Can lasting happiness be traced back to the almighty dollar? It's an age-old question, and the answer tends to vary depending on who you ask. Some say they'd sure be happier if they could afford to pay off their debts and live out the rest of their days in stress-free retirement bliss. Others swear that real happiness, like the feeling you get when your child wraps you in a warm hug, simply can't be bought.
In all my years of helping people manage their wealth and investments, I've learned that both are true. Happiness is hard to come by if you're plagued by financial insecurity. This is because what financial peace of mind really gives us is freedom. At its core, money is a resource that, if used wisely, opens the door for what matters to you most—things that don't have a price tag, like taking time to help your child with a school project or connect with your significant other.
When financial stress is down, we have more mental space and attention for life's true treasures, like family and friends. It makes sense that those struggling to make ends meet seem to have lower happiness levels. A now-famous 2010 research study out of Princeton University found that earning less than $75,000 a year was linked to more stress and everyday sadness. It stands to reason that once our basic needs are met, day-to-day stress tends to go down.
But the research also had one other particularly interesting finding: general happiness levels didn't improve much for folks who excelled beyond that $75,000 mark. In other words, someone making $200,000 wasn't all that much happier than someone earning $100,000 less.
Thanks to inflation, that $75,000 figure has surely gone up a tick since 2010. So how much do you need to be financially comfortable these days? According to Charles Schwab's annual Modern Wealth Index, an average net worth of $1.4 million should do it; $2.4 million to be considered wealthy. But these findings also come with a non-financial twist "Living stress-free/peace of mind" and "Loving relationships with my family and friends" are among the top definitions of personal wealth.
In many ways, true and lasting wealth has less to do with our net worth and more to do with our outlooks and values. On the same note, building wealth isn't so much about how much money and assets we accumulate—instead, it really depends on how we choose to spend our money. At JJ Burns & Company, our wealthiest clients (i.e. those whose financial choices are in line with their values) all have one thing in common: they've put their money to work for them by way of a diversified, long-term written investment plan.
Taking the long view is best here. Whether your idea of real wealth is the ability to put your kids through college stress-free, retire early and spend more time with family, or have the opportunity to travel the world and feed your wanderlust, smart investing is the best way to get there—and the time to start is always now. Thanks to the magic of compounding interest, those who start early typically reap the biggest returns.
All this means, in simple terms, is to keep our investments balanced. This is diversification, and it's essential to putting some muscle behind your money in order to ultimately fund your long-term goals. Why? The market is a notoriously volatile place, and ups and downs are simply par for the course. Diversifying is your best protection; if one area of your portfolio dips, it's not enough to tank your whole plan. The best analogy for long-term stability is to avoid putting all your eggs in one basket.
Many of us zero in on hitting a specific salary milestone or amassing a certain degree of assets to measure how wealthy we are. But I've learned that true wealth has much more to do with freedom—more specifically, having the freedom to use your time in a way that fosters true happiness. Spending quality time with family and friends, and making memories with loved ones, are easily life's greatest riches. The same goes for having the financial freedom to pursue our passions, nurture our health, and attend to our life's purpose. Our money is perhaps our most powerful resource for achieving all these things.
Being our client means knowing that when it comes to your personal vision of wealth and happiness, we're right behind you, echoing your values every step of the way. The most important part of the equation is putting a stable plan in place to help you get there.
The other day I was talking with a client and she mentioned that her husband was recently hospitalized. He’d unexpectedly lost consciousness during dinner, and while he came to within a few seconds, it was still a worrisome event.
Thankfully, their doctor met them at the hospital and already had the admissions paperwork completed, as well as a series of tests ordered. After a few days in the hospital, the husband left with a clean bill of health.
The reason why the couple was able to speed through the health care system: they belonged to a concierge care group.
Think how different your long-term health might be if your primary care physician had the time to focus on disease prevention rather than hospitalization? Or if your doctor could help reduce the risk of expensive chronic conditions like heart disease and diabetes?
