Curtain Call

 The Center's Team enjoys sharing their knowledge with the press to help stories come to life, share facts and bring important topics to the forefront.  We are also honored when we are recognized by media and publications for our work and service to our profession. Here's what's new:

Center named as #228 on Financial Advisor Magazine's 2014 RIA Ranking

Center for Financial Planning, Inc. has been recognized among the nation's top-ranked investment advisory firms for the past four consecutive years.

Financial Advisor Magazine ranks the top registered investment advisory firms (RIAs) across the country based on a survey of firms' assets under management and percentage of growth. C14-025822

WISER ADVISOR.COM

Melissa Joy, CFP®: Melissa was quoted on WiserAdvisor.com in an article titled, “Gen X at the Crossroads: Baby Boomers’ Kids Could Face a Retirement Squeeze” by James O’Brien. C14-023684

Factoring the Cost of Living in a Post-Retirement Relocation

Your retirement plan may involve a move. You could be moving some place warm so you don’t have to put up with the wonderful Michigan winters or perhaps moving to be closer to your kids and grandkids.  Whatever the motivation, there is always a financial component in the decision-making process.

Paying for what you want vs. what you need

The cost to live in other areas of the country can be higher or lower, but some people don’t know the specific figures you will probably pay after you make the move.  Is a dollar in Michigan the same as a dollar in California or Utah? A recent conversation with a client evaluating relocating placed focus on this specific issue. His thinking was that it didn’t matter where you lived, you can always find a way to spend money.  While I certainly have to agree with him on that point, I think the bigger point is that there is a difference between spending money on things you want versus spending money on things you need.

Comparing Expenses

Let’s take a look at the cost of different goods and services in the two cities. These figures were taken from www.costofliving.org and they are an average estimate taken from people who live in Salt Lake City and San Francisco. The list of goods and services has more than 75 commonly purchased or used items but we’ll look at just a sampling of expenses.

As you can see, everything in San Fran is more expensive except the T-Bone steak. Unfortunately, after you pay for your basic living expenses, you might not have any money left over for that T-Bone! According to the living expense calculator on www.costofliving.org someone living on $70,000 of net income in Livonia, Michigan would need approximately $120,000 net in San Francisco.  In Salt Lake City, that same person would only need $69,000 to maintain the same standard of living. 

If you think a move might be in your future, talk to your financial advisor to weigh the costs associated with the new location and make sure it fits within your retirement income goal.

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. C14-022592

Center Summer Picnic Becomes a Tradition

 Tradition is an important part of The Center’s culture. That’s why we couldn’t be happier to see last year’s picnic turning into a tradition. For our 2^nd Annual Center Picnic, The Center team gathered at Island Lake State Park in Brighton on July 19^th. The day was filled with food, laughs, and competition. The weather wasn’t quite as cooperative as last year, but that didn’t stop anyone from enjoying the day. 

The picnic began with some friendly games of cornhole and balloon animals for the kids. We fueled up on burgers, hot dogs, sausages, chips, cupcakes, and cookies, and then the games began. 

Referred to by some as “The Boyce Show,” Dan was once again the Master of Ceremonies.  Even as the ominous clouds began to roll in, our MC reminded the team that, much like the financial markets, we can’t be deterred by an uncertain future!  Despite the periodic rain showers, Dan maintained order and fun with his trusty megaphone.

The competition was heated in the balloon toss, egg and spoon race, and volleyball matches where The Center team’s passion and determination shined through. We firmly believe the motto:

It’s not whether you win or lose, it’s how you play the game.

Everyone left the picnic feeling like a champion.  However, it should be noted that some team members claim they are already training for next year.

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The 50/50 strategy turns your next raise into lifelong savings

 Ever wonder how much you should be saving? We hear it from a lot of clients who want to make sure they’re putting away enough each paycheck towards retirement.  We typically suggest saving at least 10% of your before-tax income and for those approaching retirement within 10 – 15 years, we like to see that number closer to 20%.  Although we never like to make blanket statements in financial planning, those savings rates are typically what most should be striving for while still maintaining a balance to live a full life now.  But is there a better strategy that could be more efficient?

