Quote of the Week
“Work to be a kinder conversationalist. Look for opportunities to make comments that show your interest in other people’s experiences and views.” – Unknown
First, I want to congratulate our Stephanie. She was recognized in the Business Section of the Arizona Daily Star this Sunday. She has been an incredible asset to our firm since she started with us in 2010. She has come a long way.
While here, she completed her Bachelor’s degree in finance, graduating Summa Cum Laude, earning all A’s except for a single B+. She has also earned the Chartered Retirement Planning Counselor, CRPC® certification while working at our firm.
Currently, Stephanie is enrolled in the College for Financial Planning studying for her Certified Financial Planner™ (CFP®) designation. I must reiterate that she is an asset to the firm and I am thrilled that she works here.
The markets were very quiet last week. The Dow was down 0.47%, the S&P 500 was down 0.54%, and the Nasdaq was down 0.66%. For the year the Dow is down 0.02%, the S&P 500 is up 1.47%, and the Nasdaq is up 6.53%. Yesterday (Monday) was a good day for the markets. Today as I expected the markets sold off about half of Monday’s gains.
I expected the large gain yesterday because the Trump Administration and the Chinese agreed to put the trade war on hold while trying to work out an agreement. We certainly hope that a deal can be reached. Despite what someone says, no one wins a trade war.
The software we use still has us out of the stock markets. We currently have a 10% exposure to private equity which has done well with some of their companies going public recently. We expect more companies to go public this year.
We have a 10% exposure to Gold which so far hasn’t as yet worked out very well. We do have a strong buy signal on Gold at this time. We are looking to add a 10% exposure to commodities which historically have done well during the late cycle of economic expansions. The rest of the portfolio is invested in ultra short-term bonds which have yields in the neighborhood of two-year CD’s while still retaining high liquidity.
We are currently in a protection mode. The best thing that can happen based on our positioning is for the stock markets to have a major sell-off. Then we buy back in at much cheaper prices.
Adjusting to Life Financially after a Divorce
There’s no doubt about it — going through a divorce can be an emotionally trying time. Ironing out a divorce settlement, attending various court hearings, and dealing with competing attorneys can all weigh heavily on the parties involved.
In addition to the emotional impact a divorce can have, it’s important to be aware of how your financial position will be impacted. Now, more than ever, you need to make sure that your finances are on the right track. You will then be able to put the past behind you and set in place the building blocks that can be the foundation for your new financial future.
Assess your current financial situation
Following a divorce, you’ll need to get a handle on your finances and assess your current financial situation, taking into account the likely loss of your former spouse’s income. In addition, you may now be responsible for paying for expenses that you were once able to share with your former spouse, such as housing, utilities, and car loans. Ultimately, you may come to the realization that you’re no longer able to live the lifestyle you were accustomed to before your divorce.
Establish a budget
A good place to start is to establish a budget that reflects your current monthly income and expenses. In addition to your regular salary and wages, be sure to include other types of income, such as dividends and interest. If you will be receiving alimony and/or child support, you’ll want to include those payments as well.
As for expenses, you’ll want to focus on dividing them into two categories: fixed and discretionary. Fixed expenses include things like housing, food, and transportation. Discretionary expenses include things like entertainment, vacations, etc. Keep in mind that you may need to cut back on some of your discretionary expenses until you adjust to living on less income. However, it’s important not to deprive yourself entirely of any enjoyment. You’ll want to build the occasional reward (for example, yoga class, dinner with friends) into your budget.
Reevaluate/reprioritize your financial goals
Your next step should be to reevaluate your financial goals. While you were married, you may have set certain financial goals with your spouse. Now that you are on your own, these goals may have changed. Start out by making a list of the things that you now would like to achieve. Do you need to put more money towards retirement? Are you interested in going back to school? Would you like to save for a new home?
You’ll want to be sure to reprioritize your financial goals as well. You and your spouse may have planned on buying a vacation home at the beach. After your divorce, however, you may find that other goals may become more important (for example, making sure your cash reserve is adequately funded).
