Emergency Fund Basics

I’m posting this perfect Levitate article to highlight an issue of utmost importance: being prepared financially for the unexpected. With spring showers picking up around us, there's no better time to talk about saving up a financial cushion to shield you from life's unpredictable downpours.

Like an umbrella during spring rains, an emergency fund protects you during sudden financial hardships. Here’s why an emergency fund is critical for every household:

1. Unexpected expenses - Life is full of surprises, and unfortunately, some can be costly. An emergency fund helps cover sudden financial needs, such as medical bills, car repairs, or home maintenance.

2. Financial security - Knowing you have a safety net for unforeseen expenses gives you greater financial stability and well-being.

3. Avoiding debt - When emergencies arise, it's easy to use credit cards or loans to cover the costs. However, this can lead to a vicious cycle of debt and added interest fees. An emergency fund enables you to manage unexpected expenses without borrowing money and accruing debt.

4. Protecting savings and investments - Without an emergency fund, you may be tempted to tap into your long-term savings or investments to cover unexpected expenses. This can derail your financial plans and hinder the growth of your assets. An emergency fund ensures that your savings and investments remain untouched and continue to grow.

5. Job loss or income disruption - An emergency fund is particularly important during times of unemployment or reduced income. It serves as a financial buffer, helping you cover your living expenses while you search for a new job.

6. Flexibility and adaptability - Life circumstances change, and an emergency fund gives you the flexibility to adapt to those changes. Whether it's relocating for a new job opportunity, escaping an unhealthy living situation, or making a career change, having an emergency fund grants you the financial freedom to make important life decisions with confidence.

While tailoring your fund to suit your comfort level is crucial, I generally recommend working towards three to six months' worth of living expenses set aside in an easily accessible checking or high-yield savings account. 

Take care, and, as always, let me know if I can help — that’s why I’m here. 

What Are Crypto ETFs

Adapted from:

Knowledge, Ideas & Perspective (KIP)

from CVW Financial, LLC

"A Just Get to the Point Newsletter"

A number of spot Bitcoin exchange-traded funds (ETFs) were recently listed, with trading already underway. You may have questions about this, so I thought I would reach out with an overview of the situation and what it means for Americans. If you aren't interested, I understand that, too, and you're welcome to delete!

Before we get underway, I want to stress that I generally do not use currency in portfolio construction, as currency fluctuations and trajectories are very difficult to predict, while basic market trends for companies, in general, tend to rise over time. Therefore, I want to be very clear that this informational email is strictly informational.

The Definitions

First, I want to define a few terms that are key to understanding what’s going on: 

• Exchange-Traded Fund (ETF): An ETF is a pool of investments (such as bonds or stocks) that are owned by the fund provider. An investor owns a portion of the ETF (not the underlying bonds or stocks), which rises or falls in price based on the overall performance of the pooled assets. This performance is tracked on an index, with ETFs trading on traditional stock exchanges. These are very common in portfolio construction throughout the financial industry.

• Cryptocurrency: Cryptocurrency is an intangible digital asset that exists on what is known as a blockchain. Think of a blockchain as a transparent digital ledger that allows all users to view all activity occurring within it, akin to a fully transparent accounting record of ownership and irreversible transactions. Transparency, irreversibility, limited supply, and speed of transactions are common characteristics across most digital currencies that create a part of what backers of crypto consider to be the currency's intrinsic value.

• Bitcoin: Bitcoin is one of the most well-known cryptocurrencies and the largest by market capitalization. With a current market capitalization of almost $1 trillion, Bitcoin increasing by approximately 154% in 2023. 

• Spot Bitcoin ETF: An ETF in which the fund provider has a pool of Bitcoin, with the ETF investor owning a portion of the ETF (not Bitcoin). The goal of the spot Bitcoin ETFs is for their shares to rise and fall in real time based on the fluctuations of spot (cash) Bitcoin prices.

The Backstory

The Securities and Exchange Commission (SEC) must approve an ETF’s registration statement before it can be listed and traded. For much of the last decade, Bitcoin enthusiasts have tried and failed to launch a Bitcoin ETF, with the first application submitted to the SEC in 2013. 

That is, until January 10, 2024 — when the SEC approved a rule change to allow for Bitcoin ETFs and then subsequently approved the registration statements for 11 spot Bitcoin ETFs. 

This change in tune comes after an August 2023 court ruling that called the SEC’s refusal of Grayscale’s proposed Bitcoin ETF “arbitrary” and denounced its decision to allow Bitcoin-tracking futures funds but not ETFs that track the spot price of Bitcoin.

The SEC’s Rhetoric

While the SEC is now allowing such ETFs, that does not mean its leadership is endorsing it as an investment. In fact, SEC Chair Gary Gensler ended his announcement with the following: “Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware,[4] money laundering,[5] sanction evasion, [6] and terrorist financing.[7]”

While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”

Clearly not an endorsement.

The Future Impacts

In the months ahead of this decision, as expectations for SEC approval mounted, several more mainstream players introduced paperwork to start Bitcoin ETFs, with industry giants like BlackRock and Fidelity among the first 11 companies whose ETFs received approval. 

This move by the SEC  – and the seeming embrace of crypto by some more mainstream firms (echos of banks embracing mortgage backed securities in the early/mid 2000s?) – may add a layer of credibility to cryptocurrencies and Bitcoin specifically within the general populace. More practically, the ETF allows for easier access to Bitcoin as an investment tool, without the complexity associated with direct purchasing of Bitcoin. 