Give Your Savings a Raise

What do most people do when they get a raise?  Many people keep their savings rate the same but increase their standard of living.  Sure, the actual dollar amount is increasing because the savings percentage is now based on a larger salary; however, my argument would be that controlling your standard of living is what is most important, especially when approaching retirement.  So how do you keep your standard of living from getting out of control and far surpassing savings? 

Spend 50% of your raise and save the other 50% 

Let’s see how that strategy could impact our hypothetical client, Jack.  Jack is 30 years old and is earning $100,000/yr as a business consultant.  He is currently saving 10% towards his 401k ($10,000/yr).  Jack had a great year in 2013 and earned an 8% raise for 2014, increasing his base salary to $108,000.  Assuming Jack kept his savings rate of 10% the same, he would now be putting $10,800/yr into his 401k.  However, what if he took the “spend 50, save 50” approach?  After taxes and other payroll deductions, Jack actually realizes a “take home” raise of $5,000.  In the 50/50 strategy, Jack would tack on $2,500 to his annual 401k savings, increasing total annual contributions to $12,500 (from $10,000 prior to his raise).  By simply saving 50% of the money that didn’t exist the year prior, Jack has increased his total retirement savings to about 11.6% ($12,500/$108,000). He’s controlled how quickly his standard of living increases. 

As a young professional, I can certainly attest to the difficulty of looking down the retirement road to a goal that is 35+ years away.  However, committing to your goals and having a clear, simple strategy, such as the 50/50 savings approach, can help you reach the financial goals you set for yourself or family!

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick currently assists Center planners and clients, and is a contributor to Money Centered and Center Connections.

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Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. C14-025359

Following Charles de Vaulx for 25 Years

The Center investment committee meets with and interviews dozens of management teams each year. We have face-to-face sessions, conference calls, and trips to company home offices. We recently had a chance to meet with a portfolio manager that we worked with for most of the last quarter century ... Charles de Vaulx. Warren Buffet once said:

A portfolio is much like a bar of soap, the more you touch it the smaller it gets.”

In order to keep portfolio changes to a minimum we spend a lot of time on the front end finding the right minds with an investment philosophy that matches ours.

Charles has represented part of three different teams over the 25-year period, including IVA Funds, but we have followed him. His approach to investing resides in the contrarian, absolute return, low risk, global, alternative asset class emphasis with experience in global value investing.

“The Perennial Bear”

Charles is usually looking at the world with a glass half empty viewpoint. His team was labeled “The Perennial Bear” during the market run up in the 1990’s as the greatest bubble in stocks was building and just before a 12 year bear market in stocks occurred. This was one of the longest bear markets in history. And just before the worst decade of stock returns in U.S. history (not many people realize that Dec 31st 1999 – Dec 31st 2009 produced a lower return in the S&P 500 than the depression period of the 1930s).

According to Charles, it had everything to do with price. People need to pay more attention to the price that is paid for the potential return that can be achieved going forward. That is where the work is done. The rest is patience and time. 

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any opinions are those of Matt Chope and not necessarily those of RJFS or Raymond James.

Financial Lessons for College Students

A college education holds the promise of a great career start for many students.  The excitement of choosing a college, getting accepted, and actually starting classes will eventually die down. Then your student is likely to encounter some financial lessons that won’t be taught in the classroom.  Lessons like:

• How continuous spending can take a bank balance to zero and then the bank piles on additional service fees 

• Or how spending on small things like getting a pizza or a school sweatshirt can quickly add up

Here are three time-tested financial tips to help students develop habits that will serve them well during college years and into their adult life.

Keep Track of Spending

If you don’t know what you are spending, you don’t know what is left or what you can afford or not afford. The key is to create a spending plan for necessary purchases like food, gas, and cellphone service before spending on discretionary items. Take the guesswork out of budgeting by using an online tool like Mint.com to automatically categorize transactions.

Don’t Underestimate the Importance of Managing Debt

While credit cards are great for convenience and emergency situations, be wary of running up a balance that you cannot pay off every month.  Use the plastic cautiously.  Establishing good credit during college will make it easier to apply for a car loan, rent an apartment, or even purchase a first home. If student loans are needed to fund college expenses, take the time to read the fine print.  Don’t take more than you need today because piecing together student loans for 4 or more years can add up. Your student may not realize they are easily signing up for substantial payments for twenty years or more after graduation.

