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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!

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.

“You Need to Decorate for Christmas”

By General

Last week I had the pleasure of preparing a financial analysis for a young family who brought along their three-year-old son.  As the toddler was looking around my office it was obvious he was thinking something.  Then, he looked up at me and said “You need to decorate for Christmas.”  I smiled, and replied that he indeed was right.  I needed to do that.

We all know what we need to do.  Even at an early age, some things are just self evident.  Sometimes, though, a friendly reminder doesn’t hurt.  For our December Wealth Update, this young man inspired me to provide a friendly financial reminder of the things we should do, the things we need to do to secure our financial future:

Add to our savings on a regular, disciplined schedule.
When is the best time to start saving more?  The simple answer, the one that everyone who asks that question already knows when they ask it, is now.  Why, then, do we continue to tell ourselves that we’ll start next month, or next year, or after the next raise, bonus, life-event etc?  Because it’s easier.  It may be easier, but we know better.  How do we overcome the instinctual behavior of putting off building our wealth?  I recommend automation.  Uncle Sam figured this out years ago – in 1943, to be exact, when it was realized that mandating withholding from paychecks was a much more reliable way to force the populace into paying taxes.  I’m still amazed when I hear people talking about how much money they “get back” rather than how much money is taken out of each and every paycheck.  The government has maintained this system because (for their purposes) it works.  In my view, the best time to save money is before you psychologically even know you have it.  That’s why, for my non-retiree clients, I recommend automated transfers to savings and investment accounts on the same day the paycheck comes in.  Employer retirement plans of course accomplish this goal as well.  If you never see the money, you’re much less likely to find a way to spend it.  And, as we all know, saving like this on a regular basis really does add up.

Remember that our neighbors don’t always tell us about their failings.
We all have friends or neighbors or co-workers who don’t hesitate to tell us about the 356% return they made on XYX stock last month, or about the clever options strategy they’ve perfected, or how they bought gold “right before the crash.”  And all of those statements, even if sometimes exaggerated, may be true.  And it may be that that person truly is a financial genius.  But we know better, don’t we?  The simple truth is that when that same friendly person loses his shirt on ZZZ stock, he likely keeps it to himself.  And that’s ok, it’s very much human nature, but it’s worth keeping in mind when the adrenaline-hungry part of our brain tries to tell us we’re missing out on some instant-riches opportunity.  The next time you hear one of these remarkable stories my advice is to smile, but not to try to replicate it.

Plan for purchases, and purchase with confidence.
There are some purchases that we know are coming.  A 20-year roof is called that for a reason (and no not because it takes 20 years to pay for it.)  Vehicles, paint, and heat pumps all have a life expectancy.  Why, then, is it an emergency when one of them suddenly needs replacing?  Enter our earlier thoughts on automated savings.  Savings can (and sometimes should) be specific.  “This is my car savings fund.”  What a wonderful thing to be able to say.  If you can pay a dealership for 60 months for a vehicle, then why can’t you pay yourself for 60 months for a vehicle instead?  You can.  Predictable purchases aren’t emergencies; they’re predictable purchases.  Secure your financial future by planning for them.

decorateDecorate for Christmas (or in other words, don’t forget to celebrate today)
It’s easy, sometimes too easy, to get caught up in the commotion of whatever it is we’re planning for, thinking about, fretting over, or tasked with that we just plain forget to enjoy this journey we call life.  Last week, it took a three year old to remind me that sometimes it’s the simple things that can bring joy to our lives.  It took me ten minutes to put up some Christmas decorations and now every time I walk up the stairs to my office and see them I smile because I took the time to celebrate today – something I knew I should have been doing to begin with.

Here’s wishing you and your family a very Merry Christmas!
John N. Hall, CFP®
Lynchburg Wealth Management

Welcome to Lynchburg Wealth Management

By General

Welcome to Lynchburg Wealth Management.

In a world filled with dishonest, uninformed, greedy, or just plain lousy financial advice we strive to be different. Our model isn’t sales and it isn’t cookie-cutter internet portfolios. What it is is truly personalized, professional, unbiased financial advice and services. Our only built-in bias is yes, of course we want to do business with you and we get paid if you choose to do so — but that’s it. Because our management fee is based on assets-under-management we get paid more as your portfolio grows and paid less if your portfolio value goes down. Our livelihood and yours are linked and we take our clients’ trust very seriously.

Have you experienced professional, unbiased financial advice? We would be honored to earn your business.
Call us today at 434-515-0380.

John Hall
President and Founder