Articles by Oakleigh Wealth
Retirement: Math Problem vs. Human Problem
I came across this fantastic illustration by British retirement podcaster and financial planner Dan Haylett a couple of weeks ago. It perfectly captures a dynamic I’ve written about on this blog more than a few times. Namely, the misperception we all have that financial planning is a math problem; an equation to be solved having either a right ora wrong answer.
Flow-Based Budgeting
Have you ever tried to make a budget, but never really bought into it? Maybe it went out the window when life happened. Perhaps you felt like the bad cop when trying to make sense of your credit card bill with your spouse. Or, were you were the one being interrogated?!
Budgeting is challenging. It can generate conflicts and induce guilt or shame. It can feel artificially constraining and time-consuming.
I’ve tried many budgeting systems, and I’ve quit them all. That is, until I learned about Flow-Based Budgeting.
To Buy or Not to Buy: The Case for Long Term Disability Insurance
Welcome to the world of adulting, where every decision seems to have a weighty financial consequence, but the outcomes are never certain. Amidst the financial maze, disability insurance is one of those topics that can be easily brushed off as something you'll think about later. However, in reality, it's a crucial aspect of your financial stability.
Disability insurance provides income replacement if you become unable to work due to illness or injury. Like life insurance, it also protects your family against financial hardship from the loss of your stream of income. Yet, like many types of insurance, you hope you'll never need to use it. So, how can you determine if it's a worthwhile investment for you?
Key Issues When Evaluating Disability Insurance Policies
Disability insurance is critical to protecting your income should you suffer an illness or injury that prevents them from continuing to work.
To help you guide you through the complexities of this important topic, we created this checklist. It covers key considerations, including:
Key policy features and definitions
Group and individual coverage options
Federal benefits
Tax implications
The Five Major Decisions of Every Estate Plan
Estate Planning is an essential component of your overall financial plan. It allows you to gain some control over aspects of your life both during your lifetime and after your death.
Five major decisions go into each estate plan. Those decisions are described below, along with examples and a description of people in your life that may be up to the task.
Will vs. Trust
One of the most common questions I get around estate planning is, “What is the difference between a will and a trust?”
There are a few similarities but a lot of differences, too. In both cases, these documents are a part of your Estate Plan – to have a complete Estate Plan, there are also powers of attorney for medical and financial purposes and other documents needed.
Whether a will-based or trust-based estate plan is right for you depends on your specific wishes and the contours of your financial situation.
How much is enough? A parable from Jimmy John’s
My best friend, a Jimmy John’s sandwich shop regular, alerted me to a story that hangs on the wall in the restaurant, entitled “How much is enough.”
This story hit home, but not because it’s a prescient critique of certain American attitudes about money (though it is that ). Rather, as I struggle to launch a business while juggling all of the demands of family life with young children, I realized how easily I fall into the same trap as the “poor” fool in this parable.
This simple vignette illustrates the folly of the arrival fallacy (I’ll have enough when…) and the universal difficulty we often have distinguishing between wants and needs, while also recognizing the value of what we already have.
Enjoy, then go grab a sandwich!
Risk Tolerance & Risk Capacity
Determining the right investment strategy is crucial for achieving long-term financial goals. Two key factors that play a pivotal role in shaping an individual's investment approach are risk tolerance and risk capacity. While these terms are often used interchangeably, they carry distinct meanings, each influencing how investors should approach investment selection.
Merging Financial Accounts In Marriage
The Atlantic recently published an article on the often-asked, titular question: “Should Couples Merge Their Finances?” Rather than give a direct answer, author Joe Pinsker presents a nuanced overview of the plusses and minuses of the three basic approaches: joint, separate, and hybrid. Crucially, he also points to the deeper truth that “the notion that you can keep your finances truly ‘separate’ is to some degree an illusion. Navigating the financial tensions and answering this question in the context of your marriage requires more than statistics about marital satisfaction or awareness of underlying gender equity issues.
What Issues Should I Consider Before the End of the Year?
