Surprising Examples of Insurance Fraud to Avoid

Insurance fraud can be defined as any attempt to gain a financial benefit by deceiving an insurance company and it is usually, though not always, a criminal offense. And while you may not be out to commit such fraud, it’s important to be aware of what constitutes as fraud and what you can do to avoid it.

Examples of Insurance Fraud

Insurance fraud comes in many forms including:

Struggling business owner burning down his or her own property in order to make an insurance claim.
Burgled householder who falsely claims for non-existent possessions or inflates the value of those that were stolen.
Auto repair shop that adds a premium to its invoice in the knowledge that the vehicle owner will pass it straight to their insurance company with no questions asked.

People have been known to take such drastic measures as faking their own death to get a life insurance payout, or make claims for phantom but difficult to disprove medical conditions - whiplash as result of auto accidents being the classic example.

More sophisticated frauds include identity theft, often involving medical claims, cyber-crime and scams perpetrated by industry insiders such as agents and loss-adjusters.

The Cost of Fraud

Fraudsters may attempt to justify their actions on the grounds that “everyone does it,” or that it’s a victimless crime that only affects large, faceless and immensely rich corporations. But insurance fraud is, in fact, an offense against all other policyholders who are inevitably compelled to pay higher premiums for the coverages they need.

As a direct consequence of insurance fraud, the FBI has estimated that the average American family now has to pay between $400 and $700 more for its essential insurances each year (a figure that does not include healthcare, one of the market sectors most seriously affected).¹

The costs to businesses and the wider economy are even more severe.

Around $80 billion a year is currently lost to fraudulent claims, a figure that represents some five to ten percent of the value of all United States and Canadian claims. Around one-third of insurers, however, report fraudulent claims running at a staggering 20 percent of their total payouts.²

But as shocking as these figures are, they are only a part of the picture. Insurance costs for the majority of honest policy-holders are also inflated by insurers recouping the expense of the anti-fraud measures and technologies they have to put in place. There’s also a cost to wider society in the resources of the criminal justice system that are devoted to the detection and prosecution of offenders.

It’s also important to be aware that while no sector of the insurance industry is immune to fraud, there are some that generate a disproportionate share of the overall cost.

Medical Billing Fraud

The National Health Care Anti-Fraud Association (NHCAA) has estimated that some three percent of the nation’s $3.6 trillion+ healthcare spend is lost to fraud.³

Some medical fraud is committed by medical professionals whose positions provide them with ample opportunity and temptation. Common scams include billing for treatments that were not carried out and “upcoding” - simple procedures are billed as related but more complex and therefore expensive variations.

In other instances, practitioners may even carry out unnecessary procedures on unsuspecting patients purely for the purpose of generating an insurance payout. A variation of this fraud, common in the field of cosmetic surgery, is the misrepresenting of purely elective procedures, which are not usually covered by insurance, as medically necessary treatments for which a payout can be claimed.

Medicare and Medicaid Fraud

Fraud is an expensive drain on the resources of private insurers, which is passed on to individuals and businesses in the form of higher premiums.

But Medicare and Medicaid, backed by the federal government, are subject to fraud by individuals and organized groups as well.

Medical billing fraud can be carried out against these programs, but they are also vulnerable to claims from individuals who are not entitled to payments. Medical identity theft, in which a person who is not covered takes on the identity of an insured person, is an increasing occurrence and may also involve the obtaining of prescription drugs for illegal sale.

No one knows for sure how much these frauds are costing the taxpayer, but the U.S. Government Accountability Office has estimated that in 2017 Medicare alone made improper payments of around $52 billion.⁴

So serious is the problem that all 50 states now have Medicaid Fraud Control Units (MFCUs), usually operating out of the Attorney General’s office.

Auto Insurance Fraud

Less striking in financial terms, but still a significant additional burden for millions of American drivers, is the problem of auto insurance fraud.

According to the Insurance Research Council, fraudulent claims amount to between 15 and 17 percent of the total, a figure partly explained by the practice in some states of allowing “no-fault” claims.⁵ When insurers are required to pay out for damage or injury - no matter who was to blame for an accident - it can be tempting for claimants or their attorneys to inflate their demands.

Life insurance, homeowners or renters and workers’ compensation schemes are some of the other more notable sectors for this fraudulent activity. Industry bodies and law enforcement wage a never-ending battle against this type of criminal behavior, but the vigilance of individual consumers may be in the end the best defense.

by Peter Donisanu, ChFC®, AIF®

A tidy home interior with white doors and a hanging coat, illustrating the experience of hiring cleaning help that did not meet expectations, stressing the importance of clear goals and effective time management.

Don't Pay the Price by Doing the Work Twice

Have you ever hired someone for help around the house, and you immediately regretted it?

You know, I've had my fair share of unhelpful helpers over the years.

In fact, I remember a time when I hired cleaners that didn't leave my house as clean as they promised.

You see, my family is pretty good about keeping our home tidy.

But, every once in a while, we'll hire someone to come out and take care of the deep cleaning we sometimes can't get to.

You know, it's the stuff like wiping down the baseboards, dusting in high places, cleaning the ovens, and otherwise getting into those deep nooks and crannies.

Well, one day, we needed help cleaning, and having recently moved to Pennsylvania, we were looking for a new crew.

And so, after doing our research online and calling around, three nice ladies showed up at our home one afternoon and offered to give us a "deep clean" for what seemed like a reasonable price.

Well, as they got to work, it immediately became clear that they wouldn't be able to get the job done in the time they had allotted for the work.

And how did I know this?

Well, they didn't have the same hustle or focus on their work as other professionals that we had hired in the past.

And wouldn't you know it, as soon as I left to pick up the kids from school, the crew took off.

And you know the biggest disappointment in all of this was that I could have done the work myself.

But, I just wanted to use my money to buy back some of my time so I could spend it with the family.

And because of this bad hire, I was left paying the price for the same work twice.

Have you ever found yourself in a similar situation?

Have you ever hired someone to help you out, but they didn't meet your expectations?

Well, having lived in different parts of the country and having hired plenty of contractors, here's one of the biggest lessons I learned when it comes to hiring help:

If you want to achieve your desired outcome and effectively buy back your time, then it's crucial to have a clear set of expectations and a personal definition of success for your project before you get started.

That's because having clarity not only prevents common pitfalls like cost overruns, unnecessary complications, and potential disappointments.

It also ensures that you can devote more of your time to what truly matters: like family, close relationships, and developing your passion pursuits.

So then, by clearly defining your success criteria and selecting help wisely, you'll be able to optimize the cost and quality of the service you receive.

But more importantly, by taking this approach you’re likely setting yourself up to effectively buy back more of your time in the future.

Buying Back Your Time

So, why should you even care about who or why you're hiring around your house in the first place?

Well, simply put, it's because you have better things to do with your time.

Here's the thing: given where you're at in your career, you've likely earned the ability to buy back your time.

In fact, you're likely in a position where you're juggling the demands of a high-earning career, nurturing your family, and starting to focus on what your legacy looks like, right?

So then, given all the responsibilities on your plate, you very well know that making the most of every single minute of your day is essential.

That's why it's crucial to think about hiring help around the house, whether that's cleaners, gardeners, nannies, contractors, or personal assistants, not just as an expense but as a strategic investment in your future.

You see, as Joe Dominguez points out in his book, "Your Money or Your Life," time is one of our most precious assets.

Because here's the thing: you can't buy any more of it.

But, you can use your wealth to delegate tasks to people who can help you get your time back.

In fact, by delegating daily chores and maintenance tasks on the regular, what you're doing is effectively, you guessed it, buying back your time.

So then, you can use this bought-back time to do the things that add more value to your life and that move you closer to your long-term goals.

But, it's one thing to hire out the work.

And it's another to actually get someone to show up who will actually take things off your plate in a way that adds value over the long term.

That's why what I'm talking about here is more than just getting help.

Instead, it's about creating more room in your life so you can thrive in the areas that matter most to you.

So then, when you approach the act of hiring help around the house as an investment in your quality of life rather than just another cost, it becomes a powerful tool to enhance your life and ultimately help you manage your busy lifestyle more effectively.

The Costs of Not Knowing What You Want

Alright, so now that you know that you need to be mindful about how you hire help, you’re all set, right?

Well, not so fast.

Because, here's the thing: without a clear plan or a clear understanding of what you want to have accomplished, you could end up with projects that are over budget on costs, under-delivered in terms of quality, and inefficient in terms of time management.

How so?

Well, let me tell you another story.

It's a story about a family, maybe much like yours or mine, who decided to build an addition on to their home.

In fact, this was no ordinary addition.

This family had planned on adding a whole new floor to the top of their house.

Now, the head of this household was Tom.

And Tom was a skilled builder but already had a lot on his plate.

So then, Tom teamed up with a contractor friend named Brian to help tackle this big project.

Now, at first, things seemed to get off to a good start.

That's because Tom's family started with intangible dreams and translated them into tangible blueprints.

And so, they thought they had done all the right things to prepare for a beautiful transformation.

Well, construction got underway, and Tom's family was excited to see how the structure of a new second floor was taking shape.

They were talking about how, in just a matter of months, they'd finally have the home they'd been dreaming about for so long.

But before they could get to the finishing touches, Tom began noticing something odd as the bills started coming in.

Something just didn't add up.

The numbers, the costs, they were off, and by a lot.

Now, Tom was keen to keeping a close eye on building expenses and noticed charges for materials that never made it to their house.

In fact, these were charges for materials that they didn't even need and that certainly weren't being used in their renovation.

So, Tom did what any other reasonable person would do, and he brought this up with contractor, Brian.

Now, Tom expected a simple explanation.

But instead of clarity, Tom received defiance.

That's because Brian insisted that everything his crew ordered was used in the build.

But, having been a builder himself, Tom knew this just wasn't true.

Well, push came to shove, and Brian eventually walked away from the job, leaving the family with an unfinished home and a looming legal battle.

But ultimately, in court, it came out that the contractor's crew had been ordering extra materials on Tom's dime that they were using for their own side projects.

So then, eventually, the judge ruled in the family's favor about the unused materials.

But, Tom's family was left with an unfinished home, including no electrical, no plumbing, and no roof: just a shell of what was supposed to be.

Now, what's the point of this story?

Well, while Tom clearly laid out his expectations about how the addition was supposed to be built, he fell short in the selection of his contractor.

You see, Tom placed too much trust in Brian without first establishing the right sort of expectations for how they'd work together.

It was his friend, right?

Well, there's a good reason they say you shouldn't mix business with pleasure.

Because ultimately for Tom, it led to Brian's crew taking advantage of his family and also led to a failed home improvement project.

You know, when it comes down to it, you don't want to pay the price for the same work twice.

What Happens if You Don't Know What You Want

So then this brings us to our next point about hiring help and that's hiring for the right fit.

