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When Not to Use Credit Cards

By General

There could be a master course on all things credit cards. In terms of personal financial advice, credit card articles are all over the map. There’s everything from why they should be avoided at all costs to why they should be used for 90%+ of purchases to how to play the points and rewards game. The best practices, however, can’t be whittled down to a simple one-size-fits-all approach. The best way to use (or not use) these tools, much like other personal finance decisions, is specific to the person(s) asking the question.

When You Should Avoid Using Credit Cards

  • If you cannot and do not pay the balance to $0.00 every month on every card, you should stop using credit cards and not use them until the answer to this question changes. (continuing to use credit cards in this way is a sure way to deplete your wealth)
  • If you find yourself spending more than you otherwise would because you have a credit card then you should stop using and not use credit cards until the answer to this question changes.
  • If there’s a merchant-added transaction fee to use the credit card (and that fee is more than the value of any rewards you may receive for using the card) you should not use a credit card for that transaction.
  • If there’s an annual fee associated with a credit card, and that fee is more than the value of any rewards or benefits you may receive(and take advantage of) for using the card, you should opt not to have that card.

If all of those hurdles are passed, credit cards can be a useful tool. They can aid in identity protection, building credit, tracking expenses, and fun ways for paying for life’s goals by way of built-in rewards. It’s important, though, not to focus on these rewards or rely upon credit card use if the answers to the above questions mean you’d be better off without the card in the first place!

Taking the Long View

By Education

This article was originally published in Lynchburg Business Magazine. To read the original publication, click here.

It’s fitting in this Lynchburg Business Magazine issue featuring businesses in existence over 100 years to take a step back from the day to day headlines on CNBC or Bloomberg and examine the long-term trends, and long term questions, regarding financial markets, investing, and our own personal finances.  First, though, let’s look at the short term:

Where will the markets be tomorrow, next year, and three years from now?
We have no idea.  The best of the best, Warren Buffett, admits as much.  If your financial advisor claims to know otherwise it may be time to shop around.

Where will the markets be in five and ten years?
Here, we have a better idea — but indeed no certainty.  Over time, in the history of this country, equity (stock) markets have been positive for the majority of five and ten year periods, but not all of them.

Where will the markets be in fifteen years?
Now we’re getting into fun territory.  While nothing is 100% certain, if history is our guide there’s a fairly high chance that markets will be higher fifteen years from now.  Make that time frame longer, and the historic performance of the stock market over time would indicate that positive results are likely.

Why, then, do we focus on the day-to-day headlines?  We live in an instantaneous society.  We expect answers to emails right away — and text messages even sooner!  There are financial networks that wouldn’t have much programing if they told the valuable truth: today’s headline likely doesn’t matter.

What does it mean to take the long view?  How can historical perspective shape our own finances?  Here’s where proper asset allocation and financial planning comes into play.  Asset allocation is simply another way of labeling the mix of investments you own.  These could include stocks, bonds, CDs, real-estate, precious metals, and even more broadly other assets such as life insurance and annuities if you happen to have them.  A financial plan that examines your holdings in the above assets should also take into account known income sources like social security and pension income.  Putting it all together, before you even decide how much (if any) stock market exposure is in your investment asset mix, you should first be able to answer this question:

When will you need the money to meet your living expenses or other spending goals?
It is the answer to this question — not your age, not your retirement date, or not some silly formula from an online calculator that should primarily dictate your asset allocation.  Couple that answer with the likely long-term market performance metrics mentioned above to determine an investment strategy for you.

Suppose you’re retiring tomorrow AND your pension, social security, and other known income sources wont allow you to meet your monthly living expenses.  In that case, a mostly conservative asset allocation may make sense.  Now suppose your neighbor is the same age and is also retiring tomorrow.  She has no debt, lives modestly, and a decent pension from a prior job.  Her pension, combined with her social security, covers her monthly living expenses.  Her asset allocation could stand to have a much higher percentage of equity (stock market) exposure.  This is because she doesn’t need the money to live off of and isn’t going to need to draw from it at any time in the foreseeable future.  You and your neighbor are the exact same age with the exact same retirement date but your unique circumstances, in my opinion, would dictate very different investment strategies.

