Ways to Cut Wedding Costs

I’m getting married this year, and I couldn’t be more excited . . . about getting married, not necessarily about planning the wedding. The process can be stressful and overwhelming – the organization, details, responsibility, and not least of all, cost.

As a financial planner I’ve thought a lot about the cost of this important day. A quick Google search reveals that the average amount of money spent on a wedding in the United States is over $30,000. It’s not like the old days where fathers paid men a dowry to marry their daughters (thankfully). While both of our families are helping us on wedding cost, we still need to pony up quite a bit of cash on our own. I did not want to start off this next phase of my life in debt.

Through my planning I’ve come across a number of ways that people have saved money on their wedding. While I didn’t choose all of these options, I think they’re all worth considering.  If you know someone who’s planning on tying the knot soon, you may want to share these ideas with them: 

  • Cut the guest count.I’ve experienced night sweats on who to invite to my wedding. I wake up thinking: “They invited me;” “She’s my second cousin twice removed;” or “What about my best friend from kindergarten?” A recent survey by theknot.com shows that it costs over $200 per guest at a wedding. That’s right – over $30,000 for just 150 people! Try to limit your guest to friends, immediate family, grandparents, close aunts and uncles, and close cousins. People will understand you can’t invite everyone.
  • DIY.This isn’t for me, but it is for a lot of people. I’m not overly handy or creative, nor do I have the patience for doing anything myself on my big day. However, if you are that type of person, you should do as much as you can on your own. Try printing your own invites and save-the-dates cards. Research sites like Etsy to get ideas. Pick a creative family member to help decorate for your rehearsal dinner; have a girlfriend do your hair. Every little bit that you can do yourself (or others can do) will save hundreds or even thousands of dollars. Maybe a friend’s participation could be given in lieu of a gift.
  • Don’t be so traditional.More of my friends are not getting married on Saturday. In most cases they are moving to Friday and Sunday where wedding vendors and venues don’t charge the same premium as a Saturday wedding. Also, think lunch reception and maybe not a sit-down, four-course evening meal.  Or, you could just do a champagne toast and appetizers and cut out early for the honeymoon ;).
  • Pick a season and stick with it.Try to purchase decorations, flowers, and food that are in season. If you are trying to get Birds of Paradise or sunflowers in the dead of winter, you will pay for it. You can save a lot by having a Christmas wedding because most venues are already decorated. Another option is to try for a spring wedding when everything outside is blooming. If you are planning your meal options, do a sautéed veggie option with items that are in season.
  • Bundle. Try bundling items to cut down cost. For example, instead of having a cake and party favors, maybe have a candy station for people to grab something on their way out the door. This way, you still have sweets and favors, but you’re cutting the expense down by really having one.  If you have something around the house that you can use as your guest book, do it! I’ve seen people use globes from a bookshelf to sign, as well as old corn hole boards that were painted with the wedding colors.
  • Keep it casual. Buffets may not give the same vibe as a plated meal, but it’s a lot cheaper. If you really don’t want people to wait in line for food, then try doing family style. This is a bit more expensive but doesn’t come with the extra cost of servers.
  • Hire a coordinator.  This goes against the DIY bullet, but you can save money in the long run. Most wedding planners have discounts and perks arranged with partners and vendors… but be wary and do your research before hiring someone to plan for you.
  • Do everything memorable early. Try to get the bouquet toss and cake cutting out of the way early. If you do everything memorable first thing, you can let your photographer and videographer leave early to cut down on their hourly time. Your guests will continue to snap pictures throughout the night.
  • Buy someone else’s wedding. This may sounds crazy, but sadly, many people cancel their wedding every day. Most deposits are already put down and can’t be returned. Decorations have been bought, and gifts have been purchased.  Check out http://www.bridalbrokerage.com/to purchase someone else’s unfulfilled day.

Finally, the number one way to save money… ELOPE! Have a quick wedding, a potluck in the backyard, good conversation and s’mores by the fire, and call it a good day!

Good luck on planning your special day!

