The High Cost of Weddings: 4 Consequences to Newlyweds

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™



My wife and I have four children – all boys – and I used to joke that this was a strategic financial planning decision because it meant that we wouldn’t need to pay for any wedding expenses in the future.

The short-lived Kardashian celebrity wedding covered by the E! Network was said to have cost $10 million. And TLC’s “Say Yes to the Dress” routinely shows brides and their parents forking out tens of thousands of dollars for a dress. According to Bride Magazine, the average cost of a wedding in 2010 was $26,501. Sure, that’s chump change next to the Kardashian debacle, but seriously, 26 grand? Are you kidding me? These days the average cost of a wedding almost makes a year at Northeastern University affordable.


Running of the Brides at Filene's Basement


The news gets worse for frugal brides: just last week Filene’s Basement filed for bankruptcy protection. For years, Filene’s advertised an annual bridal sale where dresses sold for $249 to $649 – a huge markdown from full retail prices of $900 to $9,000. Now that the 102-year-old retailer is closing its doors, their annual “Running of the Brides” event is a thing of the past.

The cost of dresses, photographers, caterers, flowers and honeymoon all add up.  So what kind of impact does this sort of expense have on newlyweds? Here are four consequences:

1. Debt.
Some couples start their marriage deeply in debt. Sure, it’s not unusual for most twenty-somethings to have school loans to pay back, but adding debt to pay for an expensive wedding compounds the problem and often strains a couple’s resources and adds stress to a young marriage.

Couples can avoid wedding debt by listing what they really want and identifying what they can do without. Learning to prioritize is a key financial skill for couples to develop. What is more important... to have a down payment on a house or a big wedding with a costly open bar? If you can afford both, great! If not, make some concessions: invite fewer people, change the venue, use a DJ rather than a band. In all cases, couples should make a budget and avoid wedding debt by putting money aside. The old wedding custom of “something borrowed something blue” wasn’t referring to bank or credit card debt.


2. Lost Opportunity.
The biggest cost of a wedding isn’t the actual dollar spent on the event itself. It’s all the money you could have accumulated if it were saved instead. Economists call this “Opportunity Cost”. Here’s a hypothetical example using a 25-year old bride who invites fewer people to her wedding and consequently cuts her wedding expenses by $10,000. If she saves that $10,000 over her working life of 40-years, her savings could grow to more than $70,000 assuming a five percent interest rate. Some would say that the true cost of inviting the extra guests wasn’t $10,000, but $70,000.

3. Obligation to Dom and Dad.
I often advise parents that they should not create a retirement problem down the road by trying to solve a wedding funding problem for one of their kids today. According to wedding planners, the tradition of having the bride’s parents pay for everything is slowing fading away. Why? Because newlyweds realize that if mom and dad can’t afford to pay for their own retirement, they’re going to have to have to invite mom and dad to live with them, or pay for their assisted living.


4. Crime?
Here’s a weird story. Earlier this year, police say that one Pennsylvania couple resorted to crime in order to pay for their wedding. April Carter, 24, and Joseph Russell, 23, allegedly stripped more than $7,000 worth of copper wire from 18 utility poles and then sold it to a salvage company. PennPower officials inspected the area and found that transformer ground wires had been cut. Surely there are better ways to plan and pay for a wedding than resorting to theft! I can’t imagine that spending a honeymoon in the clink would be much fun either…

Quartery Review: Third Quarter of 2011

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™

I’ve been reviewing my clients' September 30 investment statements and I’m sure you have received your copies by now too. If you're a local reader and would like to review your accounts together or would like to recieve a second opinion from an independent financial advisor, please contact me. In the meantime, this post will attempt to provide perspective on the economy and financial markets over the past 90 days.


Tug-o-War

Growth vs. Sentiment

If there was one thing that jumped out at most investors during the third quarter, it had to be the huge swings in the market. Over half the trading days in the period saw the Dow Jones Industrial Average move more than 100 points in either direction. It was like a tug-o-war: On one side was the strongest quarter of economic growth this year and on the other side was increasingly negative investor and consumer sentiment.

Economic Growth: While the economic data doesn’t point to robust economic growth, the gross domestic product (GDP) is increasing. In the second quarter, GDP was up 1.3% and the third quarter is on pace to grow at a 2–2.5% rate, the strongest growth rate so far this year. Furthermore, the Index of Leading Economic Indicators (LEI) suggests continued slow growth and that a recession is unlikely. Still, the economy is expanding at a pace that is well below historical averages at this point in an economic recovery. 1

Investor and Consumer Sentiment: For some, the slow pace of growth probably feels like a recession. Despite the lack of recessionary indicators, consumer sentiment was at near 30-year lows and this pessimism overwhelmed the market in the third quarter. 2

  

Market Performance
The third quarter was ugly with extreme volatility and the sharpest decline since the first quarter of 2009. The main drivers of the decline seem to have been European debt worries and the waning confidence on both Main Street and Wall Street as analysts began to second-guess the recovery.

