This post is going to be very candid. I’m going to highlight what’s been happening in my life recently, how I’ve dealt with it, and what habits really help.

Let’s just tackle the last month, shall we?

I had three things going on all at once.

We’re Moving

First, I ran into an issue at my current apartment. When I was shown the unit, I mentioned that I’d have my dog, Mya, a couple of days per week. The remainder of the time, she’s with my ex-wife.

I looked at the unit in October of 2019 and they were fine with it. Come to find out the Condo Association where I rent has a 25-pound weight limit on dogs. Mya is 75 pounds, so there were a few complaints.

I tried to get them to make an exception and my landlord (the owner of the condo) went to bat for me. I was thankful for that but to no avail.

The choice was to part with the dog or find a new place to live. My son and I love Mya, so it was a pretty easy decision. We’re moving.

Thankfully, we were able to find a place pretty quickly. Our new home has more space and a basement, and that’s something I’ve wanted for my son so he has plenty of room to play when the weather is crappy.

Investment Property #1

Second, my old house (the one my ex-wife and I own) is being rented. It’s March 24, 2020, as I’m writing this and our tenants have moved in.

There was a strong push to get everything done sooner than I anticipated because of the Covid-19 situation. They (the tenants) wanted to get as far away from the city as possible, and our house is 45 minutes from the nearest “big” city. They moved in, a week or so ahead of schedule.

I busted my butt to try and get the house ready for them, but that had to be done when I had free time. Outside of business hours and outside of when I had my son. That left me with two nights per week and all day Sunday.

It was a lot of work, but I’m happy to say that I got it all done. The tenants are pleased and I’m looking forward to providing a lovely home for them.

The Market

Third, the elephant in the room. Covid-19. There has not been much of an impact on me personally. My lifestyle hasn’t changed much, though, I’m not sure what that says about my lifestyle.

I avoid going out as much as I can. I also forego taking my son to his favorite play place on Wednesdays.

Outside of that, it’s created an extraordinary amount of volatility in the markets. Thankfully, I prepared clients ahead of time, in terms of proper asset allocation and mentality.

On the other side of things, I’m part of our building’s tech department, so there was a strong push over the last two weeks to set my colleagues up so they are able to work from home if it’s deemed necessary.

I’m not going to lie, things have been incredibly stressful. A lot of work in a short amount of time and a relatively significant change in my living situation. Not to mention, I’m trying my hardest to limit the impact moving has on my son.

What habits help?

I’m meditating more regularly, I’m interacting with people I care about more often, and I’m viewing everything (or trying to) from a positive point-of-view.

The meditation calms me and makes it easier for me to find my “center”. It also reminds me to breathe when I start to feel too anxious or overwhelmed.

With regard to social interaction, I’m just meeting a primal need as a human being. We’re social creatures, not to mention I’m fairly extroverted, so talking with people always gives me a good boost.

The last piece is the x-factor. I’ve shifted my mindset and I have Stoicism to thank for that. If there’s an obstacle or a trial, I’m always looking for the bright side and I’m always looking for a lesson to be learned.

As I dive deeper into Stoicism, I find more value and gain more insight from it.

It’s been busy and challenging, but I’m doing much better from a mental perspective. Keep putting in the work, find habits that help, and things will get better.

To learn more about Stoicism, I highly recommend Daily Stoic. They have weekly newsletters, videos, and podcasts.

Related:

A Systematic Approach to Goals

Jacob Sensiba

Jacob Sensible is a financial advisor with decades of experience in the financial planning industry.  His journey into finance began out of necessity, stepping up to support his grandfather during a health crisis. This period not only grounded him in the essentials of stock analysis, investment strategies, and the critical roles of insurance and trusts in asset preservation but also instilled a comprehensive understanding of financial markets and wealth management.  Jacob can be reached at: jake.sensiba@mygfpartner.com.

mygfpartner.com/jacob-sensiba-wisconsin-financial-advisor/

I’ve been in the investment advising business for almost six years now. During that time, my role in this business changed. I started as an office assistant and learned the ropes for 2 years.

Since then I’ve been in charge of other people’s money. Sometimes it’s someone’s brokerage account that they have with me to diversify among financial institutions.

Sometimes it’s someone’s life savings.

Obviously, when I started, I was in charge of very little until I gained enough experience and was able to prove myself as a capable advisor and investor.

From then until now, my investment philosophy changed. How I view investing and my approach to managing clients’ money is different from when I started.

When I started

In the beginning, it was very straight forward. I was a value stock picker. I charged a 1% fee (industry average) for that service, but the client also got unlimited access to me during business hours and other financial planning services.