Perhaps most importantly for the average American, Bitcoin ETFs can now be purchased in some investment funds and some employer-sponsored 401(k) plans. 

With that overview noted, do keep in mind that I am sending this as a helpful overview, not as a recommendation of any course of action. But if you have any further questions about cryptocurrency, Bitcoin, or your portfolio, do not hesitate to respond to this email or give me a call. I am always here as a resource for you.

Fine Print:

CVW Financial, LLC is a registered investment adviser.  Information presented is for educational

purposes only and does not intend to make an offer or solicitation for the sale or purchase of

any specific securities, investments, or investment strategies.  Investments involve risk and,

unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial

adviser and/or tax professional before implementing any strategy discussed herein. Past

performance is not indicative of future performance.

Investment vs Portfolio

Adapted from:

Knowledge, Ideas & Perspective (KIP)

"A Just Get to the Point Newsletter"

Understanding the Difference Between an Investment and a Portfolio

I hope this email finds you well! Today's newsletter is about the difference between an investment and a portfolio. These are two concepts that need to be understood in order to understand proper diversification and risk.

• Investment

  • An investment is simply the act of allocating funds to a specific asset or financial instrument with the expectation of generating a return or profit over time. Investments can be anything from stocks and bonds, to real estate, commodities, or even starting a business.

• Portfolio

  • A portfolio refers to the entirety of a the investments held. So the mix of stocks, ETFs, and real estate that someone holds could be considered their entire investment portfolio. Similarly, you could refer to various parts independently (i.e., your stock portfolio or your real estate portfolio).

  • The purpose of constructing a portfolio is to spread and/or reduce risk. 

What I really want people to understand, though, is that any individual investment should be considered both on its own and as part of an overall portfolio.

How does this work in practice?

Think about it like this:

• You hear about a great new company and you're dying to invest in it. But being an educated investor, you know that if you put all of your money into this single company, then your entire fortune depends on how that company does. You think you could make a killing, but since you don't have a crystal ball, you need to reduce your risk.

• You decide to diversify by finding another company that does something entirely different than the first one, and choose one that has been around for a while. This second company may not have as much room to grow, but at least it's a bit safer, as they seem to be quite stable.

You've now reduced your risk! You've taken the time to see that both companies are good investments on their own, and now they are working together in your portfolio. One is new, one is old; one does one thing, the other does something completely different. Unless something crazy happens to the economy as a whole, these two companies are likely to rise and fall independently from each other, which means you've begun to diversify intelligently.

Where Can I Put My Money?

Adapted from the Newsletter,

The Young Professional's Guide to Financial Success

"A Just Get to the Point Newsletter"

Today, I'd like to discuss the issue of how you determine what and where to save. 

My hope is that you walk away knowing what some common investment vehicles are and how they are used. There are laws governing these accounts and I could not possibly go over everything, but I'd like to give you a basic understanding of what is out there.

Your timeline and which investment vehicles to use are interlinked. 

• Your Timeline

The first thing that you have to determine is your timeline. If you need to save for something within a year (a downpayment on something, for example), you probably need that to be in cash. As nice as it sounds to put your money "to work for you" in the market and boost that savings, realistically, that's not going to work. Dreaming of finding that one stock that costs $1, then becomes the next Amazon, making you fabulously wealthy, are just that: dreams. It's not that that can't ever  happen, it's just too risky for short-term savings.

• Short-term means saving the old fashioned way. This could be in a regular savings account, a high yield savings account, or even CDs if they are paying enough interest for you to lock your money up for a short period of time.

• If you are looking at longer-term, like 7-10 years, then a brokerage account might be a good option. At this time frame, you are able to find some lower risk investments and ride out some of the ups and downs, although you need to determine how much ups/downs you have the stomach for and how much of the capital you can afford to lose. And remember: any gains are taxable when you sell, as are any dividends in the year they are paid.

• If you are talking about retirement, then you are talking about tax-sheltered retirement account, such as a 401(k) or IRA.

Investment Accounts

• There are a few options for investments. You could open an account with the US Treasury Department and buy government treasuries.

• Some banks have limited investment choices, too.

• Generally, though, if you are investing on your own, then you are talking about opening a brokerage account. There are many options, from Schwab and Fidelity to Betterment and Robinhood, just to name a few. For the most part they do the same thing: you open an account, wire in money, then buy whatever stocks, bonds, or funds that you have decided match your risk profile and timeline, then sit back and hope they grow!

If you are saving for retirement, then there are both employer-sponsored accounts and ones you can set up yourself. 

The most popular employer sponsored plans, which are named after the tax code that created them:

• 401(k), 403(b), 457

  • Some plans may offer a "Roth" option, which is named after the Senator who proposed it, and it means that you pay taxes on the money you put in, but it grows tax-free. This is the same concept as the Roth IRA, but is not the same thing. 

  • Anything employer sponsored is set up to take the money out of your paycheck before you see it. For many, this is a very good thing. When you have one of these employer sponsored programs, you should think of it like a menu in a restaurant. You want a few good things, but you probably don't need too much. How to determine which items to invest in is beyond the scope of this right now, particularly because each one is different and has different offerings, just like each restaurant is different. 

    • Remember also that each offering is a fund, which means they are all diversified in their own way.

    • One bonus of an employer-sponsored plan is that many employers (but not all, so you need to check) match a certain percentage. This is the closest thing to free money that you can get!

  • The downside to these plans is that there are fees involved and if there is a professional assigned to help you, that person is almost certainly paid by the company that sponsors the plan. Also, the fund choices are limited to what is in the plan.

  • You can contribute a certain amount per year (for 2023, for example, it is $22,500).