 

Below are results for key markets. These are in local currencies, so the effect of swings in the dollar is not reflected.

Source: MSCI


Looking Forward
So that’s what’s behind us – the key question is what’s ahead. What will have to happen to help this market climate improve in the coming months? There are three potential catalysts that might emerge.  

1. A decisive and truly unified effort by the EU to address the debt crisis.
2. A strong corporate earnings season featuring frequent, pleasant surprises.
3. A stream of data vouching that the economy is still growing.

Historically, the fourth quarter tends to be a very good one for Wall Street. Over the last 50 years, stocks have gained an average of 3.6% in the last three months of the year. 3 While the past is no predictor of future results, we can hope the historical pattern repeats in 2011.

Economic challenges and market volatility remain it is important to remain cautious.  But for those investors who need growth to achieve their long-term goals, it is equally important to take a longer view and know that fund managers are seeing many outstanding companies available at inexpensive prices.  For investors with cash on the sidelines, now may be the time to start putting some of that money to work. 

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 investment(s) may be appropriate for you, consult me prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.  The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
 1. Source: Bureau of Economic Analysis, Haver Analytics 10/02/2011 


2. Source: University of Michigan Consumer Sentiment Report 09/14/2011 
3. Source: usatoday.com/money/world/story/2011-10-03/world-markets-down/50640738/1 [10/04/2011]

Financial Lessons from Driver's Ed

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™ 

The Dow Jones industrial average dropped over 600 points Monday in the first day of trading after Standard & Poor's downgraded the United States' credit rating.  Skittish investors, already concerned about the economy, struggled to work out the implications of last week's downgrade.  With so much attention and angst focused on the debate in Washington over the US debt ceiling these past few weeks, it is no wonder the financial markets continue to bounce around. It seems that TV financial experts and entertainers (financial “expertainers”) often exaggerate events in the marketplace and thus excite the emotions of investors who are swayed by fear. This emotional ping-pong game results in illogical investment behavior, such as buying at market highs and selling at market lows. The wise investor learns to look past the colorful adjectives that describe daily market swings and instead keeps his or her eyes focused on long-term trends.


The Long View

My 16-year old son is currently taking his Driver’s Ed course at Driver’s Choice Driving School. Do you remember the first time you got behind the wheel of your mom’s station wagon? For me, I remember staring at the road immediately in front of the hood rather than looking 20 or so yards ahead. Quickly, it became apparent that it was next to impossible to drive safely with such a short-sighted approach to my surroundings. Even with a straight road, little traffic and perfect driving conditions, it was next to impossible to drive in a straight line when I only focused on the 3 feet of roadway immediately ahead of the front bumper. When I learned to look further down the road -- taking the long view – I discovered that maintaining a straight line of travel was not only easier, but much safer too.

It seems to me that the same logic applies to investing. Losing sight of the long term and thinking that you can time the market by selling at the peak and then re-entering the market once it hits bottom is a big mistake. Timing market shifts is nearly impossible and requires two correct decisions: when to sell and when to buy back in. While making modest adjustments can add value, investors who make wholesale market timing bets usually lose. The biggest potential pitfall in trying to time the market is missing the days it’s “up.” For example, during the 10-year period after the 1973-1974 stock market decline, an investor who missed just 10 of the market’s best days would have also missed out on more than 50% of the market’s price return.1 Imagine that! And trying to figure out when those 10 best days would occur would have been an impossible task when you consider that none of the days were consecutive, four of the days occurred in a single year, and six of the years didn’t have any of the best 10 days.2 Perhaps the folly of market timing can be illustrated with another lesson from Driver’s Ed.

Route 3 Traffic to the Cape
The left hand lane of the highway is referred to as the passing lane while the right hand lanes are called the travel lanes, right? In theory this seems correct, but on a Friday afternoon in the summer, all lanes heading to the Cape would probably be better referred to as “parking lot lanes”! How many times when sitting in traffic do you find yourself wanting to switch lanes? We’ve all done it; the lane next to ours starts to move so we put our blinker on, scan the rearview mirror and move into the line of cars that are making progress down the road. And as soon as we do it, our new lane stops and the one we were previously sitting in starts to move again. So, if you have a long-term investment horizon and are tempted to get out of the market and move entirely into cash because of short-term events, you may be wise to remember the story about Cape Cod traffic jams.

