Archive for the 'finance' Category

Market Commentary 09/04/2019

One of the “deadliest” sayings in investing is “This time it’s different”. Many investors and pundits, when faced with data contrary to their current views will rationalize a position by saying those infamous words. As they say as well, “history may not repeat, but it does rhyme.” While the big picture may not repeat, policy decisions and market reactions do. Whether interest rates are changing due to inflation fears, a slowing or accelerating economy, macro dollar policy…the results are the same. Fed tightening (rising interest rates) are never good for the market or the economy. Fed loosening will (eventually) spark an economic boost. The why may change but not the results.

The big picture is not pretty. July and August have been particularly volatile. Volatility is a precursor to bad things to come more often then good. The global economy is horrid with Japan, Germany and the rest of the Eurozone slowing. China is slowing. The U S economy is slowing. Negative interest rates are freaking out Wall Street. As we approach the 12-month point before the election, Democratic rhetoric will pick up citing examples of how bad things are. Trump will tweet back that America is Great Again! Volatility is unlikely to subside. The trend is not an investors friend.

However, let’s put things into perspective.

First let’s look at volatility. Depending on one’s predisposition volatility is just “Wall Street” and can be ignored, or it’s a reason to run for the hills, or the proverbial mattress. Reality is in between somewhere. Extreme volatility is not normal nor is it good. But by following the daily gyrations (so you don’t have to) there are really two major causes of the current volatility. The easiest to tackle is Trump v. China. China or Trump threatens more tariffs and the market is down. Some hope for reconciliation and the market rebounds. The last part being key and really the reason to hold off making portfolio changes. I have no idea how this will play out. Best guess is nothing overly substantial happens until we close in on election day. If Trump looks to be leading strongly in the polls, China will cave. Their economy is weakening. They don’t have elections, they have coups. And bottom line, they are wrong. Nations that want to play with the big boys, must act like the big boys. In hindsight, their admission to the World Trade Organization was premature. They want to have high tariffs on imports and free access to the world’s markets. They want to blackmail companies for their proprietary information. China needs to play by the rules or be kicked back to second world status on the world stage. Here are a couple of interesting articles on the subject: https://www.washingtontimes.com/news/2019/sep/3/deceiving-sky-reveals-how-china-steals-tech-secret/ and here: https://www.mauldineconomics.com/frontlinethoughts/digging-a-hole-to-china

But in the here and now, a trade war with China is not good for our economy either. As we’re about to see, we are not near a recession. I’m not even sure that all areas are slowing. With any positive economic news and a softening on China, this market has a way to run on the upside. Our stance now is that missing out on an upside move is a greater risk than riding out the market volatility.

Below is a chart from www.econpi.com Moving counter clockwise the chart graphs economic data from EXPANSION, (top right quadrant) to DECLINE, CONTRACTION and then RECOVERY. There are only two things to look at. The RED box is the average or mean for all data tracked. It is right on the line between EXPANSION and DECLINE. The GREEN box labeled LD splits out the Leading Indicators, or the more predictive of the data tracked. LD is still in the EXPANSION Quad. The RED rectangle shows where the Mean of Coordinates (MoC), has been at the start of recent recessions. We have a long way to go to get to the recessionary point. All indicators are still well above their baseline, the horizontal line splitting the graph.

At the core of our portfolio management decision tree is “price”. After a rough August most of our models would suggest moving to more conservative holdings or to higher cash positions.  We see this as premature. While many economic indicators are in the DECLINE quadrant, most indicators are compared to year ago stats to try and avoid month to month comparisons that are affected by seasonality. Think back-to-school and Christmas for retail. Remember that a year ago the economy got a big jolt from the Trump tax cuts. As the stimulus wears off, we are naturally slowing down by comparison to 2018. Once we turn the corner to 2020, comparisons will be to a much weaker 2019 and we’d expect the market to react accordingly.

One last word on interest rates. Compared to the stock market, the bond market is a much more orderly market. While there are several variables that affect interest rates, one of the most prominent is risk. A higher risk borrower must pay higher interest rates than a quality borrower. The U S is still the largest and by far, the safest economy in the world. And yet much of the world has lower interest rates than we do here in the U S. This is putting undue pressure on our interest rates. An “inverted” yield curve is a normal precursor to a recession. This time we can hope, is different. Market rates are reacting to abnormal negative interest rates from abroad. If we actually look to be headed for negative rates, all bets will be off. No one knows what will happen then as there is no history to use as a reference.

