When you’re in the throes of midnight feedings, diaper changes, and the joyful chaos of raising young children, estate planning probably isn’t at the top of your to-do list. It might not even be on your radar. After all, you’re young, healthy, and focused on building a life, not planning for its end.

But here’s the thing: estate planning isn’t about planning for the end. It’s about protecting the beginning – the beautiful family life you’re creating right now. It’s an act of love, a way to wrap your arms around your family’s future, no matter what life may bring.

Let’s embark on this journey together, exploring how young families can approach estate planning with confidence and clarity. We’ll break it down into manageable steps – think of it as baby-proofing your family’s financial future.

Step 1: Embrace the “Why”

Before diving into the “how,” let’s talk about the “why.” Estate planning for young families is about:

• Protecting your children’s future
• Ensuring your wishes are respected
• Minimizing stress and confusion for your loved ones
• Providing financial stability for your family

Understanding these motivations can help you approach the process with purpose and resolve.

Step 2: Start with the Basics

Begin with these fundamental elements:

1. Will

• Designates guardians for your children
• Specifies how you want your assets distributed
• Names an executor to manage your estate

2. Guardianship Designations

• Choose primary and backup guardians for your children
• Consider factors like values, parenting style, and location
• Discuss your choices with potential guardians

3. Beneficiary Designations

• Review and update beneficiaries on life insurance policies and retirement accounts
• Remember, these designations typically override what’s in your will

Step 3: Consider a Trust

Trusts aren’t just for the wealthy. They can be valuable tools for young families:

• Revocable Living Trust:
  • Allows for management of assets during your lifetime
  • Provides for seamless transfer of assets upon death
  • Can help avoid probate
• Testamentary Trust:
  • Created through your will
  • Can manage assets for minor children until they reach a specified age

Step 4: Power Up with Power of Attorney

Establish two types of power of attorney:

1. Financial Power of Attorney:
   • Designates someone to manage your finances if you’re incapacitated
2. Healthcare Power of Attorney:
   • Appoints someone to make medical decisions on your behalf if you’re unable

Step 5: Express Your Healthcare Wishes

Create an advance healthcare directive (living will) to specify your preferences for medical treatment in case you can’t communicate them yourself.

Step 6: Safeguard Your Little Ones’ Financial Future

Consider these financial protection measures:

• Life Insurance: Provides financial support for your family if something happens to you
• Disability Insurance: Offers income replacement if you’re unable to work due to illness or injury

Step 7: Document, Document, Document

Create a “love letter” to your family:

• List all accounts, insurance policies, and important documents
• Include passwords and access information for digital assets
• Store this information securely, but make sure your executor knows how to access it

Step 8: Review and Update Regularly

Life changes quickly when you’re raising a young family. Make it a habit to review your estate plan:

• After major life events (births, marriages, divorces)
• When there are significant changes in your financial situation
• At least every 3-5 years

Common Questions Young Families Ask

“We don’t have many assets. Do we really need an estate plan?”

Yes! Estate planning is about more than just money. It’s about protecting your children and expressing your wishes for their care.

“Can’t we just name guardians for our kids and call it a day?”

While naming guardians is crucial, a comprehensive estate plan addresses financial management, healthcare decisions, and more.

“We’re young and healthy. Why do we need to think about this now?”

Life is unpredictable. Having a plan in place provides peace of mind and protects your family from unnecessary stress during difficult times.

“Isn’t estate planning expensive?”

While there are costs involved, many young families can start with basic documents at a reasonable price. The peace of mind it provides is invaluable.

Work With Us

Estate planning for young families isn’t about preparing for the worst; it’s about ensuring your family is protected no matter what. It’s a profound act of love and responsibility, providing a safety net for the beautiful life you’re building.

As your family grows and changes, so too should your estate plan. It’s a living document, one that evolves with your family’s journey.

At LotusGroup Advisors, we understand that thinking about estate planning can feel overwhelming, especially when you’re in the midst of the joyful chaos of raising a young family. That’s why we’re here to guide you through this process with compassion, clarity, and expertise.

From helping you choose the right guardians for your children to structuring trusts that protect your family’s financial future, we’re here to support you every step of the way. And as your family grows and changes, we’ll be there to help you adjust your plan accordingly.

Ready to take this important step in protecting your family’s future? Let’s start the conversation. Reach out to us today to schedule a consultation, and together, we’ll create an estate plan that reflects your love for your family and your hopes for their future. It’s never too early to start planning – let’s begin this journey together.

Disclosure: This blog reflects the author’s views as of the date posted and may change without notice. Investment advisory services are offered through LotusGroup Advisors, LLC, a federally registered investment adviser. LotusGroup operates only in states where it is properly registered or exempt from registration requirements. While the information provided is believed to be reliable, its accuracy and the author’s opinions are not guaranteed, and we assume no responsibility for errors or omissions.

Nothing in this blog should be considered as investment, tax, financial, accounting, or legal advice, nor does it constitute a solicitation to buy or sell any securities. Investors should conduct their own research, seek professional advice, and understand the risks and benefits of any investments discussed. Past performance is no guarantee of future results. Clients will need to sign an Investment Advisory Agreement, and in case of any conflicts between this blog and the Agreements, the Agreements will control.