Financial Lessons
While the debt ceiling debate has grabbed the headlines and is currently the most significant risk to the market, the underlying strength of the global economy remains solid. Company earnings continue to be very strong as corporate America continues to benefit from a resurgent business reinvestment climate and a resilient consumer. On the other end of this self-imposed debt ceiling crisis stands an economic climate where businesses are earning near record profits, employment is improving, housing has stabilized, and consumers are once again revisiting the malls to spend.



Enjoy the Ride
As we enjoy the beautiful warm nights, think back to the summer shortly after you received your driver’s license. What joy and freedom we experienced when we used to cruise the streets with the windows open listening to our favorite songs play on the radio. One of my favorite songs from those days was by The Doors. Jim Morrison sang, “Keep your eyes on the road, your hands upon the wheel… We’re gonna have a real good time.”

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This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/financial-lessons-from-drivers-ed




The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Tick, Tick, Tick: Our National Debt and How it May Impact the Economy and Financial Markets

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™

The clock continues to tick towards the August 2, 2011 deadline when the United States debt ceiling limit will be reached. While the newspapers and TV are full of stories about this situation, I thought you might find it helpful to hear some of my thoughts as it relates to your investments and the market in general.


Overview: The debt ceiling limit is a key element of U.S. Government financial management. The U.S. Government is expected to receive about $175 billion in tax revenues for the month of August, but has $310 billion in monthly obligations that it needs to meet. As a result, the $135 billion in monthly shortfall is usually borrowed via the issuance of U.S. Treasury bonds. However, once the debt ceiling is met, the U.S. Government will not be able to issue new debt and will therefore, have to make significant decisions as it relates to what $135 billion or 44% of its “bills” it will delay payment on. That is, of course, if the debt ceiling limit is not raised by Congress and signed into law by the President.

Politics: While the rhetoric coming out of Washington has certainly transitioned from compromise to contention, it should not be overlooked that the divided parties are aligned on a few very important criteria that should bring a resolution closer to happening—namely that spending cuts should be enacted and that a more responsible government spending policy should be put in place to get a handle on the nation’s soaring national debt. In addition, both sides seem to now understand that the polarizing political view of revenue increases (the Democrats’ wish) and significant entitlement reform (the Republicans’ wish) are too significant a gap to overcome over the short term and are now virtually off the table.

What Happens Next: Now, the only things (and they are a big “only”) that the two sides have to work out are: where the cuts in spending should come from, how long they will take to implement, and how much money they will save. The reality is that the two divided sides are not as far apart on the terms of a deal as they are from an ideological and political posturing perspective. Said another way: the two sides sound and act a lot further apart than their competing plans actually are.

We expect that the debate in Washington will continue over the next few days as the game of political ideological “chicken” plays out. However, our base case is that a compromise will be forged over the coming days and will result in either a short-term extension of the debt limit or, more likely, an agreement to raise the borrowing capacity of the United States Government until well into next year.

More importantly, even if a bill is not agreed upon and signed into law to raise the debt ceiling by August 2, we do not foresee the United States Government defaulting on its obligations. A default will occur if the government failed to pay the interest due on its debt. For the month of August, the interest due on Treasury bonds accounts for only $29 billion, which is easily met by the $175 billion in tax revenues that are expected. However, while a default would be avoided, the significant impact of dialing back $135 billion that could not be borrowed for other Federal services and obligations would have serious economic impacts.

The Economy: While the debt ceiling debate has grabbed the headlines and is currently the most significant risk to the market, the underlying strength of the global economy remains solid. Moreover, several of the open-ended issues that have lingered for months are finally getting substantively addressed, including a plan for a second bailout of Greece, a stabilizing European debt crisis, and the re-emergence of Japan’s economic infrastructure from its terrible natural disaster in early spring. In addition, company earnings continue to be very strong as corporate America continues to benefit from a resurgent business reinvestment climate and a resilient consumer.

The Financial Markets: In the meantime, the current conditions support a cautious stance as the market is sin gularly focused on Washington. We expect that a resolution on extending the debt ceiling will ultimately be agreed upon, but not until the deeply divided government drags the nation and the market even further through the mud. But, on the other end of this self-imposed crisis stands an economic climate where businesses are earning near record profits, employment is improving, housing has stabilized, and consumers are once again revisiting the malls to spend. While the turmoil in Washington will invariably offer up several more nervous days as the debate lingers on, we believe that a relief rally for the market is around the corner once compromise replaces contention and unity trumps division.


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 investment(s) may be appropriate for you, consult me prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
 The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.  The research in this letter has been prepared by LPL Financial.

Don't Suffer a Financial Heart Attack!