Take control of your debt
While you’re adjusting to your new budget, be sure that you take control of your debt and credit. You should try to avoid the temptation to rely on credit cards to provide extras. And if you do have debt, try to put a plan in place to pay it off as quickly as possible. The following are some tips to help you pay off your debt:
- Keep track of balances and interest rates
- Develop a plan to manage payments and avoid late fees
- Pay off high-interest debt first
- Take advantage of debt consolidation/refinancing options
- Protect/establish credit
Since divorce can have a negative impact on your credit rating, consider taking steps to try to protect your credit record and/or establish credit in your own name. A positive credit history is important since it will allow you to obtain credit when you need it, and at a lower interest rate. Good credit is even sometimes viewed by employers as a prerequisite for employment.
Review your credit report and check it for any inaccuracies. Are there joint accounts that have been closed or refinanced? Are there any names on the report that need to be changed? You’re entitled to a free copy of your credit report once a year from each of the three major credit reporting agencies. You can go to annualcreditreport.com for more information.
To establish a good track record with creditors, be sure to make your monthly bill payments on time and try to avoid having too many credit inquiries on your report. Such inquiries are made every time you apply for new credit cards.
Review your insurance needs
Typically, insurance coverage for one or both spouses is negotiated as part of a divorce settlement. However, you may have additional insurance needs that go beyond that which you were able to obtain through your divorce settlement.
When it comes to health insurance, make having adequate coverage a priority. Unless your divorce settlement requires your spouse to provide you with health coverage, one option is to obtain temporary health insurance coverage (up to 36 months) through the Consolidated Omnibus Budget Reconciliation Act (COBRA). You can also look into purchasing individual coverage or, if you’re employed, coverage through your employer.
Now that you’re on your own, you’ll also want to make sure that your disability and life insurance coverage matches your current needs. This is especially true if you are reentering the workforce or if you’re the custodial parent of your children.
Finally, make sure that your property insurance coverage is updated. Any applicable property insurance policies may need to be modified or rewritten in order to reflect property ownership changes that may have resulted from your divorce.
Change your beneficiary designations
After a divorce, you’ll want to change the beneficiary designations on any life insurance policies, retirement accounts, and bank or credit union accounts you may have in place. Keep in mind that a divorce settlement may require you to keep a former spouse as a beneficiary on a policy, in which case you cannot change the beneficiary designation.
This is also a good time to make a will or update your existing one to reflect your new status. Make sure that your former spouse isn’t still named as a personal representative, successor trustee, beneficiary, or holder of a power of attorney in any of your estate planning documents.
Consider tax implications
You’ll also need to consider the tax implications of your divorce. Your sources of income, filing status, and the credits and/or deductions for which you qualify may all be affected.
In addition to your regular salary and wages, you may have new sources of income after your divorce, such as alimony and/or child support. If you are receiving alimony, it will be considered taxable income to you. Child support, on the other hand, will not be considered taxable income.
Your tax filing status will also change. Filing status is determined as of the last day of the tax year (December 31). This means that even if you were divorced on December 31, you would, for tax purposes, be considered divorced for that entire year.
Finally, if you have children, and depending on whether you are the custodial parent, you may be eligible to claim certain credits and deductions. These could include dependency exemptions, the child tax credit, and the credit for child and dependent care expenses, along with student loan interest and tuition deductions.
Consult a financial professional
Although it can certainly be done on your own, you may want to consider consulting a financial professional to assist you in adjusting to your new financial life. In addition to helping you assess your needs, a financial professional can work with you to develop a plan designed to help you address your financial goals, make recommendations about specific products and services, and monitor and adjust your plan as needed.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018
By the Numbers
LENGTH OF BULL – At last Friday’s close of 2713, the S&P 500 is down 5.6% from its 01-26-2018 record closing high. If the index does not make a new closing high before dropping 20% or more into a bear market, then the official end of the bull market (that began on 3/10/09) would be the current peak reached on 1/26/18. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research). – Michael A. Higley, BTN 05-21-2018
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These are the opinions of Larry Lof and Stephanie Mayoral and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs. The S&P 500 is an index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly. Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.