Because here's the thing: if you don't step into this decision with a clear idea of how you want your helpers to work with you, then you might find yourself facing not just a logistical mess but with an emotional one too.

How so?

Well, what I'm talking about here involves more than just dissatisfaction with unfinished or poorly done tasks.

No, what I'm talking about here gets at your and my core need to feel in control, to feel secure, and to feel like we're capable of making the right choices, right?

Now, up to now, you've likely prided yourself on your ability to smoothly manage things in your professional or personal life.

You've got your daily calendar dialed in, and you likely always start your week by planning out your schedule to ensure you're making the most of your time.

But this week, things aren't going as planned.

That's because the help you hired is not meeting your expectations.

In fact, now you're spending more time managing the helpers than focusing on what you were supposed to use that extra time for, right?

So what happens now?

Well, deep down, I'm guessing that you're feeling a mix of frustration and disappointment.

And there's this nagging thought that maybe, maybe you could have done the job better yourself than to have hired the help in the first place.

So then, the issue isn't just about the financial cost.

No, it's about feeling like you've failed at something as personal as creating the right environment for your family because you really weren't able to buy back your time.

And you know, the truth is that you likely had an implicit expectation that hiring this individual should have made your life easier and more enjoyable, right?

So then, when it doesn't happen as expected, it can feel like a personal setback.

How so?

Well, let me tell you what I mean here.

So last spring, I decided to hire a landscaper to help out around the house.

Now, this is work that I'd typically do myself, like mowing, edging, pruning, and generally keeping the yard around the house looking neat and tidy.

In fact, it's work that I generally enjoy doing, but I decided that it was time to buy back my time.

That's because with several changes taking place in my life, I knew that I could really use a few extra hours per week all to myself to relax and recharge.

But ultimately, hiring this help gave me peace of mind knowing that someone was going to come by at a set time each week to take this work off my hands.

Now, this wasn't the first time I hired a landscaper.

In fact, years ago, just after my oldest was born, I hired a landscaper to help out around the house in anticipation of spending more time with my newborn baby.

And back then, I got lucky because the people I hired nailed the work without me saying much about it at all.

They cut the grass, and edged the lawn.

They took care of the weeds growing between the cracks in my walkway without my saying anything about it.

And, they even cleaned the flowerbeds and carried away the leaves instead of filling up my garbage cans.

This crew took care of everything in a way like they were reading my mind.

But you know, back then, I must have simply been lucky or something.

Because last year, I didn't have the same experience.

In fact, I had to call the landscaper back out to my house multiple times to finish mowing the lawn because they missed a few spots.

I even patiently and carefully described what needed to be done, but the poor guy still couldn't get it.

And you know, the way this crew was set up, there was one guy who would come by to mow, and another guy would come by days later to edge the lawn.

It even got to the point where I didn't know when this crew would show up.

Some weeks, the lawn was taken care of, but other would go by, and I'd be staring at an overgrown lawn.

It got to the point that driving by my own home was stressing me out.

It got to the point that I wanted to mow my own lawn, but I felt frustrated because I was already paying someone to do the work, you know?

Well, long story short, I ended up parting ways with this crew and going back to taking care of business around the house.

So, what's the point?

Well, the point here is that this bad hire led to an emotional toll.

That's because the discomfort of dealing with subpar work or the need to micromanage work around the house reminded me of earlier times in my life when I felt out of control or when my financial decisions didn't pan out despite my best efforts.

In essence, the negative experience wasn't so much about the cost, as it was about the emotional toll it had taken on my life.

It was about how my attempt to buy back my time actually backfired and cost me more than it was worth.

So for you then, the lesson here from my experience is that not hiring the right fit can lead to unnecessary frustrations.

That's why getting your hiring decisions right the first time is so crucial.

It's not just about efficiency.

It's also about maintaining your emotional balance and ensuring that your home remains a sanctuary, not a source of stress.

How to Avoid Paying the Price Twice

Alright, so then, what can you do to ensure that you're hiring the right help and not paying the price for the same work twice?

Step #1: Clearly Define Success

Well, you can start by clearly defining success.

Now, this work involves gaining clarity on what you want to have accomplish before you actually go out and hire help.

You see, without a clear vision of what success looks like, the work that your helpers show up to do can become disjointed and ineffective.

But, with clear goals, you get clear actions, which in turn result in clear outcomes.

That's why, one of this first things that I do when I go looking for help is to start by defining what success looks like to me.

What I'm doing here is aligning all my efforts and resources toward achieving that defined objective.

And so, where do you begin?

Well, what I typically do is ask myself, "What specific outcomes do I expect to see once the project is complete?"

Here, you're not focused on "how" the work is supposed to be done.

Instead, you're turning your attention to the "what," or more specifically, what you want to see this individual or crew bring into reality.

Now, defining clarity might involve researching similar projects, getting to know industry standards, or even consulting with experts so you can set appropriate expectations.

Either way, what you'll want to do is to prioritize your non-negotiables.

Then, be ready to articulate your vision clearly and effectively once you start engaging with potential service providers.

Step #2: Hire for Outcomes, Not Cost

Now, one of the biggest mistakes I’ve made in the past is to base my hiring decisions solely on price alone.

That's because, more often than not, those low-cost providers are likely focused on quantity instead of quality.

And, you know, going with a low-cost provider is likely to turn you into another job that they simply rush through instead of focusing on you a highly valued client.

That's why when you're hiring for outcome, what you're doing is ensuring that the quality of work meets your needs and expectations and that it aligns with the goals you've meticulously set out in step one.

And so here, when I'm getting ready to hire help, one of the things I ask is, "Is my intended hire truly committed to my defined outcome?"

In other words, are they willing to go the extra mile to give me what I want, or am I just another job that they need to get through?

So then, to figure this out, what I've found works best is to have candidates describe what the end results will look like. But what I’m listening for is not how they’re doing the work, but what their vision for the work will look like.

In other words, instead of telling them how they should do their job, I'll go back to step 1 and articulate what success looks like to me.

So then, if they can reiterate back to me my own vision, then I know that we’re likely on the same page.

Remember, you don't want to pay the price by doing the same work twice.

Step #3: Have a Backup Plan in Place

Finally, when it comes to hiring effectively, I want to ensure that I have a backup plan in place to deal with the inevitable hiccup.

Whether it's a house that isn't cleaned to your standards, a garden that's neglected, or a home repair that's incomplete, these letdowns can disrupt your routine at best and cost you all the time you thought you had bought back at worst.

That's why being prepared for these eventualities is crucial in maintaining the smooth operation of your household and helps ensure that your family's well-being is taken care of.

So then, the number one question I ask of a service professional before I hire them is, "How will you make the situation right if the work goes wrong?"

Here, what I look for is someone to tell me more than, "we'll take care of you" or "you have nothing to worry about…"

Because the truth is that a lot has changed in recent years, so yes, I do have a lot to worry about.

That's why you'll want to ensure that your contract or service agreement includes clauses that address non-delivery or non-performance and how those situations might be resolved.

Don't Pay the Price by Doing the Work Twice

You know, when it comes down to it, hiring help in your personal life is one of the most effective ways of buying back your time.

At the same time, it could very well turn into a fruitless effort if you don't approach hiring it from a place of intention.

That's why I take the time to first clearly define what success means to me.

Then, as I'm screening candidates, I communicate these goals clearly to my helpers and have a backup plan just in case things don't work out.

Remember, your ability to get the most out of your service provider starts with you.

That's because if you don't clearly communicate your expectations when you hire them, you could end up with problems that go beyond money.

Indeed, without a clear plan, you could risk facing projects that cost too much, you could experience subpar service, or you could wake up with even less time on your hands than when you started.

But think for a moment how your life would change if you ended up getting it right.

Imagine what you could do with an extra 5, 10, or 20 hours per week if you just took a few minutes now to define exactly what you need and what you expect from those you invite into your home to help.

That's why, if you're in the market to hire help, it's essential to start with clarity and purpose in what you want accomplished.

Because by doing so, you're not only buying back your time, you're taking one step closer to becoming the master of your own financial independence journey.

by Peter Donisanu, ChFC®, AIF®

Graphic showing the impact of not diversifying concentrated stock holdings, with emphasis on the risks of relying solely on employer stock in investment portfolios.

How to Avoid Company Stock Regret: I Should Have Done Something Sooner

Have you ever taken a big bet and experienced a big loss?

Now, I'm not talking about going all-in on a Blackjack bet at the casino.

No, what I'm talking about is pouring your heart and soul into a professional role with the hope of a big payday.

It's the anticipation of giving your all to something bigger than yourself only to see it come to nothing.

Now, if you have, then you likely know that sinking feeling that you should have hedged your bets sooner.

Maybe you shouldn't have poured everything into that one big bet because you just watched it, and all your financial hopes and your life plans fade away with it.

But maybe you've been lucky.

Maybe you've made all the right moves and happened to be in just the right place at just the right time.

And so, you've likely found that one opportunity that moved you from one successful role to the next.

But, here's the thing: if you're like most of us, you'll likely one day come to know the Law of Unintended Consequences.

You'll likely learn firsthand what it means to experience a Black Swan event.

Or maybe, the universe will give you a quick lesson in Murphy's Law.

And in that moment, you'll truly experience the sinking feeling that maybe you shouldn't have put all of your eggs in one basket, that maybe you should have done something about it sooner.

Now, this point is especially true if your employer pays you with stock options, RSUs, or company stock paid into your retirement savings account.

Because here's the thing: Not having a plan for your concentrated stock holding, no matter how hard you've worked or how lucky you've been, could eventually set you up for disappointment.

Therefore, unless you have a plan for the stock you receive from your employer, whether that's a stock award or match in your 401k, you'll likely want to consider diversifying your concentrated holdings sooner rather than later.

Because if you don't, you could face unexpected financial costs, undue stress and anxiety, and a deeper challenge to your life and financial goals.

The Price of Unintended Consequences

Now, years ago, during the post-pandemic tech IPO boom I had the pleasure of working with folks whose firms were going public.

And these individuals would come to me excited because they were among the few first employees at their firm, had planned prudently, and were on their way to a big payday once their company went public.

Now, there were others I worked with who had joined their firms just months prior to their firm going public but were nevertheless excited about the prospects of coming into a big windfall.

Now, for some of these individuals, their IPO led to life-changing money in the months that followed.

But for others, they sat by and helplessly and watched the wealth they had staked their career on evaporate right in front of their eyes.

That’s because one minute the price of their company stock was riding high, and the next it fell to a fraction of its original value.

Now, whether you're part of the first group that got lucky or the second group who didn't, one day, something will happen to your concentrated stock holding that will leave you with the feeling that "I should have done something sooner…"

And so, here's the thing: not having a plan for your company stock as it vests or as it becomes available to you will likely only set you up for future losses, fill you with anxiety, and lead you to doubt your legacy-building goals.