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™



1986 Tour de France

The Tour de France is said to be the largest spectator event in the world with an estimated attendance of over 10 million people. The attendance swells because the race isn’t a single day event -- it actually takes place over 21 days and covers more than 2000 miles. The most popular stages are the ones that see the riders climbing the French Pyrenees or Alp Mountain passes. This week, the Tour is in the high mountains and the combination of gorgeous scenery, a colorful peloton and tens of thousands of cheering fans is a sight to behold. For the past several years the race has been broadcast in High Definition on the Versus TV channel (home of the Stanley Cup Playoff coverage) and it has become one of my favorite things to watch.


The only downside to watching the Tour on TV is the constant barrage of commercials. One, which seems to run repeatedly, advertises something called the “Road ID bracelet”. The Road ID provides emergency contact information and was based on the tragic story of a gentleman by the name of Jim Fixx. Jim wan an average Joe who took up running to lose weight and quickly lost 50 pounds. As a result of his experience, he wrote several books, and is known as the best selling running and fitness author of all time. Jim has been given credit for starting the Fitness and Running Boom of the early 80’s. Jim had lost weight, was running every day, and was feeling great! Then, on July 20, 1984, Jim was found unconscious on the side of the road - wearing only his jogging shorts. He was immediately taken to the hospital where he was pronounced dead of a heart attack. Unfortunately, like most runners, joggers, cyclists, and walkers, Jim was not wearing identification when he had his accident. It wasn't until a day later that he was positively identified and his family contacted. He had never been to the doctor for a physical because as long as he was staying in shape, there was nothing to worry about, right? Wrong. Apparently, there was a history of heart disease in Jim’s family. When he died, his arteries were almost 95% clogged. If Jim had gone to the doctor every year for a physical, they could have detected the heart disease and been able to treat it.


Have You Scheduled Your Financial Physical?
So, what do the Tour de France and the story of Jim Fixx have to do with your personal finances? Well, it’s time for your financial physical. The year is now more than half over and now is a good time to sit with your financial advisor to review your finances and see if you’re meeting your financial goals.

Like the undulating roads throughout the Tour, our lives are constantly experiencing ups and downs. We experience joys of marriages, births and retirements and at other times face the difficulty of divorce, death and unemployment. The financial world is also constantly changing. Changes in the market place, investments, and tax laws are much more likely to happen today than ever before. With the ups and downs of the stock market and the current state of the global financial markets, it is more important than ever to make sure your portfolio is properly positioned and right for your current situation.

We meet with our doctors frequently to get a physical to make sure everything is okay. Regular health screenings are important. Underlying health conditions aren’t always obvious: nothing hurts, no unusual symptoms, everything seems fine until one experiences sudden chest pain, or discovers a lump while in the shower. When it comes to cancer, everyone knows that it is better to catch a health problem before its advanced stages. Most of us take routine tests and go to the doctor regularly in an effort to maintain our physical health. But how about our financial health? Do yourself and your family a favor and schedule a financial physical to make sure your financial health is in check.

Yes, I Bought a Road ID

Click here to visit my PMC Profile


By the way, I ended up purchasing a Road ID bracelet because I’m currently training for the Pan Mass Challenge bicycle fundraiser to support the Jimmy Fund. This will be my 14th year riding in the event and if you would like to learn more about the PMC and why I ride, please visit my PMC Profile website: www.pmc.org/profile/SD0039

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This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Quarterly Review -- First Half of 2011

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™

MANSFIELD, MA:  As I write this blog entry, the June 30 investment statements are starting to come across my desk.  I imagine that the US Postal Service has already delivered yours to you too.  You’ll see that the first half of the year has produced modest single-digit gains for most assets classes. 

Market Performance in the First Half
The first quarter of the year showed the markets registering solid gains, despite the effects of Japan’s terrible earthquake and tsunami. 

The second quarter was a different story, with concerns arising from growing inflation threats in emerging markets, debt worries in Europe and a downgrading of growth forecasts for the global economy.  Below are the first-half results for some key markets.

Source: MSCI
Note: Results are in local currencies; the effect of swings in the dollar is not reflected

Here at home, we saw U.S. stocks fall for the first time in four quarters.  The S&P 500 lost 0.39% in the second quarter, a period marked by worries over high gas prices and indications that the recovery was stalling.  Given the above, I want to share a few quotes which I think help us see things in perspective.

Quote #1
-- Warren Buffett, letter to investors published February 2011
“Money will always flow toward opportunity, and there is an abundance of that in America.”

