“How are you guys doing?”
“Oh, we are fine. How are you guys?”
“Oh, fine? I know what that actually means. You mean Frightened, Insecure, Neurotic and Exhausted? Fine. If that is the kind of fine you are talking about then I will buy it, otherwise, I am going to have to question when exactly you won’t be fine.”
We are all varying degrees of fine or not fine right now. It isn’t a matter of if you are impacted by the fallout from the virus but how much. It’s OK not to be fine right now. But, just as contagious as a virus can be, kindness and calm be equally contagious. Your team at Azimuth Wealth Management, Inc. is committed to spreading calm, kindness and providing our clients with strategies to help thrive during these exceptionally challenging times.
For our clients, we have been on the phone with you, video meetings, and emailing with all of you the past few weeks and will continue to be here by your side. We are here to be your thought partners, to provide perspective and to listen to what is top of mind. We are not intended to endure challenges alone and know we will be here every step of the way to see you through this time.
We have put together a list of ideas and links to resources we think that many of you will find helpful. Once again, we have chosen to format this in a lighthearted way. For those that missed our previous newsletter, here is a link which provides the background on Logic Lane, our initial strategies and opportunities you may want to consider.
Now let’s go see what our neighbors on Logic Lane are up to this week and if they can inspire us to take positive action and give us some ideas of what opportunities exist. Some new neighbors have popped up and are doing some interesting things. These logical, thoughtful folks find creative and intentional ways to make the most out of any situation. Again, these are made up people being used to provide reasonable actions you could consider to potentially take advantage of the current environment. We intentionally chose to format these concepts in a light, fun way and hope that your visit to “Logic Lane” and all the neighbors that live there can provide you with a few ideas.
• Savvy Susan loves a good sale and is still buying into the stock market for the long term. She knows that you only get a handful of recessions in your life and when it feels like the world is on sale, she is ready to buy. In the last recession, the US stock market declined 51% and the recovery from 2009 through 2019 was a positive cumulative return of 453%. She tries not to get too excited about the unrelenting power of capitalism but she keeps forwarding her friends this video. It is a three minute history told through Time Magazine covers on how our economy, our world and investments have persevered over time through countless unforeseen tragedies. She has made mistakes in the past, like Dave Goetsch, and doesn’t want to repeat those this time around. She is not sure where the bottom will be but she has a plan to systematically reposition some of her cash for long term investing.
• Meet Frugal Fred. Fred is retired and while he has a very simple lifestyle, he loves to tell all his neighbors that he is on fixed income and he is always looking for ways to save money. The reason Fred is financially comfortable is because he has always lived well below his means and he is a cost cutting machine. He tells us all that this is the time to tighten your belt and he is currently on the phone driving a hard bargain with Comcast, Verizon, his gym membership and anyone else who will take his call to see how he can reduce his spending. Subscriptions, except for NetFlix, monthly recurring deliveries, and everything that is set on auto renewal and charged to his card is under scrutiny. He is determined to get Randy from Verizon to give him the new client sign up deal, again, or he is taking his business to AT&T for certain this time.
• Meet Purging Paula. Paula is a consultant who is currently off the road, has her kid home early from college, and is enjoying the time to be in her own space for awhile rather than hotel rooms and airports. She just finished reading the Life Changing Magic of Tidying Up and is taking advantage of the opportunity to clean her financial house. She is pulling out all her old files and shredding her tax returns from 2008, her property tax bills from 1998 and decade old investment statements. She is using this retention guide to know that she is adhering to recommendations for document retention. While she is purging, she is listening to the book Essentialism – The Disciplined Pursuit of Less, and finding calm being present in the moment and decluttering her life.
