Tag Archive for: LFA

Financial Health

The relationship between your financial health and physical health are interwoven and very similar.

With both, if you feel scarcity, the more time spent ruminating about it.  When your health fails, it can be all consuming.  Having trouble financially, the mental energy committed to it can be draining.

Choices you make today have a huge impact on your future self.  Did you push yourself physically to maintain a strong foundation? Did you save enough for your future self’s independence?

Chasing the fad of the day can spell disaster. Are you trying to get fit with a 2 week detox program only to find yourself right back where you left off? Are you seduced by the financial media into thinking there are shortcuts and can’t miss investments?

You may be able to splurge once in a while, but bad habits can be your downfall.

Life’s vices feel good in the moment but can be devastating for both your health and finances.  We usually know what we should do, but that doesn’t always make it so.  Of course we know a balanced diet and exercise with plenty of sleep is what we should do. Of course we know we should save for the future, insure against life’s perils, and take a long term view.

Working with a professional can greatly improve your long term results.  A trainer can keep you motivated, safe, and provide an expert plan to reach your goals.  A Financial Planner can keep you from making costly mistakes, provide discipline in trying times, and help you realize your dreams.

Many people can get by without either, but your chance and speed of success are usually much higher with than without. There is an expense to both, but both are investments in yourself.

As in financial and physical health, an ounce of prevention is worth a pound of cure. Have you had your check up?

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Keep It Simple

KISS (Keep it Simple Stupid), was the motto my high school basketball coach used to preach to us every practice.  Don’t try to force your passes; don’t do anything crazy when dribbling the ball; just stick to the basics and let the plays develop until you have the open shot.  Working at Lighthouse Financial Advisors and learning Robert’s views on the investment strategies for our clients, it is amazing to see a similar philosophy in place.  Our advisors do a great job of explaining to clients that it is not possible to “outsmart” the market.  Investors need to roll with the ups and downs, be patient and continue to keep their portfolios as diversified as possible.

The Investment Answer: Learn to Manage Your Money and protect Your Financial Future is a book I recently finished reading that does a phenomenal job of explaining how to simplify the investment decision for your clients in plain and simple English.  It is co-authored by Dan Goldie, an Investment Advisor who has been using Dimensional funds (also used by LFA) in his clients’ and Gordon Murray, who worked for Dimensional for many years himself.  They do a great job of cutting through all the financial mumbo-jumbo to explain the basics that we must know about investing in order to insure financial freedom.  If you are interested in obtaining a copy, please contact the LFA office.  We are confident that you will enjoy the book as well.

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DFA Continues Cutting Edge Academic Research

One of the main reasons we have chosen to utilize DFA (Dimensional Fund Advisors) as our primary investment/mutual fund strategy is their scientific approach based on ongoing academic research.  Below is an excerpt of their newest “dimension” of investing.  We look forward to discussing how this new layer of investment strategy works in our client portfolios.

Adapted From “Despite its Success, Firm is Tinkering with the Way it Builds Equity Portfolios” by Jason Kephart of Investment News, 8/7/13.

For the first time in more than 20 years, Dimensional Fund Advisors is changing the way it builds equity portfolios. Thanks to a breakthrough in asset-pricing research last year, DFA is adding a third layer of screening to its equity portfolios, which already tilt toward small and value stocks. The new layer, or dimension, focuses on a company’s persistence of profitability — basically a stock’s ability to earn a profit consistently.

The idea that a profitable company is going to perform better than a less profitable company over time isn’t a new idea. In fact, it is kind of common sense. The challenge for DFA, which bases all its investment methodologies on academic research, was finding a reliable way to use data to identify future profitability.

“New research has to be very robust, very reliable and have real information that’s not already captured in the other dimensions,” said Eduardo Repetto, Dimensional’s co-chief executive and chief investment officer. The breakthrough came late last year when DFA began looking at companies’ earnings-to-assets and earnings-to-book, rather than cash flow or earnings-to-price.

The company found that using a stock’s price doesn’t lead to any reliable data, because the price of a stock can be very volatile. Using a company’s assets or book value, by contrast, provides a more reliable look at how profitable a company is and how likely it is to continue to be profitable.