Then I figured out, picking stocks was not a good use of my time. The research and analysis took far too long, and my time could be better spent engaging with clients and prospects.

Meaningful change

I changed my method of doing business. Instead of picking stocks, I would utilize passive ETFs. Because I was not putting in as much time with client accounts, I charged them less. It seemed fair and logical.

I still offered the same “extra” services, but I didn’t have to spend nearly as much time researching stocks. Instead, I had a basket of investment options to pick from and would allocate clients’ portfolios according to their age, risk tolerance, and time horizon.

Don’t get me wrong, I still believed in active management, but being able to do that and grow my book of business was extremely difficult.

Yeah…passive has outperformed active for the last decade (source). That’s because we haven’t had anything to, really, panic about. Since the Great Financial Crisis, the market has been up and to the right with minimum volatility. Certainly, well below average (source).

I thought low fees and passive ETFs were going to be the way forward.

My mind was blown

That was until I watched a video on Real Vision. In the video, the guest being interviewed brought to attention the danger of passive ETFs.

He explained that once passive overtook active, in terms of net assets, we’re in trouble.

And it began to make sense. ETF custodians (Blackrock, for instance) need to sell underlying securities when investors sell the ETF. They don’t have a significant amount of cash on the side at the ready for redemptions.

The lightbulb came on. When the market actually crashes and we experience a recession, there’s going to be a barrage of selling. Everyone is going to try and get out of the market and minimize the damage.

That’s the problem. If half of investors are in passive funds, then those funds will have to sell loads and loads of securities to meet client demands.

Selling will exacerbate and the sell-off will intensify until we have a 1987 type moment. Thankfully, there are “circuit breakers” now in place.

What’s a circuit breaker?

If the S&P 500 index falls enough, trading will halt. There are three levels of circuit breakers. Level 1 is a fall of 7% and trading halts for 15 minutes. Level 2 is a fall of 13% and, again, trading halts for 15 minutes. Level 3 is a fall of 20% and trading ceases for the remainder of the day.

After that video, my philosophy shifted. Instead of utilizing passive funds, I use active and smart-beta ETFs. I get the best of both worlds. Active management and low fees.

What’s the point?

I wanted to make two points when writing this.

1. I wanted to highlight my thought process, my investment philosophy, and how it changed.
2. I needed to get across an important message. One that we seem resistant to. You HAVE to be willing to adapt. To change. Not only that, you have to challenge your own ideas.

I’ve made two changes in my process so far and I hope there are more changes coming, but those changes didn’t happen overnight.

I poured over hours of research, reports, and charts. I needed to make sure that the change I made would benefit my clients.

One last thing I wanted to mention. When my philosophy changes, I don’t make sweeping changes to my clients’ portfolios.

That would a) be incredibly annoying as a client to have your portfolio transform because my ideas changed, and b) selling and buying could incur fees and taxes. Clients shouldn’t be penalized for that.

Related reading:

The Difference Between Mutual Funds and ETFs

Are You Taking Too Much Investment Risk?

Client Experiences

Jacob Sensiba

Jacob Sensible is a financial advisor with decades of experience in the financial planning industry.  His journey into finance began out of necessity, stepping up to support his grandfather during a health crisis. This period not only grounded him in the essentials of stock analysis, investment strategies, and the critical roles of insurance and trusts in asset preservation but also instilled a comprehensive understanding of financial markets and wealth management.  Jacob can be reached at: jake.sensiba@mygfpartner.com.

mygfpartner.com/jacob-sensiba-wisconsin-financial-advisor/

Credit is important. We all know this by now, so we’re constantly looking for ways to improve our score. If you find yourself in a less than desirable situation, there might be a solution for you; enter the secured loan.

In this article, we’re going to explore what a secured loan is, what types exist, how it one can help, and what to be wary of.

Let’s go.

What’s a secured loan?

A type of lending, whether it’s a traditional loan set up or a credit card, where you put up collateral. Collateral is an asset that you own, which could include, but isn’t limited to your home, car, artwork, jewelry, stock, and money.

There are several different types of secured loans. Let’s look at a few of them.