I hope this helps in such uncertain times. If you have any questions or comments, please don’t hesitate to send me an email: wdeshurko@fundtraderpro.com or bill@401Advisor.com

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Service-Connected Disability Income Tax Deduction

By Jim Kilgore (USAF Ret.)

Financial Advisor, 401Advisor, LLC

To my retired veteran friends and friends of service-connected veterans,

If you are retired and receiving above 20% disability rating from the VA you have a possible tax refund due to you. 

In 2016 the Department of Treasury updated IRS Publication 525 (specifically page 18 center column) which explains how retired veterans with a VA rating above 20% can recoup money deducted from their retirement pay. You can either google the publication or go to the IRS website https://www.irs.gov/pub/irs-pdf/p525.pdf. I will add the main points below, here’s what you need to know:

-You should already know your disability pay should not be taxed.

-If you are retired and receive 20% or more in disability pay, your retirement pay should not have been taxed at the standard rate.

-As an example:  A retired veteran with a 70% rating should only have 30% of their retirement pay taxed. 

-A retired veteran with a 90% rating should only have 10% of their retirement pay taxed. 

-You are entitled to recoup that overage according to IRS Publication 525.

-The amount of your refund depends on your individual rating and of course your gross retirement pay.

-The statute of limitations is three years. Accountants can only go back to tax years 2015, 2016, and 2017. If you wait intil filing your 2019 taxes, you could lose the ability to get a refund for 2015. You need to act now.

– Adjustments MUST be mailed in and not electronically filed.

-State refunds will be faster than federal. 

-Veterans will also receive interest on the money from those tax years.

-Provide your accountant or me with copies of your previous tax years (2015, 2016 and 2017); and a copy of the letter stating your VA rating and a copy of your dd214. This can be found on eBenefits at https://www.ebenefits.va.gov/ebenefits/homepage. Once logged on go to Manage tab at the top of the page > Documents and Records > VA Letter > Benefit Verification.

-Our refund is sanctioned through the IRS under IRS Publication 525, specifically pages 17-19.

– For the tax year 2018, and each one going forward, we are required to add the letter verifying your rating and mail the return to the IRS. That’s right; every year going forward retired veterans should get a return.

-A question was asked in the benefits briefing if HR Block or other tax prep companies know about this. When I called the IRS I was told she is among very few accountants/preparers calling to inquire about this benefit for veterans.

-I’ve given this information to several Veterans but several tax preparers are telling the Veteran they don’t qualify. Please don’t believe them!!!! Again, the prerequisite is retired and above 20%.

I want to stress that I know this sounds too good to be true but it is. Don’t automatically think you don’t qualify, don’t allow preparers who are not versed in IRS Pub 525 to tell you that you don’t qualify and please don’t leave this money on the table. 

If you would like me to help you file your amended tax returns with the IRS, I will be happy to work with you to do so. 

If you are a friend or relative of a veteran, don’t assume they are aware of this. One tax preparer we work with, and is familiar with this benefit says he is regularly filing amended returns for thousands of dollars in refunds.

For more information or assistance contact Jim at 937.434.1790 or Jim@401Advisor.com


Mid Year Outlook

As we head into the final month of summer, we head into Wall Street’s traditional slow season. Statistically August and September are two of the worst months of the year as traders partake in their annual migration to the Hamptons.  Add in questions surrounding the strength of the economy and be prepared for the “Bears” to come out with their stock market crash predictions.

However, computers running AI programs ripping off trades that round trip in nano seconds, don’t take vacations. I’m not so sure that their AI programmers accounted for tradition and have programmed in a slow period just because the calendar has turned to August. I’d rather look at some facts. And assume that whatever happens over the next couple of months, some rationality will return in the fall to correct any excess over the next couple of months, whether positive or negative.

