Investing 101: Best Investment Blogs for Beginners

Your Financial Future Family ties are amazing. These connections, based in DNA, history and genuine care, can prompt many to support their loved ones through times of need, be it emotional, physical and even financial. It is natural to want to support your family, but the players involved can double (or even triple or quadruple in cases of blended families), increasing the financial strain. Since these familial situations can snowball quite quickly, I urge you to focus first on your own financial independence and be sure not to let your parents and your children squeeze your financial future. While many hate to be a burden on their family, it’s actually quite common for people to financially assist other family members. According to Ameritrade’s Financial Support Study, one-fifth of Americans are Financial Supporters, meaning they provide financial support to a parent and/or an adult child.1 A survey conducted by GoBankingRates found that 63 percent of children plan to financially support their parents in some way once they retire.2 On the other end, parents are also financially supporting their grown children. Per Financial Planning OWS, 24% are helping with rent and 39% are paying cell phone bills.3

My primary advice is to always pay yourself first. Be sure to establish a healthy emergency fund and contribute to your retirement. It’s similar to what you hear on airplanes about placing the oxygen mask on yourself before placing it on others. You need to be sure that you are fiscally secure before you provide for those who are financially struggling. This is very sound, logical advice, which can be difficult to follow once emotions come into play.

Most of the decisions I see my clients struggle with are when the emotional and the financials are at odds. When your daughter wants to go to that expensive, out-of-state college that you didn’t save enough for, it’s tempting to try to make it work, whatever means necessary. Or perhaps your son is going through a costly divorce, and the only way you feel you can support him and ensure you see your grandkids is to borrow from your retirement to hire him a good lawyer. These are the moments when you need to be able to tell your child and yourself, “No”. In most cases, there are other options and alternatives in place. They may not be the dream situation, but they will still get the job done. Don’t sacrifice your future for your child’s dream, no matter how compelling. Don’t let emotions cloud good judgment.

On the other end of the spectrum, is a harsh reality. When dealing with parents who may not have planned sufficiently or are in the midst of a financial crisis, be sure that you are communicating as one adult to another. If possible, you may want to tackle those financial conversations early. Some of these difficult financial conversations with parents are tied to medical issues, so be sure to discuss before physical situations become dire.

When you find yourself in the midst of these difficult situations, please don’t forget about your support system. Your financial advisor can act as an unbiased referee in moments of disagreement or emotional struggle. They will likely remember the important financial issues that may slip your mind and will be ruled by numbers rather than nostalgia. At the moments when you need a pragmatic perspective to shine through the cloud of emotions, a trusted financial advisor can be invaluable.

In a time where many people find themselves part of the Sandwich Generation, taking on financial burdens can seem inevitable. Yet, so much can be avoided and accomplished when you act in advance. Start chatting with mom and dad while they’re still in good physical and financial health. Start saving for colleges as early as possible. When you’re proactive, you can prepare. When you’re reactive, people and finances can take a hit.

1. https://s1.q4cdn.com/959385532/files/doc_downloads/research/TDA-Financial-Support-Study-2015.pdf
2. https://www.gobankingrates.com/retirement/planning/kids-plan-financially-support-parents-retirement/
3. https://www.forbes.com/sites/carolynrosenblatt/2018/07/09/aging-parents-helping-adult-children-financially-unhealthy-results/#321bb1e2ef39

Do you want to start investing but fear you will be buying in at the top of the market? Well, what if I told you there was a way to invest in which you could take emotion out of the equation altogether, not only banishing market anxiety but actually taking advantage of dreaded market volatility? Too good to be true? Far from it. The panacea exists, and it’s called dollar cost averaging or, as we call it in the finance world: DCA.

Dollar Cost Averaging is a pretty simple financial strategy: you purchase a set dollar amount (say $300) of securities (stocks, mutual funds, etfs, bonds…you get the idea) on the same day each month. Because you are committed to a set dollar investment the total number of shares purchased will vary from month to month based on the market. In months where prices are increasing you receive fewer shares; however, in months with falling prices your money buys MORE shares.

How does this benefit you? It removes emotion from the investment equation by keeping you from attempting to “time the market” (which has been proven to be impossible) and helps establish the saving behavior necessary for long term financial success. You are not waiting for a certain price to be reached before buying and when markets are experiencing volatility you are not selling and sitting on the sidelines waiting for things to settle down and then attempting to determine when to buy back into the market. Rather, you are using a disciplined strategy to steadily contribute to your long term goals and when the market is on sale, prices are declining, your monthly contribution has more buying power.

Here’s what’s even better: you are most likely already taking advantage of DCA as part of your financial plan, without even realizing it! If you are contributing to an employer sponsored retirement plan like a 401(k) (which you should be!), you are taking advantage of Dollar Cost Averaging by setting aside a certain percentage of your pay and investing it on set days each month. But why limit a DCA strategy to just one segment of your financial portfolio? You can leverage Dollar Cost Averaging to efficiently build individual accounts for shorter or medium term priorities such as travel, a new car, or purchasing a house. It’s not magic or rocket science, but Dollar Cost Averaging can help take advantage of volatility in markets, remove emotion from investing, and establish a beneficial pattern of saving for future priorities.

While dollar cost averaging is a powerful financial tool it is only one component of a full financial plan. If you would like to talk more about the impact of dollar cost averaging on your personal financial plan please contact me at zach.swaffer@trilogyfs.com.