At the heart of those investment strategies is the long view.  There should be a very big difference in your strategy for long-term money and short-term money.  Any money you’re going to need in the next five or so years likely should be invested in very conservative, low volatility assets.  Money you’re not going to need for longer than that might be mixed slightly differently.  If you’re building savings, retirement, or other investment accounts that you simply won’t need to touch for fifteen years or more then you have time on your side!  You can afford to take the long view, be more aggressively invested, and ignore the financial crisis of the day.  In fifteen years it will likely be a distant memory.

Is your strategy subject to the crisis of the day or do you have a plan that takes the long view?

Win the Game by Focusing on the Fundementals

By General

Have you ever been to a football game where your team barely lost and you blamed it on a missed 50-yard Hail Mary in the fourth quarter? I’ve certainly been guilty of that. Now, ask yourself, suppose instead of focusing on that split second, your team had simply converted one or two more third downs, or stopped the opposing side from doing so?  Yep, that may have changed the game as well.  What if they’d progressed a half yard further on every play?  Also effective. We know when our team comes up short there are any number of things the team actually could have done better all along that would’ve led to a better outcome. It’s the easy way out to place more importance on a dramatic few seconds.  Our financial lives are no different.

When it comes to building wealth, the tried and true way is to keep advancing down the field. How do we advance? By making more money than we spend and putting that money to work through saving and investing. Building wealth is rarely based on calling the next market crash or finding the next high flying stock. Yet, that’s what so many novice  and “pro” investors alike focus on.

What should we focus on to build wealth and financial security?

Consistent Advances
(starting in the first quarter!)
We’ve all seen (and ignored) the examples.  Who ends up with more money, a 30 year old who invests a modest amount each month or a 50 year old who invests substantially more to catch up?  That’s right. The 30 year old. The beginning, as Plato said, is the most important part of the work. If you haven’t yet begun to save and invest in order to build your wealth then the time to do that is today. It’s not tomorrow. It’s not when you have time or when you make more or after you achieve x. It’s today. Waiting until the fourth quarter to turn on your offense usually just doesn’t pan out. You don’t have to start big, but you should start.

The best offense is a good defense, right? In our financial lives, defense is about being smart. It’s about avoiding unnecessary debt, particularly interest-only debt like home equity lines and credit card balances. These products, by design, don’t help us get where we need to be.  They’re the financial equivalent of 20 yard lateral run.  A lot of effort and nothing to show for it. Another defensive money move is having adequate emergency cash. When life comes at us hard, this gives us the ability to withstand it. Put another way, we’ve taken the liberty of banking a few field goals to build up a healthy cushion against the occasional interception.

Watching the Clock
Time. It’s the one thing we know we can’t have more of. For that reason, it’s important to realize that we have to plan for the time we’re likely to have. Living like there’s no tomorrow can quickly leave our finances in ruin when there’s still three quarters of life left. Likewise, not preparing for the important time markers in life, like childbirth, education, retirement and even death can make it seem like their respective play clocks simply ran out before we’d put together a game-plan. Being aware of the clock and putting the time we have to good use helps a good plan turn into a win.

Are you focused on the fundamentals or on the Hail Marys?

A Money State of Mind

By General

This article originally appeared in the December 2017 edition of Lynchburg Business Magazine.  To see the original article, click here.

When I’m asked how to accumulate wealth, most people expect a mathematically-themed answer.  The math of personal finance is important, but in my opinion it is very much secondary to what’s really important—having a money state of mind.