When DFA looked at the back-tested results of overweighting the most profitable companies in its portfolios, the results weren’t inconsequential, Mr. Repetto said. In fact, the power of the profitability dimension is about par with the premium seen over time by overweighting value. When the two are combined, it leads to even better results.

“When it’s combined with size, and in particular with value, you can really form portfolios that add value relative to not using that dimension,” Mr. Repetto said.

The new overlay already has been added to seven equity portfolios with about $2 billion in assets, or less than 1% of DFA’s approximately $240 billion in equity portfolios. The plan is to roll it out across the entire lineup by year’s end, Mr. Repetto said. “Right now, we’re working with clients so everyone understands what we’re doing,” he said. “We don’t want anyone to be surprised.”  “This is not magic; it’s based on our understanding of asset prices,” Mr. Repetto said.

“Whenever we can do something good for our clients, it’s in our best interest to do it,” he said.

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Charitable Contributions

We are more than halfway through the year but it’s not too late to start finding ways that can help lower your 2013 tax bill.  Donations to charity are a tax deductible expense.  These donations can reduce your taxable income and lower your tax bill, while helping others in the process.

Taxpayers are required to keep detailed records of their charitable contributions that must include the name of the charitable organization, the date of your contribution, and the amount of your contribution.  Nonprofit organizations often provide donors with a written letter acknowledging the gift or with a receipt for the donation. (Save these documents!)

We also encourage our clients to look into opening a Fidelity Charitable Gift Fund.  This is a a donor-advised fund program where donors who contribute to Fidelity Charitable, become eligible to take an immediate tax deduction.  They then are able to recommend grants to be distributed to qualified nonprofit organizations.  Their mission is to make charitable giving simple and effective.

To receive more information about the Fidelity Charitable Gift Fund please reach out to your team at Lighthouse Financial Advisors.

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Team LFA Competes in Tough Mudder Competition

On a recent Sunday afternoon, five employees of Lighthouse Financial Advisors competed in the popular endurance event Tough Mudder consisting of over 20 obstacles on a hilly 10-mile course outside Allentown, Pennsylvania.   The competition encourages teamwork and camaraderie among participants while testing your physical and mental strength.

In March, an ambitious goal was set to find a competition to test the grit, strength and character of those willing to challenge themselves and get really muddy!  We signed up for the event and immediately started training.  After lots of early morning wake-ups and running hills, we were prepared for everything the course had to offer (except for the electroshock obstacles!).

 

As advisors, we often focus on financial goals and taking the necessary steps to make these goals come true.  However, we feel it is just as important to focus on professional and personal goals to live a balanced, healthy, happy life.  Goal setting is the cornerstone to sound financial planning because “if you don’t know where you are going, any road will take you there!”  Think BIG and set a fitness goal for the Summer.

Congratulations to Robert, Frankie, Brennan, Sarah and Sean for competing and Frank for providing encouragement and taking pictures at the event!

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Are You Taking Advantage of Everything Your Employer Offers?

Often times when we start a new job we complete many forms in the first few days/weeks related to the employee benefits offered by our new employer, such as, Savings Plan contributions, Medical Insurance Plans, Group Life Insurance, etc.  As a financial planner (and someone who recently started a new job!), I am aware of the quick decisions that need to be made and the complexity of those decisions.  Most people approach these decisions with a “set it and forget it” attitude but you can save a lot of money and heartache by reviewing the available options on a yearly basis.  Some of the key decisions are:

1.     401k/403b contributions – Are you contributing the $17,500 max for 2013? If you are 50 or older in 2013, then the max is $23,000.  Are you taking full advantage of the company match?

2.     Deferred Compensation – Are you eligible? Does your employer offer a match?  Have you reviewed the payout elections? What are the risks?

3.     Medical Insurance – Do you have the best plan for yourself and your family?  If you have a high deductible health plan, are you contributing to a Health Savings Account?

4.     Flex Spending Account – the limit for 2013 is $2,500

5.     Flex Spending for Dependent Care – the limit for 2013 is $6,000

6.     Life Insurance – Should you increase the amount?

7.     Disability or Long-Term care Insurance – Does your employer offer it?

8.     Excess Liability Insurance – Does your employer offer it?

These are just a handful of the important decisions we can assist with to ensure you understand each available option and potentially save you money next April.