The Market

A poplar talking point when election talk heats up, is that the market is not the economy. While stock prices aren’t much of an indicator, company earnings are. If businesses have strong earnings, and expectations that future earnings growth will remain strong there is little chance of an imminent recession, baring the infamous “Black Swan” event, (something completely unforeseen at this time). If you have read this blog or any of my writings prior, you are aware that earnings are everything when it comes to stock valuation. While we use multiple resources for overall money management, Zacks is my go-to for earnings reports and outlooks. Zacks main investment thesis is that companies that beat expectations with their earnings will see the greatest price appreciation. Earnings is their bread and butter. They must be pretty good at it. So, what is Zacks saying about 2nd quarter earnings? Remember the background here is that GDP came in at a tepid 2.1% growth rate, albeit slightly above expectations.

From the www.zacks.com Earnings Trend Report 7/24/2019 (subscription required):

  • While most companies are beating estimates, the tone and substance of management commentary is on the cautious side, with uncertainty about global trade a notable headwind.
  • Total earnings for the 138 S&P 500 members that have reported Q2 results already are up +2.8% on +3.4% higher revenues, with 79.0% beating EPS estimates and 59.4% beating revenue estimates.
  • The earnings and revenue growth pace for these 138 index members is unsurprisingly very weak relative to other recent periods. The proportion of these index members beating EPS estimates is about in-line with historical trends, but positive revenue surprises are modestly on the low side.

I have two positive take aways from the report. First, comparisons are to 2nd quarter 2018 when GDP came in at 3.!% boosted by the Trump tax package. Seeing an earnings decline is not a surprise. 2. Much of the current softness and expected 3rd quarter declines are being attributed to the trade war with China. Transportation and large exporters like Caterpillar have most definitely been affected. The positive? Most naysayers were saying it would be much worse. Between the trade situation and the economy facing a restrictive Fed for the first time in a decade, 2.1% growth was pretty solid.

The Economy

Every week, every month, every year some entity is producing some statistic that market pundits spend a day or two interpreting their meaning in terms of the economy’s direction. Not only are we overwhelmed by the shear number of statistics but determining what is actually predictive and what is not keeps many an economist employed. My go-to for a quick look at the economy is www.econpi.com

They take many of the most meaningful statistics and create a “Mean of Coordinates” (MoC) indicator which is plotted weekly along with its components. They also plot the Leading Indicators average. LD theoretically pulls out only the economic statistics that show some predictive ability as most indicators fall into the “hindsight is 20/20 category”. Finally, this is all put together in a very nice and intuitive graph.

The most recent update from 7/26/2019 is below. You can go to their website for a complete explanation and historical graphs (no subscription required).

Each quad is labelled as to where each indicator lies in the economic cycle. A quick look shows:

  • The red square MoC is in the decline quad – meaning overall the indicators have been slowing. However, it is well above the baseline, meaning the MoC is still showing growth above a baseline or average level. It is well above the larger red rectangle that is labelled as to where the MoC has been during the start of the last two recessions. This is consistent with positive and modest GDP growth.
  • The Green LD box, the leading indicators is still in the expansion quad. Meaning the forward-looking indicators are still leaning toward further economic growth

What’s it All Mean?

As the saying goes, “Hope for the best, but prepare for the worst”. While I don’t expect “the worst” I do expect volatility, primarily in the wrong direction over the next few months. There is little chance of a trade truce with China until after the 2020 election. The Chinese are hoping for a Democratic win and hopes of a reversion to our old policies; remove tariff’s on Chinese imports, while they maintain their tariff’s, illegal trade practices and intellectual theft of our U S goods. There is potentially too much for China to gain from a Democratic win to cave in to Trump now.

Economic indicators and earnings are both showing enough strength to keep this expansion on track. Third quarter economic growth and earnings will likely be anemic. Earnings may dip into negative growth territory, but economic indicators should stay positive. If business outlook turns positive for the fourth quarter expect a solid fourth quarter rally.

What is not being talked about, in terms of the affect on our economy, is our debt. With interest payments rising to the second largest category of Federal expenditures, our economy is being choked off by such a large amount of unproductive spending. In addition, the lack of qualified labor is further choking economic growth. This gets worse as more and more baby boomers leave the work force with fewer unemployed willing to step into the openings. Labor shortages in in transportation, retail and skilled trades are very real.