In November of 2009, Berkshire Hathaway spent $26 billion to buy the 77% of rail giant Burlington Northern that it didn't already own. In interviews, Warren Buffett referred to this as "betting on America." Buffett has been consistent in his positive outlook for the U.S. economy, looking past short-term events to focus on America's ingenuity and resolve and its ability to attract the best and the brightest from around the world.

Buffett is consistently voted the greatest investor of all time. In the 46 years he's run Berkshire Hathaway, annual growth in book value has exceeded 20%, more than twice the gains for the U.S. stock market index. Even more remarkable, Buffett's numbers are after tax, while the index's gains are pretax. And while he had lagged in individual years, in his last letter to shareholders, Buffett pointed out that there has never been a five-year period where Berkshire Hathaway underperformed the S&P.

To put his record into dollar terms, $1,000 invested in the Standard & Poor’s index of U.S. stocks at the start of 1965 would have risen by the end of 2010 to $62,620. By contrast, that same $1,000 under Buffett's stewardship would have grown to over $4 million.

Quote #2
-- Bill Gross, Morningstar Fixed Income Manager of the Decade; June 7, 2011
“In terms of the stock market, there are amazing 0pportunities [compared to U.S. government bonds]; there’s a huge gap and a huge differential.”

As manager of PIMCO Total Return Fund, the world's largest bond fund, Bill Gross turned in a track record matched by few others and was named Morningstar Fixed Income Manager of the Decade. In part, this stems from his willingness to take contrarian views: in 2010, he went on record talking about the "new normal" of lower growth, higher inflation, and increased risk in holding debt of governments around the world.

In a June 7 interview on CNBC, he spoke about stocks and said, “Corporations are in the catbird seat. They've got cheap financing, cheap leverage. They've got cheap labor and the ability to move from one country to another at their will. And so corporations basically have done very well, and will probably continue to do very well.”

What this Means to Investors
In today's low-interest-rate environment, it's hard to make a compelling case for cash except as a portfolio diversifier and a source of liquidity.  As for bonds, Bill Gross represents the growing sentiment that the risk in bonds is rising as economies recover and interest rates start to rise.
This leaves stocks.  Whether you adopt the "lesser of two evils" view of stocks as opposed to bonds, like Bill Gross, or join Warren Buffett in embracing stocks more enthusiastically, there are clear values in high-quality stock market investing.

In Buffett’s annual letter, he encouraged his shareholders to see through the haze.  He wrote, “Commentators often talk of ‘great uncertainty.’  Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Human potential is far from exhausted, and the American system for unleashing that potential remains alive and effective.”
Here’s what I wrote last quarter, and I continue to believe this is the way forward:  We've always had unexpected events and always will. And despite these unforeseen events, economies have grown, companies have prospered, and stock markets have generated positive returns. The key to benefiting from this long-term growth has been to diversify so that no single event can create permanent damage to your portfolio.

I believe that investors with a balanced approach and a long-term view will be well rewarded. The approach to risk management I recommend may not be fun or sexy in the short term, but all the evidence at hand suggests that over time it will serve you well, getting you to your goals with the least amount of stress and distress along the way.

The Pan Massachusetts Challenge

A Hero Story

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™

My Hero: 

For the past 14 summers, I have participated in the Pan Mass Challenge.  When I first rode the PMC in 1988, my mom had recently been diagnosed with cancer. Today, mom continues to cheer the Davis family paceline, having courageously beaten cancer three times. She is my hero!

Everyday Heroes:
When I first rode the PMC, one of my lasting memories was riding up a long, steep hill where someone had written on the pavement in chalk the words, "Everyday Heroes!".  The crowds who cheered and willed us up that hill thought the cyclists were the everyday heros, but they were wrong.  The true everyday heros were all those who  fight this dreadful disease and those who contribute funds toward beating it.  Last year 230,000 PMC contributors donated $33 million for cancer research and treatment at the Dana Farber Cancer Institute. And since 1980, the PMC has contributed an amazing $303 million which finances research in its earliest stages. Known as “seed money”, PMC funds enable clinicians and scientists to pursue innovative research that has the potential to achieve the results that will warrant National Institutes of Health (NIH), or other private and government grants. In so many cases, this early support has fostered the development of some of the most important advances made in cancer research over the last two decades.


A Young Hero: 
As I mentioned, I ride each year to honor my mom, a three-time survivor. This year, I will also be riding for Hannah Hughes, a young 7-year-old “Jimmy Fund Pedal Partner”. Hannah has a rare cancer but is doing well after recently undergoing a bone marrow transplant from her sister. Several of my friends and I plan to ride from her home in Ballston Spa, New York to the official start of the PMC in Sturbridge – a 180 mile journey we hope to cover over two additional days of riding. All told, we hope to ride almost 400 miles over four days. We’ll ride from Ballston Spa to West Stockbridge; West Stockbridge to Sturbridge; Sturbridge to Bourne; and Bourne to Provincetown.


