We now live huge chunks of our lives online, and do ever more of our financial transactions and interactions via email, applications on our phones, and through websites.
As a provider of financial planning and investment advice, I am perhaps a little more sensitive than most to what can go wrong in terms of online security and privacy.  The recommendations below are not intended to be comprehensive or "fail safe", but could form a foundation for improving online safety.

This one should be obvious, but it seems that a number of us out there in the world are still resisting the step to add a PIN, fingerprint, or password to our smartphone.  These devices typically have unrestricted access to email, social media, and maybe even financial accounts via apps.  Accidentally leaving an unlocked phone on the bus, coffee shop table, or a park bench can provide one-stop access to a stranger.
At a minimum, a 4 digit PIN or "pattern lock" can provide a measure of protection, especially against the mildly curious.
BONUS: take a minute to review the "remote lock" function for your phone model, operating system, or carrier.
iPhone Remote Lock Instructions
Android / Google Remote Lock Instructions

An increasing number of accounts (email, Facebook, Twitter, etc) offer what is called "two factor" or "two step" authentication or log-in.  What this means in brief is that to initially access your account on a new device (phone, laptop, tablet) you must have both the password AND a code sent to a trusted device.  So you may be logging into Gmail on a new computer and Google will send a text message to your phone, adding a layer of security to that log-in.
Generally, you can choose to have your account "remember" that device, so you do not have to go through the two step process every time.  HOWEVER, if you are using your phone as a part of this two step process, it becomes even more important to password protect or otherwise lock your phone.

 The first line of defense against another person accessing private accounts may just be having a decent password.  Gone are the days of being able to pick a pet's name or a clever but simple combination of initials and birth date.  And it is not reasonable to use the same password for multiple services.
Current best practice in strong passwords require length and randomness.
One approach could be a string of 8+ random numbers, letters (both lower and upper case), and symbols.  A challenge with this option is that the password can be overly difficult to remember even one account, much less a similar string for dozens of accounts.
A second option can be a "phrase" or combination of random words: "bananaumbrellafloristdog" is an example that may work in some scenarios...throwing in a number or symbol would make it better.
​Using a "password manager" may be helpful for some people, or having a readily accessible (but secure!) reference with various passwords could be supportive.

Some browsers (the software you use to access the internet) now default to a "secure" mode when possible.  You can check whether your access is in this secure mode or not by looking at the address bar.  The actual language or graphic varies by browser, although most will show some version of a "lock" and include the letters "HTTPS"; an example from Chrome is in the image below.  To be clear, being in "HTTPS" vs "HTTP" does not guarantee against invasions of privacy or remove any personal responsibility for security, but is better on a relative basis.

I think it is pretty common for people to fear "running out" of money.  We've all heard stories of people "dying broke" or reduced to poverty late in life, and those stories are both sad and scary.  So it makes a great deal of sense to avoid that fate.  Financial planning and prudent investment management play a crucial role in an overall approach to help ensure there are sufficient assets and income in place as we age, and they can also help prevent having too much​ left over as well!

If we all agree to the premise that it is generally not comfortable to run out of money during our lifetimes, it may then seem counter-intuitive to discuss the opposite challenge of dying with too much income or assets.  But prudent personal financial management also involves making a plan for the eventual distribution or transfer of an estate, as well as the care of the people and causes that have mattered to the person during their life.  A well crafted financial plan will seek to find an appropriate balance between having too little and having too much.

What happens when you die with "too much" in terms of assets?

• In very general terms, current tax law levies a charge when something of value changes hands.  Whether in life or at death, gifts of money or other valuables can incur a "gift" or "transfer" tax, and when the tax comes into play it can be significant.  Estate planning professionals and tax experts have various strategies to manage the impact of these taxes, but the transfers must be accounted for in any case.  Currently, the tax code at the US federal level has a fairly high exclusion for gift and transfer taxes (over $5M), but each state has their own policies to consider.
• Apart from the potential financial complications, there may also be some lifestyle and psychological impacts associated with holding on to most or all assets until death.  One very simple way to see this is that gifts made during life can be witnessed and enjoyed, both by the giver and receiver, where gifts left at death (via a will, for example) happen at a time where the giver cannot really participate in the experience.

