FINANCIaL
FIELd NOTES
Calculating Your Minimum Lifestyle Floor
I was recently listening to a financial advisor describe the “minimum lifestyle floor” (MLF) that they have their clients calculate. The idea is that your expenses can be divided into two categories, necessities, and fun money.
The necessities include food, housing, basic transportation, utilities, and health care. I also would add another “other” category for things like basic charitable giving, small gifts, personal care, and pets since you’re probably not going to pass on Christmas gifts or give away Buddy the dog because your finances are tight.
Real Risk vs. Perceived Risk
There are some risks in life that are permanent. If you live in a hurricane-prone area and don’t have hurricane insurance, you are taking a risk that could lead to a permanent loss. That is a real risk.
The financial advising world often talks about investment risk in the context of market fluctuations up and down. We categorize investors as risk-averse if they are unwilling to deal with bouts of volatility. What we are measuring is the perceived risk – the risk that values may temporarily decline in value.
Back Testing a Popular Market Timing Strategy
When we are in the middle of a bear market, sitting on our hands can be unbearable. This is also the time when you’ll start hearing about market timing strategies. I was recently listening to a market analyst describe timing the market as a simple supply and demand equation.
It sounds simple enough, but I know the data does not support this. So, I decided to stress test it. I back-tested the following strategy – one that follows a popular strategy following recent market trends…
Do Home Renovations Increase Resale Value?
Maybe you’re considering renovating your master bath or kitchen – or doing something simple like changing out the toilets or garage door. There are plenty of reasons to do projects like these but one I hear most often is “to increase resale value.” But does it really do that?
According to the Cost vs. Value 2022 report, below are the national averages for what you can expect to recoup from various home renovation projects…
How To Think Critically About Fear-Inducing Market News
Earling this year after a down day in the stock market a headline read “Dow falls more than 500 points…” These attention grabbers are designed to do just that – grab your attention and then sell ad space while your anxiety rises.
It reminded me of the book I read a few years ago, Factfulness, in which the author talks about the importance of bringing in the denominator to any statistic…
Tax Planning to Maximize Your Legacy
Most individuals have planned through their estate documents to leave all their assets to their spouse and then split them amongst their children or other family members.
And while this is certainly common practice, it does not always align with their personal values for charitable giving. In fact, it’s not uncommon to see someone give 5-10% of their income every year to charity and then give 0% of their estate after they die…