Five Gas Saving Travel Tips for the Holidays

It’s that time of year again- entertaining, eating too much, and lots of travel.  Marshall Doney, AAA president and CEO, stated in a recent press release that over 46 million Americans will journey 50 miles or more from their home this Thanksgiving.  The chart below shows that gas prices are actually in our favor for traveling this Thanksgiving.

Here are five easy ways to save on fuel prices – not just for the holidays, but all the time!

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    1. Drive the more fuel efficient car.  Many people jump to taking the family car with the most leg room and luggage space.  Perhaps take this opportunity to assess your packing and squeeze into the smaller more fuel efficient car.
    2. Lighten the load.  Take an inventory of what’s in your car.  By having a heavier car you use more fuel.  Take off the roof rack that you don’t plan on using this winter and empty out the trunk, leaving only the necessities.
    3. Get a tune up.  Consider getting your car serviced before taking off this holiday season.  The better shape your car is in, the more fuel you will save.
    4. Go back to driver’s ed.  Take this time to remember the basics of driving.  Accelerate slowly, eliminate aggressive braking and speeding.  All of these things lead to increased fuel cost.
    5. Find cheaper gas prices.  GasBuddy is my favorite app for this purpose.  You can use this to find the cheapest prices on your route.

Every penny counts when trying to stick to a budget to meet your long-term goals!

Ashley Gragtmans, CFP®
Financial Advisor

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NPR Report on Excessive Fees

Investors have a strong desire to be good stewards of their retirement funds. This often includes seeking out professionals for financial advice.  For the retirement plan sponsor, the Department of Labor (DOL) is helping by creating fee disclosure rules and requirements.  A few years ago, the DOL mandated fee disclosure rule (404(a)5) in an effort to ensure plan sponsors are able to determine if the fees for services rendered are “reasonable.”

NPR ran a story this morning about excessive 401k fees.  See link here.  If I could add to this article, I would suggest plan sponsors review their plan fees and services at least every couple of years, if not more often through a fee benchmarking process.  The generated report should give plan sponsors a general idea of how their plan compares to others of similar size.  Benchmarking has other benefits as well.  Not only will this help to uncover fees and what services are being provided, but also some service providers are willing to re-price their services to lower fees.

While many thought the disclosure rules were a bright spot in a dark corner, we feel that further disclosure and transparency is warranted in this industry.  Since not all advisors are the same, we are thankful that the DOL has re-proposed a Fiduciary Rule which seeks to make anyone giving investment advice to 401k/retirement plans (and also IRAs) to act in the account holder’s best interest.  For RIAs like Parsec, it is business as usual.  However, broker-dealers may have a bit more difficulty with this rule, as they operate under something called a suitability standard.  While not to debate the virtues of the fiduciary standard versus the suitability standard, we do feel that greater disclosure is a good thing and will ultimately drive costs down even further.

Neal Nolan, CFP®
Director of ERISA, Financial Advisor

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What’s Up (or down) with Commodities?

While stocks have been front-and-center lately given sharp price swings, fewer media outlets are focusing on commodities despite the critical role they play in global markets. They too have experienced wild price swings, although mostly to the downside. Year-to-date, the widely held S&P GSCI (Goldman Sachs Commodity Index) has fallen 20% and declined 41% over the last twelve months. What’s driving these big declines and why do they matter to your portfolio?

Commodities are defined as a raw material or primary agricultural product that can be bought and sold. This includes everything from aluminum to zinc, but also oil, natural gas, coffee, beef, and corn, among others. A key differentiator between commodities and other assets are that commodities are valuable only as an input of the production process. They’re not a store of value or wealth, like a stock, bond, or work of art. Because of their utilitarian purpose (with a few exceptions like gold), commodity prices are closely linked to global supply and demand. Simply put, when demand is strong for a commodity and supply is tight, prices go up. Likewise, when demand is falling and/or supply is abundant, commodity prices tend to fall. This causes prices to be very cyclical and closely tied to the health of the overall economy. In an increasingly globalized world, that means all economies affect commodity prices to varying degrees.

