Author Archives: Maureen Demers

Tax Loss Harvesting: A Good Idea That is Overrated?

Turning lemons into lemonade should be considered during the market volatility that we find ourselves in today. In periods of market downturns or even market upturns, one strategy that is often suggested is tax loss harvesting. It can be a beneficial strategy, but its application is often misunderstood or wrongly implemented.

Knowing when to utilize capital loss harvesting is beneficial. First, we must start with understanding how capital gains and capital losses are treated under the tax laws. You likely understand that long-term capital gains are taxed at different tax rates than ordinary income (such as wages and interest income). Like ordinary income, capital gains are taxed based on tiers. If one’s income falls under a certain threshold, capital gains are taxed at 0%! That’s huge, and there are planning opportunities here that we can hold for another day. The next two tiers are taxed at 15% and 20%. (Also note that net investment income tax can also be applied at a 3.8% rate for those exceeding certain income levels and state income taxes may apply.)

If you have a capital loss, there is an ordering rule for applying those capital losses. In simple terms (and without getting into short-term versus long-term capital gains and losses), capital losses are first applied against capital gains. Thus, if you realize a $40,000 gain on the sale of some stock and a $10,000 capital loss from the sale of another stock in one year, then your net capital gain is $30,000. If it is indeed a net long-term capital gain, then it is generally taxed at the capital gains rates. Effectively, your “deduction” for this capital loss was applied at the lower capital gains rates. If realized capital losses exceed capital gains in one year, then you can offset a portion of such losses against your ordinary income. Unfortunately, this offset against ordinary income is limited to $3,000 per year. Any unused losses (i.e., those that exceed the $3,000 limit) can be carried forward until such losses are used up. The same ordering rules apply to these carried forward amounts. Unlike many tax thresholds, the $3,000 capital loss limit is not inflation-adjusted.

Taking losses against capital gains can be advantageous in a few respects:

  1. The losses may allow you to avoid recognizing the gain at a higher tax rate.
  2. Taking losses may allow you to take advantage of other tax breaks (deductions or credits) or minimize financially-related penalties by reducing certain key thresholds.
  3. Minimizing income taxes earlier may have a time value of money benefit.

Offsetting losses against ordinary income can be even more beneficial considering the generally higher ordinary income tax rates compared to capital gains rates. Of course, one key is understanding your relative capital gains rates and ordinary income rates over the relevant period.

There are a few caveats before implementing this strategy:

  1. Understand that taking losses also reduces your tax basis in the portfolio, and this can result in larger capital gains down the road. This can, in turn, lead to higher taxes in the future.
  2. When deciding whether to buy and sell assets, the investment characteristics should be the primary factor.
  3. Consider the transactional costs and the time required to implement this strategy.
  4. Be aware of the wash sale rule.

Thus, capital loss harvesting should be considered, especially during market downturns. It can produce economic benefits in the right situation, but there are certainly other tax strategies that are often more beneficial. If done incorrectly, implementing this strategy can backfire on you. In addition to capital loss harvesting, there are a host of other strategies to consider when trying to minimize capital gains taxes, and these strategies should be coordinated with your overall cash flow and financial plan. If you would like help with this or other tax strategies, you should search for a financial planner that has expertise in the tax arena as that has the potential to enhance your overall situation.

By Steve Martin, CFP®, CPA, JD, LLM
Nashville, TN

Does Crypto Belong in Your Portfolio?

Don’t be fooled by the constant stream of articles about cryptocurrency. It’s true that cryptocurrencies have become more popular, and more numerous, including Bitcoin, Dogecoin, Ethereum, and more than 9,000 others.

They’re still not mainstream— “everyone” isn’t investing in cryptocurrencies. But are they a new asset class? Should you include cryptocurrencies in your portfolio?

No. And no.

OK, that answer sounds pretty categorical. Let’s be more precise: the enormous majority of individuals and households should not hold cryptocurrency as an investment. It’s every bit as suitable as currency speculation with all the intrinsic value of a non-fungible token (that is, not suitable at all with zero intrinsic value).

Are cryptocurrencies the newest asset class, another tool for greater diversification?

No. They’re a new kind of cash—much less stable than the US dollar—but not a new asset class. It’s very like having currency from a country you’ve never heard of. Or perhaps something like when exchange-traded funds entered the world of investments (but, unlike ETFs, just a lot less useful [well, pointless] for the enormous majority of us).