Think Twice before Lending Money to a Friend

Everyone has had an experience where a friend comes up short and says, “Can I borrow some money?  I promise I’ll pay you back!” Recognize that lending money is a risk, even if a friend is completely trustworthy.  Just because your friend is asking you don’t have to say yes. Many of life’s lessons your student will have to learn on their own, but if they think carefully before they lend, are cautious of debt, and track spending, they can avoid some common financial mistakes.

Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served. A14-025160

View from the Morningstar Conference

 Nearly 2,000 people gathered at McCormack Place in Chicago this June.  The views of the Chicago skyline, while beautiful, were not the views I flew to Chicago to see.  Advisors, asset managers and press gather once a year at this conference to listen to some of the greatest minds in investing share their views of the markets and economies around the world.  This is one of my favorite conferences of the year. 

We heard from legendary investors including Michael Hasenstab, PIMCO's Bill Gross a.k.a. The Bond King, and AQR's Cliff Asness a.k.a. The Father of Momentum Investing.

Bill Gross: The New Neutral

Keynote speaker, 70-year-old Bill Gross did not disappoint.   Very aware that his image has been dinged in recent months with the departure of his heir apparent Mohammed El Erian, and subsequent departure of $50 billion of money flowing out of his flagship product, he took the stage wearing sunglasses and spent the first 10 minutes of his speech poking fun at himself while jokingly trying to brainwash the crowd and press Manchurian Candidate style.  All fun aside, he came to the conference to coin a new phrase the “New Neutral".  He is encouraging investors to look at interest rates from a different, more muted perspective.  What does this mean for investors?  Overall lower return expectations going forward for stocks and bonds.  This is an extension of PIMCO’s 2009 “New Normal” which stated that economic growth will be sluggish as it has been. 

Employment Outlook: Labor Shortages?

Bob Johnson, Morningstar's very own economist, predicted that next summer at this conference the hot topic of discussion will be labor shortages.  He explained that the unemployment rate remains high despite the extremely large amount of open requisitions for new job postings.  He argues that there is a mismatch in job skills causing the unemployment rate to stagnate despite companies needing to hire so many.  He goes on to explain that the Federal Reserve cannot fix this skill mismatch, only the private sector, corporations and individuals, can acquire the necessary skills needed to match people to the needed job openings.

International Opportunities

Emerging markets and Japan were hot topics of discussion.  "Go anywhere" Investment managers, with the world as their oyster, prefer to access emerging markets through companies domiciled in developed markets that derive most of their revenues by selling to emerging market consumers.  Japan was a hotly debated topic, with about half of the experts loving it and half not wanting to touch it with a 10-foot pole.

In addition to these larger investing and macro-economic themes, I also find value in speaking directly with portfolio managers about their investing processes and trying to discover new strategies that may be beneficial to our clients’ portfolios.  There is never a shortage of ideas after a few days spent at Morningstar listening and learning!

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Please note that international investing involves special risks, including currency fluctuations, different financial accounting standards, and possible political and economic volatility. Investing in emerging markets can be riskier than investing in wellestablished foreign markets. Investing involves risk and investors may incur a profit or a loss. Bob Johnson, Michael Hasenstab, Bill Gross, Cliff Asness are independent of Raymond James. Any opinions are those named herein and not necessarily those of RJFS or Raymond James. C14-022058

Tips for College Students on School Year Spending

College students are finishing up summer jobs and internships and heading back to school with the money they’ve earned ... that is, if they didn’t blow it all this summer. But for those who budgeted and saved, it is time to look at how to spend.  I sat down with one of The Center’s summer interns, Nick Boguth, a senior statistics major at the University of Michigan. Over the summer, he worked primarily with our investment department but has also been involved in other areas of financial planning. He helped give his perspective as a college student on the flip slide of saving: school year spending. 

Before You Spend, Set Some Goals

Many students take summer jobs/internships to save money for the upcoming school year because they may not have the ability to work while attending class. So the first tip is to think back to that first paycheck. Remember how tempting it was to spend it all? I certainly made this mistake a few times when I was in Nick’s shoes! But hopefully you decided to take a more disciplined approach. Now that you’re heading back to campus, it’s time to dig down for another dose of discipline: Don’t blow it all at once! Nick suggests that you set a realistic goal before you touch a penny of the money you saved over the summer. Ask, “What do I need the money for?”  Simply put, how much can you spend and how much do you need to save to make it last until Christmas or the end of the school year?  Doing this from the onset will give you a much greater chance of reaching your goal as opposed to “winging it”. 

