Me and My Expensive Hobbies

In my early twenties, I started cycling, and I got really into it. All my hobbies start off simple, then they evolve into expensive obsessions. You may have experienced something similar.
You begin learning how to play a new sport or hobby, and you see a gadget or jacket or something that is supposed to help you hit the ball straighter or ride your bike faster.
I started going on group bike rides. A group of cyclists would meet at a bicycle shop at 8:00 on Saturday mornings, but it wasn’t to socialize. It was a competition for who could ride off and leave the other cyclist the quickest. It was exhausting, but I loved it!
On one particular Saturday morning there were about twenty-five people that showed up to the ride. I hadn’t been riding for long, and I had not obtained enough fitness to competently ride with the Saturday morning group. But I guess my pride did not allow me to realize my deficiencies.
Almost immediately I was huffing, puffing, and struggling. We were about twenty miles into the forty-mile ride when I started bobbing off the back of the group. As I’m gasping for air, I see a rider coming from behind me out of the corner of my eye.
Phillip effortlessly came riding up while he was literally finishing his breakfast. He had one hand on his handlebars and another on a bagel he was eating in the middle of the ride. He gave me a casual head nod and rode to the front of the group.
I’d never met Phil, but I knew I needed to start riding with him if I wanted to get more fit. We eventually became good friends and rode nearly every day for a couple of years. Years later we were in each others’ wedding.
I see it all the time. People have never had a Phil to help them. I meet with folks who diligently saved throughout the years, but they have no plan in place. They’ve got all kinds of cool investment funds, so to speak, like a fancy bike and outfit, but they’ve never been introduced to the idea of having a plan in place to ensure that their outlined goals are met. They haven’t been around somebody who will help them get better at what they’re doing.
Now is the time to have a plan in place. The market is hitting highs for no explainable reason, Congress is promising $1,400 stimulus checks, and we have ultra-low interest rates. Market commentators are growing increasingly leery of how this may turn out.
Tom Siomades, a Chartered Financial Analyst, heads the investment division of
AE Wealth Management, which I am affiliated with. Tom has been in the investment business for thirty years.
In a recent letter Tom wrote, “Most will agree that the virus-induced shutdowns have hurt the economy and individuals. Policy mistakes were made over and over again, priorities continuously shifted and people suffered. Now we have a $1.9 trillion stimulus moving through Congress that is meant to address and redress many of the problems those policy mistakes and shifting priorities created.”
He went on to say, “Hopefully, this will alleviate much of the economic pain the country has endured. The problem is we’ve already borrowed and spent so much with little to show for it, other than a massive increase in debt. Sure, some of the money will go toward small businesses and there will be payments to individuals. But much more will go to other causes that have nothing to do with pandemic relief. It will also take years to pay out and increase the size of the government. Why does that matter? More debt means more interest payments, which equals less capacity to borrow in the future and fewer funds available to reinvest in our economy and society.”
So, what’s the outcome? Tom continued, “How is all this borrowing and spending possible? Fed Chairman Powell’s testimony before Congress this past week reaffirming the Fed will keep rates artificially low is one major reason. My question is simple: If things are improving, can we really pump all this additional money into the system and not expect a bad outcome? If rates remain low and the economy is booming with cash, what can happen?”
“The sad truth is that, with so much money out there, people will spend more and some may even do so recklessly. In response, it is likely that prices will go up and we’ll have inflation. The Fed will have to act because it cannot ignore inflation forever; and history has shown that rates will go up and the equity markets will decline. Inflation and the Fed’s ultimate response are not the only things we should worry about; the markets themselves will have a say in where we head from here.”
At our firm, we align with portfolio managers that are forward looking. Most stock market advisors will talk about past performance, but what that misses is the massive problems we have today in our economy.
We believe mitigating against market downturns is essential to a sound investment plan. There are ways to productively grow our money while not having to leave it to the whims of the greater market.
As time goes on more and more firms will begin to realize that educating their clients on the tax implications of their investments will be necessary. So many of us have used tax-deferred accounts to save for retirement.
While a good thing while we are working, 401Ks and IRAs present challenges in retirement. Challenges like maybe not being in a lower tax bracket for example. Some of us have come to believe we will be in a lower tax bracket in retirement, but that’s not likely if we have too much money in our tax-deferred accounts.
Don’t want to end up winded at the back of the pack when it comes to your retirement planning? When you’re ready to begin looking at a comprehensive plan that factors in all the sides to financial planning, please call our office at 864.641.7955 or reply to this email.
Until next week,
David C. Treece,
Financial Advisor
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Clients Excel, LLC are not affiliated companies. Investing involves risk, including potential loss of principal. Any references to protection, safety, or lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the insuring carrier. This podcast is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet particular needs of an individual’s situation. Clients Excel is not permitted to offer and no statement made during this show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Clients Excel. The use of logos and/or trademarks of podcast hosting sites are the property of their respective owners and are not an endorsement by those owners of our firm or our program.

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