Friday, October 16, 2015

Downsizing or should we call it “Right Sizing”?

Downsizing or should we call it “Right Sizing”?

Downsizing, is associated with numerous emotions, some good and some bad.  We associate the term with “small”, “cramped”,” losing our home”, “end of our life”, as well as many other negative emotions.  Only a few of us associate the word with something positive.  Those who do, think of downsizing as “right sizing”, or finding a life style that is just right for them at that point in their lives.  They associate the term with freedom, freedom from caring for a house which is too large and freedom to begin a new life.

In this article, I would like to offer some suggestions as to how one might want to approach the subject of downsizing.  First, and most important, we need to recognize that downsizing is not necessarily associated with the aging process.  Yes, that is often the time when we feel forced to consider taking this step, but looked at another way, this becomes one more step in the process of goal setting, which something we have been doing most of our lives.

Typically, downsizing tends to occur when we are on the brink of a major change in our life. This could be as a result of our children becoming independent and moving out of the house, the death of one’s parents, a major job change, or the contemplation of retirement.  This is the time when we must set new goals.  Begin by asking yourself the following questions:
·         Am I able to live the way that I would like to live?
·         Am I happy living in my geographic area?
·         Am I enjoying the freedoms which I cherish, i.e. the freedom to travel, etc.?
·         Is my life wearing me down with obligations such as caring for a house?
Second, once you have the answers to all of these questions, take a pencil and paper and write down your goals.  Identify how you would like to live.  This is your brainstorming moment.  As you write, don’t filter your thoughts.  Don’t fret over whether or not you can afford these things.  That comes much later in the process.  Include things such as how much you would like to travel and where you would like to go.  Do you want to live near family?  Is it important to you that you be able to help your children and grandchildren, both physically and, or, financially?  Consider asking a friend to join you in your brainstorming sessions.

Once you have completed step two in the process, proceed to step three.  Make a five year plan.  Yes, a five year plan, not a ten year or a fifteen year, or a lifetime plan.  Five years is about the maximum number of years for which one can plan.  Anything beyond that, is too much of an unknown.  With your five year plan in hand, begin to explore your options.  This stage can be a lot of fun as long as you consider it an adventure.  Check out Condos, apartments in your favorite city, Continuing Care Retirement Communities (CCRC) or the new over fifty five communities.  Go visit!  If they have a dining option, check out the food!  Mingle with the residents.  If it’s an apartment in the city, check into public transportation, health care options, etc.
As part of this process, don’t forget to evaluate where you are living currently.  Does it meet your needs?  Do you like it?  Why are you moving?  Often times the only reason people move is because they are no longer able to take care of their house.  If that is the case, ask yourself whether you could hire people to do the work.  One word of caution:  DO NOT MOVE BECAUSE YOUR CHILDREN OR WELL MEANING FRIENDS TELL YOU TO DO SO.  Only you can honestly evaluate your needs.  Too often I hear people tell me that they love their house but are being told by their children that they are too old to stay there alone.  Remember, there is a lot of help available both for health care, as well as physical care of your house.  If your house has stairs, consider installing a chair lift.  However, if your health is such that you are no longer safe in the home, or it’s having a negative effect on the quality of your life, then it’s time to consider making a change.

If finances are an issue and you would like to remain in your house there are alternative options such as a reverse mortgage.  Notice that I am using the term “house” and not “home”.  There is a reason I do that.  Often, at a time of change in our living arrangements, we confuse these two terms.  We are sad to leave our “home”.  We confuse the building with all our wonderful memories; bringing home our first born, coming home after that great promotion, getting together with good friends.  Those things don’t change.  Those events are the definition of “home” and are part of our soul.  We never have to leave those memories behind.  They travel with us.

Finally, once you have developed a plan which meets your goals, it’s time to seek the advice of an experienced financial planner.  This will be the person to help you figure out the financial parts to all of this and how to make your plan a reality.  It is important to find someone who is a planner and not someone who is trying to sell you products.  Things to consider during this process:
§  Do I have to modify my plan to make it work?
§  What if anything do I have to trade off to make my plan work?
§  Is my plan flexible enough to meet changing needs, as well as a catastrophic illness?  Do I have sufficient medical insurance and a need for Long Term Care insurance?
Once you have completed these steps, you will be ready to plunge into the next big adventure of your life.  Welcome this change with enthusiasm and excitement.  Consider yourself reborn into a new life of endless adventure.

Rosemarie Boyd, CFP®

Tuesday, August 25, 2015

Wild Ride

My View of the Last 7 Years

The last few days have demonstrated how fast markets can move when panic is triggered in the stock market.  The chart shows the SPY which tracks the S&P500 index (in Green) and the Volatility Index (VIX—x in Red).  When volatility increases the market goes down.  The chart shows that the current decline in stock values is rapid, but is still within expected ranges to allow this to remain a “Correction in a Bull Market”. 

The height of the VIX is approaching the levels seen in 2010 and 2011, but is a long way from the peak in 2008 when there was a worldwide debt crisis.  This correction was overdue and as a result it is going to be overdone.   The next few weeks will tell us if this is a Correction in a Bull ( up) market, or a change to a longer Bear (down) market.

This is an excellent time to turn off the Business News and let the volatility of the market play out.  There will be a rebound, and then we can make a proper assessment of the prospects for the next year.  Meanwhile your allocation between Fixed Rate and Equity investments will determine the degree of exposure to the headline losses in the market.

John R. BoydCFP®
Boyd Financial Strategies, Inc.

Wednesday, April 22, 2015

The story of Two Quarters in the Stock Market

None of us are surprised that there are some “bubble” like effects due to the very low interest rates that have been in place since the 2008 financial crisis.
The last two quarters showed some interesting patterns in stock performance.  Basically the stocks dominating the S&P 500 index surged ahead at the end of 2014 only to be nearly flat during the first quarter of this year.
In contrast, other sectors and actively managed strategies, struggled to keep up in 2014, but are now leading the way in 2015.
The effect of this can be disquieting when the headlines based upon the Dow and the S&P500 are screaming double digit growth for the year, but the diversified portfolio you put together is only providing single digit returns.
Here are some numbers for the last two quarters:
                                                                                                2014 Q4                2015 Q1
S&P 500 Fund (vfinx)                                                      4.89%                    0.91%
Morningstar Target Date 2051+ Funds                    2.06%                    2.76%
Morningstar World Allocation                                     -0.72%                  2.12%
BFS Managed Mutual Funds (net of fees)*          1.10%                    4.70%                                                   
·         Typical selected account results, results may vary.
So what does this mean going forward?
We are watching carefully to invests in sectors or funds (Heath Care, for example) that have been outperforming the simple S&P Index, while watching for more “Bubble” effects that would concentrate in a small segment of the stock market.