Steps to Take

For 401k investors, definitely stay the course. But if you are not using our service at www.FundTraderPro.com or through our office www.401Advisor.com do be aware, Fidelity and potentially other Target Date Fund providers have gotten more aggressive in this rising market to capture more gains. Sounds ok except last time they did this was prior to the 2008 – 2009 crash which resulted in some large losses. When the “Pro’s” start doing what they say you shouldn’t do – change your long-term strategy based on short term market conditions, then it could be a sign to worry!

For other investors, now is the time to stress test the portfolio. How is it likely to hold up if the market does crash? If you’re currently an aggressive investor, it may be time to be more prudent and think of the long term. No one ever went broke taking their profits!

Good luck and enjoy the rest of your summer. And for our clients, relax while we watch the markets for you. ffffffffffff

Where Can an Investor Turn for Help?

Being an Independent Investment Advisor means two things to me and to our clients. 1. We are required to act as Fiduciaries https://www.merriam-webster.com/dictionary/fiduciary. on behalf of our clients, and 2. we have no product conflict of interests. Meaning we do not “sell” products where we could be compensated more for one product vs. another. We are also not told what to offer, or have anyone over us to establish quotas.

Most people I talk to assume this relationship exists between all investment advisors and their clients. Unfortunately that is not the industry standard.

Here is one example that has been posted on Twitter https://twitter.com/QTRResearch/status/1123988828807671810. regarding a popular online brokerage.

First we have this communication to Fidelity account holders where Fidelity is “pleased to announce…” an opportunity to invest in a new offering by Tesla. Sounds good…

Until you discover this…

You see that Fidelity is dumping Tesla stock from their mutual funds, while simultaneously offering Tesla stock to their investors. Now that is a conflict of interest!

The lesson? If you truly want independent investment advice, find a truly independent investment advisor. Otherwise, the sad industry truth is that the retail investor in the brokerage world exists for the sole purpose of providing liquidity to the institutional clients.

Mr. DeShurko is the Managing Member of 401 Advisor, LLC an independent registered investment advisor. He is also a registered representative of Ceros Financial Services, Inc. (Member FINRA/SIPC).  Ceros is not affiliated with 401 Advisor.  The views expressed are those of Mr. DeShurko and do not necessarily reflect those of Ceros Financial Services, Inc., its employees or affiliates.

Past performance does not guarantee future results.  There is no guarantee that any investment or strategy will generate a profit or prevent a loss. 

More Positive News

by Bill DeShurko

Despite the media’s focus on negative news, things are really doing quite well. Hard for me to understand all the angst. We should be celebrating the great successes of our time. So this post is for all those that think the world is such an awful place today. Especially those that have said that today is no time to bring children into the world. Really?? I have a better idea, have kids, raise them right and let them find new solutions to the future’s problems. Oh, and by the way, college costs…a lot, so start planning early.

Below is a nice list of just how well off we are. Thanks Jim. Please feel free to comment.

By James Kilgore

1. For the first time in our nation’s history, there are more jobs than people looking for work.
2. Initial unemployment claims in March were below 200,000 for the first time since men walked on the moon.
3. Household net worth in the U.S. is $100 Trillion.
4. For 40 the forty years after WWII the U.S. was held hostage by imported oil. In 2018, the U.S. once again became the largest oil-producing country in the world.
5. 1,700 People per day become financial millionaires in the U.S.
6. In 1960 over half of the world population lived in extreme poverty, and the majority of humans were illiterate. Today those percentages are 10% and 15% respectively.
7. The iPhone in your child’s backpack contains more computing power than the Apollo 11 spacecraft.
8. In the next 24 hours, assuming this is a normal day on our planet, 217,000 will escape poverty, and 325,000 will have gained some access to electricity, 300,000 gained access to clean water, and 600,000 will have gotten on the internet for the first time.

Jim is an Investment Advisor at 401 Advisor, LLC and can be reached at Jim@401advisor.com or 937.434.1790.

