. How
you control these three things will have a great impact on your life, your family,
and your wealth.