Then there is the retirement plan you make for yourself:

• Individual Retirement Arrangements (IRA)

  • There is the traditional and the Roth. Traditional means your contributions are tax free and Roth means you pay the taxes up-front, but not on the growth. Here is a famous case of what that could look like (note: results from that link are not typical 😂).

  • You set up an IRA the same way you would set up a brokerage account. The only difference is that there is a limit to what you can put in (this year it's $6,500) and if you take any of the money out, you pay taxes and/or a penalty, unless you meet certain conditions- typically starting with attaining 59 1/2 years old.

  • In an IRA, you can buy any stock or fund that is available. This is a major advantage, but can also be overwhelming if you do not know what to look for.

Conclusion

There are many options for where to invest and what to invest in. The choice comes down to the purpose, the timeline, and what is available to you.

There are rules for whether and how you can use some of these separately or together, but conceptually I hope this helps!

Wishing you a prosperous career!

And of course, the fine print:

CVW Financial, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

Simple Financial Planning For Beginners

from: The Young Professional's Guide to Success (vol III)

"A Just Get to the Point Newsletter" by CVW Financial

A common question that I get from those who are starting to see real money coming in, but aren't sure whether they are ready to commit to a full financial plan:

"In general, what should I be doing with my money right now?"

So here are some ideas to think about.

1. Knowledge is Power

I actually do not think everyone needs a budget. If you are paying your bills- and especially if you are paying them and have some left over- then you probably do not need a budget. Also, if you are someone who will try to follow it, fail, then overreact with anger and a spending binge, then you may not be a great candidate for a budget (especially one that you create and implement for yourself).

But understanding your budget and where your money is going is important. Noticing what you spend your money on will help you make truly informed decisions. It is not uncommon for me to work with someone who thinks they don't spend much, but through looking over bank statements, Amazon purchase pages, etc. they realize that they spend constantly and on things they do not actually care about. 

I often recommend writing everything down for a few months, from electric bills to a pack of gum. Then you will have a purely objective record of where your money is going.

Remember: Knowledge is power! You will have more control over your finances (and life) when you are fully aware.

2. Plan for Emergencies

(As the years tick by, one thing is abundantly clear: life is so unbelievably unpredictable.)

So, once you know where your money is going, you need to know how much you need to get by each month. The reality is, you just never know what life will bring tomorrow, next month, next year. Having money in a savings account (high yield, meaning one that pays 4-5% interest, is often available lately) funded with what you need for 3-6 months is important.

Here's the catch, though. Everyone is in a different situation. For example, if you live rent-free, you may not need so much; if you have another earner in your household, you may need only 3 months; if you are the supporter of others, you may need 6 months or more. 

You do not, however, need to save this amount all at once. It should be a goal that you try to achieve over time. Set the time you are comfortable with, come up with the total, then do some division. You can make this one of your non-negotiable monthly bills.

3. Set Goals

There are many things you may need to set goals for and they can take very different forms. There is the emergency savings fund (mentioned above). There may be a house that you'd like to save for, or a rental property, or a wedding, or a car. And always: retirement!

Here are some very general benchmarks that you can think about as a way of guiding you toward retirement:

• 10-13% of income every year until you turn 65. 

  • By the age of 25, you want around 20% of your income saved (if you earn $100,000 that is $20,000)

  • By 30, you want between 60% and 80% saved (if you earn $100,000, that would be $60,000-$80,000)

  • By 35, you want greater than 1.5 x your income (for $100,000, that would be $160,000-$180,000)

  • By 45: 3-4 x your income ($300,000-$400,000)

  • 55: 8-10 x income ($800,000-$1,000,000)

  • Then at 65: 16-20 x income ($1,600,000- $2,000,000)

I need to repeat: this is VERY general and relies on your earning exactly $100,000 starting at age 25 and staying at exactly $100,000 until you turn 65. Not particularly realistic.

In my experience, there is a tremendous variation in what people have saved and in what they actually need. Additionally, hitting your targets comes down to making this type of savings a regular bill, preferably as an automatic deduction, so that you never feel like you had the money in the first place. 

4.Make it Automatic

It's amazing, but people tend to adjust very quickly to new circumstances. Think about it: people live in war zones and somehow go about their lives. So if you are used to seeing a $2,000 paycheck and you automatically deduct $260 (that's 13%) from it, you will adjust to a $1,740 paycheck very quickly. 

Conclusion:

Understand where your money is going, make savings goals, then automatically set aside that amount (or those amounts, if you have multiple goals). Those are the basic principles.

BUT, you do not have to be perfect with this. And you do have to enjoy your life! Ultimately, if you are on top of things and saving regularly, there will be both a sense of satisfaction AND a fairly quick adjustment that will allow you to live without the financial stress that so so soooo many live with.

The point of all this is to live well!

To learn more, check out my homepage or head over to the FAQ section.

CVW Financial, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past

performance is not indicative of future performance.

Volatility

The Young Professional's Guide to Financial Success

from CVW Financial, LLC

"A Just Get to the Point Newsletter"

To the Reader: This second newsletter defines and discusses market volatility, which is an inevitable part of investing. Generally, a long-term investment strategy can provide a degree of insulation against the perils of emotion, impulse, and even potential regret in future years (Jackson, 2022, with italics added by me). Staying the course can feel intimidating. With that in mind,here is an overview of volatility, the current market, and opportunities to mitigate negative impacts. Please reach out if you'd like to discuss this!