What about "too much" income?  There are a few primary sources of income that could potentially be mismanaged in terms of best fit for a given person or family situation:

• Annuity benefits -- Many people accumulate or hold retirement assets in vehicles that offer the option to "annuitize" at some point in the future.  In the pure sense, an annuity is a payment that spends down an amount over a specified time period; in some cases that time period is "for life".  A pension benefit or a commercial insurance product are two common examples where the owner of the asset may have the choice to take a "monthly payment for life"; however, there may also be other payout options.  In some cases, it may be possible to choose a smaller payment that can pass to a second person after the first dies.  Or it may be possible to forgo the annuity election altogether and take a lump sum distribution from the account.  The "right" choice among these options should be informed by the actual circumstances unique to the case: does the person need income?  Do they have dependents or heirs that could benefit from a different arrangement?  Does their tax status recommend a particular strategy?
• Deferred income -- traditional IRA, 401k, and similar retirement plans (excluding ROTH style for the purpose of this point) all represent deferred income, where the deferral means it was not spendable by the earner, and so income taxes where not collected along the way.  While these types of retirement savings accounts can be very useful and powerful within a financial plan, it is important to not lose track of the fact that there will eventually be an income tax liability on the money in those accounts.  For people who die with money left in an IRA, for example, what passes on to their beneficiary comes with a tax on any eventual distributions.

The points above are meant to highlight that, while having assets and income is probably a better state of affairs for most people than having none, it is also the case that having significant assets and income involved demands careful planning as well.
A robust financial plan with a qualified financial planner, such as a CFP®, should seek to address both ends of this question, from dying with too little to dying with too much, as well as a number of other important financial considerations.

Click the "let's talk" button to send me an email.  I am a fee-only, registered investment advisor offering highly transparent financial planning and investment management advice in a fiduciary context.

It's not always easy to get a bead on exactly what "normal people" understand about their finances.  I tend to frequent public blogs and forums (places like Reddit and Quora) where people discuss personal finance best practices and strategies, as well as industry "insider" newsletters and trainings about investor psychology and behaviors.  My top level impression is that most people have a pretty decent, general idea of "personal finance": save some money, invest for the long term, try not to overpay for advice.

One very basic part of every financial plan, and one that tends to be reduced to a simplistic rule, is the "emergency fund".  It could also be called "cash on hand" or "liquid funds" or something similar, but the idea is the same: this is a stash of money set aside from the monthly budget (it shouldn't be spent down and replenished in a "normal" period) and that it mostly held in a very low risk way (checking or savings account at the bank is very typical); the purpose of this money is to cover extraordinary expenses or demands on the budget to prevent serious disruptions to regular bills, lifestyle, and use of credit.  It is impossible to know the future with certainty and to plan for ever possible eventuality, but it is possible to plan for a series of reasonably likely demands on the household budget (as suggested in the picture above).  So that explains in general terms what the emergency fund is, but leads to the more practical questions around where does this rank among goals, how much is necessary , and how to hold the funds.

Every person and every household have different specific needs and challenges, but everyone engaged in the process of financial planning is going to share in some measure this goal of having cash set aside for budget shocks, and that goal is going to be very near the top of their list of priorities (or should be).  "Cash flow" may not sound sexy, but once the flow of cash through a budget is pinched, everything else financial becomes very difficult to manage.  For that reason, in my planning and investment advisory work with clients, we focus on addressing this goal early and revisiting it often as life changes impact the answer to the how much question.  And speaking of...

