Solid Financial Advice

Have you ever wondered where you should be saving your money first? In this episode, we break down where to save your money first to ensure that you maximize each dollar. Show note, links, and resources: https://thewealthfix.com/sequence-of-savings-9-places-to-save-your-money-first/ Want to know where your income and net worth stand compared to others in your age range? Use our free calculator and download our free report PDF: https://bulloakcapital.com/where-do-you-stand-calculator-report/ Learn more about The Wealth Fix: https://thewealthfix.com/ Learn more about our fiduciary financial advisor firm, Bull Oak Capital: https://bulloakcapital.com/ 

In this episode of Solid Financial Advice, Ryan Hughes discusses the factors behind the 2020 market performance and a preview of 2021.  Between COVID, Black Lives Matter protests, intensifying political divisions, the climate crisis, and more, 2020 has been very challenging. These difficulties were exacerbated by the fact that we were all forced to stay home. Compound this with your kids forced to attend school online (now you’re a teacher too), the fear of you potentially losing your job or your business, and the risk of losing your wealth due to market instability, it is no wonder why we are all stressed out. Despite all of this, the market has delivered an impressive return this year. In fact, we have reached new all-time highs. As I write this, the S&P 500 TR is up 14.35% YTD, far better than any of us would’ve predicted in March, the peak of the hysteria.  A lot of people are quick to compare the recent stock market performance to that of the economy — “It doesn’t make sense that the market is doing performing so well when half of the economy is shut down, and the people continue to lose their jobs.”  Yes, GDP levels have dropped significantly, and the unemployment rate spiked to record levels. However, the rebound thus far has been pretty impressive.  These rebounds show that the economy is continuing to recover. History will show that the 2020 recession is the deepest since the Great Depression, though one of the shortest on record, possibly the quickest ever. Because both the Unemployment rate and GDP are lagging indicators, they confirm what has already happened, not what is yet to occur. The stock market, however, is neither a lagging nor a concurrent indicator. It is instead a forward-looking-indicator that is continuously attempting to price in probable future equity cash flows. The minute-by-minute, day-by-day moves in the stock market act as a price-discovery tool, digesting new information as it arrives.  THE MARKET REACTION TO COVID When news of COVID-19 cases began to spread in February and March, the stock market reacted accordingly. The S&P 500 fell fast, the fastest in history. At the time, we did not know what COVID-19 was or how deadly it can be. Were we looking at something similar to the ebola epidemic that killed 11,000 people or the bubonic plague that wiped out over half of Europe’s population in the 14th century? (LiveScience) Are we talking tens-of-thousands or tens-of-millions of deaths in the US? The stock market began to price in a worst-case scenario. The downside risk of a significant pandemic has the potential to cause us to lose a large number of human lives and the possibility of a major reversal of human progress. Once we began to understand this disease’s true nature, our worst-case fears started to dissipate, and the market reacted accordingly. Yes, COVID is extremely serious and deadly. Both of my grandparents are currently battling COVID, along with many other family members in my home state of Colorado. I am not downplaying this virus. However, it is not as severe as our fears indicated earlier this year. Unprecedented action by the Federal Reserve and Congress has also had a significant role in the stock market reversal. The total SPX drawdown from its February 19th peak to its March 23rd valley was -34%. It could’ve been much worse if the Fed did not act swiftly and boldly. The trillions of dollars in fiscal stimulus combined with the Fed’s actions acted as a catapult for the market. It only took five months before the S&P 500 broke above its all-time high.  STOCK LEADERS While the major averages have rebounded impressively, this rally has been extremely uneven, with tech growth stocks leading the way. The top 5 YTD SPX performers are five stocks that nobody would’ve predicted earlier this year.  More importantly, though, this is the year of innovative stocks. COVID has accelerated technological growth and its subsequent adoption. Businesses that have been reluctant to embrace digital transformation or those that are unwilling to be flexible during these times now find themselves in severe financial trouble. A post-COVID world will be one where society has embraced remote work, digital content consumption, platformification, and digital health solutions. Cathie Wood, the founder of Ark Funds, states it best – “As is typical during periods of turbulence and fear, consumers and businesses are willing to think differently and change their behavior. As both look for cheaper, more productive, or more creative ways to satisfy their needs, we believe that disruptive innovation will take root and gain significant market share.” This is why we see those companies that offer faster, cheaper, more cost-effective, and creative products to their customers are gaining significant share. They are the prime beneficiaries of this radical change we are living in today.  Instead of going to a physical retailer to buy goods, people purchased their items online. Instead of meeting up with family or friends for dinner and a drink, people would order takeout and eat and drink at home. Instead of going to a movie theater, people are streaming their content. People are still consuming goods and services; they are only consuming them differently in this environment. LOOKING FORWARD TO 2021 We believe that 2021 has a fantastic set up as there are significant tailwinds for equities. Life will likely never return to how it was in 2019, but 2021 will undoubtedly be better than 2020. Here are our most significant equity tailwinds for 2021: COVID vaccine Not a surprise to anyone, the most critical catalyst for equity returns is the deployment of the COVID vaccine. As enough American’s receive a vaccine, and as we approach herd immunity, we will begin to open our economy once again fully. Restaurant owners, bar operators, tourism employees, and others can finally return to work. However, I suspect that the economic reopening plan will be lumpy and chaotic. Many Americans will opt not to receive a vaccine, many employees will prefer to work from home, and many businesses will have already closed their doors for good. The COVID shutdowns have done irreversible damage to many individuals and business owners, and some of them will not come out of this whole. However, those that have survived this will likely be stronger and able to capture more market share. This, in its simplest definition, is capitalism — survival of the fittest.  Terminal velocity The economy continues to recover from the March economic shutdowns, and I believe that we are at breakaway speed / terminal velocity. The latest economic shutdowns will likely impact our employment figures, but it will not be enough to derail the recovery. Consumer demand looks very strong. Inventory numbers indicate that companies are having a difficult time keeping up with consumer demand. Leading Indicators continue to show robust economic strength. All of this points to a continued strong recovery.  Split Congress The Democrats have secured the House of Representatives with a 232-197 advantage. The Senate currently stands at 50 Republicans and 48 Democrats. We are still waiting on the Georgia Senate runoff election results on January 5th, 2021, for the two remaining seats. If Democrats win both runoffs, the party will control the chamber because Vice President-elect Kamala Harris would break any ties. However, if Republicans win one of the two races, they will maintain control. I don’t know how it will turn out, though it seems likely that this will be the case. Still, we will know very soon. If the Republicans maintain control, then we have a split Congress. From a capital markets perspective, this bodes well for near-term equity returns. There will be no changes to the tax code, and President-elect Biden will find it difficult to undo a lot of the deregulation President Trump has enacted over the previous four years. Again, from a capital-market perspective, this is good. Capital markets perform best under these conditions.  IN THE END At some point, we will have to pay for the fiscal deficit spending we’ve seen this year. The CBO currently projects a $3.3T deficit for FY2020. Are we only going to print more money to pay for this (this is inflationary and akin to MMT), or will we have to raise taxes at some point in the future? Who knows. We’ve been kicking this can down the road for decades, and I expect us to continue to do the same.  We also have to keep in mind that the markets and the economy are fluid and ever-changing. What we see now and what we expect to see in the future will change. Having an open mind and a willingness to change is the key to success. If 2020 has taught us anything, it is that life will place roadblocks in front of you. Be nimble and recognize that you can overcome them.