Volatility Explained

You may be asking yourself: What is market volatility anyway (Hayes, 2022)? One way to describe market volatility is the intensity and frequency of an asset’s or market’s price movements. The market environment is considered to be volatile when trading and price swings reach 1% or more.

Volatility gets a bad rap, as the term is often associated with sharp, accelerated downward price movements in a market. But sharp price increases equate to volatility, too.

Present Market Volatility & Your Response

Currently, major U.S. stock indexes are battling a higher interest rate environment, soaring inflation, war, supply chain issues, and more. All of this has culminated in accelerated downward price movements. 

Here's how investors can mitigate the impact of this volatility:

• Being prepared - Focus on diversification and creating a balanced portfolio, both of which will help to minimize the short-term impacts of downside market volatility (Lioudis, 2022).

• Identifying opportunities - As unsettling as downward price volatility on assets can be, it can create opportunities for select long-term investors with certain risk tolerances and time horizons (Sprung, 2018). Dollar-cost averaging is a strategy that investors employ situationally during times of discounted asset prices (Hayes, 2022). You're welcome to reach out to hear more about this.

• Staying the course - Ultimately, it’s important to keep in mind that long-term investing could trump short-term market trading over time. 

Remember: Volatility Is Inevitable

Market volatility can be unsettling, but it’s critical to remain mindful of the long-range game while keeping in mind that volatility is an inevitable component of market cycles and long-term investing (Forbes, 2020). Patience and discipline are key in times like these (Weiss, 2022). 

If you’d like to discuss anything more, please feel free to reach out to me!

Young Professional’s Guide to Financial Success #1

The Young Professional's Guide to Financial Success

from CVW Financial, LLC

"A Just Get to the Point Newsletter"

To the Reader: This first new letter may strike some as obvious, but trust me, it was eye opening talking to the specialists that I spoke with. I'll get into more finance topics in later issues, but this just seems too important.

So here we go:

The first step in growing your wealth is to step back and say, what is my biggest asset?

Think about that for a minute. What is your biggest asset right now?

If you're like a lot of people, you're going to immediately think about your car, your house, your parents' house, even. Maybe an expensive watch or a family heirloom. Or you will think, "I don't have any assets worth anything yet!"

But while all of those answers have some validity, they are all wrong. Very wrong!

While it may seem counterintuitive, your biggest asset is you and your ability to work and grow your wealth for many years! The absolute foundation of your net worth and your wealth will be what you do during your working life. While it is true that you could luck out with an investment in a brand new stock or a crypto-whatever, your wealth is most likely to come from working and saving over a long time. It's not an answer that appeals to you if a big lottery ticket-type windfall is what you're hoping for, but it's the truth. 

So today's post is dedicated to reminding you about how to maintain and grow your biggest asset, that is, your working life. I've spoken with several employers and HR people and this is a non-exhaustive list of key things I've learned.

1. Punctuality is Key

This one should be obvious, but showing up on time is not just a good habit, it's a reflection of your professionalism. Remember, being fashionably late is a social etiquette myth that needs to die. It's a myth because when someone invites you to be somewhere and gives you a time to do it, they actually meant that that's when they wanted you there. If they wanted you later, they would have asked you to come later.

This is even more so in the workplace. Unless told to arrive within a window of time, assume you are supposed to be there AT THAT TIME OR A LITTLE EARLIER. Just because your friends don't care as long as you text (actually, they do care), doesn't mean your employer is ok with it.

2. Appreciate Criticism

No one wants to be criticized, and the manner in which you are criticized can often dictate how you react. But, no matter your boss's/manager's style of communication, their criticism is an opportunity for you to learn. If you knew everything, you'd be the boss, so accept what they have to say with something along the lines of, "Thank you, I'll learn from this".

When asked about this, a manager recently went on a tirade along the lines of, "I actually have people crying sometimes! Like, how am I supposed to do my job, if I can't even tell them when things aren't right?!? And some of these people are in their thirties!"

An HR manager said, "Learn to give and receive feedback- it's not always easy but you'll have to do it your whole career." I actually added the emphasis at the end because that's a key thing to understand. 

3. Don't Avoid Difficult Situations

This one is tough. Very few people out there enjoy conflict. But it happens. In fact, its potential is ALWAYS there, so the best way to avoid it is to deal with what comes up right away. When people don't speak up, things fester. I told a friend once, if you stewed anymore, we'll need to rename you Stewart. He was always upset about some injustice done against him. Better to just deal with it and move on because when you stew, the bad situation just builds in your head and all sense of proportion gets lost.

And on the other side of this, one HR person told me people need to realize, simply, "It's not all about you." This is gold. Every injustice against you may not actually be so. People also have their own lives going on inside their heads and their comment/criticism may not have been intended as such.

4. Make Your Boss's Life Easy

I heard from employers that the pandemic set their young workers back so much because they were never in the office getting properly trained and mentored. Stand out as one who knows how and when to ask the right questions, with confidence and independence.

Your boss does not want to have to explain every last detail of a task they've assigned you. But this requires you to internalize #2. You have to be prepared, and not afraid, of getting things wrong! It can be a difficult balance: ask questions, but be independent and figure out your  way to solve a problem.

5. Be Curious

There's a saying that goes something like, "success favors the prepared mind." And it's true. Stay ahead of the game by doing your research and anticipating challenges. You don't know what's around the corner, but overpreparing doesn't exist. The more you know about a subject, the easier it will be to deal with even the smallest issues.

A banking manager told me that he is always impressed when an employee is intellectually curious. These are the people who don't need everything explained to them because they're looking for new knowledge. And they ask good questions. Not questions like, "how do you do this?"; but questions like, "how does that work?".