Concierge care is more than just a buzzword. Today it’s a growing practice amongst physicians who want to provide more personalized health care. Think of it like a family office for medicine where for a retainer fee ranging from $1,200 to $30,000 a year per individual, you can have a select team of medical professionals at your service when you need it.
More than anything, a true benefit of concierge medicine is the freedom it can give. Here’s what you should know about concierge care:
ASAP access. With concierge care, you don’t have to wait to see your physician. Typically, it takes 29 days to book an appointment with a regular family care physician. If you have a kidney stone in the middle of the night or your son breaks his arm during soccer, as a concierge medicine member, like my client, you’ll be seen right away. No more hours-long urgent care or emergency room visits—and the associated costs.
Customized care. Another benefit of concierge medical care is the personal touch. Unlike many traditional care practices, you have an opportunity to build a deeper relationship with your doctor. He or she takes the time to know your health history and can recommend more advanced diagnostic tests than what your yearly preventive care visit may cover. Additionally, with concierge medicine, your doctor will give you the results sooner than a general primary care physician.
Integrated medicine. Even better, your concierge doctor can work with other members of your health care team, such as specialists, naturopaths or chiropractors, to ensure that all your health care is aligned.
VIP treatment. Most concierge doctors accept no more than 50 families in their practice. This means that you can avoid the assembly-line atmosphere of even the best primary care groups. Like the days of long ago, many concierge physicians will make house calls—or meet busy patients at work or the airport.
Worry-free travel. Your concierge doctor can also arrange care anywhere in the world. If an emergency arises, a private jet or helicopter can be chartered so you can receive the best care possible.
While affluent individuals appreciate how to use their money and the art of delegation, they may not always be aware that the option of concierge medicine is available to them.
Once clients understand the advantages of concierge medicine, two of the biggest questions they ask us are if concierge care is covered by their current health insurance policy and if their costs are tax deductible. Because insurance coverage varies from state to state, as well as practice to practice, it’s important to ask your insurance provider and prospective concierge physicians about your specific situation. Additionally, if you itemize medical expenses on your tax return, you may be able to deduct the annual subscription fee. As with all things tax-related, consult your tax advisor.
While we serve as wealth and investment managers for our clients, we also believe in looking at the total life picture, which includes health planning. We discuss the often-difficult “what if’s,” the financial impact of dealing with a chronic or debilitating illness, and the various ways to develop a sound yet flexible plan. That could include long-term care insurance, a special needs trust or considering joining a concierge care practice. As a client of JJ Burns, you can rely upon us to make the full range of your financial interests a priority.
Over the years, I’ve received the standard ties, mugs and handmade items that are synonymous with Father’s Day. But the greatest gift of all has been raising money-smart kids. However, with one in college and three more waiting in the wings, I’ve also seen my kids make some “interesting” money choices—and they’re still learning how to manage their funds.
Here’s how you can help your kids navigate the financial waters at key stages of their lives.
The Younger Years
Teach them the concept of earning money. When your kids see you paying for groceries or buying a present with a credit card, they probably don’t associate those actions with you going to work each day to earn that money. A credit card is an intangible idea for most young ones. Paying your kids to do extra, age-appropriate chores, such as taking out the garbage, helping in the yard or washing the car, can instill in them the value that money is earned and doesn’t just magically appear on a small piece of plastic.
Practice goal setting. What do your kids really want? A new bike? The latest Xbox game? Rather than buy it for them (because you can), have your son or daughter save for that special item. Tell them that you’ll match whatever they come up with. Then they can choose to put a percentage of their allowance or a monetary gift from the grandparents toward reaching their savings goal.
Open a savings account with your child. Most banks and credit unions offer savings accounts for the under-18 crowd. With a little research, you can find accounts that offer up to a 1% annual percentage yield, as well as no monthly service fees or minimum opening deposits. Plus, with the online tools available, you and your child can track savings progress and set new goals.