Avoiding the Financial Costs

Alright, but I know some of you out there are likely looking at a chart of tech stocks now and looking for the disappointment.

You're looking at the trajectory of the Nasdaq 100 index in the months following the 2022 selloff versus where we are at the start of 2024, and you're saying, "Where's the beef?"

I mean, sure, while tech stocks fell precipitously at the start of 2023, by the start of 2024, the Nasdaq index was back to setting all-time highs, right?

So then, you're likely thinking, had I done nothing, had I avoided hedging my bets, everything would have been just fine, right?

Well, the truth is that not all companies that IPOd in 2021 or 2022 emerged unscathed from the tech selloff.

In fact, while some companies were able to track or best Nasdaq stock performance, many weren't quite so lucky.

That's because the value of some firms, like those associated with autonomous driving technologies, initially rallied into their IPO, but here, years later, they're now worth a fraction of their initial price.

And what SPACs?

Remember those things? They were supposed to be the next hot investment opportunity, right?

Well, the equity value of many of the firms acquired by SPACs was, in many cases, wiped out because these questionable investment vehicles later failed.

Listen, we can go on and on talking about both sides of the post-pandemic market environment.

Because for every tech IPO home run over the past few years, many more didn't make it.

But here's what really matters when you're staring into a market selloff, and you need the money: ultimately, you don't want to be the guy or gal that says to themselves, "I should have done something about it sooner…

Dealing with Anxiety and Uncertainty

Now, what you do with your company stock goes beyond your decision at IPO.

In fact, holding onto a concentrated position of employer stock can hurt you even if the stock's price has been doing relatively well for years.

How so?

Well, consider what happened to financials back in 2008.

More specifically, in the fall of 2008, I watched as Wachovia, this seemingly safe mega-regional bank, collapsed overnight, taking with it the retirement hopes of many of its employees.

Fast forward a few years, and I had the opportunity to meet some former Wachovia employees who shared with me their own battle scars.

Now, let me tell you about someone we'll call Judy.

And at the time of Wachovia's failure in 2008, Judy was in her 50s and getting ready for retirement.

Or so she thought.

That's because Judy held a large portion of her 401k retirement savings in, you guessed it, Wachovia stock.

And so, when Wachovia failed in 2008, regulators made the decision to hand the bank over to another suiter for just pennies on the dollar.

So then, just like that, the equity value of Judy's retirement savings was wiped out.

Decades of commitment to her employer, diligently saving and watching her company stock appreciate one year after the next, and just like that, it was all gone.

Could you imagine how Judy or how many of her colleagues felt at that time?

How would you feel?

Of course, you'd probably feel worried, scared, and downright angry, right?

Well, my heart went out to Judy at that moment.

And you know, because of that one Black Swan event, Judy's retirement was cut short by at least ten years.

In fact, she'd have to go on to work another decade past her planned retirement date just to be able to maintain the quality of life she had planned for in her post-employment years.

But you know, the one thing, the one regret that Judy had pointed out as we talked together, was how she wished that she should have done something sooner about her company stock.

She wished that she didn't have so much of her eggs in one basket.

The Risks of Complacency

Now, whether we're talking about a post-IPO dip or an otherwise unforeseen event, not having a plan for your company stock could cost you more than money.

Certainly, there's the worry and anxiety of not having a plan for the grant that's vesting next month or that pile of company-match stock sitting in your retirement savings account.

But, up to now, you've done nothing about it, and everything has been just fine, right?

Your company stock has appreciated over the past few years, and things seem to be going okay.

In fact, you may have already made plans for how you'll use your windfalls in the coming years.

That could include using your windfall to buy a new home, fund your kids' education, opt for early retirement, or create a seed grant for your children's future endeavors.

Either way you slice it, you now have plans for that money, right?

Well, not so fast.

Because here's the thing: just because you have plans for the money, it doesn't mean that you have a plan for your money.

I mean, sure, you have plans in mind for how you want to spend your savings, sure.

But, how would you feel when you do experience a Black Swan Event, or the universe decides to teach you a lesson in Murphy's Law?

You'd probably feel something like Judy was feeling, right?

But, I bet you'd likely feel something deeper as well.

You'd likely start doubting your ability to bring into reality all of the goals that you had given your company stock in the first place.

The new house, paying for college, early retirement, building that legacy – how will it ever come to fruition now that the money is gone?

Here's the bottom line: unless you have a good reason to hold a lot of your employer's stock, and can handle the loss if it comes, you're likely better off acting now rather than regretting it later.

How to Avoid Financial Regret

Alright, so by now, I hope that it's clear that not having a plan for your concentrated employer stock holding, whether that's in the form of a stock award or 401k match, can leave you with the feeling of more than regret later down the road.

So then, what can you do about it?

Step #1: Determine Your Timing Need

Well, the first step to ensure that you're not living with regret about your company stock is to understand the purpose of your money. That's because knowing your money's purpose will help you understand when you'll need to use it.

For example, if you're planning to use your vested stock award as the downpayment on a home purchase in the coming year, then doing something about your concentrated holding sooner rather than later would be a wise decision.

In a similar vein, if you're planning to retire in the next two to three years and have a significant holding in your Employee Stock Ownership Plan (ESOP), then consider reducing some of that risk.

Either way, based on the timing of your need, you can better appreciate whether holding that concentrated position or diversifying your holdings is the right move for you.

So then, to dig into this work, you'll want to ask yourself, "What specific needs will my company stock fund and when will I need the money?"

Then, write down specific, measurable, and time-bound goals for this stock. Either way, by clearly defining a purpose for your stock awards and company match in your retirement account, you can make more informed and strategic decisions about when to sell, hold, or diversify your investments.

Step #2: Understand Your Vesting Schedule

The next thing you'll want to do is to get ahead of potential risks of holding a concentrated position is to understand the vesting schedule for your stock award or retirement benefits.

Now, mastering your vesting schedule is crucial because it allows you to maximize the potential of your stock award or your retirement benefit while minimizing financial risks and tax implications.

How so?

Well, a moment ago, I mentioned how it's essential to understand the timing of when you'll need access to your employer stock to fund your goals, right?

Well, in order to use the money when you need it, you'll need to know when that money will be available to you.

More specifically, whether we're talking about your stock grant or an ESOP, it's crucial to know when this company stock will come into your possession.

Because most of the time, you can plan, but only when it comes into your possession can you actually do something about it.

That's why you'll want to ask yourself, "What are the key dates on my vesting schedule, and how should I be prepared?"

Then, clearly note all important vesting dates and review them on the regular to stay aware of when your shares will become available.

Either way, knowing when you can access your vested shares allows you to plan more effectively.

More specifically, you can align the availability of these assets with your financial goals, whether that's buying a home, saving for retirement, or making other investments.

Step #3: Align Your Selling Strategy

Now, the last thing you'll want to consider to minimize future regret is to come up with a selling strategy for your vested company stock.

And so, what is a selling strategy?

Well, a selling strategy is a way to manage concentrated employer stock risk, where you gradually sell off a stock that takes up too much of your portfolio.

And here again, by deciding ahead of time how and when you'll sell some of those shares, you can avoid the pitfall of having too much riding on the performance of your employer stock.

Think about it—what if your company hits a rough patch just as your life plans begin to unfold?

Well, if your financial well-being is too closely tied to your company stock, your own financial health could also take a hit.

And so, the goal here is to lower the risk in your portfolio by spreading out, or diversifying your investments.

This way, you can gradually reduce your exposure to just one company.

With the proceeds, then, you could invest in different sectors or even different types of assets like bonds or real estate.

So then, as you get started down this process, you'll want to ask yourself, "What is my ideal asset allocation strategy?

You need to know your ideal mix of stocks, bonds, and investments in the US and abroad. It will show you where to move your cash once you sell your employer's stock.

Avoiding Financial Regret

You know, when it comes down to it, you don't want to let the regret of not doing something sooner hold you back from your best-laid plans.

That's why it's essential to be proactive today by defining clear, meaningful goals for your company stock before it's too late.

This approach includes knowing your vesting schedule inside and out and then strategically planning your sales to build a robust, diversified portfolio.

Because if you decide to sit back and do nothing, you could be setting yourself up for a world of financial uncertainty, stress, and, ultimately, disappointment.

Indeed, without a plan, you're not just facing a volatile market, you're facing missed opportunities that could have been avoided altogether.

So then, start planning.

Because if you do, you could be pleasantly surprised.

Imagine the sense of accomplishment and security you'll feel once you've made prudent choices with your company stock.

Think about the relief that comes with each planned sale of your stock, knowing that you're not just reacting to the market but navigating it with intention.

You know, this isn't about lofty dreams; it's about tangible, achievable success, no matter how lucky you are.

And it all begins with that one choice, one choice that avoids leaving everything up to fate and a choice that ultimately takes you one step closer to becoming the master of your own financial independence journey.

by Peter Donisanu, ChFC®, AIF®

A family of four sits under a tree, gazing at a beautiful landscape, symbolizing the importance of reflecting on life's journey and crafting a legacy.

If You Don't Write Your Story, Someone Else Will

"How do I want to be remembered?"

You know, the older I get, the more I linger on this question.

And it's not because I'm intentionally looking for ways to gain notoriety.

Instead, I've come to realize that I only have a finite amount of time to get done what I was put on this earth to do.

The reality is that, over time, my priorities have changed.

You know, the motorcycle life that I once was so fond of in my youth is now long gone.

And today, when I think about working out, it's more about staving off heart disease than it is toning down my waistline.

But when it comes to how I want to be remembered, I'm reminded of a truly impactful quote that I recently came across that said, "In 100 years, no one will remember who you are."

It's shocking to think about, right?

In a way, I'm sure you likely already knew that intuitively.

I mean, can you remember your great-grandfather's name without looking it up or asking a relative?

I start getting depressed just thinking about it!

But here's the thing: instead of looking at this quote as being a cause for disappointment, I've used it as my inspiration to purposefully write my life's story.

You see, in 100 years, few people will care about what corporate title I earned, how much money I made, the square footage of my home , or all the toys I've owned.

But they'll likely be interested in my legacy, or rather, the story of what I did with my life.

Have you thought about your legacy lately?

Have you thought about what folks will say about you in 100 years?

And no, I'm not talking about the monetary inheritance that you could leave behind.

Instead, your legacy is the story that you want people tell about you when you’re not here to tell it yourself

But here's the thing though: your legacy can only be as solid as the vision for the ideal world that you're trying to bring into reality in the right here and now.

It's something that you can make happen right now; it's not something that magically happens in the future.

That's why, if you want to create a story worth remembering, then you need to prioritize daily activities that are aligned with your legacy-building vision.