To learn more about our services and practices, visit the SEC’s website at www.adviserinfo.sec.gov, review our Form ADV Disclosure, or contact us at www.lgadvisors.com, by phone at 720.593.9861, or at our office located at 1005 S. Gaylord Street, Denver, CO 80209.

This blog may not be copied or reproduced without prior written consent.

The post Estate Planning for Young Families: A Guide appeared first on Lotus Group.

In unpredictable economic climates, just like in outdoor adventures, clear guidance is key to avoiding making decisions driven by fear. For business owners and professionals alike, having a robust business financial planning strategy can act as your North Star—providing direction when external factors become overwhelming.

As the world dealt with the uncertainties of 2020, many individuals and companies grappled with questions about the future. At LotusGroup Advisors, we encourage a steady approach to navigating volatile times by following a well-crafted financial plan, designed to mitigate risks and focus on long-term goals. Whether it’s the turbulence brought on by a global pandemic or political shifts, the answer remains consistent: a solid financial plan will be your guide through the storm.

In both hiking and sailing, it’s vital to know where you’re headed before the journey even begins. Without a clear sense of direction, uncertainty can lead to rash decisions. It’s no different in business financial planning. As conditions change, the businesses and individuals who fare best are those who have both a destination and a plan for how to reach it. But how do you build that financial compass?

The Core of Business Financial Planning

There are six essential components that form the backbone of a successful financial plan, ensuring that your business and personal financial goals are aligned, no matter the challenges ahead.

1. Budgeting and Annual Spending Knowledge

At the heart of business financial planning is a clear understanding of your budget and annual expenses. Without this, you can’t determine whether you’ve reached financial freedom or if it’s achievable at all. Establishing these numbers allows you to stay on track with your financial goals.

To gain a clearer picture of where your business stands, consider using advanced financial software that can quickly and accurately give insights into your expense tracking. Tools like QuickBooks or Xero help business owners maintain real-time oversight of their budgets and cash flow.

2. Insurance Planning

Insurance planning is essential for protecting your business from catastrophic risks. Whether it’s liability, property, life, or long-term care, having adequate coverage safeguards your business and personal finances from unforeseen disasters. Analyzing your current insurance policies will ensure you’re not overpaying for coverage while also filling any gaps that could leave you vulnerable. LotusGroup Advisors specialize in reviewing and optimizing insurance plans to minimize risk exposure.

3. Debt Management

Debt can be one of the largest inhibitors to achieving financial independence, particularly for businesses. Part of business financial planning is knowing when to prioritize debt reduction and when to invest in growth opportunities. LotusGroup assists clients in debt consolidation, refinancing options, and strategies to lower interest payments—helping you focus on building wealth.

4. Tax Planning

Effective tax strategies are critical to business financial success. Most business owners overlook available tax-saving vehicles that could save thousands annually. From maximizing contributions to retirement accounts to employing tax-efficient charitable giving methods, understanding the tax landscape allows businesses to retain more capital for future investments. At LotusGroup Advisors, we offer customized strategies tailored to your financial situation, enabling you to stay compliant while reducing your tax burden.

For more information on tax-efficient strategies, see Forbes’ guide on tax planning for small businesses.

5. Estate Planning

Estate planning is not just for personal finances; business owners need to ensure that their estate is well-organized to avoid complications for their heirs and stakeholders. Having updated wills, trusts, and business succession plans is a crucial aspect of business financial planning, and failing to plan properly can result in a loss of business continuity. With professional estate planning, your business can seamlessly transition in the event of your passing or retirement.

Discover the importance of estate planning.

6. Investment Strategy

A solid investment strategy rounds out your business financial planning by ensuring that your assets are working toward your long-term goals. Once your budget, insurance, and taxes are in place, LotusGroup can help you craft a portfolio that’s designed to meet the specific returns necessary to reach financial freedom. Rather than taking excessive risks, we believe in achieving consistent, long-term growth through balanced investments.

As you structure your investments, you might want to explore sustainable options or emerging industries that offer high growth potential. Staying informed about market trends and diversifying your investments ensures that your financial plan remains resilient even in volatile markets.

Navigating Uncertainty with Confidence

During uncertain times, the greatest asset you have is a well-constructed financial plan. The ability to focus on what you can control and let go of what you cannot is crucial in maintaining business continuity. By centering your focus on long-term goals, your business financial planning becomes the North Star guiding your decisions.

At LotusGroup Advisors, we understand that financial returns are important, but they are not the only factor in a successful business plan. When clients set clear goals and follow a detailed strategy, they can weather short-term market fluctuations without deviating from their ultimate destination—financial freedom.

If you’re interested in building or revisiting your business financial plan, give us a call. Our team of advisors is ready to help you navigate both the calm and the stormy waters ahead.

Explore more insights on business planning.

The post Finding Your North Star in Uncertain Times appeared first on Lotus Group.

Navigating the New Year  

We are two months into the New Year.  Do you set goals or make New Year’s Resolutions?  Is this an exciting year for you, with new possibilities, personal growth, or career advancement in your plans?