Learn to budget. This is the perfect age to understand how to make—and follow—a budget. Back-to-school, the holidays or planning a weekend family vacation are ideal times to demonstrate budgeting. For example, give your kids a set amount for new school clothes. They can buy whatever they want; but once the money is gone, it’s gone. Your son or daughter may find that they have to make some hard choices about their purchases, or use their own money to make up the difference if they decide to splurge.
Understand how to spend smarter. Children may not be aware of the many ways there are to make the value of dollar last. For instance, a child who wants a new cell phone may not know that last season’s model is less expensive than the current “it” model. Point out sales or how using coupon codes can help you save on purchases every day.
Encourage entrepreneurship. Whether it’s running a corner lemonade stand, watering a neighbor’s plants while they’re on vacation or starting a dog-walking service, pre-teens can learn a lot from coming up with creative ways to make a buck. Sure, mom or dad may have to supervise a bit, but being entrepreneurial may spark a new interest for your child that lasts for years to come.
Introduce investing. If your kids have been regularly building up their savings since they were young, now is the time to show how investing can grow their hard-earned money even more. There are plenty of online tools available that demonstrate the power of compounding interest, understanding risk, and the importance of asset allocation. Or, consider having your teen invest his or her summer earnings in a Roth IRA to experience first-hand the value of compounding interest.
Talk about smart credit management. It’s a fact that credit rules our lives. And it’s relatively easy for older teens and college students to receive multiple credit offers from department stores, their financial institution or other credit issuer. Teach your teen sooner than later what a FICO score is and how credit usage can impact that score. Another credit management tool is to link your credit card to one for your teen. Monitor spending together and reinforce the importance of paying the balance in full each month to avoid interest charges.
Allow your kids to make money mistakes. We all make them—no matter what our age. By letting your kids experience the sting of a $35 overdraft charge or a hefty late fee when they don’t pay a bill on time, they become comfortable asking questions and learning from their financial choices. This helps prepare them to seek guidance in the future when they’re faced with making much larger financial decisions.
Of course, the best lessons you can teach your kids about money is through your own actions. Every family handles money differently so there’s no one-size-fits-all approach to financial education. By being open about your values and financial philosophies, you can help your kids develop a solid financial foundation to carry into the rest of their lives.
This Father’s Day, take some time to start the financial conversation with your kids. You’ll be glad that you did. Happy Father's Day!
As a CFP® professional, one of the most important lessons I’ve learned is that before you can talk savings strategies for your children’s college education, you must be crystal clear on how you are going to pay for it. By taking a hard look at your current financial situation and current family dynamic (including how many children you have), you will gain valuable perspective on how much money you can realistically contribute.
Throughout this exercise, you should be asking yourself the following questions:
Do I want to pay, in full, for my child’s college education?
Do I want my child to share in some of the expense?
Do I want to apply for financial aid?
How do I feel about my child having to repay loans?
Do I realistically believe my child will get a scholarship?
Do I want my child to have unlimited choices, or will their options be limited by their scholarship and financial aid offers?
Is there anyone else in our family who wants to help fund my child’s education?
What are my views on public versus private universities?
What is my opinion of advanced education such as an MBA, law degree, etc. and how will this be funded?
Take a few minutes and write down the answers to these questions as they will create a roadmap for developing a sound long-term college savings plan. You can then begin working with your CFP® professional to develop a savings strategy to meet your goals.
For example, saving for Harvard College with a 2018-2019 tuition of $46,340 (or $67,580 with room and board) is going to be very different than saving for Binghamton University with a New York State resident tuition of $6,870, or the University of Michigan with a nonresident tuition of $23,975.
For many families, a 529 plan can form the foundation of their college savings strategy because:
You can invest in a 529 plan regardless of how much you earn. There is no minimum to get started, so the sooner the better!
The account grows tax-free. Distributions are free of federal and most state income taxes when used to pay for qualified education expenses (tuition, books, computers, etc). This is especially advantageous if the account is started when the beneficiary is very young and has ample time to reap the benefits of the tax-free compounded growth. Further, if you have multiple children, the tax-free benefits that are not used by a 529 beneficiary can be transferred to a sibling.