If you were to Google "emergency fund amount" or "how much do I need in savings for emergencies" you will likely find a number of sources pointing to a rule of thumb suggesting "three to six months of expenses".  And that is totally a reasonable place to start the conversation, provided that person's budget is pretty stable to begin with and they earn more than they spend on a regular basis.  But this is only a starting place for the conversation, because the details in peoples' lives vary so much.  Here are some considerations that could move a given person's emergency fund needs up or down significantly:

1. Number of dependents (or potential dependents!) -- larger families have relatively more exposure to unexpected costs mounting up quickly and at the same time.  For one example, a family with three kids has much more risk of surprise medical costs (one kid with a cold can quickly lead to three kids with a cold!), than does a household made up of a single person without children.
   Add to that a situation where an elderly parent or grandparent is not currently considered part of the household, but would definitely be taken in if there was a surprise need.
   
2. Number of incomes -- one possible use for the "emergency fund" is to cover lost wages during times of short term displacement from work; if a person has to deal with a month or two of being unemployed or is laid off unexpectedly, having that cash buffer can help in the gap.  Single income homes carry more risk to disruption and therefore may have a larger need in the emergency fund.
3. Insurance deductibles -- this whole discussion is around managing risk and demands on cash, and that naturally raises the topic of insurance.  In the scenario above with the three sick kids, the actual provisions of the family's health insurance become important.  What are the copay levels?  What are the individual and family deductibles and out of pocket maximums?  In my planning work, I like to consider the aggregate deductibles across a household's insurance policies as an input to their emergency fund needs; while it may not be reasonable or possible to hold in cash enough for the "worst case" scenario, it is reasonable to plan for a "bad case" scenario where multiple deductibles are in play at the same time.
4. Asset maintenance and upkeep -- the more things a household owns, the more potential cost there will be to maintain them.  For instance, a very general average for the maintenance of a home each year is ~ 1-2% of the home's value.  So a $250,000 house may require, on average, $2500+ in annual upkeep (HVAC service, new roof every 10 - 20 years, paint, plumbing, etc).  The same goes for cars, boats, RVs -- that there will be expenses is predictable, but the timing and size of those expenses may be somewhat unpredictable.
5. Income and access to credit -- a fresh out of school radiology nurse with no spouse, kids, or mortgage and who makes $75,000 per year and has minimal expenses may be better able to roll with a minor cash disruption; a $500 transmission repair could be a small bump in the budgetary road, and she may prefer to cover that expense out of earnings by just cutting back on some other expenses for a month or two.  But for a family living paycheck to paycheck, just managing to feed the kids and pay the rent, $500 could be a devastating amount.  This point can get a little fuzzy, but when considering a particular household's emergency fund needs, a person with a relatively large "discretionary spending" budget may need a relatively smaller amount set aside in a true emergency fund.

Having money in an emergency fund but not being able to access it in an emergency renders the whole exercise pointless.  With this in mind, it makes sense to consider liquidity and risk for how those funds are held.  Some people may wish to consider a "tiered" approach to holding or investing their emergency fund, particularly people with a relatively high dollar amount allocated for this purpose.

• Cash -- Cash on hand at the house, in a fireproof box or safe, is probably the most liquid option available.  The risks are "opportunity cost" (foregoing any interest or growth, like would be available at the bank or invested) and "loss / theft" if the stored cash is lost, forgotten, stolen in a robbery, burned in a house fire, etc.  For most people, keeping a small amount of cash on hand is probably sufficient.
• Checking / savings accounts at the bank -- By far the most common option for a household's emergency funds, bank accounts are considered safe (FDIC insured up to applicable limits), liquid (funds can generally be accessed daily by check, wire, ACH, or withdrawal), and partially address the "opportunity cost" issue by offering some amount of interest on balances over time.  Some people may choose to have a separate account for emergencies, or to just treat a core amount of their general account as "off limits for spending".  The biggest challenge to these accounts is likely the rather low level of interest rates in the current market.  While "loss leader" or "teaser" rates at some banks may top 1% right now, most FDIC insured accounts are going to yield far less than 1%.
  In any case, for most households, the bulk of their emergency fund should probably be held at the bank.
  