Tracking numerous deadlines and avoiding missed planning opportunities can be challenging during these busy months. To help ensure that you remain on track, we have a checklist that outlines 18 time-sensitive considerations to guide your end-of-year review and tee up any adjustments for the coming year
Open Palm vs. Closed Fist
In the delicate act of holding a feather, we are presented with a profound metaphor for life itself. We can clasp it tightly within a closed fist or cradle it gently in the open palm of our hand. Each approach reflects a unique philosophy.
The closed fist represents our instinct to cling to what we cherish, to shield it from the unpredictable wind of change. It's an act of guarding, protecting, and controlling. We often do this out of fear or the desire for certainty and assurance. But, as we clench our fists, we inadvertently obscure the very beauty of what we hold. And what’s more, life rarely conforms to our demands for control.
Rethinking Monte Carlo Simulations
Monte Carlo simulations are a common tool in the financial adviser’s toolkit. They can help us frame the likelihood of success of a given plan by applying a large number of statistical simulations of future market returns to your financial plan.
On paper, this approach to financial planning makes a lot of sense; however, applying Monte Carlo analysis as an ongoing real-world decision-making tool often results in misunderstanding, anxiety, and/or overconfidence.
Two Logics
We live in a culture that has become wildly imbalanced, like a bodybuilder who has pumped his right side up to excessive proportion while allowing his left side to shrivel away
Look Beyond Bonds for Sustainable Retirement Income
With the recent increase in interest rates, retirees or those nearing retirement might find it tempting to invest their nest eggs in longer-dated government bonds to secure a stable, long-term income. After enduring the "Great Financial Crisis," it's understandable why exiting the stock market might seem appealing. When you have only a few working years left or have already retired, the prospect of another market downturn can be quite daunting.
However, following this line of thinking could lead you into trouble!
Maximizing Your HSA’s Full Potential: Stop Using It Like an Expense Account
Health Savings Accounts (HSAs) allow you to pay for a wide variety of qualifying healthcare expenses with pre-tax dollars. But this may not be the best use of your HSA funds (at least not now).
If you have the financial means to pay your healthcare costs directly, you might find greater value in treating your HSA as a long-term retirement savings tool rather than a healthcare checking account. This is particularly advantageous if you are younger, in relatively good health, and can afford to pay for minor medical expenses out of pocket. In the long run, it may be in your best interest to invest those HSA dollars for the long term, allowing the balance to grow and compound tax-free for use later in life or in an emergency.
10 Free & Effective Ways to Protect Yourself from Identity Theft
The threat of identity theft looms larger than ever before. Cybercriminals are constantly finding new ways to steal personal information and wreak havoc on your financial well-being. Protecting yourself from identity theft is an essential piece of a comprehensive financial plan. Here are ten inexpensive and effective things you should be doing to safeguard your identity:
Can I make a “Mega Backdoor Roth” Contribution?
Say you have maxed out your pre-tax IRA and 401(k) contributions (or Roth IRA and Roth 401(k), if current tax rates are lower) and you still have the ability to save more, you don't need liquidity and want to do it as tax efficiently as possible.
In certain cases, you may be eligible to make a Mega Backdoor Roth contribution and contribute tens of thousands more to your Roth IRA, regardless of your income level.
Q: How much liability insurance do I need? A: As much as you can get!
Cut to the chase: with liability insurance, you should carry as much as you can. Most individuals and families carry liability insurance from two main sources: their home and auto insurance policies. But this may not be enough to fully protect your assets in case of an accident or a lawsuit.
That’s where “umbrella” insurance comes in, to cover you above the liability limits of your home and auto policies. However, you must coordinate coverage with your home and auto policies to make sure that you don’t have a potentially expensive gap in coverage.
You need a will, but do you need a lawyer?
Estate planning can be an uncomfortable subject. Most of us would prefer not to think about our demise, so we avoid it. Or, you may not know where to start, and the added hurdle of finding a lawyer has led you to put off creating or updating your will. But, like most people, you probably don’t need a layer to make a will.
How much life insurance do I need?
If there is someone in your life who depends upon your current and future income for financial support, then you probably need life insurance to transfer the financial risk of an untimely death. The proceeds of a life insurance policy can cover your family’s immediate financial needs in the wake of your death, replace lost income, repay debt, and provide for your family’s expenses and goals. But how do I know how much and what type of insurance to buy?