In this episode of Solid Financial Advice, Ryan Hughes discusses the recent changes to the American capitalist system and how fiscal and monetary policy has influenced the markets.  No longer is the Federal Reserve only using interest rates as a lever to spur or temper economic growth. With interest rates at all-time lows, they are now using more radical tools at their disposal. Monetary policy (the Federal Reserve’s actions) is having a more direct influence on economic growth. The YTD money supply in the US is up nearly 20%. The Fed’s balance sheet has increased by 70% during this same period.  During the COVID slowdown, fiscal policy (government spending and tax policies) has also implemented extreme measures this year, though it was mostly necessary due to economic shutdowns. The COVID recession would likely have been much worse without intervention. These measures, though, come at a price.  A government issues additional debt when its net revenue does not fully cover its spending and the interest it owes on existing debt, creating a deficit. The year-end deficit is projected to be $3.3T, triple the shortfall recorded in 2019. Of course, this deficit is added to the country’s debt, and who knows when we will pay this debt down. According to the Congressional Budget Office, Federal Debt held by the public is projected to be 195% of GDP in 2050 (Congressional Budget Office) MODERN MONETARY THEORY (MMT) This activity resembles money printing, and some liken it to Modern Monetary Theory (MMT), an alternative to mainstream macroeconomic theory. MMT states that because the US government controls the money supply, the government can spend freely as they can always create more money to pay off their debts.  MMT has become an increasingly popular economic theory in some left-leaning circles in recent years, in part due to its extreme change from our current policy. Progressive politicians like Senator Bernie Sanders of Vermont and Representative Alexandria Ocasio-Cortez of New York are among the most vocal MMT supporters. However, the single biggest problem with MMT is the devaluation of the USD and the subsequent inflation. If the government will print more money to meet it’s spending needs, how is this strategy sustainable? DEFICIT SPENDING TO CONTINUE Deficit spending will likely continue past this COVID crisis. Policymakers no longer feel compelled to allow the free market to determine asset prices, but instead are determined to guide it themselves. Capitalism, as we know it, has changed. Furthermore, depending on the election outcome, taxes will likely rise next year, further complicating this new environment. A NEW GAME What does this mean for you all? We think there is a new game afoot and the rules have changed. The direct influence of both fiscal and monetary policymakers will benefit equity prices going forward, especially on a relative basis. However, with interest rates near all-time lows, we have a hard time believing that money printing will keep interest rates low and bond prices high. The risk/reward ratio for most bonds look meek at best. The question is, “When will rates rise again?” Your guess is as good as mine. Inflation drives interest rates and trying to predict inflation is near impossible. Inflation levels can rise next year, in three years, in five years, or even longer. While Money Supply is increasing, price discovery via online companies like Amazon has helped to keep inflation levels low. So, it is a battle between these two powerful forces. More importantly, though, is that the Federal Reserve can remain solvent much longer than any of us. Trying to ‘trade’ off of these developments is risky. Though, what we do know is that interest rates cannot go much lower. Adjust your portfolio accordingly. While asset prices are high and tax rates are low, we urge you to devote time to your planning ahead of the year-end. We are here to assist, as always.

In this episode of Solid Financial Advice, Steve Deppe joins host Ryan Hughes to discuss his career, day-to-day life, the stock market, and the economy. Steve is the co-founder of Nerad and Deppe Wealth Management. He spends most of his days centered around the thirst for knowledge about managing his clients’ monies as prudently as possible. In his personal life, he’s the father of three kids. Outline of This Episode – 0:31 – Steve Deppe: Co-Founder of Nerad and Deppe Wealth Management – 3:18 – Time Management and Leaving Work at Work – 6:00 – Market Outlook and How the Government Policies Impact Recession – 15:45 – Long-Term Implications – 24:00 – Universal Base Income (UBI) What is it? – 30:15 – UBI and the Markets – 34:25 – All-time Low-Interest Rates and the Fixed Income Market – 40:49 – How far is the Federal Reserve willing to go to manage recessions? – 48:15 – Importance and Influence of Personal Behavior Market Outlook and How the Government Policies Impact Recession   Ryan and Steve discuss the end of an 11-year bull market and the rally we are currently experiencing from the steep drop in March. Steve shared his thoughts on whether or not the worst recession since the Great Depression is over after only a couple of months, and notated that this is the trillion-dollar question. He noted that as any pragmatic person would say, we don’t know, but that the rebound has extended the levels that few thought likely and that resilience is bringing about a change in sentiment. Is this a bear market rally or indeed the start of a new bull market? Ironically, would this be considered a bear market or an unprecedented crash? The market seems to indicate that the recession, while severe and violent, was short-lived, but he has trouble subscribing to that and noted that the reality is that the economy will not be growing near the rate that it was before COVID-19. Ryan and Steve agree that it will be a long time before the economy returns to that type of economic growth.     Steve noted that to the everyday consumer, the recession might not have even begun, stating that what the government did fiscally with unemployment benefits, lending, and stimulus payments was so powerful that it softened the blow to the everyday person.  This has created a scenario where many have income higher than their expenses regardless of if they were affected, and demand has pulled back. This is a sturdy bridge for consumers to the other side in a world free from some of the fears and restrictions currently in place. Ryan noted that coupling this with less spending and increased savings creates from the market participant standpoint is exceptionally bullish. Steve stated that confident consumers with a healthy balance sheet provide the ignition to jump-start the economy and get things rapidly moving. So much of this is psychological; people are tired of being at home and unable to spend money. The possibility of a vaccine or herd immunity is a light at the end of the tunnel and that the market could be correcting to meet the optimistic outlook. The market pricing at the moment may be different from 3 to 6 months from now, depending on the demand and consumer behavior relative to the continuation of unemployment benefits and forbearance programs. Long Term Implications So what does the passing of multiple trillion-dollar packages mean? Personally, Steve is not a fan of the moral hazard and precedents this set, and it furthers the lessons learned in 2008. Once upon a time, recessions were considered healthy, but 2008 was so devastating that it changed the guard of what we do with the policy when faced with challenging times. A precedent was set that when the economy contracts, you can tinker with things to impact how the economy moves. If there continues to be support for corporate and consumer bailouts, it is a dangerous precedent for the long-term health of the economy and capitalism.   Ryan noted that this is all happening during an election year, and politicians will stand on the platform of self-righteousness, and this is not true capitalism, its “crony capitalism.” Steve referred to a statement from Jerome Powell indicating that action needed to be decisive and implications would be dealt with later. It’s hard to believe that we will escape this cycle without facing the unintended consequences of “crony capitalism.” Steve noted that even in business, in this scenario, there is a situation where the rich get richer, and those not deemed rich have little competitiveness that remains. Many small businesses may have trouble surviving, while larger ones will be able to ride the storm as things reopen.  Ryan and Steve discussed a leadership issue: the lack of long-term planning, and the potential opportunity for good leadership in the next ten years as the general public realizes that change is needed. They touched on the issue of the country operating in a mindset where deficits don’t matter and the danger of operating that way as a country when we wouldn’t personally.   Universal Base Income, what is it? UBI, Universal Basic Income, is an idea that will gain more momentum if the $600 COVID-19 unemployment benefit kicker is extended the rest of the year, bringing about the question of why not keep it on forever to help people meet their basic living needs. It has only been tested in a limited capacity and not a major economy like the United States, but it provides government payment to meet base needs such as housing, groceries, and utilities.   The concern is that as we face unprecedented unemployment levels, there will be a strong call to make UBI a reality. Steve noted that when the precedent that has been established with the unemployment benefits is a slippery slope to UBI, that would create dependency and be difficult to take away. Philosophically, he isn’t aligned with UBI being the best path for the country, and it is another example of policy actions that may be driven by short-term rather than long-term benefits. Ryan noted that it’s a well-intentioned concept and that the main driver behind this is technological advancements and a rapid rate of individuals left behind due to automation. There are many major concerns facing this. How will we pay for UBI? Can Americans be taxed at a level to fund UBI indefinitely? Once you turn UBI on, you cannot turn it off, taking something like this away is typically what spurs revolutions. The other philosophical issue with UBI is that there is no incentive for individuals to be productive and have a meaningful life. Steve continued, stating that the United States became a superpower because of the collective spirit of individuals putting their boots on and going to work. He doesn’t really see how the country would collectively choose UBI, rather than create a more robust economic climate to increase opportunities for those left behind. From a philosophical point of view, this would have more support and create a better foundation over the short, intermediate, and long term rather than handouts to those in need.   UBI and the Markets Steve discussed that the market has to be attempting to assess or discount something like this in the future when we are in such an unprecedented climate. The fact we’re even discussing UBI can be argued both ways; the market is not going to discount that far into the future because there’s no clarity of what is coming or perhaps there is confidence about UBI because of what’s been done with the unemployment benefits and the probability of them being extended past July. He estimated the likelihood of these benefits continuing at 75% or higher, noting that the government doesn’t really have the ability to turn them off. Ryan feels that UBI will not be a thing next year, but that the market recognizes that there will be extended payments through the end of 2020, but it will not continue on forever and that there will be a vaccine or herd immunity or something that will allow for the full opening of the economy next year. All-time Low-Interest Rates and the Fixed Income Market Interest rates are at all-time lows, meaning that a typical bond portfolio has a very limited upside. Since interest rates have continued to fall, even during equity bull markets, this has helped to create this problem. The Fed has actively tried to manipulate the yield curve, ensuring that it does not lead to a high inflationary environment. It has also forced investors to other asset classes, those that will offer more attractive yields. TINA (there is no alternative) is at last part of the reason why we have seen equities bounce so high the past few months.  How far is the Federal Reserve willing to go to manage recessions? Ryan and Steve discussed how far the Federal Reserve is willing to go, noting a notion from Richard Russell, a legendary stock market guru from San Diego, in which he stated that the “Federal Reserve has one mandate and one mandate only: inflate or die.” This is the idea that the last thing they will ever allow is for an economy to feel deflation; they will stop at nothing to create inflation rather than to allow a deflationary spiral to take hold. This is a learning lesson from the Great Depression with the resulting damage and severity, something that no leader will want to face again. Battling to avoid deflation at any and all costs is the motive behind these stimulus payments, benefits, etc.   Ryan noted that COVID-19 would have caused a major depression without major fiscal and monetary intervention. He posed the question that if these academic-based individuals believe in creative destruction and capitalism, why not let recessions run their course? Steve referenced that this is another example of short-termism and a sign of the times. Recessions create opportunity and are a part of the necessary business cycle, but now there seems to be an action at the first sign of recession to ensure that it doesn’t materialize. The Federal Reserve’s actions may not be the most intelligent, but these are intelligent people who realize that there are implications, but are choosing not to swallow that pill now. Importance and Influence of Personal Behavior Ryan and Steve closed by talking about the importance and influence of personal behavior. It’s interesting to discuss these topics, but the future remains unknown. Predicting your own behavior is far more important and influential than that of the market and the economy’s outcome. Ensuring that you are behaving monetarily prudent, saving as much as you can, saving intelligently, and maintaining a disciplined investment strategy is essential. If you can predict and plan for good behavior for yourself, you will come out well.  Ryan and Steve strive to do this for their clients by helping people plan and predict their behavior so that they can thrive regardless of the severity of the recession we are facing. Control what you can, know what you can’t, and put your head down and go to work, and you will be in okay shape. Finland Tried and Failed: Universal Basic Income Learn more about Solid Financial Advice Podcast Learn more about the host, Ryan Hughes Learn more about Nerad and Deppe Wealth Management   Tags: market, stock market, economy, economics, recession, finances, COVID-19