Or maybe this is a year of unknowns, with a mixture of fear and anxiety, possibly including a career move, changes in the family structure, or adjusting to the “new normal” of retirement or loss of a loved one.

Whatever circumstances you find yourself dealing with today or facing tomorrow, it helps to have a plan to guide you along the way.

Like driving in an unfamiliar area, having a GPS to guide the way can make the journey less stressful with more certainty you’ll end up where you want to go.

What makes a GPS so useful in finding your way through unfamiliar territory?

It simply takes you where you want to end up and provides the easiest route available to get there.

GPS can tell you how far and how long it will take; It will even provide step-by-step instructions for every turn, so all you need to know is the next step, the next turn.

This can make the overwhelming seem manageable!

The GPS even warns you if you make a wrong turn and how to get back on track.

Wouldn’t it be great to have a GPS for your 2019 goals?

Just plug in the end point, press “calculate best route” and your ideal navigational route appears with step-by-step instructions.

Since that technology doesn’t likely yet exist, maybe we can design our own GPS.

Designing Your GPS

G   =         Game Plan

P    =         Priorities

S    =         Singular Purpose

Our G.P.S. begins with the end in mind (our Game Plan to reach our goal).

The coordinates that set our course are determined according to our Personal Priorities.

This provides the filter for “calculating the best route” by avoiding areas where we shouldn’t spend our time and energy and directing our path by staying focused on what matters most.

This last statement is maybe the trickiest to nail down, “what matters most.”

It should become apparent when we focus on the “S” of our G.P.S. or our Singular Purpose.

A wonderful book I recently finished brings this issue of singular purpose into acute clarity (the book is The One Thing by Gary Keller).

I’ll paraphrase for the context of this discussion.  What is the ONE THING you could do this year, this month, starting now, that having done it will make other things easier or unnecessary?

1. If your singular purpose is FINANCIAL your response may include things like, “live within my means” or “save adequately for retirement” or “eliminate my debt” or “automate my bill pay.”
2. If you singular purpose is about CAREER your response may include things like, “make more money” or “achieve a promotion” or “make that career move” or “bet on myself this year.”
3. If your singular purpose is about RETIREMENT your response may include things like, “discover a plan for a ‘new normal’” or “establish new priorities and a renewed sense of purpose.”

Our lives are full of unknowns.  Some things we can control.  Some things we can’t control.

Knowing (and accepting) the difference can make all the difference in our level of stress and joy.

How Can We Help?

Lotus Group is committed to helping each individual maximize their human potential.

That could mean generating investment income to support your  lifestyle needs, while allowing you to bet on yourself in a new venture, career change or next opportunity.

It could also mean outsourcing a key responsibility of your life (finances), so that you may prioritize on yourself or your family.

Or it could be as simple as just wanting a quick chat “pick me up” chat.

Don’t hesitate to reach out and let us know how we can help make that happen.

We truly enjoy helping clients to setup their financial G.P.S. and helping to steer it towards long-term security and financial independence.

If you’re early in the game and need the encouragement to start – we can help you clarify the best moves now.

If you’re late in the game, maybe early into a life transition or retirement – we can help you navigate the unknown.

Setting and achieving your goals for the year ahead can be a daunting process.

Just as your GPS provides you with step-by-step instructions to your desired destination, your own internal G.P.S. can do the same.

As always, our Private Client Advisors can help you “calculate the best route” for 2019.

The 2019 Game Plan begins and ends with our company motto:

Make.Life.Count.

How can we help you?

Best,

Doug

The post Purpose & Priorities – What is your Game Plan in 2019? appeared first on Lotus Group.

Have you ever met someone who is extremely successful that also seems completely happy and wondered what they were doing differently?  As it turns out they don’t have any secrets, they simply focus on happiness and success follows.

Happiness and success are subjects that have been researched and written about endlessly. Shawn Achor, who wrote the bestselling book The Happiness Advantage, conducted some of the best research.  He found only 25% of a person’s success is determined by their intelligence and technical skills, the other 75% is determined by three things:

1)      Optimism

2)      Social Connection

3)      Stress Management

The good news is all three of these things can be learned with a conscious effort, practice and time. His studies have also shown that success does not bring happiness.  When people who base their happiness on success achieve a goal the resulting happiness is short-lived before they set their sights on a new objective. Optimism, Social Connection, and Stress Management are imperative to success for good reason.

Optimism

It isn’t a surprise that optimists are happier and healthier than pessimists, so it makes sense that they are more successful as well.  Although pessimists see the world more accurately, it can come at the expense of their health, success, and happiness.  Some of us are naturally optimistic, but what about others who are naturally more realistic or pessimistic?  Fortunately optimism can be a learned trait.

Changing an attitude is as simple as changing the internal story that occurs during a negative event.  Pessimists tend to think of negative events as permanent (it will never get better), universal (everything is against them), and personal (this was my fault).  Optimists have the exact opposite reaction to negative events.  They tend to see them as temporary, having a specific cause, and not their fault.

All that is needed to change from pessimistic outlook to an optimistic outlook is to change the internal story.  Instead of permanent, universal and personal, consciously change the story to – a temporary setback that had contributing factors outside of your control that can get better. It may seem too simple to be true, but research has this process actually works.