In the type of large portfolio (not yours) where it makes sense to stockpile some euros, pounds, rupees, or yuan, it might make sense to have some cryptocurrency. The rest of us should stick to investments in the kind of assets that have been around for centuries, like stocks, bonds, real estate, and cash—legal tender issued by the authority of a sovereign government. Here’s why.

What cryptocurrency really is

Money of any kind only works because groups of people agree to believe in it. (See Jacob Goldstein’s book Money: The True Story of a Made-Up Thing.) All money, including the kind issued by governments, isn’t valuable in itself. It’s an agreed-upon or accepted representation of value.

In this respect, cryptocurrency is similar to government-issued currency—it has value because numerous people agree it has value. What is different is that everyone who owns cryptocurrency receives a distributed ledger containing all the data tracking every transaction ever made by anyone in that specific cryptocurrency, and how much they have (or had) at any time. You just can’t identify who each individual is in the real world because everyone’s identity is hidden behind a unique string of characters, kind of like an account number.

Where does cryptocurrency get its value?

Cryptocurrency, like legal tender, derives its value from how much you can exchange it for in goods or services. When we talk about how many dollars you can get for a bitcoin, it eventually boils down to how much bitcoin you’d need (compared with how many dollars) for a loaf of bread, a car, or a vacation.

The enormous swings in the value of cryptocurrencies stem from the fact that it’s less certain how much cryptocurrencies can buy. Like the value of Beanie Babies rocketing upward and then crashing, the value changes based on what the community as a whole thinks it can get if it tries to sell (for example) one Bitcoin or Dogecoin.

There’s an important similarity to another recent development, the emergence of non-fungible tokens (NFTs). An NFT is a computer file that’s identified as being unique, even though it can be copied identically many times. It gets its value, if any, from the tag that identifies it as unique. How much value? As much as the next buyer is willing to pay for it (the same influence that has caused used car prices to skyrocket during the pandemic). If no one else believes it’s worth paying for, its value is zero.

Why isn’t cryptocurrency as good as a stack of dollar bills? Because many fewer people believe in its value. So, if you wouldn’t speculate on the value of yen or euros, you certainly shouldn’t speculate on the value of cryptocurrency.

Is cryptocurrency a fad?

We don’t believe cryptocurrency is going away any time soon. In fact, it’s likely to continue to be accepted by more and more people. And the technology that makes cryptocurrencies work—a distributed ledger of all transactions that can only be added to, and not otherwise edited, using blockchain technology—is already being used by businesses in ways that have nothing to do with cryptocurrency.

One of the major selling points of cryptocurrency is that it allows users to keep transactions private. (“Crypto” derives from Latin and Greek roots for hiding and concealment.) While there are obvious unlawful applications—ransomware criminals, for example, may only release computer files back to you if you pay in cryptocurrency—it’s harder to see any essential application for people who (per our consistent recommendations) avoid committing felonies.

Cryptocurrencies and the technologies behind them aren’t worthless. But cryptocurrencies are inherently speculative—they’re not suitable for investing. “Investing” in cryptocurrency is applying the wrong tool for the job for almost all of us. I wouldn’t use your doorstop as an investment any more than I’d use a mutual fund to keep your door open.

Investing without cryptocurrency

Anything with the promise of making a lot of money in the short run has at least commensurate risk. To make money with cryptocurrency, you’d need to be very good at timing the market (people are notoriously bad at that) or very lucky. Will a small number of people make enormous fortunes in cryptocurrency? Of course. Many, many others will lose substantial sums of money.

Investments should be boring. They’re not about getting rich quickly, but building wealth slowly—very tortoise-like. And of course, most of us don’t need to beat the market to succeed at investing.

Don’t be seduced by articles claiming that cryptocurrency is a new asset class—it’s not. It’s a relatively new asset and, very much like speculating in sovereign currencies, it’s marked by risks that outweigh the benefits. Like many other assets, cryptocurrency has no role in strengthening the financial security of individuals and households. Anything cryptocurrency can be relied upon to do in an investment portfolio, there’s an alternative that’s far less speculative that can do the job better.

If you’re curious or you want to be a part of the trend, take the money from your entertainment budget, and consider it already spent at the time you buy cryptocurrency. And just like a bet at a casino, don’t consider it part of your portfolio.

By Ken Robinson, JD, CFP®
Rocky River, OH

Can You Take a Punch?