• Investment accounts -- Any investment offering a higher potential return than the interest on a checking or savings account is going to come with both less liquidity and the risk of loss.  Stocks, bonds, mutual funds, ETFs, insurance products, US Trerasuries, CDs -- the whole spectrum of possible investment options are going to have some exposure to one or both of those challenges.  And as with any investment choice, people who cannot bear any risk of loss should not expose themselves to that risk.
  With all that said, some households or people will find that they are comfortable with having a significant portion of their emergency fund in cash and at the bank, and putting the balance of that fund "at risk" in the market in a measured way.  Taxable brokerage accounts (either individual or held jointly with a spouse), ROTH style IRAs (where contributions may be accessible without tax penalty in some circumstances), "permanent life insurance" policies with loan provisions -- these may all in some way play a role in holding a subset of the assets which could be drawn upon in the event of a larger scale financial need.
  

To wrap this up with one more piece of practical insight: The amount set aside of emergencies should be informed by each person / household's actual circumstances and exposures, and these should be reviewed periodically for fit.  When things change, the emergency provisions should also change.  In some cases, the "emergency" turns out to be the new status quo and things must be adjusted more dramatically for the long term; for example, a "short term" unemployment may turn out to be more permanent, and the emergency fund alone will not defend the existing budget and financial goals.  Or on a more positive note, people who find themselves with total wealth and income far outstripping their potential needs may choose to stage themselves out of holding a reserve account.

If conversations like this one pique your interest and you are ready to dive deeper into planning your own finances, email me at [email protected].  I am registered as an investment adviser in the states of Tennessee and Georgia, and may provide advice to residents of 46 other states under certain circumstances (no TX or LA at this time).  Or for a quick review of your current situation, feel free to click the following buttons:

Budgeting tends to be a consistent area that people struggle with in their personal finances, whether or not they work with a professional adviser.  In my experience, I've found that one of the primary stumbling blocks along the way to a workable budget is the desire to work backwards.

The first step to developing a budget is to identify current spending, but too often we start by trying to justify our spending.  What's the difference?

To be clear, there is no judgment here about each person's justifications, but rather a suggestion that building a budget backwards by justifying current spending and wants will often lead to an overspent or under-considered budget.

But approached the other way, with a clear picture of where the money is going each month, which categories get the most and least money, and what patterns are apparent, you now have the ability to single out which items most need to be justified, and what it will take to make it fit the overall budget.

There are tons of apps and worksheets and systems out there to help people with budgeting, but my absolute favorite and most simple option in the days of electronic banking and online credit card accounting is to download your spending history directly from your bank and credit card companies in a spreadsheet.  They will most likely have things grouped in categories already, but it is a simple thing to add a new column and sort your stuff into groups you find useful.
I recommend starting with no more than four to six categories and putting every line item into one or another.
​That's where you start!

How is DRW Financial different from our competitors?  How do we aspire to be worthy to provide advice and investment management to our clients?  These are good questions, and deserving of an answer.  Below and in brief I will outline my philosophy and the DRW Financial approach to delivering service.

One key to our approach in identifying prospects and taking on new clients relies on the concept of self sorting.  We believe that the best client relationships arise when the clients themselves see us as a good fit, as opposed to being "sold" on our services.  In some ways this is like going on a few dates before committing to a longer term arrangement.  And the process relies on both parties -- if DRW Financial doesn't get the sense that we can productively work together, we will (and have!) refer prospects on to another professional who seems like a better match.

When a prospect does become a client, our early work is dominated by a conversation around values, specifically the values that inform the client's life.  In some cases, clients have yet to take the time to articulate their thoughts and priorities around their value system, and David & DRW Financial serves to facilitate that conversation.  We aspire to remain agnostic, not imposing our values onto our clients, but choosing instead to be good and discerning listeners.