Social Connection

Having friends and family to connect with, build deep connections with and to lean on when necessary is paramount when it comes to increasing happiness and success.  The more you give, the more you get, this is due in part to the law of reciprocity.  Reciprocity is so strong, that people feel obligated to return a favor regardless of how much they like the person that gave the favor or even if they did not want or ask for the original favor.  Reciprocity is its strongest when it comes to friends and family.

Stress Management

Stress has a presence in all of our lives and we have to deal with it on a fairly regular basis.  How someone handles stress makes a significant impact on their level of success.  The book Choke, by Sian Beilock studies stress and how top performers handle it.  Similar to optimism, changing the way you see problems is not only key in becoming a top performer, but also  in being a happier person.

The people that handle stress the best are people that see problems as challenges and are excited to conquer them.  The people that handle stress poorly see problems as threats and they worry about them.  If you interpret your bodies’ signals as you are in trouble and need to get out, you will likely ‘choke’.  There’s likely been a time in your life when a stressful situation caused you to ‘choke’.  Instead, try to think of the situation as a challenge and a call to action.

Make. Life. Count.

The wonderful thing is that the research has been done, and the process to being happier and more successful is proven, all you need to do is utilize it!  Make changes today to become happier and healthier and in turn more successful.

Take action, and enjoy the results!

The post Increase Your Success by Having More Fun appeared first on Lotus Group.

Did you know the language you speak has an impact on your disposition towards saving money and how you make financial decisions?

Part of the challenge we face with saving today for our future self is that in the English language, we speak of the future differently than we do of the present or past.  In other words, our future self is different from our present self.  This concept was detailed out in a intriguing Ted Talk by Keith Chen titled Could Your Language Affect Your Ability to Save Money?, and helps shed light into this phenomenon.

This language nuance feeds into a number of misconceptions about retirement planning.  This article will explore these misconceptions and address different approaches to help you overcome them and set yourself up for a lifestyle that you desire.

#1: I can put off saving for a number of years; it’s just not a priority right now

On the surface, this can be rationalized.  As your earnings increase over time, your disposable income also increases, thus your ability to sock more money away into your retirement savings will increase.

This thinking is flawed on a number of levels.

People who earn an increase in their income routinely choose an equally proportionate increase in their spending and lifestyle.  Nicer cars, bigger TV’s, more toys, a newer/bigger house in a more expensive neighborhood, the list goes on.

Making matters more challenging is that by forgoing the establishment of the behavior to save a certain % of your income when your earnings are lower, it makes it all the more difficult to establish that behavior later on.  There’s always something else that can be enjoyed now.

Equally damaging is the loss of years for your money to grow.  Time is the greatest asset for investors, and the real benefit of being an investor is the long term compound rate of return that your money will enjoy if invested in a consistent and disciplined manner over 20-30 years.

Think that a small amount of savings (or additional savings) is pointless?  Over a 25 year period, saving an extra $100/week will translate into an additional $400k with an 8% return.  Add another 5 years and it’s over $600k.  If you were to put off saving for 10 of those years, you’d need to save about $270/week instead of $100/week to hit the same number.

Overcoming this challenge starts with simply being aware of it.  Think of where you are today, and think of how it would feel today if you had made a different spending/savings decision 5-10 years ago, and it resulted in you having 30% more money in your retirement account.  How would that make you feel?

Saving early translates into your money working for you, instead of later on you having to work for your money.

#2: There’s no sense having a retirement plan when my life is likely to change so much anyway

This is an excuse, not a plan.  Everyone’s life changes, and unexpected things, both good and bad, will come up and alter the course of your life.  That doesn’t mean you should put off saving and avoid having a plan or a defined set of goals.  Doing so just means that you are only thinking of your present self, ignoring what your future self will want or wish you had done.

Retirement planning is an ongoing process, not a one-time event that lays out the exact course of the rest of your life.

A well-constructed plan serves as an invaluable tool to help you navigate the optimal course for your life…….the course that will give you the most options, the best understanding of implications of different choices, and the least of amount of unexpected surprises at critical milestones in your life.

#3: I love what I do, so my plan is to just keep working

First off, that is AWESOME!  Many people can’t say that about their career, so you should be commended for developing a career that you love.  That concludes the good news.

The notion that you can just continue to work forever and thus not need to save for your retirement ignores a hugely important factor.

Things change.

Laws, regulations, industries, markets, disruptive technologies……all are subject to or can drive dramatic change to the way things are done.  This means that there is no guarantee that your career as you know it today will be the same or even similar in 10 years or 20 years.  Think of the world we lived in 10 years ago, and how much things have changed.  Imagine what the next 10 years will bring in terms of innovation and change.

You can’t plan your retirement (or non-retirement in this case) around the assumption that things will stay the same.  That things will change is perhaps the only certainty that we can count on.  You do yourself a disservice and severely limit your options by not saving based on the assumption that you’ll just keep doing what you’re doing because you love it.

Your ability to succeed at your career may also change as a result of physical or mental ailments that become more common as we grow older.