Because if you don't, in 100 years, someone else will write your story.

What's Keeping You from Writing Our Story

So then, what does it look like when someone else writes your story?

Well, consider the story of Nikola Tesla.

Now, as you'll likely recall, Tesla was an inventor and engineer known for his contributions to the development of many things you use today.

These include things like alternating current (AC) electricity, wireless communication, and a number of other innovations that you can look up on the web.

Here's the thing, though: Tesla's legacy has been shaped by historians in ways that emphasize certain aspects of his life while leaving out others.

How so?

Well, many times, historians will portray Tesla as an eccentric genius who struggled financially and was overshadowed by Thomas Edison.

In other words, he failed because he didn't get rich like Edison, right?

Now, the trouble here is that this portrayal of Tesla's legacy has created a narrative that often focuses on his rivalry with Edison and his financial difficulties instead of his genuine passion for science and innovation.

That's because, by many accounts, Tesla was deeply dedicated to advancing technology for the betterment of humanity.

And this dedication is evident in his numerous patents and contributions to various fields, including electricity, radio, and wireless communications.

Ultimately, Tesla had a visionary approach to his inventions and was more focused on their potential societal impact than his own personal gain.

In other words, he wasn't as concerned about the money as he was about the work, but the story that was written about him put the emphasis on money.

And that likely came from the comparison between him and Edison.

Now, had Tesla been able to shape his narrative more effectively, he might have been remembered differently.

He might have been remembered not only for his scientific genius but also for his integrity and commitment to making the world a better place through his inventions.

Maybe, had Tesla been a little more thoughtful with his finances, he'd have been better known today as a visionary who made a big impact, instead of the guy that got beat out by Edison, right?

Indeed, your legacy goes beyond how you want to be remembered. It's about the impact you make through every little daily choice you make today.

Daily Distractions

Now, the trouble is that so many of us want to do good.

We want to make an impact in our families, in our communities, and in the world around us.

And now, certainly, you likely want to make an impact and do the right thing on a daily basis, right?

The trouble is that outside obstacles often distract you from focusing on your long-term goals.

Indeed, in the context of building a legacy, you'll likely face a host of daily distractions like emails, social media notifications, and urgent but not important tasks that compete for attention.

And these distractions tend to pull you away from activities that would otherwise contribute meaningfully to your vision for the future.

In fact, these external distractors are relentless and seemingly everywhere.

And you know, the trouble is that they make it very hard for you to stay focused on what truly matters because your attention is constantly being pulled from one fire that you need to put out to another.

You're doing busy work, but you're not making any progress.

And so, all those well-intentioned plans that you had laid out with your family or the time you planned to contribute to your local non-profit are once again put on the back burner.

Now, here's the thing: this constant tug-of-war between the immediate demands of life and your long-term goals can lead to a disconnect.

That is, it inflames those feelings of frustration and a sense that the demands of everyday life are diluting your efforts.

But, where you give your time and energy is your choice.

Because, if you don't write your story, someone else will.

Internal Struggles

Now, oftentimes, those daily distractions aren't a cause but an effect.

In other words, what if you're staying busy because you want to avoid thinking about the bigger picture of life?

Let me tell you what I'm talking about here: You see, in the early 1970s, there was this psychologist by the name of Wayne Oates, who found himself grappling with his own relentless compulsion to work.

He found himself distracted by external things, or so he thought.

Now, this wasn't just about being sucked into the nine-to-five grind.

In reality, Oates was dealing with an internal struggle and he couldn't understand his compulsion to work so much.

Have you ever felt this way? Have you ever felt the need to be the one to turn out the lights in the office at night?

And so, he did some digging. He looked internally and used his own professional observations to eventually give a name to his struggles, which he called "workaholism."

And so, as part of this discovery process, Oates ended up writing a book called, "The Confessions of a Workaholic: The Facts About Work Addiction."

Now, the book starts off with an account of Oates' own life experiences and offers an inside look at how his work consumed his life, including how it cost him his personal relationships and his health.

But here's why this all matters. Oates helps give us a modern-day definition of workaholism.

He helps us understand how our own internal struggles often manifest as external issues that distract us from doing the essential things in life.

Now, you likely already have your own definition of workaholism.

But let's go back to the original definition as Oates describes it, because it's quite telling.

Now, Oates defines workaholism as an uncontrollable need to work incessantly, where an individual is internally compelled to work hard, often exceeding what is required.

But the big question here is, "why?"

What would compel an individual to behave this way, right?

Well, that's what Oates talks about in his book.

And so, Oates goes on to talk about how traits like perfectionism, a need for control, and fear of emotional intimacy can drive a person deeper into the arms of their work.

But the big takeaway here is that the struggles that individuals face internally, often lead them to mask their problems with external solutions.

That's why, ignoring the internal struggles of doubt and uncertainty when it comes to writing your life story can result in a lack of decisive action towards building your legacy.

So what happens if you don't do anything?

What if you think you're doing something, but in reality, you're just engaging in busy work?

Well, there's a cost.

And the emotional toll can include a persistent sense of dissatisfaction and the haunting question of "what if?" when it's too late, like:

What if I had started that side hustle?

What if I made it to my kid's ball games more often?

What if I took more time with that precious relationship?

What if?

What if...

You know, if you don't write your story, someone else will.

How to Write Your Own Story

So then, what can you do to move past the internal and external struggles and get to a place where you can begin write your own story and building a legacy you want to leave behind?

Step #1: Identify Your Values

Well, the first thing you'll want to do is to take the time to identify and get to know your values. Now, you'll likely recall that your values are not the things you aspire to be, but rather, they're the things that are important to you right now.

Now, this distinction between aspiration and actuality is crucial because aspirations are often externally influenced, while what you really value is often something internally important to you.

In other words, you're born with it.

Indeed, these are things that you would genuinely care about if no one was standing around watching what you're doing.

But for now, what you need to know is that gaining clarity on what is truly essential allows you to filter out the noise and focus on what genuinely matters to you and to the legacy you're creating.

And so, by defining your core values and the ultimate impact you want to leave behind, you can prioritize the actions and decisions that align directly with your life's purpose.

And how exactly do you go about doing this work?

Well, you can start by asking yourself, "Do I truly understand what's essential in my life, and if not, how can I find out?"

One thing you can do here is to take the time to complete a values assessment.

At the very least, review resources like James Clear's Core Values List.

Either way, I've covered the topic of values discovery in previous posts and episodes, so be sure to check out those resources at https://legacygenone.com.

But doing this work will give you a solid base from which to make your decisions.

Step #2: Practice Deathbed Meditation

Now, the next thing you'll want to do visualize what happens in your world after you’re gone.

And one helpful approach to this end is to practice Maranasati meditation or otherwise known as deathbed meditation.

And what exactly is Maranasati meditation, you ask?

Well, Maranasati meditation is a type of meditation that helps you not only think about but also accept the idea of death.

And so, why would you want to take the time to think about dying?

Well, this kind of meditation encourages you to think about how death is a natural part of life and to appreciate how everything in life is truly temporary.

That's because, when practicing Maranasati meditation, you might imagine what happens when you die or think about the process of your body getting older and eventually not working at all.

The goal here isn't to make you scared but to help you value life more fully and to worry less about minor problems.

So then, by frequently thinking about death in a calm way, what you're actually doing is giving yourself the ability to enjoy your life even more.

And how exactly is this possible?

Well, that's because you start to learn how to live in the moment and not get too upset about things that are impermanent or simply don't matter.

Ultimately, this meditation can help you feel more at peace and ready to handle whatever life throws your way.

So then to do this, start by asking yourself, "In my final moments, who will I be surrounded by and how will they remember me?"

Then, consider all of the values you've identified in the previous step and find a quiet space to reflect on your life as if in your final moments.

Consider the alignment between your current path, or the daily choices you're making today, and your deepest values.

Then, use this reflection to set intentions or goals that bring you closer to your ideal life vision, and keep track of these insights for future guidance.

Step #3: Take Daily, Incremental Steps

Now, the last thing that you'll want to consider as you're intentionally writing your story is to focus on your most important actions.

These are the things that you want to be doing each and every day to get you on your path and move you closer to your ideal version of your life story.

And so, what does this look like?

Well, consider the story of Mike Flint.

Now, Flint was Warren Buffett's personal pilot.

And you remember Buffett, right?

The Oracle from Omaha?

The billionaire investor?

Well, before working for Buffett, Flint had flown for four U.S. Presidents.

And so, by many measures, he was an accomplished pilot. But he was looking for more.

So then, as Flint tells it, one day, he approaches Buffett looking for advice on furthering his career.

So, what did Buffett do?

Well, Buffett asked Flint to list his top 25 career goals and then circle the top five most important ones.

At this point, Flint thought that he would work on his top five goals immediately and then focus on the remaining 20 when he had free time, right?

Well, it didn't work out that way.

That's because Buffett gave Flint a surprising instruction: He told Flint he should avoid the 20 uncircled items at all costs until he had achieved his top five goals.

These uncircled items, Buffett explained, are not just distractions but also potential traps that could divert his energy and focus away from his most critical objectives.

Now, this isn't a one-size-fits-all solution.

Not everyone can have a single-minded focus and achieve the top things in their life at the cost of other priorities.

But, Buffett's advice not only highlights the importance of focusing on your highest priorities and also underscores the necessity of avoiding less critical tasks that can impede significant progress.

That's why you'll want to take the time now to think about the small steps you need to take each and every day to move you closer to the story you want to write.

With that said, I'm not talking about doing work for work's sake.

More specifically, you'll want to make sure that you match your actions to your values.

It's about taking intentional daily steps.

It's like making sure each puzzle piece fits so you can see the big picture of your dream life coming true.

So then, to begin, you'll want to take the time to ask yourself, "What do I need to do today to live in alignment with my values?"

Then, every day, try to do one small thing that shows you what's really important, whether that's being more kind or more helpful to others.

Remember, it's okay to make mistakes; the most essential part here is to keep trying to live by your own value system, not what you think others want for you.

Ultimately, the point here is to do one thing today that moves you closer to where you want to go.

So then, don’t let another day pass you by.

Go grab a pen, outline your vision, and commit to one small step today that brings you closer to the legacy you dream of.

If You Don't Write Your Story, Someone Else Will

Remember, the story of your life is yours to write.

If you're anything like me, you'll likely want to be proud to hear what your family or loved ones have to say when they tell it.

That's because if you don't take charge and define the legacy you want to leave behind, you risk allowing life's daily hustle and others' agendas to shape your path and the steps you take.

Remember, each day spent without aligning your actions to your true purpose is a missed opportunity to forge a meaningful legacy.

Ultimately, the world will remember you not just for your good intentions but for what you did with your time.

So then, you'll likely want to make sure it's a reflection of your true aspirations. Because if you don't write your story, someone else will.

