Wealth Clarity Blog

Below is another very helpful tax missive from our friends at Kovarik and Kim CPAs detailing many of the anticipated tax changes coming our way at the end of this year.  You might remember that the Bush-era tax cuts will be expiring on 12/31 if Congress doesn’t act before then.  In addition, the new Healthcare Reform legislation signed into law by President Obama will also usher in another slew of tax changes (read “increases”).  The real impact will be on the higher income and wealthier individuals. 

The high points in summary are as follows:

1. When fully phased in, the top long-term capital gains rate could climb from 15% to 23.8% including applicable surtaxes, and ordinary dividends will no longer have preferential treatment.
2. Regular marginal tax rates will increase from 35% to 39.6%.
3. Shifting income into 2010 could be an interesting tax planning strategy to review in light of the changing future environment. Continue Reading »

If you take a minute to look at my book list you’ll notice I suggested reading The 4 Hour Workweek, by Tim Ferriss.  I have mentioned the book before in a previous blog post and there is another point Tim makes that I thought was worth highlighting; it’s the following:

There is a difference in importance between just plain “activity” in my life and “urgent and important” things.

John Wooden, the legendary basketball coach at UCLA was also quoted as saying something in a similar vein, “Don’t confuse activity with achievement.” 

I can have a tendency to get caught up in “activities” that create a sense that I’m doing a lot during my day but when I leave the office (or at the end of my day) I can get the feeling that I really didn’t get anything I wanted to get done, done.  Has that happened to you?  Basically, by being a super hero multi-tasker and letting the flow of activities, details, phone calls, and emails act as the governors of my day, instead of focusing on the really important tasks that need to be done.

I can’t tell you the number of days I get out of bed in the morning and jump right on my email.  In the book, Tim talks about taking time in the morning to jot down one to three urgent and important things that you want to get done that day, preferably the night before.  Then before the television goes on, or before you open up email, make sure to get at least one “urgent and important” thing done.  I have been doing this over the past several weeks and have found my level of stress has gone down because I get one important thing done before the rest of the day gets going. 

I’m not trying to control the outcome of my day, but instead focus on a few key actions that will move me towards the outcome I want in my life and not just fill it with lots of activity.

Give it a try tonight.  Think about just a few things that are really important and urgent for you to accomplish tomorrow.  Then before you do anything else, at least do one of those items on your list—first. 

Let me know if there are other ways you’ve found to get more of the “important” things done in your life.

A few people have recently expressed concerns to us about market volatility and where the economy is heading. Other people have asked us what options are available to help drive portfolio returns in the midst of such low yields on bonds (the two year Treasury yield recently hit its lowest point ever at 0.6 percent and the 10 year yield is now below three percent). Alternative assets, which we have built into client portfolios over the past few years, are a natural solution for reducing portfolio volatility and boosting returns. As a firm, Highland now has approximately 20 percent invested in alternative assets and even our most conservative clients generally have 10 percent or more of their portfolio exposure in alternative asset classes. Over the past quarter in fact, most of the alternative asset classes were down ½ or less than the equity markets and some (specifically gold and certain hedge funds) were actually up.

We wrote a white paper as a primer on alternative assets, which generally help mute portfolio volatility due to their low correlations with traditional asset classes. As mentioned, they can also help bolster returns. Alternative assets do have some drawbacks: namely, they tend to have longer investment horizons, involve higher risk at times, and have less liquidity than traditional asset classes. In the past the cost of participating in alternative investments was prohibitively high, however, there are now more options that allow investors to participate at lower dollar amounts. If you’re curious about alternative asset classes and what role they play in your portfolio, the white paper is a good introduction for how these asset classes behave and a description of the mechanics for making investments.

If interested in the white paper, shoot me an email (info@highlandcm.com) and I’ll send it to you for free.

The book The 4-Hour Workweek has taught me to pay attention productively. 

Productivity is not just about getting things done.  We need to pay attention and set boundaries for ourselves.  Check out our newest video where I discuss how not to let situational circumstances control those boundary lines.

What are you going to do to pay attention?

A client recently asked for my opinion on Mint.com as a budgeting tool for a relative.  I realized you’d likely also like to learn more about the tool.

 Mint.com is an organizer that gathers all of your financial accounts into one place to paint a consolidated picture of your situation.  By linking your accounts, Mint.com retrieves the data and presents it in a simple and easy to understand format (such as pie charts shown below ).  The site uses the same encryption technology as online banking sites so it is secure.

Ultimately, Mint.com is a useful resource for someone who has limited financial management needs.  For people with greater sophistication and complexity in their financial lives having a wealth manager is a more appropriate solution.  The evidence of complexity would include illiquid investments, stock options, charitable entities, and complicated income sources to name a few.

For people who are just getting started, sites such as Mint.com provide a useful introduction to personal finance before moving to more advanced management practices. 

Are there other tools you’d like me to evaluate?