Ashley Woodring, CFP®
Financial Advisor

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THE GREEK MESS WON’T HURT THE US ECONOMY

The International Monetary Fund (IMF) has performed a valuable public service by publishing a detailed “Debt Sustainability Analysis” for Greece on July 2. While this document is written in typically dry “bureaucratese,” it lays bare the failure of the strategy of “kicking the can down the road” that the other Euro Zone countries have been using with Greece for the past five years.

Dr. Carl Weinberg is Chief Economist at High Frequency Economics and a veteran of the mostly successful Brady Plan debt restructuring program of 1989-1992. Those negotiations took debt loads that were impossible and restructured them, in a manner similar to the way failing corporations are restructured in the US. Brady Plan deals were worked out for Argentina, Brazil, Bulgaria, Costa Rica, the Dominican Republic, Ecuador, Ivory Coast, Jordan, Mexico (the first one in 1989-1990), Nigeria, Panama, Peru, the Philippines, Poland, Russia, Uruguay, Venezuela and Vietnam.

Dr. Weinberg suggests that the €323 billion ($358.3 billion) Greek debt be restructured into bonds with a maturity of 100 years, a coupon (interest) rate of 5.0 percent and a 25-year grace period before the first payment is due. This would give Greece “breathing room” and would keep all its creditors (primarily the European Central Bank (ECB), the European Financial Stability Facility (EFSF) and the IMF) from having to take a “haircut” on their holdings of Greek debt.

Not very surprisingly, the IMF analysis does not go this far. However, it rather drily suggests that extending the grace period to 20 years and the amortization period to 40 years (an effective doubling of each) together with new financing, would barely be adequate.

Greek voters went to the polls on July 5 in a hastily arranged referendum to vote “yes” or “no” on accepting terms from the creditors that were withdrawn on June 30. Thus, it’s not really clear what they were voting on. The wording in the ballot was also very confusing. It read: “Should the draft agreement submitted by the EC, ECB, IMF to the eurogroup on June 25, which consists of two parts that make up their full proposals, be accepted? The first document is titled, ‘Reforms for the Completion of the Current Program and Beyond’ and the second ‘Preliminary Debt Sustainability Analysis.’”

Despite that convoluted wording (it can’t possibly be any clearer in Greek), the 62.5 percent of voters who turned out gave a victory by a 61.3-38.7 percent margin to all those wishful thinking people who believe that reality won’t triumph. Greece is being kept afloat by the ECB. If they stop doing that, the banks will all be bankrupt. No one knows where this disaster will go.

Now the creditors need to follow the IMF recommendations, which include another €60 billion ($66.5 billion) of new money through 2018. This is in addition to the restructuring of all the existing debt.

Like so many economic problems in the world, the Greek mess will be finally resolved when there are no other options. If Greece were to leave the Euro Zone (a terribly complicated exercise), it would be hit with horrendous inflation and an even bigger collapse of the economy that the 25.0 percent decline it has already experienced since 2009.

Greece needs debt relief. It also needs to reform its ridiculous pension system to conform to those of the rest of the Euro Zone and figure out ways to collect taxes that are owed.

The Greek economy is about $200 billion a year in real GDP. That’s close to Alabama ($199.4 billion in 2014) or Oregon ($215.7 billion). Both are 1.2 percent of the US total.

A failure to follow something like the prescriptions of the IMF or Dr. Weinberg will condemn the Euro Zone to remain mired in a recession that began in the first quarter of 2008. Some people would argue that a recession lasting that long ought better be called a depression.

Either way, whatever happens to Greece is mainly a problem for the Euro Zone. It is simply too small an economy to have a major impact on the US. Most of whatever impact there might be would come through damage done to overall Euro Zone growth, rather than directly from Greece itself.

Dr.  James F. Smith, Chief Economist.