But, what if you do end up writing your story the way you want it to be read?

Imagine what could unfold in your life today if you decided to prioritize what truly matters.

Picture a future where, each day, you commit to small, deliberate actions that align seamlessly with your deepest values and aspirations.

That's why it's crucial to not wait for another year to wonder what could have been.

Start now, start today so you can not only begin defining what’s truly important to you, but so you can write your own story by taking one step closer to becoming the master of your own financial independence journey.

by Peter Donisanu, ChFC®, AIF®

Keep Calm and Trust Your Investment Plan

Is all the news coverage of the stock market selloff bumming you out?

I don't know about you, but I'm downright disappointed.

You know, markets have had a ripping good start to the year, and now it feels like it's all coming to an end, right?

In fact, in the first three months of the year, the S&P 500 index, one measure of stock market performance, had its best start to the year since the pandemic.

And this stellar performance comes after watching these markets ride a rollercoaster over the past few years, with prices seemingly flying to the moon and then dropping like bricks.

But now, after having a good run for the past six months, it feels like Mr. Market is once again pulling the carpet out from under us all.

It feels like we're all about to relive the uncertainty and ups and downs in the stock market that we did just a few years ago after finally getting back to even.

It's just not fair, is it?

Indeed, turn on financial news, and it's all right there: concerns about impending wars, political wranglings and upcoming elections, unabating inflation and all this ongoing interest rate policy uncertainty.

It's enough to make you want to build a bunker and hide away for the next decade!

Now, having felt the pain of watching markets sell off in 2022 and then having it take two years to bounce back only to potentially be right back at it again, I'd be tempted to pull my money out of the markets and wait for this storm out for the time being.

Do you feel the same way?

Are you tempted to throw in the towel and just sit all of this out so you can break even?

Well, if you are, then you should know that being under-allocated in the markets could leave you with a massive case of investor's remorse.

In other words, if you take your money out now, you could feel somewhat safe, sure.

But, you could also be left with a sinking feeling of disappointment a year from now.

You know, no one has a crystal ball to divine which one of today's headline events could lead markets to rally or falter next week, let alone next year.

So then, given everything going on, if you're tempted to pull money out of the markets, I'd encourage you to pay less attention to the headlines and more to your disciplined investment strategy.

That's because if you don't, you'll not only miss out on gains on the other side of all this bad news, you'll likely also throw your investing ability into question and potentially derail your long-term financial plans.

The Problem with Being Swayed by the Headlines

So, before we go any further, it's crucial to point out that the current market environment is reflective of a natural pause in a healthy market rally.

The trouble is, however, that when you're in the middle of a rally pause, it's hard to tell whether the market is getting ready to make its next move higher or lower.

And you know, during times like these, I'm reminded of where I was on March 9, 2009.

Now, this date marked the bottom in the decline of the S&P 500 index during the height of the Global Financial Crisis.

And as you'll likely recall, the world seemed like it was coming unglued at the seams.

Now, back then, I was a market analyst for a private wealth management firm.

And at the time our leadership team held calls every week to discuss strategies for helping advisors help clients during this time of uncertainty and help them stay committed to their investment plan.

And so, to me, March 9th seemed like any other normal (or what you could consider normal during that time) day in the market.

But from that date on, the market slowly but surely started clawing its way back higher.

Now, the truth is that nobody rang a bell or sounded an alarm to let the rest of the markets know that we hit a bottom.

In fact, investors, traders, and market participants collectively decided to just start buying.

I mean, how much worse could things get at that point, right?

And so, wouldn't you know it, the rally would go on to produce annualized double-digit returns for the next decade.

But you're likely thinking to yourself, "Those conditions were different then, and the world is in a different place", right?

Well, even when you look at recent market activity, like what happened after the start of the pandemic and shutdowns, the markets sold off sharply, but then it recovered.

To be sure, in 2020, risk assets sold off in February, and then again in March, but by April, they not only bounced back, many stocks took off again and rallied until the end of 2021.

That's why you need to invest in your strategy, not in the stories.

The Problem with Market Aversion

Here's the thing: some investors are often swayed by the volatility and noise of the market and, oftentimes, are driven by constantly changing headlines that can lead to poor choices and costly mistakes.

Now, this type of investor often finds themselves swept up in the currents of financial media and headline events.

So then, when the stock market begins to shake, maybe due to economic reports, global incidents, or political unrest, these individuals react quickly and are driven by a fear of losing their life savings.

Instinctively, they want to hide their money under their mattress until it's safe to come out and play again.

Now, the trouble with this approach is that when the market begins to recover, these same individuals, still wary from their recent scare and perhaps still influenced by lingering negative headlines, are hesitant to re-enter the market.

So then, by the time they feel confident enough to invest again, the market may have already rebounded significantly and much of the big gains may already be gone.

So, why does this happen?

Well, this sort of behavior is a classic example of being influenced more by emotion and less by a disciplined, long-term investment plan.

That's because when you allow yourself to be bombarded by conflicting information and rapid-fire news headlines, it can lead to either analysis paralysis or the impulse to make hasty investment decisions.

In other words, you're allowing an external medium to influence your decisions, rather than being grounded in your internalized plan.

The Emotional Hangover

Now, could you imagine being that individual on March 9, 2009, who, amidst all the headlines, decided they couldn't take all the bad news anymore and pull their money out of the markets?

Or how about being that person who sold all of your holdings in early April 2020 just as the markets were pivoting ahead of a massive rebound?

Now, if you're one of the individuals who went to cash during either of these times, then my heart goes out to you.

Truly, I appreciate your pain because you know firsthand what it feels like to be influenced by the media, only to sit by and watch the tickers bounce back and then convince yourself that you'll likely find a good entry point that always seemed to come too late.

You understand what it feels like to have an emotional hangover.

You know how relying on your emotions instead of a disciplined strategy can exacerbate your already-existing feelings of doubt and insecurity.

You also know how this emotional turmoil can lead to episodes of heightened stress and anxiety, which likely deterred you from making any more investment decisions, right?

That's why, during times like these, it's essential to invest in your strategy, not in the stories.

The Long-term Cost of Doubting the Process

Now, when you allow yourself to be swayed by what you hear in the news, something else starts to happen besides getting out-of or in-to the markets at inopportune times.

That's because when you let emotional impulses guide your investment decision-making process rather than adhering to a disciplined strategy, you may find yourself on a turbulent financial journey.

When you let go of reason, and start following your "gut", a whole cascade of events starts to unwind that I've seen happen all too many times.

And so, what happens is that as you react impulsively to short-term market fluctuations, you might shift from one strategy to the next, chasing returns or fleeing losses, rather than staying the course with a well-thought-out, disciplined investment plan.

This pattern not only erodes potential earnings through poor timing but also incurs higher transaction costs and possible tax consequences from your frequent trading.

But here's the thing, over time, when you finally become emotionally worn out, the lack of consistent growth in your investments can ultimately lead you to question your own ability to manage your finances effectively.

It'll lead you to want to throw in the towel on all of it.

What Happens When You're Driven by Emotion

And so, how does this happen?

Well, essentially what happens is that your self-doubt undermines your confidence and makes you more susceptible to further emotional investing.

Or, on the flip side, it leads you to adopt excessively conservative strategies that don't align with your original savings goals.

Now, let me tell you a story to better illustrate how this happens.

I'm going to tell you the story of someone we'll call Sarah.

Now, Sarah is a middle-aged tech professional who was well on her way to building her retirement savings through the power of compounding and disciplined investing.

Initially, Sarah approached investing with enthusiasm and optimism, but she lacked a clear, disciplined strategy.

She loved to turn on CNBC or Fox Business News almost every morning before work and she frequently engaged in Slack chats about the markets or the latest meme stock with her coworkers.

And so, her "investment" decisions were often heavily influenced by daily market news and the opinions of financial pundits and the people around her.

So then, when the markets experienced a significant downturn, Sarah became activated by the emotional energy from, naturally, the people and media around her.

She'd hear about all the stocks and sectors losing money. She'd hear about "Markets in Turmoil" and start to get concerned.

Then, she'd hear about how her coworkers were now losing a ton of money.

So, what did Sarah do?

She panicked.

She sold several of her most fundamentally sound holdings because she was scared of taking further losses.

And wouldn't you know it, Sarah sold right as the market was setting the stage for another move higher.

So then, over the next few weeks and months, as the markets began to claw their way higher, Sarah stayed on the sidelines.

And so, by the time the talking heads on TV were touting the invincibility of the new bull market rally, Sarah felt confident enough to re-enter the market.

But, prices had significantly recovered, and she ended up buying back the very same positions she sold months earlier, but now at higher prices than for what she sold them.

Frustrated and disillusioned, Sarah began to doubt her financial experience.

She began questioning whether she could ever achieve her long-term goal of building a legacy for her family, let alone a secure retirement.

In fact, the emotional toll experienced by Sarah was so profound that each financial misstep not only diminished her resources, it also chipped away at her self-esteem and her trust in her own decision-making abilities.

Now, did Sarah learn her lesson?

Did she learn to trust her investment plan instead of the stories playing out on TV?

Well, the unfortunate answer here is, no.

The truth is that, as Sarah's investments continued to suffer due to her reactive choices, she began to feel helpless.

Now, this wasn't just about money, it was about her vision for her future and her competence in securing it.

So then, when periods of market volatility would pick up, she'd sell.

And with every market dip and subsequent sale, Sarah felt a surge of immediate relief, followed by deeper waves of regret as the market recovered without her participation.

This rollercoaster of emotions led her to oscillate from fear, to relief, to regret.

And you know, it became a recurring pattern with each cycle more disheartening than the last.

And this was such a problem that Sarah found herself increasingly cautious, second-guessing her choices and potential investment opportunities.

This anxiety over making further mistakes made it difficult for her to commit to any long-term investment strategy, trapping her in a state of indecision and paralysis.

Have you ever felt like Sarah?

Have you ever been in her shoes?

Sarah's experience here reflects many of the common responses I've witnessed from individuals who follow the headlines instead of their disciplined strategy.

How to Invest in a Disciplined Strategy

So then, what can you do to avoid a similar outcome?

Well, whether you're prone to falling for headlines, or just want to make yourself more impervious to outside influences, I'm going to share with you three things you should consider when uncertainty and market volatility pick up.

Rebalance Your Portfolio

To start, one of the first things you'll want to do is to rebalance your investment portfolio.

And why would you want to buy or sell anything during times of uncertainty?

Well, you'll want to take action now because by regularly rebalancing, what you're doing is taking a proactive, instead of a reactive stance.

You're controlling your financial future, optimizing performance, and minimizing risk, by ensuring that your portfolio is buttoned up, rather than passively reacting to market volatility.

And so, where do you begin?

Well, you can start by asking yourself, "What is my current asset allocation, and how does it compare to my target allocation?

Here what you'll want to do is to compare where your current investment holdings are now against your ideal allocation defined in your investment policy statement.

Then, adjust your portfolio by selling overrepresented investments and buying underrepresented ones.

Now, it might not seem like much, but this approach can help you stay committed to your long-term strategy because you're actually doing something proactive rather than reactive amidst the market volatility.

Prepare Your Sleep-well Number

Alright, the next thing that you'll want to do to avoid being caught up in the emotional stories is to define your sleep-well number.

And what is a sleep-well number, you ask?

Well, it's the amount of money you need to have in cash to help you, you guessed it, sleep well at night.

Here we're talking about holding enough cash equivalents to cover your living expenses or big-ticket spending over the next 12 to 18 months.

And so, by having sufficient cash on hand what this does it that it provides you with a buffer against market downturns, and ensures that you don't have to sell investments at a loss during unfavorable market conditions.

At the same time, this approach not only protects your lifestyle but also gives you the flexibility to capitalize on investment opportunities as they arise, without the need to liquidate other assets under pressure.

So then, to get started, you'll want to ask yourself, "Do I have a sufficient cash reserve to maintain my financial stability during a prolonged market downturn?

Here what you'll want to do is evaluate how much liquid cash you have now and compare it to your monthly living expenses or immediate cash need in the months ahead.

And then from there, you can proactively begin to sell investments if you need to raise more cash.

This review will help you understand if you are adequately prepared for financial downturns or unexpected expenses.

Trust Your Investment Plan

And finally, to avoid being influenced by your emotions, you'll want to trust your investment plan.

Now, this step seems obvious, but it's the one that's most often forgotten by even the most seasoned investors during times of uncertainty.

And why is this step important?

Well, it's crucial because investment plans are actually designed to help you navigate through various market conditions, especially market volatility, and help you capitalize on the natural appreciation of markets over time.

So then, by sticking to your plan, you avoid making impulsive decisions based on short-term market fluctuations, which can derail your financial goals.

Remember, consistency and patience in investing often yield the best returns.

Markets generally tend to rise over the long term. And if they didn't, you wouldn't be investing, would you?

So then, the trick here is to get through those short-term gyrations, so you can grow your money for the long-term.

And you can start by asking yourself, "Do I understand all aspects of my investment plan?"

And why would you ask this question?

Well, knowing the details of your plan, including how it works under different market conditions, will help you build confidence that you may have lost in past market downturns.

That's why it's crucial to take the time to fully understand each component of your investment strategy.

Now, this might involve researching investment types, reading up on historical market performance, or consulting your financial plan to clarify any doubts.

Either way, it means turning off the financial news.

It means, trusting your plan so you can stay focused on your financial goals.

Keep Calm and Trust Your Investment Plan

Now, when it comes down to it, it's crucial not to let market noise and short-term fluctuations distract you from your long-term financial goals.

That's because, over time, the cumulative effect of not adhering to a disciplined investment strategy, especially during times of heightened market volatility, can significantly derail your long-term financial security and your and your family's overall financial independence plans.

In fact, these missteps could mean delaying retirement, adjusting lifestyle expectations, or not following through on your long-term legacy-building initiatives.

But, the good news is that sticking to a disciplined strategy can help you overcome the investing uncertainty you're facing today.

I mean what’s the worst that could happen if you embraced the discipline of a carefully balanced portfolio, maintained a robust cash reserve, and trusted the wisdom of your long-term investment plan?

Imagine the peace of mind you'd experience, knowing you're well-prepared for market ups and downs.

Think about the confidence you'd feel, free from the grip of panic and fear, even when financial headlines shout uncertainty.

That's why, by sticking to your strategy, you not only safeguard your financial future but you're also taking one step closer to becoming the master of your own financial independence journey.

by Peter Donisanu, ChFC®, AIF®

6 Tips for Managing Emotional Investing

Market psychology is the reaction to investing.

Overcoming market psychology is not easy but learning how the market works can reduce the number of surprises and increase the degree of success.

Keep in mind, all assets rise and fall in value, the more extreme the swing, the stronger the sentiment.

For market success, develop your awareness and work with a market professional for sound advice and investment guidelines.

Participation in the market has its ups and downs, but when you compare non-participation with the right guidance and mindset the probabilities improve.

1. Equalizing the Costs

Costs include monetary and non-monetary expenses. Monetary is comprised of transaction and brokerage fees. Non-monetary is the time spent learning about the market and understanding the investment process along with managing the shifts between the increase and loss.

Much like the past, today’s modern portfolio needs the assistance and watchful eye of an experienced market professional. It’s not enough to guess or even estimate the changes – planning is necessary to anticipate the wins and the losses.

2. Long-Term and Short-Term

The nature of the market is the volatility of prices rising and dropping. Our emotions share a similar reaction between excitement and depression. Surges of pleasure with favorable uptrends and neurotic negatives with declines.

The long and short of it is about now and the future – both terms play a vital role in learning how the market shifts affect your choice.

Long-term is noted for continued performance and consistent results.
Short term focus on temporary boosts during innovative or downturn markets.

3. Market Awareness

Start by figuring out your financial characteristics, and what segment of the market works best for you. It takes an honest assessment of your knowledge, means, and objectives. For this reason, working with an experienced professional is a benefit – they are going to help ease the emotional and financial ups and downs.

There are two noted market trends – bear and bull. They are both related to volume shifts. Bear markets have prices falling accompanied by the urge to sell. Bull markets are steady and confident; prices go up involving rational decisions to buy or sell.

4. Manage and Control

Unfortunately, emotions can be drivers for selling early (short-term) diminishing the significant gains (long-term). As we go through various phases in life so does the market. On the average upswing, markets have a lifespan of five years. It doesn't mean earnings stop entirely – but they could settle in with a slower and more steady growth.

Here, diversity and multiple selections are necessary for a healthy portfolio. Don’t underestimate the value of the entire portfolio, one investment increasing won’t stand alone over time.

5. Move Forward

Get over the past experiences and focus on the future. It's coming with or without your approval – better to be part of the plan and manage the calls so you can reap the benefits. Start slowly and build trustworthy confidence to reduce the risk and the stress, allowing the market to respond back to you - positively.

Questions to ask yourself: are you in the right market? Does your plan have a solid strategy built into it? If you have some concern do yourself a favor and look for help.

6. Change Perspectives

Most individuals don’t always experience success immediately, and our mind begins to associate financial markets with negative emotions. Acknowledge the market is not just about winning and losing – it’s about strategy and duration.

The market will continue to do three things: it goes up, it goes down, or it stays the same. Talking with a market professional helps to manage the market's pluses. Working with one could change your perspectives and broaden the future's outlook.

by Peter Donisanu, ChFC®, AIF®

Windfalls are Waypoints, Not Endpoints

Have you ever suddenly come into a large sum of money, and just like that, it's gone?

Well, you're not alone.

That's because when I was a kid, I often made money by helping my dad at his auto body shop during the summer.

Now, for all of my toil, my father was kind enough to give me $50 for my trouble.

And, you know, back then $50 bucks was a lot of money.

And so, payday eventually came, and the night before, I'd lay in bed imagining all the things I could buy at the mall with what seemed to me like a windfall.

Now, this was years before I learned to put money away and save prudently for the future.

Even so, all I knew then was that I had money that was burning a hole in my pocket.

Sure enough, a few days after receiving my paycheck, I spent it on Mexican Hot Chocolates, Ice Cream, Soft Pretzels, arcade games, and useless knickknacks from one mall store or another.

Just like that, in a day or so, fifty dollars was gone.

And to add insult to injury, I was left with shopper's remorse.

Maybe you've felt that way before too, right?

Well by this point, the excitement was gone, and I wished that I had done something more meaningful with my windfall, like buying a videogame or a book to keep me occupied throughout the summer.

Now, have you ever felt disappointed when the excitement from spending a windfall wears off?

Or maybe you've felt discouraged after spending through a tax refund, a bonus, or a vested stock award?

Either way, you likely know that not having a purpose for a financial windfall can open the door to frivolous spending, and hence, regret.

That's why, when you receive a windfall, you should create a plan for how that money will amplify your life goals.

Because if you don't, you'll likely impulsively spend it, leaving you with not only the guilt of overspending but also the conflict of letting down yourself and your loved ones.

The Problem with Mental Accounting

So then, if we all know that we should do better with money that freely comes our way, why is it that we still struggle with making wise money choices, especially when it comes to financial windfalls?

Well, it likely has to do with the trouble we get into when we use mental accounting.

Now, this term, mental accounting, was coined by economist Richard Thaler.

And mental accounting is like when you put your money into different imaginary jars based on where it came from or what you plan to do with it.

Now, this approach can make you do funny things with your money that might not make much sense if you think about it long and hard.

For example, have you ever received money back from the government, like a tax refund?

Have you ever stayed up late at night thinking about how you'd spend your refund?

You know, even though this money was yours all along, you might feel like it's a special treat.

It feels like "free money," right? So then, when you think about it this way, you're likely to put it in your "free money" jar.

So, instead of using it for something boring but necessary, like paying off a credit card, you might decide to "live a little" and buy something fun or go on a little trip.

It feels like you're spending "free money," even though it's really just your own money coming right back to you.

So then, if you get $10,000 back from taxes, you might think, "Yay, free money!" and buy something cool or go somewhere nice.

Now, it might feel good right now, but that feeling won't last because you know it might not be the smartest way to use your money.

Now, Thaler tells us that this happens because we think of the tax refund as different from our regular money.

That's because, due to mental accounting, it seems like we receive a bonus we can have fun with, even though it would be smarter to use it for something more important.

Short-term Thinking Undermines Long-term Success

And so, the trouble with falling for this mental accounting is that we often get trapped in near-term thinking that can derail our long-term success.

Take the power of compounding, for example.

Let's say you received a $50,000 bonus for all of the hard work you've done over the past year at work.

What should you do with your money?

Well, bonuses are just that, they're bonuses right? You could use the money for a blowout vacation, or treat yourself to a shopping spree for toys around the house.

The trouble is however, that you likely already know what it would feel like to be on the other side of that spending spree.

Logically, you know that putting that money away so that it can grow for the long-term would be more advantageous than spending it away in the near-term.

What you need is to align your windfall with a long-term purpose you've already defined.

In fact, if you put your $50,000 to work over fifteen years and grow at around 6.5%, you could triple your money by the end of fifteen years!

The fact is that putting your money to work right now reduces how much you need to save today to reach your future goal.

Now, if you instead decide to use up all of your money today, you're effectively taking away the potential opportunity to use that money in the future at a higher level.

Remember, windfalls are waypoints, not endpoints. They help move us closer to the bigger goals that we've already established for our money. So don't let your windfall be a distraction.