5 Investments to Make with a Lump Sum

How one should invest based on circumstances gets far too little attention. Whether investing periodically, like a payroll deducted 401k contribution; or the opposite, withdrawing payments on a regular basis to fund retirement or a college education; or if investing a single lump sum say from an inheritance or sale of a property or business; all require very different strategies.

https://money.usnews.com/investing/stock-market-news/articles/2019-03-21/5-investments-to-make-with-a-lump-sum

Ellen Chang, writing for U. S. News and World Report wrote on the subject with 5 very different recommendations from five different advisors. My recommendation? Look for dividend paying investments. I know, that’s shocking! But lump sum investing incurs a specific market risk. Invest at a cyclical market high and it could take years to realize a competitive rate of return. While dividend paying stocks aren’t impervious to market sell-offs, dividends and specifically stocks of companies that have and are likely to continue to increase their dividends can help cushion market blows.

Bonus. While I personally would not recommend marijuana stocks for a significant lump sum, there is a nice section on them. Since I do get questions about the pot stocks, but don’t follow or recommend them, those that are interested may find an idea or two to look into.

The full article can be found here https://money.usnews.com/investing/stock-market-news/articles/2019-03-21/5-investments-to-make-with-a-lump-sum

Is it Real, or Just Politics?

Part of the unending political cycle is the parade of wannabe elected officials touting their version of “Doom and Gloom” as a reason to kick out the current crew and elect fresh new faces.

The reality is, at least to multiple publications, the world is the best it’s ever been. (https://www.nytimes.com/2019/01/05/opinion/sunday/2018-progress-poverty-health.html, https://www.quora.com/Is-the-world-a-better-place-today-than-it-was-25-years-ago-and-is-it-a-better-place-than-it-will-be-25-years-from-now, https://www.forbes.com/sites/stevedenning/2017/11/30/why-the-world-is-getting-better-why-hardly-anyone-knows-it/#36fd10ad7826, etc.)

And yet when polled in 2017, only 6% of Americans thought the world is getting better. The percentage of people living in extreme poverty has never been lower, Literacy is way up, health is much improved as diseases are eradicated, nutrition has improved and life expectancies are rising?

Why don’t we know the world is getting better? Forbes’ conclusion:

Our World In Data suggests that the media are partly to blame. The media does not tell us how the world is changing, it tells us where the world is going wrong. It tends to focus on single events particularly single events that have gone bad. By contrast, positive developments happen slowly with no particular event to promote in a headline. “More people are healthy today than yesterday,” just doesn’t cut it.

The result is that most people are ignorant about how the state of the world has changed. In both the U.K. and the U.S. most people think that “the share of people living in extreme poverty has increased! Two thirds in the US even think the share in extreme poverty has ‘almost doubled’.”

Apparently, ignorance is not bliss. The United States ranks as only the 18th happiest country in the world (https://en.wikipedia.org/wiki/World_Happiness_Report). Too many Americans like to claim they are miserable or feel they are fine, but everyone else should be miserable! Try living in South Sudan, the lowest ranked country on the list, if you want to know what miserable is. And, yes I’ve been there, and it is miserable.

So for the next few blog posts at www.deshurkoblog.com, I will spend some time looking at real data and try and debunk some of the doom and gloom statistics that are so prevalent in the news. This is not meant to be market-oriented. But you can’t be objective about the market, or anything else if you start off with an erroneous bias.

I will start today with a piece of news that has been hitting the media. “Our economic expansion is over because consumers have historic levels of debt.” A graph like this is usually included:

Looks pretty brutal. Debt is skyrocketing. But is that what matters? Debt is a function of the ability to pay. $100,000 of debt may be crushing to someone making $50,000 a year, but a minor annoyance to someone making $300,000 a year. So the proper metric is the ability to service that debt. Below is a graph showing all consumer debt payments divided by personal income.

Sure, there are people overburdened with debt. They screwed up. People always do. Many times for what seemed to be good reasons (student loans), but overall, as a country, as an economy, personal debt is just not an issue.

Another way to look at it is by looking at net worth, what we own divided by what we owe.

That downturn at the end is the fourth quarter of 2018…brutal. But overall a pretty solid and consistent rise in net worth. As a nation, as an economy, our financial well-being has never been better.

While income and net worth disparity is an issue, in my opinion, no one is going to close the gap by collecting unemployment and welfare checks. Below is a graph of working age Americans that are unemployed. We are at historically low levels.