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Market Update through June 30, 2015

as of June 30, 2015
Total Return
Index 12 months YTD QTD June
Stocks
Russell 3000 7.29% 1.94% 0.14% -1.67%
S&P 500 7.42% 1.23% 0.28% -1.94%
DJ Industrial Average 7.21% 0.03% -0.29% -2.06%
Nasdaq Composite 14.44% 5.90% 2.03% -1.56%
Russell 2000 6.49% 4.75% 0.42% 0.75%
MSCI EAFE Index -4.22% 5.52% 0.62% -2.83%
MSCI Emerging Markets -5.12% 2.95% 0.69% -2.60%
Bonds
Barclays US Aggregate 1.86% -0.10% -1.68% -1.09%
Barclays Intermediate US Gov/Credit 1.68% 0.82% -0.62% -0.60%
Barclays Municipal 3.00% 0.11% -0.89% -0.09%
Current Prior QTR
Commodity/Currency Level Level
Crude Oil $59.47 $47.60
Natural Gas $2.83 $2.64
Gold $1,171.80 $1,183.20
Euro $1.11 $1.07

The Pitfalls of Maximizing Shareholder Value

According to Ibbotson data, the US stock market has delivered a 10.1% annualized return from 1926 to 2014. I mention this data, which includes two significant market corrections, because the numbers speak for themselves. The US entrepreneurial spirit, along with a vibrant capital markets system, is alive and well. We see this today in the slew of new technology startups, healthy corporate profits even in the face of a strong dollar, and record foreign investments in US companies. That being said, there’s something I believe investors have gotten wrong, and that’s the virtually unquestioned tenet that a company’s main responsibility is to maximize shareholder value.

This seemingly obvious truth is surprisingly, a new idea, conjured up in the early 1970’s by economist Milton Friedman who wrote a scathing rebuke of corporate social responsibility in an op-ed piece for the New York Times Magazine. Shortly thereafter, two business school professors ran with the notion and published multiple journal articles extolling the virtues of maximizing shareholder profits. The idea stuck and today most in the financial industry agree that this is the primary, if not only, responsibility of a corporation.

Perhaps because I started out as a high school science teacher, followed by a stint at a local zoo, I came to my first financial position at an institutional money management firm with a slightly different perspective. My first year as a stock analyst was confusing. I quickly learned that companies reported two sets of financial data, one based on GAAP or Generally Accepted Accounting Principles, and another set called “pro forma” that excluded a lot of recurring “one-time” expenses. Then I realized that while my Chartered Financial Analyst (CFA) studies helped me gauge the health of a company and its growth prospects (among other things), it became clear that the stock market game had more to do with beating Wall Street’s expectations for the upcoming quarter.

What was going on? Roger Martin in his book titled “Fixing the Game” suggests that a misguided focus on maximizing shareholder returns is incenting companies to boost earnings per share in the near-term at the cost of important, and often uncomfortable, investment decisions for the long-term. He notes that executive compensation is now more closely tied to stock and earnings per share (EPS) performance than ever before. This might be one reason why companies in the S&P 500 Index bought back shares at almost record levels in 2014. While reducing a company’s share-count provides a short-term boost to EPS growth, it leaves less cash on a company’s balance sheet for the critical business investments needed to drive shareholder value for the long-term.

So if maximizing shareholder value is not what company management teams should focus on, then what is? As with most pursuits in life, I find that fixating on a certain result often ends badly. No one can know the future, let alone deliver a certain outcome in perpetuity. Sure we can do it here and there in the short run, but in the grand scheme of things, our jobs – as individuals and companies – is to serve our clients and our communities. I believe that when companies focus on their customers, their employees, and their vision for the future, they are much more likely to maximize shareholder value – with the added benefit of contributing to society along the way. But when management teams and investors alike focus on profits for the sake of profits, the whole system becomes twisted and warped. We’re seeing this today in the rampant short-termism on Wall Street, outsized executive compensation packages, and subpar business investment levels – the lifeblood of our economy and capital markets.

While all this may sound discouraging, the good news is that more and more well-regarded financial professionals – among them, Warren Buffet, Jack Welch, and Blackrock’s CEO, Laurence Fin – are speaking up. One of our industry’s leading organizations, the CFA Institute, hosted a distinguished investment professional at its latest annual event whose presentation was called, “Shareholder Value Maximization: The World’s Dumbest Idea?” His research found that companies that focused on responsibility to customers, employees, and communities tended to outperform those that did not. All this to say that investors are starting to wake up the outdated and erroneous notion that corporations exist only to maximize shareholder value. We’re finally starting to put the cart back behind the horse, where it belongs.