Hayden Hughes, the 11-year old son of Ryan Hughes, interviews his father during the COVID-19 quarantine. We begin the episode with Ryan asking Hayden what his experience has been like during the lockdown period and if he thinks at all about finance (the answer is no, of course). Then Hayden flips the script and interviews his father with a list of unscreened questions. You are all in for a treat as we get to experience the world through the eyes of a very inquisitive 11-year old boy. Enjoy. Outline of this Episode [0:43] Hayden Hughes [1:15] Hayden's Quarantine Experience & Life of an 11-yr old [5:37] Purpose of Financial Advice [7:16] Why Start Bull Oak Capital? [9:05] Why Do Clients Choose To Work With You? [10:18] What Was Your Biggest Business Mistake? [13:36] How Do You Keep Your Clients Happy? Hayden's Quarantine Experience Hayden does not like being in quarantine, but he enjoys his weekly bikes rides with his family to pick up a pizza. He is also an independent studier, so his mother doesn't have to spend too much time helping him with his school work.  If Hayden had all of the money in the world, he would cure COVID-19 and save the rest of the money.  Purpose of Financial Advice The purpose is to help people make better financial decisions. Some don't need help while others are do-it-yourselfers. Though, the ones that do need help want to make smart financial decisions, they just might not have the time nor the patience to do it on their own.  As your financial life becomes more complicated, you need the help of a financial advisor. Why Did You Start Your Own Business? I wanted to do my own thing and on my own terms. I enjoy running my own business because I get to help out my clients the way that I think is the right way.  Some financial planning firms have major conflicts of interest and I did not want to be a part of this.  Why Did Your Clients Decide To Work With You? When a client chooses to work with Bull Oak Capital, they are not necessarily signing up with the firm, they are choosing to work with Ryan Hughes. And what makes me different is that there's only one Ryan Hughes. Nobody can replicate my experience, my education, or my philosophy on the capital markets.  I structured Bull Oak Capital to be different from the competition. The way we approach financial planning and our investment philosophy is different. But at the end of the day, my clients are working with Ryan Hughes.  What Was Your Biggest Business Mistake? I started my career at Merrill Lynch at their Beverly Hills office in 2007. I was a junior partner on a team that managed over $1B. My daily commute was about 3 hours (1.5 hours each way). During that time period, Hayden was born, which also happened to be during the height of the Great Financial Crisis. At the time, I did not know if Merrill Lynch was going to survive (Bank of America ended up buying the firm in 2008). I also knew that I wanted to be a father that was always there for his children. So, I panicked and left the firm to join Morgan Stanley branch 5 minutes from my home.  In the end, I took a major step backward and left a great team. But, the move also prompted me to go to business school (UCLA Anderson), which ultimately allowed me to start this firm.  How Do You Keep Your Clients Happy? When clients join this firm, they have certain expectations. My job is not only to meet those expectations but to also exceed them. Whenever a client calls or emails me, they expect a certain level of service.  Subscribe to Solid Financial Advice on the platform of your choice