You Can Help: 

If you would like to join us in the cause, please visit the Pan Massachusetts Challenge website or see my rider profile page: http://www.pmc.org/profile/SD0039

Financial Independence Day

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™


MANSFIELD, MA:  We recently had a friend from New Zealand staying with us for a few days. One of my sons jokingly asked him, “Andrew, do they have the 4th of July in New Zealand?” He was quick to catch on and replied, “Of course they do, but they don’t celebrate Independence Day.”

Corey Shea Memorial Flagpole, Mansfield, MA

Today, Americans are observing Independence Day. Most of us have been looking forward to this long-weekend because we’re able to enjoy a day off from work and spend our free time with friends and family. And just as we look forward to the 4th of July weekend, most of us look forward to celebrating another type of Independence Day – Financial Independence Day. This, of course, is not a single day free from work, but a period in our lives when we no longer need to work ever again because our expenses are met by unearned income.

While this is a laudable goal, it won’t be achieved by all. Some people work their whole life, while others retire early. Some people retire and live comfortably, while others are dependent on children and friends. Here are three tips to help you achieve financial freedom:

Spend less than you earn.
If you’re looking for a good book to read on the beach during this summer’s vacation, check out the 1996 bestseller, The Millionaire Next Door. While this book is now 15-years old, its message is timeless. Authors Thomas J. Stanley and William D. Danko explain that one of the keys to success is to live within your means. This can be accomplished by earning more – OR – spending less. The theme of the book is that society’s concept of a millionaire is wrong; most actual millionaires live a very simple lifestyle. In general, they are frugal and value achieving financial independence more than displaying high social status. In other words, they don’t try to keep up with the Jones’. After all, the Jones’ may be in debt up to their eyeballs!

Feed your 401k.
One of the most important things you can do to hasten your own Financial Independence Day is to continually save and invest for retirement. Take full advantage of your company’s 401k plan. If your company matches your 401k contributions, be sure to at least contribute the amount they will match; it’s like getting free money! Remember too that the government offers tax advantages to these types of qualified retirement plans. Most contributions are made with pre-tax dollars which means you pay less in taxes. Furthermore, your earnings have the potential to grow on a tax-deferred basis. This means your nest egg may grow quicker because you’re not paying taxes on the account until you begin to take distributions, typically at retirement.

Prepare for emergencies.
If you suddenly discover your home needs a new roof, or if a major appliance or car breaks down, will you have the money available to pay for it? Create an emergency reserve. The amount of your emergency reserve may vary according to the flexibility of your budget and your comfort zone. Bear in mind that this is the money that will see you through financial storms while you maintain a long-term strategy working toward financial independence. Your emergency reserve is not intended to cover all possible risks. For complete protection, get medical insurance, long-term disability insurance and fire protection for your home. Even policies with a large deductible can help if a crisis comes up. You can't avoid emergencies, but living without these types of insurance is an invitation to financial ruin.
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This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/financial-independence-day


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Doctor, what do you mean you can't talk to me about my child?

Important considerations for parents of young adults


By Steve Davis, CERTIFIED FINANCIAL PLANNER ™



MANSFIELD, MA:  It was a proud moment for the members of Mansfield’s largest ever graduating class. Each of them walked across the stage of the Comcast Center to receive their diplomas -- and thunderous applause from family and friends. My wife and I were there cheering one of our boys and the conversation we shared with other parents was about times past. “Remember when came here direct from the Little League fields so we could watch the kids perform in the Jordan Jackson band? They were so tiny then.” But here we were a dozen years later watching our “kids” walk off the stage into adulthood. Where did the time go?

For parents of young adults, it may come as a surprise to learn that once our children become legal adults at age 18, they and they alone are responsible for making their own medical and financial decisions. This means that if your son or daughter has an accident or is unable to make decisions about his care, you would be powerless to help – even as parents. While your son may still be your dependent, you are no longer considered his legal guardian. Under the federal HIPAA rules, your teen’s medical records are between him and his doctors. Similarly, no bank officer or college purser will break privacy rules to discuss your child’s financial account status or even grades. And just because you pay the tuition doesn’t override the school’s privacy policy. Your daughter’s finances are as private as yours.

Helping with Health Care Decisions:

It’s every parent’s nightmare. You might be informed that your child had an accident and is in the hospital, but legally, you cannot get any information about your child’s condition or treatment. As a dad, I can’t imagine a situation that would produce stronger feelings of helplessness and frustration.