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2012 Income Tax Deadlines

With another year in the books and the first month of the New Year quickly coming to an end, we would like to share important dates:

 

January 2013: All employers, businesses, banks and other financial institutions begin preparing the numerous tax documents to be mailed out to us individuals.

 

January 30, 2013: The IRS starts accepting tax returns for processing.  There are a few types of tax returns that will have to wait till late February to mid-March, but the basic U.S. Individual Tax Return may begin to be filed.

 

January 31, 2013: The deadline for employers to mail out W-2 Forms to their employees, as well as the deadline for businesses to provide 1099 statements.  Other important information required to be mailed out is non-employee compensation, bank interest, dividends, and distributions from a retirement plan. (If you do not receive information on a retirement account or savings account, chances are the interest did not exceed $10.)

 

February 15, 2013: Deadline for employees who claim exemption from withholding to file a new Form W-4 with their employers. Also, the deadline for financial institutions to mail out Form 1099-B, relating to sales of stocks, bonds or mutual funds through a brokerage account and Form 1099-S, relating to real estate transactions.

 

March 1, 2013: Deadline for farmers and fisherman who have a balance due on their taxes to file their individual tax return and pay the balance due to avoid any late payment penalties.

 

March 15, 2013: Deadline for corporate tax returns (Forms 1120, 1120A and 1120S) or to request automatic 6-month extension of time to file (Form 7004). It is the final deadline to file an amended corporate tax return (Form 1120X) for tax year 2009 and still claim a tax refund.

 

April 15, 2013: The most important deadline – to file individual tax returns (Form 1040, 1040A, or 1040EZ) or to request an automatic extension (Form 4868) for the year 2012. An extension provides an extra six months to file your return.  Payment of the tax is still due by April 15th.  You can submit payment for tax along with the extension form.  It is also the last day to make a contribution to traditional IRA, Roth IRA, Health Savings Account, SEP-IRA or your 401(k) for the 2012 tax year. If you do file an extension, you have till October 15th to fund a SEP-IRA or solo 401(k).  Lastly it is the deadline for estates, trusts, or partnerships to file an amended tax return and still claim a tax refund for the year 2009.

 

Please don’t hesitate to contact any of us at Lighthouse Financial Advisors with any questions or concerns you may have.  We will be working with and for you to make sure everyone is completed on time.  As always we look forward to any comments and discussions you may have on any of our posts. 

 

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Best Year Ever

The New Year is a great time to reflect on what has happened over the past year. It’s also a great time to sketch a draft map for the years ahead. Like any journey, the past year and the years ahead will have plenty of twists and turns. With your own “UNIQUE” map, you can easily make course corrections and enjoy the journey as much as the destination.

As I reflect on the past year, the one thing that keeps popping into my head is how can we help you create your own unique map, and what an empowering tool it could be. There are plenty of APPS available to create a vision right on your phone. The one that resonated with me, which I started using last year, is https://workflowy.com/ It’s a personal TO DO LIST called “Organize your Brain”. I use it for keeping track of my goals “destination” and values that are important to me. It’s really easy to use and a lot of fun to cross items off as you accomplish them. The items you cross off stay in your history, so you can review your accomplishments whenever you like. This year I have added a few items to my workflowy to help me enjoy the journey.

1.       Express gratitude

2.       Be happy

3.       Live in the now

4.       Take care of my body, soul and mind

5.       Help others

Give it try and let me know what you think.

I want to personally express my gratitude to each of you for all the wisdom you are so willing to share with me every day.

And please let me/us know what we can do to help you build your own unique map. If you ever have any questions or concerns, please don’t hesitate to contact me.

Wishing you the best year ever!

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Building the Foundation

Having recently started my career at Lighthouse Financial Advisors, I am working to obtain every bit of knowledge I can from Robert and the LFA team. I am very fortunate to have this opportunity and aspire to receive my CFP accreditation in the near future.  It is important to me to not only “learn from the best,” but to follow the Lighthouse principles in my personal life.

One of the tools that we use when meeting with our clients is the Financial Life Cycle, the seven stages used to determine your financial position.  I am currently in the first of the seven stages – “Building the Foundation.”  In this first stage, my primary strategy has been to follow the “Five Fundamentals of Fiscal Fitness.”