And finally, not only are more Americans working, but wages are once again growing at a fairly steady rate (+4%) since a sharp decline in 2015 to early 2016.

Summary

Sometimes it’s best to be careful what you wish for. Sure every level of life can always stand improvement, but to base one’s life and on a larger scale, how we run our country on perceived weaknesses that just don’t exist is not a solution. There are real issues, but addressing those means separating the real from the feigned. Decisions need to be based on facts that really matter.

In The News

Just a quick note that Wes Campbell CPA, President of P&A Tax Services and myself will be on Channel 7 News tonight between 5:30 and 6:30. We were asked to comment on people who don’t file but are owed refunds. And I offer suggestions on what to do with a refund.

Value Trap

“Over 30 years as an investment advisor, I have been asked so many times to suggest “a book that teaches me how to do all this (investing) stuff?” My response has always been along the lines of, “Don’t you realize that people spend $100,000 and more on MBA’s in finance or go through the grueling process of getting their CFA certification–one of the hardest post-graduate exams out there? Many more have spent 20 or 30 years actually investing other people’s money, and you really think you can read one book and match wits with these people?” Well, Brian, you did it. I can now honestly recommend this book to anyone, and confidently say, “If you read it, understand it, and (the hardest part) actually utilize it, you will have the tools to invest successfully on your own.” – William Deshurko Investment Advisor, 401 Advisor, LLC


My above endorsement is included in Brian Nelson’s new book, ” Value Trap: Theory of Universal Valuation”. I’ve read dozens of books on economics, investment theories and biographies. While many are well worth the read, this is truly one of the few books that can be used as a “How to” when it comes to investing.

Brian is a former Director of Methodology at Morningstar, Inc. The company that made “Star Ratings” famous for mutual fund investors. As they branched into stock research Brian was instrumental in creating their research methodology. Now he is President of Investment Research for his firm, Valuentum, Inc.

The value of the book is two fold. What so many confuse is the difference between a stock’s price and it’s value. The “Efficient Market Theory” (very academic and rather real world useless) states that a stock’s price is its value. But casual observation proves this not to be true as an individual stock’s price may fluctuate by 10% or more in just a single day. Valuation is the process of determining a stock’s value regardless of price. Stocks have a value, primarily based on earnings. Brian’s methodology, while not necessarily simple, arrives at a very solid range for a stock’s value.

What does this mean to an investor? Simple. Buy when a stock is under valued. Right? But to do so, one needs an accurate and accepted assessment of value. Deciding a stock is worth $100 a share doesn’t do an investor any good if all other investors feel it’s only worth $80 a share. The second step is the money maker. Knowing when to buy, every value investor has bought a stock only to watch its price languish, or worse drop further testing resolve and patience. We have all also seen stocks continue up in price, when by all accounts they are overvalued. Knowing when to buy and when to sell is key. Brian’s use of momentum is priceless.

The Valuentum methodology is something we’ve been incorporating into our investment process at 401 Advisor, LLC for the last several years. If you’d like to find out more give me a call 937.434.1790 or send me an email at bill@401Advisor.com.

For more information or to order a digital copy of the book you can go to www.valuentum.com

Mr. DeShurko is a registered representative of Ceros Financial Services, Inc, (Member FINRA/SIPC). Ceros is not affiliated with 401 Advisor, LLC or Fund Trader Pro. The views expressed are those of Mr. DeShurko and do not necessarily reflect those of Ceros Financial Services, Inc., its employees or affiliates.  Past performance is no guarantee of future results. 
All investing involves risk.

The Not So Secret, Secrets of Accumulating Wealth

The following was written by Jim Kilgore, an Investment Advisor with 401 Advisor, LLC. Jim has been a welcome addition to the firm, adding a financial planning perspective to our practice. If you are interesting in the financial planning process for yourself, contact Jim at: Jim@401Advisor.com.

I wish I could tell you I have followed the advice I am about to give, but sadly I didn’t.  I am older and a little wiser now in my mid-forties, and I have six kids.  I am in the business of helping people with money, and so it is natural for me to take some time to write down some principles I want my children and my clients to learn and practice in their own life.  I’d like to make you aware of three things that are derailing people’s ability to save for emergencies, and squirrel away money for their later enjoyment during retirement.