Finances in relationships can be a large source of stress and conflict. Developing a budget and deciding where money is or isn’t spent isn’t an easy conversation to navigate. Scott Milnes specializes in helping couples navigate conflict, create the life they’ve imagined, and recovering from divorce. After a divorce at the young age of 29—and dealing with a heart-wrenching breakup years later—he knew something needed to change. Listen to this episode as we discuss how his past influenced his future, financial infidelity, prenuptial agreements, and much more.  Outline of This Episode [0:58] Scott Milnes: Founder of The Great Relationship Academy [5:19] Did money play a factor in his failed relationships?  [7:50] Does money amplify problems or is it the problem? [13:51] What resources does Scott provide to his clients? [18:19] Is financial stress higher in younger or older couples? [20:20] A discussion surrounding financial infidelity [23:00] Should you consider a prenuptial agreement? [29:33] How to get back on your feet financially after a divorce [38:55] Wrapping up: solid financial advice to live by [41:49] Connect with Scott Does money amplify the problem—or is it the problem? Before Scott started The Great Relationship Academy, he ran a divorce recovery ministry, “Healing from Heartache”. He found that couples come off the rails in one of two ways: quantity and control. Quantity is as it sounds—the couples perhaps didn’t have a high-enough income to cover expenses and it is a source of friction. However, he found that the larger issue wasn’t how much money was being made, but how it was being controlled.  For couples who were in complete agreement with how they managed their money, it didn’t matter how much of it they had. They were on the same page. Some other couples with all the money in the world—but no plan in place to manage their assets—weren’t even in the same book. They had no plan, no control, and while they had the necessary income, it caused unnecessary friction.  He notes that regardless of the outcome, “Spouses just want to be included in the ongoing conversation about how we’re controlling these assets”. Keep listening to hear how he helps couples gauge financial compatibility in his academy.  Finances in Relationships: proper planning is key It is important—regardless of how much money you make—to align with your spouse/significant other on your budget and your goals. Take some time at the beginning of your relationship or marriage to discuss a general direction you want to take and where your money will be allocated.  Something that Scott and his wife do that he highly recommends is having a joint checking account for expenses—think house payment, car payments, groceries, etc. They allocate 50% of their personal net income to a joint account. The other 50% goes into their personal discretionary accounts. Scott uses it to pay for his motorcycle, which is his “toy” and not necessarily a necessity. He’ll also use it for nights out with friends or anything where his wife isn’t directly involved. It is a simple yet effective tool that helps you prevent conflict. You each control what’s done with your own money, and have a plan in place to cover expenses together.  Should you get a prenuptial agreement?  Anyone getting married for the first time doesn’t want to think about getting a prenup. After all, their marriage will be “forever”. But someone who has never been married doesn’t have the experiential knowledge to make that decision. Scott is all for prenups for a simple reason—it makes divorce an emotional choice, not a financial decision. The blunt fact is that 50% of first marriages end in divorce, and the statistics are even worse for second marriages. You cannot be naive about this decision. If you’re young and have no assets to bring to the table, perhaps a prenup doesn’t make sense. But if you have assets built up, perhaps it’s worth considering where those assets will go after 5 or 10 years of marriage. It benefits all parties involved—including future children.  Scott gets that it isn’t a romantic discussion—but it is planning for your future. Good people meet, get married, and grow apart and it isn’t always someone’s fault. A prenup helps facilitate a smooth process that doesn’t end with lawyers and walking away with less than you both deserve.  How to get back on your feet financially I asked Scott to share some of his thoughts—for those who are recently divorced—on how to get back on your feet financially. It’s so easy to fall into destructive habits after dealing with the emotional roller coaster that divorce can be. So what should you do? Avoid retail therapy: Everything has changed when you get divorced. You have to reevaluate your lifestyle and goals. Your self-esteem is likely at an all-time low. When Scott got divorced, he went on a spending binge and racked up substantial debt. He recommends embracing a season of minimalism. Stick to the basics and don’t make emotional spending decisions.  Don’t make any big geographic move: Your first instinct after a divorce may be to run—to get out of town as soon as possible. While Scott acknowledges that a move may be in your future, you want to wait and do it from a place of strength and not as a means to run from your pain. He describes it as an “Outside solution to an inside problem”.  Don’t make large financial decisions: Sometimes simplicity is key. Avoid quitting your job or making large financial decisions that could impact your future negatively.  Scott notes that you must be patient with the process. You are in a phase where you have to rediscover who you are and reinvent yourself. You have a chance for a bigger, better, and brighter life. Listen to the whole episode for details on who Scott is, what he does, resources he recommends, and how to implement proper financial planning into your relationship. Resources & People Mentioned Financial Peace University BOOK: The Power of Habit BOOK: The Slight Edge Connect with Scot Milnes LinkedIn Twitter The Great Relationship Academy Healing from Heartache podcast Connect With Ryan A. Hughes and Bull Oak Capital www.BullOakCapital.com Podcast (at) BullOakCapital.com Subscribe to Solid Financial Advice on the platform of your choice

Outline of This Episode [0:25] Dispelling misunderstandings around the coronavirus [1:25] Why Jim starting researching the coronavirus [3:48] Why wasn’t there this level of fear about SARS/MERS/Ebola? [7:24] Is COVID-19 comparable to the 1918 Spanish Flu? [11:21] What is the possibility of the virus mutating? [14:56] Should I wear a mask? [17:22] Does Purell work to slow the spread? [22:01] What to do if you think you’ve contracted COVID-19 [27:45] Common symptoms of the Coronavirus [31:48] Understanding the R0 equation (the spread of the disease) [35:43] The current mortality rate of COVID-19 [41:38] You need to have a well-defined investment strategy [44:38] Is there a recession coming? [50:09] Don’t completely get out of the market [52:35] What’s happening with the oil industry [55:07] Do we need this wake-up call? Is the Coronavirus the next Spanish Flu? The media has started comparing the coronavirus pandemic to the 1918 Spanish flu. Jim points out that we can’t compare events that are 102 years apart, but that they have a similarity: they both are a ‘super-spreading event’. As soldiers started returning home at the end of World War I, they brought the flu with them and spread it worldwide. With the modern convenience of air travel, we are engaging in the modern-day equivalent of a super-spreading event. We could see wide-ranging effects similar to that of the Spanish Flu, but only time will tell. Precautions you should consider Jim and I discussed some common questions being asked by everyone concerned. Should you wear a mask? Globally, everyone appears to be donning masks. However, Jim points out that there’s no point in wearing them unless you’re sick. They help prevent droplets from your mouth reaching other people. It can help aid you to remember to stop touching your face and spreading the virus that way. Don’t hoard masks. You should leave them available for those who are sick and medical professionals on the front-lines. Is Purell effective? Purell is not as effective as washing your hands. Another downside is that it appears to be sold out everywhere. While hand-sanitizer IS better than nothing, it won’t kill a strain of bacteria called ‘Clostridium Difficile’. The bottom line? Surgeons don’t purell their hands before surgery, they scrub them with soap and water. Do the same. What do you do if you think you’ve contracted the Coronavirus? Firstly, do not go to the emergency room. If you don’t have the virus, the likelihood of it increases by stepping foot in an ER. Call your doctor or take advantage of any virtual care afforded you. Some retail giants are now setting up drive-in testing sites at their stores. What are the symptoms of the virus? The two prevailing symptoms are a fever and a cough (which can be difficult to differentiate from the flu, bronchitis, the common cold, etc.) How do I avoid catching the virus? The easiest way is to limit unnecessary travel and attendance at large events (most sporting or music events have already been canceled). What do you do if you HAVE been diagnosed with COVID-19? It’s best practice to quarantine yourself and wear a mask to prevent spreading it to others. A technical discussion on the spread and mortality rate of the virus ‘R0’ (pronounced ‘R-nought’) is an equation that indicates how quickly an infectious disease could spread. Another way to phrase it is the average number of people who will catch a disease from a single infected person. The best-case scenario is the R0 stays below 1—signifying that the spread will likely die-out. If it rises anywhere above 1 it is likely to continue spreading. We must preface this by pointing out that this is a variable and multiple factors impact this number daily. If people practice social distancing and isolate themselves if infectious, it can lower the R0 range. At the time of recording, COVID-19 is at an R0 range of 1.4-3.9 with a variable fatality rate anywhere from 0.7% (in South Korea) to 5% (in Italy). Taking an optimistic viewpoint of the R0 and fatality rate calculation—based on today’s numbers—we could be looking at the possibility of 285,000 people dying from the virus. If you calculate it with a 3.9 R0 and a 1% fatality rate—we could be looking at 2.4 million people (in the United States) dying. It is concerning, which is why the government is taking action to slow the spread of the virus. The more precautions we take to slow the spread, the lower the R0 will fall—lowering the number of people potentially impacted. How the coronavirus could impact your portfolio Everyone is wondering—is the market going to crash? Are we about to see a recession? I believe the probability is high. The window of opportunity is open and the Coronavirus is an outside catalyst that could push our market over the edge. A few months ago, this virus didn’t exist. Suddenly, it plunged the entire world into chaos. So how should you move forward with your investment strategy if there is an impending recession? Firstly, you must always have a well-defined investment strategy. Humans are emotional about money. We work hard for it and feel the need to protect it—which can lead to poor financial decisions. So please find someone who knows what they’re doing to guide you. Gain a basic understanding of how the economy works. Whatever you do, it is probably not wise to go completely out of the market. If you know what you’re doing and have a good investment strategy you’re looking at probabilities. The average portfolio is a 60/40 split between stocks and bonds. If you are 100% sure that a recession is coming, a defensive strategy would be to shift your portfolio to a 50/50 split. It can protect you in a downturn and psychologically helps alleviate your worry. The bottom line is we don’t know what’s going to happen. The R0 could drop significantly, slowing the spread of the virus. We could see a vaccine come to market quickly. Warmer weather could slow the spread of the virus (similar to how the flu slows). The Astrophysicist Neil deGrasse Tyson stated “We’re in the middle of a very important experiment worldwide. The question is—will people listen to scientists?”. So stay educated, prepared, and vigilant. Don’t let the mass media misinform you or incite fear. Above all, listen to the people who actually know what they’re talking about—scientists. Resources & People Mentioned The W.H.O. report on SARS Advice on the use of masks The Lancet on viral mutations How to make hand sanitizer (W.H.O. recommendations)  What to do if you’re sick (CDC) The New England Journal of Medicine on Covid-19 Country-based mitigation measures Early Transmission dynamics of the Coronavirus W.H.O Coronavirus situation report Connect with Jim Best LinkedIn Connect With Ryan A. Hughes and Bull Oak Capital www.BullOakCapital.com Podcast (at) BullOakCapital.com Subscribe to Solid Financial Advice on the platform of your choice

Do you know your why? Consultant, executive coach, and leader of leaders, Darren Reinke, joins me today to discuss money, freedom, and the importance of knowing your why. Darren coaches leaders and helps them become stronger leaders by helping them win in competitive markets. Darren has enjoyed a career that didn’t necessarily end up where he expected. Instead of shooting to the top of a Fortune 500 company, he realized that more than anything, he really wanted time freedom and creative direction. After becoming a freelancer he struck out on his own and hasn’t looked back. Listen in to discover how this executive coach began to control his own destiny. Outline of This Episode [1:22] Darren loved his freedom of both time and space [6:34] What is Darren’s earliest memory of money? [12:52] Darren knows his why [15:15] Being his own boss is quite an accomplishment [17:28] Don’t try to follow someone else Darren knows his why Darren Reinke is an executive coach and consultant that realized that time freedom and creative direction were really his ultimate goals. His goals are what funnels everything he does. He has worked at Accenture and he founded Group 60 marketing. He also coaches youth sports and mentors veterans as they transition away from the military. For Darren, working is all about his ‘why.’ He knows that understanding why he wants to do things is not only important for himself but it’s important for his firm as well.  In personal finance, it is essential to know your why Darren learned at a young age the value of being frugal. He was influenced by his father and his grandfather who grew up with post-depression era frugality ingrained in his psyche. Darren’s takeaways from this upbringing are to think about the choices that you really value. Once you know that you can cut costs in other places. He uses his values to frame his choices. He also lives in the moment while still saving for the future. Everyone has a hard time finding the right balance between saving and spending, but remembering your values can help you find that balance.  What is Darren proud of? Entrepreneurship isn’t the smoothest road. Darren knows that it takes a unique personality to strike out on your own. He sees being his own boss as quite an accomplishment. He feels a sense of pride in starting his own business and in owning a home. Owning a home in California in this day and age is something to really be proud of. Knowing that he has built something out of nothing and the fact that he serves others gives him a real sense of accomplishment. Forge your own path What advice does Darren have for others? Don’t try to follow someone else. Everyone has their own choices to make. You can only do what makes sense to you. If you try to follow in someone else’s footsteps you’ll never be happy. Listen to this conversation to hear this inspiring executive coach discuss how he has forged his own path and made a life out of helping others.  Connect with Darren Reinke Group 60 Connect With Ryan A. Hughes and Bull Oak Capital www.BullOakCapital.com Podcast (at) BullOakCapital.com Subscribe to Solid Financial Advice on the platform of your choice  

This year-end financial planning checklist is the perfect tool for ensuring that your habits line up with your financial goals. We’ll cover a range of different areas that you should consider at the end of the year. You’ll want to take this opportunity to maximize your income and minimize your expenses and taxes. Discover what you should be doing on a yearly basis to consider whether your spending aligns with your values by listening to this episode of Solid Financial Advice.  Outline of This Episode [2:12] Review your budget [3:28] Examine your credit report [4:25] Review your estate plan [5:30] Review and update insurance [6:45] Conduct a personal tax audit [7:56] Take a look at your 401K and IRA [9:23] Have a peek at your investments [10:15] Can you participate in tax-loss harvesting? [12:40] Calculate your net worth [13:44] Satisfy your required minimum distribution A handy year-end financial planning checklist Review your budget - If you don’t have a budget in place, now is the time to create one. Your budget is the foundation of your finances and you need one to be financially successful. The final quarter of the year is the best time to review your budget since you can compare your actual income to your projected income. You can also review trends in expenses and compare them to your financial goals. Do you make a monthly budget? Examine your credit report - Nowadays identity fraud is a real threat. A yearly review of your credit report can help ensure the data’s accuracy. You can check your credit report with all 3 agencies at AnnualCreditReport.com. Remember that your credit score can affect mortgage interest rates and even employment opportunities. Update your estate plan - You should meet with an attorney every 3-5 years to go over your estate plan in-depth, but you should still consider updating your estate plan on your own each year. Think about the events that occurred during the year. Did you get married, divorced, have a new baby? How could these events affect your estate plan? Check your insurance coverage - Everyone has home, life and auto insurance but it’s important to review your insurance periodically to ensure that you have an adequate amount of coverage. This is also a good time to compare prices to ensure you aren’t overpaying. When is the last time you updated your insurance coverage? Conduct a personal tax audit - Examine ways to keep your taxes down by contributing the maximum amount to various retirement accounts. Also, consider whether you are going to take the standard deduction or itemize. Make sure you are maxing out your retirement accounts - Take a look at your 401K’s and IRA’s to make sure you are contributing the most you possibly can. Know how much you can contribute and whether you can contribute to a 403B, 457, or TSP. Also, consider whether you are eligible to contribute to a Roth IRA. Saving towards retirement means that you can defer your taxes.  Have a peek at your investments - If you aren’t familiar with the investment side of things make sure to work with a professional financial advisor. Your long-term positions probably don’t need any changes. But it’s always smart to review the positions and consider if you can simplify.  Can you participate in tax-loss harvesting? Not all investments are winners, but sometimes you can benefit from losers. They can actually help you save in taxes. Tax-loss harvesting allows you to lower your taxes and improve your investment portfolio for the future. You’ll need to avoid the wash sale rule. Listen in to find out what that means Calculate your net worth - this helps you learn how close you are to financial goals. Do you know where you stand? Satisfy your required minimum distribution (RMD) - Make sure you are set up to withdraw the minimum amount needed to satisfy the RMD if you are over the age of 70 ½.  Make sure you are moving toward your goals You may think that all of this is too much work, but it is time well spent. You won’t be able to fulfill your financial goals if you don’t stay on top of your finances regularly. By using a financial planning checklist at the end of the year will help you maximize your income and allow you to build wealth. It will also allow you to ensure that your spending lines up with your values. When will you begin your year-end financial planning? Resources & People Mentioned BullOakCapital.com AnnualCreditReport.com IRS worksheet Connect With Ryan A. Hughes and Bull Oak Capital www.BullOakCapital.com Podcast (at) BullOakCapital.com Subscribe to Solid Financial Advice on the platform of your choice