Mike Tyson, the former world heavyweight boxing champion, is not well known for making profound observations, but I believe he made at least one. Once, prior to a fight, a sports reporter asked him how he planned to handle his opponent who had said that he had a special plan to defeat “Iron Mike.” His response was that, “Everyone has a plan until he is hit in the mouth!” Mike may not have realized it at the time, but his observation has meaning far beyond the boxing ring.

There is more than one way to be a successful investor in the equity markets, but the one thing that most successful investors have in common is that they have a plan. Warren Buffett, who has enjoyed a modicum of success, buys businesses that he believes are undervalued and then holds them for the long term. I am told that there are successful day traders (though I do not know any) and I suspect that they have plans that they follow to time their trades. Others who invest in individual stocks have buy and sell rules based on price earnings ratios, dividend growth rate, the markets 200 day moving average, or other criteria that they follow. Still others have realized success using stock and/or bond mutual funds.

The investment policy that I suggest for my clients is to allocate one’s investment money between equities (stocks or stock funds) and bonds and cash in a fashion that meets their individual needs. They should think of their equity portion as their growth engine; money they will not need for three to five years. The bonds and cash portion of the portfolio serves to smooth out the inevitable swings in the equity markets, hopefully provide a bit of growth, and be a source of ready cash. As the various asset classes move up or down in value, these positions would be periodically rebalanced by moving money from one position to the other to keep the initial allocation plan in place.

Of course how much you may allocate to each portion depends on your particular circumstances. You should consider your age, your future goals and financial needs, and your tolerance for risk. But once your allocation decision is made, I suggest you stick with it through the market’s ups and downs.

Following such a plan accomplishes at least three important things: 1) It forces one to buy low and sell high as the rebalancing process will dictate that gains are taken from positions that have grown to be too large and invested in the positions that are smaller than the original allocation called for; 2) It takes emotion out of the decision; and 3) It keeps us from trying to “time” the market by jumping in and out, which no one has been reliably able to do over the long term.

Perhaps the most important thing an investment policy can do for us is to help control our emotions. Many studies (Google it) have shown that emotions often lead us to make exactly the wrong investing decision. Rational investing decisions are best made with CNBC turned off, all of the “talking heads” tuned out, and our long-range plans in mind. This is easy to say but hard to do. It is difficult to avoid the herd mentality as everyone is rushing for the doors screaming about the sky falling and the end being near! It seems no one likes equities when they are discounted and put “on sale,” but that is when they will be purchased by those who are rationally rebalancing their portfolios and following their plan.

One of the roles I try to fill for my clients is that of an emotional anchor; I try to keep them from getting too high when the markets are going up, or too low when markets turn down. Every asset class has its day, and all of them will eventually go both up, and down, in value. That is why I suggest a balanced portfolio where our money is spread over a variety of asset classes. That is also why I suggest we establish a plan, or a policy, that helps us decide when it is time to make changes to that portfolio.

So this is where Mike Tyson’s observation may apply to us. We need to ask ourselves if our plan is good enough to withstand a stiff punch to the mouth by the stock market; or put another way, are we committed to stick with our plan after such a lick? A well-conceived plan, or investment policy statement, will help you do just that. You will very likely be rewarded if you do as history has shown that the disciplined investor is more likely to succeed over the long term. But through it all remember: money is not the most important thing, perhaps not even in the top ten; but still, money matters.

By Michael Ryan, CFP
Hendersonville, TN

The Pros and Cons of Target Date Funds

Most 401k plans offer target date funds as an easy way for participants to start investing. A target date fund is a mutual fund that is composed of several other mutual funds and ETFs. These funds include domestic and international stock funds and fixed income funds. The target date represents the date when the investor plans to retire. The allocation changes over time as you get older. The allocation is more aggressive when you are younger and becomes more conservative as you age.

Target date funds are good for novice investors or individuals who do not want to spend a lot of time researching and selecting investment options. Simplicity is one of the biggest advantages of target date funds. You can select a fund based on when you plan to retire, and your money will be allocated in a manner deemed appropriate for your retirement plans. You don’t need to analyze, select, and monitor individual funds. It will automatically rebalance your portfolio as the market fluctuates and it will adjust your allocation to become more conservative as you get older.

This type of fund keeps you diversified across different investment categories and encourages participation from those who are reluctant to contribute to their retirement plan. It also helps investors avoid market timing and extreme investment behavior.