It’s the Little Things

Almost every day I run across someone who tells me they don’t have the money to save for retirement after I just watched them spend $8 on a white mocha and a scone from a busy coffee shop.  Recently, I engaged a young lady in a conversation for several minutes to find out a little more about her and her spending habits.  She goes to that coffee shop almost every day and gets the same thing.  Next, I asked her about her lunch plans.  She said she usually goes out to a deli or a fast food restaurant to pick up lunch.  Having found out that most of her coworkers do the same thing, the wheels began to turn in my head.  It caused me to stop and think about the effects this is having on many people’s ability to save money.  Do they even know, they are chopping off their own feet?

According to a study conducted by the Simple Dollar, the average American spends $232 on meals away from home every month.  That dollar figure doesn’t include the swipes at the gas station for a candy bar and a soda, and it also leaves out the regular stops for a mid-afternoon coffee at a high dollar coffee shop.  In total the average person spends nearly $500 per month on quick convenience items throughout the month.  What could cutting this dollar figure down to say $200 add up to over a long period?  Let’s take a look.  

If you decided you were going to change your spending habits a little and take the monthly expenditure and reduce it to $200 per month over your lifetime, and save the rest in an investment account ($3,600/yr).  Saving what equates to your lunch money can add up to a significant dollar amount over time. 

The Tax Trap

I can’t tell you all the reasons people give for liking to get a tax return at the end of the year, but it happens all the time.  After learning just a little about personal finance several years ago, I realized how silly this is.  Many people would not argue that the federal government has severe spending problems.  I don’t trust them to use my money in a smart efficient way, and if I have to pay taxes anyway, why wouldn’t I try to hit my tax liability as close as possible each year.  Thereby getting the money in my paycheck throughout the year and putting it to use in the way I see fit. 

According to the IRS, the average income tax return in this country is $2,000.  If you average that out, it comes out to about $166 per month you are sending to the IRS for them to use all year at 0% rate of return.  Technically speaking you lost money because of the invisible tax called inflation on those dollars.  Let’s add that $2000 to the money we were saving from packing our lunch and see how that changes our retirement savings.  See the chart below.



If this is starting to make sense to you, then you can go to www.irs.gov and use their withholding calculator to help you estimate what you should have your withholding set to so you can pay the right amount of tax each year without giving them free use of YOUR money.

 The Car Payment

If you are not ready to run me out of town with pitchforks yet, this last point will bring the rest of the way.  According to nerdwallet, in 2018 the average new car payment was $530 per month and the average used car payment is $381.  New cars are great, and they smell good too.  Do you know what else is great?  Not spending $530 per month on a car every month.  I have almost always bought used cars and when you take your time to find one, you can find some great deals. 

Given the fact that many people have resigned to the fact that a car payment is an automatic this day and age, let’s look at what buying a used car and investing the difference would add to the total.  The difference between a new car payment and a used car payment is $149 per month.  So, let’s add that total to your already growing savings.  That added $1788 per year to your retirement savings and the changes can be seen below.

All the ideas I just shared with you, anyone can do.  I don’t care if you make $40,000 or $200,000 you can pack your lunch, make sure you don’t send the IRS too much money this year, and make wise car buying decisions.  Doing these three things and saving the difference for a long period of time adds up to a significant dollar figure. 

Don’t Give Up

What if you are already 40 years old and have not started saving for your retirement?  There is hope and it is not too late.  While the results won’t be as impressive as the chart above, there is no reason to abandon all hope.  The chart below shows you what you could save if you started saving at 40.

What are some of the ideas you have for increasing retirement savings?  Email jim@401advisor.com to share your ideas for possible use in future articles.

*Jim Kilgore is a financial planner and investment advisor with 401 Advisor, LLC.  401 Advisor, LLC is a Registered Investment Advisor, with the State of Ohio. The views expressed in this article are those of Jim Kilgore.


bill@401advisor.com • 937.434.1790

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Charles H. Dow Award Winner 2008. The papers honored with this award have represented the richness and depth of technical analysis.

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