You can never have too much information on Social Security. Brody Rosenfeld is on the Solid Financial Advice podcast today to help me dissect the Social Security beast. We dive deep to teach you as much as we can about Social Security. You’ll learn a brief history of how it started, what it looks like today, will it go broke, and how and when should you file. You’ll want to listen in since Social Security makes up a big chunk of just about everyone’s retirement plan. So sit down and have a listen to learn all you can about Social Security in 20 minutes! Outline of This Episode [1:47] A brief history of Social Security [4:15] Who benefits from social security? [5:45] Is Social Security going to go broke? [9:58] How do they calculate what you’ll receive? [11:55] When should you file for Social Security? [15:53] What are some of the unique benefits to Social Security? [20:11] You can never really know what the right choice is Some background information on Social Security The idea behind Social Security actually came about in 1889 in Germany. Otto von Bismarck created the first state-run, old-age insurance system. The Germans found that by creating this system they freed up the workforce a bit. Social Security didn’t come to the United States until the middle of the Great Depression in 1935. Roosevelt created it as a part of the New Deal. Surprisingly, many states had their own old-age pension systems at the time but only 3% of those eligible took part in it.  Who benefits from Social Security? When we think of Social Security we automatically think of retirees, but families of deceased workers, people who are disabled as well as retirees all benefit from Social Security. 1 in 5 Americans receive a Social Security benefit right now. Retirees are the largest portion of beneficiaries. And 1/7 of retirees depend solely on Social Security as their income.  Is it going to go broke?  We all contribute to social security. You’ll notice the 6.2% FICA payroll tax on your paycheck. The money goes into a special issue treasury security where it only earns about 3%. So there is money going in and it is growing but there is more money going out. If nothing is done by Congress to fix the lopsided amount that is paid out it won’t go broke but they would only be able to pay 79% of benefits to the beneficiaries. Find out more information on Social Security by listening to this episode of Solid Financial Advice.  When should you file for Social Security? When to file is always the big question regarding Social Security. People tend to want to file early at age 62. But mathematically it will benefit you more if you wait until age 70. Unfortunately waiting until 70 isn’t the blanket answer for everyone. Sometimes it makes sense for someone to file early. If you file before full retirement age you’ll lose 6.67% each year. But if you wait until after full retirement age you’ll earn 8% more each year. There is a lot to consider when deciding at what age to take Social Security. Listen to this episode to learn more to help you decide when the best time for you would be.  Connect with Brody Rosenfeld Connect With Ryan A. Hughes and Bull Oak Capital www.BullOakCapital.com Podcast (at) BullOakCapital.com Subscribe to Solid Financial Advice on the platform of your choice

Some of the most famous investment advisors out there are involved in Active Fund Management - big name people like Warren Buffett and George Soros. They are famous because they are so successful at actively managing investment funds, regularly beating the averages reflected in the S&P 500, for example. But most active fund management is not that successful - not even close. On this episode, I want to help you understand the difference between active and passive management funds and why the Warren Buffets of the world can perform so incredibly well - and why your manager likely won’t be able to do so. Outline of This Episode [1:23] Our team’s recent move to La Hoya - why and what it’s done for us [2:41] What is an ACTIVE fund (as opposed to a passive fund) [3:41] How many funds actually underperform their benchmark? [5:52] An illustration to explain how news travels faster than managers can handle [10:35] Is it impossible to find a manager who can beat the benchmarks? [13:35] The best course of action for those who are not in the know The difference between active and passive fund management Before we can talk about the reasons active fund managers usually underperform, it’s important to understand first what an active fund is. An active fund is a public or private investment fund where the manager is actively trying to outperform a particular benchmark with his/her investment decisions. Some examples of these benchmarks are the S&P 500, the Russell 2000, and Barclay's Aggregate Bond Index. There are literally thousands of these indexes that make up the entire market. A passive fund, on the other hand, is not actively managed in an attempt to beat those benchmarks. Passive funds simply want to mimic or match what the benchmark indexes are doing, so they are much less hands-on in terms of management. This keeps fees low and allows the manager to take a simple investing approach. Interestingly, this approach does typically outperform active fund approaches. What percentage of active funds underperform? When you hear the difference between an intentional, active management approach and a passive fund approach, it seems unbelievable that active management is the lesser performer of the two. But it is - by a very wide margin.  Over the past 5 years, 82% of actively managed funds have underperformed their benchmark. That represents an abysmal failure of the active management model, in my book. I think there are much better ways to ensure better returns than active fund management. What is driving the underperformance of today’s active fund managers? The reason actively managed funds perform so poorly has to do with what is called information diffusion. To put it simply, it has to do with the rate at which information spreads throughout the marketplace. Given that we use modern technologies commonly in the stock and investment world, information travels faster all the time, which means it becomes more and more difficult for managers to meet benchmarks because the information that would enable them to make good investment choices travels faster than they can keep up with. In actuality, there is an extremely short window within which to capitalize on news that would impact investment decisions.  By comparison, in the mid-80s this was not the case because much more effort and time were required to get the news out about happenings that would impact stock pricing. In those days, fund managers could more easily and readily capitalize on news as needed to bring value (Alpha) to their investors. What can the average manager do to provide value? Buy passive funds If you’re hoping to find the next Warren Buffet to actively manage your investments, it’s not likely you’re going to find that person. New managers may be able to show the proof of having a fabulous year here and there, but without a long term track record to look at, It’s difficult to separate skill from luck. Newer managers don’t usually have access to the high-level connections that make it possible to outperform the indexes. There is clearly a relationship between successful brokers and institutional investors that enables the brokers to leak the info to their select clients who can then take advantage of the news. Instead of taking that approach at all, I recommend fund managers follow passive fund strategies that have proven to outperform active approaches to fund management and to focus on the things that can be controlled on a personal level. Those things would be getting personal budgets in line, saving as much as you can, and planning accordingly. If you find this episode helpful, I’d love to hear about your experience. Please contact me using the contact info at the bottom of the page. Resources & People Mentioned Miramar Marine Corp Station SPIVA report card for 2018 Warren Buffett Stanley Druckenmiller George Soros WHITEPAPER: The Relevance of Broker Networks for Information Diffusion in the Stock Market Connect With Ryan A. Hughes and Bull Oak Capital www.BullOakCapital.com Podcast (at) BullOakCapital.com Subscribe to Solid Financial Advice on the platform of your choice

There are many roads you could take to become a financial professional and my road was one that didn’t necessarily seem like the natural path to take. From a very non-privileged upbringing to enlistment in the Navy after high school, to a self-funded college education, I pursued the path that I felt made sense for me. It’s made me who I am and has enabled me to build a financial advisement practice that serves hard-working people who want to build a better future for themselves. Like I did. This episode briefly outlines my story. I think it’s important for you to know who I am if you’re going to listen to this podcast and take my experience and insights seriously. So I invite you to listen to how I moved from childhood into adulthood and set my sights on the career of my dreams. Outline of This Episode [0:22] My history: Why should you listen to anything I say? [2:30] My enlistment in the U.S. Navy - boarding suspicious ships to investigate [5:11] The pitch from Charles Schwab: More money in less hours - and the biggest mistake [6:08] The three things needed to be a financial advisor in the western world [7:50] Pitching my professor with an idea to build an investment strategy for my own firm [9:07] After graduation: my naive assumptions but success nonetheless You don’t have to come from money to get into the financial industry I was born to a Persian immigrant father and an American mother. My sister and I lived with them until they divorced when I was three years old. When I was five years old my parents were no longer in a position to raise us, so my grandparents took us in and eventually adopted us. It was a childhood full of confusing, mixed emotions. I tell you that so that you can understand that I know what it’s like to be from less-than-advantageous circumstances. It’s not the kind of childhood you’d expect a financial professional to come from. But it’s possible. Especially if you have help along the way - which I did, and which I want to be for others through my financial advisement practice. My start as a financial professional was not all I imagined it would be When I graduated from college I worked as a Junior Partner in a small financial firm. The firm was well established and had a large book of business, but as the junior member of the team, it was my responsibility to do a lot of cold calling to drum up new business. It was a difficult way to start out in the industry. When 2008 came and the financial crash occurred, that firm dissolved and I was left without much to show for my time there. I eventually wound up at Charles Schwab, selling products to existing customers. The pitch they made to me was that I’d make more money working fewer hours, but it turned out that there were other aspects of the job that made it more difficult than I imagined. Charles Schwab is heavily oriented toward sales and I discovered I’m not that good at sales. So it wasn’t the best fit for me. That’s when it dawned on me that I’d have to develop a very particular skillset to thrive as a financial professional. I focused my studies at UCLA Anderson on investment management and finance After working for Merrill Lynch, Morgan Stanley, and Charles Schwab - where I learned a lot about the retail side of the financial industry, including cold calling, selling, and building my own book of business, I realized that in order to succeed as a financial professional, a person needs at least one of 3 things… 1 - become great at sales (that definitely wasn’t me) 2 - have a very strong financial skillset (I didn’t have this at that time) 3 - be well connected with influential people who have money (I didn’t have this) I felt that my advantage would be found by becoming well-versed in financial knowledge and developing a financial skillset, so I went back to school. That’s when I started my studies at UCLA Anderson and backtested investment strategies that I would eventually use to start my own practice - Bull Oak Capital. I graduated from UCLA and received the J. Fred Weston Finance Award - and was named a GAP Fellow, meaning I graduated in the top 5% of program thesis participants. I was a bit naive when I started my financial advisement firm After graduating from UCLA, I moved with my wife to the San Diego area to start my own financial advisement firm. I admit that I was very naive about how things would go in the San Diego area. I assumed that because of my education, my firm would be a raging success right off the bat. The problem with that assumption was that I had no network in the San Diego area. As a result, it took a year or two to gain momentum. But it was well worth the risk of starting my own firm. Now, the work I do is very fulfilling to me and instrumental in helping people attain their dreams. In my practice, I focus solely on investment planning and management. I work with clients I truly enjoy spending time with and I get to help individuals achieve their life-long goals. It’s a life I love and work I enjoy.  Resources & People Mentioned My Whitepaper on The Use of Risk Contribution Analysis and Value Investing to Outperform Global Benchmarks Connect With Ryan A. Hughes and Bull Oak Capital www.BullOakCapital.com Podcast (at) BullOakCapital.com