While stocks have surged over the past six years, commodities have languished. The widely-held commodity index, the S&P GSCI, has fallen 35% from 2009 to 2014 while the S&P 500 Index rose 131%. As U.S. stocks benefited from improving economic growth at home, commodities never saw a similar bounce-back given their exposure to the broader global backdrop. Lackluster global demand and excess supply of many commodities weighed on commodity prices. The supply/demand imbalance has worsened recently as China, the world’s largest consumer of commodities, has seen economic conditions deteriorate and is curbing its appetite for input products. Likewise, it continues to produce too much supply and is dumping some commodities, like steel, onto global markets, further pressuring prices. It’s a vicious cycle, one that usually reverses when excess supply is finally worked-off and most investors have given up on the asset class.

As an investor, where does this leave you? Should you include commodities in your portfolio? Is now a good time to buy? According to Dr. Rouwenhorst, a leading expert on commodities, research suggests that commodities do outpace inflation over the long-term. And he’s looked at data going back to the 1800’s. At the same time, commodity prices tend to have low correlations with other asset classes like stocks and bonds; meaning that when stocks go down, commodities tend to go up. Thus, adding commodities to a portfolio can help improve your overall volatility and gives you a good chance of out-pacing inflation.   But…we’ve also learned that during massive global crises, like the one in 2008, commodities tend to move in lock-step with other asset classes. People panic and tend to sell everything. We’ve also seen substantial price declines in most commodities over the last six years, and if you’ve owned these assets you know your portfolio has suffered as a result. What to do?

During most periods, a small position in a diversified basket of commodities such as the S&P GSCI or the Dow Jones Commodity Index can help insulate investors from wild swings in traditional asset classes like stocks and bonds. And commodities can experience periods of strong price appreciation. However, it’s difficult to identify those periods and at the same time, avoid sharp declines like we’ve seen in recent years. If you have a long enough time horizon, of twenty years or more, a small allocation to commodities can make sense, but another option is to own high-quality stocks that derive their revenue from commodities. While these companies are also subject to the cyclical nature of commodities, they often have diversified revenue streams and strong balance sheets that can help provide some insulation during cyclical downturns.

Overall, commodities are important to understand in order to gauge the health of the global economy. Although they tend to be a volatile asset class, owning a small amount can provide diversification benefits in your portfolio. Another and perhaps less volatile option is to own high-quality blue chip companies that deal in commodities and have the resources to weather cyclical downturns. This approach also provides the diversification benefits associated with commodities but often with smaller price swings then owning a basket of commodities directly.

The “What” of Retirement Planning

Most working-age Americans focus on the “how” of retiring: how to maintain a decent standard of living today while saving enough money for retirement tomorrow, or how to play catch-up and cover their retirement savings shortfall. Sadly, another group of Americans wonder “if” they’ll be able to retire at all. The sobering statistics tell a bleak tale. According to U.S. Census Bureau data, the average 50-year old has just $42,797 in retirement savings while 38% of Americans have no savings at all. This is scary stuff considering that average medical costs alone for an individual over 65 years old are north of $100,000. Clearly we’re not as prepared for retirement as we could be. Despite lots of media doom-and-gloom about the pending retirement crisis, it hasn’t improved retirement savings trends. Thus, I’d like to propose a new approach, one that focuses on the “what” of retirement planning instead of the “how.”

The “what” of retirement planning involves an intentional mental shift, one that approaches the retirement conundrum from a new angle. Instead of focusing on how much more you need to save or how far behind you are versus your peers, try imaging what you want your years in retirement to look like. What new hobbies would you like to explore in retirement? Or what countries do you want to visit? Etc… This approach, coupled with an honest assessment of your current situation, is more likely to help you reach your goals than beating yourself over the head.

Focusing on the problem or what’s missing can increase stress levels and sap your energy – because you need more energy to help manage those higher stress levels. It can also lead to financial paralysis, which only exacerbates the problem and reinforces our old, unhelpful patterns – ensuring we get what we fear the most: not enough retirement savings. In contrast, anchoring your goal to the positive end result – your vision of a relaxing, meaningful retirement – can increase the odds of realizing that reality. Either way, you’ll feel a whole lot better on your journey there.