• Meet Budget Barb. Barb is a stay at home mom and is taking a hard look at the family expenses. She expects her family income will decrease from this fallout, and she wants to have a solid understanding of what they spend when they aren’t worried about money and how much they actually need to spend to support their family’s most basic needs. She is downloading the past six months of transactions from credit cards and debit cards, categorizing and educating herself about what her family of five spends on a monthly basis. She has discerned that of their $250,000 household income, after taxes, 401(k) max, HSA, and health/vision/dental insurance that they take home about $13,000 per month. The mortgage, HOA, and all utilities are $4,000. Groceries, all car related expenses, basic life costs and insurances are $4,000. That totals $8,000 for their most basic cost of living. Of the other $5,000, they save $900 for college, pay for kids activities, childcare, buy plane tickets, dine out at restaurants, buy new clothes, buy gifts, hair color/cut and manicures and pedicures, and Pilates and her husband's gym membership. After this exercise she realizes that of the $5,000 of discretionary spending, they can't even really incur most of those costs right now. She is relieved that they could live comfortably and meet all their family's most basic needs on $8,000 after-tax per month, which equates to $180,000 annual, about a 30% reduction in income from $250,000. Barb reminds herself this is why they keep $50,000, six months of their basic expenses, in a high yield online savings account. If worse to comes to worse, they will stop 401(k) and college savings for awhile but she knows they have several worst case scenarios that need to materialize before that happens. She is focusing on what she can control and realizing that one unintended consequence of being quarantined is that she can’t spend much money. But she sure is looking forward to getting back her American ways of stimulating the economy.
• Retiring Roger and Rebecca are having their Friday happy hour cocktail and playing Trivial Pursuit via Zoom with their friends. They are still worried but decide they will take their problems over what so many others are struggling with currently. Their portfolio has decreased in value from $3.4M, their high water mark in February, down 25% to $2.55M as of Friday March 20th. While they plan on retiring in 2021 with $15,000 a month of pre-tax income, withdrawing $10,000 from their portfolio and $2,500 each from Social Security, they understand they are not retiring today and have time to see how things pan out. As it stands today, they would start their retirement withdrawing $9,000 per month for a total income of $14,000 per-tax. While the stock market is down 35%, their monthly spending in retirement has decreased 7% ($15,000 to $14,000.) This makes them worry a lot less. They realize where we are on this chart and don’t want to make any mistakes which could put their entire retirement plan in question.They also know that the stock market is very good at taking the money of impatient people and giving it to patient people. Their patience and discipline has served them well through four decades of wealth accumulation, so they aren’t about to change their strategy now. They even got a refund of $10,000 for the river cruise they booked for May and are considering listening to Susan and taking advantage of the sale. Fred is telling them they should call back and ask for not only a refund but a discount on a future cruise. Oh, Fred you really do drive a hard bargain.
• Meet Zen Zara. Zara is only turning on the TV to watch National Geographic and the Food Network. She has a daily punch list she has printed out and has on her refrigerator. Her daily activities include 1) writing down three things she is grateful for 2) checking in on someone 3) connecting with someone 3) getting outside 4) moving her body 5) finding, creating or cultivating some source of beauty. She realizes that nothing good in her life has ever come from worrying. She also will tell you that what you focus on expands. She is so Zen. She said if you focus on calm and kindness, then that is what expands. What you appreciate, appreciates. She just finished a Zoom hangout with her mom and sisters over morning coffee and is putting on her running shoes to go for a walk. Later she is going to hop on her community’s free yoga class broadcast.
Don’t worry, Generous Grandpa George, Mortgage Molly and Tax Smart Tara are so happy with all the money they have saved with their own smart financial and tax planning that they are figuring out safe ways to do acts of service for the most vulnerable in their community. If you don't know about George, Molly and Tara, they were some of the Logic Lane VIPs from our last newsletter.
In our "community of neighbors" at Azimuth Wealth Management, Inc., we have many clients that are emergency room physicians, physicians in all different specialties, nurses, restaurant and brewery owners, small business owners, and parents that are juggling home schooling children in addition to work. We are here to be your thought partner, to think creatively and to help. We believe it is right to have an underlying faith in humanity. We are in this together and we will get through this together. One day at a time. Spread calm, kindness, and thorough hand washing.
And as always, if you have friends, family or colleagues that you think would find this guidance helpful, please feel free to share.
All my best to you and your families,
The preceding are hypothetical case studies and are for illustrative purposes only. Actual performance and results will vary. These case studies do not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted for your specific situation.