There is a lot of talk in financial circles about the inverted yield curve and how it might be indicating bleak economic times ahead. But many investors don't understand what the yield curve is or how it can indicate future economic difficulties. On this episode, I explain what the yield curve is, discuss how predictive it is of recession, and explain why we should not be too quick to take the yield curve alone as a sign of bad things to come. I hope you’ll take the time to listen. Outline of This Episode [0:41] An inverted yield curve and why it’s important [1:30] An illustration that explains what happens with an inverted yield curve [4:31] How predictive is the yield curve? [6:08] Why you need to keep in mind that this is only one indicator [7:20] Recap of the yield curve and its importance Explaining the inverted yield curve in simple terms We’ve all seen financial charts, with lines moving up and down over time. When you hear people talking about the inverted yield curve, they are referring to one of these charts, the one that reflects the US Treasury bond market. The lines on the chart show the interest rates of Treasury Bonds across the maturity date spectrum. A normal yield curve is an upward sloping line, which means that investors have a healthy risk appetite (are willing to invest in higher-risk investment classes). It means that investors will receive lower rates when investing in shorter-term Treasury Bonds and higher rates for investing in longer maturities. When the line on the chart begins to flatten - meaning interest rates are becoming greater for shorter maturity periods, it’s not a good sign. It means confidence in the economic health of the country is becoming pessimistic - to the point that the sloping line can head downward. This is the inverted yield curve we’re talking about. Listen to learn what this inversion means for the economy as a whole and why it could mean a recession is in the near future. The problems that arise when the yield curve inverts When you first hear of the inverted yield curve it may simply sound like numbers on a chart. Why does it represent such a problem? Remember that those numbers represent real conditions in the Treasury Bond Market that indicate that real-life investors are hesitant to put their money into securities that are considered riskier. Some of those investors are banks. Why are we concerned about banks? Because the way banks make money, on a very basic level, is to use the money their customers have on deposit to invest in other things - usually the same kind of things the typical investor is putting her money in. So if typical investors are afraid to risk money in vehicles other than Treasury Bonds, the banks will be too. That means banks have less opportunity to make money (what they are in business to do). This causes liquidity to dry up in the financial sector, which negatively impacts the liquidity of funds in all other sectors. How predictive IS an inverted yield curve? While it’s true that there are many other financial indicators we should consider when trying to forecast the possibility of a recession, the yield curve is what I consider to be the biggest indicator. Since 1955 a recession has always occurred within 2 years of an inverted yield curve, with only one exception in 1967. In that case, many factors contributed to the “false positive” indication the inverted yield curve indicated. As you can see, the yield curve is a pretty reliable predictor of financial health and possible recession. But I want to make a disclaimer here - in a very low-interest-rate environment like we’re experiencing now, the inverted yield curve we’re experiencing could be another false positive because we’ve never seen it happen in this kind of economic situation. That means we don't know what it indicates under these conditions.  Short-term good news typical of an inverted yield curve While the inversion of the yield curve could be predicting bleak economic times in the near future there is good news on the short-term horizon. Impressive gains typically occur in the months between the inversion and the recession, with average yields on investments right around 12%. Of course, there is no guarantee this will happen - even in the presence of the inversion. I hope you find my explanation of the inverted yield curve helpful as you consider the financial options available to you. Please keep in mind, none of my explanation is to be construed as financial advice but is for informational purposes only. If you are interested in speaking with me about the possibility of retaining my services as a financial planner, I’d be happy to talk further. Connect With Ryan A. Hughes and Bull Oak Capital www.BullOakCapital.com Podcast (at) BullOakCapital.com Subscribe to Solid Financial Advice on the platform of your choice

If you are a parent you know that higher education is expensive - so how do you plan to pay for college for your kids? For this episode of the podcast, I’ve invited my friend Brody Rosenfeld to join me to discuss this issue. Brody has experienced his own college funding struggle first-hand, including graduate school - and he’s also walked alongside clients in making plans to pay for their children’s college. Together, the two of us have some ideas about how you can begin to plan for the typical college expenses and even offer some ways you can save for college tax-free. Please, join us for this conversation. Outline of This Episode [0:21] Brody Rosenfeld’s experience paying for his own college education [2:42] My experience and the benefit of the G.I. Bill, plus grad school expenses [7:49] Why is college so expensive? [11:30] The first steps toward saving for college [12:56] The 529 Plan to save for college tax free [16:22] How less expensive schools can be a huge benefit [18:30] The G.I. Bill is a huge benefit to consider [19:07] Federal loan forgiveness programs Why IS college so expensive in the United States? Many of us funded our own college education with student loans, and the proof of that fact can be seen today in the existence of over $1.6 trillion of student loan debt. That student debt has a dramatic impact on the economic potential of new grads - causing them to delay or even postpone indefinitely the financial decisions that drive our overall economy. For example - every $1000 in student loan debt lowers a person’s likelihood of homeownership by 1.5%. It’s a problem that impacts an entire generation of Americans. But the question remains, “Why is college so expensive in the first place?” Three factors play a part in the answer... Legislation - changes in the economy - the high demand for college education Listen to this episode to learn how each of those plays into the cost of a college education and how you can begin to address the issue effectively.  Paying for college outright requires a plan The task of entirely paying for even one student’s higher education is astronomical these days. The average public school education costs $20,000 per year and the average private school education can be as much as $47,000 per year. Deliberate planning is necessary if those costs are going to be handled apart from taking on student loan debt. Brody and I recommend that you start planning by defining your contribution level to your child’s education. Are you going to pay all of the cost as their parent? Will you only pay some of it? Will the child be required to work for scholarships and grants or work their way through school at least on a part-time basis? These questions and many more need to be a vital part of any planning you do. Listen to learn more of the things you should be asking.  Have you heard about the benefits of a 529 plan to pay for college expenses? Savvy parents and students are open to all kinds of options when it comes to paying for college. One of the most beneficial ways to go about it - especially if you are starting early - is to use the government’s college savings plan known as a 529. Currently, there is $328.9 billion invested in 529 plans and the number is only going up. What’s so good about a 529 plan? It enables you to deposit funds into the plan and direct them toward investment accounts. All of the growth is tax-free - which enables you to keep much more of the money you earn to use for college expenses. Under a 529 plan, you can contribute $15,000 per year, per person to build your investment nest egg. There are also options to contribute even more all at once through what is known as a “superfund” plan. Listen to find out more about the 529 and get your college savings underway!  Why a community college is a better option than you may think Some people have a negative impression of a community college education, but Brody and I recommend you take another look if you’re one of those people. We both experienced community college and felt our experiences were good. But more importantly, the education you get at a community college is typically just as good as a higher level or 4-year school and will cost far less. Many people get their basic curriculum requirements out of the way at a community college and then transfer to their “dream school” to focus on their chosen area of study. One of the things I like to explain is that nobody is going to ask or even care what community college you attended. They are only going to care about the college you graduated from, so if you can save money and still get the education and graduation credentials you need, why not do it? I hope you listen and take to heart the advice Brody and I share on this episode. A college education is possible if you plan early and get started. Resources & People Mentioned 529 Plan The GI Bill Connect with Brody Rosenfeld Brody on LinkedIn Connect With Ryan A. Hughes and Bull Oak Capital www.BullOakCapital.com Podcast (at) BullOakCapital.com

