I Don’t Want to Invest In Stocks

Investors are nervous; despite the recent rally in stocks, and they are looking to sell shares because of the virus or the economic environment. It’s forcing some individuals to reconsider their exposure to risk assets. As the market climbs higher and interest rates fall to zero, what else can you do with your money?

If you want to sell your stock holdings, and you’re not excited about investing in bonds, consider a few other alternatives for your assets. Here are a few suggestions.

  1. Reduce your debt. Though interest rates are low, reducing or eliminating your debt is a smart choice, especially debt you can’t deduct like credit cards or auto loans. It doesn’t make sense to store your cash in a bank account with a zero percent interest rate if you’re mortgage rate is 3%, 4%, or higher. Let’s assume your current mortgage balance is $250,000, with twenty years remaining, and it carries a 4% interest rate. If you pay it off today, you will save $113,588 in interest payments.
  2. Buy a second home. Buying a second home in the mountains, at the beach, on a lake, or in the country sounds inviting. In a COVID-19 world, a little elbow room would be nice. Several years ago, I helped a friend run numbers before he purchased a lake house. He made the plunge, and his family has enjoyed the property for many years. Recently, a client purchased a small ranch in central Texas after we completed his financial plan. The plan validated his decision. My grandparents owned an immaculate second home in Laguna Beach – family and friends used it often. A second home can create experiences and memories that last a lifetime.
  3. Remodel your home. The shutdown is creating a remodeling boom. Individuals are upgrading kitchens, bathrooms, and backyards. If you plan to stay in your home for another five to seven years, then give it an upgrade. If you don’t want to spend big bucks, consider a paint job or a few small landscaping projects. According to HGTV, bathrooms, landscaping, and kitchen upgrades have the best ROI.[1]
  4. Donate to a charity. Nonprofits and charitable organizations are struggling, so any money you donate will go along way to help those in need. Consider contributing to groups or organizations you support. A Google search for nonprofit organizations in your neighborhood will yield many results.
  5. Love your neighbor. Are you aware of any friends or relatives who are struggling financially? Do they need a new car? Can you help them pay their medical bills? According to the BBC, “The US is expecting an avalanche of evictions.”[2] If you know someone who is on the brink of being evicted, pay their rent.

Money should be spent; it’s meant to change hands, and hoarding cash is not a wise investment. If you’re not sure how much to spend on a home project or donate to your favorite charity, consider a financial plan. Your plan will help you quantify and prioritize your goals. When a client asks me if they can buy a car or a home or donate money, we will review their financial plan together. And, more often than not, they can proceed. A financial plan gives them the confidence to act on their wishes.

So, if you’re not ready to invest in the stock market, look for alternatives.

“Each time you muster up what it takes and go for it, the next go-round becomes that much easier. Real and important changes begin with small, courageous acts.” ~ Chip Gaines

July 14, 2020

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

 

 

 

[1] https://www.hgtv.com/lifestyle/real-estate/top-home-updates-that-pay-off-pictures

[2] https://www.bbc.com/news/world-us-canada-53088352, Jessica Lussenop, June 19, 2020

Measure Twice, Cut Once.

I love DIY projects.

This past weekend I was going to fix my garage door. I researched the issue, watched a few YouTube videos and talked to some professionals. I felt confident I could fix it, so I ordered the supplies.

The project was going well until I started to add the new part. It wasn’t working. I reviewed the instructions, but no luck. Frustrated, I gave up after an hour and went back to the drawing board. After my review, I figured out that the part I had ordered was 1/16th of an inch too big, so I ordered another replacement part. When it arrived, I completed the project in less than ten minutes. A friend of mine once told me with the right tools you can fix anything. He was right.

The primary tool for an investor is the financial plan. It will give you a blueprint on how best to construct, or fix, your financial life. There isn’t a good plan or a bad plan, there’s only your plan. It will give you a picture of your current financial situation. How does it look? Are you on track to reach your financial goals? Do you need to make any adjustments? Will your fix be a tweak or a major overhaul?

Like a construction project, a financial plan can appear daunting. Here are a few suggestions to help you get started.

Take an inventory of your financial assets. Where are they located? Do you own stocks, bonds or mutual funds? Do you have a 401(k) or company retirement plan? If so, gather all your statements and put them in an investment folder.

Gather your important documents like tax returns, insurance policies, and Social Security statements. Put these items in your important documents folder.

Identify your income. In addition to your job, do you generate income from other sources? Royalties? Rental Income? Pension? Print your paystubs, W-2s and 1099s and put them in your income folder.

Create a budget or spending plan. Where is your money going? The best way to create a budget is to review your past six months of bank and credit card statements. Write down your expenses and then create categories like housing, shopping, groceries, entertainment, and so on. Once you’ve gathered this data, put it in your budget folder.

Do you have debt? Do you have a mortgage? Car loan? Student loan? Credit card debt? Print out all your statements that identify your debt levels, payments, balances and interest rates. After this is done, put your statements in a debt obligations folder.

Establish your goals. Do you want to travel the world? Buy a second home? Volunteer? Retire early? Start a new business? Leave a bequest? Write them down, all of them. Dream big. Once this is done put your list in a goals folder.

List your concerns. Are you worried about your finances? Are you concerned about running out of money? Market losses? Dying early? Living too long? After you write down your concerns and fears, put them in your concerns folder.

Once your exercise is complete you should have several folders identifying your assets, goals, and concerns. You now have the foundation for your financial plan. Schedule a meeting with your advisor or planner to hand over all your folders. They will review the data and build your plan. Simple.

You now have a financial plan to help guide you toward achieving your goals. I know you can do it!

Hammer away!

Real men don’t use instructions, son. Besides, this is just a manufacturer’s opinion on how to put this together. ~ Tim Allen

May 29, 2019

Bill Parrott, CFP®, CKA® is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation.