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The theme of the second quarter was sustained volatility with trading across the asset classes being dominated by the market’s view of Brexit.
Source: Bloomberg
When the polls showed it looked as if Britain would stay in the European Union (EU), risk assets rallied. Risk assets did rally hard up until the June 24th vote in which the United Kingdom (U.K.) voted to leave the European Union after more than four decades. The vote sparked a global sell-off and sent the U.K. spiraling into a political crisis. David Cameron resigned as Prime Minister, the British pound plunged to the lowest since 1985, stocks tumbled around the globe, and U.S. Treasuries surged, sending the 10-year U.S. Treasury yield below 1.40%. The benchmark U.S. 10-year Treasury note yield ended the second quarter at 1.49%, just a shade above the all-time closing low of 1.38% struck in July of 2012.
The vote to leave the EU was largely unexpected and initially the markets sold off sharply for two days. However, after two days of global market sell-off, the markets recouped almost all of the losses over the next several days into the end of the quarter. It is interesting that after the initial shock of the vote, both risk-off and risk-on asset classes rallied.
Looking to the US equity markets, small-cap stocks as reflected by the Russell 2000 index (+3.8%) outperformed large-cap stocks and the broader market as reflected by the S&P 500 index (+2.5%) and the Russell 3000 index (+2.6%) respectively. Year to date, the S&P 500 moved sideways and ended the quarter very close to where it started the year, but performance variance across sectors has been more distinct. Bond-proxy sectors topped out for the quarter and the year-to-date. Energy took the lead followed by Telecom and Utilities. Consumer Discretionary and Information Technology experienced negative returns over the quarter but are still positive for the year-to-date.
Source: Bloomberg
In this volatile environment, we continue to stress the importance of the critical path as we continue to believe in our philosophy that portfolios are best structured to achieve a set of time defined goals and/or projected lifetime spending needs rather than by economic and/or short-term market performance data alone.
For more details on the importance of the critical path and goals-based investing read the 1Q2016 Market Commentary, which you can access by clicking HERE.
Looking Forward
As we enter the second half of 2016, the focus will likely remain on:
Brexit;
The monetary policies of central banks globally
China’s growth and currency trends; and
political uncertainty.
What does “Brexit” mean for the UK and the rest of the world?
The UK stepping away from the EU is a strong signal against globalization. A shift away from globalization and free trade has negative implications for long-term global growth and asset return expectations. If this de-globalization trend continues, we may see more of a global environment of stagflation on a secular basis, characterized by slower GDP growth and rising inflation. Cyclically, analysts are calling for the UK economy to enter recession as a result of the vote. The decline of the pound will make exports from the UK appear cheaper to foreign consumers, which could benefit the UK export sector in the short term. But the UK is walking away from many key trade partnerships. At the same time, employment and business investment will likely suffer amid the uncertainty, and inflation is likely to rise significantly.
Will Brexit cause a global or US recession?
There will be some negative consequences in the US, which is currently experiencing a mix of mid- and late-cycle dynamics, but this vote is unlikely to push the US into recession. The dollar strength and decline in energy prices in the wake of the vote may hamper our export markets and commodity-based sectors. But, the US household sector, which represents about 70% of US GDP, is still exhibiting broad strength. US consumers’ real incomes are still quite strong and may even improve as a result of the vote. However, inflation risk concerns in the US have been percolating under the surface, primarily driven by labor-market tightening and rebounding energy prices. These pressures have warned of potentially rising late-cycle dynamics. The Leave vote likely pushes these concerns off into the future, as the Fed will likely continue to be very cautious.
In fact, the market appears to be pricing in zero rate hikes in 2016 and minimal tightening in 2017, which may actually extend the mid-cycle in the US, rather than bring forward the late cycle or a recession.
We had begun to see some positive economic momentum across continental Europe; however, the Leave vote is an unfortunate negative shock for those markets that will likely play out over the next several quarters. One potential silver lining for Europe is that EU leaders may now shift their policy focus toward more of a pro-growth stance, which may open the door for pro-cyclical fiscal policy and provide a buffer for the negative shock coming out of the UK. Mark Carney of the Bank of England has already hinted at easing measures, including the possibility of a rate cut this summer.
The fixed income markets are likely to continue trading based on sentiment rather than economic fundamentals. Negative rates in much of Europe make U.S. fixed income assets even more appealing to bond investors around the world; the resulting decline in yields and the associated flattening of the curve far exceeds what is warranted solely on the basis of U.S. economic and policy prospects. Additionally, there is a risk that China will again choose to devalue the Renminbi in sympathy with the weakness in European currencies brought about by Brexit, so that their exports remain competitive.
Trends and Investment Themes
The theme of strong US dollar remains at the forefront of our strategy, however over the coming months we will be reviewing global trends and their related investment themes with a view to reviewing the “mapping” of trends and their investment implications across the time horizons that are of most interest to our clients and their financial goals.
Two trends that we are interested in is global population by 2030 and the growth of the middle class across the world.
The following chart illustrates the change in population distribution through 2030. [1]
By 2030, 93% of the global middle class will be from emerging markets, according to World Bank estimates. Consumption by the global middle class in 2030 is forecast to increase by 160% from 2009.[1] The adoption of middle class lifestyles on a global scale will likely have huge implications for providers of goods and services of all types. Makers of cars and other consumer discretionary goods stand to benefit, as do providers of financial and medical services.
By the year 2050 global population is predicted to be dominated by the middle class of China, India and “Other Asia” according to the OECD.
This Wealth Management Commentary is not meant as a general guide to investing, or as a source of any specific investment recommendations and makes no implied or express recommendations concerning the manner in which any client’s accounts should or would be handled, as appropriate investment decisions depend upon the client’s individual investment objectives. Calculations that appear throughout this Commentary are for demonstration purposes only and different assumptions will lead to different results. This Commentary is provided solely for educational and information purposes and is not intended to be an offer or solicitation or the basis for any contract to purchase or sell any security or other instrument.
The views expressed herein reflect Patterson Partners’ opinions as of the date of this publication and are subject to change without notice. The perspectives were formed by a variety of sources.
Past Performance is no guarantee of future results.
The indices and benchmark information included in this Commentary have been selected to allow for comparison of an individual investor’s performance to that of certain well known and widely recognized indices. The inclusion of an index or benchmark should not be considered a representation by Patterson Partners Ltd. that it is an appropriate benchmark in all client circumstances for specific securities or against overall portfolio performance. The performance and volatility of an individual investor’s portfolio may be materially different from that of the indices. Further an individual investor’s holdings may differ significantly from the securities that comprise the indices. In preparing this Commentary, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources. Nothing herein should be interpreted to state or imply that past results are an indication of future performance.
Indices are not available for direct investment; their performance does not reflect the expenses associated with the management of an actual portfolio.
Aggregate corporate bond rates: http://www.bloomberg.com/markets/rates-bonds/corporate-bonds/
http://bea.gov/newsreleases/national/gdp/
Wilshire index data: http://www.wilshire.com/Indexes/calculator/
Russell index data: http://www.russell.com/indexes/data/daily_total_returns_us.asp
S&P index data: http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf--p-us-l--
Nasdaq index data: http://quicktake.morningstar.com/Index/IndexCharts.aspx?Symbol=COMP
International indices: http://www.mscibarra.com/products/indices/international_equity_indices/performance.html
Commodities index data: http://us.spindices.com/index-family/commodities/sp-gsci
Treasury market rates: http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/
Want to (Finally) Achieve the Results You Want in Your Life and Wealth? Here’s the Formula.
Have you ever wondered just why it can be so hard to achieve that next level of success and fulfillment in your life? We all want RESULTS for our effort - in key areas of our life plus financially - yet many struggle to achieve them. We get results in ONE area, while we give up in other areas or outright fail.
But, it doesn’t have to be this way. What if you wanted to improve certain key areas of your life from your social relationships and health or time with your family AND keep your financial and business or career goals on track too? What would that be like for you?
After a few years of achieving financial results for clients and noticing that they weren’t actually happier, I started to question much of my training. I researched and iterated. Four professional designations and two coach training programs later I created a formula for life and wealth achievement that is now the core of my private client work...
((Assets + Aim) x Alignment) + Action + Attention
When all of the “levers” are in the forward position, the results follow.
Let’s look at each of the “levers” and what goes into them. As we go through each of them, I encourage you to rate where you think your lever is right now. Is it in neutral? Maybe it’s in a low gear or in reverse. Get the accompanying 5 Levers Assessment here.
Lever #1: Assets
This lever is all about your human capital – your skills, your knowledge, your experience -- and your ability to generate income through your career or through entrepreneurship. The leverage comes from how well you convert your human capital to financial capital.
Lever #2: Aim
When I talk about aim, we’re focused on obtaining clarity around what you want. When I talk about aim in this context, you’re developing the skills that go into the act of designing. The short-sighted path here is to minimize this concept to goal-setting, particularly those “common goals” you can choose from a checklist or similarly an “investment objective” also chosen from a predetermined list, usually ranging from “conservative” to “aggressive”.
The key question is “What was the process you used to arrive at that goal, that outcome?” Goals need direction to be effective. Your money needs purpose. It can’t work for you without it.
So in Aim we’re doing the work of arriving at purpose. We start with very tactical, day-to-day issues to arrive at high level direction in the form of vision.
This lever is affected by three elements, all of which are driven by data rather than pulled from thin air:
1. Your Life as measured via your level of satisfaction in the 7 Facets of Daily Living.
2. Your Lifestyle. This is made up of the
costs of daily living, and the
costs associated with funding future planned expenses
3. Vision. A lot of people talk about vision as it relates to time, but in my opinion specific outcomes that are time based are actually goals. You need to think of vision as your future self or your future life without the constraint of time.
Do you know people who seem to be busy all the time, but don’t seem to move higher on the economic or life satisfaction meter? They’re chasing the latest financial fad or they’re following the prescription of rules of thumb they learned in a book and they can’t figure out why they’re not getting the results. It’s because the action doesn’t directly tie back to their aim. And this leads to the third lever: Alignment.
Lever #3: Alignment. At its core, alignment is about strategy. Think about what makes the difference between pros and amateurs in sports and in the performing arts. Amateurs do a whole bunch of things but they don’t have a strategy behind why they’re doing it. The pros usually have tight alignment between outcome and resources, which drives the specific action they take.
Alignment is effectively about controlling today for:
Money. Cash flows in and out in the present, but the present cash flows include those commitments made in the past and an allocation to our future self. The question is how much to each?
Time. How do you allocate your time to all of the projects and activities in the areas of life you want to improve?
Resources. Again, what’s available to you and how can you best utilize them?
So, alignment is about knowing what to do, making decisions based on strategy rather than falling for the latest idea.
Should you be focused on debt payoff like all the books and blogs tell you?
Should you be focused on shifting at least 10% of take home wages into an investment account before you do anything else, like many blogs, books and programs tell you to?
Should you always buy instead of rent?
The alignment lever is about how well our decisions are tied to our best opportunities, so it sets you up to take the action that has the most impact to your future.
This is where the ability to think strategically makes a big difference between selecting goals that become stepping stones vs those that are just keeping us busy.
Lever #4: Action. This is all about how well you are executing the projects needed to carry out the strategy.
This is about your tax structuring
This is about your spending plan
This is about automating where you can
This is about clear direction for your financial capital
This is about building momentum through a lot of small wins
Lever #5: Attention. The last piece of this framework is attention. We need to measure and iterate.
How well are you converting your human capital to financial capital?
What is your Quality of Life (QOL) Indicator saying?
How well is your business or career supporting the Asset Lever? (We need to measure that because, if you remember, the elements of the Asset Lever all affects the elements of the Aim Lever.)
I know for many people measurement can be like fingernails on a chalk board but it’s necessary. Remember, the pro athletes and performers review their tape and their stats, then they work with their coach on what needs to be adjusted - that’s what got them to the pro level.
Seeing what the results are based on the actions you’re taking, plus how your financial capital is working and closing those information loops provides increased confidence. This leads to increased competency, and ultimately, to direct control.
The mastery level of this framework is to be so dialed in to your own life that if you adjust one lever one way, you know how all the other levers will react.
It’s about coordinating and integrating all the levers so that you can achieve a higher level of satisfaction and certainty in your life and lifestyle.
I hope you found this overview helpful.
What’s next? Figure out which Lever you most need to focus on and create an action plan. If you haven’t already, download the 5 Levers Assessment for additional insight.
If you haven’t already, go ahead and click the follow button so you can continue to benefit from the free training and resources that I’m going to give you. It’s the one way I know that I can easily be your mentor as you design and build a cross-border life of your design and achieve financial freedom.
Another Volatile Start Reconfirms Our “Planning” Approach to Investing: 1Q Market Review
[originally Published by Patterson Partners Ltd.]
Volatility has been the recurring theme. Global equity markets, as represented by the MSCI World Index, contracted to a twenty-six month low at the end of February, before re-bounding during March to end the first quarter of 2016 about where it started.
For the quarter the S&P 500 Index followed the same pattern as the MSCI World Index, declining just over 5% during January but ending the quarter up just over 1% following a sharp rebound in March. Growth sectors such as consumer discretionary, technology and healthcare and defense sectors such as consumer staples and utilities have outperformed the other sectors of the S&P 500 Index.
The S&P GS Commodities Index continued its downward fall as oil investors struggled to strike a balance amid conflicting reports on the outlook for supply and demand. Europe’s bourses suffered from many of the same challenges facing Asian investors. Specifically, lackluster growth, low inflation and questions about the efficacy of monetary policy. The worst performing countries across the globe were Greece and Italy. They caused the MSCI All Country Europe Index to fall 4.4% for the quarter. Exposure to the far east helped the MSCI EAFE as noted in Table 1 above, fall by 3.34% over the quarter extending losses in that asset class.
Over the last two years, the S&P 500 has spent all but six trading days in an 1850 to 2150 trading range[1]
Chart 1 below shows the growth of $100 in a diversified portfolio as well as in the various major indices listed in Table 1. Note the last two years, which has been isolated inside the purple dashed box. The blue line is the S&P 500 Index and the orange line is a diversified, long term portfolio comprised of 50% global equity, 45% global fixed income and 5% commodities.
Despite the recent market downturn, it’s critical to separate the fundamentals underpinning the various global economies from short term stock market activity.
This year’s market movements are not unexpected nor are they out of the ordinary. In times like this, it’s important to understand the big picture. Markets are not economies and let’s not let emotions cloud clear strategic thinking by simply looking at market returns in isolation.
Having a strategy tailored to the various time frames of one’s individual goals is critical. This allows for the separation of the various risks involved across time frames.
Take the data shown in Chart 2 below. Chart 2 ranks asset classes from highest return to lowest return for each year from 2004 through 2014. For additional perspective, there is a column at the far right that provides the highest performing asset class if the time horizon were 10 years versus one. And the January to June 2015 period is also included for some further clarification and illustration.
Chart 2
As you can see Real Estate Investment Trusts (REITs), emerging markets and gold were the three asset classes that most frequented the top spot over the time period. However, when you look at the same data over a ten-year period gold won the top spot with a return of 10% over the period. Gold had its best year in 2010 and its worst in 2013.
Another challenge that many investors face is measuring progress via a “high water mark” in the form of the highest value of a portfolio.
This is most typically suffered by investors with portfolios that do not have a specific goal to achieve. Rather than achieve a pre-determined level and lock in gains/asset value, the objective becomes to see how much further higher the value will go. When the market falls back, in this situation we feel strongly for the loss and find blame in many different areas. The reality is that these major setbacks are avoidable when an investment portfolio has a clear and specific goal or set of goals to achieve.
Rather than guessing which market will perform best in any one year, we continue to believe in our philosophy that
portfolios are best structured to achieve a set of time defined goals and/or projected lifetime spending needs rather than by economic and/or short-term market performance data alone.
Our overall strategy is based on the concept of a critical path which requires the modeling of the investment assets in the context of the financial plan to determine feasibility.Goals are funded by the investment asset classes and securities that best match from a risk and return perspective.
For example, if a client’s only goal is to ensure that they have sufficient income to offset inflation during their lifetime and we have already allocated income producing securities that are projected to meet the next ten years of their spending needs, we may create a growth-oriented sub-allocation that is designed to maximize returns over a rolling 7-15 year time horizon.
These investments are “separated” from one another into “virtual” portfolios or “goal accounts” at the point of construction. However in most cases we do not require the actual opening of two or more physical accounts at the custodian. That would cause a spike in unnecessary portfolio costs. Our internal reporting allows us to keep an “accounting” for purposes of rebalancing the various investments held in the account.
So, while we technically do not employ market timing, we absolutely consider asset values in the context of goal achievement, time horizons, required growth rates and sustainable withdrawal rates. To the outsider this can often look, particularly in hindsight, like excellent timing. The difference is that market timing is based on actual technical trading intelligence and not at all on goal achievement or specific circumstances.
If you have any questions about this or want to clarify the “goal set” we are working with, please call or email us.
So with market volatility, how do you know if you are “on track”?
The critical path concept is a useful visual tool to determine whether a portfolio created to achieve the goals it was designed for is on target or not. Only two numbers need to be compared: the value of the portfolio today and where it should be today if progress is on target.
The critical path report produced for our managed portfolios divide the area on the chart into three zones, a safety zone, a transition or comfort zone, and a danger zone. Please note that we are working on improved visual aids however for now all goals are shown in one consolidated critical path report that is tied to the overall portfolio value. In addition, in some cases we are also including the value of financial assets that we do not custody for you if they are part of the strategy for the achievement of that particular financial goal.
Some fluctuations are harmless while others are dangerous.
The chart shown above illustrates a critical path split into visual bands as well as the values over time of a hypothetical portfolio (the black line segments). If the value of the hypothetical portfolio shown in the chart stays in the overfunded (or safety) zone, then the goals being modeled will be met or exceeded. Fluctuations and volatility in the upper bands of the safety zone are usually not very relevant. Fluctuations are dangerous to the extent that they cause the portfolio’s value to dip into the danger (aka “underfunded”) zone and stay there.
We believe this is a superior way to determine if the portfolio is doing what it needs to do verus comparing rates of return against various index benchmarks. What this process and the review of various charts depicting different scenarios make clear is that volatility is not the real problem nor is the traditional idea of outperforming a given market index. The real problem is making sure that the average return is high enough to keep the value of the portfolio above the danger zone. The advantage is knowing when to be legitimately nervous or when to reduce risk and lock in returns and provides context for critical decisions.
For US investors, the combination of the critical path report as a context for decision making with tax planning, particularly at year end, is particularly effective when implementing a set of integrated life and wealth strategies.
This Wealth Management Commentary is not meant as a general guide to investing, or as a source of any specific investment recommendations and makes no implied or express recommendations concerning the manner in which any client’s accounts should or would be handled, as appropriate investment decisions depend upon the client’s individual investment objectives. Calculations that appear throughout this Commentary are for demonstration purposes only and different assumptions will lead to different results. This Commentary is provided solely for educational and information purposes and is not intended to be an offer or solicitation or the basis for any contract to purchase or sell any security or other instrument.
The views expressed herein reflect Patterson Partners’ opinions as of the date of this publication and are subject to change without notice. The perspectives were formed by a variety of sources.
Past Performance is no guarantee of future results.
The indices and benchmark information included in this Commentary have been selected to allow for comparison of an individual investor’s performance to that of certain well known and widely recognized indices. The inclusion of an index or benchmark should not be considered a representation by Patterson Partners Ltd. that it is an appropriate benchmark in all client circumstances for specific securities or against overall portfolio performance. The performance and volatility of an individual investor’s portfolio may be materially different from that of the indices. Further an individual investor’s holdings may differ significantly from the securities that comprise the indices. In preparing this Commentary, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources. Nothing herein should be interpreted to state or imply that past results are an indication of future performance.
Indices are not available for direct investment; their performance does not reflect the expenses associated with the management of an actual portfolio.
Any written advice provided herein is not intended or written to be used, and cannot be used to avoid any penalty under the Internal Revenue Code or to promote, market, or recommend to anyone, a transaction or matter addressed herein. The recipient should seek advice from an independent tax advisor regarding the taxpayer’s particular circumstances.
Sources:
Bloomberg
[1] Ned Davis research
Allianz Global Market Review
Aggregate corporate bond rates: http://www.bloomberg.com/markets/rates-bonds/corporate-bonds/
http://bea.gov/newsreleases/national/gdp/
Wilshire index data: http://www.wilshire.com/Indexes/calculator/
Russell index data: http://www.russell.com/indexes/data/daily_total_returns_us.asp
S&P index data: http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf--p-us-l--
Nasdaq index data: http://quicktake.morningstar.com/Index/IndexCharts.aspx?Symbol=COMP
International indices: http://www.mscibarra.com/products/indices/international_equity_indices/performance.html
Commodities index data: http://us.spindices.com/index-family/commodities/sp-gsci
Treasury market rates: http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/
Anya is live and ready to show you everything. Watch her strip, dance, and perform exclusive shows just for you. Interact in real-time and make your fantasies come true.
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Anya is LIVE right now
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Free to watch • No registration required • HD streaming
Many dual nationals and overseas Americans have taken the view that the IRS cannot reach them, or their assets, because they live outside the US. Recent compliance changes as a result of FATCA has started to change this perception, however a new law can cause additional problems to the extent taxpayers now ignore IRS audit and collection activity. It also foreshadows potentially serious problems for taxpayers living abroad (or domestically) with unreported foreign assets if the IRS later determines that they are non-compliant and assesses liabilities.
On December 4, the United States dramatically increased the consequences of tax non-compliance when President Obama signed into law the Fixing America's Surface Transportation Act (the "FAST Act"). The statute includes a provision placing at risk the holding of a US passport for any American taxpayer with “seriously delinquent tax debt”. You are considered to have “seriously delinquent tax debt” if the IRS has assessed a tax liability exceeding USD50,000 (adjusted each year for inflation) and where a notice of lien has been filed or levy made.
Of course, US$50,000 sounds like a large amount of money to many, until you understand that there are many international reporting requirements for taxpayers. Specifically, the Internal Revenue Service can impose a penalty of US$10,000 for each violation of failing to complete and file various information forms, even if no income taxes are owed.
The statute does provide a safe harbor for certain taxpayers, including those who are paying their tax liabilities in a timely manner under an installment agreement or offer-in-compromise. Individuals serving in a combat zone or contingency operation, as defined in section 7508 of the Code, are exempt from certification.
I had been hearing of situations (some from clients and potential clients) where the question of the potential for the linking of tax compliance and US passport renewal was raised. It seems we have an answer to that question, at least for the circumstances covered in this new legislation.
This is a special episode released on Thanksgiving day and it deals with bringing gratitude into your life. Being thankful impacts more than just your personal life as it reflects in your business and your community. Let’s take a look at a framework about how to make this habit of being grateful a part of your daily living.
Thanksgiving for dual nationals and overseas Americans can be a mixed blessing. Those born abroad may have school or have to work on the day and depending on how the holiday is managed during childhood, it could just be another day or it can be a day of meaning and reflection. It can be a day of feeling alone or it can be a day of great blessings- either way you have control over what it will be.
In my day-to-day interaction with clients, our discussions focus around getting to a “next level” or a set of financial and life goals. In short, it’s always really about striving for something. Striving can keep us motivated in life but in the developed world I think there is a dark side to achievement and success and that is becoming so accustomed to the goodness that it becomes routine. And we forget the miracle of it. Maybe we even lose enthusiasm for life itself.
Thanksgiving is special because it is linked to harvest and celebrating what we have. Its about having a sense of appreciation for what you have in life, those things that often get left behind in a world of the latest tweet or notification. So today I wanted to teach you a framework that you can start using immediately.
Notice the Good
We have the ability to notice the good things in life or notice the bad things in life. It’s a matter of what we pay our attention to. It’s a fact that there’s a lot of stuff going on. Let’s just face it—in the world, in our local community, in our daily living, and all these things can be bad and good.
The good news is we can choose. I’m not saying to ignore the bad but I am saying to choose, to find the good so we can be grateful for what is there. So, look for the goodness, notice it. Take a moment to as yourself: “What is good here? What can come out of it?”
Because when we start to raise that awareness, when we start to look for those things; we’ll find it. If you want to find something negative, you’re going to find it. If you want to find something good, you’re going to find that too. Either way, you are right.
Although you may be separated by distance as my family is and you may be living as I do in a country that does not celebrate the holiday, take a few minutes to “Notice the Good” in the following 5 Key Areas of Life. Write down all that you are grateful for. If you’ve had a tough year, all the more reason to take some time for this.
1. Relationships. Who are some people in your life in the present day that you are grateful to know, have as mentors, or simply just be or have around? Maybe you have one or more people from the past who were blessings in your life. It’s possible that you have negative associations with people from your past or present. Think about one thing that person has done or how they influenced who you are today, and see if you can flip the negative to a positive. Can you feel grateful for that experience? How has this contributed to the person you are today? Can you be grateful for that experience?
2. Health. Hippocrates taught “a wise man should consider that health is the greatest of human blessings, and learn how by his own thought to derive benefit from his illnesses”. What blessings do you have?
3. Mind. Did you know that practicing gratefulness can actually improve your health?. In one 2003 study, a group of subjects kept a personal journal for 10 weeks, in which they rated their mood, physical health, and other factors that contribute to being happy. They were told either to describe five things they were grateful for that had occurred in the past week (the gratitude condition), or they did the opposite and described five daily hassles (the hassles condition) that they were displeased about.Those in the gratitude condition reported fewer health complaints. Similar studies have shown improved emotions when someone who has a chronic illness focuses on an “attitude of gratitude” instead of feeling negative. Since gratitude is a mental activity, it’s a powerful finding to show how something totally non-physical can alter the physical activity of the brain. The general lesson here is that the brain responds to positive input and sends life-enhancing messages to every cell in the body. How are you feeding your mind? What blessings do you have in this area?
4. Finances. In addition to the material things you may have, consider your career and/or business. How well do they support your life? What are the blessings here? Consider also resources you have or have access to such as coaches and advisors. What if anything have they helped you learn or achieve?
5. Fun & Fulfillment. Think of activities or opportunities for personal enjoyment, and for refreshing your mind, body and spirit. Also think about time. What are your blessings (or hidden blessings in the form of awareness) when you consider the concept of time? Also think in terms of your community or your daily actions. What are the blessings? Are there people who give you the opportunity to step up and be a role model to? How do you feel about that opportunity?
Extend this Practice Beyond Today
I started a practice of keeping a gratitude journal about 2 years ago at a conference on high performance. The idea being taught was to heal from the past ultimately by not just accepting but by finding a way to be grateful for the lesson or the experience or some aspect of what may have been painful. I am now grateful for a couple of events in my childhood that I now realize gave me strength. We all get choices in life and one of those choices is how we deal with things that cause us emotional pain. Once you find a way to forgive, you pave the way to gratefulness. From there the door opens wide for good things to come into your life.
Get Yourself a Journal and write the five things that you’re grateful for every day. Maybe they’re going to be the same things day-in and day-out for a couple of days. Maybe you’ll struggle to find five things. The point is the practice, not the outcome.
The point of keeping the journal is:
To write out what you feel and to feel what you write
To read what you have written and reflect on it
To appreciate what we have or what we have done
To turn a negative into a positive.at times where we create negative associations with either environment, statements, people; where it brings up negativity in us.To find the goodness again and try to re-associate the goodness and transform the environment or those triggers that typically raise up negative thoughts into positive thoughts; to transform negative associations to positive ones. I know it’s more complex than that and I know that there’s more to it because of the emotions attached to it but at this stage all I’m saying is to recognize it and start to try to practice it. And over time, the tools, we can get the tools to you and help you with that.
To provide an opportunity to record our personal growth
I am truly grateful for my family. I lost my sister earlier this year after a valiant fight with cancer and so I am even more grateful now for the moments and the experiences we share; I am grateful for my clients for challenging me everyday and for giving me the opportunity to serve, for my team without whom I would not be able to serve as many people in as many ways as we do, my personal and professional friends and I am grateful for every single one of the people in my community; to you for reading this post.
I wish you peace on this day of thankfulness. Bring the spirit of gratitude and abundance to those you see today. It will be a gift to them and to yourself.
Have you ever gotten half way through a month or to the end of a month and realized that you don’t have enough money from regular income to pay all the bills? It’s one of those situations where there’s more month than income.
It may be that the property tax bill is due or the school fees. It’s not that this was completely unexpected (you knew it would need to be paid), although you may have forgotten that it was due this month. So, you find yourself either using the funds you planned to set aside for your longer-term goals or having to dip into your short-term savings that you had allocated to that trip abroad later this year.
You’re not alone. Many people—including very successful people—get caught from time to time. I’ve seen this happen a lot with people who relocate, as well as with those whose lives involve more than one country or currency. It seems to be a universal challenge, and frankly, it was a challenge that I used to struggle with too (despite being a Certified Financial Planner™ practitioner) until I stopped budgeting in the traditional sense and invented a better way to plan that was more in line with how we live our lives today.
So, I’m going to give you the key tactic you need as well as a tool that will take you from struggle to success very quickly. It won’t take much time, and it’s not complicated.
The issue with any irregularly occurring expenses and variable expenses is staying ahead of them. So, you need to know when they occur or are most likely to occur. Once you know the amount and the expected or planned timing, you can master this aspect of your financial management.
Go grab a pencil or pen and some paper so that you can get this figured out now.
First, let’s be clear about what I mean by variable expenses and annual expenses. Your variable expenses are those expenses that reoccur each month but can change in value from month to month. In other words, they can have a high level of discretion. Examples of variable expenses are clothing, food, and restaurants/take out costs as well as out-of-pocket medical expenses. What makes these expenses more challenging to work with is the fact that while you can estimate and plan for these expenses—meaning you can allocate an expected total for the year for example—the actual amount you pay out is going to vary from month to month.
Annual expenses are those that don’t typically reoccur during the year, such as membership fees and property tax. Some expenses may be paid more than once per year, such as estimated income tax payments, school fees, or lessons such as tennis lessons or dance or music lessons. These expenses do not usually vary.
Take a moment to identify those expenses that surprise you. These are the expenses you need to isolate so that you can have a plan to handle them. Take a moment to write down on a piece of paper all the expenses that you want to be sure you have sufficient funds on hand.
Once you have identified all the variable and annual expenses you want to handle, you need to determine the month in which each of these expenses must be paid plus the amount you will need to pay that month. So, sort your expenses by month. On a separate piece of paper, transfer the expense amounts into groups by month. Once you have all your expenses listed for each month, total each month.
Ideally, you have a spending plan that you can pull all this information from. A spending plan is different from a budget because budgets are based on the past. A spending plan is about telling your money where to go based on your current year priorities and doesn’t require figuring out where it went. So if you don’t have a spending plan to pull information from, that’s ok. It just means that you need to determine your typical monthly recurring expenses in addition to the annual and variable expense information. So, if you don’t have a spending plan, just make an estimate of the typical amount you spend each month on your fixed expenses, such as rent or mortgage payment, any type of debt payments, and phone and utilities.
Add this monthly amount to the monthly sub totals you have for your variable and annual expenses to obtain your projected total expenses for that particular month. Then, subtract this figure from your total monthly take-home income.
Identify which months have shortfalls, and highlight those months. The month with the greatest shortfall is key. This is where most people stop, but the secret to always having enough money on hand for your planned variable and annual expenses is to fund a special savings account that you can transfer funds into each month—and you need to fund this account with enough money to get through your first few months. How much do you start with? Start your variable and annual savings account with the amount of the shortfall in the most expensive month that you’ve just identified. If two or more months in a row are highlighted, you may need to start with the total shortfall for those months.
So, I hope you found this of value.
To make this easier, download the Life & Wealth Achievement Formula™ Variable and Annual Expense Calendar HERE.
Please comment below, and if you haven’t already, go ahead and click the follow button so you can continue to benefit from the free training and resources that I’m going to give you. It’s the one way I know that I can easily be your mentor as you design and build a cross-border life of your design and achieve financial freedom. You can also follow me on Facebook (just search for Cross Border Living) and on Twitter (@JenPatterson3).
Until I get another chance to talk with you, go out there and try these ideas. And remember them so that the next time you find yourself in this situation, you’ll know what to do. If you implement these ideas, you’ll be on your way to experiencing reduced stress and the relief of knowing you have enough money on hand when you need it.
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Like this? Please share it with your friends and family so that they can try this and begin to experience their own success with integrating their life and money. --Jennifer
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Want To Manage Cash Flow Better? Set Your Life Goals First.
Do you find yourself restricting spending over several weeks at a time, but still have very little, if anything, left over at the end of a calendar year to allocate to your household emergency fund or the deposit on your dream beach house? Is getting cash flow under control something that you would like to master this year?
Then its time to develop a strategy to keep everyday obligations, funds for those expenses that occur once or twice per year and savings commitments from clashing with one another.
Set Your Life Goals, Then Create Your Spending Plan
After 20 years of advising people on a global level on this subject, I can categorically state that those who have articulated their priorities for the year and revisited their longer term objectives are substantially more successful in managing cash flow across and within country borders. But, to develop an effective cash flow strategy, you need to know what you want to achieve. Otherwise, you end up with haphazard discretionary spending driven by whim and other people's agendas or problems.
You can improve your cash flow by becoming intentional about how your money will support your life this year and beyond. Many people genuinely do not have the funds to have all that they want in their ideal time frame. But by getting intentional about what you want and then creating the spending plan needed to get you what you want, you shift in a couple of important ways:
1. You get better at prioritizing.
2. You refine your goals into those that you can achieve.
3. You get creative and start opening to the idea of reverse engineering your business or career to support the lifestyle you aspire towards. You'll know where to focus your attention in the coming months and years.
4. You start seeing that money is not a limitation; instead you see it as a tool to be shaped and wielded as you direct.
How could getting intentional about connecting your cash flow to your life goals make your life better? What could you do or have if you took control of this? How would your personal life improve? How will you break through?
Thanksgiving for dual nationals and overseas Americans can be a mixed blessing. Those born abroad may have school or to work on the day and depending on how the holiday is managed during childhood, it could just be another day vs. a day of meaning. It can be a day of feeling alone or it can be a day of great blessings- either way you have control over what it will be.
I'm feeling blessed this year to have my son Curtis at home, after not having him for four years while he was at boarding school in Canada. But I'm still away from my mom, who lost her mom this year, and my brother and my sister.