Conceptually, target date funds work well for many investors. Participants like the hands-off approach where you can set it up and forget about it. However, this also presents one of the biggest downfalls. People select a fund and forget about it without understanding the asset allocation and how it will change over time. When you begin investing, the allocation may be appropriate but as you approach retirement, target date funds can become too conservative.

It is common for target date funds to use an allocation of 50% in stock and 50% in fixed income upon retirement and gradually transition to over 75% in fixed income. This is a very conservative allocation for many retirees who anticipate spending 20 to 30 years in retirement. Monitor and under-stand the asset allocation of your fund to be sure it meets your investment goals.

Target date funds are not customized to your situation, everyone is treated the same based on age. The allocation of the fund does not take into consideration other financial considerations in your life and your tolerance for risk. 

Some additional disadvantages to target date funds include potentially higher investment expenses. With a target fund you pay the investment fee for the fund itself as well as fees for the underlying mutual funds held within the fund. Target date funds are generally concentrated in one fund family, providing less diversification and there may be tax inefficiencies if used in a non-retirement account. Do not use target date funds for Roth accounts which should generally be invested more heavily in equities

By Jane Young, CFP, EA
Colorado Springs, CO

Where There’s a Will, There’s a Way – to Control what Happens!

You worked hard for many years, saved well, and find yourself in a position to provide a legacy to loved ones after your death. The starting point for me is always the reminder that you have no obligation to provide an inheritance to anyone, even family (with a possible spousal exception), and therefore you can decide on an individual basis who gets what and whether there are any strings attached.

The simplest approach to leave a legacy to loved ones is to use your Will or Revocable Living Trust to name the individuals to whom you are providing an inheritance amount, either a percentage or specific dollar amount, with outright distribution to the beneficiary at your death and “no strings attached.” But simple is not always the best approach in more complex situations.

Sadly, it is not an uncommon situation to have concerns about providing an inheritance to family members who may have a poor track record of handling money, are in a troubled marriage, or have substance abuse or gambling issues. As planners we are often asked by our clients what they should do in these cases.

Let’s look at the case of Marge, a widow with no children of her own who wants to provide for her five nieces and nephews as well as some charities when she dies. Marge has a total estate of $1 million. Marge is thinking about a bequest of $100,000 each to her five nieces and nephews from the sale of her $500,000 home, with the remaining assets going to several charities. Marge is comfortable with three of her nieces and nephews getting their funds outright, but one niece is in a troubled marriage and one nephew has a history of substance abuse. Marge asks your advice on what she should do.

In coordination with Marge’s estate planning attorney, we looked at her options. The simplest option of outright distributions is not feasible for the one niece and nephew with issues. Marge could consider creating a trust in her Will or a Revocable Living Trust. Either trust can appoint a trustee to manage the inherited funds for the niece and nephew with whatever terms and conditions Marge would like. The trust option does satisfy Marge’s goal to provide for her family but not permit them to squander their inheritance. However, due to the cost of administering each trust, a trust may not be economically feasible for the $100,000 amount that Marge is considering for this legacy goal. Assuming it is feasible, who should she choose as her trustee? Marge is thinking that one of her nephews, a CPA, would be a good choice for that role, but a relative is not always the best idea. The trustee is put in a difficult position of being seen as standing between the beneficiary and his or her money. A professional trustee such as a bank, trust company, or financial/legal professional would be a good choice but may not be cost effective for this size legacy.

Another option for legacies too small to create a cost-effective trust is to include a provision in her Will or Trust to have her Executor/Personal Representative (likely her CPA nephew) use $200,000 from the proceeds of her home sale to purchase two $100,000 restricted single premium immediate annuities (SPIAs) for the benefit of her niece and nephew with issues. The restricted SPIA differs from other annuities in that the beneficiary has no ability to sell the annuity for cash or demand any payments beyond what the annuity provides. And, unlike a trust, there is no family member or other professional in charge of the funds in trust – just the annuity company making monthly, quarterly, or annual payments to the beneficiary. For the $100,000 legacy, it may not be feasible to have an annuity go on for longer than 10 years, but Marge is okay with that since neither her niece nor nephew can change anything, and they get the guaranteed payments under the terms of the annuity contract. What they do with the money once they get it is something Marge can’t control! But that is the same for trust distributions as well. Control can only go so far.

Your situation may not be similar to Marge’s, but it is important to understand that you have multiple options with providing a legacy – or not – and that your planning team can help you achieve your goals in often creative ways. The only plan that won’t work is the plan that is never put in place!