Importantly, though, don't pretend you know something when you don't!

6. Act Appropriately

It's been said that ethics is what you do when you think nobody's watching. Well, how about turning that on its head and just act as though you're always being watched (even if you're working from home). It's important to maintain professionalism in your communication, behavior, and work ethic. You never know who might be observing!

7. Don't Burn Bridges 

I cannot stress this one enough. At some point in life, it becomes almost spooky how interwoven your world becomes with those around you. Whether it's actually running into the same people or noticing how you are constantly meeting people who know someone you know, it becomes obvious that past behavior can come back to haunt you...especially bad behavior. Trust me, the bad things stick out WAY more than you'd like to think they do.

This includes your coworkers (even the ones you think can't pull their weight), it includes what you say on social media (even when you think it's private), and it definitely includes how you deal with your bosses. ESPECIALLY when you don't agree with them.

I hope these tips help. Many people will find at least one of these ridiculous but trust me on this: your professionalism will help you boost your net worth exponentially more than a good investment will. It's not as fun as trying to "win" or "beat the market", but it's the absolute foundation of your wealth.

Thank you for reading this! I look forward to sharing more about wealth-building and investing.

Wishing you a prosperous career,

Tim

And of course, the fine print:

CVW Financial, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

Calories and Counting

The Confounding Case of Money and Calories

Calories and Counting ⅼ Food and Finance

Bottom Line: When basic elements of our lives don’t seem to work, we are vulnerable to bad actors who are selling products for themselves, not to help you.

Premise

If there’s one thing that is completely obvious to us all it’s that 1+1=2. (Note: feel free to Google this and find out all the clever ways that this is not true. I just did. The one about using base-2 instead of base-10 is kind of interesting…)

Similarly, when we count up, we know what our next number will be. One, two, three, and then here we are at four.

Then counting backwards does the same thing in reverse: one, two, three, four, three, two, etc.

And from what we observe in everyday life, adding and subtracting work out pretty much every time, so long as we are careful and using the correct numbers for our situation.

Two Common Examples of this: Money and Calories

If you have $100 and then your good friend gives you another $100, you end up with $200 dollars. Every time.

If you have a 100-calorie snack pack, then eat another tasty 100-calorie snack pack, you’ve now consumed 200 calories of snack pack. Every time.

So, this means that you are now 200 dollars richer, and 200 calories richer. In fact, if you kept going with this, by the time your friend has given you 35 of these wonderful $100s, and by the time you’ve had 35 of these snack packs, you’d be both $3,500 richer and one pound heavier.

Now, if we factor in some walking around and shopping a little, we can reverse some of these numbers. We could buy some trinkets at the local gift shop, then walk around some more and look at the ocean. These activities have the effect of burning both our money and our calories. So now we have $3,485 and weigh slightly less than the one pound more that we’d gained!

The implication of these facts is that there are some easy solutions to some of our vexing problems. We can just follow the simple logic of addition and subtraction to our weight, if we want to lose or gain; and our money supply, if we want to have more or less!

Eat less. Save more. Eat less. Save more. Exercise, too.

For some, this is great advice. And yet for so so so many others, it’s absolute junk. It is simply not good advice because, a) it doesn’t bring about the expected result and, b) it doesn’t bring about the expected result and that makes us feel miserable!

Implications

The existence of these erroneous “simple facts” has led to massive industries that thrive on our inability to deal with these basic facts of living. These industries develop perplexing products that claim to simplify our lives.

For example:

The Diet Industry!

“All you need to do, and it is so simple, is deny yourself these two or three nutrients on a regular basis, along with taking our patented Life Powder, and you will UNLEASH the younger, vibrant self that you know has been buried for so long!!!” *

                (*this statement has not been proven or even researched because we are completely full of it…)

The Finance Industry!

“Roll over your 401(K) into an IRA with a buffered fund of limited downside with an industry-leading blend of 3x upside that’s guaranteed to beat the market!” *

                (*past performance is not a guarantee of future returns and blah blah blah we are completely full of it….)

These industries have more in common than they appear to. To start, they are both built to solve the problem of how complex their respective areas are. But the individual products, often, are built to solve a different problem: how to build wealth for their founders. Clever and marketing and sales aside, their existence results in more confusion, which is great for business! There are many people with good intensions out there, but all of these products are products for sale.

This absolutely does not mean that everything out there is bad. This is more of caveat emptor. We all need to step back and ask ourselves whether we are getting sucked into a product that only solves a problem that was hatched in someone’s head (or a lab, or a boardroom), or if it genuinely solves an existing problem. Perhaps a starting point is to ask this: how complicated is it?

And here, too, we have some similarities between food and finance.

We can consider- very briefly, and I’ll ask that you allow me to just paint a couple of sparse pictures- that food and finance, calories and counting, began in much simpler forms than how we see them today.  Our distant ancestors ate what they could get and traded for what they could not. They ate to live, and exercise was in the form of work and play.

Hunt, gather, trade for the things that you can’t get yourself.

Now let’s add a layer of complexity with some social contact and currency.

Hunt, gather, trade using some form of currency, and while talking to the person you traded with, you invite them to eat dinner with you and spend the night. They tell you that, since you’re being so hospitable, they have this great spice that will make your food tastier and they’re happy to share. And it is amazing! You want more, but how can you get it? You ask. And won’t others want it?