Carrie A. Tallman, CFA
Director of Research

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Economic Predictions and Investment Decisions

The economy is an important factor that drives both capital markets and personal financial decisions. While we continuously monitor the latest economic news, have an opinion about the direction of markets, and incorporate these factors into our stock selection process, market or economic predictions do not drive us to make tactical shifts in your portfolio allocation.

We often hear, “What do you think the market will do this year?”

After a hefty caveat that the future is unknowable, and short-term market predictions can be hazardous to your wealth, we usually talk about the current economy, how it might affect markets in the near-term, and then provide a more intermediate-term view of the health of the U.S. and global economies.

Our investment philosophy hinges on the abiding belief that an investor should not attempt to time the market. That’s to say that an investor should not move his or her money in and out of asset classes based on economic predictions, or beliefs about what the market may do over the next few years. Rather, when we make decisions in a client’s portfolio, it is based on two factors: 1) asset allocation – based on the client’s financial goals and risk tolerance; and 2) individual security selection – used to comprise the contents of the asset classes that have been prescribed for the portfolio.

An investor’s asset allocation, if chosen correctly, shouldn’t fluctuate based on changes in the economic landscape. Instead, asset allocation should be reviewed regularly and modified if the individual’s financial situation changes. It’s the second of these two – security selection – where a bit more prognostication comes in. To be sure, we are fundamental analysts. We look at a company’s earnings, growth potential, balance sheet and cash flows relative to its price to determine whether or not the stock represents a good buying opportunity. Understanding the economy helps us understand those companies better. It helps us determine what the growth drivers of a certain sector may be, and what the consumer trends may look like for a given company. Understanding the economy is a critical component of our stock selection process.

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Our Chief Economist, James F. Smith, provides insight to Parsec’s clients regarding the local, national and global economy. We appreciate Jim’s experience and perspective on economic matters, and we believe our clients enjoy getting to know him at various engagements, and of course hearing his entertaining, plain-spoken and informative economic speeches.

Recently, Jim was featured in an Asheville Citizen-Times article called “The Wisdom of Mr. Smith” about his success predicting housing prices. Way to go Jim! You can read that article here:

http://www.citizen-times.com/story/money/business/2015/05/08/asheville-economist-nations-top-housing-forecaster/26975203/

While economic predictions don’t drive us to make tactical shifts in our portfolio allocation, economic factors do play an ongoing role in our security selection process. To see Jim’s economic commentary each quarter be sure to read our newsletters. Back copies can be found here: http://www.parsecfinancial.com/news.html

Starting on the Right Foot

In the spirit of college graduation season, as Milliennials contemplate their careers and financial futures, I thought I’d share a bit of perspective that’s helped me find career contentment and at the same time, put me on a course towards financial independence. While those of you who recently earned your bachelor’s degree (congrats!) may feel pressure to find your life’s calling, as society often tells you you should, I would suggest a different approach. Instead of trying to figure out your purpose or your true career calling, I advocate a low-pressure alternative; something I call “following your thread.” More on that in a bit. In addition to focusing on your career, which is admittedly very important, I would recommend giving some attention to your finances at this point in your life. Even if your income is paltry, carving out just a small amount of time and energy in this area will pay off in spades.

As it turns out, identifying a single line of work that will lead to perfect career bliss is a tall order. As a young college student I didn’t have that hindsight. Had I known to pay attention to the classes that really interested me and followed that thread, I might have arrived at career contentment sooner. While I’m finally happy in my financial vocation, the point is that few of us discover our life’s passion in college. For the rest of us, learning to identify important career sign posts, setting ourselves up for financial success, and tuning into our intuition are much more useful.

My advice to those of you just starting off is to start tuning-in exactly where you are. If you’ve landed your first job, congrats! Now is time to dive into your work and also pay attention to what energizes you and what drags you down. I call this “following your thread”. Move towards tasks that interest and energize you and over time, reduce those duties that sap your energy. While any job will often have some unpleasant assignments, moving towards a better work mix will ultimately lead to greater career satisfaction.