Plan for the fact that life will be disrupted and you’ll be in a far stronger position to adapt and be financially secure.

#4: Maxing out my 401k is sufficient for my retirement savings

Wouldn’t it be great if IRS knew (or cared) what your specific lifestyle and goals looked like?  Limits on the amount that can be contribute into retirement accounts apply to everyone, regardless of lifestyle.

Saving the max allowable amount into your 401k (currently $17,500/year) every year for 30 years will yield you a retirement portfolio of around $2.5MM (assuming 8% return and 2% increase in contributions each year).  This would be sufficient assets to fund a retirement income of about $100k/year in future dollars.  Discounted back to today at a 3% inflation rate equates to a retirement income of about $3,500/month in today’s dollars.  And that is pre-tax.

So in addition to this likely being an under-funded retirement portfolio, every single dollar that comes out of your 401k in retirement will be taxed.  This means you have a lot of tax risk exposure.

Contributing additional savings into in a diversified set of retirement accounts, including taxable brokerage accounts as well as tax-free Roth accounts, reduces your future tax risk along with increasing your portfolio balance to better support your goals and lifestyle.

Most investors have more options available to them for saving than they take advantage of, so taking the time to understand your options and coming up a plan that utilizes those options and spreads your retirement asset tax base is a critical component of any financial plan.

It’s also one that your future self will thank for you having done.

#5: Since my kids will go to college prior to my retirement, I need to save for that first

Chronologically this is correct, but financially this is a mistake.  Saving for and paying for your child(ren)’s college expenses is absolutely a noble goal for which you should be commended.

However, saving for college expenses should not come at the expense of not saving for your own future self.  You lose a significant number of years’ worth of compounding returns, and in the end, you end up having to work more for your money than having your money work for you (refer to #1 above).

Perhaps most importantly, you don’t want to put yourself in a position where you are going to be reliant upon your children to take care of you or you would find yourself at an assisted living situation because you failed to take care of yourself first. It is worth considering and calculating the cost of nursing home care or home care services (contact NDIS Support Sydney for more info), or consider going to a center such as the Home Care Assistance 9050 W Olympic Blvd, Beverly Hills, CA 90211 (310) 857-4730 at https://www.google.com/maps?cid=4994661453016816924.

#6: An inheritance or financial windfall is going to come my way, that’s my plan

What if it doesn’t?  What if it is far less than you thought?  Enough said.

Literally everyone has a different view of what their retirement will look like, and the view that many middle-aged Americans now have is quite different than the perspectives of their parents.  There’s more focus on living for the now, enjoying the ride, worrying about the future later.

The optimal answer lies in the middle.

At its most fundamental level, Retirement planning is about giving yourself choices and avoiding unexpected or undesirable outcomes.

It’s about delaying some level of gratification by investing for your future self.  Along the way, limit your expenditures on the things that you don’t matter much to you, while pursuing your passions and living life to the fullest……

In other words, MAKING LIFE COUNT!

The post 6 Misconceptions about Retirement Planning and How to Overcome Them appeared first on Lotus Group.

Quantifying the value of any service can be difficult, and quantifying the value of the service provided by a financial advisor is no exception.  Vanguard is known in the financial industry for its low-cost funds, index investing, and has been spearheading the do-it-yourself movement.  However, they recently released a report using their very own data that found that investors who used an advisor had an average return over a full market cycle that was 3%/year greater than investors who did it themselves.

The above graph shows hypothetically how an additional 3% a year in returns compounding for 30 years increases the investors portfolio of $100,000.  The investor’s account value is nearly double if they use an advisor vs. do-it-themselves.

This is not from beating the market every single year, but rather from the guidance and advice that advisors offer during critical points in the market cycle.

Their data showed that advisors add value in 7 specific ways that contributed to the increased returns.

The 7 Advisor Advantages:

1)      Behavioral coaching: This is where advisors added the most value to client returns.  Investors who stayed disciplined through the most crucial times (market peaks and market valleys) values will add large returns.  We talk about this often as being the single largest contributor to generating long term returns, making good decisions and staying the course at market extremes.  The natural human tendency that many investors have is to take on more risk when the market is doing well because it seems safe to do so (since the market is doing well, it will surely continue to do well, right?).  And when the market breaks down and declines, the natural reaction is to sell and get out.  We speak about this often with our clients, that this is the exact opposite behavior that leads to real returns in the long run.

Dalbar produces an annual report called the Quantitative Analysis of Investor Behavior that we often cite, and the most recent edition shows the 20-year return of the market to be 7.81%/year, while the average investor returns from equity mutual funds is 3.49%/year.  This gap is entirely attributed to making the wrong behavioral decision at the wrong time.

2)      Asset Allocation: Investors who do it themselves often end up in an asset allocation that is driven by headlines and gut reactions.  This is important because it drives the return volatility and performance, which often leads one back to the behavioral decisions noted above (taking on too much risk at the wrong time, and taking on too little risk at the wrong time).

Investing in a diversified portfolio of securities that will deliver the right risk/return characteristics is a significant contributor to generating better returns over time.