The spice-bringer, Spicy, has something wonderful to tell you: there is a ship going off to get some more spice, and for a little of your currency, you can have some spice. This sounds pretty good, you think, but a little risky. You’re going to need something extra because you’re really going out on a limb here. So Spicy has an idea: you give some currency, and you’ll get all of it back, plus a little more after it’s all been sold. And some spice? You ask. And some spice, replies Spicy.

So now there’s interest being earned on your money because you took a risk and invested, and there’s also something new, the spice itself, compelling you to desire changes to your food!

Fast forward to today…

Well, it’s only a matter of time before each of those things gets built upon and complexity gets added. We now have tremendous menus of financial and food products. There are people in laboratories figuring out the perfect vanishing caloric density (to make you feel like the calories are just melting away) and there are people hatching buffered index funds (they invest in index funds using collar options to….forget it, just understand that they are not even remotely like handing Spicy some money for a product and being compensated a little for your risk).

The bottom line is that we’ve got a world that is far ahead of itself in terms of what we, as a species, are able to deal with. This isn’t just my theory, it’s been written about by others who know a whole lot more than I do (I trust you can Google this), but the proof is all around us: mental health, the environment, social media, constant advertisements, and the dizzying array of decisions we have to make in order to make it through each day.

It's all so taxing that we end up larger, poorer, and running just to stay in place!

So, What Are We to Do?

First thing: we need to simplify.

Did you have a dad, or some other wise person, who always said, “If it looks too good to be true, it probably is”?

I frequently find myself saying to clients, “Let’s not get too cute with this.” And what I mean is, when you start getting too clever about everything, there is a cost. Mental and physical energy are expended whenever we add a layer of complexity to our lives. Mistakes get made, which are frustrating. Then there is the pressure we put on ourselves- Am I supposed to eat this? Am I supposed to invest in that? Did I just make a mistake? Have I polluted my body with X-additive? Should I run a little faster, should I lift more weights, should I should I should I??????

Simple Ideas:

An apple is better for you than a candy bar. Earning interest is better than not. Saving more than you spend is generally a good idea.

There is no magic, so if something is incredibly complicated-sounding and seems to work by some kind of magic, it’s probably not a good idea!

Probably most importantly, if you find something that works for you, then is it sustainable? If you get results and can keep it up, you’ve got a winner! If you cannot stick with something, then it’s definitely not going to work for you. The greatest, most fat burning and strengthening exercise in the world is not good for you if you’re not going to do it! The best saving program in the world is not so great if you are not actually doing it.

In Conclusion

So there it is. A simple list to check:

                Who was this product made for, you or the creator?

                Is it unnecessarily complicated such that you cannot really understand it?

                Does it work for you?

                Can you continue doing it for a very long time?

If all these steps are in place, then you’ve got yourself a winner!

Now let’s get out there, make some money and build up a sweat.

Pickleball, anyone?

CVW Financial, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

Fortune Telling is Complete Nonsense

The beginning of the year, to me, is a fantastic time. I enjoy the cold, crisp air; I enjoy looking back at the past year and reflecting; I really enjoy the idea that there is a fresh beginning- that there is some sense that a “do-over” is possible; and I enjoy looking toward the year ahead, thinking about what may be possible, and wondering what I will see when I look back over this year once it is completed.

What I do not enjoy doing, however, is pretending to see the future. In the past, it is something that I would do, as so many others do. But over the past few years, something has really changed my view on this; almost a profound realization, except that it’s something that we all know.

Here it is:

We cannot see the future.

We can make educated guesses, we can predict for fun, we can use odds to favor outcomes, but that’s about it.

Perhaps what I realized- so profoundly- was not that we cannot tell the future, exactly, since I already knew that, but that people are actually engaging in this nonsense ALL THE TIME. I don’t want to be one of them.

If you really listen to what people are saying, and step back for a moment, I think you’ll see what I’m saying. And it’s not just your friends predicting- for fun- who’s going to win a football game, or who’s going to win an election. It’s that there are entire industries doing this! At the highest level, and for tremendous amounts of money, there are people who predict the outcomes of those same games- absolute experts with tremendous amounts of information- and they still get it wrong! There are companies that use incredibly sophisticated polling to predict the outcome of elections…and still they get it wrong!

anecdote:

A little over six years ago, when my older daughter was first born, I decided to take a few weeks of parental leave from my job as a third-grade teacher. It was an amazing time of bonding, cuddling, poopy diapers, and all the other wonderful things that go on at the start of a new life. It was also a time of sitting around a lot because she was an unbelievable sleeper. Really, she slept for hours a day! Sometimes she’d fall asleep on my shoulder, sometimes in the rocking-thingy that plays music, sometimes the pack-and-play, but wherever it was, I ended up having time to fill.

Now, I’ve always been fascinated with the stock market, but up until this parental leave, I’d never had that much time to really dive into it. So I jumped at the opportunity. I started watching videos, reading articles (Investopedia was a big one), and watching CNBC. So here I was, learning about all this stuff while sitting with- or next to- my beautiful baby daughter, watching CNBC and getting- this was dawning on me- the most life-changing pieces of information I’d ever received:

They were actually telling me which stocks to buy!

Holy shit! Right? I was going to make a fortune! They knew, and were OPENLY SHARING, the stocks that were going to go up! I started doing some math and realized that I’d probably be able to retire and do this on the side within about a year.

In my little mind, it was just that simple. I mean, how else did these people get on tv? Especially on a station owned by one of the biggest television corporations there is. These were rich and successful people who knew what they were talking about!

So I took their advice. Nothing too crazy, of course. All my reading was teaching me not to put in more than I could afford to lose, and to make sure I understood the company, yada yada…but I bought.

And lost.

