Wealth advisers stress the importance of maintaining discipline
This time of year, it’s easy to get caught up in the spirit of the season. But when the gifts are unwrapped and the tree comes down, the incoming bills are about as welcome as tinsel and pine needles on the carpet, or the untouched fruitcake on the counter.
First of all, don’t worry. You are hardly alone.
“It can be challenging to maintain financial discipline during normal times of the year, but it can be especially difficult during the holiday season,” says Aaron Cramer, a wealth adviser with Jessup Wealth Management of Dayton. “Everyone wants to get their kids, family and friends nice gifts during the season of giving, but it is best to do so within your budget.”
“The holidays bring about a lot of joy but can also be a time of high stress, including financial stress,” adds Zach Horn, MBA, CFP, managing partner and president of the wealth management firm of Foster & Motley. “It is an expensive time of year with the purchasing of gifts, hosting friends and family, charitable giving and more.”
While it is certainly okay to splurge a little bit from time to time, especially around the holidays, it is always best to approach the giving season with a well thought out plan and appropriate budget to maintain financial discipline, says Horn.
“Being prepared with a plan in place will reduce your chances of overspending and the regret that can come with large credit card bills due in January,” Horn says. “And, more importantly, a plan will help take some of the stress out of the holidays and allow you to enjoy friends, family and the spirit of the season.”
Sound advice. But many of us have already racked up debt and put expenses on credit cards that we can’t pay off with our normal cash flow.
“If you do slip up and overspend during the holidays, try to get back on track as soon as you can,” Cramer advises. “Paying off that credit card sooner will lower your monthly average balance and help save you on interest as well. Fiscal discipline is something many people have challenges with, but getting in a habit of overspending can be detrimental to savings and retirement plans.”
Even if you’ve overspent this holiday season, there is no time like the present to make a resolution to star saving and preparing for your future.
“While ‘now’ is always the best time to start investing for your future, a New Year’s resolution to do so is great, too,” says Horn. “At the beginning of each year people tend to be more focused on personal and financial improvement with a bit of a clean slate feel to the year to come.”
“If you haven’t already started saving for retirement, it is crucial to start it as early in your working life as possible,” advises Cramer. “The more time you have to save and invest the better your odds are at meeting your retirement goals. If you don’t have any retirement savings yet, focusing on making small sacrifices now, even if it’s just a few percents off your paycheck. Any potential raises, or increase in income, try to save it rather than spend it. If you start saving your raises before you spend them, the less painful it will be to increase your savings rate and you really won’t miss the additional money.”
One common mistake people make is investing with too short a timeline and improper risk allocations, says Cramer.
“It is important for investors to remember investing is a long-term strategy,” he says. “There’s a phrase I like to use that I thinks sums it up: ‘It’s about time in the market, not timing the market.’
“What this refers to is over time, the longer you are invested in the stock market, the better your odds are at having a favorable outcome.”
Trying to jump in and out of the market, trying to time highs and lows, rarely works and could blow up your brokerage account or retirement savings, Cramer adds.
“The second mistake I see is investors being too aggressive or too conservative for their age or phase in life,” Cramer says. “It is important for investors to recognize what stage of their financial life they are in.”
So, if you are a younger investor in the accumulation phase of life, you have the ability to take on more risk, because you have more time to be invested and weather market volatility. If you are an older investor and retired, likely you will be in the capital preservation phase of your life and should focus on keeping up with inflation and maintaining your existing capital. This is due to less time to make up market losses, especially when you may be living off your saved assets.
“Recognizing and managing risk in a portfolio is an extremely important part of investing,” says Cramer.
Regardless of what phase of life you find yourself in, it’s very important to select a wealth management firm that is client focused.
“What really sets Jessup Wealth Management apart from other wealth management organizations is our team,” says Cramer. “I truly think we have the best staff in the world. Everyone on our team genuinely cares about our clients and it reflects in their work.
“As a smaller independent firm we are able to manage investments as we see fit for our clients, but also have time to go the extra mile with our clients and deeply understand their families, what’s important to them and understand how we can best assist them in reaching their financial goals.”
Foster & Motley has clients from Northern Kentucky all the way up to and including Dayton as well as across 34 different states. However, it still prides itself on “putting the client first,” says Horn.
Foster & Motley uses a two-team, collaborative approach to its services. On the financial planning side, that can include everything from retirement planning, college education planning, estate planning, retirement planning, tax planning and a host of other services.
“And then we have a separate team that is dedicated to investment management, which is a specialty that we think is best done by a dedicated team,” Horn explains. “We work with our clients by managing their money in an investment management capacity, and then managing all other aspects of their financial life through financial planning.”