Dinner Out, New Clothes, or a Roth?

As you’re setting those goals, consider putting a chunk of your money into a Roth IRA. It might seem pointless because we’re not talking about a large dollar amount, but the more you save early in life, the more it can add up to later. Sure, it might seem like more fun to spend it going out or shopping and, take it from me, when you do that it will vanish in no time. But if you contribute 5-10% of your summer savings to a Roth, you are starting an excellent habit. By making such a responsible choice, your parents may even offer to throw in a "match" the same way many employers do to incentivize employees to save for retirement.

Let’s be honest, when you’re a college student working in the summer, you typically are not earning a large paycheck. WHO CARES?!  What you’re earning as far as experience, knowledge and interaction with others in your field of study is worth far more.  Best of luck to everyone returning to school this year – we wish you nothing but the best! 

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick currently assists Center planners and clients, and is a contributor to Money Centered and Center Connections.

Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Roth IRA owners must be 59 ½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Unqualified withdrawals may be subject to ordinary income taxes as well as a penalty tax. C14-026213

Top 5 Factors in College Selection

I’m beginning to feel like a pro when it comes to helping my kids pick a school. In my recent post “Making the Most of your Empty Nest Years”, I explained my son Jack was undecided on his college choice. Albion College? Belmont University in Nashville? Well, in late-breaking news from the Wyman house: Jack picked a school (though it wasn’t televised like some high school athletes these days…really!). Jack decided that Albion College is the best fit for him at this time.  Go BritonsJ!!!

After working with many families over the last 23 years and now seeing my own two kids go through the “college selection” process, I’ve developed a few factors in determining the best college for you/your child.

My top 5 factors in determining the best college for you/your child:

1. School Size: My oldest son, Matt, knew he wanted to be at a large school (20k+) and Jack thought he might like a smaller school (under 10k).

2. Location: Live at home or break free to the opposite coast? Matt wanted to be as far away from his parents (no offense taken Matt) as possible. Matt visited Colorado, West Virginia, and Kansas. Jack was more neutral on location but did visit both campuses (as well as others) to get a "feel" for what the campus environment was like.

3. Majors: Some kids know exactly what they want to study as they leave high school; however, many do not (hey, they are 17-18 years old). I know of a fella that was a political science major and guess what class he dropped first semester freshman year? If your child is a bit unsure about their major, perhaps a college or university with a large ofering is best.

4. Sports/Extracurricular: Both our kids will be playing a varsity sport next year, but neither selected their choice on athletics or other extracurricular activities alone - they are part of the package.

5. Cost: Let's not beat around the bush - there is a financial component to the process. College is expensive! However, it is important not to make a decision based on the published costs of attendance. In Jack's case both Albion and Belmont reduced the "sticker" price and, in the end, the costs were similar.

We found the college “hunting” experience enjoyable.  It provide my wife Jen and me an opportunity to lock the kids in the car (or plane) and force them to talk to us and the boys got to check out their potential four-year home. Enjoy the hunt!

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. C14-024133

Summer Internship Offers Inside Look at The Center

 The summer months provide the perfect opportunity for college students aiming for a career in the financial services industry to shadow some of our knowledgeable team members. We seek out eager learners who work independently and are able to multi-task. We found the perfect candidate in Nick Boguth. This summer he is working primarily with the Investment and Financial Planning Departments. While doing research projects, mutual fund performance reporting, and database updates, he is getting invaluable access to our culture and operation.

Nick Boguth: University of Michigan

A double major in economics and statistics at U of M, Nick Boguth was a natural fit for our team. Nick starts his senior year this fall. Next year he plans on finding a job in the financial services industry and pursuing either the CFA or CFP designation. When hunting for the right internship placement, Nick says he did his homework.

 I researched The Center and it seemed like an established company with similar values to mine, and I knew that I would have a great experience over the 4 months of summer.”

As for his dream job, well, Nick says he’s still deciding whether he wants to focus more on the advising part of the industry or the investment side.