Maybe a stock went up a little here and there, but really it was…perplexing. Here I was getting great information from rich professionals who managed lots of money, and I was losing!

But this blog post is not about how and why this is. There are theories about all kinds of things and lots of people who can explain how this stuff works- actually, I’m now one of them- but here I want to point to something much simpler: while I thought I was listening to experts tell me how it was going to be, what I really was listening to was fortune telling.

simplistic scenario:

If you have a dollar and your friend comes over and gives you a dollar, then you have two dollars. But if you have a dollar and your friend is coming over later with a dollar, you do not have two dollars. All you can do is predict that you will have two dollars at some point in the future. But your friend is yet to come, so you really can’t be sure that this is going to happen.

Now, if your friend texts to say they are on the way and have the dollar, you can feel a little more assured about your future riches, but a lot can happen between your friend’s house and yours- traffic, public transportation problems, tripping and twisting an ankle, tripping and falling into a bar…not to mention forgetting the dollar!

It’s only when your friend is coming to your door, holding that thing out in the open for you to see from your window, that you can start to really predict with real certainty that this is really going to happen, that you are about to have two dollars.

And this is because of information. Specifically, because of a lack of information about the future. Because we cannot see the future.

(By the way, regarding the market, information that makes anything certain is called “inside” information and is illegal- unless you are in Congress…in sports, it would be a fix, which is also illegal.)

This is the point: so much of what you hear is people making predictions. That is: trying to tell the future.

And telling the future is absolute nonsense.

What is truly amazing is the number of professions and professionals out there dedicated to doing something that cannot actually be done. Telling us what’s going to happen in other countries, in politics, in the economy, in the labor market, and on and on. It’s everywhere: people pretending to know things that they can’t actually know! And getting paid a lot to do it! What a world!

So enjoy each new year. Enjoy the crip weather. Enjoy reflecting on the past year. Enjoy the feeling of a new start with a new set of goals!

Just beware of fortune tellers. They’re everywhere!

CVW Financial, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

Overwhelmation

5 Things to Do:

When Feeling Financial Overwhelmation

Thing One: Notice Your Breath

                What does that breath feel like? Just notice. Maybe take a few more.

                You have to start somewhere. And now you have. It’s that simple.

Thing Two: Get Philosophical

Remember that nothing is permanent. Recognize that financial overwhelmation is not unique to you and, therefore, is not insurmountable. But it will take steps, starting with the first step, which you’ve already begun. While our minds tend to think about easy solutions (lottery, inheritance from long-lost family, giant raise- why does so-and-so make that much?), none of those things are realistic, nor will they keep you from ultimately ending up right back here.

Thing Three: Pick Up a Pen

How do you relate to money? What has been your relationship to it? What do you truly want out of life? This will help you think about whether your decisions are in line with your goals. You can start of general and then get amazingly specific.

Thing Four: Start a File

Time to put your recent financial life into a file. This will serve two purposes: you will begin to see your financial life in a concrete way; and it will prepare you for the next “Thing”.

Thing Five: Pick up the Phone (or the email)

Your new best friend should be an advisor who you feel you can really open up to. You absolutely will feel like you need to explain yourself, but you don’t. You will pick an advisor that you know is not there to judge, but to help; not there for himself, but for you.

It does not have to be Tim at CVW Financial (that is, tim@cvwfinancial.com!). Truthfully, there are many of us out there. The best excuse for not picking up the phone is that you’ve already done so, and you feel confident that you are on the right track for you and your family.

If this speaks to you, please call Tim at (857) 270-7437 or email tim@cvwfinancial.com.

CVW Financial, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

Easing Our Financial Minds

Introduction

Do you look forward to payday?

Without the Payday Effect

A scenario:

It’s Tuesday at 2:00 and Timmy is walking down Main St. He’s got to pick up his daughter from daycare in about 45 minutes to get her to swim class by 3:30 and he absolutely has to get gas. As Timmy goes through how much time he has to walk to the car, drive to daycare and grab the kid, then drive to the gas station and pump gas, then get to swim class, he realizes that he actually has some extra time.

“This is fantastic!” He thinks. “I never have extra time anymore!”

Now, choices need to be made. Does Timmy stroll around for a while? Get coffee? Check out what exciting things are happening downtown? He knows a couple of shop owners so he could stop in and just say hello and have a brief chat if he chose.

Payday is Thursday-two days away- and Timmy’s only got $20 left in his pocket.

Well, he knows that he has to get gas, so maybe he should save the 20 for that, since $20 of gas won’t even come close to filling the tank. But it is almost payday, and he does have some time to kill.

Timmy decides at once that he should grab a coffee, then visit a friend in a shop. The money left over will get him plenty of gas to get to swimming and then he’ll fill up the tank in a few days after he gets his paycheck. Along the way he sees a sale at the shoe store, but even though he’s training for a race, he hardly thinks about checking the shoes out. Not worth it. The shoes he owns still have plenty of miles left in them.

Perfect!

Timmy used opportunity cost to weigh the effects of his spending and came up with a solution that felt right to him.

But what if Timmy had only had $10 in his pocket? What different choices would he have made?

Obviously, using the same idea of opportunity cost, he would have decided that getting his daughter to swimming without the possibility of running out of gas would be far more responsible than getting coffee and putting in only a gallon or two of gas. As for the shoe sale? It doesn’t really register in the mind of a guy in possession of only $10, who, as stated, doesn’t actually need new shoes.

Again: Perfect!

With the Payday Effect

Now, what if this had been a few days later- just after payday?

The Payday Effect means things could turn out much differently.