The Problem of Self-Sabotage

Now, another problem that you'll likely face when you don't have a purpose for your financial windfall is that, over time, you can develop guilt from poor spending decisions that eventually leads to self-sabotage.

Indeed, sometimes, the negative feelings associated with poor financial decisions could send you into a spiral that has effects beyond the initial windfalls itself.

Now, I, like I'm sure many of you out there, have tried dieting at various points in life.

And so, like a lot of experts will tell you, dieting simply doesn't work.

That's because I've found that, at times, I end up gaining more weight after my diet than when I initially started.

And you know, this weight rebound had nothing to do with the food I was eating.

Instead, it had to do with the fact that, once I fell off my diet, or felt the feeling of making a poor decision, I didn't care about counting calories or macros anymore.

I'd just go with the flow and just splurge.

Certainly, it wasn't the diet that threw me off.

Rather, it was not sticking to the plan that set me in the wrong direction.

I'd think, "What's the point? Things will always be the same, right?"

Have you ever felt that way? Have you ever put your car into a ditch because you've gone off course?

I know I have.

Now, in a similar way, not having a plan for your windfall and just spending money as it comes through your hands could set you up for a similar outcome.

From Millionaire to Broke

How so?

Well, let me tell you about the story of a man named Jack Whittaker.

Now, in December 2002, Whittaker won nearly $315 million in the Powerball lottery, which was, at the time, the largest jackpot ever won by a single lottery ticket in U.S. history.

Now, Whittaker was already a millionaire from operating his construction business before he won the lottery.

And despite his existing wealth, the windfall presented him with an unprecedented opportunity to further his financial security, support his family, and contribute to his community.

Winning the lottery was a good thing for a man who was already blessed, right?

Well, not so much.

That's because, following the win, Whittaker's life took a series of tragic turns, and much of it due to impulsive and reckless spending, along with poor financial management.

And by some accounts, he indulged in high-stakes gambling, gave money to friends and family without a strategic plan, and made numerous investments in businesses that did not align with his expertise.

At the same time, the poor guy was robbed several times, as he often carried large sums of money on his person.

Now, these financial missteps were compounded by personal tragedies, including the loss of his granddaughter in circumstances that were indirectly linked to the misuse of the lottery winnings.

And, ultimately, Whittaker's relationships with his family and community suffered significantly.

He faced lawsuits, personal loss, and public scrutiny.

And so, the man who once had everything, found himself grappling with the consequences of his decisions, and ultimately expressing regret over winning the lottery.

In the end, Whittaker was a broken man.

His later reflections revealed his guilt over overspending, to the extent that he wished he had never won the lottery.

That's because the conflict of letting his future self and loved ones down was manifested in his deteriorating relationships and the personal losses he endured.

Now, his experience is an extreme example of how impulsively spending a financial windfall without a clear plan to amplify one's life goals can lead to profound emotional distress and a fear of failing to live up to your own expectations.

Indeed, not being proactive with your money could set you down a path of not just blowing through a tax refund or a lucrative stock option vest, it could leave you with a defeatist mindset and trap you in a self-fulfilling prophecy that nothing will ever change.

That's why windfalls are waypoints, not endpoints.

How to Give Your Windfall a Purpose

So then, what can you do to avoid the perils of impulsive spending and turn your windfall into a waypoint for future life goals?

Move the Money

Well, you can start by moving your windfall to a trusted savings account.

That's because, by immediately placing your windfall in a savings account, what you're doing is effectively putting a barrier between your impulse to spend and the action of spending it.

And this approach is crucial because this cooling-off period allows you to make more rational, long-term decisions and counteracts the natural tendency towards seeking immediate gratification.

So then when you first receive a windfall, ask yourself, "Where can I put this money so that it's out of my immediate reach?"

And when you receive that direct deposit or that stock award vests, don't wait: Take the time to move those funds to a savings account where you'll be less tempted to spend it.

Revisit Your Savings Goals

The next thing you'll want to do to ensure that your windfall is set for the future is to consider your long-term funding goals.

Now, when done right, your long-term savings goals are directly tied to your most significant life ambitions, such as building generational wealth, supporting future generations, and contributing to causes you care about.

So then, without a clear vision for these goals, it's easy to let a windfall slip through your fingers on expenditures that don't contribute to your long-term happiness or fulfillment.

That's why, as you go about this process, ask yourself, "Will my great-grandkids be proud of me for this choice?"

Thinking this far in advance will help ground the decisions you make with your money in the present.

So then, what you'll want to do is start by clarifying what you want your legacy to look like.

This could include identifying the values you want to pass down, the kind of impact you wish to have on your family and the wider community, and how you envision your wealth supporting these aspirations.

Remember, small moves can have a big impact.

Take Action

And the last thing that you'll want to do when you get that windfall is to act immediately.

This means moving that money you're about to receive into a savings account immediately after you receive it.

To be sure, taking immediate action will keep you out of trouble and give you peace of mind.

That's because knowing you are actively contributing to a legacy that reflects your deepest convictions can, in many ways, offer profound satisfaction and clarity of purpose.

So then, take the time to ask yourself, "Where can I apply the money today so that I'm not just waiting to act?"

You know, the longer you wait to define and act on your financial goals, the more you expose yourself to external influences and internal doubts that can erode your original intent.

That's why taking immediate action solidifies your commitment and protects your vision from being diluted over time.

Windfalls are Waypoints, not Endpoints

Now, if you expect a bonus, stock award, or other windfall this year, it's crucial to create a plan for how you'll use the money before you receive it.

Remember, easy come, easy go. If you don't appreciate what you have, there's a good chance that it will be gone before you know it.

And that loss will not only cost you in terms of lost future opportunities, it could also be a trigger for a cascade of further poor financial decisions and challenge your belief in getting your financial house in order.

That's why, as tax season comes to a close and bonus checks are cut, ask yourself how your life or financial situation could change over the long term if you used your windfall to speed up your broader life outcomes.

Ultimately, windfalls are waypoints, not endpoints, that will not only help you get to your destination sooner, but the decisions you make today will also help you become the master of your own financial independence journey.

by Peter Donisanu, ChFC®, AIF®

What is a Vesting Schedule?

A vesting schedule is a critical element of equity compensation, dictating the timeline over which employees gain full ownership of stock options or shares granted to them as part of their remuneration package.

This structured approach ensures that the interests of the employees and the company align, incentivizing employees to remain with the company and contribute to its long-term success.

Understanding Vesting Schedules

Typically, when you are granted stock options or restricted stock units (RSUs), you don't immediately own these financial instruments.

Instead, your rights to these assets mature over time according to a predefined vesting schedule dictated by your employer.

For example, if you’re awarded 1,000 shares that vest over a four-year period, you might receive 250 shares each year for four years, provided you remain employed by the company.

Types of Vesting Schedules

Graded Vesting: Graded or incremental vesting is the most common type of vesting schedule where a certain percentage of shares vests each year over the period of the schedule. This method ensures a steady accumulation of equity, rewarding ongoing commitment and job performance.
Cliff Vesting: Under a cliff vesting plan, none of the shares vest until a set period has passed. At that point, all shares vest at once. For example, in a four-year cliff vesting schedule, if you remain with the company for the full four years, all 1,000 shares would become yours at the end of the fourth year. If you leave before this period, you forfeit all the shares.

Importance of the Vesting Schedule

The vesting schedule is a fundamental component of equity compensation plans because it ties your financial benefits directly to your tenure with the company.

Leaving the company before your options or shares have fully vested means that you forfeit the unvested portion, which acts as a powerful incentive for employees to stay longer with the company.

This retention strategy aligns employee interests with the company's objectives, fostering a committed workforce.

Financial and Tax Implications

When shares or options vest, they might also trigger financial and tax consequences. The specifics depend on the type of equity compensation:

Non-Qualified Stock Options (NQSOs): Exercising these options can lead to ordinary income tax on the 'spread'—the difference between the exercise price and the fair market value at the time of exercise.
Incentive Stock Options (ISOs): These are potentially subject to the Alternative Minimum Tax (AMT) if exercised and not sold in the same year, which necessitates careful tax planning.

Strategic Considerations

A vesting schedule not only offers financial rewards but also serves as a strategic tool within your broader career and financial planning.

Understanding the specifics of how and when your equity compensation vests can guide decisions about career moves, financial planning, and tax strategies.

What is a Vesting Schedule?

Taken together, a vesting schedule is more than a mere timeline.

It’s an integral part of your compensation package, designed to align your growth and success with that of the company, and to incentivize long-term engagement by linking financial rewards to sustained employment.

Comprehensive understanding of this mechanism enables you to maximize the benefits and strategically plan your career trajectory and financial stability.

by Peter Donisanu, ChFC®, AIF®

What You Should Know About the Behavior Gap and Investing

“It turns out my job was not to find great investments, but to help create great investors,” writes Carl Richards, author of “The Behavior Gap.”¹ From increasing our budget mindfulness to taking a steadier approach to investing, Richards has drawn attention to the way our unexamined behaviors and emotions can be our detriment when it comes to living a happy and financially sound life.

In many cases, we make poor financial decisions when experiencing panic or anxiety as a result of personal or widespread events. In the past few weeks, the Coronavirus is one such event that has affected nearly every industry and home as people and governments take action to keep themselves and their community safe. The virus continues to evoke fear and panic as the number of affected individuals rises.

The stock market volatility of 2020 began on Monday, March 9, with history’s largest point plunge for the Dow Jones Industrial Average. On March 16, 2020, the Dow hit a new record. It lost 2,997.10 points to close at 20,188.52, demonstrating the financial effect of this health crisis.²

Whether facing a devastating event or an exciting advancement, people frequently make money decisions as a response. Below we discuss the common financial behaviors driven by such circumstances.

The Behavior Gap Explained

Coined by Richards, “the behavior gap” refers to the difference between a smart financial decision versus what we actually decide to do. Many people miss out on higher returns because of emotionally driven decisions, creating a gap — “the behavior gap” — between their lower returns and what they could have earned.

4 Common Emotions that Can Create a Behavior Gap

#1: Excitement When Stocks Are High

Whether in a bull market or witnessing the hype from a product release, many investors may feel tempted to increase their risks or attempt to gain from emerging investments when stocks are high. This can lead to investors constantly readjusting their portfolios as the market itself experiences upswings. An investor who follows such patterns is likely to do the same with declines and may end up trying to time the market time and again amidst its inevitable, unpredictable movement.

#2: Fear When Stocks Are Low

As a response to the Coronavirus, the market has seen losses as many investors feel the need to choose more secure investments and avoid uncertain or seemingly unsafe investments.² When stocks are low, a common response may be to sell and effectively miss out on potential long-term gains.