 

1.)    Save at least 10% of your annual income:

As far back as I can remember, my mother had always taught me the importance of saving and to appreciate money.  I always wanted to see how much I could fit into my piggybank!  A few years ago I began using an Excel spreadsheet to better track my finances.  Once I receive my check I automatically try to put at least 10% into a separate bank account.  This helps keep myself from “wasting” money on unnecessary things that most people in their twenties do.

 

2.)    Have sufficient liquidity:

As my life progresses, the number of bills that I am responsible for increases – so it certainly makes saving money a lot harder.  As we suggest to clients, I try to have at least 10% of my annual income in a cash reserve account, with another 20% in a secondary reserve.  It seems crazy, but nothing in life is guaranteed and it’s always important to have a backup plan in case something unexpected happens.

 

3.)    Fully fund your pensions:

Just the other day Robert called me into his office to help with my initial investment in my first 401(k).  It does not matter what age you are, you should take advantage of tax deferred savings plans, especially any that your employer will match your contributions.

 

4.)    Have the right size house:

For most middle income Americans, your home is the most significant investment you will ever have to make.  We recommend buying a home 2 ½ – 3 times your annual income and holding a mortgage of 50% or more of its value.  If the value of the home reaches 100% to 125% of your income, sell it and trade up.  I have been working hard since graduating college and plan to take the leap to home ownership within the next year or two.

 

5.)    Pay off all credit cards and consumer debt:

It is important to be aware of the differences between bad debt, good debt and acceptable debt.  Avoid the bad, use the acceptable debt wisely, and take advantage of the leverage of good debt.  Through high school and most of college, my mom advised me not to open a credit card (and as I reflect, I realize she had valid reason).   I am now grateful that I didn’t “ruin” my credit at a young age, as many friends have done.  When I did start using a credit card, I always made sure that I never purchased anything that I couldn’t afford to pay off in the next month.  As a result, at 23 years old, I was able to purchase a car in my own name.

 

I hope this information has been useful, as well as insightful, as I know many of our clients have children and grandchildren in a similar stage of life. I encourage you to discuss these important “5 Fundamentals of Fiscal Fitness” with your loved ones.  My current success would not have been possible without the help of many great people in my life – especially my parents, Robert and Donna.

Wishing you all a healthy and happy holiday season!

 

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Post-Storm Cost May Force Many From Coast Life

As many of us continue to cope with the aftermath of Hurricane Sandy, this NY Times article (http://www.nytimes.com/2012/11/29/nyregion/cost-of-coastal-living-to-climb-under-new-flood-rules.html?pagewanted=1&_r=1&ref=todayspaper&) examines the costs that could force many from coastal life. It was estimated the fewer than 30% of NY homes affected had flood insurance. FEMA states that homeowners in storm-damaged coastal areas who had flood insurance — and many more who did not, but will now be required to — will face premium increases of as much as 20% to 25% per year beginning in January, under legislation enacted in July to shore up the debt-riddenNational Flood Insurance Program. This means that premiums will double for new policyholders and for many old ones within three or four years under the new law.

Avoiding the expense of flood insurance will become harder because the lenders who do enforce the insurance requirement will face higher penalties. It will take FEMA months to years to finalize the new flood maps which will reflect the damage from Sandy. It may take some time, but it should be a sound assumption that flood insurance and new building standards will be much more expensive and stringent.

Also please note:

  • NJ and NY declared Federal disaster areas will have until Feb 1st, 2013 to make any estimated payments.
  • While property taxes will likely increase in response to the rebuilding effort, NJ State law contains a provision which states that a property with a building or other structure that has been destroyed by a storm between Oct 1st and Dec 31st can have the assessment reduced to reflect the depreciation in value for that property. The landowner must provide the assessor with notice prior to Jan 10th, 2013. The assessor will value the property as of 1/1/2013 but will take into account any improvements made as of 1/1/2013. If you experience damage, we strongly suggest you call your town to have a re-assessment.
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Lighthouse Financial Advisors

3 Harding Rd Suite B
Red Bank, NJ 07701

P: 732.747.6697
F: 800.886.0302
info@lfadvisors.com

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