George F. Reilly, J.D., CFP®
Occoquan, VA

Align Your Financial Life with the Dreams You Want to Protect

“Let your dream devour your life, not your life devour your dream.”
~ Antoine de Saint-Exupéry

Now that many people have the gift of flexibility and can work from anywhere, what they find this has turned into is they work from everywhere. “I’d like to go on a vacation that isn’t consumed by my work.” Sound familiar? If so, you are in good company.

This “flip side of the coin” phenomenon, where getting what we thought we wanted brings us something we don’t like at all, is one of the challenging parts of planning for an ideal life. How do we anticipate the unintended consequences and how do we stay awake to the dreams when it is so much easier to take an alternate route, to go to sleep on them instead?

Sometimes the reason this is easier can be blamed on what Jerry Seinfeld calls “Tomorrow Guy.” We stay up late because Today Guy wants to watch the TV show or finish the book and figures it’s Tomorrow Guy’s problem when we have to wake up and go to work.

This plays out in everyday decisions that affect our long-term health and wealth like increasing the cost of our entertainment subscription instead of the amount we defer to our 401k, or eating the bowl of ice cream instead of taking a walk after dinner.

When we experience thoughts and feelings that tell us something isn’t right we are in an uncomfortable place. It’s the chasm between where we are and where we want to be. When it comes to money choices, the bridge across it is recognizing that there are two sides to money, and they don’t work the way we think they do.

We think the remedy out of our uncertainty and discomfort will be found in rational solutions and we ask ourselves technical questions. How can I pay less in taxes, what are the best investments to maximize return, how much and where should I save?

What most people don’t do is look at the personal side of mon-ey. And what’s unfortunate about that is that while both sides of money are equally important and complex, it’s the personal side that drives decision-making.

It’s the side that needs to have the conversation with Today Guy.

As a fiduciary, what I love most about the work I do, what I call Financial Life Planning, is helping people clarify what financial problems they want to solve and building solutions on the foundation we create first, which is to make vivid what is essential to have in a fulfilled life.

Fee-only financial planners offer a structured dialogue to organize their clients’ thinking about living well and connecting their ideas to their money. This is one of the things that makes the experience of working with a fee-only planner feel unique.

Many of my fee-only colleagues hear things like, “I had no idea someone like you existed,” or “You do things really differently,” when they start working with new clients. That’s because traditional financial advice often feels like the advisor doles out advice about the money, rather than putting the client’s life at the center of the planning. 

The advisor often takes over responsibility, instead of empowering the person. You. This is the essence of the difference be-tween the traditional approach and what financial life planners do. 

George Kinder, founder of the Kinder Institute which grants the RLP® designation, recalls his work as an accountant and financial planner in The Seven Stages of Money Maturity. He writes: “To become who we most truly are, we must be free first to dream, then to translate that dream into the practicalities that might allow it to be accomplished. Only then . . . should we consider compromises as we attach dollar signs—reality’s most potently sobering symbol—to the dream. Right there, where dream and dollar cross, the surface and the soul connect.”

And that’s very different.

Source: Miriam Whiteley, CFP®, RLP®, CeFT®
Eugene, OR

More Than Your Fair Share

“Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”

Gregory v. Helvering, 293 U.S, 465 (1935), a landmark decision by the United States Supreme Court, set rigid standards and also acknowledged that the tax law allows various deductions, credits, and allowances for use by a taxpayer. This form of “tax avoidance” is legal and supportive of the Congressional intent to encourage particular economic behaviors by the taxpayer, for example, owning a home. However, these “incentives” are difficult to find within the U.S. Tax Code, which is not your cozy, fireside reading material.  

The difficulty of interpreting and applying the U.S. Tax Code drives many taxpayers to seek assistance preparing and filing their tax returns. The best tax preparers will ask you to complete a questionnaire and then utilize tax forms, statements, receipts, and miscellaneous documents to enter data into their tax software. After a rigorous review process, the final tax return is ready for signature and filing. Mission accomplished, and although you are one of the 99.9% of U.S. taxpayers who believe they pay too much in tax, you are ready to move on.

1. Understanding the U.S. Tax Code – Duh! This goes without saying. It is critical to know what is allowed, what is not allowed, and what is subject to interpretation – the famous “grey area.” Tax preparers often steer clients away from a tax-saving strategy because of a potential “Red Flag,” supposedly drawing IRS attention. Tax planning eliminates “Red Flags” by establishing a position allowed by the tax code or advising the client to take specific actions that allow the strategy.