#3: Engagement in the Search for Alpha

People yearn to make money and take action to do so. Throughout our lives, this emotional desire is likely a constant one. As such, many seek the help of a financial advisor to procure above-average returns, otherwise known as “alpha.”¹ However, in this search for “alpha,” our humanness — our emotions and our behaviors — may lead us astray. Ironically, studies done by DALBAR have calculated the “average investment return” as compared to investor returns and have shown that investor returns are lower.¹ The underlying emotional desire and pursuit of money is exactly the recipe for unwise behaviors in response to emotions — but only if left unchecked.

#4: Short-Term Anxiety and Focus

As humans, viewing aspects of our lives through the lenses of current circumstances is normal. One emotional response to any event, however, is letting the moment consume us, especially if faced with grave consequences — from our personal health being compromised to the loss of loved ones. Many may find it difficult in these times to both think long-term and to remember logic. However, making a rash decision can inhibit the long-term benefit that comes from maintaining a balanced perspective without reactionary behavior.

How to Lessen the Behavior Gap for Your Financial Health

At any given point, the market can go up, down or it can remain the same. While many aspects of the virus are out of our control, one thing we can control right now is how we handle our financial strategy.

In the past, the market has recovered in response to epidemics with an average of 17.17 percent over time.³ While no two situations are alike, remembering the likelihood of recovery over time — and the market’s nearly inevitable up-and-down movement — can provide a more logical angle to calm the nerves.

If you’re experiencing financial anxiety in response to the coronavirus, take a breath and also remember the potential for long-term gains. Of course, you can and should always reach out to your advisor for further clarification and advisement.

by Peter Donisanu, ChFC®, AIF®

Illustration of a person in a suit with a money bag labeled 'TAX' covering their head, symbolizing the burden of tax errors.

Tax Mistakes are Costly, Precision is Priceless

Making mistakes on your tax returns can cost you big time.

According to the IRS, nearly 17 million mathematical mistakes were made on tax returns filed in 2022.

And these errors not only involved not paying enough money to the government, it also involved leaving money on the table.

That's because, last year, the IRS made a last call to 1.5 million tax filers who were collectively owed $1.5 billion in refunds that they had yet to claim.

Could you imagine your name being on that list?

One year, I was working with a client who had surrendered an insurance product that no longer suited their lifestyle needs. It was one of those situations where the insurance agent was looking out more for their bottom line than they were for my client's best interest.

Nevertheless, my client got most of their money back from the insurance company. And when the tax documents came in the mail, in this case, a 1099-R, the taxable amount reported on their form was wrong.

Now, it wasn't just wrong. The cost basis was reported as zero, meaning that my client was on the hook for tens of thousands of dollars in taxes due to this one reporting mistake.

Fortunately, we got on the phone with the insurance company, and after some back-and-forth over a couple of weeks, we were able to sort out the situation, and my client had no reported tax liability in this situation.

But could you imagine being in that position?

Knowing that this insurance company already cost you in lost opportunities, and now you're potentially on the hook for a big tax bill?

I know my heart nearly stopped when I realized the consequences of that tax document.

But that episode drilled home the lesson that tax mistakes are costly, but precision is priceless.

That's because haphazardly filing your tax returns can result in financial and personal setbacks, especially when you're not paying attention.

Therefore, you should slow down and check for tax document irregularities, reporting omissions, and preparation errors as we approach the April 15 deadline.

The Costs of Rushed Tax Returns

Now, the truth is that many of us hate paying taxes.

And if you're one of them, you're in good company.

Indeed, according to a recent Gallup poll, nearly two-thirds of Americans surveyed believe that taxes are too high.

This natural repulsion to taxes can naturally leave any of us with a desire to put off completing our returns for as long as possible, especially when we know we're going to owe money, right?

Well, here's the reality of the matter: when it comes to taxes, the only person watching out for you, other than your advisor, is you.

Indeed, rushing through your returns this year can cost you money, peace of mind, and, ultimately, your self-confidence in achieving your financial goals.

And chances are good that when you owe money, the IRS will be quick to send a letter to your home or office.

But, when you're owed money, you can be sure that Uncle Sam won't let you know until you take the time to find out.

Financial Costs

Now, like I mentioned earlier, there's a financial cost for missing reporting errors that lead to you paying too much in taxes.

But there are also life-changing costs to not staying on top of your taxes that can have a profound life impact if you're not careful.

And, this is exactly what happened to Willie Nelson.

Now, as you'll likely recall, Willie Nelson was a renowned country musician who hit it big in the 1970's and 80's. And chances are, you've likely heard one of his songs like "On the Road Again," or "Always on My Mind."

And so, Nelson went on to make millions of dollars, but his run-in with the IRS is a classic tale of how a series of tax mistakes can lead to massive repercussions.

That's because, after a successful career, Nelson was hit with a whopping $32 million tax bill due to mismanaged funds and tax avoidance strategies gone awry.

In fact, the IRS ended up seizing some of Nelson's assets, but ultimately, to settle his debts, Nelson released an album called, "The IRS Tapes."

Fortunately, Nelson was able to pull himself out of his financial hole and eventually settle the issue with the government.

However, the ordeal taught him (and us) a truly valuable lesson: and that's that tax mistakes are costly, but precision—in finances and life—is priceless.

It's a stark reminder of the importance of keeping a keen eye on our financial obligations.

The Cost of Peace of Mind

Now, rushing to file your taxes can not only cost you money, it can also cost you peace of mind.

It reminds me of this one time that our family took a last-minute road trip.

Now, we didn't have any special destination in mind.

What it came down to was that we had some extra time on our hands, and we were in the mood for a short trip away from home.

Well, given the short notice, we rushed to pack our bags, and hurried to head off on our journey.

We were in a hurry to make the most of an otherwise long weekend.

But wouldn't you know it, there was something inside of me that said that I missed something.

Have you ever had that feeling? Like you moved so quickly on something that you have this feeling in the pit of your gut that something you forgot could cost you?

Well, I knew I should have checked the garage door.

And you know what happened? I ended up spending the first half of our trip worrying about whether I had closed the garage door, and it completely distracted me from our family time together.

That's why, when we're not precise with how you approach your returns, you might be haunted by questions like "Did I miss something?" or "Will everything be okay?"

This happens because you're anxious about the possibility of making mistakes and the consequences that could follow.

Tax mistakes are costly, but precision is priceless.

The Cost of Self-Assurance

And finally, while rushing through your taxes can cost you money and peace of mind, but the other thing that rushing does is that it can also cost you in terms of your self-assurance.

Now, I know that I sometimes confuse self-confidence with self-assurance.

So what's the difference?

Well, self-confidence is when you believe you can do things well, like solving a math problem or playing a sport.

It's about knowing you're good at certain things.

Self-assurance, on the other hand, is feeling good about yourself, even if you're not the best at everything.

It means you're okay with who you are, no matter what happens.

And so, if you've been working to get your financial house in order, have made positive progress after a long-stretch of chaos and suddenly find yourself with a letter from the IRS and a potential tax bill, your self-assurance could take a hit.

You can start doubting yourself and saying things like, "after all of this work, I should have just reviewed my return one last time."

To be sure, not being precise about your taxes can really shake your confidence, especially if you've been working hard to get your finances in order.

Indeed, imagine finally feeling like you've got everything under control, only to get hit with a surprise tax bill or audit because of mistakes on your tax return.

It's like taking a big step backward just when you thought you were moving forward.

This can make you doubt your progress and abilities, turning what was a source of pride, and that's prudently dealing with your money, into a source of stress.

That's why mistakes are costly, but precision is priceless.

How to File a Precise Return

So then, what can you do to ensure you're not rushing through your returns, paying Uncle Sam no more than necessary and not leaving money on the table?

Step #1: Review Your Tax Documents

Well, you can start by reviewing your tax documents.

It's crucial to check your tax documents, especially for things like accurate cost-basis reporting on 1099s.

That's because reporting institutions make costly errors more often than you think.

And so, if the numbers are wrong, you might pay too much tax.

That's why, as you go about your review process, ask yourself, "do my tax documents accurately reflect my current financial situation?"

Here what you'll want to do is consider any life changes or events over the past year, such as 401k transfers, annuity surrenders, or IRA withdrawals from various financial accounts.

And if you do find errors, make sure to proactively request a corrected 1099 when necessary because no one will tell you otherwise.

Step #2: Report All Your Income

The next thing you'll want to do is ensure that you've reported all your income.

Now, we've all let a small dividend income payment slide here or there.

But this step isn't just about paying your fair share. Indeed, not reporting all your income could lead to an IRS audit.

That's because the IRS checks income reported against information from employers and banks.

And this is especially the case if you have crypto income.

So then, audits mean more scrutiny and potential penalties.

That's why you'll want to ask yourself, "Have I received all tax documents necessary to report my income accurately?"

Take the time to review your W2s, K1s, and 1099s to ensure that you've received all required documents from reporters.

And follow up with your financial institution's website and download what you haven't received.

Step #3: Review your tax return before submitting.

And last, but certainly not least, you'll want to review your tax documents one last time before clicking that button to eSign your returns.

Now, even when a tax pro helps with your return, it's crucial to note that they can make mistakes because they're busy and are human, too.

That's why it's smart to check your taxes yourself before signing them.

This approach will help you catch any mistakes and potentially save you time and money later on down the road.

Here, what you'll want to do as you review your return is ask yourself, "Does my return reflect all events that have transpired in my life last year?"

If your money situation has mostly stayed the same, but your taxes look very different, then you may want to get another set of eyes on your return to ensure that everything is in order.

Tax Mistakes are Costly, Precision is Priceless

Either way, use these last few days to carefully evaluate the various components of your return to ensure you're setting yourself up for success.

And if you're worried about the April 15 deadline and unsure about anything in your return, file an extension.

No, filing an extension will not make you a target for an audit.

And it will actually help you avoid common mistakes that could lead to an audit down the road.

Either way, take some time to review your tax documents, income sources, and finalized tax return before clicking submit on your return.

Sure, you might just take your chances this time around.

But what could you do with an extra thousand dollars?

Maybe you're not anticipating a refund this year, but you could save yourself thousands in taxes if you had a major life change that involved your finances and a reporting institution made a mistake.

The point here is that it's worth taking a look.

Because ultimately, being a little more precise with your taxes could help give you peace of mind, preserve your self-assurance and take you one step closer to becoming the master of your financial independence journey.

by Peter Donisanu, ChFC®, AIF®

Blog

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Financial and Tax Implications

Strategic Considerations

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The Costs of Rushed Tax Returns

Financial Costs

The Cost of Peace of Mind

The Cost of Self-Assurance

How to File a Precise Return

Step #1: Review Your Tax Documents

Step #2: Report All Your Income

Step #3: Review your tax return before submitting.

Tax Mistakes are Costly, Precision is Priceless