The point is to look carefully at the way in which you approach your retirement goals, because the methods you use will help determine your success rate. It all starts with taking an honest and sometimes difficult look at your current situation and determining what your goals are. Once you know where you are and where you’d like to be in the future, crafting a plan of action that will reinforce helpful, constructive habits is key. This brings me to one of my favorite quotes from St. Teresa of Avila, “The whole way to heaven is heaven itself.” A lifetime of berating ourselves is unlikely to lead to financial bliss in our twilight years. It will probably just lead to more stress and anxiety. Instead, it seems we’re better off focusing on “heaven” in the here and now. We can do that with a proactive, realistic plan that’s anchored on the positive feelings we’d like to experience in our retirement years. And who knows, we might even start to feel better today.

Carrie A. Tallman, CFA
Director of Research

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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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Shouldering the Burden of Financial Responsibility

“Atlas through hard constraint upholds the wide heaven with unwearying head and arms.” –Hesiod

My Wednesday morning started with five 400-meter runs, uphill, carrying a 35# sandbag. OK, maybe “run” is a bit of an exaggeration – it was more of a trudge, and there might have been some walking in there toward the top. I hated every second of it, but I kept going because, well, that’s just what you do. When I thought about it later, it struck me as an apt metaphor for the way life feels sometimes – an endless uphill struggle with the weight of responsibility resting heavily on your shoulders. This is particularly true for anyone who is the primary provider for their family. As my colleague Carrie pointed out in her recent blog post, more and more women (including me) are finding themselves in this position, whether by choice or necessity. Most of the time I am able to face each day as it comes and maintain an upbeat outlook on life, but sometimes the enormity of this responsibility is paralyzing and my mind races with worries – what if something happens to me? Have I prepared for the worst possible outcome? What more can I do to ensure that the people who depend on me to keep going will be OK if I can’t?

Since everyone loves a list, let’s break this down into 5 areas that you definitely want to address if you are the primary provider for your family:

  1. Life Insurance – This one is pretty obvious, and I hope most people have some amount of life insurance in order to provide for their dependents should the worst come to pass. But do you have enough? Many companies provide life insurance as an employee benefit, but the standard amount will probably not be enough to replace your salary for an extended time. As a starting point, consider your current salary and how old your children are, so you can estimate how much financial support they will need and for how long. Beyond that, you may want to provide your spouse with your lost income until retirement age. Take these factors into consideration when determining the length of the term and amount of coverage you need.
  2. Long Term Disability Insurance – This one is a little less common, but no less important than life insurance. Think of it this way – if you become disabled and cannot perform the job that supports your family, how will you replace your income? What if your disability adds to the household expenses in the form of ongoing medical care? Now you’ve not only lost your earning power, but you’ve also become a liability to the family you once supported. Don’t let that happen.
  3. Estate Planning/Will – Many times younger people who are still in the asset accumulation phase tend to put off drafting a will, despite its importance. It is especially imperative if you have young children, since it allows you to determine who will become their guardian if both you and your spouse are gone. Make sure your beneficiary designations are up-to-date for any IRAs, 401(k) plans, pension plans or life insurance policies. For more complex estate planning strategies you might want a trust – your financial advisor can help you figure out what you need to do to make sure your estate plan is sufficient.
  4. Retirement Savings – If the worst doesn’t happen and you live to a ripe, old age, you need to be sure that you are saving money to provide for your golden years. As the primary earner, the bulk of this responsibility falls to you to contribute to your company’s 401(k) or another retirement plan, but it is equally important to include your spouse in your retirement projections and contribute to a plan for him or her if you can. Again, your advisor can help you figure out how much you need to be putting aside and how to navigate the ever-complicated IRS rules and requirements for retirement savings.
  5. Education Savings – Though not as imperative as the first four points, saving for your children’s education expenses will relieve them of significant financial pressure when they are in school and will help them avoid taking on massive amounts of student loan debt. You can rest easier knowing that if you predecease your spouse and children, you won’t be leaving them with an insurmountable tuition bill. As with retirement plans, there are several investment vehicles available to you for education savings. Work with your advisor to determine the best plan for you and your family.

Shouldering the burden of financial responsibility can make you feel like Atlas, but it needn’t crush you. With a little planning and preparation, you can weather the uphills, savor the downhills, put down the sandbag every once in a while and live fully in the present.

Sarah DerGarabedian, CFA Financial Advisor

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Living Healthier – Better for your Wallet, Not Just your Waistline.