DRW Financial is organized as a registered investment advisory.  Our sole compensation comes from the delivery of advice via a financial planning fee or a fee only investment management fee.  RIAs must adhere to a fiduciary standard.  The combination of this standard and our compensation arrangements create a scenario where our interests align with those of our clients, as well as providing simple transparency to identify conflicts of interest where they may exist.

When we deliver advice or design investment portfolios, we aspire to high standards of simplicity and clarity.  While there are complicated concepts in the world of finance, we believe that good advice should be understandable and actionable.  We avoid "black box" investment products; we favor planning that follows best practice; we design plans and investments to be portable should our clients wish to transition to a DIY model.  Our portfolios tend to be rely heavily on low cost "index tracking exchange traded funds", individual stocks, and bonds.

We work alongside our clients in pursuing their goals.  We are also open and willing to working cooperatively with other members of the "team" advising our clients: estate planning attorneys, tax professionals, insurance agents, and similar all have roles to play and DRW Financial is able to productively engage with each.  In circumstances where our clients need services not directly provided by DRW Financial, we are able to provide objective and conflict free advice on how and where to find those services.

David and DRW Financial are committed to communication.  We make use of personal interaction, the telephone, email, and social media to engage with our clients, and we leverage a select set of technology platforms to support our values of simplicity and transparency.  Different clients have different needs, and our technology suite is curated to allow for a variety of modes of engagement.  On one point we remain proudly abnormal: David answers the phone and responds to emails directly, and with an efficiency many clients find startling.

David brought more than a decade of financial services experience and education to DRW Financial, and since founding the firm has sought and earned designations as Chartered Advisor in Philanthropy® and CFP®.  Our intention is to continue seeking new learning and evolving our approach along with industry best practice.

When you find yourself evaluating the options for choosing professional financial advice or going the DIY route, you may wish to consider the following (with notes on our likely answers):

• Who do you like to work with?
  • DRW Financial prefers to work with clients who value communication and care about something(s) more than money.
• How are you organized, and how do you get paid?  Broker, agent, advisor?  Commission, fees, or a hybrid?
  • DRW Financial is a fee only advisor
• What standard applies to your practice?  Are you a fiduciary, or held to a "suitability" standard?
  • DRW Financial is a fiduciary
• How many clients share your attention?
  • DRW Financial is committed to maintaining a small and focused practice.  We currently serve approximately 25 households, with an intention to cap our practice at 50 households.

It was around this time of year back in 2012 that I gave notice to my managers that I was leaving their employment to start my own business.  After twelve years in a couple of roles there, I felt that I had fulfilled the opportunity available to me, had delivered considerable value, and was ready to focus more on pulling my work life into alignment with my core values.

When I created my firm, I worked the words "family, community, legacy" into my logo; while the words mean a range of things to different people, to me they captured what I am working toward in my personal and professional life.  I want to care for and support my own family, and I want to help other people do the same on their terms.  I want to be an engaged contributor to the health and well being of my community, and to facilitate the work of other people and organizations in their unique approaches to that same mission.  And I want to do all of this in full awareness that whatever we do now has the potential to create long term echoes and impacts, thereby shaping a legacy.

Three years ago I walked away from what seemed like a pretty good gig, and there are definitely things I miss: the money wasn't bad, I had a significant degree of autonomy in how I ran my desk, and I had the confidence of knowing that I was good at my job -- but what I miss the most are the relationships with the people I talked to daily or weekly.  There were people who worked alongside me, clients that I served, and professionals at other firms with whom I negotiated / traded / swapped insights, and all of them contributed a lot to my personal growth.  But just as I miss some things from that time in my life, DRW Financial has allowed me to focus on a much smaller set of clients, and this focus has led to what I believe to be is a higher quality approach to managing the specific and varied needs of those clients.

I am about halfway to my target for size and revenue for my company, and I maintain that once I get there I will leave off marketing, prospecting, and client solicitation and reallocate that minor portion of my attention to even more focus on my clients.