2. Continuing Tax Education – Unfortunately, the tax code is subject to change. And change it does, often dramatically. It is crucial to be aware of proposed tax changes, their effects, and steps to take advantage of the change.

3. Avoiding Expensive Mistakes – There are two types of errors that proper tax planning can help avoid. The first mistake most people think about is “doing something wrong.” If the first mistake is “doing something wrong,” the second and more impactful mistake is “not doing something right.” An adage says, “There is nothing more expensive in life than a missed opportunity.” The primary purpose of tax planning is to be thoughtful in seizing all legitimate tax avoidance opportunities.

4. Tailoring Individual Strategy – Tax planning is most effective when done in conjunction with achieving your goals. Rather than first thinking of a tax angle, think of a life angle and then find the tax strategy to make it work. In our line of work, we advise clients, “Do not let the tax tail wag the dog!”

5. Helping Others – There are powerful tax incentives for those of us who attain great joy in helping others. Tax law is very favorable to those willing to donate to charitable causes. Likewise, less publicized techniques can help family members in a tax-advantaged way, such as providing low-interest rate loans, hiring family members, tax-free gifting, and caregiver stipends.

6. Eliminating Surprises – When appropriately done, tax planning provides the roadmap for actions needed to avoid taxes. Remember, it’s legal to do so! The steps need to be executed in the current tax year to impact the return you file next April 15th. Alliance of Comprehensive Planners members all integrate tax-focused planning with comprehensive financial planning and investment management. Being able to see the whole picture, solve for competing priorities, make informed short-term and long-term decisions, and have clients engaged in the process is a game-changer. Proper tax planning avoids the anxiety of not knowing how much tax you might owe come next April and the possibility of having a tax due without the funds to pay.

Source: Frank Corrado, CFP®, CPA, RLP, Holmdel, NJ

Give back, get back: Being a mentor in retirement

Retirement can be a difficult transition.  We go from work where we used years of experience, wisdom, and our creativity in solving problems and making a difference to suddenly not always feeling that we are actively using our experience and skills.

There are a variety of ways to stay engaged in retirement, and mentoring is one of my favorites. 

Mentoring can be a fulfilling way for retirees to make the most of their professional or non-professional skills, give back, and stay active. Mentoring activities can range from helping youth do homework to helping junior executives run their businesses to many other possibilities.   

Tips for Being a Mentor in Retirement

Here are four tips that can help both mentor and mentee get the most out of the relationship (as a mentor, you may also receive specific guidelines from the mentoring organization).

1. Tie to Your Values and Skills
One of the wonderful things about retirement is that you have the opportunity to participate in activities that tie to your values and passions. Choosing your volunteer activities—including being a mentor—should not be any different. What are the causes that are important to you?  What kind of people do you want to engage with and help?  Bringing passion to a mentoring relationship will undoubtedly allow you to make an even bigger impact on the mentee.

Similarly, you should ask yourself what special skills or knowledge you may be able to pass down to others. Successful communities find ways to pass knowledge from one generation to the next, and your insight and wisdom can be invaluable. However, don’t make the mistake of thinking you need to know everything or that you cannot learn new skills or knowledge to use in such a relationship. Sometimes, being a successful mentor can consist of just being there with words of encouragement. 

2. Set Expectations
If your mentoring organization has rules and expectations, you will obviously want to make sure you can meet those expectations. Share those expectations with the mentee, when appropriate. If you are not in a formal organization, setting expectations with the mentee is critical for both of you to get the most out of the experience.

Setting the schedule is important and may include stating when and where will you meet. Who will be responsible for scheduling?  How long do both of you expect the relationship to last?  Setting a timeframe will allow both of you to be more focused while providing a clear end date (if needed).

Of course, you will want to establish the purpose of the mentorship. What are the goals at the end of the day? What is the mentee looking to learn or accomplish?

You will also want to understand the boundaries of communication and whether any work will be put in between the meetings.  Is the mentee going to have benchmarks to meet, and how will those be tracked? Without such expectations, either or both of the parties may get frustrated, and the potential benefits of the mentor relationship may not be fully realized.

3. Develop a Personal Relationship
Whether you are mentoring a youth or someone in mid-career, trust is important.  As a mentor, you should be willing to break the ice and open up about your family, career, and hobbies. Try to find a connection while also celebrating differences.