3)      Cost Effectiveness: On average, investors using an Advisor saw an increase in return of about .45% related to fund fees.  This was primarily the result of being placed in lower-cost funds by the Advisor.

These savings can also come from the efficiencies of having all accounts in the portfolio managed together, thus avoiding redundancy and/or holding all the same positions in each account.

4)      Rebalancing: In order to reduce risk and volatility, investors must rebalance.  Rebalancing can take advantage of short term corrections of certain assets while reducing risk in short term highs of other assets.

Although rebalancing’s primary function is to reduce risk, it is also a disciplined and systematic way to buy low and sell high little by little over time.

5)      Asset Location: The knowledge of what types of accounts to have and how much to have in each account is imperative to building wealth.  Putting too much money into the wrong account can have tax implications which in turn hurt the returns of that account.  Choosing the correct types of accounts to invest in depending on their independent purpose can give you tax deductions, tax free growth, or tax free withdrawals.  Investors who do not take advantage of these properly leave significant money on the table by paying too much in taxes.

6)      Withdrawal order from assets: When the time comes of retiring, knowing which accounts to take from first and which ones to leave alone can leave investors with more money to use.  In general the correct formula depends on the investor’s situation, but it is usually best to use the tax free money last and use investment gains first.  Having the correct order of account withdrawals adds returns in the form of saved taxes and extending tax free money.

7)      Total return vs income investing: Instead of relying on the old rules of retiring, a savvy advisor can add longevity and stableness to investors’ money.  Decades ago investors could depend on bonds to provide the income necessary for retirement through their dividends and interest.

Now interest rates are hovering around all-time lows bonds do not have the interest needed to support retirement.  An advisor can help by using creative investments that have higher interest rates and growth than bonds.  Also, deciding what assets to take money from and which to let grow further can have significant implications on an investors retirement and having a knowledgeable advisor’s expertise helps immensely.

How To Capture the added 3%/Year

All together these portfolio improvements along with behavioral guidance and advice add 3% annualized a year to investor’s returns.  The majority of the added returns occur during market peaks and valleys which tend to be when advisors talk clients into staying the course and not getting greedy or fearful.

When investor’s returns deviate from what their friends and the markets are returning, people can have a hard time staying the course even though these strategies can potentially have much greater returns in the long run.  This can have added benefit of potentially greater returns over time, but are also more challenging in the short term market peaks when the US market is the best performing asset class.

Successful investors find an advisor that they trust and will take advice from and simply follow their guidance.  This adds more in returns than any sort of fancy investment strategy can possibly add.  Find yours and your added 3% a year in returns will compound to a fortune through your lifetime.

The post Vanguard study finds how much value is added by advisors, and it’s a lot. appeared first on Lotus Group.

Black Friday is this week and it is the greatest test of your financial behavior of the year.

The promise of getting the most incredible savings of your lifetime on that TV or computer you’ve been eyeing all year, as well as the chance to get all your holiday shopping done in one day.  Oh, how sweet it sounds!

Black Friday is the single most advertised shopping day of the year, and retailers pull everything out of their bag of tricks to get you to spend as much as possible in the pursuit of a ‘good deal’.  But proceed with caution, these ‘good deals’ are not what they seem and can lead you to big money mistakes.

Door buster deals for people are like catnip for cats, we just can’t stay away.

The Allure

Retailers have become masters of making consumers believe that they are there getting a once in a lifetime deal on Black Friday.  Further, they build the emotional trap to make you feel like you’ll completely miss out if you’re not there when the doors open before the crack of dawn with your Thanksgiving feast still digesting in your stomach.

What most people don’t realize (or care to think about) is that retailers have what are called “loss leaders”, which is the crazy cheap TV or the 50% off computer that turns you into a ravenous consumer ready to purchase more.  They are not discounting for charity, these loss leaders get you in the door to spend more money than you had planned.

The Trap

The problem is, on your way out you are likely to pick up a couple of movies from the $10 bin and some gold plated cables for your new TV.  Oh, and don’t forget the new game for your nephew, it’s projected to sell out before Christmas, better buy it now before it’s too late.  By the time you’ve fought through the crowds and make it to the checkout aisle, you’ve got a cart full of stuff you never knew you needed and have spent way more than you thought you were “saving” by being there in the first place.

Retailer’s ploys continue to work year after year.  Last year during Black Friday weekend, which has been expanded to include Thanksgiving Day, retailers put up some very staggering numbers:

–   Total spending on Black Friday weekend was $59.1 Billion

–   139.4 million people shopped Black Friday weekend, nearly 1/2 our population

–   The average American spent $423 during Black Friday weekend

–   Walmart served 22 million customers on Thanksgiving Day alone

–   Walmart sold 1.3 million TV’s and 250,000 bicycles during Black Friday

Those are eye-popping numbers on a massive scale.

The Tactics

Scarcity – only 50 T.V.’s available!

A game they like to play is perceived scarcity of the products that you are looking to buy.  They will limit the number of door buster items to get you in line earlier.  Even if they don’t limit the number, you may assume that they will sell out unless you get there at the crack of dawn.  Overall, this perceived scarcity helps get people in the door early, as no one wants to be 51^st when there are only 50 door buster TVs.