Having a money state of mind means understanding and putting into practice certain concepts that help shape all of our financial decisions. It’s a firm grasp of these concepts, not the intricacies of financial math, that allow us to accumulate, grow, and maintain wealth. My favorite of these are below:

Opportunity Cost and Unintended Consequences
Sometimes, the true cost of our actions is not the cost of what we do, but, rather, the cost of what we don’t do instead. Consider this: you’ve recently received a year-end bonus of $20,000. With it, you decide to purchase a new vehicle costing $20,000. The way most people would look at the cost of this transaction is that it came at no extra cost, since the vehicle was paid for with “bonus” money. A better way to think about this transaction is to take into account what you didn’t do with the money. You didn’t, for example, use it to pay down your 4% mortgage. The cost of not doing that was roughly $800 this year in interest, not to mention interest on those same borrowed monies you’ll pay every year until your mortgage debt is gone. The cost was also the fact that your mortgage payments would last that many more months—in future years when you may no longer be employed. Another potential cost of this transaction is the cost of not investing the bonus. Suppose you’d invested the $20,000 in an investment account for the next 20 years. If that account averaged a 5% annual return, then the value at the end of 20 years would be over $50,000. Thinking about the opportunity cost of your vehicle purchase, you could say that it cost you $50,000 in future cash.

People easily see the immediate consequences of their actions but seldom consider the unintended consequences of those same actions. One of the keys to building wealth is considering the unintended consequences and the opportunity costs of financial decisions both large and small.

Time and Compound Interest
Time never stands still. This can be a blessing, or it can be a curse. It’s a curse if time is counting the days that we could have been saving, investing, and earning—but weren’t. It’s an even more detrimental curse if it’s counting the days that debt is piling up. It’s a blessing, on the other hand, if it’s counting every single day that we have saved, earned interest, and that interest earns interest, until the money-minded librarian retires with an account balance to rival that of her attorney brother. I absolutely love to point this out to my younger clients. The more time you have, the more magical compound interest can truly become. It’s how our $20,000 bonus example turned into $50,000 years later.  I encourage you to do a simple internet search for “compound interest calculator” or visit and find one there. See for yourself how saving even a little bit, over time, can potentially become quite a bit more.

From Henry Ford to Ray Kroc, those who have been successful have learned that automation is often a key factor of that success. Personal finance is no different. In this realm, automation serves two purposes: 1)It sets up discipline ahead of time, requiring effort only once; and 2)It helps us deceive ourselves (in a good way) into not missing money because we never see it.

Many workplace retirement plans allow for this type of automation. Automatic saving, investing, and rebalancing lead to the potential for automatic wealth accumulation. We can also self-automate. It takes just minutes to set up a monthly draft from a paycheck or checking account into a savings or investment account. Saving on the same day as our payday allows us to act as if that money never existed. It exits the day it comes and we’re never tempted to spend it. Not only does it never get spent, it can go on to bigger and better things. That is the power of automation. Out of sight, out of mind, until that special future day when it’s suddenly a huge part of our nest egg.

Risk vs. Reward
Not all returns are created equal.  There is a difference between an FDIC-insured account earning 2% and the stock of an unprofitable start-up that’s appreciated 300% in three months.  In my experience, people love to compare returns, but rarely do so through the lens of the risk that was taken to achieve those returns.  A “one-size-fits-all” mentality is incorrectly used to determine where to invest.  In reality, one size does not fit all.  Some monies are better left safe, and some monies are better used to take on more risk.  It’s only through evaluating the specific needs for your money that you’re able to know which is which.  Being aware of the risk of our decisions, not simply the potential reward, helps our financial transactions become informed ones.

Putting it All Together
I chose to highlight the above concepts because they work so well together. First, understanding the opportunity cost of not saving and investing can help us be more cognizant of it when making all kinds of financial decisions. This can lead to the decision to automate our savings. Understanding the power of time and compound interest can lead us to automate sooner, rather than later. Understanding risk and return can help us choose an appropriate level of risk for monies designated for different purposes. All of these concepts combined contribute to a truly powerful wealth-building life.

Taking Control of Our Financial Fears

By General

*This article was originally published in the February 1, 2018 edition of Lynchburg Business Magazine.  Find it here.