You will want take notes (mentally, if not written) so that you can recall some of these personal items later. The more mentees believe that you are personally concerned about them, the more they will put into the mentee relationship and be attentive to your feedback.

4. Be Honest, Encouraging, and Thought-provoking
You will want to find the delicate balance between providing constructive feedback and providing encouragement. In many mentor relationships, you may not necessarily want to provide conclusive statements or answers to all the questions. A large part of learning in any environment is learning how to think. Having a dialogue with mentees as they find the solution will not only help them improve their critical thinking skills, but it will also elevate their confidence for problem solving.

Where to Find Opportunities to Become a Mentor

  • Your existing community, formal and informal:  church, school (elementary to high school), neighbors, family
  • Previous workplaces (whether through that employer or former co-workers)
  • Industry associations
  • Formal youth organizations such as Big Brothers Big Sisters, YMCA, Boys & Girls Clubs, etc
  • Your alma mater

The possibilities are endless.  What is available in your area? Where do you most want to make an impact? 

Source: Steve Martin, CFP®, CPA, JD
Nashville, TN

Cultivating Simplicity

Because we are often consumed with the busyness of daily life, most of us give little thought to the bigger questions of where we are going in life and how we will get there. We let others around us set our goals for us because that is how life starts out in childhood. With the coming of adulthood, we are supposedly prepared to know what we want and to think for ourselves about how we will obtain it. However, human nature complicates this in various ways.

For most of us, our lives go through predictable stages.

We all need food, shelter, and clothing. Living in a developed society, it is necessary to become educated in a specialized skill while we learn about the broader world and its context. We do what are supposed to do. There is also the element of risk. Bad things happen, so there is the tension of living for today vs. living for some unknown future. Our time is limited. Despite it all, we yearn to make something more of life. We are caught up in the business of life, with the idea of earning, having, and achieving, and we begin to look for shortcuts to success.

It is this impulse that can make a person look for clever solutions to things like weight loss or investment returns, fad diets, and complex multi-factor theoretical models. It can ultimately lead to fraud and disaster. Thankfully, most of us can resist those wrong turns, though we might still search for shortcuts. We listen attentively to those who tell us there is a better, easier way. Sometimes, there are better ways. More often, the right path is often simplest, yet not the easiest. Diet, exercise, and saving are never popular, but they always work.

We can become confused about what we want or need because we listen too much to those around us. How do we cut through the clutter of life to focus on what we really want, what is most important, and the best way to get it?


Simplicity may not be the easy way to live, but you can be more happy, more focused, and waste less energy.

Here are some ways to simplify life:

  • Set goals for a shorter time period (e.g., a week instead of a year). Keep the long term goals but simplify them by paying the most attention to the next step. Break big goals into smaller, more manageable goals.
  • Set fewer goals. Limit yourself to work on a few at a time, no more than six.
  • When you are working, work on one thing at a time.
  • Have a written plan. Write things down, whether it is on paper or your phone. This is equally true of a grocery list as well as your life plans. If your plan is written, you can check it and change it. If it is only in your mind, you can avoid thinking about it, or doing anything about it. Plans change, and when they do, next steps change.
  • Cut down on screen time. This may seem impossible. If so, consider taking a block of time off each week. Call it a “digital fast.” That includes social media and old-fashioned TV.
  • Pay bills and make savings deposits automatically wherever possible. Limit the number of accounts you use to pay bills. Make a single annual payment instead of monthly payments.
  • Own fewer investments and have fewer accounts. Just make sure they are the right ones for you.
  • Say “no” whenever possible. Make choices to slow down. It is not always possible, but it will never happen unless we ask the question, “do I really need to do this? What is it leading me to?”
  • Consider your circle of influence—the things you can actually control—vs. your circle of concern. Everyone is concerned about big events outside our control (think COVID-19). While there are some things we can do (wash hands, wear masks, social distance) whether any one of us ultimately gets sick is largely beyond our complete control.
  • Declutter or downsize. Ask yourself: would I buy this again? Would I keep it if I were moving to a new place?

At first, knowing what goals to choose will be hard for most people. It is an iterative process. We must begin with teaching ourselves to listen to the world around us. Only then can we start thinking accurately about what we want for ourselves.

Source: Michael Garber, CFP®, San Jose, CA

3 Quarter Market Review

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.