So, what’s a parent to do? The first step is to have an adult conversation with your adult child. Explain that in the event of a medical emergency you would be unable to help unless you are given prior permission. According to Easton attorney Karen McSherry, “A properly executed health care proxy and durable power of attorney grants a parent authorization to make health care decisions if your child is incapacitated, and grants you access to your child’s medical records so you can have discussions with doctors and insurance companies.” When you speak with your adult child, you should agree in advance how and why such documents would be used. Your son or daughter should also know that they remain in charge of their own affairs since the documents can be revoked at a later date.

Without prior approval, the only other option for parents of an incapacitated adult child is to petition the probate court for guardianship. This is often a long and expensive process that only gives you the ability to help once the court appoints you as guardian.


Helping with Financial Decisions:

Before we know it, the summer will be over and many of these recent high school grads will be heading off to college. Hopefully, we won’t see them on TV at the big game holding a sign that reads, “Hi Dad, send money!” But if your student needs help with banking, financial aid, or has a problem with his credit card while travelling overseas, for example, you’ll be unable to help unless you have a durable power of attorney.

According to McSherry, “Properly drafted documents will give parents peace of mind because they know they’ll be able to help with ordinary transactions, plus deal with financial and medical emergencies.”


Action Steps:

So, while your kids are still living under your roof, take some time to talk with them about these important matters. Before your son or daughter heads off for school and beyond, visit your local attorney to discuss your specific situation. Better safe than sorry.



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This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/doctor-what-do-you-mean-you-cant-talk-to-me-about-my-child


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

3 Reasons to Hire a Financial Advisor

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™


Ah, spring has sprung! The flowers and trees are budding, the birds are chirping and the loud, incessant drone of lawnmowers reverberates throughout the neighborhoods of Mansfield.

As a young teenager, I remember the great sense of satisfaction I experienced when my dad taught me how to cut the grass. I pulled the starter cord and got the lawnmower running all by myself. I pushed the mower in straight-lines in such a way that even Joe Mooney -- the long-time groundskeeper at Fenway -- would be proud. What joy and fun! That is, until dad asked me to cut the lawn the following week. Like most boys, I found cutting the lawn was fun the first time. But after that? Not so much. It became a terrible chore.

Today, I still cut my own grass. I have grown to like the activity. I enjoy being outside. I like walking around my yard. And I still get a sense of satisfaction when the job is done and the green carpet of grass looks nicely manicured. Some folks, however hate cutting the lawn and consequently hire someone to do it instead. Why? There are lots of good reasons:

• You’re too busy
• You don’t have the health, skills or tools
• You would prefer to spend your weekends doing something more fun


Interestingly, these are some of the very same reasons why people hire financial advisors. As a CERTIFIED FINANCIAL PLANNER™, I can confidently tell you that financial planning is not brain surgery or rocket science. In fact, I believe that most people are capable of managing their own money. The internet, TV and radio talk-shows offer no shortage of financial tools, calculators, research and education. But if you don’t have the time, interest or inclination to focus on your finances, you should seek professional help.

Here are three warning signs that it is time for you to hire a financial advisor:

1. Procrastination: You know you should fund your IRA, buy that additional life insurance, or open a 529 college plan, but you just never get around to it. Let’s face it, we all have too many other things to do, or at least that’s what we tell ourselves. If you know you should develop a retirement plan, but find yourself rearranging your sock drawer instead, it’s time to hire an advisor. Or, if your daughter is five and you’ve been telling yourself since the day she was born that you’ll open that college savings plan, it’s time. A good financial advisor will call you to make sure you don’t miss the IRA deadline, forget to send in your insurance paperwork, or fund your daughter’s college savings plan.

2. Disinterest: If the money section of your newspaper never gets read or if your eyes roll in the back of your head when the subject of the economy or finance comes up in conversation, then it’s probably time to get help. If you don’t know the difference between a Roth and a Traditional IRA, or if you think a 401k is a very long running race, it’s time. There is so much information floating around that if you’re really not interested in investments, insurance, taxation and the like, you’ll probably struggle educating yourself on these important matters. One of the great values of a financial advisor is having someone to tell you what you need to know.

3. Lack of Time: A famous Greek philosopher once said, “Time is the most valuable thing a man can spend”. (1)  Just like the golfer who prefers to hire a lawn company to cut his grass so he spend his time on the golf course each Saturday, some folks prefer to hire a financial advisor so that when they get home from work they can relax, spend time with their family and know that their finances aren’t being neglected. Many people know they could handle their own finances, but either can’t take the time, or don’t want to take the time to do so. If you’re struggling to balance work and family time and find that your financial and retirement goals are being ignored, it’s time to get help.