Types of secured loans

• Mortgages – When you purchase a home (unless you pay for it with cash) you take out a mortgage and agree to pay back that loan over a period of time. In this instance, the home you purchase is collateral. If you fail to make good on your promise, the lending institution can take ownership of your home and sell it in order to pay off your loan.
• Car loans – Exact same set up as a mortgage, although on a much smaller scale. If you take out a loan to buy a vehicle, you’re promising to pay the loan back over a period of time. In this case, the car is your collateral. If you fail to make payments, the lender will take possession of your car and sell it in order to pay off your car loan.
• Secured credit cards – A secured credit card is my general recommendation for someone that has bad credit and wants to rebuild it. With a secured credit card, you have to put down money in the form of a deposit. That deposit effectively functions as your credit limit. If you put down $1,000, then your credit limit is $1,000. If you don’t make payments on what you borrowed, the lender will take your deposit and pay off your card.
• Title loans – If you own an asset outright (specifically, your home or your car), you can take out a title loan. The owned asset acts as your collateral. If you don’t make payments on the loan, the lender will take possession of your asset and sell it to pay off your loan.
• Other secured loans – Anything that you can put up as collateral gives you the ability to take out a secured loan. Artwork, jewelry, stocks, etc. all fit that profile.

How it can help

Unsecured loans, like personal loans or standard credit cards, like to see good credit scores. If you don’t have a good score, a secured loan could help you build yours back up.

I’d like you to refer back to the secured credit card section. The lender is out, literally, nothing by giving you a secured credit card. You put the money down. If you don’t make the payments, they’ll take the card back and keep your deposit to pay off the outstanding balance.

The most important point to be made here, however, is when you’re building your credit score, you HAVE to make payments on time. This is the number 1 factor considered when calculating your credit score.

Things to watch out for

The biggest concern with a secured loan is the lender has the ability to take ownership of your asset if you’re not making the payments.

When you’re borrowing money, whether it’s secured or not, you have to make sure you’re making your payments on time. Another thing, don’t borrow more than you need to and stay within your means.

Related reading:

Strategies for Improving Your Credit Score

How to Pay Off Credit Card Debt

Diving Deep Into Debt

What Affects Your Credit Score

Diving Deep Into Credit Cards

Jacob Sensiba

Jacob Sensible is a financial advisor with decades of experience in the financial planning industry.  His journey into finance began out of necessity, stepping up to support his grandfather during a health crisis. This period not only grounded him in the essentials of stock analysis, investment strategies, and the critical roles of insurance and trusts in asset preservation but also instilled a comprehensive understanding of financial markets and wealth management.  Jacob can be reached at: jake.sensiba@mygfpartner.com.

mygfpartner.com/jacob-sensiba-wisconsin-financial-advisor/

As I’ve gotten older, my relationship with money has changed. I’ve made mistakes, learned some things, and I found a new dynamic that works for me and suits my goals.

What I was taught

To be perfectly honest, my memory isn’t great, so if I was taught anything about money and how to handle it, I don’t recall it.

It wasn’t something that was openly discussed in our family. My folks took a fairly hands-off approach when it came to teaching us, besides our morals, character, and work ethic. Other than that, they let my siblings and I figure things out on our own.

Over this past year, as I’ve explored my upbringing I went through a phase of being angry with them for not being more hands-on, but after having an opportunity to really reflect, I’m incredibly grateful.

Because of their approach, I’m a very fast learner and a very good problem solver. I wouldn’t change a thing.

Past experiences

During the last two years of high school and a few years after, my buddies and I would always go get fast food, bring it back to one of our respective homes, and hang out.

Because of that, part of socializing I attributed to getting food, and as a result, spending money.

I also went through a period of “keeping up with the Joneses”, so I often spent money on things I didn’t need or I agreed to things I couldn’t afford because I didn’t want to be left out.

The last mistake I made was charging, darn near, everything when we went on our honeymoon. A very costly mistake at that.

What I learned

The lessons I learned I pretty remedial in terms of financial common sense, but it took making those mistakes in order to learn:

• You don’t need to spend money to hang out with your people. Whether that’s food or entertainment. You can have a good time with the right company, no matter the circumstances.
• Spending more than you ought to on material things in order appear to have the same social status as your peers is a recipe for disaster. To quote Dave Ramsey, “We buy things we don’t need with money we don’t have to impress people we don’t like.”
• Stay within your means – I wanted to “do it up” on the honeymoon, so I spent WAY more than I should have. Had I known what I do now then, we would’ve planned things differently, and spent MUCH less.

Me and money now

My relationship with money has changed a lot over the last few years. I think as I’ve matured (and had a child) I’ve realized what is more important, and that spending on frivolous things, and gifts for that matter, is wasteful.

Money isn’t everything, but it’s an important tool. It’s a tool that deserves to be used in a thoughtful way.

I pay my bills, I pay down debt, I save, and set aside a little for fun. The money I save goes into three buckets: retirement savings, short-term savings, and emergency savings.

The short-term bucket is broken down further. Holiday spending, college savings, and experiences.

Spending money on experiences and precious time with my son has taken precedence over spending it on stuff.

He doesn’t get a lot of gifts from his mother or me (Santa) for Christmas, as he gets spoiled by the rest of our families.