Sunk cost – after all of this work, I have to go home with something.

Even if you are too late and don’t get the item that you woke up early for, you tend to stick around and buy things. You woke up at 2am, drove to the mall and found parking.  After all of that effort you must leave with something or the entire trip would have been a waste, and you’d having nothing to put on your Facebook page.  The best thing to do would be to call it a day and leave empty handed, instead you stay and shop until you find something that’s ‘worth’ it.

Pain anesthesia – how retailers make the prices hurt less.

Retailers pull everything out of their hats for this one-day super-sale.  You will find store credit with purchase, instant rebates, low or no interest layaway.   All of these are designed to make you spend more money. They are distractions to further distance your focus from what you are spending.

How to take advantage?

This isn’t rocket science, but behavioral finance rarely is.  When the 50 pages of ads come out, toss them aside.  When the commercials air during the football games, turn the channel. When the radio is blasting in your ears about amazing steals, switch the station.  Remember this, Black Friday deals were invented to make people behave like idiots.

So how do you take advantage of the undeniable great deals?  Stick to your list, and if you can save big money on an item on Black Friday, then GREAT!  Better yet, focus on trying to find the items on your list on the web, so you can stay focused and not get stuck in the store feeling like you need to buy something.

Remember, if you don’t need something at regular price, you don’t need it just because it’s 25% off either.  By sticking to your list and saving some cash on the items you actually need, you can turn Black Friday back in your favor and not into the trap that the masses fall into.

The post How Black Friday is Designed to Make You Behave Like an Idiot appeared first on Lotus Group.

FOMO Defined

FOMO, or the “Fear Of Missing Out”, can lead to a fun, spontaneous life, but it can also lead to financial ruin.

We’ve all heard the age-old saying, “The best things in life are free”, but in reality, living a fun-filled life of travel and adventure requires a constant flow of cash.  Unlike their predecessors, Gen-Xers and Gen-Yers are much more interested in living in the now, a lifestyle more focused on instant gratification.

Of less importance is suspending life’s luxuries in favor of delayed satisfaction and saving for the future. The implication of this behavior is that money, and a lot of it, is being spent now and isn’t going into savings that will lead to financial freedom and stability in the long run.

The Allure

You’re sitting at home on a sleepy Friday evening, content with your glass of wine or a beer and a movie when it happens.  You get a text from a friend spontaneously requesting your presence for a fun night out. Your initial reaction is a quick, “nah”, but with just a tiny push from your friend you start thinking about what you could be missing out on, who they might see, what memories they might create without you.

FOMO isn’t always nights out, it comes in a variety of disguises.  Sometimes it reveals itself in trips, concerts and other experiences. It can also be shopping that induces FOMO. You fear missing out on fitting in, having the latest fashion, enjoying the best TV watching experience, not being able to play Madden on the newest gaming console, and so on.

Financial Implications

This gut reaction, undisciplined spending style is the exact behavior that forces people to live paycheck to paycheck seemingly never able to catch up, let alone get a step ahead.

FOMO quite literally denies people the most basic level of financial freedom, an ample emergency fund and a growing retirement portfolio.

To be clear, financial freedom does not entail an inactive or a meticulously planned lifestyle, but it does require a strategy that includes saving a set amount every month.  You can still live an exciting, adventurous life; you just need to temper that with a bit of discipline.

Counter with a Lifestyle Plan

Budgets don’t work for the same reason diets don’t work, people simply aren’t disciplined enough and don’t want to live a confined life.  The ones that do work don’t overindulge, but they still allow some of the good stuff.

To conquer FOMO you need a lifestyle plan that negotiates the right balance between saving and spontaneous luxuries.

So how do you do that?

Implementing FOMO Protection

Creating a lifestyle plan and sticking to it takes a lot of expertise and work that normally require a professional to help build it correctly who can also hold you accountable, but that doesn’t mean you can’t get started on your own.

1. Get a handle on your fixed monthly expenses, such as rent/mortgage, car costs, utilities, cell phone, TV, memberships, insurance, etc.  Are there areas you can cut some monthly cost?  Are there things you spend money on each month in a fixed manner that aren’t really that important to you

2. Determine how much you should be saving each month for your long term lifestyle and financial stability.  This could be retirement savings or emergency account savings, but it is the ongoing maintenance and support of your lifestyle.  It’s imperative that you have a plan to save the amount necessary to ensure you get to where you want to be down the road in the short and long term.

3. Whats left over after your fixed expenses are paid and your savings are taken care of is your monthly discretionary spending (groceries, dining, clothing, etc.) and your FOMO spending.

The key here is automation.  You must automate your savings every pay period or every month to ensure it happens and that you are paying yourself first.

Where people get it wrong is putting their discretionary and FOMO spending before their savings, making savings the ‘whatever is left over’ pile at the end of the month, which is often nothing.

With a properly crafted lifestyle plan, when you spend the last of your FOMO money for the month, there is no mo’ FOMO for you!

If you’d like guidance on crafting your lifestyle plan, or help figuring out how much you should be saving to hit your short and long term goals, send me a note and we can discuss.