Don't Let Your Lawn (or Finances) Go to Seed

It’s one thing to let the lawn go and find it overgrown. It’s another thing all together to let your finances go and discover too late that your financial affairs have suffered as a result.



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This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/three-reasons-to-hire-a-financial-advisor 



The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.


(1) Theophrastus: “Father of Botany” and student of Aristotle.

Stanley Johnson: "I'm in debt up to my eyeballs...somebody help me!"

By Steve Davis, CFP®







Click to watch the Stanley Johnson TV ad

    Does anyone remember that funny Lending Tree commercial where a guy named Stanley Johnson appeared to be living the good life? Stanley had the big house, a country club membership, a pool and even a brand new car. When asked how he does it, Stanley responds with a contrived smile, “I’m in debt up to my eyeballs; I can barely pay my finance charges. Somebody help me!”

In January, banks sent out billing statements that included all the charges for those holiday gifts many consumers put on their credit cards. If you were one of the many who used your card to pay for holiday shopping or for that big ticket item that was on sale at year-end, you may be feeling a bit like good old Stanley Johnson right now. Here are 5 tips for getting over your post-holiday credit card hangover.

1. Assess the damage

Go ahead and gather all your credit card statements and list your debts in descending order from smallest to largest. Put this list somewhere visible so it remains on your radar.

2. Go on a financial diet

If you’re unable to pay off your balances in full, stop all discretionary spending for the next month. Put your credit cards away. Just as a dieter will remove cookies from the cupboards when starting a diet, you should remove your credit cards from your wallet. Studies have shown that paying cash actually discourages spending while using credit encourages it.

During the first week, track your spending; know where every dollar goes. Successful dieters learn to track their calories so they know what foods are healthy and what foods are not. While this can be tedious, it helps break bad habits and it also reinforces good ones. Tally your expenses for the week and categorize them under headings like housing, groceries, dining, and transportation. You will probably be amazed at how the “financial calories” add up. Determine where you can cut back and earmark your cost cutting toward the credit card bills.

3. Consolidate

If you have more than one credit card and can consolidate them onto one low interest card, do so. Be extremely careful about using a home equity loan to payoff your unsecured credit card debt. This option sometimes seems attractive since you can write-off the interest you pay. But beware! If you miss a credit card payment you lose your good credit rating, but if you miss a mortgage payment you could lose the roof over your head!

4. Pay off your smaller debts first

Experience the gratification of eliminating your bills one by one. When you start paying off your smaller debts first, you will receive quicker feedback and enjoy the success of eliminating a debt entirely! Once a loan is paid off, apply that former payment to the next smallest debt. You may be tempted to pay off your larger bills first, especially if they charge higher interest rates, but you will be more likely to stick to the plan when you receive ongoing positive feedback and see fewer bills arriving each month.

5. File your taxes and apply your tax refund.

The Internal Revenue Service recently reported that it refunded taxpayers $328 billion last year. On average, Americans received refunds of more than$3,000. If you expect a refund, gather your tax forms, receipts and shoebox of papers and get them off to your accountant right away. The sooner you file, the sooner your refund will be paid to you. Now is not the time to procrastinate. Use your refund toward your credit card balances and then determine whether you should change your withholding to increase your take-home pay.

Once you’re back on track, focus on living within your means. Build an emergency fund for unexpected events, and begin to set money aside for retirement. Doing so will help you replace a “Stanley Johnson smile” with an honest smile of relief, financial success and peace of mind.


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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/in-debt-up-to-your-eyeballs

Financial Planning in Mansfield, MA

CERTIFIED FINANCIAL PLANNER Steve Davis, principal at Davis Financial in Mansfield, MA has been providing independent and objective investment, insurance and financial guidance for more than twenty years.

Serving the Local Community

As a professional in the industry, Steve can advise you on how to make the proper decisions for both short term and long term goals while helping you protect your current assets. Feel free to contact his office for a complementary review of your investment portfolio.

Financial Planning Services provided to these and other local communities:

 Financial Planner Mansfield MA

 Financial Planner Norton MA

 Financial Planner Foxboro MA

 Financial Planner Plainville MA

 Financial Planner Attleboro MA

 Financial Planner Easton MA

If you would like to explore working with Davis Financial, please call today.  You can reach Steve directly at 508 337-9400.

Visit the Davis Financial website at http://www.talkwithdavis.com/

Some of the services provided by Steve Davis, CFP®:

IRA and 401k rollover planning

Evaluation of your insurance coverage

Complete portfolio review

Investment advice and planning

Retirement planning

Planning for college expenses

Analysis of company retirement plans

Conversion of Saving to Retirement funding

Securities and Financial Planning offered through LPL Financial , Member FINRA/SIPC

©2010