Once you get the hang of following your thread – and it is a life-long process – making a commitment to excellence will take you to the next level. This may sound like a tall order, but I’ve found that it’s not my job that gives me meaning but it’s the meaning I bring to my job that matters. Granted, we’ll fail often (I do regularly), but a commitment to excellence imbues our work and everything we do with meaning and value. This flips the notion that career bliss comes from finding our passion or figuring out what we want to be when we grow up. It seems that working with what’s right in front of us at our current job, digging in, and brining our passion and commitment to our current task is actually what brings lasting career contentment, which overtime should pay off in financial rewards.

And last, but not least, I believe that setting yourself up for financial success is the bedrock of a bright future. Without stable financial footing, including saving regularly for retirement, money stress can hang over the happiest of careers and lives. A stable financial situation can free up your innate creativity, which then helps open you up to new opportunities. It’s a virtuous cycle that paves the way for a rewarding and meaningful life. Where to begin? Start small and simply. Track your expenses and set a reasonable budget that allows you to save a regular amount monthly, but with wiggle room to still have fun with friends and family. The power of compound returns will grow your money significantly over time and can better help you weather market and career downturns. Financial education is key and there are plenty of great financial planning books out there. If you’re not a do-it-yourself-er, consider contacting a fee-only independent financial planner who can help get your started.

Wishing you a bright and fruitful future!

Carrie A. Tallman, CFA
Director of Research

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Using Brief Everyday Moments to Teach Kids about Money

More than once my nine year old daughter has asked “Why don’t you quit your job so you can be home more?” After I remove the knife from my heart, I tell her that we would not be able to afford to live in our house if I didn’t have a job. “Daddy could get a job,” she says. After my stay-at-home husband removes the knife from his heart, he tells her that my job pays more than a job that he could get. These are the few and small lessons we teach our kids about money. I hope they’re enough.

As a working mother with three small kids, and a busy stay-at-home dad, there’s not a lot of time for my husband and I to have protracted discussions with our kids about money. We want to teach our children how to work hard, spend wisely, and value the things they have. But with so little time, I find myself having far fewer conversations about the money than I thought I would before I had kids. I also thought I would never let them eat in the car, but you know how that goes.

Because my time, focus, and patience are so limited, I try to model behavior in my daily actions and conversations. When the kids ask why we can’t have something or do something that is not in our budget, we explain that we have to make priorities about how we spend our money. If we buy that toy, then that would be one less pair of pants we could buy, and you need a certain amount pants for school. Recently, my daughter overheard the grocery store clerk tell my husband how much the groceries were. “One hundred and fifty-three dollars!?” She was shocked. He explained that yes, it was crazy expensive, we were lucky to be able to afford it, not everyone can, and that’s why it drives us nuts when she doesn’t eat the edges of her sandwich. It’s like leaving a dollar on your plate!

My daughter has asked us to pay her money for chores around the house. When it comes to allowance, each family must decide what works best for them. We have decided not to pay allowances or to pay for chores. I explain that it is her job to help out in the house. As a family, we all have a duty to make the household run better. She puts the dishes in the dishwasher every night because she is part of the family. I do, however, pay her to “babysit” my two year old sometimes when I have a household chore that I have to tend to, and I need someone to distract my toddler. I tell her that as the mom, it’s my job to watch the baby, but she can earn some money by helping me with my job. I distinguish between her household duty as a member of the family, and an extra job to help me out with my job. In doing this, I hope it helps her to grow up not feeling entitled, with a strong work ethic, and the knowledge that in life, you just have to work. That’s the deal.

We also try to scale down Christmas and birthdays. I believe that if I only ever gave the kids two gifts for Christmas they’d be just as excited as if I gave them ten. But once they expect ten, they are let down at two. I’ve tried very hard each year to keep it minimal. Unfortunately, that may be a battle I’m losing, because it becomes uncomfortable when grandparents lavish more gifts than Santa Claus. What’s a Santa Claus to do?

Parents, your time is limited and you are exhausted. But you don’t have to summon loads of energy to teach your kids about money, just show them with your everyday actions and conversations. As parents, we have to work hard, spend wisely and value what we have. We have to be vocal about it with our kids. Let’s hope they get the message, because I don’t have time for a bigger discussion on the matter – I have to leave right now to get to my six year-old’s soccer game.

Harli Palme, CFA, CFP®
Partner

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