“Wow!” Timmy thinks, “I’ve got so much time and so much money. And, Holy crap! There’s a sale at the shoe store! What a wonderful coincidence- I just started training for a road race and right now I really want new running shoes!”

Timmy walks out with some really nice, top-of-the-line running shoes, grabs a coffee and heads off to get his kid. $298 poorer.

Terrible.

The Payday Effect means that people tend to spend more just after they receive a lump sum of money, then moderate themselves until the next sum comes in. (Interestingly- or perhaps alarmingly- mortality also rises just after payday.) So, Timmy makes choices based on a combination of how much money he has and what his different priorities are. As we can see, those priorities can be quite flexible.

Parkinson’s Law

British Naval Historian Northcote Parkinson looked out at the diminishing British empire and saw that the number of administrators instead of also diminishing, actually continued to grow. He famously realized that, “Work expands so as to fill the time available for its completion.” Put another way: we have an amazing capacity for wasting our time. Think about the hour and a half meeting where you walk out and realize that what you learned could have been stated in about three or four sentences.

But I believe we do this throughout our lives.

In a way, the Payday Effect is just another form of this. Our perception of what we can spend changes based on what we have. In the news recently was the startling fact that 58% of Americans live paycheck to paycheck. Even more startling, however, was that 30% of people earning $250,000 or more were doing the same. $250,000 and living paycheck to paycheck! If you earn that amount of money, you are in the top 5% of all earners in the country. Top 5% and living paycheck to paycheck!

Clearly what we perceive as “needs” is quite flexible!

Income Smoothing

Clearly, many of us are hardwired for waste. And if we are being honest with ourselves, we all probably know that. We seem to be governed by a Financial-Parkinson’ Law; the ability to expand our finances to the amount of money we have right now. It is the food that we throw away; it’s the clothing we never wear; it’s the mindless calories that we consume; and the list can go on and on.

But I don’t want us to feel badly about this. The point is to live in such a way that we don’t have to feel badly. In fact, in many instances we already set ourselves up to automatically put our minds at ease: We make shopping lists to try to cut down on food waste; those who feel recycling is important set up a system to make it easy to do so; when possible, we develop a system to get everyone in the household up and out the door with the least resistance possible (I italicize possible because kids/spouses are not always on the same page!). These are all instances where we could waste our time and energy- not to mention our mental space- but try to set up a system to make things more efficient.

What I propose, is that we do that with our money.

Financial constraint is really only possible over the long term when we make it easy to be so. Holding onto several hundred dollars and not wasting a good part of it is not possible for most of us! Is it possible for some? Yes, of course! In the same way that some people quit a habit like smoking cold turkey in one try, while others, like me, tried to quite several times a year for decades before it finally took hold.

Income Smoothing means that we make sure all percentages of our income that need to go to certain things automatically go there, or into a dedicated account. It means that our money for “waste” is accounted for, thus making it “impulse” or “pleasure” instead of “waste”. But we must accept these constrains ahead of time. It is not wasteful if it was put aside for that dedicate purpose. And we then have a natural braking system that works with our other natural tendency for using opportunity cost when we have these constraints. That is, we can notice the shoes, then weigh whether it is really worth it to get them, but not succumb to impulses just because we happen to have a lump sum of money, parts of which should be put to other purposes.

New scenario:

Timmy has to pick up the kid and get gas before swimming but has some time. He decides to get a cup of coffee, then go see a friend or two. He notices a sale at the shoe store- he is planning for a race, after all- and says to himself, “My shoes are great, but before the race I may need some new ones. If I do, I’ll plan to save a bit of my “fun money” and get them. While I do love a sale, I’m not gonna fall for it- there will be plenty of sales between now and the race!”

Outstanding! He never even thought about payday.

Final Test

A test for whether you should reconsider the way you plan your finances:

Do you look forward to payday?

CVW Financial, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

Student Loan Debt Relief

If someone walked up to you and said, “Hey, do you have an hour or less to answer a few questions and do a couple of annoying tasks?” would you do it?

What if this inconvenience could pay you $5,000? $10,000?? $20,000???

Well, it’s finally here…maybe. The government has decided to give student loan borrowers some relief on their debts. There are all kinds of rules and requirements for the different levels of relief and having researched all of this for you, thinking I would write a comprehensive article, I can tell you: the rules are complicated and are different for different people.

Why? Because we all have some degree of:

• working different jobs

• working for different companies

• having different household income levels

• different types of loans

• going to different types of schools

• and on and on!

I’ve read articles from Forbes, to Investopedia, to the government student aid website. And no matter how comprehensive the site is, it does not feel much clearer. In fact, the more comprehensive, the more your eyes will tear up! And, things change based on the date your reading about it!

This is why I realized that another comprehensive article woud be a waste of time.

So cut the fat and just go to one (or all) of these student aid links, whether you think you qualify or not:

• A list and description of all the loan forgiveness programs.

• Specifically for the Public Service Loan Forgiveness Program.

• Although some teachers can get the above loan forgiveness Teacher Loan Forgiveness program.

• Then there’s the Student Debt Relief program.

This byzantine system will make your mind spin, almost guaranteed, but if you have student loan debt, it is worth your time to explore and basically start applying to everything until you are certain that you do not qualify.

I emphasize “certain” for a specific reason: It is easy to start feeling confused and decide something along the lines of, “I give up! I probably don’t qualify anyway!”

This is understandable, but remember what I said at the top about what if you were asked to spend an hour on something annoying, would you do it?

For $5,000?

$10,000??

$20,000???

CVW Financial, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.