Thanksgiving is special because it is linked to harvest and celebrating what we have. Its about having a sense of appreciation for what you have in life, those things that often get left behind in a world of the latest tweet or notification.
Although you may be separated by distance as my family is and you may be living as I do in a country that does not celebrate the holiday, take a few minutes to write down all that you are grateful for. Write down 3 things that you're thankful for in your life. If you've had a tough year, all the more reason to take some time for this.
I started a practice of keeping a gratitude journal about 12 months ago at a conference on high performance. The idea being taught was to heal from the past ultimately by not just accepting but by finding a way to be grateful for the lesson or the experience or some aspect of what may have been painful. I am now grateful for a couple of events in my childhood that I now realize gave me strength. We all get choices in life and one of those choices is how we deal with things that cause us emotional pain. Once you find a way to forgive, you pave the way to gratefulness. From there the door opens wide for good things to come into your life.
Bring the spirit of gratitude and abundance to those you see today. It will be a gift to them and to yourself.
New Information Reporting by US Passport Applicants
Previously proposed amendments to the regulations under Code Sec. 6039E concerning information reporting by U.S. passport applicants are now effective as of July 18, 2014.
The information required to be provided by passport applicants under Code Sec. 6039E is collected on the U.S. passport application form submitted by applicants to the Department of State.
The new regulation describes the information passport applicants must provide: the applicant’s full name and, if applicable, previous name; address of regular or principal place of residence within the country of residence and, if different, mailing address; taxpayer identifying number (TIN); and date of birth.Applicants who do not have a TIN are guided to enter zeros in the TIN space.
In addition, the new regulations provide for circumstances under which the IRS may impose a $500 penalty amount on any passport applicant who fails to provide the required information.
Dual nationals without TINs may wish to obtain advice given the recent announcement regarding the new Streamlined Foreign Offshore Procedures and the Streamlined Domestic Offshore Procedures and their coordination with the Offshore Voluntary Disclosure Program. It is unclear at this time what, if any, ramifications may result from the renewal of a U.S. passport without a TIN.
US Foreign Bank and Financial Account Forms Must Be Filed by Today
Who Must File
United States persons are required to file an FBAR if:
The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
The aggregate value of all foreign financial accounts (this includes banks, stock brokerage accounts, cash surrender value of foreign life insurance, foreign pension plans in most situations) exceeded $10,000 US dollars at any time during the 2013 calendar year to be reported.
United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.
Exceptions to the Reporting Requirement
Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
Certain foreign financial accounts jointly owned by spouses;
United States persons included in a consolidated FBAR;
Correspondent/nostro accounts;
Foreign financial accounts owned by a governmental entity;
Foreign financial accounts owned by an international financial institution;
IRA owners and beneficiaries;
Participants in and beneficiaries of tax-qualified retirement plans;
Certain individuals with signature authority over, but no financial interest in, a foreign financial account;
Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust); and
Foreign financial accounts maintained on a United States military banking facility.
Review the FBAR instructions for more information on the reporting requirement and on the exceptions to the reporting requirement.
Reporting and Filing Information
A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. The reporting obligation is met by answering questions on a tax return about foreign accounts (for example, the questions about foreign accounts on Form 1040 Schedule B) and by filing an FBAR.
The FBAR is a calendar year report and must be filed on or before June 30, 2014 for the calendar year 2013 foreign bank and financial account balances. Effective July 1, 2013, the FBAR must be filed electronically through FinCEN’s BSA E-Filing System. The FBAR is not filed with a federal tax return. A filing extension, granted by the IRS to file an income tax return, does not extend the time to file an FBAR. There is no provision to request an extension of time to file an FBAR.
A person required to file an FBAR who fails to properly file a complete and correct FBAR may be subject to a civil penalty not to exceed $10,000 per violation for nonwillful violations that are not due to reasonable cause. For willful violations, the penalty may be the greater of $100,000 or 50% of the balance in the account at the time of the violation, for each violation. For guidance when circumstances such as natural disasters prevent the timely filing of an FBAR, see FinCEN guidance,FIN-2013-G002 (June 24, 2013).
U.S. Taxpayers Holding Foreign Financial Assets May Also Need to File Form 8938
Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. The new Form 8938 filing requirement is in addition to the FBAR filing requirement. A chart providing a comparison of Form 8938 and FBAR requirements may be accessed on the IRS Foreign Account Tax Compliance Act web page.
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The Concept of Cross-Border Living Picked Up By CNBC
Follow Jennifer's Blog!
CNBC Reporter and Editor, Robert Frank posted an article highlighting one of the key factors that make this lifestyle accessible to many: globalization has moved to the individual level. To quote the article:
"...money will move where it’s treated best. Technology has allowed the rich to run their businesses and investments from anywhere in the world. And while taxes play a role in the decision, relocation experts say culture, education and climate also play roles among the rich."
I'd like to add my name to those "relocation experts" who say that taxes are not always the primary driver of this lifestyle. More importantly, this lifestyle is not just for the "rich". It's available to everyone who truly wants it.
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