Most people understand the basics about the stock market and the economy - but few people have a deep enough knowledge of the two to serve them well in making financial decisions. With that in mind, I thought it would be helpful to outline how the economic cycle works and how stocks, the underlying economy, and the leading indicators can help us forecast what’s coming next so that you can make solid financial decisions.  Outline of This Episode [0:30] Why it’s important to know how the economic cycle works [1:10] The historic stock market drop in December 2015 - as an illustration [3:07] Why you need to understand the basics of the economic cycle [6:44] How does the movement of the stock market affect the underlying economy? [8:55] What SHOULD we look at to understand economic health? What is an economic cycle? Simply put, the economic cycle is the booms and the busts of the overall economy. During a boom time, the overall economy is healthy, jobs are available, corporations are profitable, etc. A bust is just the opposite - jobs are scarce, corporations are having a hard time making money, and the overall spending of the population is down as a result. Economic cycles are important to watch and understand because we can learn to see patterns and correlations from one cycle that can possibly inform us about the next. In this episode I describe the way the economic cycle works and what we start to see as a recession or downturn happens. Be sure to listen. MYTH: The stock market is a leading indicator of the overall economy In December 2018, The S&P 500 (stock market) fell by 15%. The concern was that we were entering a recession and many believed they might be losing their job, or that they should sell their stock holdings. Many people hold the misconception that the stock market is a leading indicator of the underlying economy or that it represents the overall economy. But it’s not true. The stock market is more of a forward-looking indicator that is actively trying to price in the overall economy itself. Even though it’s forward-looking, it’s not a reliable leading indicator. It’s constantly trying to guess whether the economy is going to get stronger or weaker - it’s an aggregate of many variables. The overall economy will typically drive stock prices, but the stock market does not necessarily have that much of an impact on the economy overall. A great example of this was what happened in 1987’s “Black Monday” when the stock market fell 23% in a single day but the underlying economy didn’t even bat an eye. 4 things that drive the health of the underlying economy Naturally, there are many things that impact the direction the economy goes, but on a very basic level there are 4 things that drive the underlying economy. These can legitimately be called leading economic indicators. What are they? Employment - people lose their jobs Income - resulting from loss of jobs Sales - people are buying less because they are earning less Output - companies reduce output to be comparable to the decreased demand During an upturn in the economy, these indicators feed into each other, driving prices higher. The sales cycle is extremely difficult to predict, no matter how much economists and those forecasting the stock market try to do so.  What should we be looking at as recession indicators? There are many things that point to the possibility of a recession. Traditionally, there are eight things that we can watch to discern if a recession is on the horizon. They are... Sensitive commodity prices Average manufacturing work weeks Commercial and industrial building contracts Inverted yield curve New incorporations New orders Housing starts Money supply I think the one we need to understand is the INVERTED YIELD CURVE : it’s a highly reliable tool to track, if there is an unexpected slow-down in economic activity. It’s not perfect, but it’ spretty reliable. Here’s how it works… A yield curve shows interest rate points across several maturity dates. Most of the time it’s just a chart of the US Treasury Bond yield curve - from 3 months all the way up to 30 years. It’s important because the Treasury Bond is quite possibly the largest and most widely held security in the world. A normal yield curve (which shows a normal risk appetite among investors) is an upward sloping chart… the rates of a 3 month treasury bond will be lower than a bond of greater maturity length. However, that curve can flatten or invert - inversion means shorter term rates are higher and longer term rates are lower. The problem with this indicator is that there is a long lead time - it usually inverts years before an economic slowdown. Used in tandem with other economic indicators it can be very helpful.  Listen to learn more about why the stock market is not a leading economic indicator and how you can become a better observer of the economy. Resources & People Mentioned Paul Samuelson Jeffrey Moore’s Composite Index Connect With Ryan A. Hughes and Bull Oak Capital www.BullOakCapital.com Podcast (at) BullOakCapital.com

Did you know there are over 686,000 financial advisors in the United States as of 2017? That means there are a lot of people out there giving advice about financial matters and getting paid for it. Of course, that’s fine - but if you’re wanting to work with an advisor to build wealth, there are some things you should look out for. On this episode, I want to lay the groundwork for everything to come by giving you 9 tips I’ve learned from my experience as a financial advisor that will help you find the perfect person to advise you about financial matters. Listen carefully, take notes, and apply them to your search. I’m going to fill you in on a few of these tips below but listen to the entire episode to hear all nine. Outline of This Episode [0:28] Reasons you may be trying to find a financial advisor [1:03] 1: Work with a true fiduciary advisor [2:26] 2: Make sure the advisor has a formal education in finance [3:47] 3: Work with a planning expert who runs multiple scenarios [5:21] 4: Work with someone who has been managing wealth for at least 10 years [6:36] 5: An advisor who has an evidence-based philosophy and non-customized portfolios [9:29] 6: Fees are transparent and easy to understand [10:25] 7: Make sure your assets are held at a 3rd party custodian [11:30] 8: You want an advisor who has a record of compliance [12:11] 9: Make sure you enjoy working with the individual you choose TIP 1: You want to find a financial advisor who is a true fiduciary Are you familiar with the term “fiduciary?” It’s an important word when it comes to finding a financial advisor. Fiduciary: Placing another person’s interest above your own When you’re hiring someone to advise you about what to do with your money or to recommend investments, you want someone who is working for you first and foremost, not someone who might have a stake in the game that motivates them to look to their own interests first.  An easy way to find out if your potential advisor is a true fiduciary is to ask a simple question: “Are you affiliated with a broker or dealer?” If the advisor answers, “Yes” then there is potential that they will not be working for your interests first - they are not a true fiduciary. TIP 3: Look for a planning expert who works with multiple scenarios Creating a comprehensive financial plan takes a lot of work. It’s the process of projecting your financial life into the future to figure out the best financial decisions to make now. That requires running many different scenarios to answer the big questions like… When should you retire? When should you file for Social Security? Should you downsize your home? Should you purchase a rental property to add to your monthly income? If you find a financial advisor who doesn’t approach financial planning in this way, you’re missing out on a huge benefit that you need. Vanguard published a report that stated that a good financial advisor can add the equivalent of 1.6% in annualized portfolio returns through advice alone! Make sure you work with a planning expert who can run those scenarios to give you the best advice - it’s very important. TIP 4: Work with an advisor who has been through the entire market cycle There are likely a lot of younger financial advisors who are genuine, good people - but the financial industry is one where experience matters. Why? Let’s consider an example: An advisor who has not been working long enough to see a full market cycle of ups and downs in the economy is not going to have enough experience during the down times to advise you well. They might panic and advise that you pull all of your investments just as the market hits the bottom. But a seasoned advisor will have the personal knowledge to not only know that course of action is a bad idea, but why it’s a bad idea, and what you should do instead. How much experience is enough? I advise over 10 years of experience. TIP 7: Make sure your assets are held at a third-party custodian  If the person who is advising you about your finances is also holding your assets, you run a huge risk of fraud taking place. The Bernie Madoff scandal happened because as an advisor, Madoff had access to the assets of his investors. That’s not safe or secure. The best situation is for your advisor to work with a discount brokerage firm like TD Ameritrade, Fidelity, or any of the others. Just make sure the firm they work with is a discount firm so that you don’t have to pay higher fees for the trades your advisor makes.  Again - there are several more tips covered in the audio for this episode that you need to know if you’re trying to find a financial advisor, so be sure to listen. Resources Mentioned The SEC website TD Ameritrade Charles Schwab Fidelity ETrade Connect With Ryan Hughes and Bull Oak Capital   www.BullOakCapital.com/podcast  Podcast (at) BullOakCapital.com