When the girls were growing up, Saturday night was our time we all sat down to do some good ol’ family fun. Whether it be a puzzle, cards, scrabble, or a movie, we all came together for “fun” night. Times have changed in the Cutter household due to three teenagers with driver’s licenses. So, Saturday nights are now just Jill and I. Even though I have explained over and over again how cool of a dad I am to Maeve, Phoebe, and Sophie, they don’t buy it and off they go with their friends on Saturday night.
Last Saturday night, Jill and I sat down to work on a puzzle we’ve been meaning to finish up for weeks now. With over 1000 pieces, it was not something we would ever attempt to complete in one sitting, so this past Saturday night was the night to get it done. Frankly, I’m not really much of a puzzle-guy, never have been. I typically lack the patience to spend hours staring at hundreds of little cardboard pieces that all look the same. But you know, sitting there with Jill, I realized that I had started to really look forward to these evenings with just she and I. It was a stress-free opportunity for us to come together and enjoy each other’s company with the singular goal of matching up the pieces. Now, I’m still not really a puzzle person, but I’ve found that my opinion of puzzles had changed. My attitude shifted from “Ugh, so many little pieces!” to “Cool, time to hang out with my wife”!
I know this is not a particularly life-changing shift on my part, but it did get me thinking about how many of us have shifted our attitudes and opinions on a number of things this past year. For most people, the pandemic and the accompanying stress about our health, our jobs and our finances are reframing our perspective in a number of ways. And unfortunately, not all of these changes in attitude are a good thing, especially if they cause us to lose our focus about what’s important for our retirement plans to be successful in the long term. So, this week with our time together, I’d like to look at some of these changes and how we can take steps to remain on track.
There have been numerous studies and surveys conducted about the consumer mindset as it relates to financial planning. Get this, according to a recent study by Hearts & Wallets, 1 in 3 Americans say COVID-19 has changed their attitudes to saving, investing and advice, ranging from increasing anxiety levels to greater receptivity to financial advice. For these folks, their attitudes about finances have changed significantly more than those who have not noticed any changes. As an example, they report being 3 times more anxious, are 3 times more likely to have experienced a job loss or reduction, and a full half of them have experienced a decline in income.
Another study by Allianz Life Insurance Company of North America noted that for 57% of those surveyed, health and wellness are taking top priority for the majority of Americans in 2021. But this increased attention to health comes at the expense of financial stability, which is the top priority for fewer than a quarter of respondents. And in addition to less focus on their financial stability, the study found that only 13% of respondents said they are including financial planning as a resolution for 2021, the lowest percentage since 2009. While this is certainly not surprising given the COVID pandemic we’ve all had to deal with, it can have a very detrimental effect on our finances if we lose our long-term focus. After all, our financial plan is not a once-and-done task. It requires careful on-going attention for it to continue to meet the changing financial landscape and our eventual retirement needs.
But despite so few saying they will include financial planning in their resolutions for 2021, not all of the financial planning news is bad. The Allianz study found that a full 88% of Americans expect their financial situation to improve or stay the same this year rather than get worse, and more than a third said they have reduced their overall spending since the start of the COVID-19 pandemic. Now, there is still room for improvement, as only about one-quarter of Americans said they were more likely to work with a financial advisor in the coming year, the same amount who were looking for more financial planning help heading into 2020.
Being receptive to financial advice about how to manage your expenses during the crisis while not abandoning your long-term retirement plans require a balanced and disciplined approach, and you need to be proactive to make this happen. For example, if you ignore your financial plans, you run the risk of holding on to an inappropriate, or out dated, investment strategy due to complacency. You see, any sound financial system has to be regularly monitored and must be built in a way to be able to make both strategic and tactical moves to help anticipate the volatility of the market. And for most of us, this also means incorporating a downside risk mitigation strategy using quantitative data to help put us in the highest probability of financial success.
Building downside risk mitigation into any financial system can help your portfolio weather extreme or unexpected market declines and volatility. Folks, if you are unsure if you have incorporated downside risk mitigation into your financial system, just go back to March of 2020. Did your strategy move to safe havens such as cash to help preserve capital, or did you just ride it out hoping for the best? If you just rode it out, what would have happened to you if the markets kept on crashing past the roughly 34% decline, like a 2008 where we saw the markets shrink by about 58%. This year, make it a priority to review your strategy with a qualified retirement specialist to help ensure that you build a system to help put you in the highest probability of financial success.
This past year was certainly filled with unexpected challenges and uncertainty and, as a result, a significant amount of stress, but what it shows us is that we need to be prepared. Although I’m sure that most of us would like to leave 2020 behind us and never look back, we need to view it as a teaching opportunity. 2020 has emphasized the fact that anything can happen, and we need to be prepared for the unexpected. As I tell my girls, it is hard to predict the future, but that does not mean that you’re not prepared. While there’s no doubt that there’s great value in improving your health and wellness, now more than ever, take the time this year to complete your financial puzzle.
So as always – be vigilant and stay alert, because you deserve more!
Have a great week.
Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, & Mansfield. Jeff can be reached at firstname.lastname@example.org.
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