We don’t want to get too heavy and pound you with market thoughts, we know you’re getting enough of that from the “Market in Turmoil” like headlines, but we did want to give some explanations and let you know we are watching carefully as we have been on notice since December for a possible slowdown.
Look forward, not back
Economic reports such as today’s CPI (consumer price index) report is very much rearview looking, as such it’s sometime easy to forget that what’s most important is looking forward to what is going to happen next rather than backwards to what has happened. Yes it is much harder, and you do not know exactly what is going to happen … but you sure do not drive a vehicle looking continually in the rear view mirror – some humor on a dry subject… stay with me!
This is even more evident at the recent quick rise in interest rates, creating the headwinds to bonds. As noted here and again here in our posts (the second with even a special video) it’s highly likely and the probability is most that the headwinds for our fixed income investments are behind us. Once again looking forward, a slow down usually garners lower interest rates, exactly opposite to our slightly current and mostly rearview looking higher rates.
FOMC chaired by Powell gave and now takes
Over the past 18 months to two years the FOMC (Federal Open Market Committee) headed by Jerome Powell have taken very aggressive measures to stimulate the economy. Much of a stimulation, once the book is written may have over stimulated not only the economy but various asset prices. Their goal at this time is to slow inflation thereby doing a complete turnaround from their prior stance and taking away stimulus. This most likely will continue until they see evidence of slower inflation or lower employment.
Higher rates are their main instrument of choice:
The FOMC waits for the reports such as the CPI to confirm their decisions, making for a lag in decision making and possibly longer decision-making, but they will eventually get there….
Finally, capital markets are certainly looking forward hence the sluggishness as they begin to price in a slowdown in full force. Eventually it’s very likely the FOMC will begin to see these clues as well!
As a reminder this is a high level Financial Planning Education like overview, starting with the basics of and we will continue into advanced topics in order of Planning Importance.
So who needs Estate Planning?
In a word, everyone should have an Estate Plan and Estate Documents.
As your family complexity increases, the need for Estate Planning documents rises. Young families just starting out with no dependents that may be moving to another state in the very near future can have a brief hall pass as each state has its own unique rules, but the clock is ticking.
Couples with a dependent, you need an Estate plan!
Even with simple family situations, as we get older, statistically we get closer to utilizing these documents, thereby increasing our need.
Any further complexities, as an example multiple assets, multiple dependents, some type of unique family situation, you absolutely must have a good Estate Plan and Estate Planning documents.
Why do we need estate plan documents?
Without them you are leaving your wishes recklessly in the hands of the public domain via the court system for a prolonged timeframe and an unfamiliar person, (a judge), to try and guesstimate what your wishes would have been, using the general rules of the state you reside! Not good.
OK enough lecturing on who needs them and why, let’s take the complexity out of Estate Planning and make it very easy for you to prepare and complete the documents.
Rather than go into the complexities of all of the documents, keeping with our “Back to Basics” theme, we are going to go into what you need to think about to easily complete all of your Estate Documents. Don’t worry about the fancy legal and financial terms, if you can answer the following few questions, your Estate Documents can be easily completed …
So here we go!
If something happens to one of the couple, the general rule is the other is the primary default, hence the following terminology for decisions.
If something happens to both you and your spouse at the same time, Who will be in charge of administrating your estate and who is the backup person? This is called your executor.
If something happens to both you and your spouse, who will take care of your minor children? This is called guardian.
Assuming you and your spouse once again are gone, who will take care of the financial stuff for your minor children? This is called your Trustee and you’ll need at least one back up.
At what age do you want you’re now grown children, once again assuming you and your spouse are gone, to distribute financial assets? This is the terminal clauses of your trust, a very common age is 1/3 at age 25, 30 and 35 but parameters can vary widely. Trusts cannot be perpetual and therefore must eventually end.
Lastly, a very unlikely scenario, but one that should be answered, if everyone in your immediate family… you, your spouse, and minor children should perish, think of where you would like your assets to be distributed i.e. beneficiaries.
There are a few simple peripheral documents such as Power of Attorney (POA) and healthcare power of attorney that will need decisions, but we find if you have answered the above questions you likely already have a person that fits each of these roles.
One planning tip: Try and match the personality of your person to the role, i.e. the caring family person may be best fit for guardian, a good financial person trustee, a close relative with a very pragmatic attitude and calm and nature, your executor… as this is the most emotional role and comes first.