If you’ve ever taken an economics course you may have learned that people are rational.  If you’ve ever met another person or simply looked in the mirror you may have learned that that’s simply not always the case.  Sometimes our emotions, not our intellect, drive our decision making process. When it comes to our financial decisions, it can pay to be aware of these emotional tendencies.  Chief among them: fear.  Let’s look at three different types of fear that can affect our financial well-being:

Fear of Missing Out (aka FOMO)

You remember the dot-com bubble, don’t you?  Everyone you knew was making it big.  It was a can’t lose situation!  You had to get in too.  You “did your research” by reading a few articles and visiting the website and jumped into a great-sounding internet company.  After all, you couldn’t be the one idiot who didn’t make gobs of money.  You do remember that, right?

In our now acronym-laden vernacular, what you experienced would be referred to as FOMO (fear of missing out.) FOMO can make us take undue risk.  When that next great opportunity comes along, ask yourself three questions to help keep your FOMO in check:

  1. What is the downside risk of pursuing this opportunity, and can I afford that risk?
  2. Could my resources be put to more proven productive use elsewhere?
  3. If I’d never heard about this potential opportunity would my life be perfectly fine without it?

Fear of Losing it All

Fear doesn’t always push us to take too much risk.  Sometimes it pushes us to not take enough.  Nearly every day there’s at least one talking head on one of the financial channels warning of an impending market or economic crash.  This constant fear-mongering causes many to hoard cash, gold, or other so-called “safe” assets.  There may be a place for these in your portfolio, but I would argue you’re doing yourself a disservice if that place is always 100%.  Our money is best allocated according to our financial goals, not our financial fears.  Long-term goals should be matched with long-term investments.  Letting short-term fears override this risk matching has the potential to limit the growth of our money to the point where those long-term goals aren’t as attainable as they could’ve been.

Fear of the Unknown

I don’t know what inflation will be this coming year or the year after that.  I don’t know where the stock market will be in six months.  I also don’t know who’ll win the next presidential election or what the next congress might do to my taxes.  What I do know, though, is that I cannot control any of these and so they likewise shouldn’t control me or my financial decisions.  Fear of the unknown can sometimes cause us to sit on the sidelines and “wait.”  Wait for what?  The certainty that doesn’t come.  Every month we hesitate because of our fear of the unknown is a month that we could’ve been benefiting from the results of an informed, albeit imperfect, financial decision.

Take Control of Your Fears

Fear is part of who we are, and we are all occasionally afraid.  Sometimes that fear is justified and sometimes it isn’t.  We can benefit from recognizing our own fear and how it affects us.  Fear of the unknown, fear of losing it all and fear of missing out all have the potential to negatively affect our finances, but they don’t have to.  The next time you’re making a financial or investing decision, ask yourself what’s informing, and what’s influencing, your decision-making.  Observe your fears.  Take note of of them.  Then decide what’s truly best for you.

Where to Find Good Reads

By Education

In my monthly email to friends of Lynchburg Wealth Management, articles of interest in the financial world are often highlighted.  They’re so popular that I thought I’d share some of the websites I comb through in the hopes that you too will find them useful:

  • Real Clear Markets is updated twice daily with finance and market-themed articles from varying points of view. You may not always agree with the authors of the day, but you will learn something.  I do.
  • Investopedia is a great go-to when you’re looking up an unfamiliar financial term, concept, or situation.  Here you’ll find easy-to-read explanations to help bring you up-to-speed.
  • A Wealth of Common Sense is maintained by blogger turned financial advisor Ben Carlson.  Yes, technically he’s a competitor, but he puts out good material that is often worth the read.

As you’re exploring on your own, please feel free to share your finds and your thoughts with me.  I look forward to discussing them with you.


Helpful Financial Columns

By Uncategorized

Did you know Lynchburg Wealth’s President, John Hall, is a regular contributor to the finance column of Lynchburg Business Magazine?  If you haven’t already, check out some of these more recent columns:

Be sure to pick up your copy of Lynchburg Business Magazine for more informative content from right here in the Hill City!

Announcing Our Summer Intern

By Announcements

We’re very pleased to announce that today is the first day of our new summer intern, Jacob Ranson.  Jacob is a native of Appomattox and is a rising senior at Hampden-Sydney College studying business and economics.  In addition to his interest in finance, Jacob enjoys traveling, playing guitar, and fishing.  Please join us in welcoming Jacob to Lynchburg Wealth Management.