The post The Financial Implications Of FOMO (The Fear Of Missing Out) appeared first on Lotus Group.

When you say to a new homeowner – “Congratulations on your new home!”  What you’re really saying is – “Congratulations on $400,000 of new debt!”

Owning a home is part of the American dream, for better or worse.  If executed correctly, home ownership can absolutely add net worth in the long run. However, it can also lead to being ‘house poor’ and push retirement back by years if mistakes are made. In case you are facing foreclosures, experts in the field can help by offering you a fair price for your home very fast.

We have not seen a real estate market like this in a number of years, and likely will not again for some time.  It seems like everyone is buying a home, but should you?

Don’t allow yourself to get caught up in the hype and make costly mistakes.  Buying a home is the largest purchase you will make, and has a larger impact on your finances than anything outside of your job. Sometimes a mortgage, or refinancing options, even a loan from family is required. Check out HouseBuyerNetwork.com to make the home-buying experience straight forward and stress free.

Why is the real estate market so crazy right now?

1)    Interest Rates

Rates are starting to creep back up, according to Eric Kuchinsky, property sales manager for Redstones Willenhall,  “Home rates remain near the historic lows of last year, but a small change in percentage points could add up to a lot of money over the life of the loan.  We are seeing people that have been waiting rush in to get a mortgage now before rates rise.”

2)    Supply and Demand

Scott Boyer, a top Real Estate agent in Denver shared his thoughts on the current Real Estate market.  “If the listing agent has a house last through a weekend, they are not doing their job.  A successful broker used to be judged by the amount of for sale signs that they would have up, now if you have signs up you are not selling fast enough.”

The inventory is low because the retail buyer, the mom and pop investor, and the institutional investors are piling into the market.

Blackrock is an investment firm that currently holds more than 26,000 homes and has spent $45 billion buying them.   Home prices across the country have risen 11% this year, and rents have only risen 2.4%, so at this point if you have not gotten in the market yet, it may be too late to make financial sense.

Houses are going for well over their asking price in just a day or two, and as a result we have been asked more home buying questions than ever.

Mistakes to Avoid

Home ownership costs a lot more money and time than advertised, and avoiding these mistakes will help you down the path to the American Dream, rather than the broke, in debt, American Nightmare that plagues many Americans.

1)    Using your emergency account for the down-payment

Having an ample emergency account that contains 3 – 6 months of income is step 1 to financial success, but they tend to get raided for down payments because of their size.  This is your lifeline and cushion should something happen to prevent taking on more debt, that is why you should know what is down payment assistance in Texas or any other state you are currently located. The down-payment must be saved for outside of the emergency account.

Additionally, homeowners need more in their emergency account than renters.  A homeowner has a lot more financial responsibility, and one water main break or bad storm can wipe out an ample emergency account.

2)    Spending more than 25% – 30% in monthly income

A healthy cash flow spends no more than around 30% of monthly income on housing.  Spending more than 30% is not prudent, and can have major credit and lifestyle impacts.

3)    Spending too much on a house

The age old rule of thumb is to spend around 2 to 2 ½ times your annual income on a home.  So if you make $80,000, you should spend between $160,000 and $200,000 on a home. Visit Danny Buys Houses for professional real estate services which let you buy a home at a great price.

4)   Forgetting about extra costs

The true cost of owning a home is much higher than the mortgage paid every month.  To get the true cost, you need to add in the property taxes, utilities, maintenance, repairs and services like gutter installation Loveland, and home insurance, and where applicable, HOA fees, mortgage insurance, and closing costs. Check out GettysburgGutterGuards for reliable, affordable gutter cleaning services.

5)    Buying somewhere you don’t plan on living for 7 years or more.

Writing a large check to your landlord every month can feel like a waste of money.  After all, you are not earning anything on it. But if you buy a house, and have to sell for any reason inside of around 7 years and don’t choose a company like HomeBuyerCA.com, you will very likely lose money due to closing costs, commissions, and other expenses.

6)    Not paying attention to your credit score

A poor credit score can add tens of thousands of dollars in cost to buying a home.  Find out what yours is and how you can improve it before taking on a  mortgage.  Check out this graphic to see what different credit scores yield in monthly payments and overall costs.

Planning for home ownership

The best way to approach home ownership is going in with a plan that takes into account your current cash flow, accounts, and most importantly your future plans.  These variables drive if you should buy a home or not, and what you should pay for a mortgage and a down payment.

A long-term plan will help you understand the implications of home ownership on your retirement, cash flow, investment accounts, savings accounts, and credit.  Talking with a professional Advisor beforehand will help ensure you get the right amount of house, and will set you up for the best financial future.

The post 6 Home Buying Mistakes To Avoid appeared first on Lotus Group.

Have you ever worried about your children or grandchildren becoming financial catastrophes?

Financial literacy and education can never start at too young of an age.  We are happy to share a valuable webinar from our brokerage partner TD Ameritrade, called: “Your Parents are not ATMs: Teaching Children the Value of Money.”

One of our clients recently viewed this webinar and had really positive comments to share with us.  We hope you find it beneficial and insightful as well.

The post Your Parents are not ATMs! appeared first on Lotus Group.