As I reflect today, the main feeling is that things are good, and they are going to get better.

In discussions of policy and process, there is a phrase that gets a lot of play: "Correlation does not imply causation".  One interpretation of that expression is that just because two (or more) things appear to happen or appear together regularly doesn't mean there is an explicit and clear connection between them.

One aspect of the scientific and philosophic approach to portfolio design is recognition that there may be some connections between discrete pieces of a portfolio, and it is important to seek those out and consider their impacts.

Keeping this simple: a correlation measure can range from -1 to +1 (Negative 1 to positive 1).  A correlation of +1 means that two things move together in perfect lockstep; a negative one means a perfect inverse relationship.  Zero, right in the middle, suggests there is no implied or explicit relationship between the two things.  In the chart above, the price of Apple's stock appears to be positively correlated with the S&P 500 for much of the last three years.

In my practice, I try to look at statistical data like this with some skepticism to see if I can understand the underlying connection.  If someone finds strong correlation between the height of a population and their preference for lattes over cappuccinos, I may do a little more digging to data manipulation.  In the case shown above, however, it makes some sense that Apple and the S&P 500 tend to move together sometimes.  For one thing, Apple is a member of that index, so Apple's movement does, itself, contribute to the overall performance of the index.  Second, Apple is a disproportionately large contributor to the index.

Lastly, Apple is a huge company with a large presence in the US financial markets, and large companies tend, in general, to move in sync with other large companies.

If the goals for a given portfolio include a need for diversity (and risk sensitive portfolios should), the designer should run some testing on correlations among constituents.

So the market has taken a bit of a downturn in recent weeks.  Blame what you like: China, Greece, oil prices are all among the possible culprits, but the net effect is the same -- stocks are down.  As of this writing, the S&P 500 is down 7% for 2015.

There is not much that investors can do to avoid the bumps and bounces in the market -- the reality is that if you want the full potential upside of stocks, you must also accept the potential downsides.  But, that is not to say that there aren't ways to make the most of the volatility and turn some negatives into positives.  Here are a few actions that may make sense in your case:

This option is only available in taxable accounts (not IRAs, 401ks, etc).  The value proposition here is that realizing a capital loss on an investment may serve to lower your tax liability in the current tax year or some future tax year.

The IRS offers some guidance on their website.

In very general terms, an individual may be able to claim up to $3000 per year in capital losses against their taxable income; for example, a person paying taxes at a 25% marginal rate could effectively lower their tax liability for the year by $750 ($3000 x 0.25).  So in a period where stock and mutual fund prices may have dropped below the initial purchase price, it may in some circumstances make sense to sell, lock in the loss, and reinvest the proceeds in another investment that aligns with your goals and risk tolerance.  Be careful and cognizant of "wash sale" rules.

For rebalancing to be relevant, there is an assumption that you followed an asset allocation plan in the first place.  In simple terms, asset allocation models suggest what percentage of an overall portfolio or goal should be invested in stocks, bonds, real estate, cash, or any number of possible categories.  Over time, these percentages drift from the initial targets as the market bounces and does its thing.  So rebalancing can bring the percentages back in line with the plan, or can be an opportunity to implement a new plan.  In either case, big dips (or rises!) in the market will typically present an opportunity to rebalance...this may look like selling some things that are up and buying more of things that are down.

Often when a person opens an account or initially funds a goal they put in as much cash as they can at the time while maintaining an appropriate reserve or emergency fund.  But over time, cash may build up in a checking or savings account in excess of what may be most appropriate for a given household's needs.  While many people in the market may panic in a sell off, investors with excess cash may be in a position to make a strategic new or additional entry to the market.  A price that is lower than it was before is not necessarily a good price, but in some cases a broad market sell off will create valuable opportunities.

In every case, seek qualified and professional advice before taking actions with tax, legal, and financial consequences.