More importantly, however, we would rather spend the money on things that create memories, which could include trips or a day at the zoo.

I’d rather him remember the time he spent with myself and others, rather than playing with toys. That’s what creates a happy, memorable childhood.

Related reading:

Psychology and Finance

Financial Mistakes to Avoid

My House and What Brought Me Here

Different Ways to Think About Your Finances

Jacob Sensiba

Jacob Sensible is a financial advisor with decades of experience in the financial planning industry.  His journey into finance began out of necessity, stepping up to support his grandfather during a health crisis. This period not only grounded him in the essentials of stock analysis, investment strategies, and the critical roles of insurance and trusts in asset preservation but also instilled a comprehensive understanding of financial markets and wealth management.  Jacob can be reached at: jake.sensiba@mygfpartner.com.

mygfpartner.com/jacob-sensiba-wisconsin-financial-advisor/

The Roth IRA was created in 1997 and since has grown in popularity as a retirement savings vehicle, outside of employer-sponsored plans.

In this article, we’re going to discuss the characteristics of a Roth IRA and how it can be effectively used by teens for retirement savings.

How it’ll be structured

Since the children opening the account will be minors, the Roth IRA will be opened as a Custodial account.

The custodian (often a parent, grandparent, or guardian) will open the account for the benefit of the minor.

As the custodian, you are in control of the account until the minor reaches “the age of majority (18 or 21 depending on which state you reside). I live in Wisconsin. The age of majority is 18.

*The custodian can’t withdraw, remove, or transfer funds from the account under any circumstances.

Once of age, the child is able to do as they wish with the funds. With the correct guidance, these funds can accumulate and compound over several decades. 

The benefit

Adults can contribute by “matching” the teen’s earned income. The teen has to have earned income in order to open the account and make contributions.

For example, your teen earns $5,000 during the year. Theoretically, they could contribute all of it to their Roth. To encourage their money-saving habits and to show them the benefit, you tell them to save $2,500 and you match with an additional $2,500.

This provides an immediate reward/incentive to the teen and also helps illustrate how most employer-sponsored plans function.

Not only is this great for saving money, but it also instills the habit of saving. In my opinion, that’s even more important.

Additionally, if the minor can’t make a contribution (didn’t make enough, etc.) the custodian can still make contributions on their behalf.

Standard Roth Regulations

• Contribution max (for 2019) is $6,000
• Money grows tax-deferred
• Money withdrawn is tax-free
• 10% penalty if withdrawn prior to 59 ½, but there are exceptions
  • Medical expenses that exceed 10% of your adjusted gross income (AGI)
  • Health insurance
  • Disability
  • Qualified higher-education expenses
  • Death Distribution
  • First home purchase

For a more detailed list, click this link.

Comparing to other accounts

With regard to other custodial accounts, the Roth IRA is best for retirement savings. In terms of college savings, the 529 and the Coverdell ESA are far superior. If you’re looking for simplicity and flexibility, an UTMA/UGMA account will be your best bet.

Below is a brief explanation of each, followed by links to more detailed articles previously written.

• 529 – A college savings plan that is exempt from federal taxes, if you use the funds to pay for qualified education-related expenses. Those expenses include tuition, books, room and board, computer equipment, and necessary supplies for students with special needs, as long as the student is attending at least half-time. (More on the 529)
• Custodial IRA – Like the 529, the Coverdell ESA is an education savings vehicle for K-12 and secondary education. Coverdell ESA stands for Coverdell Education Savings Account. (More on the Coverdell ESA)
• UTMA/UGMA – The UTMA and the UTMA are custodial accounts. An adult (the custodian) opens an account for the benefit of a minor. UTMA stands for Uniform Transfer to Minors Act. UGMA stands for Uniform Gift to Minors Act. The difference has to do with the age of majority, but more on that later. (More on UTMA/UGMA)

Conclusion

If you’re looking for an effective way to help your kids save for retirement, the Roth IRA is a great way to go. Please advise, that the child needs to have earned income in order to make contributions.

Related reading:

Why I Love the Roth IRA

How to Teach Your Kids About Money

Jacob Sensiba

Jacob Sensible is a financial advisor with decades of experience in the financial planning industry.  His journey into finance began out of necessity, stepping up to support his grandfather during a health crisis. This period not only grounded him in the essentials of stock analysis, investment strategies, and the critical roles of insurance and trusts in asset preservation but also instilled a comprehensive understanding of financial markets and wealth management.  Jacob can be reached at: jake.sensiba@mygfpartner.com.

mygfpartner.com/jacob-sensiba-wisconsin-financial-advisor/