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A couple of years ago I made a significant lifestyle change. After gaining post-college weight, I realized that the carefree metabolism of a 20-year old went out the window at 21. I made the decision to stop eating unhealthy food and develop a workout regimen that I could stick to. At first I worried that I couldn’t afford to live “healthy.” I believe that this is a normal and reasonable reaction. $120 for a gym membership? WHAT! $10 for organic breakfast? HUH? Thankfully, what I realized was that I was incorrect to think that “healthy lifestyles” and “expensive lifestyles” were synonymous. I actually saved money! Here are just a few ways that you can get healthy, save a dollar or two, slim down and be happier.

  1. Get rid of your expensive bad habits:
  • Do you pay $10 a day for a double pump, venti, skinny, salted caramel mocha frappuccino? Stop it! First, whoever told you that this was “skinny” was lying to you. Second, these things add up. What bad habits do you have? Is it the lunch time soda? The mid-afternoon candy bar from the vending machine? The two packs of cigarettes a day? Once you write down your vices, tabulate them to see how much those bad habits cost over a week, a month, a year, a lifetime.
  • Example: A pack of cigarettes in North Carolina costs $4.45. You could spend more than $49,662 on smoking a pack a day for 30 years. According to the American Cancer Society, each pack of cigarettes on average will cost you $35.00 in health care costs. That’s $383,250 in health care costs due to smoking for 30 years. Is it worth it?
Vice Per day Per 30 Years 30 Yr Health Cost Total 30 Yr Cost
Cigarettes $4.45 $49,662 $383,250 $432,912

 

  1. Reduce your medical bill:
  • It’s impossible to ignore the fact that eating healthy and exercising can reduce visits to the doctor. There are a plethora of studies out there that prove a healthier diet can reduce your risk of heart disease, lower your cholesterol, reduce stress on joints from excess weight, etc. To give you a personal example, I have always had trouble with stress management. I’m a worrier (#shegetsitfromhermama). Since I was a child I have racked up numerous medical bills related to anxiety, including medications, sleep studies and doctor visits. Had I known much earlier that by slapping on a pair of running shoes and going for a jog, I could eliminate a lot of my stress, I would have saved myself and my parents a lot of money. Running is a much more affordable way to blow off steam than medication. With my routine, I was able to ditch the expensive medications and doctors’ visits.
  1. Waste not:
  • I’m marrying a Dutchman soon… literally. One thing I learned from him and his Dutch family is to waste nothing and use everything. When I first started dating Chris I couldn’t understand how he would eat 2-3 times more food than I did and spend 2-3 times less money than I did. The answer simply was he didn’t waste anything. Now, this was a bit harder for me to do. Chris could sit down and eat hummus with a spoon, but if I didn’t have crackers to eat the hummus I’d let it sit there, go bad, and then I’d throw it out. So how did I fix this little problem and save hundreds of dollars doing it? Planning! How did I shed some pounds? Planning! Sit down at the beginning of the week and plan out all your meals. When you plan ahead of time you’re more likely to make healthier choices. You also are less likely to go out and eat when you have already planned, purchased and prepped your healthy food choices. Once you realize the savings potential you start using the “waste not” mentality in other facets of your life.
  • Tip: when planning your meals ahead of time, leave yourself a day to go out and splurge. Without the occasional “cheat” you may go crazy and give up.
  1. Cut on transportation cost:
  • Now this isn’t possible for everyone, but for a lot of people you can quickly save some money, cut cost and your waistline by switching up your transportation methods. Bike and walk to work. Is there a train nearby? Then walk to the train rather than driving to your office. If you are eating out for lunch, pick a restaurant that you don’t have to drive to. A lot of people say that the time spent walking is a great way to meditate, and reflect on their day. This can offer a peace of mind that can’t be achieved with the stresses of the road.
  1. Create healthy family outings:
  • Skip the $30 movie, popcorn, and 2 hours of inactivity and do something active with your family. Spend $15 on a soccer ball and go to the park on Sunday afternoon. Take the dog on a hike or a walk. This brings up another point… working out and being active is always more rewarding and sustainable when you have a support group or community of people that you workout with. If healthy outings cannot be accomplished with busy family members, then join a running club, a biking group or a community gym.

I could write an entire blog series on ways to be healthier and save money… but the key is to start small! Pick an area that needs improvement in your life and manage it. Use the momentum of a small change to snowball into an entire lifestyle change. Fatten up that wallet by trimming up the love handles!

Ashley Woodring, CFP®

Financial Advisor

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