That’s it, each of those answers fit into a fancy legal term and your legal professional will know exactly how to formulate the appropriate language for your specific state. With the aforementioned answers your Estate Planning documents can be easily created.
Over the years we found many people fearful of the complexity of the documents, when in reality the majority of the problems are simply answering the questions above.
You are now armed with how to easily complete your Estate Documents, why you need them, how to be ready and how to easily complete!
Happily, the schedule shows several road trips in the next few weeks making for a fast May …. Nothing air related, but a nice drive in all different directions in a return to normal…. as also mentioned in our Three Positives Happy Post here mid week….
FED Increases Rates – Jerome Powell
Mid Week, as expected the FOMC (Federal Open Market Committee) led by Jerome Powell increased the Fed Funds Rates (think our checking accounts) by 1/2 Percent or in Wall Street Speak, 50 basis points… We will talk more about this soon, but wanted to let the Capital Market Dust Settle before diving in….
Friday in the South – Heated Weekend
With near 1000 followers … many from all over the country of friends and clients we like to toss you the rollercoaster ride of deep South Texas weather every once in a while … a high 40 degree mid week start of the day to only top out at 60 this week, was a cool spell …. this weekend Donald the Brain hits 100 in his neck of the woods and we are expecting mid 90’s…
That is ok the cold, rain and ice are gone… Lot’s of water, sunscreen, shade and no extended time in the first round of heat….
Have a Great Friday and super Weekend- Talk next week!
In our continued fun “Back To Basics” Series here we discuss Educational Funding…
Here is one very important item to remember from the post:
Did you notice we put Retirement Planning BEFORE Education planning? Do you recall in Part 3 in Debt Planning we said one of the few good debts are educational related debts ….We of course are not advocating Student debt/loans… but they are available in abundance and again not a bad debt. There are not retirement planning loans…. just saying!
Proxy Vote Reminder
In this post we remind you to please reach out if you have fallen off the list for us to proxy vote for you!
If you are getting those pesky Proxy Notices (some can be small books- oh the trees that are destroyed- digressing) reach out to us, we not only vote the Proxies for you, but we get one single notice for everyone, and Jen has done an excellent job in getting a great deal of those electronically…. Did we say how Green this is?
Capital Market Comments
The Slowdown is Here
We first started speaking of the slowdown in our Q 1 2022 Newsletter here in our “Anatomy of a Slowdown” main aricle actually released in December of 2021….
Frequently Saturday morning is met with several long time acquaintances as our paths cross in timely fashion at the local Starbucks.
After a few pleasantries, the normal economic and market update question was presented. Maybe it was the extra restful sleep, maybe it was just starting the weekend out bright with a new thought, either way this possible Epiphany was worth sharing.
FOMC Talks Rates Up
What if the federal reserve, FOMC led by chair Jerome Powell were able to aggressively talk interest rates up, which they have done, but not actually have to raise rates near to the level of their chatter?
Currently using our Old Faithful CME Fed Watch interest rate tracker tool….8-10 Yes (8-10 WOW) normal rates priced into markets by July 2022…
So why would the federal reserve want extra room to not have to raise rates? If the economy naturally slows or goes into a recession and the Federal Reserve has raised rates very little it could be easily construed that they could say it wasn’t their fault!
Longshot, maybe, but if we were sitting in their perch that would be a nice safety net to have!
We listen and constantly research different thoughts by different folks and have not heard this in any venue!
So you heard it here first, thanks Starbuck buddies, for the new possibility!
Monday after a long holiday weekend made for the final day of the regular form 1040 Tax filing day… yay
Extenders, which there are many, we will wrap up those as the needed documents arrive, but for the most part all the hard work is complete.
As mentioned earlier, we like the firm date of filing, but it does make for extraordinary busy days… all good of course…
Speaking of taxes, for those that have not, we always like a copy for our records for review and safe keeping… amazing how many threads of light our tax return will shed if needed… Thanks to all of those who have already shared a copy!!
Spring has Sprung
Usually the faithful tree out back makes for a good Spring has Sprung alert…. this year with the holiday and late spring, it came and went before we could make note here…. BUT the mosquito bite is a sure, but much less pleasurable sign Spring has Sprung….
Ahhhhh, but today is a Friday on a Spring has Sprung Weekend… Enjoy and talk next week!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, please consult your financial advisor prior to investing!
The is the vocal portion of J.K. Financial, Inc. a Dallas Texas Based Fee Only Total Wealth Financial Planning Firm. Founded by John Kvale, a Dallas Texas Fee only Financial Planner and Total Wealth Manager.