Anyone can own an account for a beneficiary (e.g. relatives or friends) or contribute to a 529 plan. Another bonus? Accounts owned by non-parental relatives/friends will not have an impact on the student’s eligibility to receive financial aid. There’s also the option to change the beneficiary on the account from one eligible family member to another without penalties or taxes. As of 2018, a 529 plan can also cover $10,000 in annual tuition expenses for elementary or secondary public, private, or religious schools. Not all states allow tax-free distributions for K-12 education yet, so check with your state before you make any withdrawals.
For most people who don’t have a plan and don’t consider the many variables that affect them, the biggest issue to be aware of is the penalty. Earnings on distributions not used for education expenses are taxed as ordinary income at the recipient’s federal tax rate and usually incur a 10 percent penalty tax.
For more information and guidance, a CFP® professional can help you clarify your college savings objectives and determine which plan and investment options are best suited to help you meet your goals.
Recently, I watched a segment on 60 Minutes that moved me to tears. It was about a couple living with Alzheimer’s, and I’d like to share a few national statistics about this terrible disease:
Alzheimer’s is the 6th leading cause of death in the U.S.
An estimated 5.7 million Americans of all ages are living with Alzheimer's dementia in 2018
16.1 million Americans provide unpaid care for people with Alzheimer’s or other dementias
While these statistics are powerful, they don’t tell the story of what it’s like to live with the devastating emotional, physical and financial effects of Alzheimer’s. But 60 Minutes did tell that story in heartbreaking detail. For 10 years, Dr. Jon LaPook has been checking in on and interviewing Carol Daly, a woman diagnosed with Alzheimer's, and her caregiver husband, Mike. As you step into their shoes and live the devastating impact the disease is having on each of them, you learn the real costs of Alzheimer’s.
I encourage you to take 12 minutes and watch this piece.
Our role as a trusted advisor to several hundred families is incredibly fulfilling. We’re able to help people clarify, plan for and achieve their most important life goals. Yet it is also filled with many heartbreaking moments, often centered around a change in their health. Of all the issues we help clients with—from unexpected changes in their job, to challenging family dynamics, to divorce—the one that I find to be the most devastating and insidious to a family is either a sudden loss or a diagnosis such as Alzheimer’s.
What most people don’t talk about is the potentially catastrophic financial effects of a life-sentence disease. While the emotional and physical stress is certainly overwhelming, it is the financial stress that often breaks the proverbial camel’s back. People are faced with a dizzying array of choices and decisions that they must make under emotional duress when it’s most difficult to clearly evaluate choices rationally. The costs of care from prescription drugs, to therapies, to care services, to care supplies, to travel and more add up at an alarming rate.
What I believe in my heart, and what most people fail to grasp, is that financial planning and wealth management is so much more than just investment management and how to grow and/or draw income from assets. It is about developing a sound yet flexible plan that addresses both the highs and the lows that life inevitably serves up. As a trusted advisor to my clients, it is incumbent upon me to raise awareness about these issues. And as a client of JJ Burns, you can expect our help in addressing the full range of your financial interests—even those that may not be fun to address.
Client needs are best served by developing a sound wealth management plan. A sound plan is one that lifts the hood and looks at and coordinates all areas of a client’s financial life from living wills, durable powers of attorney, types and rules of medical coverages, insurance policies, taxes and so much more. This is the stage I call “prepare for the worst and hope for the best while living fully.”
I am grateful for the opportunity to serve my clients. I know that in tough times, after immediate family members, we are the ones receiving the next call. As disheartening as it is to hear from a client, “I’ve been diagnosed with Alzheimer’s,” we take great pride in knowing we have been there doing the hard work.
As our client, you will know you are prepared for difficult moments AND you will also know that we are right beside you all the way. That is the power of planning, that is the security of a plan, that is the comfort in having a truly great team.
On behalf of our entire wealth management team at JJ Burns & Company,
James J. Burns, CFP®
JJ Burns & Company